Q4 2023 New York Mortgage Trust Inc Earnings Call

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Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the New York Mortgage Trust's fourth quarter 2023 results conference call. During today's presentation, all parties will be in a listen-only mode.

Good morning, ladies and gentlemen, and thank you for standing by and welcome to the New York Mortgage Trust's fourth quarter 2020 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.

Operator: Following the presentation, the conference will be open to questions. If you have a question, please press star followed by one one on your touchtone phone. If you would like to withdraw your question, please press the pound key. If you are using speaker equipment, we do ask that you please lift the handset to make a selection.

If you have a question. Please press star followed by one one on your Touchtone phone. If you would like to withdraw your question. Please press the pound key if you are using speaker equipment. We do ask that you. Please lift the handset before making your selection.

Operator: This conference is being recorded on Thursday, February 22nd, twenty-two four. I would now like to turn the call over to Christine Salem, Investor Relations. Please go ahead.

Conference is being recorded on Thursday February 22nd 2024, I would now like to turn the call over to Christina <unk> Investor Relations. Please go ahead.

Christine Salem: Thank you all for joining New York Mortgage Trust's fourth quarter 2023 earnings call. A press release and supplemental financial presentation with New York Mortgage Trust's fourth quarter 2023 results were released yesterday. Both the press release and supplemental financial presentation are available on the company's website at www.nymtrust.com. Additionally, we are hosting a live webcast of today's call, which you can access in the events and presentations section of the company's

Thank you all for joining New York Mortgage Trust fourth quarter 2023 earnings call.

Yes release, and supplemental financial presentation, with New York mortgage Trust's fourth quarter 2023 results was released yesterday, both the press release and supplemental financial presentation are available on the company's website.

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.

Christine Salem: At this time, management would like me to inform you that certain statements made during the conference call, which are not historical, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although New York Mortgage Trust believes the expectations reflected in any foregoing statements are based on reasonable assumptions, I can give no assurance that its expectations will be. Factors and risks that could cause actual results to differ materially from expectations are detailed in yesterday's press release and from time to time in the company's filings with the Securities and Exchange Commission. Now, at this time, I would like to introduce Jason Serrano, our Chief Executive Officer. Jason, please go ahead.

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.

Although New York Mortgage Trust believes the expectations reflected in any forward looking statements are based on reasonable assumption.

It can give no assurance that its expectations will be attained.

Factors and risks that could cause actual results to differ materially from expectations are detailed in yesterday's press release and from time to time in the company's filings with the Securities and Exchange Commission.

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

Jason Thomas Serrano: Thanks, Christy. Welcome to New York Mortgage Trust's fourth quarter earnings call. Also joining me is our President Nick Ma and our CFO, Christy Nario. After the Fed Chair surprised Dover's commentary late in the fourth quarter, much relief was immediately provided to the market in the form of lower medium-term rates. However, the market gave back much of its relief after the latest CPI print, which was more than a two-step deviation, then, from market expectations. With these gyrations, economists continued to update models with forecasts to predict the likelihood and timing of a soft landing or recession. Curiously, under extreme unbalanced sector gains in the U.S. equity markets, debate rages on about the ability of the U.S. economy to innovate its way through the hangover of a debt-fueled expansion. Our task is to determine how to prudently allocate capital against the potential long-term investment risk posed by slowing this economy. Our planning for this cycle was vastly completed last year.

Okay.

Thanks Christie welcome to New York Mortgage Trust fourth quarter earnings call also joining me is our president Nick <unk> and.

And our CFO Kristina Oreo after the fed chair surprise dovish commentary late in the fourth quarter. Much relief was immediately provides to the market in the form of lower medium term rates. However, the market gave back much as relief after the latest keep our print which was more than a <unk> innovation event for market expectations with these gyrations economics continued to update <unk>.

Models with forecast to predict the likelihood and timing of a soft landing or a recession curiously under extreme unbalanced record gains in U S equity markets debate rages on about the ability of the U S economy to innovate its way through the hangover of a debt fueled expansion.

Our task is to determine how to prudently allocate capital against the potential long term investment risk posed by slowing us economy.

Our planning for this cycle was vastly completed last year now in 2024, we look forward to building the company's earnings base, given a portfolio reshaped with lower credit risk and asset duration. A goal for today is explains evolution and why we believe our balance sheet is primed for growth through a dislocated market. We believe this cycle camp.

Jason Thomas Serrano: Now, in 2024, we look forward to building the company's earnings base, given a portfolio reshaped with lower credit risk and asset duration. A goal for today is to explain this evolution and why we believe our balance sheet is primed for growth in a dislocated market. We believe this cycle can provide significant value to the company, not just over 2024 but for the remainder of the decade. For success, our team will need to reach deep into the multiple decades of investment experience in sourcing, valuation, and asset management execution. We are excited about the opportunity ahead of us. Starting with fourth-quarter activity noted on page four of our Q4 supplemental, the company generated earnings per share of $0.35 or $0.37 on an undepreciated basis, adjusted book value per share at the end of the quarter at $12.66, or down 2.09%. After the 20 cent dividend, the quarterly adjusted economic return was negative 54%.

Provide significant value to the company not just over 2024, but the remainder of the decade.

For success, our team will need to reach deep into the multiple decades of investment experience in sourcing valuation and asset management execution. We are excited about the opportunity ahead of us.

Starting with fourth quarter activity noted on page four of our Q4 supplemental the company generated earnings per share of <unk> 35, or <unk> 37 on a <unk>.

Appreciate basis adjusted book value per share ended the quarter at $12, 66% or down two 9% after 'twenty dividend quarterly adjusted economic return was negative 54 basis points.

Jason Thomas Serrano: Book value gains from our single-family portfolio were largely offset by evaluation reductions to our multifamily joint venture equity portfolio. After further dispositions, unrealized losses, and reclassifications of certain properties to held and used in the quarter, we have approximately $35 million remaining of capital allocated to JV multifamily equity that we intend to sell in the near term. Christine and Nick will provide additional details on this point a bit later.

Book value gains from our single family portfolio was largely offset by valuation reductions to our multifamily joint venture equity portfolio.

After further dispositions unrealized losses, and reclassifications of certain properties to held and used in the quarter. We have approximately $35 million remaining of capital allocated JV multifamily equity that we intend to sell in the near term Kristina Nick will provide additional details on this point a bit later and setting.

Jason Thomas Serrano: In setting up 2024, we enhanced our purchasing power by renewing and increasing warehouse line capacity to $2.2 billion, providing $1.6 billion of undrawn financing as of the fourth quarter. Additionally, to enhance liquidity, we issued our third BPL securitization in early January. Consistent with past deals issued by NYMT, the $225 million securitization contains a revolver for future BPL acquisitions. Page 8 of our supplementary report shows two important graphs that help shape our market view, starting with U.S. deficit spending, which may have had a role in delaying economic contraction in 2023. The CBO recently reported that the U.S. budget deficit is expected to total $1.6 trillion in 2024. Moreover, over the next 10 years, the budget gap will grow another $1 trillion.

2024, we enhanced our purchasing power by renewing increasing warehouse line capacity to $2 2 billion provided $1 6 billion of Undrawn financing as of the fourth quarter.

Additionally to enhance liquidity, we issued our third BPL securitization in early January January consistent with past deals issued by <unk>. The 225 billion in securitization with teens revolver for future <unk> acquisitions.

Page eight of our supplemental shows two important graph that helps shape, our market view, starting with the U S deficit spending which may have had a role in delaying economic contraction in 2023. The CBO recently reported that the U S budget deficit is expected to total $1 six trillion in 2024 over the next 10 years the budget.

Jason Thomas Serrano: Remarkably, interest expense is expected to total over $1 trillion this year alone. The consequence of high Treasury issuance to fund U.S. deficit spending could result in stubbornly high long-term rates, even in the case where Yellen continues to utilize a high allocation of short-term bills to fund the budget shortfall. To meet the liquidity needs of the U.S. government, global investment allocation to U.S. Treasuries could be diverted from other sectors and tenors within those sectors. In this scenario, the CRE space is particularly vulnerable.

