Q4 2022 New York Mortgage Trust Inc Earnings Call

February 23, 2023

Okay.

Good morning, ladies and gentlemen, and thank you for standing by welcome to the New York mortgage Trust's fourth quarter and full year 2022 results conference call.

During todays presentation, all parties will be in a listen only mode.

In your presentation. The conference will be opened for questions. If you have a question. Please press the star followed by one one on your Touchtone phone if he would like to withdraw your question. Please press star. One again, if you are using speaker equipment. We do ask that you. Please lift the handset before making your selection.

This conference is being recorded on Thursday February 23rd 2023.

Our press release and supplemental financial presentation, with New York mortgage Trust's fourth quarter and full year 2022 results was released yesterday, both the press release and supplemental financial presentation are available on the company's website at Www Dot N Y Amtrust dotcom.

Additionally, we are hosting a live webcast of todays call, which you can access in the events and presentations 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 maybe deemed forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Though New York Mortgage Trust believes 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 Companys filings with the Securities and Exchange Commission.

Now at this time I would like to introduce Jason Serrano, Chief Executive Officer, Jason. Please go ahead.

Thank you and thanks, everybody for joining the fourth quarter earnings call I'm joined today by our CFO , Kristina Mario and President Nick.

Nick work alongside of me since 2004 at Fortress, then at Blackstone and more recently at <unk>. He joined New York Mortgage Trust in 2018, and after four years and the managing director role I'm excited to have Nick joined the senior management ranks as president at the end of this year.

In 2022, sorry, and be available to you today and on future calls.

Here to speak to you today about our fourth quarter results along with a brief first quarter update I.

I will also discuss how we align the company with Marc with the market and why we feel prime for growth in our high return distressed environment.

I will initially provide commentary around these points and handover to Cristina Nick to provide greater detail around our financials and portfolio management.

Now we've been documenting our take on the market roadmap, which is on page seven for a few quarters now we believe our mark market calls have aligned well with actual quarterly progression and.

An honest assessment from investors in our sector throughout the second half of 2020, and even thus far in 2003 likely contains a high degree of buyers remarks, the market shifted the market shift started in April 2022, with a caucus that laid out the game plan for historic rate increase due to inflation.

Witnesses to 70%.

In one month the market went from historic securitization financing efficiency to market dislocation as common bond investors brushed off years of missing out and instead have sat on the sidelines.

And they too.

In the second quarter of last year, we took decisive action to eliminate near term investment pipelines at the time, we were generating over $1 billion of new acquisitions per quarter. We ended the third quarter with $119 million of investments in mostly short duration Bpl's and followed up in the last quarter with just $116 million to $106 million.

<unk> our portfolio of pipeline with great effort, we have the ability to add multiples of our fourth quarter investment activity on our balance sheet today, Nick will discuss this in more detail. However at this time, we don't see a great risk reward proposition to aggregate in this market. We believe opportunity cost of capital right now is extremely high and prudent to wait for better enter.

Points.

In many ways, we see this first quarter to be inferior inferior buyer's market than that of the third quarter of last year.

Our story is much more than avoiding significant losses with acquisitions from the second half of last year. In fact, we avoided tying up capital along.

Losing propositions and human capital and managing these assets through a distressed environment and minimize downside risk.

However, we have a clear path plan to drive EPS higher with portfolio growth through this year and can do so without dilution to our investors and incurring costly debt. The question is timing of this redeployment and what are the near term catalyst to create the opportunity for us while it is difficult to determine the day.

What seems apparent is that we are in right now on the right season.

While there are many data points and telling grass one can use to judge timing of the market reset I watched the data supporting these two graphs on page eight more closely.

The graph on the left shows the U S consumer has been.

<unk> has roughly been squeezed out of new loans and credit card products credit is what drove our economy in 2022, evidenced by nearly $1 billion of credit card debt that has been added by U S consumers, which is a record high.

Steeply rising credit card balances coupled with higher interest rate paid on such debt is crushing household budgets as high inflation deteriorate savings that many amassed during the pandemic personal savings rate now at two 7% as one of the lowest points ever only 2006, and seven witness such vapor thin levels, a large pullback bank rate recently showed only 50.

Percent of Americans can afford a 1000 emergency emergency expense.

Now that the borrowing Merry go round is ended many Americans will be looking through their monthly expenses and rejecting payments, which was that low utility to everyday life.

<unk> selective payment defaults that present little to no near term consequence.

Thus it is all but certain of delinquencies will dramatically increase in a variety of asset classes, especially with loans originated over the past 18 months to low FICO score borrowers.

Overall consumption is challenged.

And most significantly weighed on GP in 2023.

The graph to the right shows a tight as current relationship between existing home supply and HPA recorded in the year for the past two years the market reach historically low supply at less than two months of homes inventory on the market today, we still have very low supply levels at approximately three months supply is in check and keep national home prices positive near term.

But as I discussed the consumer is under significant pressure. Thus it should be it should not be surprised to see supply to pick up from homeowners struggling to make ends meet for equity extraction.

However, when observing the demand side housing affordability is painfully high U S mortgage rates more than doubled from the mid 3% range to above 7% in 2022 housing expense to income is now approximately 35% higher than last year, new homebuyers essential demographic for home price growth are faced with even worse affordability not.

After two years of double digit HPA and rent growth in the market in 2022.

As Hap.

In the previous year on the ground conversations should even create greater volatility and large traditional speculative markets such as Phoenix, Las Vegas and in small markets like Boise in Salt Lake in these markets, we see property investors willing to accept prices equal to their basis of two years ago, suggesting in home price decline of 20% in <unk>.

5% for these investors, thus, we see significant home price pressure in these markets in the year, despite historically tight housing supply and.

In summary, unsecured debt and high LTV products, particularly late in the late 2021, and 2022 vintage will likely significantly underperformed.

Housing supply.

We will most likely be pushed higher with the constrained buyer base, new construction other types of pro forma underwriting.

We'll lead supply as these sales are often more distressed as homeowners. These homeowners are not a traditional long term holder delinquencies will follow financing will become more constrained, which you see as a likely catalyst for the opportunity and we are focused on.

Now switching over a quarter results, which you can find on page nine we ended the quarter with unappreciated loss per share of negative 12%.

In this quarter, we introduced adjusted book value per share mostly to capture the market Mark to market change on our debt most of which is in the securities reform and other noncash items Christine will elaborate further about these measures, but as some of you pointed out earlier, we thought it would be helpful for consistency consistency to disclose adjusted book value, which declined by four.

8% quarter on quarter.

Our after effect of of our previously declared dividend quarterly economic return on adjusted book value was negative two 4% nearly all booked a loss in the quarter were unrealized and expected to be reversed over time. We ended the year with two 6% G&A expense ratio, which we believe is one of the lowest in the market where the complexity.

Of the sectors. We are engaged in our low cost platform is deliberate we focus on our costs and believe we can obtain additional savings in 2023.

As far as quarterly investment activity, our plan was to reduce risks and focus and really as we bought some of our debt in the secondary market as well as common shares.

With a full team effort in both single family and multifamily business. We also strengthened our asset management platform, which we believe will lead us through the distressed opportunity set we will have more details around this next quarter at some new pieces of our platform being assembled now.

Finally, after issuing term securitization November we reduced our leverage ratio to three times and ended the quarter with 224 million of cash our cash balances will jump around a bit the goal is to limit cash holdings and drag but under leveraging our portfolio.

We want to avoid incurring additional financing costs with additional drawdowns on our facilities without reinvestment targets.

Page 10 shows this relationship we can raise up to $644 million of cash by utilizing financing options available to us.

With our own portfolio, thus, we can drive EPS higher without dilution to shareholders and an equity raise and also avoid expensive corporate debt placement by taking this additional asset based financing our portfolio leverage would increase to four times or five times at the company level. Thus, we have the flexibility here to obtain incremental financing while also keeping.

Our leverage at market, leading low multiples.

Additional upside exists to our short duration portfolio, we have the luxury of reinvesting our asset turnover at higher yields available today, which the EPS illustration does not capture we intentionally focused on organic fundraisers through our portfolio to drive earnings higher in a market, which presents a superior risk adjusted returns with a catalyst that.

May trigger a downturn now in view, we firmly see our differentiated patient approach as the winning one where our stockholders will benefit from our steadfast path of seeking value in a disruptive environment at this time I'll pass it over to Christine to provide a deeper dive on our financial results and then Nick on the portfolio Christine. Thank.

Thank you Jason Good morning, everyone and my comments today I will focus my commentary on the main drivers of fourth quarter financial results.

Our financial snapshot on slide nine covers key portfolio metrics for the quarter and slide 23 summarizes the financial results for the quarter. The company had underappreciated loss per share of <unk> 12 in the fourth quarter, an improvement of more than 50% as compared to unappreciated loss per share of <unk> 27.

Third quarter.

Fair value changes related to our investment portfolio continued to have a significant impact on our earnings and during the quarter. We recognized <unk> 11 per share of unrealized losses, primarily due to an increase in interest rates and credit spread widening that resulted in a decline in the fair values of our residential loans and investment and consolidate.

Excellent.

We had net interest income of $22 2 million contribution of <unk> <unk> per share down from <unk> <unk> per share in the third quarter.

