Q2 2024 New York Mortgage Trust Inc Earnings Call

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the New York Mortgage Trust's second quarter 2024 results conference call.

Operator: second quarter 2024 results conference call. During today's presentation, all parties will be in a listen-only mode.

Operator: 2nd quarter, 2024 results conference call.

Operator: During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. If you have a question, please press the star followed by one one on your touchtone phone. If you'd like to withdraw your question, please press star one one again. If you are using speaker equipment, we do ask you, please lift the handset before making your selection.

Operator: Following the presentation, the conference will be open to questions. If you have a question, please press the star followed by 11 on your touchtone phone. If you'd like to withdraw your question, please press star 11 again. If you are using speaker equipment, we do ask that you please lift the handset before making your selection.

If you have a question, please press the star followed by 11 on your touchtone phone. If you'd like to withdraw your question, please press star 11 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, August 1, 2024. I would now like to turn the call over to Kristi Mussallem, Investor Relations. Please go ahead.

Operator: This conference is being recorded on Thursday, August 1, 2024.

Operator: This conference is being recorded on Thursday, August 1st, 2024. I would now like to turn the call over to Kristi Mussallem, Investor Relations. Please go ahead.

Kristi Mussallem: I would now like to turn the call over to Kristi Mussalem, Investor Relations. Please go ahead.

Kristi Mussallem: Thank you, operator, and good morning, everyone. Thank you for joining New York Mortgage Trust 2nd quarter 2024 earnings call. A press release and supplemental financial presentation with New York Mortgage Trust 2nd quarter, 2024 results was released yesterday. Both the press release and supplemental financial presentation are available on the company's web. At www.nymtrust.com.

Kristi Mussallem: Thank you, operator. And good morning, everyone. Thank you for joining New York Mortgage Trust's second quarter 2024 earnings call. A press release and supplemental financial presentation with New York Mortgage Trust's second quarter 2024 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 website.

Kristi Mussallem: A press release and supplemental financial presentation with New York Mortgage Trust second quarter 2024 results was released yesterday.

Speaker Change: Both the press release and supplemental financial presentation are available on the company's website at www.nymtrust.com.

Kristi Mussallem: Additionally, we are hosting a live webcast of today's call, but you can access it in the events and presentation section of the company's website. At this time, management would like me to inform you that certain statements made during the conference call, which are not historical, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although New York Mortgage Trust believes the expectations reflected in any form of looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained.

Kristi Mussallem: 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 such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be achieved.

Speaker Change: Although New York Mortgage Trust believes the expectations reflected in any forelooking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained.

Kristi Mussallem: Factors and risks that have caused 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.

Kristi Mussallem: 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 Serrano: Now, at this time, I would like to introduce Jason Serrano, Chief Executive Officer. Jason, please go ahead.

Speaker Change: Now at this time, I would like to introduce Jason Serrano, Chief Executive Officer. Jason, please go ahead.

Jason Serrano: Hi, thank you for joining New York Mortgage Trust's second quarter earnings call. Joining me today is Nick Mah, President, and Kristine Nario, CFO. With the US economy showing a sequential slowdown of organic growth or personal savings drawdown as a factor stabilizing GDP, obvious concerns point to an inflection point in the economy at a time when consumer debt is at the highest level ever and demonstrating evidence that the US consumer is tapped. Our preparation for a slowdown began after the first rate hike in March 2022, which typically predicts the end of a growth cycle.

Jason Serrano: Hi, thank you for joining New York Mortgage Trust 2nd quarter earnings call. Joining me today is Nick Mock, president and Christine Naryo, CFO. With a U.S.

Jason Serrano: economy that is showing a sequential slowdown of organic growth for personal savings drawdown as a factor stabilized GDP, obvious concerns point and inflection point in the economy. At a time where consumer debt is at the highest level ever, and demonstrating evidence that the U.S. Consumer is passed out.

Jason Serrano: With a U.S. economy that is showing a sequential slowdown of organic growth, where personal savings draw down as a factor stabilize GDP, obvious concerns point to an inflection point in the economy at a time where consumer debt is at the highest level ever and demonstrating evidence that the U.S. consumer is tapped out.

Jason Serrano: Our preparation for a slowdown began after the first rate hike in March 2022, which typically predicts the end of a growth cycle. At this time, we installed a large scale portfolio rotation plan where we have provided updates to this portfolio adjusted in each of the past seven quarters. To execute our goal to de-vest the portfolio from longer term credit and transition to a higher level liquidity, we focused on high current interest-oriented strategies.

Speaker Change: Our preparation for a slowdown began after the first rate hike in March 2022, which typically predicts the end of a growth cycle. At this time, we installed a large-scale portfolio rotation plan where we have provided updates to this portfolio adjustment each of the past seven quarters.

Jason Serrano: At this time, we installed a large-scale portfolio rotation plan where we have provided updates to this portfolio adjustment each of the past seven quarters. To execute our goal to de-risk the portfolio from longer-term credit and transition to higher-level liquidity, we focused on high current interest-oriented strategies. We understood a reduction to our balance sheet would occur, and consequently, company earnings would dip in this period. However, we are pleased to show elevated second quarter adjusted interest income of $84 million, which is a 63% increase from the same period last year.

Speaker Change: To execute our goal to deregister the portfolio from longer-term credit and transition to a higher-level liquidity, we focused on high-current interest-oriented strategies.

Jason Serrano: We understood a reduction to our balance sheet would occur, and consequently, company earnings would dip in this period. We are pleased to show elevated 2nd quarter adjusted interest income of 84 million, which is a 63% increase from the same period last year. We are still working to improve company income and find ourselves in a great liquidity position to add to this momentum over subsequent quarters.

Speaker Change: Company earnings would dip in this period. We are pleased to show elevated second quarter adjusted interest income of 84 million Which is a 63% increase from the same period last year

Jason Serrano: We are still working to improve company income and find ourselves in a great liquidity position to add to this momentum over subsequent quarters. While the timing of our balance sheet reduction began in 2022 and frankly could have been better timed by delaying such activity for up to two to three quarters, we believe being directionally correct outweighs the loss of earnings potential of being early.

Speaker Change: We are still working to improve company income and find ourselves in a great liquidity position to add to this momentum over subsequent quarters.

Jason Serrano: While the timing of our balance sheet reduction began in 2022, and frankly, could have been better timed by delaying such activity for up to 2 to 3 quarters, we believe being directionally correct outweighs the loss of earnings potential of being early. Balance sheet flexibility created in this period could bring about multi-year benefits.

Jason Serrano: Balance sheet flexibility created in this period could bring about multi-year benefits. As a reminder, a year ago, we started the phase for balance sheet growth, first an early goal with the best real property holdings, mostly related to our multifamily JV equity portfolio, which admittedly took longer to sell and was a primary factor in recent book volatility, which has been disappointing. Given recent sales progress, the portfolio is now immaterial to our book, representing less than 1% of total company holdings.

Jason Serrano: As a reminder, a year ago, we started the phase for balance sheet growth. First, an early goal with the de-vest real property holdings, mostly related to our multi-family JV equity portfolio, which admittedly took longer to sell and was a primary factor in recent book volatility, which has been visible. Pointing. Given recent sales progress, the portfolio is now immaterial to our book, less than 1% of total company holdings. Second, we raise company current interest income, which has been a priority.

Speaker Change: As a reminder, a year ago, we started the phase for balance sheet growth.