<unk> will grow another one trillion remarkably interest expense is expected to total over <unk> in this year alone. The consequence of high Treasury issuance to fund use debit spending could result in stubbornly high long term rates, even the case yellen continues to utilize a high allocation of short term bills to fund the budget.

Well to meet the liquidity needs of the U S government global investment allocation to U S treasuries could be diverted from other sectors and tenders within those sectors in this scenario the CRE space, particularly vulnerable.

Jason Thomas Serrano: Fresh liquidity is required to recapitalize $2.8 trillion of debt maturing over the next four years, half of which is held by banks. Banks' ability to offer CRE refinancing packages on the one hand, while fending off CRE loss reserves on the other, is likely to further restrict lending in the market. The opportunity available for permanent capital vehicles with access to liquidity is great. For over a decade, our team has experienced generating opportunities in the multifamily bridge loan sector. Combined with extensive asset management experience, the New York Mortgage Trust platform can opportunistically navigate through the CRE dislocation on multiple fronts. We see a spillover effect constraining residential loan markets as well.

Liquidity is required to recapitalize to $8 million of debt maturing over the next four years half of which is held by banks.

<unk> ability to offer CRE refinancing packages on one hand, while fending off CRE loss reserves on the other is likely to further restrict lending in the market the opportunity available for permanent capital vehicles with access to liquidity is great for a over a.

Decade, our team has experienced generating opportunities in the multifamily bridge loan sector, coupled with extensive asset management experience New York Mortgage Trust platform can opportunistically navigate through the CRE dislocation on multiple fronts.

We see a spillover effect constraining residential loan markets as well <unk>.

Jason Thomas Serrano: Bridge loans and alternative financing for single-family residential properties used for investment purposes are likely to be transformed into a new generation of lending. After $3.5 billion of residential bridge loans invested to date, our team has the experience to capitalize on the opportunity. As previously documented, our approach to enhance company liquidity began in March 2022. We committed to curtailing investment activity, particularly in medium to long-duration credit risks, in favor of a portfolio rebalancing to provide enhanced flexibility. In early 2023, we continued to prioritize increased liquidity over balance sheet growth in consideration of a potential slowing U.S. economy and increased market credit. However, later in 2023, we recognized a recession call was premature.

Bridge loans and alternative financing for single family residential properties used for investment purposes is likely to be transformed into a new generation of blending after $3 5 billion of residential bridge loans investor to date.

Our team has the experience to capitalize on the opportunity.

As previously documented our approach to enhance company liquidity began in March 2022.

We're committed to curtailing investment activity, particularly in medium to long duration credit risks in favor of our portfolio rebalancing to provide enhanced flexibility in early 2023, we continue to prioritize increased liquidity over balance sheet growth and consideration of a potential slowing U S economy and increased market credit concerns.

Later in 2023, we recognized a recession Paul was premature Nevertheless, we remain concerned about a screening market liquidity. Thus, we increased our portfolio exposure to agency MBS to stabilize portfolio interest income. We are pleased to report that company adjusted interest income.

Jason Thomas Serrano: Nevertheless, we remain concerned about a strain in market liquidity. Thus, we increased our portfolio exposure to agency RMBS to stabilize portfolio interest income. We are pleased to report that company adjusted interest income increased 22% quarter over quarter to $72.5 million.

Increased 22% quarter over quarter to $72 5 million.

Jason Thomas Serrano: At the start of the fourth quarter, we added agency RMBS at attractive spreads. We also continue to add short-duration, high-coupon residential property bridge loans, reversing a sequential quarter portfolio decline. With recent improvements to securitization market funding, we expect to meaningfully add detailed bridge loans throughout the year. With $431 million of dry powder available, not including capital allocated to the liquid agency RMBS sector, our balance sheet is structured for growth.

At the start of the fourth quarter, we added agency MBS at attractive spreads. We also continue add short duration high coupon residential property bridge loans reversing a sequential quarter portfolio decline with recent improvement to securitization market funding, we expect to meaningfully add detailed bridge loans throughout the year.

<unk> with $431 million of dry powder available not liquidity capital allocated to the liquid agency MBS sector, our balance sheet is structured for growth.

Christine: We will continue to utilize a patient approach to portfolio growth. We believe this path will yield superior results not only this year but has the potential to enhance results in the years ahead as trillions of dollars of maturing commercial real estate debt are sorted out. At this time, I'll pass the call over to Christine for additional comments on our financial results and then to Nick for portfolio manager discussion.

We'll continue to utilize our patient approach for portfolio growth. We believe this path will yield superior results not only this year, but has the potential to enhance results in the years ahead as trillions of dollars of maturing commercial real estate debt is sorted out.

At this time I will pass the call over to Christine for additional comments on our financial results and then to Nick for portfolio manager discussion Christine.

Christine: Thank you, Jason. Today, I will focus my commentary on the main drivers of fourth... Our financial snapshot on slide covers key portfolio metrics for the company, and slide 26 summarizes the financial results. As Jason just covered, the company had undepreciated earnings per share of $37.6 million, compared to undepreciated losses per share of $1. Our earnings were impacted primarily by valuation improvements on a residential loan in Blanford, Florida, which resulted in $1.69 per share of unrealized gains recognized during. These gains were offset by a recognition of 38 cents per share of law on certain multifamily real estate assets held by JV Equity Investments and Disposal Group held for sale due to a decrease in the estimated fair value less cost to sell of the real estate act and the We experienced solid momentum in our portfolio acquisitions over the past three quarters after significantly reducing our investment activity for most of 2020, increasing our investment portfolio on a net basis by approximately $0.4 billion and $1.3 billion during the fourth quarter of the year. Respect.

Thank you Jason Good morning today, I will focus my commentary on the main drivers of fourth quarter financial results, our financial snapshot on slide 12.

Key portfolio metrics for the quarter.

26 summarizes the financial results for the quarter.

Jason just covered the company has underappreciated earnings per share of <unk> 37.

This quarter as compared to underappreciated loss per share of $1 <unk>.

Third quarter <unk>.

Earnings were impacted primarily by valuation improvements on our residential loan and bond portfolios, which resulted in $1 69 per share of unrealized gains recognized during the quarter.

These gains were offset by a recognition of 38 cents per share of losses on certain multifamily real estate assets held by JV equity investments and disposal group held for sale due to a decrease in the estimated fair value less cost to sell the real estate assets.

And the reclassification of certain of our joint venture equity investments in multifamily properties from held for sale to held in us and I will discuss further.

We experienced solid momentum in our portfolio acquisitions over the past three quarters after significantly reducing our investment activity for most of 2022.

Increasing our investment portfolio on a net basis by approximately <unk> 4 billion and $1 3 billion during the fourth quarter and the year, respectively, ending at $5 1 billion as of December 31. This was the primary driver of the increase in our interest income and adjusted interest income contribution for the <unk>.

Christine: Ending at $5.1 billion as of December 31st, this was the primary driver of the increase in our interest income and adjusted interest income contribution. Net interest income was relatively flat in the fourth quarter, contributing $16.8 million or $0.19 per share, while our adjusted net interest income, a non-GAAP financial measure, increased to $23.5 million from $20.7 million in the fall. Our quarterly adjusted interest income increased by $13.2 million, primarily as a result of the $674 million in investments made in agency RMDS and higher yielding short duration BPL. The increase in adjusted interest income was partially offset by a $10.4 million increase in adjusted interest expense due to the financing of investments. However, our interest rate swaps continue to benefit our portfolio, reducing our adjusted interest expense during the year.

Quarter.

Net interest income was relatively flat in the fourth quarter contributing $16 $8 million or <unk> 19 per share while our adjusted net interest income and non-GAAP financial measure increased to $23 5 million from $20 7 million in the third quarter.

Our quarterly adjusted interest income increased by $13 2 million, primarily as a result of the $674 million in investments made in agency RMB.

And higher yielding short duration BPL bridge loans during the quarter.

The increase in adjusted interest income was partially offset by a $10 4 million increase in adjusted interest expense due to the financing of investments made during the quarter our.

Our interest rate swaps continue to benefit our portfolio, reducing our adjusted interest expense during the quarter.

Christine: Overall, the operations of our consolidated multifamily joint venture properties contributed a net loss of $0.08 per share. Since investing in this asset class, we have disposed of six multifamily joint venture properties, four of which occurred in the second quarter of this year and one in the current. This resulted in a decrease in overall net loss from real estate during the.

