PASADENA, Calif., Nov. 2,
2016 /PRNewswire/ -- Western Asset Mortgage Capital
Corporation (the "Company" or "WMC") (NYSE: WMC) today reported its
results for the third quarter ended September 30, 2016.
THIRD QUARTER 2016 HIGHLIGHTS
- $0.31 per share common dividend
declared.
- GAAP net income of $32.3 million,
or $0.77 per basic and diluted
share.
- Core earnings plus drop income of $14.8
million, or $0.35 per basic
and diluted share.1,2
- 1.85% annualized net interest spread on our investment
portfolio.1,5
- Constant prepayment rate on the Company's Agency RMBS portfolio
of 11.4% for the quarter.
- $11.48 per share net book value
as of September 30, 2016, net of third quarter common
dividend.
- Economic return on book value was 7.1%1,3 for
the quarter.
- 5.2x leverage as of September 30, 2016 (7.1x leverage when
adjusted for net TBA position1,4).
MANAGEMENT COMMENTARY
"I am pleased to report that we delivered another solid
performance in the third quarter, generating an economic return on
book value of 7.1% and higher sequential core earnings plus drop
income of $14.8 million, or
$0.35 per share. We remained focused
on our long-term goal of generating strong total return for our
shareholders through attractive dividends derived from sustainable
core earnings and appreciation in the value of our portfolio. In
our view, WMC's strategic advantage in pursuing this goal is its
ability to draw on the deep investment experience and team at
Western Asset Management Company, our Manager, as well as the
breadth of its global investment, risk management, and operational
infrastructure," said Jennifer
Murphy, Chief Executive Officer of the Company. "Our third
quarter dividend of $0.31 per share
reflects our commitment to paying an attractive dividend based on
the sustainable earnings power of the portfolio balanced with our
focus on maintaining greater stability in our book value."
Anup Agarwal, Chief Investment
Officer of the Company, commented, "Despite interest rate
volatility during the quarter, our portfolio performed well,
driven by tightening spreads across all of our sector holdings and
a positive contribution from our hedge positions, and as a result,
our book value increased sequentially by 4.3%, net of our third
quarter dividend. In addition, we increased our Agency RMBS,
Whole-Loans and TBA exposure during the third quarter, enabling us
to increase our core earnings plus drop income by approximately
$2.2 million, or $0.05 per share, when compared to the second
quarter 2016."
"We are pleased with our financial results for the quarter and
remain optimistic going forward. Our current expectations are for
ongoing, yet slow economic growth and a "lower for longer" interest
rate environment in the U.S. Given these conditions, we believe
that a balanced portfolio consisting of both Agency RMBS and
credit-sensitive investments continues to be appropriate. We
continually monitor the relative value of opportunities across the
broad mortgage universe, in an effort to achieve an optimal
risk-adjusted total economic return for our shareholders,"
Mr. Agarwal concluded.
THIRD QUARTER 2016 RESULTS
The below table reflects a summary of our operating results:
|
|
For the Three Months
Ended
|
|
GAAP
Results
|
|
September 30,
2016
|
|
June 30,
2016
|
|
|
|
|
|
|
Net Interest
Income
|
|
$
|
21,469
|
|
|
$
|
21,493
|
|
|
Other Income
(Loss):
|
|
|
|
|
|
Realized gain (loss)
on sale of investments, net
|
|
1,439
|
|
|
(352)
|
|
|
Other than temporary
impairment
|
|
(4,978)
|
|
|
(6,356)
|
|
|
Unrealized gain
(loss), net
|
|
15,292
|
|
|
21,510
|
|
|
Gain (loss) on
derivative instruments, net
|
|
6,121
|
|
|
(14,165)
|
|
|
Other, net
|
|
(60)
|
|
|
234
|
|
|
Other Income
(loss)
|
|
17,814
|
|
|
871
|
|
|
Total
Expenses
|
|
4,762
|
|
|
5,061
|
|
|
Income before income
taxes
|
|
34,521
|
|
|
17,303
|
|
|
Income tax provision
(benefit)
|
|
2,239
|
|
|
—
|
|
|
Net income
(loss)
|
|
$
|
32,282
|
|
|
$
|
17,303
|
|
|
|
|
|
|
|
Net income (loss) per
Common Share – Basic/Diluted
|
|
$
|
0.77
|
|
|
$
|
0.41
|
|
|
Non-GAAP
Results
|
|
|
|
|
|
Core earnings plus
drop income(1)
|
|
$
|
14,838
|
|
|
$
|
12,676
|
|
|
Core earnings plus
drop income per Common Share – Basic/Diluted
|
|
$
|
0.35
|
|
|
$
|
0.30
|
|
|
Weight average
yield(2)
|
|
4.28
|
%
|
|
4.45
|
%
|
|
Effective cost of
funds(3)
|
|
2.43
|
%
|
|
2.44
|
%
|
|
Annualized net
interest spread(2)(3)
|
|
1.85
|
%
|
|
2.01
|
%
|
|
Annualized constant
prepayment rate (CPR)(4)
|
|
11.4
|
%
|
|
12.1
|
%
|
|
|
|
(1)
|
For a reconciliation
of GAAP Income to Core earnings, please refer to the Reconciliation
of Core earnings at the end of this press release.