Speaker Change: First, an early goal with the best real property holdings, mostly related to our multifamily JV equity portfolio, which admittingly took longer to sell and was a primary factor in recent book volatility, which has been disappointing.

Jason Serrano: Second, we raise company current interest income, which has been a priority. In the past, we had high allocation strategies with attractive total returns but exhibited low current cash income. As an example, in the multifamily mezzanine lending sector, where we originated loans with double-digit returns, contained a feature of a partial or total interest.

Jason Serrano: In the past, we had high allocation strategies with attractive total returns but exhibited low current cash income. As an example, in the multi-family mezzan lending sector, where we originally loans with double digit returns, contained a feature of a partial or total interest rate. While the market today provides an exciting backdrop to reestablish pipelines from multi-family mezzanine investments, we are focused on a new funding model for future reginations.

Speaker Change: which has been a priority. In the past, we had high allocation strategies with attractive total returns, but exhibited low current cash income.

Speaker Change: As an example, in the multifamily medicine lending sector, where we originate loans with double-digit returns.

Jason Serrano: While the market today provides an exciting backdrop to reestablish pipelines from multifamily mezzanine investments, we are focused on new funding models for future originations. We are happy to announce we are pursuing a joint venture constructed for MIMT-originated multifamily mezzanine loans with a third-party capital provider which allows up to $300 million of funding. While this venture is still subject to final negotiations of a definitive agreement with the third party, we are hopeful of an early September launch date.

Jason Serrano: We are happy to announce we are pursuing a joint venture constructed for M.M.T. originated multi-family mezzanine loans with a third party cap provider, which allows up to $300 a funding. While this venture is still subject to final negotiations of the beginning of agreement with the third party, we are hopeful of an early September launch date.

Speaker Change: We are happy to announce we are pursuing a joint venture constructed for MYMT-originated multi-family investing loans with a third-party calc provider which allows up to $300 million of funding.

Jason Serrano: Third, we wanted to remain liquid, but also increase company income. Our core strategies intended to achieve this goal by allocating capital to agency RBS and short duration business purpose loans. For different reasons, both investments return, a principle is accelerated in a near term economic slowdown, which allows M.M.T. to organically raise cash and balance sheet.

Jason Serrano: Third, we wanted to remain liquid but also increase company income. Our core strategy is intended to achieve this goal by allocating capital to agency RMBFs and short-duration business purposes. For different reasons, both investments return principal in a near-term economic slowdown, which allows NYMT to organically raise cash on balance. Furthermore, we anticipated MDS liquidity to spike after the first rate cut, which should be well-timed for pursuing opportunities with enhanced return. Finally, maintaining minimal levels of recourse, mark-to-market leverage in the credit space is an absolute goal for MYMT.

Jason Serrano: Furthermore, we anticipated M.D.S. liquidity to spike after the first rate cut, which should be well time for pursuing opportunities with enhanced returns.

Speaker Change: Furthermore, we anticipated MDS liquidity to spike after the first rate cut, which should be well-timed for pursuing opportunities with enhanced returns.

Jason Serrano: Finally, maintaining minimal levels of recourse. Mark to market leverage in the credit space is an absolute goal for M.M.T. as the broader market demonstrated initial exuberance for potential accelerated rate cuts and excellent opportunity to pursue non recourse term funding structures at tighter spread has developed. We continued to take advantage of pricing this market for funding needs.

Speaker Change: Finally, maintaining minimal levels of recourse mark-to-market leverage in the credit space is an absolute goal for MIT.

Jason Serrano: As the broader market demonstrated initial exuberance for potential accelerated rate cuts, an excellent opportunity to pursue non-recourse term funding structures at tighter spreads developed. We continue to take advantage of this market for funding needs. I also want to mention that we're seeing opportunities with our own capital. As reinvestments accelerate and we continue to build out interest income, we evaluate opportunities to repurchase shares at a significant discount against our high-performing book that contains elevated concentrations of agency and cash-on-balance shares.

Speaker Change: As the broader market demonstrated, initial exuberance for potential accelerated rate cuts and an excellent opportunity to pursue non-recourse term funding structures at tighter spreads has developed. We continue to take advantage of pricing this market for funding needs.

Jason Serrano: I also want to mention that we're seeing opportunities within our own capital structure. As reinvestments accelerate and we continue to build out interest income, we evaluate opportunities; we purchase shares as a significant discount against our high performing book that contains elevated concentrations of agency and cash on balance sheet.

Speaker Change: I also want to mention that we're seeing opportunities within our own capital structure.

Jason Serrano: Lastly, we also look for additional accretive funding sources and seek to properly time the execution to maximize earnings impact. On the balance sheet, we opportunistically issued 60 million senior unsecured notes at a 9-in-1 ACE rate in the quarter for additional funding in anticipation of wider spread opportunities in the agency space. Furthermore, given our extensive experience previously managing third-party capital at scale, we've evaluated several opportunities focused on the right elements to

Jason Serrano: Lastly, we also look for additional creative funding sources and seek to properly time the execution to maximize earnings impact on balance sheet. We opportunity issued $60 million to your notes in a 9-1-8 rate in the quarter for additional funding into space and wider spread opportunity in the agency space.

Jason Serrano: Furthermore, given our extensive experience previously managing third party capital at scale, we have evaluated several opportunities to focus on the right elements to seek external funding.

Jason Serrano: Page 8 of our supplementary illustrates our thought process related to this utilization. We look for the overlap of three factors, areas of team expertise and proven track record, strategies that provide compelling risk-adjusted returns at scale, and investment needs of third parties and our own balance sheet. As an example, delayed recognition of return or a low rate of current cash income will be a factor in seeking third-party capital.

Speaker Change: Furthermore, given our extensive experience previously managing third-party capital at scale, we have evaluated several opportunities focused on the right elements to seek external funding. Page 8 of our supplemental illustrates our thought process related to this utilization.

Jason Serrano: Page eight of our supplemental illustrates our thought process related to civilization. We look for the overlap of three factors. Areas of team expertise and proven track record strategies that provide compelling risk of stress return at scale and investments needs of third parties and our own balance sheet. As an example, the late recognition of return or low rate of current cash income will be a factor in seeking third-party capital. We are focused on current cash income. As such, we see our monthly family and lesbian literature as a great fit for external capital funding.

Speaker Change: We look for the overlap of three factors.

Speaker Change: areas of team expertise and proven track record, strategies that provide compelling risk-adjusted returns at scale, and investments needs of third parties and their own balance sheet. As an example, delayed recognition of return or a low rate of current cash income will be a factor in seeking third-party capital.

Jason Serrano: We are focused on current cash. As such, we see our multi-family muzzin launcher as a great fit for external capital. We are one of the largest originators of these loans over the past decade and carry an impeccable track record in a market where we have witnessed a significant pullback of regional bank lending when capital solutions are required against $500 billion of CRA loans reaching maturity in each of the next four years.

Speaker Change: We are focused on current cash income.

Jason Serrano: We are one of the largest originators of these loans of the past decade and carrying impeccable track record in a market where we have witnessed the significant pullback regional bank lending when capital solutions are required against a 500 billion of zero loans reaching maturity in each of the next four years. We are excited to utilize our platform back by a third party capital provider who is focused on attractive total return opportunity.

Speaker Change: We are one of the largest originators of these loans over the past decade and carry an impeccable track record in a market where we have witnessed a significant pullback of regional bank lending, when capital solutions are required against a $500 billion of CRA loans reaching maturity in each of the next four years.