Overall, the operations of our consolidated multifamily joint venture properties contributed a net loss of eight cents per share during the quarter.

Since investing in this asset class, we have disposed of six multifamily joint venture properties four of which occurred in the second quarter of this year and one in the current quarter. This resulted in a decrease in overall net loss from real estate.

Christine: As mentioned earlier, we recognize 34.4 million or 38 cents per share of losses related to the following. First, and $18.3 million, or $0.20 per share, loss from impairment charges in real estate due primarily to lower net operating income resulting in lower property value As compared to our carrying costs and multifamily property, And second, a $16.2 million or $0.18 per share loss related to reclassification of nine multifamily properties from held for sale to held in use as of December 31, as they no longer met the criteria to be held for sale in conformity with, The reclassification of the real estate assets from held-for-sale to held-and-used was at the lower of fair value or carrying amount before the real estate assets were classified as held-for-sale, adjusted for depreciation and amortization expense that would have been recognized had the real estate assets been continuously classified as This change to our plan of sale on these JV investments and multifamily properties was due to unfavorable market conditions and the lack of transactional activity in the multifamily market, negatively impacted our ability to secure a reasonable buyer and completely exit our investment in these giant, We continue to market for sale our JV equity investments and five multifamily properties, but we can provide no assurance of the timing or success of our ultimate exit from these investments.

During the quarter as mentioned earlier, we recognized $34 4 million or <unk> 38 per share of losses related to the following.

<unk> and $18 3 million or <unk> 20 per share loss from impairment charges and real estate due primarily to lower net operating income estimates.

<unk> and lower property valuations as compared to our carrying costs are multifamily properties held for sale and second a <unk>.

$10 2 million or <unk> 18 per share loss related to reclassification of nine multifamily properties from held for sale to housing use as of December 31.

They no longer met the criteria to be held for sale in conformity with GAAP.

The reclassification of the real estate assets from held for sale to how the news was at the lower of fair value our carrying amount before the real estate assets were classified as held for sale adjusted for depreciation and amortization expense that would have been recognized had the real estate assets been contingency classified as held for use.

This change to our plan of sale on these JV investments in multifamily properties.

Two unfavorable market conditions, and a lack of transactional activity in the multifamily market.

<unk> impacted our ability to secure a reasonable buyer and completely exited our investment in these joint ventures.

We continue to market for sale or JV equity investments in multifamily properties like we can provide no assurance of the timing or success of our ultimate exit from these investments.

Christine: As mentioned earlier, fair value changes related to our investment portfolio continue to have a significant impact on our. During the quarter, we recognized $152.9 million, or $1.69 per share, of unrealized gains due to higher asset prices on our residential loan and bond portfolio. These games were partially recognized, by a $0.71 per share in law, in our derivative instruments, primarily consisting of interest rate swaps and $0.27 per share in real life losses related to the sale of non-agency RMBS and CMBS and losses incurred on foreclosed properties during the quarter. We had total GNA expenses of $11.7 million, which remained relatively flat as compared to the third quarter.

As mentioned earlier fair value changes related to our investment portfolio continued to have significant impact on our earnings during the quarter, we recognized $152 9 million or $1 69 per share of unrealized gains due to higher asset prices on a residential loan and bond portfolios.

Gains were partially offset by a <unk> 71 per share and losses recognized on our derivative instruments, primarily consisting of interest rate swaps and caps and 27 per share unrealized losses related to the sale of non agency RMB SMC MBS and losses incurred on foreclosed properties during the.

Quarter, we had total G&A expenses of $11 7 million.

It's remained relatively flat as compared to the third quarter.

Christine: We had portfolio operating expenses of $6.1 million, which increased primarily due to legal fees incurred related to the asset management of our BPL Bridge portfolio. Adjusted book value per share ended at 12.6, down 2% from September 3rd. The main drivers of our adjusted book value change were a $0.35 basic income per share, a reduction of $0.20 per share related to our declared dividend, a reduction of $0.07 per share primarily due to the removal of cumulative depreciation and amortization add-backs attributable to consolidated multifamily properties for which impairment was recognized during, and a negative 39 cents per share change in estimated fair value of her life. As of quarter end, the company's recourse leverage ratio and portfolio recourse leverage ratio increased to 1.6 times and 1.5 times, respectively, from 1.3 times and 1.2 times, respectively, as of September.

We had portfolio operating expenses of $6 1 million, which increased primarily due to legal fees incurred related to the asset management of our BPL bridge portfolio.

Adjusted book value per share ended at 12.66 down 2% from September 30.

The main drivers of our adjusted book value change was a 35 cents and basic income per share a reduction of <unk> 20 per share related to our declared dividend a reduction of seven cents per share primarily due to the removal of cumulative depreciation and amortization add backs.

Charitable to consolidated multifamily properties for which impairment was recognized during the quarter and a negative 39 per share change in estimated fair value of our liabilities.

As of quarter end, the company's recourse leverage ratio and portfolio recourse leverage ratio increased to one six times and one five times, respectively from one three times and one two times, respectively as of September 30.

Christine: While our financing leverage remains low relative to historic levels, we would expect our leverage to move higher as we expand our holdings of highly liquid agencies. Our portfolio recourse leverage on our credit book is up slightly, 0.4 times when compared to 0.3 times for previous. Currently, 58% of our debt is subject to mark-to-market margin, of which 45% is collateralized by agency RMBS and 13% is collateralized by residential credit assets. The remaining 42% of our debt as of December 31 has no exposure to collateral repricing by our counterparts.

While our financing leverage remains low relative to historic levels, we would expect our leverage to move higher as we expand our holdings of highly liquid agency RBS.

Our portfolio of recourse leverage on our credit book is up slightly.

Four times, when compared to <unk> three times for the previous quarter.

Currently 58% of our debt subject to Mark to market margin calls of which 45% is collateralized by agency RMB and 13% collateralized by residential credit assets.

The remaining 42% of our debt as of December 31 has no exposure to collateral repricing by our Counterparties.

Nick: And as Jason mentioned earlier, we completed a revolving business purpose loan securitization. Consequently, this securitization reduced debt subject to market risk from 58% to 55%, and our recourse leverage ratio and portfolio recourse leverage ratio to 1.5 times and 1.4 times, respectively. We paid a $0.20 per common share dividend down from $0.30 in the prior quarter. We continue to evaluate our dividend policy each quarter and look at the 12 to 18 month projection of not only our net interest but also realize the capital gains that can be generated from our investment portfolio. We remain committed to maintaining an attractive current yield for our shareholders, and we believe that the current dividend provides excess liquidity for reinvestment in a more attractively priced asset. I will now turn it over to Nick to go over the market and strategy update. Thanks, Christine. Good morning, everyone.

And as Jason mentioned earlier, we completed our revolving business purpose loan securitization last month.

Sequentially, the securitization reduce debt subject to mark to market risks from 58% to 55% and our recourse leverage ratio and portfolio recourse leverage ratio to one five times and one four times respectively.

We paid a <unk> 20.

<unk> per common share dividend down from 30 in the prior quarter, we continue to evaluate our dividend policy each quarter and look at the 12 to 18 months projection of not only our net interest income but also realized.

Capital gains that can be generated from our investment portfolio, we remain committed to maintaining an attractive current yield for our shareholders and we believe that the current dividend provides excess liquidity for reinvestment and a more attractively priced market I will now turn it over to Nick to go over the market and strategy update Nick.

Thanks, Christine good morning, everyone.

Nick: In the quarter, we witnessed a key moment in the shift of the market center. This follows the pivot in the Fed's stance on future monetary policy. Through Q4, we experienced dramatic moves in interest rates, with five-year treasuries trending up to 5% in October, then sharply reversing course to end the year at 3.9%. The Fed's restrictive policy has made further inroads into subduing inflation, with economic data in the quarter pointing to the continued moderation of inflationary pressure.

In the quarter, we witnessed a key moment in the shift of the market sentiment.

This follows the pivot and the fed stance on future monetary policy.

Through Q4, we experienced dramatic moves in interest rates with five year treasuries trading up to 5% in October.