The decrease can be attributed to Scott.

New factors first a decrease in average interest earning assets in our portfolio due to pay downs received during the quarter as well as our decision to significantly curtail our investment activities starting at the end of the second quarter.

In addition financing costs and our investment portfolio were higher due to increases in base interest rates related to our repurchase agreements.

As a result of residential loan securitization that we completed in the fourth quarter.

While securitization may incur greater interest expense relative to repurchase agreement financing in general they reduce our exposure to mark to market risk and allow us to better manage our liquidity.

Securitization is also locked in financing costs versus floating rate repo in that sense is it fair to aggressively raises above expectations and may even reduce interest expense versus repo over the medium term.

Unlike in the third quarter, we had minimal sale activity, which resulted in a decrease in realized gains and other income during the quarter.

Also as previously discussed due to increases in interest rates and continued credit spread widening prices on the majority of the assets in our portfolio declined during the quarter of $42 million of unrealized losses 35 million or <unk> <unk> per share are attributed to residential loans held in securitization vehicles.

Unlike some of our peers, we do not mark our securitization liabilities to fair value. Therefore, there is no corresponding unrealized gain recognized in our securitization liabilities to offset unrealized losses on the assets held in the securitization more on this point later.

Total general administrative and operating expenses amounted to $68 2 million for the quarter.

One from $91 6 million in the previous quarter, primarily due to one reduction in amortization expense as a result of lease intangibles related to consolidated real estate being fully amortizing in prior quarter.

Reduction in depreciation expense due to the application of held for sale accounting consolidated real estate and the disposal group and finally due to residential loan portfolio run off and minimal purchase activity, which reduced portfolio operating expenses no.

That these numbers reflect the reclassification of interest expense related to our mortgages payable on consolidated real estate to operating expenses in the fourth quarter than in prior periods.

This quarter, we introduced a new metric adjusted book value, which is a non-GAAP financial measure, replacing underappreciated book value when presented in prior periods Unappreciated book value reflected the value of our single family rental properties and JV equity investments after underappreciated basis by excluding from GAAP book value.

The company's share of depreciation and lease intangible amortization expenses related to the operating real estate.

Since we began disclosing unappreciated book value, we identified additional items thats materially affecting our book value and believe they should also be incorporated to provide a more useful non-GAAP measure.

Accordingly, adjusted book value begins with the same calculation is underappreciated book value and includes two additional adjustments to GAAP book value.

First we exclude the adjustment of redeemable NCI.

Estimated redemption value redeemable NCI represents third party ownership in one of our consolidated consolidated JV structures.

These third party owners have the ability to sell their ownership interest to us once a year for cash, which then increases our ownership stake in the consolidated JV structure. However, because it against the corresponding real estate are not reported at fair value were unrealized gains or losses are taken into income the adjustment of the redeemer.

NCI directly affects our GAAP book value.

Excluding this adjustment adjusted book value more closely aligns the accounting treatment applied to the real estate and reflects our JV equity investments again at their own depreciated basis.

Second we adjust our liabilities that finance our investment portfolio to fair value most of our assets, except our single family and consolidated multifamily real estate or financial instruments that are carried at fair value. However, unlike our use of fair value option for these assets the cdos issued by our residential loan securitizations and corporate debt.

To finance our investment portfolio assets are carried at amortized cost.

Alex sheet by adjusting these financing instruments to fair value adjusted book value reflects the Companys net equity and investments on a comparable a fair value basis.

We believe that adjusted book value provides investors a more useful and consistent measure of our value and facilitates the comparison of our financial performance to that of our peers.

As Jason mentioned earlier adjusted book value per share ended at $3 97 down four 8% from September 30, and translated to a negative two 4% economic return on adjusted book value during the quarter.

With our efforts to further strengthen our balance sheet and reduced mark to market risk. We completed a securitization of our business purpose loan rental book with the completion of the securitization as of December 31, the company's recourse leverage ratio on portfolio leverage ratio decreased to three times and two five times respective.

Lee from five times and four times, respectively. As of September 30. In addition, as indicated on slide 13, only 13% of our total financing arrangements, which include cdos or securitization structures, the subject to mark to market margin call risk down from 23% at September 30.

You can also see on slide 13 that we have limited corporate bond maturity exposure, we have $100 million of unsecured fixed debt due in 2026 and $45 million of subordinated bonds. Due in 2035. This helps us maximize our liquidity, particularly in dislocated markets, we paid a <unk> 10 per common.

Share dividend, which was unchanged from the prior quarter, it's been the company's policy not to provide guidance or forward dividend projections, we evaluate our dividend dividend policy each quarter and look at the 12 to 18 months projections of not only your net interest income, but also realized capital gains that can be generated from our investment portfolio.

And with that I will now turn it over to Nick to go over the market and strategy update Nick.

Thanks, Christine and good morning, everyone.

I'll walk you through our overall portfolio positioning starting first with overall portfolio acquisitions, we have meaningfully slow down our pipeline all purchases across both residential and multifamily. This really started at the end of the second quarter of 2022 and that trend continues through the fourth quarter.

Our fourth quarter 2022 acquisitions at $106 million is 89% lower than our prior peak of acquisitions in the second quarter of last year, we have achieved a significant reduction of activity due to our flexible purchasing arrangements and the minimal economic entanglements that we have with our various trading counterparties.

Overall, the portfolio as prepayments and redemptions have outpaced our investments over the last two quarters, which was part of the plan.

We do however have an eye towards the future. We continue to stay actively engaged with our partners to bolster our ability to scale up our investments when the time is right. We continue to test and refine our credit criteria and the market to ascertain the availability of the different types of assets that we historically barn.

We have also continued to onboard new originators borrowers and trading partners. During this temporary lull in purchase activity.

Now delving into single family. If you look across the board in resi portfolio, we have consciously targeted a lower LTV profile to create a margin of safety the portfolio across the board has ltvs in the sixties, which in most cases should be sufficient for par payoff, even in a challenging economic environment.

Furthermore, the pause in purchases in the second quarter of 2022 as housing prices peaked also means that we have less exposure to the loans that are most upsides on underwriting versus what we have recently experienced which was several months of home price declines.

From a financing standpoint, we have most of our BPL rental and <unk> loans in securitization or similar structures. We moved the majority of our rental loan collateral and <unk> into a securitization in the fourth quarter further reducing mark to market margin call exposure.

We continue to prioritize utilizing non mark to market financings for our assets in particular for assets that may have more duration or inherent price volatility.

If youre looking at page 17 of our supplemental you can see that the total portfolio leverage ratios are quite high for an asset class like Rps.

Eight six times.

This is due to the total portfolio leverage being a GAAP measure and does not factor in the change of the valuation of liabilities because of the shifting valuation of the underlying assets.

If we were to adjust for this valuation of liabilities.

Similar to our adjusted book value concept that Christine mentioned earlier, the total portfolio leverage for <unk> will be closer to seven times.

Moving on we continue to see value in concentrating our portfolio and short term BPL bridge loans. The duration of these loans keeps the turnover of the portfolio high while also generating a compelling near term return opportunity.

We are seeing coupons widen under our more conservative credit box.

<unk> allows us the flexibility to grow the portfolio within this asset class or to rotate when we see other opportunities.

As an organization, we continue to invest in asset management resources for bridge and our other rescue loans that will differentiate our ability to capitalize on secondary market opportunities in the future.

I will note that unlike other parts of the resi portfolio, where delinquencies have been relatively stable quarter over quarter. The delinquencies and bridge loans has increased from 8% to 13, 5%.

This is due to the late stage cycle of the bridge portfolio given the limited amount of new investment activity in the last two quarters and also due to the corresponding short tenor of these assets.

The majority of these delinquencies are due to loans not making their expected balloon payment at maturity.

Which occurs frequently in this space and it's often worked through by our asset managers to an extension of sale or refinance overall of the portfolio has experienced de minimis amounts of realized principal losses less than one basis points of the $2 9 billion of French loan purchases, we have made to date.

On the multifamily side the positive demographic trends in our target markets in the south and southeast still remain at play.

What is attractive about the evolving opportunities here in Mezz lending is the further downside protection that we can get access to given lower senior financing leverage generally available in the market.

We should be able to access a thicker mezzanine tranche with approximately five to 10 additional LTV points of cushion.

Which would serve as additional credit enhancement in a recessionary environment.

It is however important to note that valuation declines has thus far been muted in our portfolio given the availability of cost efficient senior financing and strong underlying fundamentals.

As we mentioned in the previous quarter, we are waiting for yields the best lending to move towards the 13% to 15% range.

This has started to materialize in some respect and we hope to build small pipelines here.

As the growing maturity wall of senior debt coming due in 2023, and 2024, but with equivalent senior financing only available at lower leverage points. There is an opportunity for mezz lending.

To provide mezz lending on a GAAP basis.

We believe the yield profile will continue to move towards the 13% to 15% target over the coming months due to this dynamic.

Our multifamily JV as we previously discussed we are in the process of divesting the assets in our portfolio and that is ongoing.

Relating to the multifamily portfolio performance. Once again fundamentals are strong the portfolio experienced rental growth of 11% in 2022 after an 8% growth in 2021.

Portfolio occupancy is stable at 93% at the end of 2022.