Jason Serrano: We are excited to utilize our platform, backed by a third-party capital provider who is focused on attractive total return opportunities. We are encouraged that our portfolio reconstruction, which began just over two years ago, is well-situated for an accommodative monetary policy response from the Fed. We believe this decision will enable the company to generate sustainable earnings on a variety of on and off balance sheet options. At this time, I'll pass the call over to Kristine to discuss our financials. Kristine.

Jason Serrano: We are encouraged that our portfolio reconstruction, which began just over two years ago, is well situated for an accommodative monetary policy response from the Fed. We believe this decision will enable the company to generate sustainable earnings on a variety of on-and-off-balance-sheet options.

Speaker Change: We are excited to utilize our platform, backed by a third-party cap provider who is focused on attractive total return opportunities.

Kristine Nario: At this time, I'll pass the call over to Kristine and discuss our financials.

Kristine Nario: Kristine, thank you, Jason. Good morning. Today, I will focus my commentary on the main drivers of our second quarter financial results. I will also be highlighting some of the information from the quarterly comparative financial information section included in slides 27 to 36 of the supplemental presentation. Our financial snapshot on slide 12 covers key portfolio metrics for the quarter, and slide 26 summarizes the financial results for the quarter. The company had under-appreciated loss per share of 25 cents in the second quarter, as compared to under-appreciated loss per share of 68 cents in the first quarter. We experienced a solid momentum in our portfolio acquisitions in the first half of the year, as we continue to utilize our excess liquidity and rotate our lower yielding multi-family real-property exposure into business-purpose loans in agency R&BS.

Kristine Nario: Thank you, Jason. Good morning. Today I will focus my commentary on the main drivers of our second quarter financial results. I will also be highlighting some of the information from the quarterly comparative financial information section included in slides 27 to 36 of the supplemental presentation. Our financial snapshot on slide 12 covers key portfolio metrics for the quarter, and slide 26 summarizes the financial results for the quarter. The company had an undepreciated loss per share of $0.25 in the second quarter as compared to an undepreciated loss per share of $0.68 in the first quarter.

Speaker Change: Our financial snapshot on slide 12 covers key portfolio metrics for the quarter, and slide 26 summarizes the financial results for the quarter.

Speaker Change: The company had undepreciated loss per share of $0.25 in the second quarter as compared to undepreciated loss per share of $0.68 in the first quarter.

Kristine Nario: We experienced solid momentum in our portfolio acquisitions in the first half of the year as we continue to utilize our excess liquidity and rotate our lower-yielding multifamily real property exposure into business purpose loans and agency RMBF, increasing our investment portfolio on a net basis by approximately $0.6 billion and $0.8 billion during the second quarter and year to date, respectively, ending at $5.9 billion as of June 30. As a result, net interest income contribution increased to $0.21 in the current quarter from $0.20 in the first quarter. Our quarterly adjusted net interest income, a non-GAAP financial measure, also increased by $1.1 million to $27.3 million in the second quarter from $26.2 million in the first quarter.

Speaker Change: We experienced a solid momentum in our portfolio acquisitions in the first half of the year as we continue to utilize our excess liquidity and rotate our lower-yielding multifamily real property exposure into business purpose loans and agency RMBS.

Kristine Nario: Increasing our investment portfolio on a net basis by approximately 0.6 billion and 0.8 billion during the second quarter and year-to-date, respectively, ending at 5.9 billion as of June 30. As a result, net interest income contribution increased to 21 cents in the current quarter from 20 cents in the first quarter. Our quarterly adjusted net interest income, a non-GAAP financial measure, also increased by 1.1 million to 27.3 million in the second quarter from 26.2 million in the first quarter. And, as detailed in slide 27, our net interest spread has steadily increased over the last few quarters, growing by two basis points during the quarter and 31 basis points year-to-date.

Speaker Change: Our quarterly adjusted net interest income, a non-GAAP financial measure, also increased by $1.1 million to $27.3 million in the second quarter from $26.2 million in the first quarter.

Kristine Nario: And, as detailed in slide 27, our net interest spread has steadily increased over the last few quarters, growing by two basis points during the quarter and 31 basis points year-to-date. Our interest rate swaps also continue to benefit our portfolio, reducing our average financing costs by 75 and 78 basis points during the quarter and year-to-date, respectively. We have also reduced our net loss from real estate from $16.4 million to $13.1 million, primarily due to the disposition of two multifamily properties, which resulted in deconsolidation.

Kristine Nario: Our interest rate swaps also continue to benefit our portfolio, reducing our average financing cost by 75 and 78 basis points during the quarter and year-to-date, respectively. We have also reduced our net loss from real estate from 16.4 million to 13.1 million, primarily due to the disposition of two multi-family properties, which resulted in deconsolidation. We continue to make progress in the disposition of our multi-family real estate assets, and after quarter end, disposed of 400 performing assets. We expect earnings to improve without the negative drag from these assets in the range of two to two and a half million per quarter.

Speaker Change: We have also reduced our net loss from real estate from $16.4 million to $13.1 million primarily due to the disposition of two multifamily properties, which resulted in deconsolidation.

Kristine Nario: We continue to make progress in the disposition of our multifamily real estate assets and, after quarter end, disposed of four underperforming assets. We expect earnings to improve without the negative drag from these assets in the range of $2 to $2.5 million per quarter.

Kristine Nario: Volatility and interest rates continue to impact the valuation of our investments. During the quarter, we recognized $16.5 million, or $0.18 per share of unrealized losses due to lower asset prices, primarily in our agency RMBS portfolio, as a result of increases in interest rates in the final days of the quarter, which have subsequently reversed. However, these unrealized losses were mostly offset by $0.17 per share in gains recognized in our derivative insurance, primarily consisting of interest rate swaps.

Kristine Nario: Volatility in interest rates continued to impact valuation of our investments. During the quarter, we recognize 16.5 million, or 18 cents per share, of unrealized losses due to lower asset prices. Primarily in our agency, R&BS portfolio. As a result of increases in interest rates in the final days of the quarter, which has subsequently reversed. However, these unrealized losses were mostly offset by 17 cents per share in gains recognized in our derivative instruments, primarily consisting of interest rate swaps. We also recognize 7.5 million, or 18 cents per share, of losses, primarily incurred on foreclosed properties or REO still on balance sheet, which are carried at lower of cost or market due to lower valuations during the quarter.

Speaker Change: We expect earnings to improve without the negative drag from these assets in the range of $2 to $2.5 million per quarter.

Speaker Change: Volatility and interest rates continue to impact valuation of our investments.

Speaker Change: During the quarter, we recognized $16.5 million or $0.18 per share of unrealized losses due to lower asset prices, primarily in our agency RMBS portfolio, as a result of increases in interest rates in the final days of the quarter, which has subsequently reversed.

Kristine Nario: We also recognize $7.5 million, or $0.08 per share of losses primarily incurred on foreclosed properties or REOs still on balance sheet, which are carried at a lower cost or market due to lower valuations during the quarter. We had total G&A expenses of $11.6 million, down from $13.1 million in the previous quarter, primarily due to decreases in compensation costs and non-recurring professional costs.

Speaker Change: We also recognize $7.5 million, or $0.08 per share of losses, primarily incurred on foreclosed properties or REOs still on balance sheet, which are carried at lower of cost or market due to lower valuations during the quarter.