|
|
(2)
|
Includes
interest-only securities accounted for as derivatives, foreign
currency swaps and total return swaps.
|
|
(3)
|
Includes the net
amount paid, including accrued amounts for interest rate swaps and
premium amortization for MAC interest rate swaps during the
periods.
|
|
(4)
|
Annualized CPR on
Agency RMBS.
|
PORTFOLIO COMPOSITION
As of September 30, 2016, the Company owned an aggregate
investment portfolio equaling $2.9
billion in market value. The following table sets forth
additional information regarding the Company's portfolio as of
September 30, 2016:
|
Investment
Portfolio
(dollars in
thousands)
|
|
Coupon
|
|
Principal
Balance
|
|
Amortized
Cost
|
|
Fair Value
|
|
Agency
|
|
|
|
|
|
|
|
|
|
30-year fixed
rate
|
|
3.0%
|
|
$
|
226,157
|
|
|
$
|
234,817
|
|
|
$
|
235,260
|
|
|
|
3.5%
|
|
214,969
|
|
|
226,091
|
|
|
227,788
|
|
|
|
4.0%
|
|
326,886
|
|
|
354,379
|
|
|
357,758
|
|
|
|
4.5%
|
|
329,114
|
|
|
351,870
|
|
|
368,843
|
|
|
|
5.0%
|
|
51,330
|
|
|
57,598
|
|
|
58,461
|
|
|
|
5.5%
|
|
2,369
|
|
|
2,708
|
|
|
2,669
|
|
|
|
6.0%
|
|
2,444
|
|
|
2,703
|
|
|
2,861
|
|
|
20-year fixed
rate
|
|
3.5%
|
|
130,342
|
|
|
137,010
|
|
|
139,557
|
|
|
|
4.0%
|
|
372,681
|
|
|
392,188
|
|
|
404,926
|
|
|
Agency RMBS IOs and
IIOs(1)
|
|
3.2%
|
|
N/A
|
|
|
52,463
|
|
|
53,445
|
|
|
Agency
CMBS
|
|
4.5%
|
|
4,553
|
|
|
4,553
|
|
|
4,283
|
|
|
Agency CMBS IOs and
IIOs(2)
|
|
1.2%
|
|
N/A
|
|
|
9,739
|
|
|
9,455
|
|
|
Total
Agency
|
|
3.4%
|
|
$
|
1,660,845
|
|
|
$
|
1,826,119
|
|
|
$
|
1,865,306
|
|
|
Non-Agency
|
|
|
|
|
|
|
|
|
|
Non-Agency
RMBS
|
|
4.0%
|
|
$
|
422,498
|
|
|
$
|
294,221
|
|
|
$
|
309,495
|
|
|
Non-Agency RMBS IOs and
IIOs(3)
|
|
5.7%
|
|
N/A
|
|
|
61,304
|
|
|
85,647
|
|
|
Non-Agency
CMBS
|
|
5.0%
|
|
479,405
|
|
|
393,994
|
|
|
368,898
|
|
|
Total
Non-Agency
|
|
4.0%
|
|
$
|
901,903
|
|
|
$
|
749,519
|
|
|
$
|
764,040
|
|
|
Other
Securities(4)
|
|
7.7%
|
|
42,384
|
|
|
64,384
|
|
|
63,326
|
|
|
Residential
Whole-Loans
|
|
4.8%
|
|
198,651
|
|
|
199,832
|
|
|
204,882
|
|
|
Securitized
Commercial Loan(5)
|
|
9.0%
|
|
25,000
|
|
|
25,000
|
|
|
24,138
|
|
|
Total
Portfolio
|
|
4.0%
|
|
$
|
2,828,783
|
|
|
$
|
2,864,854
|
|
|
$
|
2,921,692
|
|
|
|
|
(1)
|
Includes $25,274 of
amortized cost and $25,438 of fair value for Agency RMBS IOs and
IIOs accounted for as derivatives for GAAP.
