001-35543 | 27-0298092 | |
(COMMISSION FILE NUMBER) | (IRS EMPLOYER ID. NUMBER) |
385 East Colorado Boulevard | 91101 | |
Pasadena, California | (ZIP CODE) | |
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) |
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
Common Stock, $0.01 par value | WMC | New York Stock Exchange |
WESTERN ASSET MORTGAGE CAPITAL CORPORATION | ||||
By: | /s/ Adam C. E. Wright | |||
Name: | Adam C. E. Wright | |||
Title: | Assistant Secretary |
▪ | June 30, 2019 book value per share of $10.51, net of second quarter common dividend of $0.31 per share declared on June 20, 2019. |
▪ | GAAP net income of $10.6 million, or $0.21 per basic and diluted share. |
▪ | Core earnings of $15.8 million, or $0.31 per basic and diluted share.1 |
▪ | Economic return on book value was 1.1%1,2 for the quarter. |
▪ | 2.14% annualized net interest margin on our investment portfolio. 1,3,4 |
▪ | 5.6x leverage excluding non-recourse debt as of June 30, 2019 (8.5x leverage including non-recourse debt). |
▪ | $49.3 million of common equity raised during the quarter, net of offering costs. |
▪ | Acquired $1.2 billion of investments, consisting of: |
* | $584.0 million in Agency RMBS |
* | $500.9 million in Agency CMBS |
* | $50.0 million in a Commercial Loan |
* | $67.3 million in Non-Agency CMBS |
* | $19.8 million in GSE Risk Transfer Securities |
▪ | Completed a securitization of $945.5 million of our Residential Whole Loan investments involving the issuance of $919.0 million of mortgage-backed notes. |
For the Three Months Ended | ||||||||
GAAP Results | June 30, 2019 | March 31, 2019 | ||||||
(in thousands-except share and per share data) | ||||||||
Net Interest Income | $ | 15,860 | $ | 15,633 | ||||
Other Income (Loss): | ||||||||
Realized gain (loss) on sale of investments, net | (8 | ) | (5,105 | ) | ||||
Other than temporary impairment | (3,295 | ) | (1,232 | ) | ||||
Unrealized gain (loss), net | 74,614 | 50,781 | ||||||
Gain (loss) on derivative instruments, net | (71,530 | ) | (27,148 | ) | ||||
Other, net | 532 | 236 | ||||||
Other Income (loss) | 313 | 17,532 | ||||||
Total Expenses | 5,081 | 5,277 | ||||||
Income (loss) before income taxes | 11,092 | 27,888 | ||||||
Income tax provision (benefit) | 478 | 12 | ||||||
Net income (loss) | $ | 10,614 | $ | 27,876 | ||||
Net income (loss) per Common Share – Basic/Diluted | $ | 0.21 | $ | 0.58 | ||||
Non-GAAP Results | ||||||||
Core earnings (1) | $ | 15,758 | $ | 15,492 | ||||
Core earnings per Common Share – Basic/Diluted | $ | 0.31 | $ | 0.32 | ||||
Weighted average yield(2)(4) | 4.94 | % | 5.17 | % | ||||
Effective cost of funds(3)(4) | 2.94 | % | 3.25 | % | ||||
Annualized net interest margin(2)(3)(4) | 2.14 | % | 2.36 | % |
Principal Balance | Amortized Cost | Fair Value | Net Weighted Average Coupon | |||||||||||
Agency CMBS | $ | 1,772,577 | $ | 1,793,383 | $ | 1,879,939 | 3.3 | % | ||||||
Agency CMBS Interest-Only Strips, accounted for as derivatives | N/A | N/A | 3,829 | 0.4 | % | |||||||||
Total Agency CMBS | 1,772,577 | 1,793,383 | 1,883,768 | 3.0 | % | |||||||||