Kristine Nario: We had total GNA expenses of $11.6 million, down from $13.1 million in the previous quarter, primarily due to decreases in compensation costs and non-recurring professional fees. We had portfolio operating expenses of $7.4 million, which declined slightly from the prior quarter. We also incurred a one-time expense of $4.6 million related to the issuance of senior unsecured notes and a residential securitization, securitization which Nick will touch on later. Adjusted book value per share ended at $11.02, down 4.3% from the first quarter. The main drivers are $0.29 in basic loss per share, a declared dividend of $0.20 per share, and a $0.05 per share reduction in cumulative depreciation and amortization add-back, a trivial to a consolidated multi-family property for which impairment was recognized during the quarter.

Speaker Change: We have total G&A expenses of $11.6 million down from $13.1 million in the previous quarter, primarily due to decreases in compensation costs and non-recurring professional fees.

Kristine Nario: We had portfolio operating expenses of $7.4 million, which declined slightly from the prior quarter. We also incurred a one-time expense of $4.6 million related to the issuance of senior unsecured notes and a residential securitization, which Nick will touch on later. Adjusted book value per share ended at 11.02, down 4.3% from the first quarter.

Speaker Change: We had portfolio operating expenses of $7.4 million, which declined slightly from the prior quarter.

Speaker Change: We also incurred a one-time expense of $4.6 million related to the issuance of senior unsecured notes and a residential securitization which Nick will touch on later.

Kristine Nario: The main drivers are $0.29 in basic loss per share, our declared dividend of $0.20 per share, and a $0.05 per share reduction in cumulative depreciation and amortization add back, attributable to a consolidated multifamily property for which impairment was recognized during. As of quarter end, the company's recourse leverage ratio and portfolio recourse leverage ratio moved higher to 2.1 times and 2 times, respectively, from 1.7 times and 1.6, respectively, Our portfolio recourse leverage on our credit book stands at 0.5 times, up from 0.3 times at March 31, due to acquisitions during the quarter partially funded by recourse repurchase finance.

Nick: down 4.3% from the first quarter.

Kristine Nario: As of quarter end, the company's recourse leverage ratio and portfolio recourse leverage ratio move higher to 2.1 times and 2 times respectively, from 1.7 times and 1.6 respectively as of March 31, due to the continued expansion of our agency R&B strategy and the issuance of $0.60 million in unsecured notes in June. Our portfolio recourse leverage on our credit book stands at 0.5 times, up from 0.3 times at March 31, due to acquisitions during the quarter partially funded by recourse repurchase financing. However, we do not expect portfolio recourse leverage on our credit book to exceed one times, as we intend to continue to prioritize procuring longer term and non-market market financing arrangements for certain parts of our credit portfolio.

Nick: Our portfolio recourse leverage on our credit book stands at 0.5x up from 0.3x at March 31 due to acquisitions during the quarter partially funded by recourse repurchase financing.

Kristine Nario: However, we do not expect portfolio recourse leverage in our credit book to exceed one times, as we intend to continue to prioritize procuring longer-term and non-mark-to-market financing arrangements for certain parts of our credit portfolio. We paid a 20 cents per share common dividend.

Kristine Nario: We paid a $0.20 per share, common dividend, unchanged from the prior quarter. We continue to evaluate our dividend policy each quarter and look at the 12-18 month projection of not only our net interest income, also realize gains or capital gains that can be generated from an investment portfolio. We remain committed to maintaining an attractive current yield for our shareholders, and we expect under-appreciated earnings per share to move closer to the current dividend as we continue to rotate excess liquidity for reinvestment, and assets that generate recurring income will optimize in expenses.

Kristine Nario: Unchanged from 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 income but also realized gains or capital gains that can be generated from an investment portfolio. We remain committed to maintaining an attractive current yield for our shareholders, and we expect underappreciated earnings per share to move closer to the current dividend as we continue to rotate excess liquidity for reinvestment and assets that generate recurring income while optimizing expenses. I will now turn it over to Nick to go over the market and strategy update. Thank you, Kristine.

Nick: Unchanged from the prior quarter.

Nick: We continue to evaluate our dividend policy each quarter and look at the 12-18 month projection of not only our net interest income, but also realized gains or capital gains that can be generated from an investment portfolio.

Nick: We remain committed to maintaining an attractive current yield for our shareholders, and we expect underappreciated earnings per share to move closer to the current dividend as we continue to rotate excess liquidity for reinvestment and assets that generate recurring income while optimizing expenses.

Nicholas Mah: I will now turn it over to Nick to go over the market and strategy update. Nick? Thank you, Christine. As Jason discussed, readings of softening inflation and signs of a cooling labor market have heightened expectations for potential rate cuts later this year. The active growth of the portfolio over the past several quarters aligns with what is likely a more favorable period for fixed income assets in the near future. We have made meaningful progress in our goal of achieving a higher rate of recurring net interest income through the deployment of our available capital. In the quarter, we had 934 million of total acquisitions, representing a 54 percent increase from the prior quarter.

Nick Mah: As Jason discussed, readings of softening inflation and signs of a cooling labor market have heightened expectations for potential rate cuts later this year. The active growth of the portfolio over the past several quarters aligns with what is likely a more favorable period for fixed income assets in the near future. We have made meaningful progress in our goal of achieving a higher rate of recurring net interest income through the deployment of our available capital. In the quarter, we had $934 million in total acquisitions, representing a 54% increase from the prior quarter.

Nicholas Mah: We are pleased to have growing volumes in our core strategies of agency RNBS and BPLO. In agency R&BS, we purchased 467 million in the quarter, and we continue to be opportunistic in the cadence of our deployment activity. More than half of the quarter's agency purchases are 252 million, occurred in late June when Treasury yields and mortgage spreads move wider. In BPLs, we purchased 412 million of loans in the quarter. BPL acquisitions were split across 344 million of BPL bridge loans and 68 million of BPL rental loans. In BPL bridge loans, we continue to drive higher volumes through our partnership of originators, and we'll expect this trend to continue in the third quarter.

Nick Mah: We are pleased to have growing volumes in our core strategies of agency RMBS and BPL loans. In agency RMBS, we purchased $467 million in the quarter, and we continue to be opportunistic in the cadence of our deployment activities. More than half of the quarter's agency purchases, or $252 million, occurred in late June when Treasury yields and mortgage spreads moved wider. In BPLs, we purchased 412 million loans in the quarter. BPL acquisitions were split across $344 million of BPL bridge loans and $68 million of BPL rental loans.

Nick Mah: In BPL Bridge Loans, we continue to drive higher volumes through our partnership of originators, and we'll expect this trend to continue in the third quarter. Delving first into agency and RMBS, current coupon mortgage spreads widened by 10%, to 148 basis points in the.

Nick: In BPL Bridge Loans, we continue to drive higher volumes through our partnership of originators, and we'll expect this trend to continue in the third quarter.

Nicholas Mah: Delving first into agency R&BS, current coupon mortgage spreads widened by 10 basis points to 148 basis points in the quarter. The minor difference in quarter-over-quarter spread levels belied the larger intra-quarter moves in both spreads and rates. In conjunction with issuing a senior unsecured corporate bond deal in late June, we took advantage of relatively higher spreads late in the quarter to increase the pace of acquisitions. Having no near-term corporate maturities or other obligations afforded us the flexibility to focus our available capital on portfolio growth. At 2.6 billion of market value, the agency R&BS portfolio represents 44% of our asset portfolio and 20% of our capital allocation.