Sharply reversing course every year at three 9%.

Defense restricted policies has made further inroads in subduing inflation with economic data in the quarter. According to the continued moderation of inflationary pressures.

Nick: Fed Chair Powell's remarks in December further highlighted that the FOMC is now taking a more balanced approach to tackling inflation and managing economic downturns. The market reacted positively, with tightening spreads across asset classes alongside a falling interest rate curve. Over the course of the last year, NYMT has refocused on growing the balance sheet to achieve more consistent earnings. This was a changed strategy given several prior quarters of minimal investment activity. We were initially concerned about heightened credit risks under the Fed's restrictive interest rate regime.

Sure Paul's remarks in December further highlighted by the <unk>.

<unk> is now taking a more balanced approach to calculate inflation and managing economic risks.

The market reacted positively with tightening spreads across asset classes, alongside a falling interest rate curve.

Over the course of the last year <unk> has refocus on growing the balance sheet to achieve more consistent earnings. This was shifted strategy given several prior quarters of minimal investment activity.

Were initially concerned of heightened credit risks under the feds restrictive interest rate regime.

Nick: Through 2023, we grew our portfolios such that we could generate more consistent income while also maintaining liquidity for future opportunities. Over the quarter, we invested in 674 million of assets, primarily concentrated in 416 million of agency RMDS and 232 million of BPL-Bridge. The pace of agency RMDS purchases has slowed from last quarter's $946 million as we curbed our buying in response to the decline in yields in the latter half of the quarter. Current coupon mortgage spreads to interpolated 5- and 10-year treasuries started the quarter in the high 170s, reached a quarterly peak in October in the high 180s, then trended down to the end of the year in the high 130s. 77% of our agency purchases in the quarter were prior to the near-term peak of rates on October 9th.

Through 2023, we grew our portfolio is such that we can generate more consistent income while also maintaining liquidity for future opportunities.

Over the quarter, we invested in $674 million of assets, primarily concentrated in $416 million of agency RBS by $232 million of BPL bridge loans.

Pace of agency MBS purchases has slowed from last quarter's $946 million as we curbed our bias in response to the decline in yields in the latter half of the quarter.

Current coupon mortgage spreads to interpret later five and 10 year treasuries started the quarter in the high 100, Seventy's reached a quarterly peak in October and the high Eighty's, then trended down to be every year in the high 100 <unk>.

77% of our agency purchases in the quarter was prior to the near term peak of rates on October 19th.

Nick: In DPL Bridge, we have made further progress to boost the volume of asset acquisitions with three quarters of consecutive growth. In 2023, we have grown our agency RMBS book from zero to almost $2 billion in market value. We took advantage of the historically wide spreads in the sector that persisted throughout the year, driven by high interest rate volatility and tepid incremental demand from banks and money managers. In particular, we sought to build a portfolio of higher coupon-specified pools under this favorable return environment. Quarter over quarter, the agency RBS portfolio grew by approximately 30% on a market value basis. The average coupon of our spec pools continues to rise, increasing from 5.73% to 5.85% this quarter, driven by purchases primarily concentrated in 6.5% coupon bonds. Leveraging the strategy declined to 6.7 times as of year end, down from 8.5 times in the prior quarter.

A detailed bridge we have made further progress to boost the volume of asset acquisitions with three quarters of consecutive growth.

In 2023, we have grown our agency MBS from zero to almost $2 billion of market value.

We took advantage of the historically wide spreads in the sector that persisted throughout the year driven by high interest rate volatility and tepid incremental demand from banks and money managers.

Particular, we sought to build a portfolio of higher coupons specified pools under this favorable return environments.

Quarter over quarter, the agency MBS portfolio grew by approximately 30% on a market value basis.

The average coupon of our spec pools continues to rise increasing from 573% to $5 eight 5% this quarter driven by purchases primarily concentrated in six 5% coupon bonds.

Leveraging the strategy declined to six seven times as of Europe down from $8 five times in the prior quarter. The declining leverage ratio was due to price increases and the agency bonds amidst lower yields and the slowdown of acquisitions in the latter half of the quarter.

Nick: The declining leverage ratio was due to price increases in agency bonds amid lower yields and the slowdown of acquisitions in the latter half of the quarter. However, given the available capital and the ability to scale up leverage in the portfolio, we still have capacity to meaningfully expand our agency RMDS exposure. We look to increase the portfolio's allocation to agencies under the current market environment, with high spreads still presenting a compelling risk-adjusted return. Additionally, the asset class also has the added benefit of having outperformed in periods of economic downturn. BPL Bridge is a core asset class for us due to its high return and short penner profile.

Given the available capital and the ability to scale up leverage in the portfolio, we still have capacity to meaningfully expand our agency MBS exposure.

We look to increase the portfolio's allocation to agencies under the current market environment with high spreads still presenting a compelling risk adjusted return. Additionally.

Additionally, the asset class is also an added benefit of having outperformed <unk>.

<unk> of economic downturn.

Detailed bridge as a core asset class for us due to its high return and short tenor profile.

Nick: The short tenor of the portfolio allows for flexibility to redeploy the return capital into BPL Bridge or other investments, depending on market conditions. From a credit perspective, the BPL Bridge portfolio continues to perform to expectations. For the past few quarters, the level of delinquency in BPL Bridge has moderated to 20 percent.

The short tenor of the portfolio allows for flexibility to redeploy the return of capital and to BPL bridge for other investments depending on market conditions.

From a credit perspective, the BPL bridge portfolio continues to perform to expectation.

Over the past few quarters, the level of delinquency and BPL bridge has moderated to 20% and.

Nick: And life-to-date cumulative losses in the strategy are under 10 basis points. In the past, the shrinking BPL-Bridge portfolio balance due to our reduction in investment activity contributed to the high delinquency numbers on a percentage basis. Under the heightened acquisition pace, where the portfolio is growing quarter over quarter, this delinquency effect should be muted. For our current acquisition pipeline, we note that the credit profile of new purchases has improved versus the existing portfolio. In particular, we try to avoid niche subsectors within BPL, such as Ground-Up Construction or Small Balance Multifamily.

I'd like to take cumulative losses, and this strategy is under 10 basis points.

In the past the shrinking BPL bridge portfolio balanced due to our reduction in investment activity contributed to the high delinquency numbers on a percentage basis.

Under the Titan acquisition pace, where the portfolio is growing quarter over quarter vis delinquency effect should be muted.

For our current acquisition pipeline, we note that the credit profile of new purchases has improved versus the existing portfolio. In particular, we try to avoid niche subsectors within BPL bridge, such as ground up construction or small balance multifamily.

Nick: These are segments of the market that have experienced constraints given the retrenchment of regional bank lending and therefore an increased risk of future credit dislocation. Furthermore, both ground-up and small-balance multifamily present increased default management challenges if delinquencies rise. Our purchases in the quarter consisted of only 3% ground-up construction loans versus the portfolio average of 13%. We did not purchase any multifamily-backed bridge loans in Q4.

These are segments of the market that have experienced constraints given the retrenchment of regional bank lending and therefore, an increased risk of future credit dislocation.

Furthermore, both ground up and small balance multifamily present increased default management charges if delinquencies rise.

Our purchases in the quarter consists of only 3% ground up construction loans versus the portfolio average of 13%.

We did not purchase any multifamily backed bridge loans in Q4.

Nick: The credit profile of our purchases, both historically and today, remains strong, with borrower credit scores above 700 FICO, loan to after repair value ratios or LTARVs in the mid-60s, and Loan to Cost Ratios or LTCs in the low 70s. We aim to continue growing our purchases in BPL Bridge in the coming quarter. In January 2024, NYT also executed on its third BPL bridge securitization. This two-year revolving structure will be beneficial for the funding of existing and future purchases of BP oil spills. On the heels of tightening rates and spreads in the fourth quarter, there has been a flurry of activity in the non-agency securitization market, with issuers trying to capitalize on better deal execution than what was available for most of 2023.

The credit profile of our purchases both historically and today remains strong with borrower credit scores above 700 FICO lowered.

Lower two after repair value ratios are LTE rvs in the mid sixties.

And loan to cost ratios, our LTC is in the low seventies.