|
|
(2)
|
Includes $9,182 of
amortized cost and $8,850 of fair value for Agency CMBS IOs and
IIOs accounted for as derivatives for GAAP.
|
|
(3)
|
Includes $2,279 of
amortized cost and $4,170 of fair value for Non-Agency RMBS IOs and
IIOs accounted for as derivatives for GAAP.
|
|
(4)
|
Other securities
includes residual interests in asset-backed securities which have
no principal balance and an amortized cost of approximately $22.4
million.
|
|
(5)
|
The $25.0 million
securitized commercial loan is from a consolidated variable
interest entity in which the Company owns a $14.0 million first
loss position in a
|
|
CMBS Securitized
Trust.
|
PORTFOLIO FINANCING AND HEDGING
Financing
At September 30, 2016, the Company financed its portfolio
with $2.5 billion of borrowings under
master repurchase agreements with 18 of its 28 approved
counterparties, bearing fixed interest rates with maturities of six
months or less. The following table sets forth additional
information regarding the Company's portfolio financing as of
September 30, 2016 (dollars in thousands):
|
Repurchase
Agreements
|
|
Balance
|
|
Weighted
Average
Interest Rate
(end of
period)
|
|
Weighted
Average
Remaining
Maturity
(days)
|
|
Agency
RMBS
|
|
$
|
1,784,448
|
|
|
0.75
|
%
|
|
31
|
|
Agency
CMBS
|
|
10,725
|
|
|
1.66
|
%
|
|
31
|
|
Non-Agency
RMBS
|
|
270,060
|
|
|
2.32
|
%
|
|
33
|
|
Non-Agency
CMBS
|
|
256,544
|
|
|
2.36
|
%
|
|
33
|
|
Whole-Loans and
securitized commercial loan
|
|
173,901
|
|
|
2.78
|
%
|
|
15
|
|
Other
Securities
|
|
27,858
|
|
|
3.05
|
%
|
|
22
|
|
Total
|
|
$
|
2,523,536
|
|
|
1.25
|
%
|
|
30
|
Hedging
The Company has entered into $3.7
billion notional value of pay-fixed interest rate swaps,
excluding forward starting swaps of $1.8
billion (approximately 7.0 months forward), which have
variable maturities between October 2, 2017 and
February 12, 2044, and $4.0
billion notional value of pay-variable interest rate swaps,
which have variable maturities between February 5, 2020 and
February 5, 2045.
The following tables summarize the average pay rate and average
maturity for the Company's interest rate swaps as of
September 30, 2016:
|
Fixed Pay Rate
Swap Transactions
|
|
|
|
|
|
|
|
(dollars in
thousands)
|
|
|
|
|
|
|
|
Remaining Term to
Maturity
|
|
Notional
Value
|
|
Average
Fixed Pay
Rate
|
|
Average
Maturity
(Years)
|
|
Greater than 1 year
and less than 3 years
|
|
$
|
1,098,900
|
|
|
1.1
|
%
|
|
1.6
|
|
Greater than 3 years
and less than 5 years
|
|
2,006,200
|
|
|
1.8
|
%
|
|
4.2
|
|
Greater than 5
years
|
|
2,358,300
|
|
|
2.6
|
%
|
|
9.9
|
|
Total
|
|
$
|
5,463,400
|
|
|
2.0
|
%
|
|
6.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable Pay Rate
Swap Transactions
|
|
|
|
|
|
|
|
(dollars in
thousands)
|
|
|
|
|
|
|
|
Remaining Term to
Maturity
|
|
Notional
Value
|
|
Average
Variable
Pay
Rate
|
|
Average
Maturity
(Years)
|
|
Greater than 3 years
and less than 5 years
|
|
$
|
2,036,500
|
|
|
0.7
|
%
|
|
4.1
|
|
Greater than 5
years
|
|
1,936,500
|
|
|
0.8
|
%
|
|
10.1
|
|
Total
|
|
$
|
3,973,000
|
|
|
0.8
|
%
|
|
7.0
|
DIVIDEND
On September 22, 2016, the Company declared a regular cash
dividend of $0.31 per share for each
common share. Since its inception in May 2012, the Company has
declared and paid total dividends of $13.75 per share in a combination of cash and
stock.