Nick Mah: The minor difference in quarterly-over-quarter spread levels belies the larger intra-quarter moves in both spreads and rates. In conjunction with issuing a senior unsecured corporate bond deal in late June, we took advantage of relatively higher spreads late in the quarter to increase the pace of acquisition. Having no near-term corporate maturities or other obligations afforded us the flexibility to focus our available capital on portfolio growth. At $2.6 billion in market value, the agency RMBS portfolio represents 44% of our asset portfolio and 20% of our capital allocation.

Speaker Change: The minor difference in quarter-over-quarter spread levels belie the larger intra-quarter moves in both spreads and rates.

Nick: In conjunction with issuing a senior unsecured corporate bond deal in late June , we took advantage of relatively higher spreads late in the quarter to increase the pace of acquisitions.

Nick: Having no near-term corporate maturities or other obligations afforded us the flexibility to focus our available capital on portfolio growth.

Nicholas Mah: Strategically, we continue to target higher carry assets. In the quarter, we predominantly purchased 6% coupon lower payup spec pools, increasing the spec pool portfolio whack by 3 basis points to 5.87%. Agency R&BS remains a core strategy for us at these historically wider spread levels. We believe that agency R&BS is a liquid asset class that can outperform through a future rate easing cycle. It also can exhibit resiliency through a recessionary environment, at which time we can rotate the capital into discounted higher return opportunities. We intend to increase our exposure in this sector as it aligns with our broader portfolio management strategy.

Nick Mah: Strategically, we continue to target higher carry assets. In the quarter, we predominantly purchased 6% coupon bonds with lower payout spectrum. Increasing the spec pool portfolio WAC by three basis points, to 5.87, Agency RMBS remains a core strategy for us at these historically wider spread levels. We believe that agency RMBS is a liquid asset class that can outperform through a future rate easing cycle. It also can exhibit resiliency in a recessionary environment, at which time we can rotate the capital into discounted higher return opportunities.

Nick Mah: We intend to increase our exposure in this sector as it aligns with our broader portfolio management strategy. On BPL Bridge Loans, we have been expanding our pipeline of future loan purchases. To date, we have purchased from 15 different originator and aggregator companies, and we are currently actively buying from eight of them.

Nicholas Mah: On BPL bridge loans, we have been expanding our pipeline of future loan purchases. To date, we have purchased from 15 different originators and aggregator companies, and we are currently actively buying from eight of them. From the beginning, we have chosen to participate in the BPL bridge business with a light operating model by being an investor and not an originator in the BPL bridge base. Over the past few years, buying from external sellers has allowed us the flexibility to scale up and down with the market opportunity. For the more, we bear a lower operational cost while still being able to gain exposure to assets at compelling coupons.

Nick: We intend to increase our exposure in this sector as it aligns with our broader portfolio management strategy.

Nick: On BPL Bridge Loans, we have been expanding our pipeline of future loan purchases.

Nick Mah: From the beginning, we have chosen to participate in the BPL Bridge business with a light operating model by being an investor and not an originator in the BPL Bridge space. Over the past few years, buying from external sellers has allowed us the flexibility to scale up and down with market opportunities. Furthermore, we bear a lower operational cost while still being able to gain exposure to assets at compelling coupons. More importantly, however, we have avoided subsectors such as multifamily bridge and more involved projects like ground up construction.

Nick: To date, we have purchased from 15 different originator and aggregator companies and we are currently actively buying from eight of them.

Nick: Over the past few years, buying from external sellers has allowed us the flexibility to scale up and down with the market opportunity.

Nicholas Mah: More importantly, however, we have avoided sub-sectors such as multi-family bridge and more involved projects like ground-up construction. It is at these fringes where the fault management tends to be difficult for loss of avoidance. Our reasons for being selective are for downside protection and to maximize liquidity and financibility of the loans that we buy. Tangentially, our tighter credit criteria has coincided with the advent of rated securitizations, where financing execution on our type of collateral profile has been superior. In the quarter, we executed our first rated DPL bridge securitization, which was the third such deal in history.

Nick Mah: It is at these fringes where default management tends to be difficult for loss avoidance. Our reasons for being selective are for downside protection and to maximize liquidity and financeability of the loans that we buy. Tangentially, our tighter credit criteria has coincided with the advent of rated securitizations, where financing execution on our type of collateral profile has been superior. In the quarter, we executed our first rated BPL bridge securitization, which was the third such deal in history.

Nick: More importantly, however, we have avoided subsectors such as multifamily bridge and more involved projects like ground-up construction.

Nick: It is at these fringes where default management tends to be difficult for loss avoidance.

Nick: Our reasons for being selective are for downside protection and to maximize liquidity and financeability of the loans that we buy.

Nick: Tangentially our tighter credit criteria has coincided with the advent of rated securitizations, where financing execution on our type of collateral profile has been superior.

Nicholas Mah: Overall, our $244 million deal provided a higher advance rate and a savings of over 80 basis points on overall rate than what was available on whole-on-repo. Execution of our rated securitization has also delivered a comparable advance rate to our unrated deal that we did in the first quarter, but also an approximate 65 basis points of savings on overall rate. Our intent is to use the rated securitization structure as the preferred source of financing for our BPL bridge business on a go-forward basis. Also, this year, we restarted the purchases of 30-year BPL rental loans after pausing the program in 2022 due to the rising rate environment.

Nick Mah: Overall, our $244 million deal provided a higher advance rate and a savings of over 80 basis points on overall rates than what was available on whole loan repo. Execution of our rated securitization has also delivered a comparable advance rate to our unrated deal that we did in the first quarter, but also an approximate 65 basis points of savings on overall rates. Our intent is to use the rated securitization structure as the preferred source of financing for our BPL bridge business on a go-forward basis. Also, this year, we restarted the purchases of 30-year BPL rental loans after pausing the program in 2022 due to the rising rate environment.

Nick: In the quarter, we executed our first rated BPL bridge securitization.

Nick: which was the third such deal in history.

Nick: Execution of our rated securitization has also delivered a comparable advance rate to our unrated yield that we did in the first quarter, but also an approximate 65 basis points of savings on overall rate.

Nick: Our intent is to use the rated securitization structure as the preferred source of financing for our BPL bridge business on a go-forward basis.

Nicholas Mah: Given the improvement in securitization market execution and the evolving economic landscape, we are comfortable, selectively adding some duration in the residential credit portfolio today. The pace of purchases should arrive at the critical mass for securitization later this year.

Nick Mah: Given the improvement in securitization market execution and the evolving economic landscape, we are comfortable selectively adding some duration to the residential credit portfolio today. The pace of purchases should arrive at the critical mass for securitization later this year. Moving on to multifamily, starting first with J.B. Ecklund, with the JV equity portfolio now at $39 million.

Nick: Given the improvement in securitization market execution and the evolving economic landscape, we are comfortable selectively adding some duration in the residential credit portfolio today.

Nicholas Mah: Moving on to multifamily, starting first with JV equity. With the JV equity portfolio now at $39 million, this constitutes less than 1% of our overall portfolio, and we now have limited exposure of this asset class on our balance sheet. We continue to make progress relating to dispositions of this portfolio, and we aim to free up the remaining capital to rotate into our core strategies. In our supplemental presentation, we have isolated the cross-collateralized mezzanine lending asset, which was historically, at certain points, combined with our JV equity category. This asset is one mezzanine loan over 13 properties with a cross-collateralization benefit to NYMP.