The resolutions in our portfolio also continued to occur at expectation with 36 million paying off at a 12, 5% IRR.

Delinquencies remain low and our Mezz book with only one loan delinquent that is expected to pay off.

We are pleased with the performance of this portfolio and we will leverage the extensive sourcing and asset management ability of our team to drive further returns here in the future.

With that I will pass it back to Jason for any closing comments.

Thank you Nick.

We are primed to utilize our strong liquidity under our low cost structure.

<unk> greater flexibility when we remained selective across the residential housing sector in anticipation of near term market dislocation. So we can participate in what we see as a coming buyer's market.

We want to invest through our asset management platform and we believe this will be key to unlocking value in this distressed cycle.

So at this time, we'd like to pass the call back to the operator and open up for questions.

Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question Press Star One again, please standby, while we compile the Q&A roster.

Our first question comes from Stephen Laws with Raymond James. Please go ahead.

Hi, Good morning, Jason Good morning, everyone.

Jason I guess to start first question for you.

When you look at the JV multifamily.

The JV equity portfolio I think you announced your intention to monetize that in September . So it's been five months can you can you talk about where you stand with making some traction on.

Monetizing some of those assets and kind of how you how you see that playing out over the course of the year the.

Across roughly what 20 assets I think.

Yes, I think it's 19 assets.

Our.

Looking at a variety of options, we have assets that are out in the market for sale, we have investor.

Investors looking at different components of our book to take us out of our even our LP position.

We're in conversations on on.

Different parts of the portfolio. So it's active I mean as you can understand.

<unk> was very quiet in December .

Intuit and in January .

We see some pent up demand given lack of investment activity in multifamily space over the over the last couple of months the market kind of shut down prematurely in November given some of the volatility that was out there.

But we're getting good traction on.

Investors, taking a look at our properties.

We look forward to sharing more details about that.

As we said earlier calls we're not going to provide.

For guidance on timelines or where total.

Returns related to those assets as they are being marketed now and obviously, it's too speculative at this point to provide further detail there.

Okay I appreciate the comments Jason.

Maybe follow up on the edge.

As you look forward I know Christine you made a comment around the dividend and I believe that it kind of takes a 12 to 18 months outlook, but when we think about.

Somewhat unknown kind of monetization process of those investments and it sounds like.

From the deck in prepared remarks.

We're currently pretty patient right now as far as new investment activity leverage kind of tick down.

Sure.

Are there thoughts to kind of what run rate earnings we're going to be for the next year I mean that make any sense to bring the dividend down near term.

And take it back up once you kind of rotated capital redeployed into new investments.

I know you used the word aggressive positioning F&B to aggressively move.

The deck kind of just wanted to get your thoughts around earnings through the year and how that compares to where the dividend currently.

Yes so.

As you May recall, our company has historically been.

A company of kind of two paths for earnings one is through the interest income the other is through realized gains.

So what when.

When we look at our and as Christine mentioned, we look at our dividend policy and the dividend with our board.

Looking at the 18 month forecast based on <unk>.

Both activity related interest income and costs and also actually related to realized gains we have.

With over $300 billion portfolio of assets, where we have not recognized any gains on those assets to date due to GAAP measures.

So that provides a little bit of difficulty on.

And kind of smoothing out a earned.

Earnings calendar, given the volatility of when these assets are sold in.

And what those results look like so when we look at the entirety of our portfolio and look at what we're doing.

On a quarterly basis.

And worthy of investment concepts, which is.

Repurchases of our debt selective purchases of assets in the market.

We.

We see that.

That was the purpose of providing the tencent dividend for the fourth quarter and this is something that we discuss with our board regularly so.

We as a company, we do not provide forward guidance on our our dividend.

However.

<unk> that you are bringing is that we have slow investment activity see a better opportunity in the future and the only other thing I'd add into that equation that you are looking at for earnings as the for the unrealized.

The realized activity that we can generate through ourselves. So we're going to look at all of those things.

Together and we'll continuously set what we believe is a.

Prudent dividend policy going forward.

Great. Thanks for that color lastly, and you touched on it in your comments there but.

You've repurchased some of your debt both in Q4 and again in February can you talk about the decisions behind that capital allocation and really what makes that attractive to you right now.

Given you're generally cautious on your other options.

Yes, so when we look at the market I look at the capital we have to deploy we do see teens returns opportunity in single family multifamily.

Mostly within the bridge loan opportunity space and within multifamily.

Mezz mezzanine lending.

We believe we can achieve that now the question is are we better what is the opportunity.

Cost of that capital today by allocating to a 14% return when we have been circling around and seeing these opportunities that we think will percolate.

In the near term that can provide greater returns on that so in a market, where we're trading at a discount it's difficult to.

Raise new capital that we won't be dilutive to our shareholders instead, we'd rather.

Hold that cash back and wait for that better return and it's really a forecast over.

And have a two to three year total return on our capital versus making the incremental return in the next couple of months. So that's kind of the view that we're taking on.

On the asset.

Deployment.

As it relates to repurchases, we do see in the secondary market, we traffic that market quite a bit and we do see opportunities to buy some of our securitization debt back at discounts.

We find that accretive obviously, you can monetize it as kind of immediately on those assets on that debt, but also provides us greater flexibility.

For calling transactions in the future given our bigger equity piece that we have through the creation of monetizing that that debt that we just repurchased.

It gives us more flexibility.

On that on that capital stack going forward. So what we're trying to do here is provide more options growth and at the same time you have something that we're buying is accretive.

And lowers the risk profile for the company. So that's we do see them in the market and we're not there are some that we were not looking at buying all the asphalt a deck that we see in the market related to our securities, but we do see some that make more sense than others.

And then obviously, let's take us further in on share repurchases we.

Sure. The question will come up we do see opportunities.

Utilize our capital for share repurchases is accretive at our balance sheet at a discount in the market.

We just re upped our repurchase program $200 million and we will continuously look into the market for opportunities there.

And in the last thing I'll mention is <unk>.

One of the other.

Ways of kind of bridging the gap if you will on earnings for for interest income.

As we wait for this opportunity is outside of the credit markets and in that area. We're looking at agencies.

Of.

Deferring some of the kind of the running cost today.

Putting assets to work and having downside protection through.

Principal protected asset class so.

I think the expectation is next.

And next quarter that Youll see that were we're starting to leg into the agency market.

We will do so even.

More so if we feel like this opportunity or the <unk>.

Catalysts I described earlier is taking longer to develop.

Great helpful comments, thanks, very much Jason.

<unk>.

Thank you one moment for our next question.

Our next question comes from Doug Harter with Credit Suisse. Please go ahead.

Thanks, just on that last point about possibly deploying some capital into agency.

How do you think about.

The volatility.

Of that capital and kind of the risk that we're willing to take.

With that capital as it is you kind of it sounds like youre viewing it more as a placeholder versus kind of the core strategy.

That's right.

Traditionally our company has traditionally invested in agency Margaret.

Had a position there for quite some time, we took it off when we felt like there was a better opportunity in the credit space.

And we've been looking at this sector ever since we took it off it's just not a core strategy for us, but it is a strategy of a more of a cash management tool and obviously the market has experienced credit quite a bit of volatility in agency space given rates.

Which is the reason why we have an allocated to that to date. Despite the low thats an activity that we've always had that as an option for us and we decided against it.

We do see parts of the market that look interesting for that particular about today and yes, you're right. It is a shorter term strategy hold.

But I can see going through this cycle that we actually may keep a position in that space.

On a near term on a more of a medium term basis, just on a near term basis.

So we're we've been traffic in this market.

And we believe it's we're.

We're at a time now where we can start legging into the trade given some of the volatility is.

Has passed now.

There is definitely more volatility come we look to fully interest rate hedge our position.

Two.

Some of that volatility from the right markets.

And look for.

Agency assets to have a better.

Degree of extension.

Given some of the spec pools that are out there. So we'll be focusing on that part of the market, but doing so.

Slowly and.

And taking consideration the volatility that may come.

Thanks.

And then earlier you guys mentioned that you're still kind of prioritizing the shorter duration.

PPL.

Can you just talk about kind of how you win.

The advantages of those shorter duration versus the opportunity to kind of locked in.

Spreads that are relatively wide today.

The longer duration.

Sure sure Doug This is Nick.

We see.

Still believe that there is probably going to be more compelling opportunities for assets with potentially more credit risk while protecting more duration in the future. So that's really what's informing us in terms of trying to focus more on the on the short term bridge.

And Furthermore, that can also build potentially buildup.

Interest income, which is something that we do have lots of parts of our portfolio that could potentially already have embedded realized gains such as our multifamily JV. So it would be good to balance that with our residential products have shorter duration that generates a high degree of interest income.

I'll add to that point real quick witches.

Something that we've been looking at and feel is likely to happen in near term.

A lot of market participants that went into the BPL space.

That doesn't have the.

The asset management capability to manage that through distressed cycle.

You can go back to 2007 and had a lot of originators originate loans once the liquids one above 3%.

Kind of the wheels fall off for asset management on those portfolios.

Which allowed us of all types of.

Anomalies in asset management for those delinquencies, we see similar patterns here in this space, where you have investor that came in and bought a portfolio paid back it up with.

A strong asset management capability, but when looked at as more of a performing asset class.