We aim to continue growing our purchases and detailed bridge in the coming quarters.

In January 2024, <unk> also executed third BPL bridge securitization.

This two year revolving structure will be beneficial for the funding of existing and future purchases of PPL bridge.

On the heels of tightening rates and spreads in the fourth quarter. There has been a flurry of activity in the non agency securitization market.

Issuers are trying to capitalize on better deal execution than what was available for most of 2023.

Nick: An additional noteworthy point is that the first ever investment grade rated bridge securitization came to market in 2024, which will be an important evolution in the structure to fund these assets. Moreover, rated transactions should provide better financing costs relative to the historical unrated structure. NYMT's BPL Bridge Purchase Program fits very well with the tighter credit box necessary for a rated transaction. Rated deals have more punitive structural treatment of ground-up construction due to its correlation with higher rehab requirements.

An additional noteworthy point is that the first ever investment grade rated bridge securitization came to market in 2024, which will be an important evolution in the structure to fund these assets.

<unk> transactions should provide better financing costs relative to the historical unrated structures.

Rmp's BPL bridge purchase program fits very well with a tighter credit box necessary for radio transaction.

Rated deals have more punitive structural treatment of ground up construction due to its correlation with higher rehab requirements. It is also restrictive on multifamily bridge loans.

Nick: It is also restrictive on multi-family bridge loans. As I alluded to before, we have already been reducing exposure to these loans. We plan to be an issuer of these rated deals in the future. On multifamily mezzanine lending, 2023 continues the historical strong performance of this asset. The payoff rate of the portfolio accelerated in 2023 at 37% compared to 32% in 2022. This is also higher than the historical annual payoff rate of 28%. The expectation for this portfolio is that this payoff rate should continue to remain high, primarily driven by the seasoning of the portfolio at 29 months and the 83% LTV at origination. Occupancy rates of the portfolio today have also been strong, at 90%.

As I alluded to before we have already been reducing exposure to these loans already.

Hard to be an issuer of these reader deals in the future.

On multifamily mezzanine lending 2023 continues the historical strong performance of this asset class.

The payoff rate of the portfolio has accelerated in 2023 at 37% compared to 32% in 2022.

This is also higher than the historical annual payoff rate of 28%.

The expectation for the portfolio is that this payoff rate should continue to remain high primarily driven by the seasoning of the portfolio at 29 months and the 83% LTV at origination.

Occupancy rates of the portfolio today have also been strong at 90%.

Nick: Given that we have significantly reduced our purchases since 2022, our portfolio has more years of locked-in rental growth at lower property acquisition entry. This translates into an additional equity buffer for the borrower and further alignment with NYMT's mezzanine position. We believe that the sponsors in our portfolio are in a position to monetize these assets today, fueling paydowns in the portfolio, contrast this with later vintage originations in the market. We have limited exposure to originations from 2022 onwards as Fed rate increases took center stage. There has been upward pressure on cap rates and market shifts, causing certain pro forma projections on NOI to be unachievable.

Given that we significantly reduce our purchases since 2022, our portfolio has more years of locked through rental growth.

Lower property acquisition entry points. This translates to additional equity buffer for the borrower and further alignment with NYU Ts mezzanine position.

We believe that the sponsors in our portfolio are in a position to monetize these assets to date.

Fueling pay downs in the portfolio.

Contrast, this with later vintage originations in the market.

We have limited exposure to originations from 2022 onwards.

Rate increases took center stage, there has been upward pressure on cap rates and market shifts, causing certain pro forma projections on NOI to be unachievable.

Nick: On multifamily JV equity, we do not expect any future equity funding of new positions within this asset, as our efforts are focused on the asset management and sale of the existing portfolio. We have made progress on the wind down of these assets, which began in Q3 of 2022. So far, we have completed the sale or resolution of six of the original 20 properties, leaving 14 remaining properties as of the end of the year.

On multifamily JV equity, we do not expect any future equity funding of new positions within this asset class as our efforts are focused on the asset management and sale of the existing portfolio.

We have made progress on the wind out of these assets that began in Q3 of 2022.

So far we have completed the sale or resolution of six of your original 20 properties, leaving 14 remaining properties as of the end of the year.

Nick: In the quarter, as Christine noted, we have moved nine of the remaining 14 assets to be held in. The market for the sale of these properties has become more challenging, at the pending Ford Supply and New Multi-Family Property, contributing to slowing rent growth, increased operating expenses, taxes, and insurance have also impacted overall property NOI. These factors, along with interest rate volatility and an uncertain path for future cap rates, result in a wider bid-ask spread in the market. We find it more productive for our asset management team to complete any beneficial value-add programs on these properties to maintain or bolster occupancy for an improved NOI profile in the future. I'll now turn the call back to Jason. Thanks, Nick.

In the quarter as Christy noted we have moved nine of the remaining <unk> assets to held in used.

The market for the sale of these properties.

Some more challenging as.

That's the pending port supply new multifamily properties has contributed to slowing rent growth.

Increased operating expenses taxes and insurance have also impacted overall property NOI.

These factors along with the interest rate volatility and an uncertain path for future cap rates result in the wider bid ask spread in the market.

We find it more productive for our asset management team to complete any beneficial value add programs on these properties to maintain or bolster occupancy for an improved NOI profile in the future.

I'll now turn the call back to Jason.

Jason Thomas Serrano: The company is focused on opportunities in a market undergoing a structural landscape change. Balance sheet growth is expected to continue with agency securities, short-term bridge loans, and structured derivatives. In this new environment, success may be achieved through organic creation of liquidity, tactical asset management, and prudent liability management. At this time, I'd like to open the call to questions. Thank you and thank you. As a reminder to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.

Thanks, Nick the.

The company is focused on opportunities in new market undergoing a structural landscape change balance sheet growth is expected to continue with agency Securities short term bridge loans and structured derivatives in this new environment success may be achieved through organic accretion liquidity tactical asset management and prudent liability management.

At this time I'd like to open the call for questions. Thank you.

And thank you.

As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

Operator: Please stand by while we compile the Q&A roster. And one moment for our first question, www.thevenusproject.com. And our first question comes from Jason Weaver from Jones Trading. Your line is now open. Hi, good morning.

And one moment for our first question.

And our first question comes from Jason Weaver from Jones trading your line is now open.

Hi, good morning, Thanks for taking my question.

Jason Weaver: Thanks for taking my question. So I was wondering how you look at the effective trade-off in terms of allocating new capital to agency versus BPL bridge and what the relative ROEs are. Is that really just a timing issue alone given that, you know, allocating to agency is, you know, just a lot more liquid market in the immediate term? Yeah, thanks for the question, Jason. This is Nick.

So I was wondering how you look at the effective trade off in terms of allocating new capital to agency versus BPL bridge and what the relative Roe.

Is that really just a timing issue alone given that.

Allocating to agency is just a lot more liquid market in the immediate term.

Yes. This is thanks.

Thanks for the question Jason This is Nick.

Nick: Yeah, a big part of it is the fact that agencies are liquid. You're seeing faster growth in that portfolio because we can deploy capital much quicker. But the goal is to have our BPL bridge continue to grow.

Yes, a big part of it is the fact that agencies are liquid youre seeing.

Faster growth in that portfolio, because we can deploy capital much quicker.

But the goal is to have our BPL bridge to continue to grow in terms of Roe.

Nick: In terms of ROEs, we do see, based on our leverage ratios in our agency portfolio, somewhere in the mid-teens type return. And then, in our BPL bridge, we see, under a securitization profile, somewhere in the high-teens type return. So at the margin from a return perspective, we do prefer BPL bridge, but because of our, as I mentioned earlier, a tighter credit box, it does take a little bit longer to procure.

We do we do see.

Based on our leverage ratios and our agency portfolio somewhere in the mid teens type return.

And then in our BPL bridge, we see under our securitization profile. So we're at a high teens type of return so at the margin from a return perspective, we do prefer BPL bridge, but because of our as I mentioned earlier.

Our credit box it does take a little bit longer to procure.

Nick: Thank you. That's helpful. And focusing a little bit more on the agency side, I was curious how you think about the convexity risk and some of those higher coupon assets. If you do get softer monetary policy, what's the likely reaction in prepayments on some of those?

Got you. Thank you that's helpful and focusing a little bit more on the agency side I was curious how you think about the convexity risk in some of those higher coupon assets do get softer monetary policy, what's the likely reaction and prepayments on some of those are you thinking.

Nick: Are you thinking? Yeah, we do understand that there is a trade-off between the convexity and the carry profile that we are targeting. Our general stance is that rates, and we have started to see that at the beginning of this year, will potentially stay higher for longer, so we don't mind participating in that particular part of the coupon stack. Furthermore, we do have a relatively large credit portfolio, and our credit portfolio that was accumulating at a time period when rates were lower has a different convexity profile with lower coupons in that particular sector. So we find that this is a nice balance for both. So a lot of the BPL bridge that we are buying has a higher coupon, higher return, and a lot of the agencies also have that high carry profile at the expense of some convexity risk, but we do believe looking at the portfolio as a whole is relatively balanced. Thanks, that's a helpful color.

Yes.

We do understand that there is there is a tradeoff between the convexity and the carry profile that we are that we are targeting.

Our general stance is that rates and we have to start to see that at the beginning of this year.

Potentially stay higher for longer so we don't mind participating in that particular.

And that particular part of the coupon stack.

Further. Furthermore, there is also we do have a relatively large credit portfolio and our credit portfolio that was accumulating and at a time period, where rates were lower has a different convexity profile.

With lower coupons in that particular sector. So we find that this is this is a nice balance for both so a lot of the BPL British over buying has higher coupon higher return and a lot of the agencies also have that hi, Terry profile at the expense of some some convexity risk, but we do believe looking at the portfolio as a whole is relatively balanced.

Thanks, that's helpful color and just one more taking I appreciate your comments on the remaining multifamily JV equity that you have on board I think it is.

Jason Thomas Serrano: And just one more, you know, taking in, I appreciate your comments on the remaining multifamily JV equity that you have on board. I think it's in just to hone in on, I believe it's 14 assets and about $35 million in equity are so much so about, You know, have you actively been marketing those properties, and have you received any bids, but they just really are at haircuts that are not attractive to you? Or is it not at that stage yet? I'll take that question. Jason Serrano

And just to hone in I believe it's 14 assets at about $35 million.

And equity or so.

About.

How do you actively been marketing those properties and have you received any bids but they just really are at haircuts that are not attractive to you or is it not at that stage yet.

And I'll take that Jason Serrano.

Jason Thomas Serrano: The five assets that we have marketed, we have not received bids directly on those assets just yet. Two of those, and I'm talking about this year, two of those were in a process last year where the sponsor walked away from a deposit that we held back. And that was due to changes in their funding requirements and rates that moved on them during that period, and it seemed like that buyer wasn't hedged. So in that case, we did have very attractive pricing there, and we looked to basically go back out to the market, given that the funding costs had alleviated somewhat and were back to the kind of levels where these buyers were engaged. So that's just two of the five.

The the five assets that we have marketed.

We have not received bids directly on those assets just yet.

Two of those.

And I'm talking about in this year two of those were in a process last year, where the sponsor walked away from a deposit that we that we held back.

And that was due to changes in their funding requirements and.

And rates that moved on them during that period and it seemed like that buyer wasn't hedged so in that case.

Did have.

Very attractive pricing there and.

And we look to go back out to the market.

Given that the funding costs have alleviated somewhat and are back to the kind of levels where.

These buyers are engaged so that's just two of the five and again overall, it's a very small portfolio.

Jason Thomas Serrano: And again, overall, it's a very small portfolio. And the assets we chose to put out to the market are assets that we've completed our value-add program on, where we believe that the go-forward NOI has been stabilized, and therefore, the bids will be attractive for us to execute. And just to further round up the question, we have nine assets that are not part of our disposal group and are held in use, and those are assets that we are still in the process of completing our value-added program on, and there's a bit of a J curve that's still left on those assets. We have looked at whether or not those assets should be part of that disposal group, and the answer is, given that the cash flows are increasing, the NOI is increasing on those assets, as those value-add programs, CAPEX programs, have achieved higher rents, and entail a more difficult funding market, we believe it's better to hold those assets on more of a medium- to longer-term basis and benefit from the NOI growth and property valuation So that's kind of split out, and on those nine, we have not received bids directly on those assets. Okay, that's helpful. Thanks again for your time, and thank you.

And the assets, we chose to put out to the market our assets that we've completed our value add program.

We believe that the go forward NOI has been stabilized and therefore, the the bids will be attractive for us to execute.

And just a further round up the question, we have nine assets, which are not part of our.

Part of the sale or disposal group and are held in use and those are assets that we are still in the process of completing our value added program and theres a bit of a J curve thats still left on those assets.

We have looked at whether or not that should be part of that disposal group and the answer is given that the cash flows are increasing the NOI is increasing in those assets as those value add program capex programs achieve higher rents.

And in today's more difficult funding market, we believe it's better to hold those assets on a more of a medium to longer term basis.

<unk>.

Benefit from the NOI growth and property valuation valuation increase so that's kind of split out and.

Those nine we have not.

We received bids directly on those assets.

Okay. That's helpful. Thanks again for the time.

Alright.

Thank you.

Okay.

Jason Weaver: And one moment for our next question. And our next question comes from Bose George from KBW. Your line is now open. Good morning.

And one moment our next question.

Okay.

And our next question comes from Bose George from <unk>. Your line is now open.

Bose George: Actually, one more on agency MBS. In 2024, how big a piece of your, you know, or your assets or equity do you think agency MBS could become? Thanks for the question. A lot of it is market-dependent. Right now, Z-spreads are around 160, in the low 160s, in terms of what we're seeing today.

Good morning. Thank you one more on the agency MBS.

In 2024, how big a piece of your.

Are your assets your equity do think agency MBS could become.

That's my question.

We it's a lot of it is market dependent.

Right now the spreads are around $1 60 in the low 100 <unk> in terms of where we were what we're seeing today.

Nick: A lot of the assets that we were purchasing in the earlier half of the last quarter were higher than that. So, at this juncture, we do believe that the pace of agency RMBS procurement, given current market conditions, will be a little bit slower. But with that said, we do have available capacity to leg into this. I would say that we will still have a relatively consistent pipeline, in terms of purchases from quarter over quarter, but the pace will not be as robust as we have seen in Q3 and Q4. So, okay, great, that's helpful. Thanks.

Lot of the assets that we were purchasing in the earlier.

Earlier half of the last quarter was higher than that.

So from at this juncture, we do believe that the piece of agency MBS procurement given current market conditions will be a little bit slower.

But with that said, we do have available available capacity to look into this.

I would say that the.

We will still have a relatively consistent pipeline in terms of purchases.

From quarter over quarter, but the pace will not be as quick as it is.

As robust as we've seen in Q3 and Q4.

Nick: And then switching over to the JV, you know, the multifamily portfolio, what's the current return on the equity that's in that mix? And, I mean, if you retain that or the other nine properties, is the return there really coming from sort of the increase in the value of that over time? Or just trying to think about how that impacts the overall ROE of the balance? Yeah, so on the JV equity book, you know, the $57 million that we have exposed on our held for the held in use group and $35 million in JV equity, I would say overall, not materially significant to our earnings growth, given the size that that's remaining.

Okay, Great. That's helpful. Thanks, and then switching over to the JV the multifamily portfolio.

What's the kind of the current return on the equity that's in that mix.

I mean, if you retain that or the.

The other nine properties is the return theyre really coming from.

The increase in the value of that over time or just trying to think about how that impacts the overall Roe.

The balance sheet.

Yes, so on the JV equity book.

57 million that we have exposed on our.

Help.

The <unk> group and $35 million in JV equity I would say overall not materially significant to our earnings growth given the size that's remaining.

Nick: You know, these assets were bought at a, you know, 5% cap rate and levered. And, you know, going forward, we believe that a lot of the return attribution from here is going to be on property valuation increases as the NOI builds. I mean, we, when I talk about the value add program, it's more than just releasing activity and getting a better, you know, sequential quarter year over year rent increase. It's also our occupancy.

These assets were bought in the 5% cap rate and Levered.

And go forward.