Nick: The pace of purchases should arrive at the critical mass for securitization later this year.

Nick Mah: This constitutes less than 1% of our overall portfolio, and we now have limited exposure to this asset class on our balance sheet. We continue to make progress relating to dispositions of this portfolio, and we aim to free up the remaining capital to rotate into our core strategy. In our supplemental presentation, we have isolated the cross-collateralized mezzanine lending asset, which was historically, at certain points, combined with our JV Equity category. This asset is one mezzanine loan, over 13 properties, with a cross-collateralization benefit to NYME.

Speaker Change: Moving on to multifamily, starting first with J.B. Equity.

Speaker Change: and we now have limited exposure of this asset class on our balance sheet.

Nicholas Mah: We also provide additional information on the loan on page 21. The cross-collateralized mezzanine lending position has many similarities and profile compared to our mezzanine lending book. The average adjusted LTVs are in the 80s, and the average portfolio coupons are in an even more favorable trait is that 100% of the cross-collateralized mezzanine lending properties have senior debt above us that is either a low fixed rate or is hedged with an existing interest rate cap. This has the benefit of maintaining lower and predictable senior debt service payments that are accretive to the underlying property and NY. Across the mezzanine portfolio in general, the collateral performance continues to be remarkable.

Nick Mah: We also provided additional information on the loan on page 21. The Cross-Collateralized Mezzanine Lending Position has many similarities in profile compared to our Mezzanine Lending Book. The average adjusted LTVs are in the 80s, and the average portfolio coupons are in the low double digits. An even more favorable trait is that 100% of the cross-collateralized mezzanine lending properties have senior debt above us that is either at a low fixed rate or is hedged with an existing interest rate cap. This has the benefit of maintaining lower and predictable senior debt service payments.

Speaker Change: We also provided additional information on the loan on page 21.

Speaker Change: The cross-collateralized mezzanine lending position has many similarities in profile compared to our mezzanine lending book.

Speaker Change: An even more favorable trait is that 100% of the cross-collateralized mezzanine lending properties have senior debt above us that is either a low fixed rate or is hedged with an existing interest rate cap.

Speaker Change: that are accretive to the underlying property NOI.

Nicholas Mah: We have not experienced a principal loss to date on any mezzanine or cross-collateralized mezzanine lending position since our initial investment into this asset class in 2012. 2012. Currently in the portfolio, there is only one delinquent loan and only one other loan that was either restructured or extended. Mezzanine loans are held at fair value, with marks reflective of the status and performance of the loan. As Jason discussed, mezzanine lending may be a better fit for third-party capital instead of the REAP balance sheet. As the asset generally generates a higher total return than a current return. Our strong track record, along with our deep experience in sourcing and managing this asset class, provides us with the ability to raise and deploy third-party capital to take advantage of what we see as compelling future opportunities in this space.

Speaker Change: Currently in the portfolio, there is only one delinquent loan and only one other loan that was either restructured or extended.

Nick Mah: As Jason discussed, mezzanine lending may be a better fit for third-party capital instead of the REIT balance. Our strong track record, along with our deep experience in sourcing and managing this asset class, provides us with the ability to raise and deploy third-party capital to take advantage of what we see as compelling future opportunities in this. We will now open the call for Q&A. Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Operator: We will now open the call for Q&A. Thank you. At this time, we will conduct a question-and-answer session.

Operator: As a reminder, to ask a question, you will need to 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. Please stand by while we compile the Q&A roster.

Speaker Change: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

Douglas Harter: Our first question comes from Doug Harder with UBS. Please talk about the decision to continue to hold the high-level liquidity and trade-offs that you see there, the potential for wider spreads at some point in the future. Offsetting that is the strong securitization markets you talked about, where you see returns today and how that would compare to the returns you might see in the future.

Operator: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Doug Harter with UBS. Please go ahead.

Jason Serrano: Can you just talk a little bit more about the decision to kind of continue to hold a high level of liquidity and, you know, the trade-offs that you see there, the potential for wider spreads at some point in the future, but, you know, kind of offsetting that is the strong securitization markets you talked about, you know, kind of where you see returns today and, you know, kind of how that would compare to kind of the returns I'll start that, Jason.

Speaker Change: And, you know, the tradeoffs that you see there, you know, the potential for, you know, for wider spreads at some point in the future, but, you know, kind of offsetting that is the strong securitization markets you talked about.

Jason Serrano: I will start with that, Jason. The opportunity we see in front of us today has, I call it, two different avenues you can go down, one in which there is a core asset class that's available that has the double-digit key type of equity returns after financing or securitization. That is more limited in total scale, given just general lack of production in the market, lack of transaction activity as well.

Jason Serrano: The opportunity that we see in front of us today has, There's, I'd call it, two different avenues you can go down, one in which there's a core asset class that's available that has the double-digit teen type of equity returns after financing or securitization, but that is more limited in total scale, given just the general lack of production in the market and lack of transaction activity as well. There is a growing area in the market that is generally new to the market from the previous, let's call it three to four years, which is a larger scale of what's called multifamily middle market origination activity and ground-up activity.

Jason Serrano: There is a growing area in the market that is generally new to the market from the previous, let's call it three to four years, which is a larger scale of what's called multi-family, no market origination activity and ground up activity. When we do see volume in the market, we have to be careful on which part of the market we are focused on and where we are being selective in our growth. The purchase path, the pace that we are utilizing is in the consideration of the selective nature of the assets we are seeing available and the growth pattern that takes place there.

Jason Serrano: So when we do see volume in the market, we have to be careful about which part of the market we're focused on and where we're being selective in our growth. So the purchase path, the pace that we're utilizing, is in consideration of the selective nature of the assets we're seeing available and the growth pattern that takes place there. On the agency side, it's been very volatile over the past six months. We've been very selective on when to enter the market.

Jason Serrano: On the agency side, it's been very volatile in over the past six months. We've been very selective on when to enter into the market. We do want to grow up as Nick mentioned, grow up portfolio in that space but are looking for a better opportunity to leg in over the course of the year. Sprites have moved out wider just recently, and we took advantage of that in large form, and we will continue to look for this price into the market to leg in. We want to be patient assets. We are buying today, have a five-year consequence, and we are looking at a more of a medium term, the long-term value proposition for our access capital today.

Jason Serrano: We do want to grow our, as Nick mentioned, grow our portfolio in that space, but we're looking for better opportunities to leg in over the course of the year. Spreads have moved out wider just recently, and we took advantage of that in large form, and we'll continue to look for this price into the market to leg in.

Jason Serrano: The assets we're buying today have a five-year consequence, and we're looking at more of a medium-term to long-term value proposition for our excess capital today. Yeah, I think, you know, clearly, there has been a fair amount of movement in terms of expectation of rates, and I would say, generally speaking, this has been positive for the agency space in general, as interest rate volatility and the spectrum of potential interest rate paths in the future decline.

Speaker Change: And we'll continue to look for, you know, kind of mispricing the market to the leg end. So we want to be patient. You know, assets we're buying today have a five-year consequence, and we're looking at more of a medium-term and long-term value proposition for our excess capital today.

Jason Weaver: Great. Appreciate it. Thank you, Jason.

Jason Serrano: Thank you.

Jason Weaver: Our next question comes from Jason Weaver with Jones Trading. Please go ahead. Hey, good morning. You know, along with some of the softer economic data we've seen as of late, I think we've had a 70 basis point rally in the 10 year, and then we're talking about possible rate cuts coming up with, you know, a high high probability of them being priced in right now. Nick, you said you were, you know, focusing on the 6.0 coupon sector and agencies, and I'm just curious about what you think about how you're thinking about pre-pay risk going forward.