Agency RMBS | 570,369 | 580,636 | 585,751 | 3.5 | % | |||||||||
Agency RMBS Interest-Only Strips | N/A | 10,202 | 11,891 | 2.3 | % | |||||||||
Agency RMBS Interest-Only Strips, accounted for as derivatives | N/A | N/A | 6,741 | 2.8 | % | |||||||||
Total Agency RMBS | 570,369 | 590,838 | 604,383 | 3.2 | % | |||||||||
Total | $ | 2,342,946 | $ | 2,384,221 | $ | 2,488,151 | 3.1 | % |
Principal Balance | Amortized Cost | Fair Value | Weighted Average Coupon(1) | |||||||||||
Non-Agency RMBS | $ | 53,458 | $ | 37,320 | $ | 38,086 | 4.8 | % | ||||||
Non-Agency RMBS IOs and IIOs | N/A | 9,007 | 9,101 | 0.6 | % | |||||||||
Non-Agency CMBS | 255,882 | 217,764 | 219,704 | 5.8 | % | |||||||||
Residential Whole Loans | 1,169,136 | 1,187,222 | 1,206,220 | 5.2 | % | |||||||||
Residential Bridge Loans(2) | 96,485 | 96,618 | 94,892 | 9.3 | % | |||||||||
Securitized Commercial Loans(1) | 799,183 | 802,199 | 804,134 | 5.0 | % | |||||||||
Commercial Loans | 312,032 | 311,237 | 312,032 | 7.2 | % | |||||||||
Other Securities | 66,015 | 70,897 | 76,617 | 7.6 | % | |||||||||
$ | 2,752,191 | $ | 2,732,264 | $ | 2,760,786 | 4.4 | % |
Outstanding Borrowings | Weighted Average Interest Rate | Weighted Average Remaining Days to Maturity | |||||||
Short Term Borrowings: | |||||||||
Agency RMBS | $ | 573,771 | 2.65 | % | 40 | ||||
Agency CMBS | 1,673,902 | 2.62 | % | 35 | |||||
Non-Agency RMBS | 11,488 | 3.86 | % | 23 | |||||
Non-Agency CMBS | 146,629 | 3.79 | % | 42 | |||||
Residential Whole-Loans | 226,784 | 3.63 | % | 68 | |||||
Residential Bridge Loans | 89,241 | 4.59 | % | 29 | |||||
Commercial Loans | 137,821 | 4.67 | % | 36 | |||||
Securitized Commercial Loan | 19,708 | 3.28 | % | 19 | |||||
Other Securities | 53,114 | 3.93 | % | 32 | |||||
Subtotal | 2,932,458 | 2.95 | % | 39 | |||||
Long Term Borrowings | |||||||||
Residential Whole-Loans (1) | 11,762 | 4.15 | % | 966 | |||||
Commercial Loans (1) | 57,000 | 4.60 | % | 727 | |||||
Subtotal | 68,762 | 4.52 | % | 768 | |||||
Total | $ | 3,001,220 | 2.99 | % | 55 |
Classes | Principal Balance | Coupon | Carrying Value | Contractual Maturity | ||||
Offered Notes:(1) | ||||||||
Class A-1 | $ | 769,825 | 3.3% | $ | 769,823 | 4/25/2049 | ||
Class A-2 | 41,248 | 3.5% | 41,248 | 4/25/2049 | ||||
Class A-3 | 65,350 | 3.8% | 65,348 | 4/25/2049 | ||||
Class M-1 | 25,055 | 4.8% | 25,055 | 4/25/2049 | ||||
901,478 | 901,474 | |||||||
Less: Deferred Financing Cost | N/A | 5,686 | ||||||
Total | $ | 901,478 | $ | 895,788 |
Remaining Interest Rate Swap Term | Notional Value | Average Fixed Pay Rate | Average Floating Receive Rate | Average Maturity (Years) | Forward Starting | ||||||||||
1 year or less | $ | 200,000 | 1.8 | % | 2.6 | % | 0.9 | — | % | ||||||
Greater than 1 year and less than 3 years | 738,000 | 2.0 | % | 2.6 | % | 2.8 | — | % | |||||||
Greater than 3 years and less than 5 years | 828,700 | 2.6 | % | 2.5 | % | 4.6 | — | % | |||||||
Greater than 5 years | 2,005,700 | 2.4 | % | 2.6 | % | 9.2 | 20.6 | % | |||||||
Total | $ | 3,772,400 | 2.3 | % | 2.5 | % | 6.5 | 10.9 | % |