CONFERENCE CALL
The Company will host a conference call with a live webcast
tomorrow, November 3rd, at 11:00
a.m. Eastern Time/8:00 a.m. Pacific Time, to discuss
financial results for the Third Quarter 2016.
Individuals interested in participating in the conference call
may do so by dialing (866) 235-9914 from the United States, or (412) 902-4115 from
outside the United States and
referencing "Western Asset Mortgage Capital Corporation." Those
interested in listening to the conference call live via the
Internet may do so by visiting the Investor Relations section of
the Company's website at www.westernassetmcc.com.
The Company is enabling investors to pre-register for the
earnings conference call so that they can expedite their entry into
the call and avoid the need to wait for a live operator. In order
to pre-register for the call, investors can
visit http://dpregister.com/10093817 and enter in their
contact information. Investors will then be issued a personalized
phone number and pin to dial into the live conference call.
Individuals can pre-register any time prior to the start of the
conference call tomorrow.
A telephone replay will be available through November 17, 2016 by dialing (877) 344-7529 from
the United States, or (412)
317-0088 from outside the United
States, and entering conference ID 10093817. A webcast
replay will be available for 90 days.
ABOUT WESTERN ASSET MORTGAGE CAPITAL CORPORATION
Western Asset Mortgage Capital Corporation is a real estate
investment trust that invests in, acquires and manages a diverse
portfolio assets consisting of Agency RMBS, Non-Agency RMBS, CMBS,
ABS, Residential and Commercial Whole-Loans and other financial
assets. The Company's investment strategy may change, subject to
the Company's stated investment guidelines, and is based on its
manager Western Asset Management Company's perspective of which mix
of portfolio assets it believes provide the Company with the best
risk-reward opportunities at any given time. The Company is
externally managed and advised by Western Asset Management Company,
an investment advisor registered with the Securities and Exchange
Commission and a wholly-owned subsidiary of Legg Mason, Inc.
Please visit the Company's website at www.westernassetmcc.com
FORWARD-LOOKING STATEMENTS
This press release contains statements that constitute
"forward-looking statements." Operating results are subject
to numerous conditions, many of which are beyond the control of the
Company, including, without limitation, changes in interest rates;
changes in the yield curve; changes in prepayment rates; the
availability and terms of financing; general economic conditions;
market conditions; conditions in the market for mortgage related
investments; legislative and regulatory changes that could
adversely affect the business of the Company; and other factors,
including those set forth in the Risk Factors section of the
Company's annual report on Form 10-K for the period ended
December 31, 2015 filed with the Securities and Exchange
Commission ("SEC"). The Company undertakes no obligation to update
these statements for revisions or changes after the date of this
release, except as required by law.
USE OF NON-GAAP FINANCIAL INFORMATION
In addition to the results presented in accordance with GAAP,
this release includes certain non-GAAP financial information,
including core earnings, core earnings per share, drop income and
drop income per share and certain financial metrics derived from
non-GAAP information, such as weighted average yield, including IO
securities; weighted average effective cost of financing, including
swaps; weighted average net interest spread, including IO
securities and swaps, which constitute non-GAAP financial measures
within the meaning of Regulation G promulgated by the SEC. We
believe that these measures presented in this release, when
considered together with GAAP financial measures, provide
information that is useful to investors in understanding our
borrowing costs and net interest income, as viewed by us. An
analysis of any non-GAAP financial measure should be made in
conjunction with results presented in accordance with GAAP.
|
|
1
|
Non – GAAP
measure.
|
|
2
|
Drop income is income
derived from the use of 'to-be-announced' forward contract ("TBA")
dollar roll transactions which is a component of our gain (loss) on
derivative instruments on our consolidated statement of operations,
but is not included in core earnings. Drop income was approximately
$3.1 million for the three months ended September 30,
2016.