Speaker Change: Hey, good morning, you know along with some some of the softer economic data we've seen as of late I think we've had a 70 basis point rally in the 10-year and then we're talking about possible rate cuts coming up

Nicholas Mah: I did see one comment from, you know, a famous fixed income investor yesterday that expects the 10 year trade in the low threes by this time next year, so, you know, taking that into account. Yeah, I think, you know, clearly there has been a fair amount of movement in terms of expectation of rates, and I would say generally speaking, this has been positive to the agency space in general as interest rate volatility and the spectrum of potential interest rate paths in the future declining. So we do think that there is an ability for spreads to tighten from here in the longer term.

Jason Serrano: So we do think that there is an ability for spreads to tighten from here in the longer term. Clearly, there's going to be pockets of time where things wind out and tighten in. And so, as Jason alluded to, we try to be opportunistic on that. To answer your question, yeah, we have been targeting the 6% coupons because of the higher carry profile.

Speaker Change: to the agency space in general as interest rate volatility and the spectrum of potential interest rate paths in the future declining. So we do think that there is an ability for spreads to tighten from here in the longer term.

Nicholas Mah: Clearly, there's going to be pockets of time where things widen out and tighten in. So, as Jason alluded to, we try to be optimistic on that. To ask you a question, yeah, we have been targeting the 6% coupons because of the higher-carrier profile. We do have, in our residential credit book, more of a disc, more discounted assets there that due to a different kind of coupon profile that has the ability to accrete if rates continue to come down as spreads continue to tighten. With that said, though, we are continuously looking at our agency strategy, and I think that we are going to start gravitating a little bit more towards belly coupons as well.

Speaker Change: Clearly, there's going to be pockets of time where things wind down and tighten in. So, as Jason alluded to, we try to be opportunistic on that.

Nick Mah: We do have in our residential credit book more discounted assets there due to a different kind of coupon profile that has the ability to accrete if rates continue to come down and spreads continue to tighten. With that said, though, we are continuously looking at our agency strategy, and I think that we are going to start gravitating a little bit more towards belly coupons as well. So, diversifying a little bit given the size of the agency portfolio has grown to where it is now. Got it.

Jason Weaver: So diversifying a little bit, given the size of the agency portfolio has grown to where it is today. Got it. Thank you for that.

Jason Serrano: And then, Jason, I appreciate your comments regarding the repositioning of the portfolio and focusing more towards on current income. I was wondering, you know, with that taken into account, how do you think about the sustainability, the dividend, and then also the visibility of the sustainability of the dividend within your reporting as you complete that transition? We also have comments about Passover and Christine. You know, we evaluate this with a board every single month and look at the projections we have relating to our growth plan with respect to our assets as well as our liability structures and the access spread and them that we are achieving on our book.

Jason Serrano: Thank you for that. And then, Jason, I appreciate your comments regarding the repositioning of the portfolio and focusing more on current income. I was wondering, you know, taking that into account, how do you think about the sustainability of the dividend and then also the visibility of the sustainability of the dividend within your reporting as you complete that transition? Yeah, so essentially, we're comfortable with our progress and continuing to move closer to our current dividend, as Jason mentioned.

Jason Serrano: Got it. Thank you for that. And then, Jason, I appreciate your comments regarding the repositioning of the portfolio and focusing more towards on current income. I was wondering, you know, with that, taking that into account, how do you think about the sustainability of the dividend and then also the visibility of the sustainability of the dividend within your reporting as you complete that transition?

Jason Serrano: You know, there are a number of parts of our portfolio that we are underperforming or for our current income approach. One of those is J.B. Equity. Another one is within the SFR space. And, you know, those asset classes are oriented as total return, but don't meet the current dividend as a portfolio holding. So in those cases, you know, we're looking to rotate those assets into either a program or into other assets that can achieve our goals. That's just one component of our portfolio that is kind of, you know, underneath the surface here, that actually has real earnings potential that's kind of hidden behind the scenes.

Jason Serrano: Rotate those assets into either a program or into other assets that can achieve our goals.

Kristine Nario: And with respect to that, I'll pass over Christine to kind of numerate other. Yeah, so essentially we're comfortable with our progress and continuing to move closer to our current dividend. Jason mentioned we've increased activity as it relates to our investing. We've rotated some of our lower yielding assets into assets that generate recurring income. And we've also implemented measures to optimize our expenses, essentially eliminating higher operating cost strategies, such as our JV book, and we see other opportunities in lowering our operating cost.

Jason Serrano: We've increased activity as it relates to our investing. We've rotated some of our lower-yielding assets into assets that generate recurring income. And we've also implemented measures to optimize our expenses, essentially eliminating higher-operating-cost strategies, such as our JV book.

Speaker Change: Yeah, so essentially we're comfortable with our progress and continuing to move closer to our current dividend, as Jason mentioned.

Speaker Change: We've increased activity, as it relates to our investing, we've rotated some of our lower yielding assets into more.

Jason Serrano: into assets that generate recurring income, and we've also implemented measures to optimize our expenses, essentially eliminating higher operating cost strategies, such as our JV book, and we see other opportunities in lowering our operating costs.

Kristine Nario: And we see other opportunities to lower our, Thank you. Our next question comes from Bose George with KBW. Please go ahead. Hi, good morning, guys. This is actually Frank Labetti.

Jason Weaver: Alright, thanks, guys. That's a full color. Thank you.

Bose George: Our next question comes from Bose George with KBW. Please go ahead.

Speaker Change: Got it. All right. Thanks guys. That's Helpful Color.

Frank Labetti: Hi, good morning, guys. This is actually Frank Labetti; it's all meant for Bose. Can we get an update on adjusted book value quarter day, please? Sure, we estimate adjusted book value to be up somewhere between two to three percent for the day. Awesome.

Speaker Change: Thank you.

Nick Mah: It's all in for Bose. Can we get an update on the adjusted book value quarter date? I think that would be a positive outcome for the portfolio, and I think we are trying to position ourselves by growing the book and by picking the assets that we are picking to be able to capitalize on that. So we believe that if the rate cuts come, and it's arguable as to whether or not it's going to be one or two or several more this year, but we do believe that that will lead to a repricing of the rate curve and would be positive for fixed income assets.

Speaker Change: Our next question comes from Bose George with KBW. Please go ahead.

Speaker Change: Hi. Good morning, guys. This is actually Frank Labetti. It's all in for Bose. Can we get an update on adjusted book value quarter date, please?

Frank Labetti: Thank you.

Jason Serrano: And then, to the extent that Fed does cut multiple times over the next year, how does that change your outlook for the portfolio going forward? I think that would be a positive outcome for the portfolio, and I think we are trying to position ourselves by growing the book and by picking the assets that we are picking to be able to capitalize on that. So we believe that if the rate cuts come, and arguable as to whether or not it's going to be one or two or several more of this year, but we do believe that that will lead to a repriting of the rate curve and would be positive for fixed income assets.

Speaker Change: Sure, we estimate adjusted book value to be up somewhere between 2-3%.

Speaker Change: What is the date?

Speaker Change: Awesome, thank you. And then, to the extent the Fed does cut multiple times over the next year, how does that change your outlook for the portfolio going forward?

