Executive Summary / Key Takeaways

• New York Mortgage Trust, Inc. (NYMTM) is executing a strategic repositioning, shifting capital from multi-family joint ventures towards higher-yielding residential loans and Agency RMBS to enhance recurring income generation.
• This pivot contributed to a significant 55% increase in GAAP interest income and over 57% increase in adjusted interest income in Q1 2025 compared to the prior year period, driving a return to positive net income attributable to common stockholders ($0.33 per share) and positive Earnings Available for Distribution (EAD) ($0.20 per share).
• The company is actively managing its liability structure, increasing recourse leverage to 3.40x (Portfolio Recourse Leverage 3.20x) in Q1 2025, primarily financing liquid Agency RMBS, while pursuing longer-term, non-mark-to-market financing to mitigate market disruption risk.
• While the company does not detail proprietary technological differentiators, it utilizes risk analysis and simulation models and relies on third-party valuation services, operating in an industry where some competitors leverage automated systems and digital platforms for efficiency.
• Key risks include sensitivity to interest rate volatility, credit performance of its diversified portfolio, liquidity management under potential margin calls, and the uncertain macroeconomic environment influenced by inflation, trade policy, and recession fears.

Setting the Stage: A REIT's Evolution in the Mortgage Landscape

New York Mortgage Trust, Inc. operates as an internally-managed real estate investment trust, focused on the acquisition, investment, financing, and management of mortgage-related residential assets across the United States. For years, the company has aimed to deliver stable long-term earnings to its stockholders through a diversified portfolio. However, the dynamic nature of the mortgage and real estate markets necessitates strategic evolution.

Recognizing shifting market conditions and opportunities, the company embarked on a significant strategic repositioning beginning in the second quarter of 2023. This involved a deliberate move away from joint venture equity investments in multi-family properties, with a plan for opportunistic disposition over time. The capital released from these investments is being strategically reallocated towards targeted assets perceived to offer better potential for generating stable, recurring income in the current environment.

Within the competitive landscape of mortgage REITs, New York Mortgage Trust operates alongside larger, more established players like Annaly Capital Management (NLY) and AGNC Investment Corp (AGNC), which often focus heavily on agency-backed securities for stability and scale. It also competes with entities like Starwood Property Trust (STWD), which has a significant presence in commercial and multi-family mortgages. Compared to these larger rivals, New York Mortgage Trust positions itself as a more agile player, willing to engage in credit-sensitive and niche segments, including distressed residential loans and mezzanine multi-family financing, alongside more liquid agency assets.

This strategic positioning implies a different risk-reward profile compared to peers primarily focused on agency RMBS. While potentially offering higher yields in specific credit segments, it also exposes the company to greater credit risk and operational complexity. The competitive analysis suggests that while New York Mortgage Trust may achieve higher yields in certain non-agency segments (potentially 15-20% higher yield potential on non-agency RMBS compared to some agency-focused strategies), it may lag in overall profitability margins (aggregate net margins potentially 40-50% compared to competitors' 50-60%) and operational efficiency (potentially 10-20% higher costs in certain areas) due to the nature of its targeted assets and internal management structure. Indirect competitors, including traditional banks, fintech platforms (which may offer faster, cheaper processing), and private equity firms, also exert pressure by providing alternative capital and financing solutions.

In terms of technological differentiation, the company does not detail proprietary, cutting-edge technology or significant R&D initiatives that provide a distinct competitive moat for New York Mortgage Trust. The company mentions utilizing a model-based risk analysis system and an earnings simulation model for internal assessment and relies on third-party valuation services. This contrasts with some competitors who may leverage more advanced automated systems or digital platforms for potentially faster processing or lower operational overhead, as suggested by the competitive analysis. Therefore, while New York Mortgage Trust employs standard analytical tools, its competitive edge does not appear to stem from a unique technological advantage.

The Strategic Pivot: Reshaping the Portfolio for Income

The core of New York Mortgage Trust's current strategy is the deliberate repositioning of its investment portfolio. This involves a phased exit from joint venture equity investments in multi-family properties, a process that has seen a reduction in exposure to this disposal group to $19.9 million across two properties as of March 31, 2025. The company is not actively seeking new multi-family equity investments, intending for this portfolio segment, including its Mezzanine Lending, to wind down over time.

The capital freed up from these dispositions, along with new capital raised, is being directed towards targeted assets designed to enhance recurring income and offer less price sensitivity to credit deterioration (in the case of Agency RMBS) or higher coupons and lower duration (in the case of business purpose loans). Targeted investments include residential loans (performing, re-performing, non-performing, and business purpose loans), Agency RMBS, non-Agency RMBS, and other related credit assets.

This strategic shift has already yielded tangible results. During the three months ended March 31, 2025, the company significantly expanded its holdings of Agency RMBS, purchasing approximately $1.5 billion with an average coupon of 5.35%. It also acquired approximately $396.8 million in residential loans with an average gross coupon of 9.33%. These acquisitions, coupled with ongoing investment activity since the strategic pivot began in Q2 2023, contributed directly to the substantial increase in interest income observed in the first quarter of 2025.