We see opportunities, where we can step in.

And help those problems that may.

Emulate through.

Poor management, and Thats, where some of the distress and dislocation, we think will be attractive for us to leg into so when I had said earlier that we're focused on in really in our asset management capability and we see an opportunity for both service income.

Fee income are managing helping manage others.

As well as.

Taking a portfolio is down that are difficult to manage for those investors.

Got it.

You mentioned the delinquency rate on the portfolio today I.

I guess, if you could just give us a context of kind of.

Where that where that run kind of a range that you've experienced.

Kind of in your portfolio over time.

Yes, so the number is that.

Order earlier was on.

BPL bridge.

That delinquency range is on the higher end of where we have historically experience.

But is there hasnt been a time period, where are the pace of our investments in that particular asset classes slowed so a couple of <unk>.

Over the last couple of quarters, we have not really invested a lot in there. So our overall portfolio seasoning has just been at the backend so as I mentioned earlier.

There is it's fairly common for borrowers as they approach maturity to either in an effort to preserve capital and then paid off after two after a refinance or a sale that they do go delinquent.

So from our perspective, we monitor this very closely.

We in fact, one of the things that we do is.

We actually try to engage the borrower to execute extensions and try to charge the appropriate amount for these extensions because of the cost of capital of that debt on our balance sheet is high.

So for borrowers to just extend comfortably is something which we will not do so we want to engage these borrowers we will charge from the appropriate for extensions and that sometimes that negotiation results in some amount of delinquency as we work that through so overall, you'll be continuing to.

Monitor progress.

Of the performance of the portfolio, we're still very happy with where it is.

Given given the seasoning of the portfolio a lot of these projects when they are complete we will still be profitable for these investors.

So we don't see the distress in that particular area to come.

So with that we're going to we're going to continue to focus on asset management and we're going to continue to.

Monitor the levels of delinquency, but this is something that we expected as we.

Slowdown in investment activity over the last couple of quarters.

Thank you.

Thank you when limit for our next question.

Our next question comes from Bose George with <unk>. Please go ahead.

Hey, guys. This is actually Mike Smith on for Bose.

Maybe just one more on credit in the BPL business how.

Much of a pickup in delinquency rate.

Has been driven by.

Home sales freezing up versus the lack of ability or lack of availability of permanent financing do you see any trends here or is it kind of mix across the board.

I will say that the probably is what these.

Borrowers feel more is the fact that there is just less lending available generally speaking so a lot of these borrowers who would require more time to finish these projects.

Would typically seek out refinancings.

And the refinancing availabilities, just lower so because of that we tend to work with these borrowers to keep them with us.

And then sizing.

The return or the extension fees that we would charge appropriately.

One thing I'd like to add there is that you have.

A portfolio that we purposely have targeted low.

<unk>.

Percent of capital required for the completion alright. So we looked at projects were easy to complete but even in those situations.

If anybody has.

Finishing our home and refurbishing of different parts of the house and the timelines that from a 2000 early 2021 origination the talents have extended to get work done.

That's just a fact across the entire United States. So.

It's not surprising to see that you have <unk> of the portfolio that needs more time to.

To finish the project, which is where a lot of the extensions and delinquencies come up that Nick is referring to so we want to provide that timeline to complete the job.

Even though it has a lower percent of total value of the home that we approved.

For our completions, but.

But we do so we're making it aligning the bar with us and that's the point of the cost which is additional return on our investment relates to those assets, we don't make it easy we want the alignment we want the we.

Let me get difficult and somewhat.

Somewhat painful to hub was essentially put in place, but we do see that there is lots of.

Situations, where it pops up where the bar just needs more time to complete where the houses under a sale agreement and it's a 45 day close with the financing. It just takes time. So we allow for those types of things.

Great. That's helpful color and then maybe just from an asset management perspective, whats the timeline, usually look like fees et cetera in terms of kind of getting these loans resolved and then can you kind of talk about the capacity on year end.

To the extent the delinquency rate continues to increase from 13% to 14% range.

Sure. So we have an internal asset management team that have capacity to take on significantly more of these delinquencies also it's also important to note that we have servicers and asset managers on this portfolio.

Third party site that is doing a lot of the legwork in terms of communication with the borrowers and making sure that these borrowers understand what our processes are relating to extension so on and so forth.

In terms of in terms of timing it usually takes let's say if someone approaches that maturity usually takes anywhere between let's say three to six months.

To resolve in some cases sooner it really depends on what the what the why they are why its taking longer is it are they waiting for a sale or are they waiting for refinance.

And then with regards to just making sure that the cost of capital is aligned.

We are seeing our extension fees increase over the past, let's say six to 12 months. So typically now we're charging 100 to 200 basis points.

For a three month extension in the hundreds of 200 basis points will be dependent on whether or not that is paid upfront or is paid in the backend.

Great. That's really helpful. And then maybe just one more have you seen any changes to your book value So far in the first quarter.

Yes, so the quarter to date, we estimate our adjusted book value to be up between 3% to 4%.

Great. Thanks, a lot for taking the questions.

Thank you one moment for our next question.

Our next question comes from Christopher Nolan with Ladenburg. Please go ahead.

Hey, Thank you for taking my questions Nick welcome.

Christine the decline.

And interest expenses quarter over quarter was that related to last quarter had interest expense from mortgage payables.

Absent this quarter.

No. It was reclassified from interest expense to expenses related to real estate.

Yes.

So that resulted in that number being lower but if you look at our filings.

Our press release.

Have been reclassified also in <unk> and shell and the prior periods is being re class to expenses related to operating real estate.

So it's just a shifting categories right.

That's right okay.

Okay, and then on the follow up on the multi family.

I have noticed that the interest coverage quarter over quarter has declined from 170 179 to $1 50, but the ltvs have remained relatively steady quarter over quarter.

Frequently are the valuations done.

Go into that LTV formula.

So the valuations are done for our held for sale portfolio on a quarterly basis Thats part of our impairment exercise in terms of the portfolio. That's not for sale are not part of the disposal group that appraisal is really done on a yearly basis consistent with our agreement so that is updated yearly.

Okay.

A portion of it will be quarterly that's the $244 million.

Portfolio that we have will be refresh quarterly and then the 140 something million that we have on one JV structure will be refreshed yearly.

Alright, so is it fair to say that the <unk> ratios are current but the ltvs are lagging.

Yes, yes, that's a fair statement alright.

Alright, and then is the intention for the multifamily mezz portfolio to just simply run that off given the.

A more defensive characteristic of.

If you remember approaches.

Yes, so in the multifamily space.

Given that is also a kind of a short duration.

<unk> that we put in place.

We are seeing as we report every quarter, we are seeing a high pay downs.

Related to that portfolio.

The what where do you see in that space.

As the catalyst there is related to about $120 billion of senior financing that will be coming due over the next 18 months and that capital that is debt financing on multifamily property across United States that is coming due.

Coming due with Ltvs, our advance rates that are 10% to 15% lower than they were at the time of financing.

So we're.

The market lending market has obviously lowered the advance rate given the turmoil that the market is experiencing.

And what is what we see as an opportunity to there is basic GAAP funding on a short term basis related to.

Some of that refinancing activities take place. We think we can do that as Nick mentioned on the call. We think we can do that.

10% to 15% lower LTV than we have today on our portfolio and at origination and also raise our coupon anywhere from 200 300 basis points.

From where we.

Our today, so we're kind of targeting a 14% to 15% kind of coupon in that space with total turn economics on make holes that would put us in the teens we're.

We're not quite there yet in the market.

It's definitely wider.

And it's wider quarter over quarter sequentially, but.

There will be some pressure that we're going to see in that space on an on the refinancing side. So.

I wouldn't say that it's going to be a roll roll down of the portfolio its more of a wait and see.

And this bridge loan Caf funding opportunity that we think is.

Coming to our market.

No.

Okay. Thank you for the detail that's it for me. Thank you.

Okay. Thank you one moment for our next question.

Our next question comes from Eric Hagen with BTG. Please go ahead.

Hey, Thanks. Good morning Hope you guys are doing all right.

Couple from me is there any of the multifamily portfolio pledged as collateral for financing and are those assets included in the unencumbered assets that you advertise having and then the $26 $5 million.

Margin call that you received in the fourth quarter.

Can you describe which assets in the portfolio drove that margin call on when in the quarter. It was.

Kind of concentrated.

$26 5 million of net margin call for the quarter.

Big that it maybe got when spreads were really.

Wide in October thank you.

I'll answer the first question.

So the the unencumbered multifamily portfolio is not levered. So there is no leverage.

And then the unencumbered assets that we do disclose in our.

Supplemental does not include that portfolio as well.

In terms of the margin call thats, mostly related to residential loans and thats. The number that we actually paid out during the quarter.

Got it.

Was that a net margin calls for the quarter.

In October when spreads are really wide.

What was the margin call you may have received on the in the loan portfolio.

That's the gross number Eric.

That's the gross number we have.

If you look at our portfolio, we have very small portion of it on mark to market repo a lot of it is non non mark to market facilities for Securitizations.

A smaller number.

Okay, great. Thank you guys very much.

Thank you one moment for our next question.

Okay.

Our next question comes from Western Martin <unk> with <unk>. Please go ahead.