We believe that a lot of the return attribution from here is going to be on property valuation increase as the NOI builds.

When I talk about the direct program, it's more than just re leasing activity and getting a better.

Sequential quarter of year over year rent increase it's also our occupancy now many of the units had to be.

Nick: Many of the units had to be, you know, unoccupied when the valuation as the value add program was implemented. And then, you know, putting tenants back in really materially increases the value of the property. So, you know, we expect to go forward from here, the cash flows of the property will obviously be in, you know, kind of the mid single digit range, but evaluation is what we're focused on as it relates to that value add, and we call it the, you know, the J curve in this program. Okay, great.

On.

<unk> as the valuation as the value add program was implemented and then putting tenants back in really materially increases the value of the property.

We expect go forward from here.

The cash flows of the property obviously.

Kind of mid single digits, a range, but evaluation is what we're focused on as it relates to that value add.

And we call it the J curve in this program.

Bose George: And then actually, just one more in terms of the portfolio, as it is right now going into 24. What's the kind of economic return? Do you think that it can generate?

Okay, Great and then actually just one more in terms of the portfolio.

As it is right now going into 'twenty four.

The economic return do you think that it can generate.

Bose George: The portfolio, are you speaking specifically about the multi-family JV equity or just the portfolio as a whole? No, actually, the whole balance sheet, just, you know, just the ROE or, you know, just including expenses, just kind of, you know, how do you think it's positioned now in terms of what it can generate? We estimate about a mid-teens return. I'll add to that.

The portfolio are you speaking specifically about the multifamily JV equity earnings.

No actually the whole balance sheet.

It does.

Earlier, this including expenses kind of.

How do you think its position now in terms of what it can generate.

We estimate of a mid teens return.

Jason Thomas Serrano: So, you know, Nick just highlighted the return attribution per asset class. One of the biggest factors for us on earnings growth is, you know, the deployment of our dry powder that we've highlighted at $431 million in Q4, which also does not include, you know, the agency capital allocation that we've included. And, you know, with the way we're looking at agencies, you know, we're very opportunistic on that asset class. As Nick mentioned, the pace will change depending on what the market's providing us with in terms of entry points. But overall, you know, we see that as a means to deploy capital and to stabilize our interest earnings, which we started in March 2023.

I'll add to that so.

Nick just highlighted the return attribution per asset class.

One of the biggest factors for us on an earnings growth.

Is the deployment of our as our dry powder that we have highlighted $431 million.

As of the end of Q4, which also does not include the agency capital allocation that we've included.

And with the way we're looking at agencies.

We're very optimistic on that asset class.

As Nick mentioned, the pace will change depending on what the market is providing us an entry points.

But overall, we see that as a.

As a means to play capital in.

To stabilize our interest earnings, which we started in March 2023.

Jason Thomas Serrano: But overall, you know, we're looking for further dislocation in this market and more attractive entry points, particularly in the credit space, where risk-adjusted returns are, we believe, not as attractive as they will be in the future. And therefore, you know, these are assets where, you know, looking in the credit space, anywhere from five to seven-year durations, you only have an opportunity to buy them once, and then you're dealing with asset management and go-forward returns from there. So, you know, we want to be very patient in our deployment schedule as it relates to those longer-duration assets. As I highlighted in my earlier comments, we do see about $2.8 trillion of CRE debt that's going to be coming due in the next four years. That's about half a billion per year.

But overall, we're looking for further <unk>.

For dislocation this market more attractive entry points, particularly in the credit space, where risk adjusted returns we believe are.

Not as attractive as will be in.

In the future and therefore.

These are assets, we're looking in the credit space anywhere from five to seven year durations.

You don't have an opportunity to buy once and then youre dealing with asset management and Gulfport returns from there. So we are we want to be very patient and our deployment schedule as it relates to those longer duration assets.

As I highlighted in my earlier comments, we do see about.

$2 eight trillion dollars of CRE debt, that's going to be coming due in the next four years, that's about a half of $1 billion per year.

Jason Thomas Serrano: And banks are obviously very exposed to that, with 50 percent of the exposure. And with that said, you know, liquidity, we believe, will be strained as the CRE debt is sorted out. So, overall, we do see more attractive opportunities in the future, highlighting our more conservative stance on deployment and asset allocation. Okay, great. That's helpful.

And banks are obviously very exposed to that with 50% of the exposure.

And with that said liquidity, we believe will be strained.

As the CRE debt is sorted out so overall, we do see more attractive opportunities in the future.

Highlighting our our more conservative stance on deployment and asset allocation.

Bose George: Thank you, and thank you. And one moment for our next question. And our next question comes from Matthew P. Howlett from B. Reilly. Your line is now open. Hi, good morning, everyone.

Okay, Great. That's helpful. Thank you.

And thank you.

And one moment our next question.

And our next question comes from Matthew <unk> from B Riley. Your line is now open.

Matthew Philip Howlett: Thanks for taking my question. Hey, Jason, how do you, how do you, Matt? I love this slide on the CRE market, the maturities coming up, and you know, what's being held by the banks. And all that stuff's probably underwater.

Hey, good morning, everyone. Thanks for taking my question, Hey, Jason heavy petting.

I Love this slide on the CRE market, the maturities coming up and what's being held by the bank.

Matthew Philip Howlett: How do you envision NYAT participating in that? Are you going to be buying some sort of distressed paper out there? Will you be providing rescue capital? How do you think yields and leverage yields will be calculated? Are we talking about teens here?

All that stuff's, probably underwater how do you envision in NY and keep participating.

Are you going to be buying sort of distressed paper out there.

Providing rescue capital.

How can you envision yields unlevered yields are we talking mid teens just.

Matthew Philip Howlett: Just walk me through how you think NYT participated was probably gonna be a wave of maturity defaults and other distress. Yeah, great question. So, you know, the way we look at this market is in two ways. There's a vintage effect.

Walk me through how you think <unk> can participate in was probably going to be a wave of maturity defaults and other distress.

Yeah, Great question. So the way we look at this market is <unk> theres a vintage effect. The vintage effect is based on entry points and financing cost at that time.

Jason Thomas Serrano: The vintage effect is based on entry points and financing costs at that time. And so if you look at basically, you know, 2021 first half and earlier, we see that as more of a performing market opportunity for us in the case of preferred equity, lending, mezzanine lending, as simply as, you know, senior lending cut back about 20% to 15% in LTV, there needs to be a bridge lending gap funding source for that paper. That's an opportunity that is more on the performing side. And I'll call that dislocated.

And so if you look at basically 2020 ones first half and earlier, we see that as more of a performing market opportunity for us and in the case of preferred equity lending mezzanine lending as simply as senior lending cut.

Cut back about 20% to 15% LTV there needs to be a bridge lending gap funding source for that paper, that's an opportunity that is more on the performing side and I'll call that dislocated on the distress side.

Jason Thomas Serrano: On the distressed side, you know, it's the 2021 second half vintage and later where, you know, funding costs and LTV have been cut back on senior lending, but there are also issues with NOI and basically negative carry related to current financing costs. So, you know, as the market is now in around 6% plus type of financing costs, and your cap rates at those earlier purchase points were at the four and three quarters to five to five and a quarter range. You know, there's going to be some haircuts that have to be taken on those assets to basically refloat the positive carry. So in that case, the opportunity is multiple, you know, in multiple directions.

2021 second half antigen and later.

Sure.

Not only.

Have funding cost LTV has been cut back on senior lending, but there is also issues on NOI.

And this can carry related to current financing costs, so as the market.

Is now in around 6% plus type of financing costs and your cap rates at those earlier purchase points, where the four and three quarters to five to five and a quarter range.

There is going to be some haircuts that have to be taken on those assets.

Two basically refloat the.

Positive carry so in that case the opportunity is multiple.

Jason Thomas Serrano: It's recaps, it's, you know, senior loan purchases. And, you know, I argue that, you know, a lot of this is to come. There's been quite a bit of capital raised in the market as a whole, which we're looking at as well. And there just hasn't been a lot of opportunity with respect to banks selling at discounts.

In multiple directions, it's recaps.

Senior loan purchases and I would.

Argue that a lot of this is to come.

Been quite a bit of capital raised in the market as a whole.