|
|
3
|
Economic return is
calculated by taking the sum of: (i) the total dividends
declared; and (ii) the change in book value during the period
and dividing by the beginning book value.
|
|
4
|
As of
September 30, 2016, the net long position in TBAs was $890.0
million in notional value.
|
|
5
|
Includes
interest-only securities accounted for as derivatives, total return
swap and the cost of interest rate swaps.
|
-Financial Tables to Follow-
|
Western Asset
Mortgage Capital Corporation and Subsidiaries
|
|
Consolidated
Balance Sheets
|
|
(in
thousands—except share and per share data)
|
|
|
|
September 30,
2016
(Unaudited)
|
|
December 31,
2015
|
|
Assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
30,965
|
|
|
$
|
24,711
|
|
|
Mortgage-backed
securities and other securities, at fair value ($2,660,129 and
$2,777,717 pledged as collateral, at fair value,
respectively)
|
|
2,692,672
|
|
|
2,851,127
|
|
|
Residential
Whole-Loans, at fair value ($204,882 and $218,538 pledged as
collateral, at fair value, respectively)
|
|
204,882
|
|
|
218,538
|
|
|
Securitized
commercial loan, at fair value
|
|
24,138
|
|
|
25,000
|
|
|
Investment related
receivable
|
|
12,123
|
|
|
572
|
|
|
Accrued interest
receivable
|
|
25,285
|
|
|
22,621
|
|
|
Due from
counterparties
|
|
270,398
|
|
|
249,563
|
|
|
Derivative assets, at
fair value
|
|
127,862
|
|
|
21,915
|
|
|
Other
assets
|
|
756
|
|
|
382
|
|
|
Total Assets
(1)
|
|
$
|
3,389,081
|
|
|
$
|
3,414,429
|
|
|
Liabilities and
Stockholders' Equity:
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Borrowings under
repurchase agreements, net
|
|
$
|
2,523,480
|
|
|
$
|
2,585,667
|
|
|
Securitized debt, at
fair value
|
|
10,621
|
|
|
11,000
|
|
|
Accrued interest
payable
|
|
18,311
|
|
|
20,431
|
|
|
Investment related
payables
|
|
—
|
|
|
66,146
|
|
|
Due to
counterparties
|
|
6,047
|
|
|
9,950
|
|
|
Derivative liability,
at fair value
|
|
330,799
|
|
|
180,177
|
|
|
Accounts payable and
accrued expenses
|
|
2,689
|
|
|
2,078
|
|
|
Payable to related
party
|
|
2,714
|
|
|
3,019
|
|
|
Dividend
payable
|
|
12,995
|
|
|
24,313
|
|
|
Total Liabilities
(2)
|
|
2,907,656
|
|
|
2,902,781
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
Common stock: $0.01
par value, 500,000,000 shares authorized, 41,919,801 shares issued
and outstanding, respectively
|
|
419
|
|
|
419
|
|
|
Preferred stock,
$0.01 par value, 100,000,000 shares authorized and no shares
outstanding
|
|
—
|
|
|
—
|
|
|
Additional paid-in
capital
|
|
764,678
|
|
|
763,283
|
|
|
Retained earnings
(accumulated deficit)
|
|
(283,672)
|
|
|
(252,054)
|
|
|
Total Stockholders'
Equity
|
|
481,425
|
|
|
511,648
|
|
|
Total Liabilities and
Stockholders' Equity
|
|
$
|
3,389,081
|
|
|
$
|
3,414,429
|
|
|
Western Asset
Mortgage Capital Corporation and Subsidiaries
|
|
Consolidated
Balance Sheets (Continued)
|
|
(in
thousands—except share and per share data)
|
|
|
|
September 30,
2016
(Unaudited)
|
|
December 31,
2015
|
|
(1) Assets of consolidated VIEs
included in the total assets above:
|
|
|
|
|
|
Residential