Hi, good morning, gentlemen.

My name is Wes on the small investor just looking at the results and.

The elephant in the room for me is the 401 split.

Just wanted to know what was your main focus main reason for turning the floor to one split.

Yes, so I mean, obviously.

Nothing material occurs from reverse split of our shares we do find that some of our investors.

Could afford more afford more flexibility.

And our share.

Activity in the market through better liquidity with a higher share price.

It is simply the reason why we did that.

It does bring some some liquidity to the market given the share price at that level versus <unk>.

Below $5 level so.

Obviously not much.

The change materially to the company or to the metrics simply.

And it was a measure for helping on the balance liquidity for our shares.

Okay, great that makes sense and how it the next fed interest rate hike.

Looking about.

More interest rate hikes, how has that can affect the bottom line here.

Hi are you referring to the future expected fed hike.

Yes, exactly okay, yes, so I mean look we have obviously.

Have endured.

Historic rate increases on our portfolio to date.

We have a very short duration portfolio and both multifamily single family and look when you look at our assets they are paying off.

High rate that a fifth of our portfolio that pay down.

That paid off in the in the last quarter.

Through our portfolio reduction.

We have in our multifamily JV equity.

<unk>, which benefit from.

From inflation through rent higher rental rates, we also have caps against those positions.

For our financing cost that exists.

We feel that we're well covered there so.

And ultimately we.

<unk> see it as an opportunity.

Sure.

The assets can be kind of shaken out a little bit further in the market and part of the catalyst that we see too.

Legging into better risk adjusted returns in the future.

Okay, great that sounds good thanks.

Thanks, gentlemen, I have a great day.

Thank you.

Thank you I'm showing no further questions at this time I'd now like to turn it back to Jason Serrano for closing remarks.

Yes. Thank you for spending time with US. This morning, we look forward to discussing our Q1 results. Our next call have a great day.

Thank you for your participation in today's conference. This concludes the program you may now disconnect.

[music].

Good morning, ladies and gentlemen, thank you for standing by welcome to the New York mortgage Trust's fourth quarter and full year 2022 results conference call. During today's presentation. All parties will be in a listen only mode. Following the presentation. The conference will be opened for questions. If you have a question. Please press the star followed by one one.

On your Touchtone phone if he would like to withdraw your question. Please press star one again, if you are using speaker equipment. We do ask that you. Please lift the handset before making your selection. This conference is being recorded on Thursday February 23 2023.

The release and supplemental financial presentation, with New York mortgage Trust's fourth quarter and full year 2022 results was released yesterday, both the press release and supplemental financial presentation are available on the company's website at www Dot N Y Amtrust dot com. Additionally, we are hosting a live webcast of todays call, which you can access in the events <unk>.

Presentations section of the company's web site.

Although New York Mortgage Trust believes expectations reflected in any forward looking statements are based on reasonable assumptions. It can give no assurance that its expectations will be attained.

Now at this time I would like to introduce Jason Serrano, Chief Executive Officer, Jason. Please go ahead.

Thank you and thanks, everybody for joining the fourth quarter earnings call I'm joined today by our CFO , Kristina Oreo and President Nick Nick.

2022, sorry, and be available to you today and on future calls I'm eager to speak to you today about our fourth quarter results along with a brief first quarter update I'll also discuss how we align the company with Marc with the market and why we feel prime for growth in our high return distressed environment.

I will initially provide commentary around these points and handover to Cristina Nick to provide greater detail around our financials and portfolio management.

Now we've been documenting our take on the Mark roadmap, which is on page seven for a few quarters now we believe our mark market calls have aligned well with actual quarterly progression.

An honest assessment from investors in our sector throughout the second half of 2022, and even thus far in 2003 likely contains a high degree of buyers remarks, the market shifted.

Shift started in April 2022, with the pockets that laid out the game plan for historic rate increase due to inflation not witnessed since the seventies.

In one month the market went from historic securitization financing efficiency to market dislocation as common bond investors brushed off years of missing out and instead have sat on the sidelines.

And they too.

Second quarter of last year, we took decisive actions to eliminate near term investment pipelines at the time, we were generating over $1 billion of new acquisitions per quarter. We ended the third quarter with $119 million of investments in mostly short duration Bpl's and followed up in the last quarter with just $160 million to $106 million.

Reducing our portfolio of pipeline took great effort, we have the ability to add multiples, although our fourth quarter investment activity on our balance sheet today, Nick will discuss this in more detail. However at this time, we don't see a great risk reward proposition to aggregate in this market. We believe opportunity cost of capital right now is extremely high and prudent to wait for better <unk>.

Three points.

In many ways, we see this first quarter to be inferior, but in theory buyer's market than that of the third quarter of last year.

Our story is much more than avoiding significant losses with acquisitions from the second half of last year. In fact, we avoided tying up capital along.

Losing propositions and human capital on managing these assets through a distressed environment minimize downside risk.

However, we have a clear path plan to drive EPS higher with portfolio growth through this year and to do so without dilution to our investors and incurring costly debt. The question is timing of this redeployment and what are the near term catalyst to create the opportunity for us while it is difficult to determine the de.

What seems apparent is that we are in right now on the right season.

While there are many data points and telling grass one can use to judge timing of the market reset I watched the data supporting these two graphs on page eight more closely.

The graph on the left shows the U S consumer has been.

Steeply rising credit card balances, coupled with higher interest rate paid on such that as crushing household budgets as high inflation deteriorate savings that many amassed during the pandemic personal savings rate now at two 7% as one of the lowest point ever only 2067 witness such vapor thin levels, a large pullback bank rate recently showed only 50.

Percent of Americans can afford 1000 emergency emergency expense.

Now that the borrowing Merry go round is ended many Americans will be looking through their monthly expenses are rejecting payments, which was that low utility to everyday life.

<unk> selected payment defaults that present little to no near term consequence.

It is all but certain of delinquencies will dramatically increase in a variety of asset classes, especially with loans originated over the past 18 months to low FICO score borrowers.

Overall consumption is challenged.

And we will significantly weigh on GP in 2023.

The graph to the right shows a tight escrow relationship between existing home supply and HPA recorded in the year for the past two years the market reached historically low supply at less than two months of homes inventory on the market today, we still have very low supply levels at approximately three months supply is in check and keep national home prices positive near term.

As I discussed the consumer is under significant pressure. Thus it should be should not be surprised to see supply to pick up from homeowners struggling to make ends meet for equity extraction.

After two years of double digit HVA and rent growth and in the market in 2022.

As Hap.

In the previous year on the ground conversations should even create greater volatility and large traditional specular markets, such as Phoenix, Las Vegas, and in small markets like Boise in Salt Lake in these markets, we see property investors willing to accept prices equal to their basis of two years ago, suggesting in home price decline of 20%.

5% for these investors, thus, we see significant home price pressure in these markets in the year, despite historically tight housing supply and.

In summary, unsecured debt and high LTV products, particularly late in the late 2021, and 2022 vintage will likely significantly underperformed.

Housing supply.

We will most likely be pushed higher with the constrained buyer base, new construction other types of pro forma underwriting.

We'll lead supply as these sales are often more distressed at Homer deep home are not a traditional long term holder delinquencies will follow financing will become more constrained, which we see as a likely catalyst for the opportunity and we are focused on.

Now switching over a quarter results, which you can find on page nine we ended the quarter with unappreciated loss per share of negative 12%.

In this quarter, we introduced adjusted book value per share mostly to capture the market Mark to market change on our debt most of which is in securitization reform and other noncash items Christine will elaborate further about these measures, but as some of you pointed out earlier, we thought it would be helpful for consistency consistency to disclose adjusted book value, which declined by four.

8% quarter on quarter.

Our after effect of of our previously declared dividend quarterly economic return on adjusted book value was negative two 4% nearly all book loss in the quarter were unrealized and expected to be reversed over time, we ended the year with two 6% G&A expense ratio, which we believe is one of the lowest in the market for the complexities.

Of the sectors. We are engaged in our low cost platform is deliberate we focus on our cost and believe we can obtain additional savings in 2023.

As far as quarterly investment activity, our plan was to reduce risks and focus and really as you bought some of our debt in the secondary market as well as common shares.

As a full team effort in both single family and multi tenant business. We also strengthened our asset management platform, which we believe will lead us through the distressed opportunity set we will have more details around this next quarter as some new pieces of our platform are being assembled now.

Finally, after issuing term securitization November we reduced our leverage ratio to three times and ended the quarter with 224 million of cash our cash balances will jump rabbit. The goal is to limit cash holdings and dragged by under leveraging our portfolio, we want to avoid incurring additional financing costs with additional drawdown.

And our facilities without reinvestment targets.

Page 10 shows this relationship we can raise up to $644 million of cash by utilizing financing options available to us.

With our own portfolio, thus, we can drive EPS higher without dilution to shareholders and an equity raise and also avoid expensive corporate debt placement by taking this additional asset base financing our portfolio leverage would increase to four times or five times at the company level. Thus, we have the flexibility here to obtain incremental financing while also keeping our leverage.

At market, leading little multiples.

<unk> a downturn now in view, we firmly see our differentiated patient approach as a winning one where our stockholders will benefit from our steadfast path of seeking value in a disrupted environment at this time I'll pass it over to Christine to provide a deeper dive on our financial results and then Nick on the portfolio Christine. Thank.