We're looking at as well and there just hasnt been a lot of opportunity with respect to bank selling at discounts. The market has not gotten to that point, just yet, but we believe over the course of as these maturity schedules continue to come through and the lack of <unk>.

Jason Thomas Serrano: The market has not gotten to that point just yet, but we believe, you know, as these maturity schedules continue to come through and the lack of willing buyers stepping up at current valuations, there's an opportunity there to work with banks, not only with respect to, you know, loan purchases but also with respect to servicing. You know, our asset management platform is, you know, the 30 person team has been doing this for multiple decades. You know, it's very capable, and not many institutional players are involved in that space where we can come in and use our technology and experience to help these positions and also get a look at the potential outtake of the actual of the opportunity or the restructuring that would take place.

Willing buyers stepping up at current evaluations.

There is an opportunity there.

To work with banks, not only with respect to loan purchases, but also with respect to servicing.

Our asset management platform.

<unk>.

A 30 person team of doing this for multiple decades.

It is very capable and very not many institutional players are involved in that space, where we can come in and use our technology and experience to help these positions and also get a look at the potential uptake of the actual loan.

The opportunity or the restructuring that would take place. So we have been spending a lot of time that an.

Jason Thomas Serrano: So, you know, we have been spending a lot of time on that, and we see an enormous opportunity for us, you know, in the near term. Oh, that's interesting. You could partner with the bank to buy paper and do all those services.

Enormous opportunity for us.

In the near term.

That's interesting because you could partner with the banks and buy paper into servicing that debt.

Matthew Philip Howlett: That's, that's an interesting dynamic. I mean, I know it's early, but near the crystal ball, are we talking what type of, I'm assuming a lot of these deals are to be unlevered. We think you're already getting mid teams in your agency in 19 on your BPL.

It's an interesting dynamic I mean, I know I know, it's early but in your Crystal ball I mean are we talking what type of I'm assuming.

A lot of these deals are can be unlevered.

You're already getting mid teens in the agency and 19 in your BPL, you think yields could be bad or unlevered yields at or above that.

Matthew Philip Howlett: Do you think yields could be bad or unlevered yields that are above that? And you know, in this market, I mean, it just seems like it could be an incredible opportunity in any sense of what returns could look like. Yeah, I mean, we're seeing that our mezzanine, you know, the mezzanine asset class today is around a 15% return opportunity. And that's, you know, kind of the 70s, very low 80s LTV range.

Mark I mean, just to it seems like it could be an incredible opportunity any sense on what returns could look like.

Yes, I mean, we are seeing that our mezzanine.

The mezzanine asset class today is around a 15% return opportunity.

And that's it.

On the.

Seven years, very low Eighty's LTV range.

Jason Thomas Serrano: So, you know, if you're looking at these assets, and particularly, let's call them loan purchases, the market is going to, you know, look at them as a mid-teens type return opportunity. I mean, all you have to do is look at the debt funds that have been raised in this asset class and the return hurdles that they're speaking to their investors, and you can back into what you think those senior notes, a discount, based on the three and a half percent coupon that would exist on that bond or that note. So, you know, overall, you know, our opportunity, we would not avail our capital to it unless we saw a mid-teens and above type of return on our capital. Great Well, it's worth keeping all that dry powder for it.

So if youre looking at these assets and particularly at let's call. It was called loan purchases the market is going to.

Look at it as a mid teens type return opportunity I mean, all you have to do is look at the debt funds have been raised in this asset class and the return hurdles that they are speaking to their investors and you can go back into what you think what those that senior note discount and greatly based on the three 5%.

Coupon that would exist on that on that bond or that note. So.

Overall.

Our opportunity, we would not avail, our capital to it unless we saw.

Mid teens and above type of return.

Through our to our capital.

Great well towards keeping all that dry powder for it thanks a lot.

Matthew Philip Howlett: Thanks a lot, and thank you. And one moment for our next question. And our next question comes from Doug Harder from UBS. Your line is now open. Hi, this is Corey Johnson on behalf of Doug Carter.

Okay. Thank you.

And one moment our next question.

And our next question comes from Doug Harter from UBS. Your line is now open.

Alright.

Corey and counting on for Doug Harter.

Doug Harder: Sorry if I missed this earlier, but do you happen to provide any update on the book value for the updated book value for this upcoming first quarter? Hi Corey, no, we did not mention that earlier, so as of February 20th, we see the quarter-to-date adjusted book value to be down about 3%. Okay, thank you. I appreciate it. Thank you, and thank you. And one moment for our next question. And our next question comes from Eric Hagen from BTIG. Your line is now open. Hey, good morning.

Sorry, if I missed this earlier.

Yes, I'm going to provide any update on the book value for that.

<unk> updated book value.

Sure.

For the first quarter.

Hi, Cory no we did not we did not mention that earlier.

So as of February 20th.

We see quarter to date adjusted book value to be down about 3%.

Okay. Thank you I appreciate it that's all ahead.

Thanks.

And thank you.

And one moment our next question.

And our next question comes from Eric Hagen from <unk>. Your line is now open.

Eric Hagen: I hope we're doing well. A follow-up on the book value, mark-to-market, quarter-to-date. Can you flesh out or provide any color about what's maybe, uh, drag that down a little bit? And then, in the BPL Bridge portfolio, is there an unfunded commitment that's associated with that?

Hey, good morning, Hope Youre doing well a follow up on the book value Mark to market quarter to date can you.

Flesh out or provide any color about what's maybe.

Drag that down a little bit.

And then on the BPL bridge portfolio is there an unfunded commitment that's associated with that.

Eric Hagen: Thank you so much. Yeah, no problem. On the first question, it's primarily driven by rate moves and primarily driven by rate moves adjusting yield higher on residential credit assets.

Thank you so much.

Yes, no problem on the on the first on the first question is primarily driven by buy rate moves.

Private primarily driven by rate moves adjusting adjust.

Adjusting yield higher on residential credit assets primarily.

Nick: And then on the second question, yes, there's usually an unfunded commitment on these BPO loans. But for the most part, I think what we try to do is, a lot of the assets that we try to purchase have, we try to limit the amount of additional rehab that needs to be done because as you have larger rehab projects such as Ground Up, and if there is a point where the borrower hands back the keys, now you have this midstream project that you have to manage. So, generally speaking, we try to limit how much additional rehab and try to make it as down the fairway in terms of projects as possible. Yep, that's helpful. Is there a balance associated with the unfunded commitment?

And then on the second question, Yes, Theres, usually unfunded commitment on these GPO loans.

But for the most part I mean, what we try to what we try to do is we try to log the assets that we try to purchase half.

We tried to limit the amount of additional rehab that needs to be done.

Because as you have larger rehab projects such as ground up.

And if there is a point where the borrower handed back the keys that now you have this midstream projects that you have to manage so generally speaking we try to limit how much additional rehab and tried to make it as down the fairway in terms of projects as possible.

Yes. That's helpful is there a balance associated with the unfunded commitment it looks like the total portfolio is about $900 million.

Nick: Looks like the total portfolio is about $900 million. So as of December 31, that's about $6.6 million of unfunded commitment liability that we have. Got it. Okay. Thank you guys so much. Please see the complete disclaimer at https://sites.google.com, and thank you. And if you would like to ask a question that is Star 1-1, again, if you would like to ask a question that is Star 1-1, one moment for the Q&A.

So as of December 31, Thats about $6 6 million of unfunded commitments.

The ability that we have on our books.

Got it okay. Thank you guys so much.

Yeah.

And thank you.

And if he would like to ask a question that is star one one again, if he would like to ask a question that is star 111 moment for the Q&A.

Jason Thomas Serrano: And I am showing no further questions. I would now like to turn the call over to Jason Serrano for closing remarks. Yes, thank you for joining our fourth quarter earnings call, and we look forward to speaking with you on our first quarter call in early May. Have a great day. This concludes today's conference call. Thank you for participating. You may now disconnect. Thanks for watching!

And I am showing no further questions I would now like to turn the call over to Jason Serrano for closing remarks.

Yes. Thank you for joining our fourth quarter earnings call. We look forward to speaking with you on our first quarter call in early May have a great day.

This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

Okay.

[music].

Yeah.