Complementing the asset strategy is a focus on liability management. The company is committed to prudently managing its financing and actively seeks longer-term, non-mark-to-market financing arrangements where appropriate for its credit portfolio. This aims to provide greater stability and insulation from potential market dislocations compared to reliance on shorter-term, mark-to-market repurchase agreements. In January 2025, the company issued $82.5 million of 9.12% Senior Notes due 2030, with net proceeds of $79.3 million predominantly used to purchase Agency RMBS. Furthermore, the company completed two residential loan securitizations in Q1 2025, generating $326.3 million in net proceeds and obtaining non-recourse financing, while also redeeming an existing securitization.

Financial Performance Reflecting the Pivot

The financial results for the first quarter of 2025 demonstrate the impact of this strategic repositioning. Interest income surged to $129.7 million for the three months ended March 31, 2025, a significant increase from $83.9 million in the same period of 2024. This 55% increase in GAAP interest income, and over 57% increase in adjusted interest income, was a direct result of the expanded portfolio of interest-earning assets, particularly Agency RMBS and residential loans.

Naturally, the increase in assets was accompanied by higher financing costs. Interest expense rose to $96.6 million in Q1 2025, up from $66.0 million in Q1 2024, driven by increased borrowings through repurchase agreements, securitizations, and the issuance of senior unsecured notes. Despite the higher expense, the growth in interest income outpaced the increase in interest expense, resulting in a net interest income of $33.1 million in Q1 2025, a substantial improvement from $17.9 million in Q1 2024.

The net loss from real estate decreased significantly, from $16.4 million in Q1 2024 to $2.2 million in Q1 2025. This improvement reflects the reduced exposure to multi-family real estate assets due to dispositions and de-consolidation since March 31, 2024, leading to lower associated expenses, although rental income also decreased.

Other income and loss components showed notable shifts. The company recognized net unrealized gains of $118.2 million in Q1 2025, a stark contrast to net unrealized losses of $39.4 million in Q1 2024. This swing was primarily attributed to a decrease in interest rates during the quarter, which positively impacted the fair value of investment securities and residential loans. However, this was partially offset by net losses on derivative instruments ($46.8 million in Q1 2025 vs. $49.2 million gains in Q1 2024), mainly due to lower valuations of interest rate swaps as rates declined. Realized losses, net, increased to $41.1 million in Q1 2025 from $10.5 million in Q1 2024, primarily driven by sales of U.S. Treasury securities (though largely offset by derivative gains) and increased losses on foreclosed residential properties.

Income from equity investments increased to $3.6 million in Q1 2025 from $2.1 million in Q1 2024. This was influenced by reduced unrealized losses on unconsolidated multi-family joint ventures (due to lower remaining balances), higher income from the residential loan originator entity (Constructive Loans, LLC), and unrealized gains on preferred equity investments.

Overall, these factors contributed to a significant improvement in the bottom line. Net income attributable to the company reached $42.2 million in Q1 2025, a substantial turnaround from a net loss of $57.9 million in Q1 2024. This translated to net income attributable to common stockholders of $30.3 million, or $0.33 per basic and diluted share, compared to a net loss of $68.3 million, or $0.75 per basic and diluted share, in the prior year period. Earnings Available for Distribution (EAD), a non-GAAP measure indicating current income generating capacity, was $18.2 million, or $0.20 per common share, in Q1 2025, a significant increase from $2.1 million, or $0.02 per common share, in Q1 2024.

The company's book value per common share stood at $9.37 as of March 31, 2025, while adjusted book value per common share, which accounts for certain non-cash items and fair value adjustments on liabilities, was $10.43. These figures are key metrics used by management and investors to evaluate performance and compare against peers.

Balance Sheet and Capital Structure

As of March 31, 2025, New York Mortgage Trust held total assets of approximately $10.0 billion, an increase from $9.2 billion at December 31, 2024. This growth was primarily driven by the expansion of the investment portfolio, particularly in investment securities (up to $4.7 billion from $3.8 billion) and residential loans (up to $3.9 billion from $3.8 billion). The multi-family loan portfolio remained relatively stable at $87.2 million, while equity investments decreased to $94.0 million from $113.5 million, reflecting dispositions.

The company's financing structure is diverse, including repurchase agreements ($4.5 billion), collateralized debt obligations (CDOs) ($3.2 billion), senior unsecured notes ($238.8 million), and subordinated debentures ($45.0 million). The increase in assets was largely funded by an increase in repurchase agreements and CDOs.

The company's recourse leverage ratio, which includes recourse repurchase agreements, senior unsecured notes, and subordinated debentures, increased to 3.40x at March 31, 2025, from 3.00x at December 31, 2024. The portfolio recourse leverage ratio, focusing solely on recourse repurchase agreements, increased to 3.20x from 2.90x. This increase is primarily attributed to the financing of highly liquid Agency RMBS. While leverage is expected to increase gradually as the portfolio scales, the company remains focused on managing its liabilities prudently. As of March 31, 2025, 62% of the company's debt (excluding non-recourse mortgages payable on real estate and Consolidated SLST CDOs) is subject to mark-to-market margin calls, with the majority (57%) collateralized by Agency RMBS. The remaining 38% has no exposure to collateral repricing.