Thank you Jason Good morning, everyone and my comments today I will focus my commentary on the main drivers of fourth quarter financial results result.

Third quarter.

Excellent.

We had net interest income of $22 2 million a contribution of <unk> per share down from <unk> <unk> per share in the third quarter.

The decrease can be attributed to a few factors first a decrease in average interest earning assets in our portfolio due to pay downs received during the quarter as well as our decision to significantly curtail our investment activities starting at the end of the second quarter.

In addition financing costs and our investment portfolio were higher due to increases in base interest rates related to our repurchase agreements.

As a result of residential loan securitization that we completed in the fourth quarter.

Securitization is also locked in financing costs versus floating rate rebuilt and that is.

As the fed aggressively raises above expectations and may even reduce interest expense versus repo over the medium term.

Unlike in the third quarter, we had minimal sale activity, which resulted in a decrease in realized gains and other income during the quarter.

Also as previously discussed due to increases in interest rates and continued credit spread widening prices on a majority of the assets in our portfolio declined during the quarter of $42 million of unrealized losses $35 million or <unk> <unk> per share are attributed to residential loans held in securitization vehicles.

Unlike some of our peers, we do not mark our securitization liabilities to fair value and therefore, there is no corresponding unrealized gain recognized in our securitization liabilities to offset unrealized losses on the assets held in the securitization more on this point later.

Total general administrative and operating expenses amounted to $68 2 million for the quarter down from $91 6 million in the previous quarter, primarily due to one reduction in amortization expense as a result of lease intangibles related to consolidated real estate being fully amortized in the prior.

<unk>.

Reduction in depreciation expense due to the application of held for sale accounting to consolidated real estate and the disposal group and finally due to residential loan portfolio run off and minimal purchase activity, which reduced portfolio operating expenses.

Note that these numbers reflect the reclassification of interest expense related to our mortgages payable on consolidated real estate to operating expenses in the fourth quarter than in prior periods.

This quarter, we introduced a new metric adjusted book value, which is a non-GAAP financial measure, replacing unappreciated book value when presented in prior periods Unappreciated book value reflected the value of our single family rental properties and JV equity investments that after underappreciated basis by excluding from GAAP of <unk>.

The company's share of depreciation and lease intangible amortization expenses related to the operating real estate. Since we began disclosing unappreciated book value, we identified additional items thats materially affecting our book value and believe they should also be incorporated to provide a more useful non-GAAP measure accordingly.

Adjusted book value begins with the same calculation is unappreciated book value and includes two additional adjustments to GAAP book value.

First we exclude the adjustment of redeemable NCI.

To the estimated redemption value redeemable NCI represents third party ownership in one of our consolidate consolidated JV structures. These are these third party owners have the ability to sell their ownership interest to us once a year for cash, which then increases our ownership stake in the consolidated JV structure.

However, because it is a corresponding real estate are not reported at fair value were unrealized gains or losses are taken into income.

<unk> of the redeemable NCI directly affects our GAAP book value.

This adjustment adjusted book value more closely aligns the accounting treatment applied to the real estate and reflects our JV equity investments again at their unappreciated basin.

<unk> debt to finance, our investment portfolio assets are carried at amortized cost on our balance sheet.

Adjusting these financing instruments to fair value adjusted book value reflects the Companys net equity and investments on a comparable fair value basis.

We believe that adjusted book value provides investors a more useful and consistent measure of our value and facilitate the comparison of our financial performance to that of our peers.

As Jason mentioned earlier adjusted book value per share ended at $3 97 down four 8% from September 30, and translated to a negative two 4% economic return on adjusted book value during the quarter.

Consistent with our efforts to further strengthen our balance sheet and reduced mark to market risks, we completed a securitization of our business purpose loan rental book with the completion of the securitization as of December 31, the company's recourse leverage ratio on portfolio leverage ratio decreased to three times and two five times respect.

Lee.

Five times and four times, respectively. As of September 30. In addition, as indicated on slide 13, only 13% of our total financing arrangements, which includes cdos or securitization structures, the subject to mark to market margin call risk down from 23% at September 30.

Can also see on slide 13 that we have limited corporate bond maturity exposure, we have $100 million of unsecured fixed debt due in 2026 and $45 million of subordinated bonds. Due in 2035. This helps us maximize our liquidity, particularly in dislocated markets, we paid at <unk>.

Common share dividend, which was unchanged from the prior quarter, it's been the company's policy not to provide guidance or forward dividend projections, we evaluate our dividend dividend policy each quarter and look at the 12 to 18 month projection of not only our net interest income, but also realized capital gains that can be generated from our investment portfolio.

And with that I will now turn it over to Nick to go over the market and strategy update Nick.

Thanks, Christine and good morning, everyone I will walk you through our overall portfolio positioning starting first with overall portfolio acquisitions, we have meaningfully slow down our pipeline while purchases across both residential and multifamily. This really started at the end of the second quarter of 2022 and that trend continues through the fourth quarter.

<unk>.

Our fourth quarter 2022 acquisitions at $106 million is 89% lower than our prior peak up acquisitions in the second quarter of last year, we have achieved a significant reduction of activity due to our flexible purchasing arrangements and the minimal economic entanglements that we have with our various trading counterparties.

Overall, the portfolio as prepayments and redemptions have outpaced our investments over the last two quarters, which was part of the plan.

We have also continued to onboard new originators borrowers and trading partners. During this temporary lull in purchase activity.

Now delving into single family.

If you look across the board in resi portfolio, we have consciously targeted a lower LTV profile to create a margin of safety.

The portfolio across the board has ltvs in the <unk>, which in most cases should be sufficient for par payoff, even in a challenging economic environment for the more the pause in purchases in the second quarter of 2022 as housing prices peaked also means that we have less exposure to the loans that are most upsides on underwriting versus.

What we have recently experienced which was several months of home price declines.

We continue to prioritize utilizing non mark to market financings for our assets in particular for assets that may have more duration or inherent price volatility.

If youre looking at page 17 of our supplemental you can see that the total portfolio leverage ratios are quite high for an asset class like Rps at $18 six times.

This is due to the total portfolio leverage being a GAAP measure and does not factor in the change of the valuation of liabilities because of the shifting valuation of the underlying assets.

If we were to adjust for this valuation of liabilities.

Similar to our adjusted book value concept that Christine mentioned earlier, the total portfolio leverage for <unk> will be closer to seven times.

We are seeing coupons widened under our more conservative credit box and this allows us the flexibility to grow the portfolio within this asset class or to rotate when we see other opportunities.

I will note that unlike other parts of the resi portfolio, where delinquencies have been relatively stable quarter over quarter. The delinquencies and bridge loans has increased from 8% to 13, 5%.

This is due to the late stage cycle of the bridge portfolio given the limited amount of new investment activity in the last two quarters and also due to the corresponding short tenor of these assets.

The majority of these delinquencies are due to loans not making their expected balloon payment at maturity.

On the multifamily side the positive demographic trends in our target markets in the south and southeast still remain at play.

We should be able to access a thicker mezzanine tranche with approximately five to 10 additional LTV points of cushion.

Which would serve as additional credit enhancement in a recessionary environment.

It is however important to note that valuation declines has thus far been muted in our portfolio given the availability of cost efficient senior financing and strong underlying fundamentals.

As we mentioned in the previous quarter, we are waiting for yield the mezz lending to move towards the 13% to 15% range.

This has started to materialize in some respect and we hope to build small pipelines here.

The growing maturity wall of senior debt coming due in 2023, and 2024, but with equivalent senior financing only available at lower leverage points. There is an opportunity for mezz lending.

To provide mezz lending on a GAAP basis.

We believe the yield profile will continue to move towards the 13% to 15% target over the coming months due to this dynamic.

Our multifamily JV as we previously discussed we are in the process of divesting the assets in our portfolio and that is ongoing.

Relating to the multifamily portfolio performance. Once again fundamentals are strong the portfolio experienced rental growth of 11% in 2022 after an 8% growth in 2021.

Portfolio occupancy is stable at 93% at the end of 2020 to the.

The resolutions in our portfolio also continued to occur at expectation with 36 million paying off at a 12, 5% IRR.

Delinquencies remain low and our Mezz book with only one loan delinquent that is expected to pay off.

We are pleased with the performance of this portfolio and we will leverage the extensive sourcing and asset management ability of our team to drive further returns here in the future.

With that I'll pass it back to Jason for any closing comments.

Thank you Nick.

We are primed to utilize our strong liquidity under our low cost structure.

Afford greater flexibility when we remained selective across the residential housing sector in anticipation of near term market dislocation. So we can participate and we sent you see that coming buyer's market.

We want to invest through our asset management platform and we believe this will be key to unlocking value in this distressed cycle.

So at this time, we'd like to pass the call back to the operator and open up for questions.

Our first question comes from Stephen Laws with Raymond James. Please go ahead.

Hi, Good morning, Jason Good morning, everyone.

Jason I got to start first question for you.

When you look at the JV multifamily.

The JV equity portfolio. Thank you.

Announced our intent to monetize that in September . So it's been five months can you can you talk about where you stand with making some traction on.

And monetizing some of those assets and kind of how you how you see that playing out over the course of the year I think thats the.

Across roughly what 20 assets I think.

Yeah, I think it's 19 assets.

<unk>.

Looking at a variety of options, we have assets that are out in the market for sale we have invest.

Investors looking at different components of our book to take us out of our even our LP position.

We're in conversations on on.

Different parts of the portfolio. So it's active I mean as you can understand.

It was very quiet in December .

Intuit in January .

See some pent up demand given lack of investment activity in multifamily space over the over the last couple of months the market.

Shut down prematurely in November given some of the volatility that was up was out there.

We're getting good traction on.

Investors, taking a look at our properties.

We look forward to sharing more details about that.

As we said earlier calls we're not going to provide.

For guidance on timelines or where total.

Returns related to those assets as they are being marketed now and obviously, it's too speculative at this point to provide further detail there.

Okay I appreciate the comments Jason.

Maybe follow up on that.

As you look forward I know Christine made a comment around the dividend and I believe that it kind of takes a 12 or 18 month outlook, but when we think about the.

Somewhat unknown kind of monetization process of those investments and it sounds like.

In the deck in prepared remarks.

We're currently pretty patient right now as far as new investment activity leverage kind of ticked down.

Sure.

Are there thoughts to kind of what run rate earnings we're going to be for the next year I mean that make any sense to bring the dividend down near term.

And take it back up once you kind of rotated capital redeployed into new investments.

I know you used the word aggressive positioning F&B to aggressively move.

The deck kind of just wanted to get your thoughts around earnings through the year and how that compares to where the dividend currently is.

Yes so.

As you May recall, our company has historically been.

A company of kind of two paths for earnings one is through the interest income the other is through realized gains.

So what.

When we look at our and as Christine mentioned, we look at our dividend policy and set the dividend with our board.

Looking at 18 months forecast based on <unk>.

Both activity related interest income and costs and also related to realized gains we have.

With over 300 million to our portfolio of assets, where we have not recognized any gains on those assets to date due to GAAP measures.

So that provides a little bit of difficulty on.

And kind of smoothing out a earned.

Earnings calendar, given the volatility of when these assets are sold in.

And what those results look like so when we look at the entirety of our portfolio and look at what we're doing.

Quarterly basis.

Felipe inwardly kind of investment concepts, which is.

Repurchases of our debt selective purchases of assets in the market.

<unk>.

We see that.

That was the purpose of providing the tencent dividend for the fourth quarter and this is something that we discuss with the board regularly so.

We as a company, we do not provide forward guidance on our dividend.

However, the point that you are bringing is that we have slow investment activity you see a better opportunity in the future and the only other thing I'd add into that equation that you are looking at for earnings as the of the unrealized and realized activity that we can generate through ourselves. So we're going to look at all of those things.

Together and we'll continuously set we believe there is.

A prudent dividend policy going forward.

Great Thanks for that color.

Lastly, and you touched on it in your comments there but.

You've repurchased some of your debt both in Q4 and again in February can you talk about the decisions behind that capital allocation and really what makes that attractive to you right now.

Given you're generally cautious on your other options.

Yes, so when we look at the market look at the capital that we have to deploy we do see teens returns opportunity in single family multifamily.

Mostly within the bridge loan opportunity space and within multifamily.

<unk> mezzanine lending.

We believe we can achieve that now. The question is are we better what is the opportunity cost of that capital today by allocating to a 14% return when we have been circling around and seeing these opportunities that we think will percolate.

In the near term that can provide greater returns than that.

In a market, where we're trading at a discount it's difficult to know.

A raise new capital that we won't be dilutive to our shareholders instead, we'd rather.

Hold that cash back and wait for that better return and it's really a forecast over.

Kind of a two to three year total return on our capital versus making the incremental return in the next couple of months. So that's kind of the view that we're taking on.

On the asset.

Deployment.

As it relates to repurchases.

We do see in the secondary market, we traffic that market quite a bit and we do see opportunities to buy some of our securitization debt back at discounts.

Find that accretive obviously, you can monetize it as kind of immediately on those assets on those on that debt, but also provides us greater flexibility for calling transactions in the future given our bigger equity piece that we have through the creation of monetizing that that debt that we just repurchased.

It gives us more flexibility.

On that on that capital stack.

Going forward. So what we're trying to do here is to provide more options growth and at the same time.

Something that we're buying is accretive.

And lowers the risk profile for the company.

We do see them in the market we're not.

Some that we were not looking at buying all the asphalt of debt that we see in the market related to our securities, but we do see some that make more sense than others.

And then obviously, let's take a little bit further and on share repurchases we.

Those costs will come up we do see opportunities.

We utilize our capital for share repurchases and accretive on our balance sheet at a discount in the market.

We just re upped our repurchase program $200 million and we will continuously look into the market for opportunities there.

And the last thing I'll mention is.

One of the other.

Ways of kind of bridging the gap if you will on earnings for for interest income.

As we wait for this opportunity is outside the credit markets and in that area. We're looking at agencies as a way of.

Deferring some of the kind of the running cost today.

Putting assets to work and having downside protection through <unk>.

Principal protected asset class so.

I think the expectation is next.

And next quarter that you will see that were we're starting to leg into the agency market.

And we will do so even.

So if we feel like this opportunity or.

The catalyst I described earlier is taking longer to develop.

Great helpful comments, thanks, very much Jason.

North.

Thank you one moment for our next question.

Our next question comes from Doug Harter with Credit Suisse. Please go ahead.

Thanks, just on that last point about possibly deploying some capital into agency.

I guess, how do you think about.

The volatility.

That capital and kind of the risks that you are willing to take.

With that capital as it's you know as you kind of it sounds like youre viewing it more as a placeholder versus kind of the core strategy.

That's right and we have traditionally our company has recently invested in agency market had.

I had a position there for quite some time, we took it off when we felt like there was a better opportunity in the credit space.

And we've been looking at this sector ever since we took it off it's just not a core strategy for us, but it is a strategy of more of a cash management tool.

And obviously the market has experienced credit quite a bit of volatility in agency space given rates.

Which is the reason why we have an allocated to that to date. Despite the low investment activity. We've always had that as an option for us and decided against it.

We do see parts of the market that look interesting for that particular bet today and yes, you're right. It is a shorter term strategy hold but.

I can see going through this cycle that we actually may keep a position in that space on a near term on a more medium term basis. Just then on a near term basis. So we've been tracking this market.

And we believe it's.

At a time now where we can start legging into the trade given some of the volatility is.

As past now.

There is definitely more volatility come we look to fully interest rate hedge our position.

Some of that volatility from the right markets.

And look for.

Agency assets to have a better.

Agree of extension.

Given some of the spec pools that are out there. So we'll be focusing on that part of the market, but doing so.

Slowly and.

And taking consideration the volatility that may come.

Thanks.

Then earlier you guys mentioned that you're still kind of prioritizing the shorter duration.

PPL.

Can you just talk about kind of how you win.

The advantages of those shorter duration versus the opportunities to kind of locked in.

Spreads that are relatively wide today.

A longer duration.

Sure sure Doug This is Nick.

We still believe that there is probably going to be more compelling opportunities for assets with potentially more credit risk or potentially more duration in the future. So that's really what's informing us in terms of trying to focus more on the on the short term bridge.

And Furthermore, that can also build potentially buildup.

Interest income, which is something that we do have lots of parts of our portfolio.

That.

Could potentially already embedded realized gains such as our multifamily JV. So it would be good to balance that with our residential products have shorter duration that generates a high degree of interest income.

I'll add to that point real quick witches.

Something that we've been looking at and feel is likely to happen in near term.

There is a lot of market participants that went into the BPL space.

That doesn't have the.

The asset management capability to manage that through distress cycle and if you can go back to 2007 and had a lot of originators originate loans once the liquids one about 3%.

The wheels fall off for asset management on those portfolios.

Which allowed all types of.

Anomalies in asset management for those delinquencies, we see similar patterns here in this space, where you have an investor that came in and bought a portfolio payback it upwards.

A strong asset management capability, but when looked at as more of a performing asset class. So we see opportunities where we can step in.

And help those problems that may Emil.

Emulate through.

Poor management, and Thats, where some of the distress and dislocation, we think will be attractive for us leg into so when I said earlier that we're focused on internally on our asset management capability and we see an opportunity for both service income.

Fee income are managing helping manage others with their proposals as well as <unk>.

<unk> portfolio is down that are difficult to manage for those investors.

Got it and just you mentioned the delinquency rate on the portfolio today.

I guess, if you could just give us a context of kind of where that where that run kind of a range that you've experienced.

Kind of in your portfolio over time.

Yes, so the numbers that I quoted earlier was on the BPL bridge.

That delinquency range is on the higher end of where we have historically experience.

But there hasnt been a time period, where are the pace of our investments in that particular asset classes slowed.

So a couple of we have over the last couple of quarters, we have not really invested a lot in there. So our overall portfolio seasoning has just been at the backend so as I mentioned earlier there is.

Fairly common for borrowers as they approach maturity to either in an effort to preserve capital and pay it off after two after a refinance or a sale that they do go delinquent.

So from our perspective, we monitor this very closely.

We in fact, one of the things that we do is we.

We actually try to engage the borrower to execute extensions and try to.