Whole-Loans, at fair value ($204,882 and $218,538 pledged as
collateral, at fair value, respectively)
|
|
$
|
204,882
|
|
|
$
|
218,538
|
|
|
Securitized
commercial loan, at fair value
|
|
24,138
|
|
|
25,000
|
|
|
Investment related
receivable
|
|
3,230
|
|
|
—
|
|
|
Accrued interest
receivable
|
|
1,745
|
|
|
1,836
|
|
|
Total assets of
consolidated VIEs
|
|
$
|
233,995
|
|
|
$
|
245,374
|
|
|
(2) Liabilities
of consolidated VIEs included in the total liabilities
above:
|
|
|
|
|
|
Securitized debt, at
fair value
|
|
$
|
10,621
|
|
|
$
|
11,000
|
|
|
Accrued interest
payable
|
|
82
|
|
|
85
|
|
|
Accounts payable and
accrued expenses
|
|
2
|
|
|
2
|
|
|
Total liabilities of
consolidated VIEs
|
|
$
|
10,705
|
|
|
$
|
11,087
|
|
|
Western Asset
Mortgage Capital Corporation and Subsidiaries
|
|
Consolidated
Statements of Operations (Unaudited)
|
|
(in
thousands—except share and per share data)
|
|
|
|
For the three
months ended
September 30,
2016
|
|
For the three
months ended
September 30,
2015
|
|
For the nine
months ended
September 30,
2016
|
|
For the nine
months ended
September 30,
2015
|
|
Net Interest
Income
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
|
29,154
|
|
|
$
|
35,821
|
|
|
$
|
87,992
|
|
|
$
|
117,656
|
|
|
Interest
expense
|
|
7,685
|
|
|
6,981
|
|
|
23,391
|
|
|
19,960
|
|
|
Net Interest
Income
|
|
21,469
|
|
|
28,840
|
|
|
64,601
|
|
|
97,696
|
|
|
Other Income
(Loss)
|
|
|
|
|
|
|
|
|
|
Realized gain (loss)
on sale of investments, net
|
|
1,439
|
|
|
(2,482)
|
|
|
(4,968)
|
|
|
9,267
|
|
|
Other than temporary
impairment
|
|
(4,978)
|
|
|
(5,917)
|
|
|
(22,131)
|
|
|
(14,884)
|
|
|
Unrealized gain
(loss), net
|
|
15,292
|
|
|
24,723
|
|
|
47,571
|
|
|
10,284
|
|
|
Gain (loss) on
derivative instruments, net
|
|
6,121
|
|
|
(41,363)
|
|
|
(53,214)
|
|
|
(76,511)
|
|
|
Other, net
|
|
(60)
|
|
|
(29)
|
|
|
(158)
|
|
|
1,744
|
|
|
Other Income
(Loss)
|
|
17,814
|
|
|
(25,068)
|
|
|
(32,900)
|
|
|
(70,100)
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Management fee to
affiliate
|
|
2,604
|
|
|
2,761
|
|
|
7,945
|
|
|
8,133
|
|
|
Other operating
expenses
|
|
188
|
|
|
799
|
|
|
809
|
|
|
1,472
|
|
|
General and
administrative expenses
|
|
|
|
|
|
|
|
|
|
Compensation expense
(including non-cash stock based compensation of $433, $509, $1,351
and $1,969, respectively)
|
|
868
|
|
|
857
|
|
|
2,254
|
|
|
3,006
|
|
|
Professional
fees
|
|
723
|
|
|
882
|
|
|
3,947
|
|
|
3,261
|
|
|
Other general and
administrative expenses
|
|
379
|
|
|
325
|
|
|
1,226
|
|
|
1,123
|
|
|
Total general and
administrative expenses
|
|
1,970
|
|
|
2,064
|
|
|
7,427
|
|
|
7,390
|
|
|
Total
Expenses
|
|
4,762
|
|
|
5,624
|
|
|
16,181
|
|
|
16,995
|
|
|
Income (loss)
before income taxes
|
|
34,521
|
|
|
(1,852)
|
|
|
15,520
|
|
|
10,601
|
|
|
Income tax provision
(benefit)
|
|
2,239
|
|
|
—
|
|
|
2,239
|
|
|
—
|
|
|
Net income
(loss)
|
|
$
|
32,282
|
|
|
$
|
(1,852)
|
|
|
$
|
13,281
|
|
|
$
|
10,601
|
|
|
Net income (loss) per
Common Share – Basic
|
|
$
|
0.77
|
|
|
$
|
(0.05)
|
|
|
$
|
0.31
|
|
|
$
|
0.24
|
|
|
Net income (loss) per
Common Share – Diluted