The company maintains a solid liquidity position, with $173.1 million in unrestricted cash and cash equivalents, $256.8 million in unencumbered investment securities, and $100.2 million in unencumbered residential loans as of March 31, 2025. These assets are available to meet potential margin calls or fund new investments. The company also has access to potential future liquidity through its common stock and preferred stock repurchase programs ($189.7 million and $97.6 million available, respectively, as of March 31, 2025) and at-the-market equity offering programs ($100 million available for both common and preferred stock).

Risks and the Macro Environment

New York Mortgage Trust operates in a market environment characterized by significant volatility and uncertainty, exposing it to various risks. Interest rate risk remains paramount, as changes in rates directly impact the value of the company's assets and the cost of its variable-rate financing. The faster re-pricing of repurchase agreements compared to some assets can negatively affect net interest income. While the company uses interest rate swaps and caps to hedge this risk, the effectiveness of these hedges can be influenced by factors like prepayment speeds and basis risk.

Credit risk is inherent in the company's portfolio of residential loans, non-Agency RMBS, and multi-family investments. Economic slowdowns, inflation, and trade policy impacts could lead to increased delinquencies, defaults, and foreclosures, adversely affecting asset values and income. The company employs due diligence and monitoring processes to mitigate this, but unanticipated losses remain a possibility.

Liquidity risk is a key concern, particularly due to the reliance on mark-to-market financing. Significant and rapid declines in asset values could trigger substantial margin calls, potentially forcing unplanned asset sales at unfavorable terms. While the company maintains a liquidity cushion and seeks longer-term financing, this risk is amplified in volatile markets. The company's recourse leverage, while within its target range, is higher than some agency-focused peers, potentially increasing its sensitivity to funding market disruptions.

Fair value risk arises from the subjective nature of valuing certain illiquid or complex credit-sensitive assets, especially in turbulent markets. Minor changes in valuation assumptions can materially impact reported fair values and, consequently, book value.

Capital market risk affects the company's ability to raise equity and debt capital, which is crucial for funding operations and growth, particularly given the REIT requirement to distribute a large portion of taxable income. The current volatile capital market environment could constrain access to capital on attractive terms.

Furthermore, the broader macroeconomic environment, including persistent inflation, trade policy uncertainty (such as recently implemented tariffs), potential for stagflation, and resurfaced fears of a recession, creates headwinds. These factors can negatively impact housing fundamentals, credit performance, market liquidity, and overall economic activity, posing material risks to the company's business, financial condition, and ability to pay dividends. A new risk factor highlights the potential adverse impact of global trade disruption and trade barriers.

Outlook and Path Forward

Looking ahead, New York Mortgage Trust intends to continue executing its strategic repositioning. This involves the opportunistic disposition of remaining multi-family joint venture equity investments and a focus on generating higher portfolio turnover in targeted asset classes. The primary objective remains the acquisition of assets capable of growing interest income, with a continued emphasis on Agency RMBS and business purpose loans.

The company expects to maintain a selective approach to acquiring residential credit assets and remains committed to prudently managing its liabilities. The recent issuance of senior notes and completion of securitizations underscore the strategy to secure longer-term, non-mark-to-market financing arrangements for portions of the credit portfolio, aiming to enhance liquidity management and provide greater resilience against market dislocations.

Specific quantitative guidance figures for future earnings or portfolio growth were not available. However, the strategic direction is clear: pivot towards income-generating assets, manage liabilities defensively, and navigate market volatility with a focus on risk-adjusted returns. The company's ability to successfully execute this strategy, manage associated risks, and adapt to evolving market conditions will be critical in determining its future financial performance and the sustainability of its dividend policy. The Board of Directors will continue to evaluate the dividend policy quarterly based on earnings, financial condition, capital requirements, REIT qualification, and other relevant factors.

Conclusion

New York Mortgage Trust is actively reshaping its portfolio and financing strategy in response to the current complex and volatile market environment. The strategic pivot away from multi-family joint ventures towards higher-yielding residential loans and more liquid Agency RMBS is central to its objective of enhancing recurring income generation. The significant increase in interest income and return to profitability in the first quarter of 2025 provide initial validation of this strategic direction.

However, the path forward is not without challenges. The company operates in a competitive landscape against larger, more efficient rivals and faces inherent risks from interest rate fluctuations, credit performance, and liquidity management, particularly given its leverage profile and reliance on mark-to-market financing for a portion of its assets. While the company is taking steps to secure longer-term financing, the uncertain macroeconomic outlook, including potential impacts from inflation and trade policy, could pressure asset values and credit quality. Investors should monitor the company's execution of its disposition and acquisition strategy, its ability to secure favorable long-term financing, and its capacity to manage risks effectively in a persistently unpredictable market.