<unk> the appropriate amount for these expenses because of the cost of capital of that debt on our balance sheet is high.

So for borrowers to just extend the comfortably is something which we will not do so we want to engage these borrowers we will charge them the appropriate for extensions and that sometimes that negotiation results in some amount of delinquency as we work that through so overall you'll be continuing.

Monitor progress.

The performance of the portfolio, we're still very happy with where it is.

Given given the seasoning of the portfolio a lot of these projects when they are complete we will still be profitable for these investors.

No we don't see the distress in that particular area to come.

So with that we're going to we're going to continue to focus on asset management and we're going to continue to.

Monitor the levels of delinquency, but this is this is something that we expected as we.

Slowdown in investment activity over the last couple of quarters.

Thank you.

Thank you when limit for our next question.

Our next.

Comes from Bose George with <unk>. Please go ahead.

Hey, guys. This is actually Mike Smith on for Bose.

Maybe just one more on credit in the BPL business.

How much of a pickup in delinquency rate.

Has been driven by.

Home sales freezing up versus the lack of ability or lack of availability of permanent financing do you see any trends here or is it kind of mix across the board.

I will say that the probably is what these.

Borrowers feel more is the fact that there is just less lending available generally speaking so a lot of these borrowers who would require more time to finish these projects.

Would typically seek out refinancings.

And the refinancing availabilities, just lower so because of that we tend to work with these forwards to keep them with us and then sizing the return or the extension fees that we would charge appropriately.

One thing I'd like to add there is that you have.

A portfolio that we purposely have targeted low.

Percent of capital required for the completion alright. So we looked at projects were easy to complete but even in those situations.

If anybody has.

Finishing at home and refurbishing of different parts of the house and the timelines that from a 2000 early 2021 origination the talent have extended to get work done and Thats, just a fact across the entire United States. So it's not surprising to see that you have <unk> of the portfolio that needs more time to.

To finish the project, which is where a lot of the extensions and delinquencies come up that Nick is referring to so we want to provide that that timeline to complete the job.

Even though it has a lower percent of total value of the home that we approved.

<unk> completions, but.

But we do so in making it.

Lining the bar with us and Thats the point of the cost which is additional return on our investment related to those assets. We don't make it easy we want to make we want the alignment we wont be we wont make it difficult and.

Somewhat painful to have was essentially put in place, but we do see that there is lots of.

Situations, where it pops up where the largest needs more time to complete where the houses under a sale agreement and it's a 45 day close the financing. It just takes time, so we allow for those types of things.

To the extent the delinquency rate continues to increase from this 13% 14% range.

Third party site that is doing a lot of the legwork in terms of communication with the borrowers and making sure that these forward understand what our processes are relating to extension so on and so forth.

In terms of in terms of timing it usually takes let's say if someone approaches that maturity usually takes anywhere between let's say three to six months.

To resolve.

In some cases sooner it really depends on what the.

Why they are why it is taking longer is it are they waiting for a sale or are they waiting for refinance.

And then with regards to just making sure that the cost of capital is aligned.

We are seeing our extension fees increase over the past, let's say six to 12 months. So typically now we're charging 100 to 200 basis points.

For a three month extension in the hundreds of 200 basis points will be dependent on whether or not that is paid upfront or is paid in the backend.

Great. That's really helpful. And then maybe just one more have you seen any changes to your book value So far in the first quarter.

Yes, so the quarter to date, we estimate.

Our adjusted book value to be up between 3% to 4%.

Great. Thanks, a lot for taking the questions.

Thank you one moment for our next question.

Our next question comes from Christopher Nolan with Ladenburg. Please go ahead.

Hey, Thank you for taking my questions Nick welcome.

Christine the decline.

And interest expenses quarter over quarter was that related to last quarter had interest expense from mortgage payables was that absent this quarter.

No. It was reclassified from interest expense to expenses related to real estate.

So that resulted in that number being lower but if you look at our filings.

Our press release.

Those have been reclassified also in <unk> and shell and the prior periods is being re class II expenses related to operating real estate. Okay. So it's just a shifting category right.

Right.

Okay, and then on the follow up on the multi family.

I've noticed that the interest coverage quarter over quarter has declined from 170 179 to $1 50, but the ltvs have remained relatively steady quarter over quarter, how frequently are the valuations done.

Go into that LTV formula.

So quick question quarterly.

Some of it will be quarterly that's the $244 million.

The portfolio that we have will be refresh quarterly and then the 140 something million that we have on one JV structure will be.

Fresh yearly.

So is it fair to say that the <unk> ratios are current but the ltvs are.

Lagging.

Yes, yes, that's a fair statement alright.

Alright, and then is the intention for the multifamily mezz portfolio to just simply run that off given the.

A more defensive characteristic of.

Of your investing approach uses.

Yes, so in the multifamily space.

Given that is also a kind of a short duration.

<unk> that we put in place.

We are seeing as we report every quarter, we are seeing high paydowns.

Related to that portfolio.

The what where do you see in that space.

Is coming due with Ltvs, our advance rates that are 10% to 15% lower than they were at the time of financing.

So we're.

The the market.

Ending market has obviously lowered their advance rate given the turmoil that the market is experiencing.

And what is what we see as an opportunity to there is basic GAAP funding on a short term basis related to.

Some of that refinancing activity and easy to take place. We think we can do that as Nick mentioned on the call. We think we can do that.

10% to 15% lower LTV than we have today on our portfolio and at origination and also raise our coupon anywhere from 200 to 300 basis points.

From where we.

Our today, so we're kind of targeting a 14% to 15% kind of coupon in that space with total turn economics on make holes that will put us in the teens.

We're not quite there yet in the market.

It's definitely wider and wider quarter over quarter sequentially, but.

There will be some pressure that we're going to see in that space on an on the refinancing side. So I.

I wouldn't say that it's going to be a roll roll down of the portfolio its more of a wait and see.

This bridge loan.

Funding opportunity that we think is.

Coming to market soon.

Okay. Thank you for the detail that's it for me. Thank you.

Okay. Thank you one moment for our next question.

Our next question comes from Eric Hagen with BTG. Please go ahead.

Hey, Thanks, Good morning, I Hope you guys are doing alright a.

A couple from me is there any of the multifamily portfolio pledged as collateral for financing and are those assets included in the unencumbered assets that you advertise having.

And then the $26 $5 million.

<unk> call that you received in the fourth quarter.

Can you describe which assets in the portfolio drove.

That margin call on when in the quarter it was.

Concentrated.

Is that $26 $5 million net margin call for the quarter.

How big that it maybe get when spreads were really.

Wide in October .

Yes.

I'll answer the first question.

So the the unencumbered multifamily portfolio is not levered. So there is no leverage on them and then the unencumbered assets that we do disclose in our <unk>.

Supplemental does not include that portfolio as well.

In terms of the margin call thats, mostly related to residential loans and thats. The number that we actually paid out during the quarter.

Got it.

Was that a net margin for the quarter look like in October when spreads are really wide.

What was the margin call you may have received on the in the loan portfolio.

That's the gross number Eric.

That's the gross number we have.

If you look at our portfolio, we have very small portion of it on mark to market repo a lot of it is non non mark to market facilities of Securitizations.

At this moment.

Okay, great. Thank you guys very much.

Thank you one moment for our next question.

Our next question comes from Western Martin with <unk>. Please go ahead.

Hi, good morning, gentlemen.

My name is Wes on the small investor.

Looking at the results and the <unk>.

Also in the room for me is the 401 split.

Just wanted to know what was your main focus main reason for turning the floor to one split.

Yes, so I mean, obviously.

Nothing material occurs from reverse split of our shares we do find that some of our investors.

Could afford more for more flexibility.

Our share.

Activity in the market through better liquidity with a higher share price, which is simply the reason why we did that.

It does bring some some liquidity to the market given the share price at that level versus.

Below $5 level so.

Obviously not much.

Change materially to the company or to the metrics simply on a measure for helping on the balance liquidity for our shares.

Okay, great that makes sense and how are the next steps.

Interest rate hike.

On the boat.

More interest rate hikes, how has that can affect the bottom line here.

Are you referring to the future expected fed hike.

Yes, exactly okay, yes, so I mean look.

We have obviously.

Have endured.

Historic rate increases on our portfolio to date.

We have a very short duration portfolio and both multifamily single family and look when you look at our assets they are paying off.

High rate that a fifth of our portfolio that pay down.

That paid off in the in the last quarter.

Through our portfolio reduction.

We have in our multifamily JV equity.

<unk>, which benefit from.

From inflation through rent higher rental rates, we also have caps against those positions are.

Our financing costs that exist.

We're well covered there.

And ultimately.

<unk> see it as an opportunity.

Sure.

The assets could be kind of shaken out a little bit further in the market and part of the catalyst that we see too.

Legging into better risk adjusted returns in the future.

Okay, great that sounds good thanks, gentlemen, I have a great day.

Thank you.

Thank you I'm showing no further questions at this time I would now like to turn it back to Jason Serrano for closing remarks.

Yes. Thank you for spending time with US. This morning, we look forward to discussing our Q1 results on our next call have a great day.

Thank you for your participation in today's conference. This concludes the program you may now disconnect.

Q4 2022 New York Mortgage Trust Inc Earnings Call

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