Remaining Interest Rate Swap Term | Notional Amount | Average Variable Pay Rate | Average Fixed Receive Rate | Average Maturity (Years) | ||||||||
Greater than 1 year and less than 3 years | $ | 225,000 | 2.6 | % | 2.4 | % | 1.8 | |||||
Greater than 3 years and less than 5 years | 66,000 | 2.4 | % | 2.2 | % | 5.0 | ||||||
Greater than 5 years | 683,400 | 2.6 | % | 2.3 | % | 8.6 | ||||||
Total | $ | 974,400 | 2.6 | % | 2.4 | % | 6.8 |
Investor Relations Contact: | Media Contact: |
Larry Clark | Tricia Ross |
Financial Profiles, Inc. | Financial Profiles, Inc. |
(310) 622-8223 | (310) 622-8226 |
lclark@finprofiles.com | tross@finprofiles.com |
June 30, 2019 | December 31, 2018 | |||||||
Assets: | ||||||||
Cash and cash equivalents | $ | 81,761 | $ | 21,987 | ||||
Restricted cash | 87,139 | 55,808 | ||||||
Agency mortgage-backed securities, at fair value ($2,388,337 and $1,505,979 pledged as collateral, at fair value, respectively) | 2,488,151 | 1,505,979 | ||||||
Non-Agency mortgage-backed securities, at fair value ($214,946 and $237,107 pledged as collateral, at fair value, respectively) | 266,891 | 250,856 | ||||||
Other securities, at fair value ($76,483 and $59,780 pledged as collateral, at fair value, respectively) | 76,617 | 59,906 | ||||||
Residential Whole Loans, at fair value ($1,196,415 and $1,041,885 pledged as collateral, at fair value, respectively) | 1,206,220 | 1,041,885 | ||||||
Residential Bridge Loans ($87,402 and $211,999 at fair value and $90,606 and $221,486 pledged as collateral, respectively) | 94,892 | 221,719 | ||||||
Securitized commercial loan, at fair value | 804,134 | 1,013,511 | ||||||
Commercial Loans, at fair value ($292,032 and $196,123 pledged as collateral, at fair value, respectively) | 312,032 | 216,123 | ||||||
Investment related receivable | 35,779 | 42,945 | ||||||
Interest receivable | 19,413 | 21,959 | ||||||
Due from counterparties | 55,519 | 39,623 | ||||||
Derivative assets, at fair value | 3,329 | 2,606 | ||||||
Other assets | 1,631 | 2,488 | ||||||
Total Assets (1) | $ | 5,533,508 | $ | 4,497,395 | ||||
Liabilities and Stockholders’ Equity: | ||||||||
Liabilities: | ||||||||
Repurchase agreements, net | $ | 3,001,220 | $ | 2,818,837 | ||||
Convertible senior unsecured notes, net | 110,719 | 110,060 | ||||||
Securitized debt, net ($722,026 and $949,626 at fair value and $83,749 and $246,802 held by affiliates, respectively) | 1,617,813 | 949,626 | ||||||
Interest payable (includes $374 and $816 on securitized debt held by affiliates, respectively) | 11,982 | 8,532 | ||||||
Investment related payables | 99,534 | — | ||||||
Due to counterparties | 22,029 | 17,781 | ||||||
Derivative liability, at fair value | 1,317 | 10,130 | ||||||
Accounts payable and accrued expenses | 2,801 | 3,858 | ||||||
Payable to affiliate | 2,827 | 4,615 | ||||||
Dividend payable | 16,500 | 14,916 | ||||||
Other liabilities | 87,140 | 56,031 | ||||||
Total Liabilities (2) | $ | 4,973,882 | $ | 3,994,386 | ||||
Commitments and contingencies | ||||||||
Stockholders’ Equity: | ||||||||
Common stock: $0.01 par value, 500,000,000 shares authorized, 53,224,379 and 48,116,379 outstanding, respectively | 532 | 481 | ||||||
Preferred stock, $0.01 par value, 100,000,000 shares authorized and no shares outstanding | — | — | ||||||
Additional paid-in capital | 883,417 | 833,810 | ||||||
Retained earnings (accumulated deficit) | (324,323 | ) | (331,282 | ) | ||||
Total Stockholders’ Equity | 559,626 | 503,009 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 5,533,508 | $ | 4,497,395 |
June 30, 2019 | December 31, 2018 | |||||||
(1) Assets of consolidated VIEs included in the total assets above: | ||||||||
Cash and cash equivalents | $ | 2,874 | $ | 674 | ||||
Restricted Cash | 87,139 | 55,808 | ||||||
Residential Whole Loans, at fair value ($1,196,415 and $1,041,885 pledged as collateral, at fair value, respectively) | 1,206,220 | 1,041,885 | ||||||
Residential Bridge Loans ($83,116 and $211,766 at fair value and $90,606 and $221,486 pledged as collateral, respectively) | 90,606 | 221,486 | ||||||
Securitized commercial loan, at fair value | 804,134 | 1,013,511 | ||||||
Commercial Loans, at fair value ($292,032 and $196,123 pledged as collateral, at fair value, respectively) | 212,032 | 196,123 | ||||||
Investment related receivable | 35,725 | 42,945 | ||||||
Interest receivable | 10,494 | 15,540 | ||||||
Other assets | 124 | 178 | ||||||
Total assets of consolidated VIEs | $ | 2,449,348 | $ | 2,588,150 | ||||
(2) Liabilities of consolidated VIEs included in the total liabilities above: | ||||||||
Securitized debt, net ($722,026 and $949,626 at fair value and $83,749 and $246,802 held by affiliates, respectively) | $ | 1,617,813 | $ | 949,626 | ||||
Interest payable (includes $374 and $816 on securitized debt held by affiliates, respectively) | 4,067 | 2,419 | ||||||
Accounts payable and accrued expenses | 394 | 708 | ||||||
Other liabilities | 87,139 | 56,033 | ||||||
Total liabilities of consolidated VIEs | $ | 1,709,413 | $ | 1,008,786 |
Three months ended | ||||||||
June 30, 2019 | March 31, 2019 | |||||||
Net Interest Income | ||||||||
Interest income | $ | 53,818 | $ | 52,033 | ||||
Interest expense (includes $1,106 and $2,338 on securitized debt held by affiliates, respectively) | 37,958 | 36,400 | ||||||
Net Interest Income | 15,860 | 15,633 | ||||||
Other Income (Loss) | ||||||||
Realized gain (loss) on sale of investments, net | (8 | ) | (5,105 | ) | ||||
Other than temporary impairment | (3,295 | ) | (1,232 | ) | ||||
Unrealized gain (loss), net | 74,614 | 50,781 | ||||||
Gain (loss) on derivative instruments, net | (71,530 | ) | (27,148 | ) | ||||
Other, net | 532 | 236 | ||||||
Other Income (Loss) | 313 | 17,532 | ||||||
Expenses | ||||||||
Management fee to affiliate | 1,832 | 1,735 | ||||||
Other operating expenses | 1,253 | 1,598 | ||||||
General and administrative expenses: | ||||||||
Compensation expense | 705 | 544 | ||||||
Professional fees | 761 | 1,215 | ||||||
Other general and administrative expenses | 530 | 185 | ||||||
Total general and administrative expenses | 1,996 | 1,944 | ||||||
Total Expenses | 5,081 | 5,277 | ||||||
Income before income taxes | 11,092 | 27,888 | ||||||
Income tax provision (benefit) | 478 | 12 | ||||||
Net income (loss) | $ | 10,614 | $ | 27,876 | ||||
Net income (loss) per Common Share – Basic | $ | 0.21 | $ | 0.58 | ||||
Net income (loss) per Common Share – Diluted | $ | 0.21 | $ | 0.58 |
Three months ended | ||||||||
(dollars in thousands) | June 30, 2019 | March 31, 2019 | ||||||
Net Income (loss) | $ | 10,614 | $ | 27,876 | ||||
Income tax provision (benefit) | 478 | 12 | ||||||
Net Income before income taxes | 11,092 | 27,888 | ||||||
Adjustments: | ||||||||
Investments: | ||||||||
Unrealized (gain) loss on investments, securitized debt and other liabilities | (74,614 | ) | (50,781 | ) | ||||
Other than temporary impairment | 3,295 | 1,232 | ||||||
Realized (gain) loss on sale of investments | 8 | 5,105 | ||||||
One-time transaction costs | 130 | 269 | ||||||
Derivative Instruments: | ||||||||
Net realized (gain) loss on derivatives | 65,025 | 42,885 | ||||||
Net unrealized (gain) loss on derivatives | 10,519 | (11,313 | ) | |||||
Amortization of discount on convertible senior unsecured notes | 138 | 137 | ||||||
Non-cash stock-based compensation | 165 | 70 | ||||||
Total adjustments | 4,666 | (12,396 | ) | |||||
Core Earnings | $ | 15,758 | $ | 15,492 | ||||
Basic and Diluted Core Earnings per Common Share and Participating Securities | $ | 0.31 | $ | 0.32 | ||||
Basic and Diluted Core Earnings plus Drop Income per Common Share and Participating Securities | $ | 0.31 | $ | 0.32 | ||||
Basic weighted average common shares and participating securities | 50,823,683 | 48,236,647 | ||||||
Diluted weighted average common shares and participating securities | 50,823,683 | 48,236,647 |
Three months ended | ||||||||
(dollars in thousands) | June 30, 2019 | March 31, 2019 | ||||||
Coupon interest income | $ | 57,792 | $ | 54,771 | ||||
Premium amortization, discount accretion and amortization of basis, net | (3,974 | ) | (2,738 | ) | ||||
Interest income | 53,818 | 52,033 | ||||||
Contractual interest income, net of amortization of basis on Agency and Non-Agency Interest-Only Strips, classified as derivatives(1): | ||||||||
Coupon interest income | 819 | 784 | ||||||
Amortization of basis | (655 | ) | (595 | ) | ||||
Subtotal | 164 | 189 | ||||||
Total adjusted interest income | $ | 53,982 | $ | 52,222 |
Three months ended | ||||||||||||||
June 30, 2019 | March 31, 2019 | |||||||||||||
(dollars in thousands) | Reconciliation | Cost of Funds/Effective Borrowing Costs | Reconciliation | Cost of Funds/Effective Borrowing Costs | ||||||||||
Interest expense | $ | 37,958 | 3.54 | % | $ | 36,400 | 3.94 | % | ||||||
Adjustments: | ||||||||||||||
Interest expense on Securitized debt from consolidated VIEs | (8,215 | ) | (4.26 | )% | (9,157 | ) | (4.22 | )% | ||||||
Net interest (received) paid - interest rate swaps | (3,850 | ) | (0.36 | )% | (4,283 | ) | (0.46 | )% | ||||||
Effective Borrowing Costs | $ | 25,893 | 2.94 | % | $ | 22,960 | 3.25 | % | ||||||
Weighted average borrowings | $ | 3,527,942 | $ | 2,868,327 |
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