|
|
$
|
0.77
|
|
|
$
|
(0.05)
|
|
|
$
|
0.31
|
|
|
$
|
0.24
|
|
|
Dividends Declared
per Share of Common Stock
|
|
$
|
0.31
|
|
|
$
|
0.60
|
|
|
$
|
1.07
|
|
|
$
|
1.91
|
|
|
Reconciliation of
GAAP Net Income to Non-GAAP Core Earnings
|
|
(Unaudited)
|
|
(in
thousands—except share and per share data)
|
|
|
The table below
reconciles Net Income (Loss) to Core Earnings for the three and
nine months ended September 30, 2016 and September 30,
2015:
|
|
|
(dollars in
thousands)
|
|
Three months
ended
September 30,
2016
|
|
Three months
ended
September 30,
2015
|
|
Nine months
ended
September 30,
2016
|
|
Nine months
ended
September 30,
2015
|
|
Net Income (loss) –
GAAP
|
|
$
|
32,282
|
|
|
$
|
(1,852)
|
|
|
$
|
13,281
|
|
|
10,601
|
|
|
Provision for income
tax
|
|
2,239
|
|
|
—
|
|
|
2,239
|
|
|
—
|
|
|
Net income (loss)
before provision for income tax
|
|
34,521
|
|
|
(1,852)
|
|
|
15,520
|
|
|
10,601
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
Unrealized (gain)
loss on investments and securitized debt
|
|
(15,292)
|
|
|
(24,723)
|
|
|
(47,571)
|
|
|
(10,284)
|
|
|
Other than temporary
impairment
|
|
4,978
|
|
|
5,917
|
|
|
22,131
|
|
|
14,884
|
|
|
Realized (gain) loss
on sale of investments
|
|
(1,439)
|
|
|
2,482
|
|
|
4,968
|
|
|
(9,267)
|
|
|
Realized (gain) loss
on foreign currency transactions
|
|
149
|
|
|
275
|
|
|
266
|
|
|
(2,523)
|
|
|
Unrealized (gain)
loss on foreign currency transactions
|
|
195
|
|
|
(201)
|
|
|
639
|
|
|
859
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
Instruments:
|
|
|
|
|
|
|
|
|
|
Net realized (gain)
loss on derivatives
|
|
14,242
|
|
|
(20,944)
|
|
|
(11,479)
|
|
|
(12,829)
|
|
|
Unrealized (gain)
loss on derivatives
|
|
(26,054)
|
|
|
58,546
|
|
|
46,073
|
|
|
82,952
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash stock-based
compensation expense
|
|
433
|
|
|
509
|
|
|
1,351
|
|
|
1,969
|
|
|
Total
adjustments
|
|
(22,788)
|
|
|
21,861
|
|
|
16,378
|
|
|
65,761
|
|
|
Core Earnings –
Non-GAAP Financial Measure
|
|
$
|
11,733
|
|
|
$
|
20,009
|
|
|
$
|
31,898
|
|
|
$
|
76,362
|
|
|
Basic Core Earnings
per Share of Common Stock and Participating Securities - Non-GAAP
Financial Measure
|
|
$
|
0.28
|
|
|
$
|
0.48
|
|
|
$
|
0.76
|
|
|
$
|
1.82
|
|
|
Diluted Core Earnings
per Share of Common Stock and Participating Securities - Non-GAAP
Financial Measure
|
|
$
|
0.28
|
|
|
$
|
0.48
|
|
|
$
|
0.76
|
|
|
$
|
1.82
|
|
|
Basic weighted
average common shares and participating securities
|
|
41,970,108
|
|
|
41,946,885
|
|
|
41,959,152
|
|
|
41,896,839
|
|
|
Diluted weighted
average common shares and participating securities
|
|
41,970,108
|
|
|
41,946,885
|
|
|
41,959,152
|
|
|
41,896,839
|
|
|
Reconciliation of
Interest Income and Effective Cost of Funds
|
|
(Unaudited, in
thousands)
|
|
|
The
following table reconciles total interest income to interest income
including interest income on Agency and Non-Agency Interest-Only
Strips classified as derivatives (Non-GAAP financial measure) for
the three and nine months ended September 30, 2016 and
September 30, 2015:
|
|
|
(dollars in
thousands)
|
|
Three months
ended September
30, 2016
|
|
Three months
ended September
30, 2015
|
|
Nine months
ended September
30, 2016
|
|
Nine months
ended September
30, 2015
|
|
Coupon interest
income
|
|
$
|
34,944
|
|
|
$
|
49,287
|
|
|
$
|
109,514
|
|
|
$
|
161,835
|
|
|
Premium accretion,
discount amortization and amortization of basis, net
|
|
(5,790)
|
|
|
(13,466)
|
|
|
(21,522)
|
|
|
(44,179)
|
|
|
Interest
income
|
|
$
|
29,154
|
|
|
$
|
35,821
|
|
|
$
|
87,992
|
|
|
$
|
117,656
|
|
|
Contractual interest
income, net of amortization of basis on Agency and Non-Agency
Interest-Only Strips, classified as derivatives(1):
|
|
|
|
|
|
|
|
|
|
Coupon interest
income
|
|
$
|
3,503
|
|
|
5,436
|
|
|
11,113
|
|
|
16,700
|
|
|
Amortization of basis
(Non-GAAP Financial Measure)
|
|
(2,827)
|
|
|
(4,163)
|
|
|
(8,930)
|
|
|
(12,877)
|
|
|
Contractual interest
income, net on Foreign currency swaps(1)
|
|
61
|
|
|
190
|
|
|
268
|
|
|
585
|
|
|
Contractual interest
income, net on Total return swaps(1)
|
|
308
|
|
|
—
|
|
|
836
|
|
|
—
|
|
|
Subtotal
|
|
1,045
|
|
|
1,463
|
|
|
3,287
|
|
|
4,408
|
|
|
Total interest
income, including interest income on Agency and Non-Agency
Interest-Only Strips, classified as derivatives and other
derivative instruments - Non-GAAP Financial Measure
|
|
$
|
30,199
|
|
|
$
|
37,284
|
|
|
$
|
91,279
|
|
|
$
|
122,064
|
|
|
|
|
(1)
|
Reported in gain
(loss) on derivative instruments in the Consolidated Statement of
Operations.
|
|
The following tables
reconcile the Effective Cost of Funds (Non-GAAP financial measure)
with interest expense for the three and nine months ended
September 30, 2016 and September 30, 2015:
|
|
|
|
Three months ended
September 30, 2016
|
|
Nine months ended
September 30, 2016
|
|
(dollars in thousands)
|
|
Reconciliation
|
|
Cost of
Funds/Effective
Borrowing
Costs
|
|
Reconciliation
|
|
Cost of
Funds/Effective
Borrowing
Costs
|
|
Interest
expense
|
|
$
|
7,685
|
|
|
1.29
|
%
|
|
$
|
23,391
|
|
|
1.31
|
%
|
|
Net interest paid -
interest rate swaps
|
|
6,736
|
|
|
1.14
|
%
|
|
21,907
|
|
|
1.22
|
%
|
|
Effective Borrowing
Costs
|
|
$
|
14,421
|
|
|
2.43
|
%
|
|
$
|
45,298
|
|
|
2.53
|
%
|
|
Weighted average
repurchase borrowings
|
|
$
|
2,365,695
|
|
|
|
|
$
|
2,389,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, 2015
|
|
Nine months ended
September 30, 2015
|
|
(dollars in thousands)
|
|
Reconciliation
|
|
Cost of
Funds/Effective
Borrowing
Costs
|
|
Reconciliation
|
|
Cost of
Funds/Effective
Borrowing
Costs
|
|
Interest
expense
|
|
$
|
6,981
|
|
|
0.90
|
%
|
|
$
|
19,960
|
|
|
0.75
|
%
|
|
Net interest paid -
interest rate swaps
|
|
5,224
|
|
|
0.68
|
%
|
|
10,796
|
|
|
0.41
|
%
|
|
Effective Borrowing
Costs
|
|
$
|
12,205
|
|
|
1.58
|
%
|
|
$
|
30,756
|
|
|
1.16
|
%
|
|
Weighted average
repurchase borrowings
|
|
$
|
3,064,689
|
|
|
|
|
$
|
3,536,381
|
|
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/western-asset-mortgage-capital-corporation-announces-third-quarter-2016-results-300356159.html
SOURCE Western Asset Mortgage Capital Corporation