Speaker Change: and by picking the assets that we are picking to be able to capitalize on that. So we believe that if the rate cuts come, and arguable as to whether or not it's going to be one or two or several more,

Nick Mah: So yeah, I think we have that firmly in mind as we are ramping up the portfolio, and our asset selection is also gearing towards that eventual outcome. Thank you. Our next question comes from Eric Hagen with BTIG. Please go ahead.

Jason Serrano: So yeah, I think we have that firmly in mind as we are ramping on the portfolio and our asset selection is also gearing towards that eventual outcome.

Frank Labetti: Thank you.

Eric Hagen: Our next question comes from Eric Hagen with BTIG. Please go ahead. Thanks. Good morning. Just following up on maybe some of the interest rate sensitivity. I mean, I know that we don't typically think of RPLs as being very interest rate sensitive or maybe as interest rate sensitive as agency loans, but is it reasonable to expect to pick up and voluntary prepayment activity if you are in your portfolio if rates are coming down? Are you mentioning, are you talking about RPLs or RPLs, like transitional loans? Sorry, the reforming loans, the legacy reforming loans in your portfolio.

Speaker Change: Thank you.

Nick Mah: Just following up on maybe some of the interest rate sensitivity, I mean, I know that we don't typically think of RPLs as being very interest rate sensitive or maybe as interest rate sensitive as agency loans, but is it reasonable to expect a pickup in voluntary prepayment activity in your portfolio if rates are coming down? Sorry, the re-performing loans, the legacy re-performing loans in your portfolio. Yeah, we believe that, on the margin, there could be a higher increase in prepayments.

Eric Hagen: Legacy reforming. Yeah, we believe that at the margin there could be a higher increase in prepayments. The prepayment rate right now is somewhere in the mid-single digits. A lot of these borrowers have pretty out of the money coupons relative to where on the run coupons are. So we believe that could increase, but not substantially. Also, RPLs have a history of potential choppy pay credit profiles. So that also creates somewhat of a cap in terms of the prepayments.

Nick Mah: The prepayment rate right now is somewhere in the mid-single digits. A lot of these borrowers have pretty out-of-the-money coupons relative to where on-the-run coupons are. So we believe that could increase, but not substantially. Also, RPLs have a history of potential choppy pay credit profiles.

Speaker Change: Pretty out-of-the-money coupons relative to where on-the-run coupons are.

Nick Mah: So that also creates somewhat of a cap in terms of the prepayments. But overall, as we have seen historically, when rates do come down, and there are other options for these borrowers, we do expect prepayments to move up slightly. Just a little bit more on the Reggie credit portfolio. I mean, how do you think real estate values might respond to the higher cost and the more limited supply of homeowners insurance? Do you see that as being a risk for housing values? Yeah, this is Jason.

Speaker Change: So we believe that could increase, but not substantially. Also, RPLs have a history of potential choppy pay credit profiles. So that also creates somewhat of a cap in terms of the prepayments.

Eric Hagen: But overall, as we have seen, historically, when rates do come down and there are other options for these borrowers, we do expect prepayments to move up slightly.

Jason Serrano: Just a little bit more on the registered credit portfolio. I mean, how do you think real estate values might respond to, you know, the higher cost and the more limited supply of homeowners' insurance? Like, do you see that being a risk for housing values? And, like, is there a way to, you know, potentially even manage that risk? Yeah, this is Jason. So overall, that is obviously happening, particularly in the South and also within the multi-family space as well. And that definitely is a headwind to further HPA growth. I think where you see that the concern that I have with respect to that, and also taxes going higher due to, you know, increase in valuations, is in the short-term rental markets.

Speaker Change: How do you think real estate values might respond to the higher costs and the more limited supply of homeowner's insurance? Do you see that being a risk for housing values?

Jason Serrano: So overall, that is absolutely happening, particularly in the South and also within the multifamily space as well. And that definitely is a headwind to further HPA growth. I think where you see that, the concern that I have with respect to that and also taxes going higher due to an increase in valuations is in the short-term rental markets. And in those markets, particularly with the slowdown of rental throughout the month and increase in costs, you can see an increase in supply on the market given the NOI of those short-term investments. However, short-term rental investments have waned.

Speaker Change: Yeah, this is Jason. So, overall, that is absolutely happening, particularly in the South, and also within the multifamily space as well.

Jason Serrano: And then those markets, you know, you're particularly with those slow down of, you know, rentals throughout the month and increase in costs. You can see an increase in supply on the market given. The, you know, the NOI those short-term investment, the short-term rental investments have, have waned. So I think that's part of the reason why you're seeing a historical increase in supply in markets like Austin, where, you know, in the last six months, you just had a massive pickup in supply side. Supply side has kept the market intact, given the high funding costs as well as the higher levels of home prices and lack of affordability.

Jason Serrano: So I think that is part of the reason why you are seeing a historical increase in supply in markets like Austin where, literally, over the last six months, you have had a massive pickup in supply side. Supply has kept the market intact given the high funding costs as well as the higher levels of home prices and lack of affordability. So when you look through all that, you still have a super majority part of the country that has a fixed rate mortgage that is not affected, and then incrementally, insurance costs weigh in, but it's still a smaller piece of the entire puzzle.

Speaker Change: in supply on the market given the NOI, those short-term investments, the short-term rental investments have waned. So I think that's part of the reason why you're seeing historical increase in supply in markets like Austin where, you know.

Speaker Change: Literally, over the last six months, you just had a massive pickup in supply side. Supply side has kept the market intact given the high funding costs as well.

Jason Serrano: So when you look at through all that, you know, you still have, you know, the supermajority part of the country that has a fixed-rate mortgage that's not affected. But, and then incrementally that insurance costs, you know, weighs in, but it's still, you know, a small piece of the entire puzzle. It's where the NOI gets really impacted. And I think that's where our concerns are. So those are the markets that we're watching, you know, very carefully, and particularly within our BPL bridge book is where we're looking to minimize exposure. That's interesting. Interesting comments. Thank you so much.

Speaker Change: Blahs

Speaker Change: the higher levels of home prices and lack of affordability.

Speaker Change: So, when you look at through all that, you know, you still have...

Jason Serrano: It's where the NOI gets really impacted, and I think that's where our concerns are. So those are the markets that we're watching very carefully, and particularly within our BPL bridge book, is where we're looking to minimize exposure. Thank you for your participation in today's conference. This concludes the program. You may now disconnect.

Operator: Thank you.

Jason Serrano: I'm showing no further questions at this time.

Speaker Change: are looking to minimize exposure.

Jason Serrano: I now like to turn it back to Jason Serrano for closing remarks. Well, thank you all very much for joining us on this call. We look forward to speaking to you about our third quarter results.

Speaker Change: That's interesting. Interesting comments. Thank you so much.

Speaker Change: 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.

Operator: Have a great day. Thank you for your participation in today's conference.

Operator: This concludes the program. You may now disconnect. Thank you very much.

Speaker Change: Well, thank you all very much for joining us on this call, and we look forward to speaking to you about our third quarter results. Have a great day.

Speaker Change: In the name of the Father, and of the Son, and of the Holy Spirit. Amen.

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Operator: Copyright 2020 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent. Recording 2020 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent. Recording 2020 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent. Recording 2020 Mooji Media Ltd. All Rights Reserved.

Operator: No part of this recording may be reproduced without Mooji Media Ltd.'s express consent. Copyright 2019 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent.

Speaker Change: Copyright © 2020 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent.