PASADENA, Calif., Aug. 8,
2017 /PRNewswire/ -- Western Asset Mortgage Capital
Corporation (the "Company" or "WMC") (NYSE: WMC) today reported its
results for the second quarter ended June 30, 2017.
SECOND QUARTER 2017 HIGHLIGHTS
- $0.31 per share common dividend
declared.
- GAAP net income of $20.7 million,
or $0.49 per basic and diluted
share.
- Core earnings plus drop income of $13.3
million, or $0.32 per basic
and diluted share.1,2
- 2.25% annualized net interest margin on our investment
portfolio.1,4
- Constant prepayment rate ("CPR") on the Company's Agency RMBS
portfolio of 9.9% for the quarter.
- $10.64 per share net book value
as of June 30, 2017, net of second
quarter common dividend.
- Economic return on book value was 4.8%1,3 for the
quarter.
- 6.3x leverage as of June 30,
2017.
|
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 statements of
operations, but is not included in core earnings. Drop income was
approximately $0.7 million for the three months ended June 30,
2017.
|
|
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
|
Includes
interest-only securities accounted for as derivatives, total return
swap and the cost of interest rate swaps.
|
MANAGEMENT COMMENTARY
"I am very pleased to report that we delivered another quarter
of strong economic return on book value of 4.8% for the second
quarter, bringing our economic return for the first half of 2017 to
9.6%," said Jennifer Murphy, Chief
Executive Officer of the Company. "In addition, core earnings plus
drop income increased 28.0% from the first quarter, to $0.32 per share as the combination of our
repositioned portfolio and our simplified hedge book enabled us to
increase our net interest margin and lower our operating expenses.
Our second quarter dividend remained stable at $0.31 per share for the fifth quarter in a row,
which reflects our commitment to our long-term goal of generating a
strong total return for our shareholders through attractive
dividends derived from sustainable core earnings and potential
appreciation in the value of our portfolio."
Anup Agarwal, Chief Investment
Officer of the Company, commented, "Our solid performance for both
the first and second quarters is a result of a shift in our asset
composition and our ongoing focus on achieving operating
efficiencies. Our second quarter performance was driven by
contributions across our holdings and reflects the benefit of our
strategy of investing in a diversified portfolio in a number of
sub-sectors of the mortgage market. During the quarter, we
continued to benefit from spread tightening on the credit portion
of our portfolio, which helped support an increase in our book
value to $10.64, or 1.8%, at
June 30, 2017. Also, despite
the expected fed funds rate increase, our effective borrowing costs
declined, primarily due to lower hedging costs resulting from our
reconfigured hedge book."
"Our current expectations are for a continuing moderate pace of
economic growth and an improving global backdrop combined with a
low inflation environment, both in the U.S. and abroad. We believe
that a balanced portfolio consisting of Agency CMBS, Agency RMBS
and credit-sensitive investments continues to be appropriate and in
our opinion, positions us well to continue to generate attractive
risk-adjusted total economic returns for our shareholders," Mr.
Agarwal concluded.
SECOND QUARTER 2017 RESULTS
The below table reflects a summary of our operating results:
|
|
For the Three Months
Ended
|
|
GAAP
Results
|
|
June 30,
2017
|
|
March 31,
2017
|
|
|
|
|
|
|
Net Interest
Income
|
|
$
|
19,648
|
|
|
$
|
19,693
|
|
|
Other Income
(Loss):
|
|
|
|
|
|
Realized gain (loss)
on sale of investments, net
|
|
(2,488)
|
|
|
21,258
|
|
|
Other than temporary
impairment
|
|
(6,579)
|
|
|
(6,097)
|
|
|
Unrealized gain
(loss), net
|
|
35,017
|
|
|
(5,140)
|
|
|
Gain (loss) on
derivative instruments, net
|
|
(18,555)
|
|
|
(4,697)
|
|
|
Other, net
|
|
222
|
|
|
403
|
|
|
Other Income
(loss)
|
|
7,617
|
|
|
5,727
|
|
|
Total
Expenses
|
|
4,466
|
|
|
4,866
|
|
|
Income (loss) before
income taxes
|
|
22,799
|
|
|
20,554
|
|
|
Income tax
provision
|
|
2,115
|
|
|
312
|
|
|
Net income
(loss)
|
|
$
|
20,684
|
|
|
$
|
20,242
|
|
|
|
|
|
|
|
Net income (loss) per
Common Share – Basic/Diluted
|
|
$
|
0.49
|
|
|
$
|
0.48
|
|
|
Non-GAAP
Results
|
|
|
|
|
|
Core earnings plus
drop income(1)
|
|
$
|
13,290
|
|
|
$
|
10,281
|
|
|
Core earnings plus
drop income per Common Share – Basic/Diluted
|
|
0.32
|
|
|
0.25
|
|
|
Weighted average
yield(2)
|
|
4.13
|
%
|
|
4.39
|
%
|
|
Effective cost of
funds(3)
|
|
2.17
|
%
|
|
2.81
|
%
|
|
Annualized net
interest margin(2)(3)
|
|
2.25
|
%
|
|
2.01
|
%
|
|
Annualized CPR on
Agency RMBS
|
|
9.9
|
%
|
|
10.5
|
%
|
|
|
|
(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.
|
PORTFOLIO COMPOSITION
As of June 30, 2017, the Company owned an aggregate
investment portfolio totaling $2.9
billion. The following table sets forth additional
information regarding the Company's portfolio as of June 30,
2017:
|
Investment
Portfolio
(dollars in
thousands)
|
|
Coupon
|
|
Principal
Balance
|
|
Amortized
Cost
|
|
Fair Value
|
|
Agency
|
|
|
|
|
|
|
|
|
|
40-year fixed
rate
|
|
3.5%
|
|
$
|
96,259
|
|
|
$
|
97,406
|
|
|
$
|
99,075
|
|
|
30-year fixed
rate
|
|
3.0%
|
|
25,245
|
|
|
26,163
|
|
|
25,206
|
|
|
|
4.0%
|
|
251,379
|
|
|
269,763
|
|
|
266,562
|
|
|
|
4.5%
|
|
200,920
|
|
|
215,689
|
|
|
219,438
|
|
|
|
5.0%
|
|
44,980
|
|
|
50,608
|
|
|
50,159
|
|
|
|
5.5%
|
|
1,890
|
|
|
2,220
|
|
|
2,095
|
|
|
|
6.0%
|
|
2,241
|
|
|
2,499
|
|
|
2,580
|
|
|
20-year fixed
rate
|
|
3.5%
|
|
32,607
|
|
|
34,537
|
|
|
34,063
|
|
|
|
4.0%
|
|
124,843
|
|
|
131,845
|
|
|
132,860
|
|
|
Agency RMBS IOs and
IIOs(1)
|
|
2.9%
|
|
N/A
|
|
|
24,979
|
|
|
27,227
|
|
|
Agency
CMBS
|
|
2.9%
|
|
1,285,278
|
|
|
1,273,286
|
|
|
1,287,773
|
|
|
Agency CMBS IOs and
IIOs(2)
|
|
0.9%
|
|
N/A
|
|
|
6,941
|
|
|
6,317
|
|
|
Subtotal
Agency
|
|
3.1%
|
|
2,065,642
|
|
|
2,135,936
|
|
|
2,153,355
|
|
|
Non-Agency
|
|
|
|
|
|
|
|
|
|
Non-Agency
RMBS
|
|
3.0%
|
|
82,966
|
|
|
59,516
|
|
|
63,659
|
|
|
Non-Agency
CMBS
|
|
4.8%
|
|
397,837
|
|
|
309,741
|
|
|
298,183
|
|
|
Subtotal
Non-Agency
|
|
4.5%
|
|
480,803
|
|
|
369,257
|
|
|
361,842
|
|
|
Other
Securities(5)
|
|
7.0%
|
|
102,514
|
|
|
125,712
|
|
|
133,036
|
|
|
Subtotal MBS and
Other Securities
|
|
4.9%
|
|
2,648,959
|
|
|
2,630,905
|
|
|
2,648,233
|
|
|
Whole-Loans
|
|
|
|
|
|
|
|
|
|
Residential
Whole-Loans
|
|
4.5%
|
|
198,784
|
|
|
199,308
|
|
|
203,540
|
|
|
Residential Bridge
Loans(3)
|
|
9.7%
|
|
64,597
|
|
|
64,912
|
|
|
N/A
|
|
|
Securitized
Commercial Loan(4)
|
|
9.0%
|
|
25,000
|
|
|
25,000
|
|
|
24,875
|
|
|
Subtotal
Whole-Loans
|
|
6.1%
|
|
288,381
|
|
|
289,220
|
|
|
228,415
|
|
|
Total
Portfolio
|
|
3.6%
|
|
$
|
2,937,340
|
|
|
$
|
2,920,125
|
|
|
$
|
2,876,648
|
|
|
|
|
(1)
|
Includes $10.6
million of amortized cost and $12.1 million of fair value for
Agency RMBS IOs and IIOs accounted for as derivatives for
GAAP.
|
|
(2)
|
Includes $6.9 million
of amortized cost and $6.3 million of fair value for Agency CMBS
IOs and IIOs accounted for as derivatives for GAAP.
|
|
(3)
|
Residential Bridge
Loans are reflected at amortized costs.
|
|
(4)
|
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.
|
|
(5)
|
Other securities
includes residual interests in asset-backed securities which have
no principal balance and an amortized cost of approximately $23.1
million.
|
PORTFOLIO FINANCING AND HEDGING
Financing
At June 30, 2017, the Company financed its portfolio with
$2.8 billion of borrowings under
master repurchase agreements with 17 of its 27 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
June 30, 2017 (dollars in thousands):
|
Repurchase
Agreements
|
|
Balance
|
|
Weighted
Average
Interest Rate (end of
period)
|
|
Weighted
Average
Remaining Maturity
(days)
|
|
Agency
RMBS(1)
|
|
$
|
1,030,440
|
|
|
1.23
|
%
|
|
42
|
|
Agency
CMBS
|
|
1,226,008
|
|
|
1.25
|
%
|
|
34
|
|
Non-Agency
RMBS
|
|
48,908
|
|
|
2.73
|
%
|
|
42
|
|
Non-Agency
CMBS
|
|
215,841
|
|
|
2.84
|
%
|
|
35
|
|
Whole-Loans(2)
|
|
226,983
|
|
|
3.54
|
%
|
|
19
|
|
Other
Securities
|
|
53,426
|
|
|
2.59
|
%
|
|
25
|
|
Total
|
|
$
|
2,801,606
|
|
|
1.60
|
%
|
|
36
|
|
|
|
(1)
|
Includes
approximately $202.9 million of repurchase agreement borrowings
related to securities sold in June 2017 that was paid off when the
sale settled in July 2017
|
|
(2)
|
Whole-Loans includes
the repurchase agreements for Residential Whole-Loans, Residential
Bridge Loans and Securitized Commercial Loans
|
Hedging
At June 30, 2017 the Company had $1.5 billion notional value of pay-fixed
interest rate swaps, excluding forward starting swaps of
$832 million (approximately 10.1
months forward), which have variable maturities between
October 2, 2017 and April 27, 2037.
The following tables summarize the average pay rate, average
receive rate and average maturity for the Company's interest rate
swaps as of June 30, 2017:
|
Fixed Pay Rate
Swap Transactions
|
|
|
|
|
|
|
|
|
|
(dollars in
thousands)
|
|
|
|
|
|
|
|
|
|
Remaining Term to
Maturity
|
|
Notional
Value
|
|
Average
Fixed
Pay
Rate
|
|
Average
Floating
Receive Rate
|
|
Average
Maturity
(Years)
|
|
1 year or
less
|
|
$
|
105,900
|
|
|
0.8
|
%
|
|
1.1
|
%
|
|
0.3
|
|
Greater than 1 year
and less than 3 years
|
|
600,000
|
|
|
1.6
|
%
|
|
1.2
|
%
|
|
2.3
|
|
Greater than 3 years
and less than 5 years
|
|
500,000
|
|
|
2.0
|
%
|
|
1.2
|
%
|
|
4.8
|
|
Greater than 5
years
|
|
1,103,500
|
|
|
2.5
|
%
|
|
0.3
|
%
|
|
10.9
|
|
Total
|
|
$
|
2,309,400
|
|
|
2.1
|
%
|
|
0.8
|
%
|
|
6.8
|
|
|
|
|
|
|
|
|
|
DIVIDEND
On June 20, 2017, 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 $14.68 per share in a combination of cash and
stock.
CONFERENCE CALL
The Company will host a conference call with a live webcast
tomorrow, August 9th, at
11:00 a.m. Eastern Time/8:00 a.m. Pacific Time, to
discuss financial results for the second quarter 2017.
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/10110179 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 August 23, 2017 by dialing (877) 344-7529 from
the United States, or (412)
317-0088 from outside the United
States, and entering conference ID 10110179. 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 of assets consisting of Agency RMBS, Agency CMBS,
Non-Agency RMBS, Non-Agency CMBS, 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
provides 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, 2016 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.
-Financial Tables to Follow-
|
Western Asset
Mortgage Capital Corporation and Subsidiaries
|
|
Consolidated
Balance Sheets
|
|
(in
thousands—except share and per share data)
|
|
|
|
June 30, 2017
(Unaudited)
|
|
December 31,
2016
|
|
Assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
41,159
|
|
|
$
|
46,172
|
|
|
Mortgage-backed
securities and other securities, at fair value ($2,609,459 and
$2,261,430 pledged as collateral, at fair value,
respectively)
|
|
2,648,233
|
|
|
2,576,517
|
|
|
Residential
Whole-Loans, at fair value ($203,540 and $192,136 pledged as
collateral, at fair value, respectively)
|
|
203,540
|
|
|
192,136
|
|
|
Residential Bridge
Loans ($64,912 and $0 pledged as collateral,
respectively)
|
|
64,912
|
|
|
—
|
|
|
Securitized
commercial loan, at fair value
|
|
24,875
|
|
|
24,225
|
|
|
Investment related
receivable ($209,065 and $0 pledged as collateral,
respectively)
|
|
211,733
|
|
|
33,600
|
|
|
Accrued interest
receivable
|
|
11,806
|
|
|
18,812
|
|
|
Due from
counterparties
|
|
70,901
|
|
|
243,585
|
|
|
Derivative assets, at
fair value
|
|
8,013
|
|
|
20,571
|
|
|
Other
assets
|
|
1,093
|
|
|
398
|
|
|
Total Assets
(1)
|
|
$
|
3,286,265
|
|
|
$
|
3,156,016
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity:
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Borrowings under
repurchase agreements, net
|
|
$
|
2,801,606
|
|
|
$
|
2,155,644
|
|
|
Securitized debt, at
fair value
|
|
10,945
|
|
|
10,659
|
|
|
Accrued interest
payable
|
|
5,445
|
|
|
16,041
|
|
|
Investment related
payables
|
|
—
|
|
|
341,458
|
|
|
Due to
counterparties
|
|
2,185
|
|
|
740
|
|
|
Derivative liability,
at fair value
|
|
2,374
|
|
|
182,158
|
|
|
Accounts payable and
accrued expenses
|
|
2,808
|
|
|
3,255
|
|
|
Payable to
affiliate
|
|
1,913
|
|
|
2,584
|
|
|
Dividend
payable
|
|
12,995
|
|
|
12,995
|
|
|
Total
Liabilities (2)
|
|
2,840,271
|
|
|
2,725,534
|
|
|
|
|
|
|
|
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
|
|
765,657
|
|
|
765,042
|
|
|
Retained earnings
(accumulated deficit)
|
|
(320,082)
|
|
|
(334,979)
|
|
|
Total Stockholders'
Equity
|
|
445,994
|
|
|
430,482
|
|
|
Total Liabilities and
Stockholders' Equity
|
|
$
|
3,286,265
|
|
|
$
|
3,156,016
|
|
|
Western Asset
Mortgage Capital Corporation and Subsidiaries
|
|
Consolidated
Balance Sheets (Continued)
|
|
(in
thousands—except share and per share data)
|
|
|
|
June 30, 2017
(Unaudited)
|
|
December 31,
2016
|
|
(1) Assets of consolidated VIEs
included in the total assets above:
|
|
|
|
|
|
Residential
Whole-Loans, at fair value ($203,540 and $192,136 pledged as
collateral, at fair value, respectively)
|
|
$
|
203,540
|
|
|
$
|
192,136
|
|
|
Residential Bridge
Loans ($64,912 and $0 pledged as collateral,
respectively)
|
|
64,912
|
|
|
—
|
|
|
Securitized
commercial loan, at fair value
|
|
24,875
|
|
|
24,225
|
|
|
Investment related
receivable
|
|
2,407
|
|
|
1,241
|
|
|
Accrued interest
receivable
|
|
2,697
|
|
|
1,622
|
|
|
Total assets of
consolidated VIEs
|
|
$
|
298,431
|
|
|
$
|
219,224
|
|
|
|
|
|
|
|
(2) Liabilities of consolidated VIEs
included in the total liabilities above:
|
|
|
|
|
|
Securitized debt, at
fair value
|
|
$
|
10,945
|
|
|
$
|
10,659
|
|
|
Accrued interest
payable
|
|
82
|
|
|
85
|
|
|
Accounts payable and
accrued expenses
|
|
181
|
|
|
2
|
|
|
Total liabilities of
consolidated VIEs
|
|
$
|
11,208
|
|
|
$
|
10,746
|
|
|
Western Asset
Mortgage Capital Corporation and Subsidiaries
|
|
Consolidated
Statements of Operations (Unaudited)
|
|
(in
thousands—except share and per share data)
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
June 30,
2017
|
|
June 30,
2016
|
|
June 30,
2017
|
|
June 30,
2016
|
|
Net Interest
Income
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
|
30,055
|
|
|
$
|
29,220
|
|
|
$
|
58,485
|
|
|
$
|
58,838
|
|
|
Interest
expense
|
|
10,407
|
|
|
7,727
|
|
|
19,144
|
|
|
15,706
|
|
|
Net Interest
Income
|
|
19,648
|
|
|
21,493
|
|
|
39,341
|
|
|
43,132
|
|
|
Other Income
(Loss)
|
|
|
|
|
|
|
|
|
|
Realized gain (loss)
on sale of investments, net
|
|
(2,488)
|
|
|
(352)
|
|
|
18,770
|
|
|
(6,407)
|
|
|
Other than temporary
impairment
|
|
(6,579)
|
|
|
(6,356)
|
|
|
(12,676)
|
|
|
(17,153)
|
|
|
Unrealized gain
(loss), net
|
|
35,017
|
|
|
21,510
|
|
|
29,877
|
|
|
32,278
|
|
|
Gain (loss) on
derivative instruments, net
|
|
(18,555)
|
|
|
(14,165)
|
|
|
(23,252)
|
|
|
(59,335)
|
|
|
Other, net
|
|
222
|
|
|
234
|
|
|
625
|
|
|
(98)
|
|
|
Other Income
(Loss)
|
|
7,617
|
|
|
871
|
|
|
13,344
|
|
|
(50,715)
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Management fee to
affiliate
|
|
1,830
|
|
|
2,588
|
|
|
4,306
|
|
|
5,340
|
|
|
Other operating
expenses
|
|
736
|
|
|
183
|
|
|
1,153
|
|
|
621
|
|
|
General and
administrative expenses
|
|
|
|
|
|
|
|
|
|
Compensation
expense
|
|
664
|
|
|
649
|
|
|
1,404
|
|
|
1,386
|
|
|
Professional
fees
|
|
832
|
|
|
1,222
|
|
|
1,720
|
|
|
3,224
|
|
|
Other general and
administrative expenses
|
|
404
|
|
|
419
|
|
|
749
|
|
|
847
|
|
|
Total general and
administrative expenses
|
|
1,900
|
|
|
2,290
|
|
|
3,873
|
|
|
5,457
|
|
|
Total
Expenses
|
|
4,466
|
|
|
5,061
|
|
|
9,332
|
|
|
11,418
|
|
|
Income (loss)
before income taxes
|
|
22,799
|
|
|
17,303
|
|
|
43,353
|
|
|
(19,001)
|
|
|
Income tax
provision
|
|
2,115
|
|
|
—
|
|
|
2,427
|
|
|
—
|
|
|
Net income
(loss)
|
|
$
|
20,684
|
|
|
$
|
17,303
|
|
|
$
|
40,926
|
|
|
$
|
(19,001)
|
|
|
Net income (loss) per
Common Share – Basic
|
|
$
|
0.49
|
|
|
$
|
0.41
|
|
|
$
|
0.97
|
|
|
$
|
(0.46)
|
|
|
Net income (loss) per
Common Share – Diluted
|
|
$
|
0.49
|
|
|
$
|
0.41
|
|
|
$
|
0.97
|
|
|
$
|
(0.46)
|
|
|
Dividends Declared
per Share of Common Stock
|
|
$
|
0.31
|
|
|
$
|
0.31
|
|
|
$
|
0.62
|
|
|
$
|
0.76
|
|
|
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 six
months ended June 30, 2017 and June 30, 2016:
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
(dollars in
thousands)
|
|
June 30,
2017
|
|
June 30,
2016
|
|
June 30,
2017
|
|
June 30,
2016
|
|
Net Income (loss) –
GAAP
|
|
$
|
20,684
|
|
|
$
|
17,303
|
|
|
$
|
40,926
|
|
|
$
|
(19,001)
|
|
|
Provision for income
tax
|
|
2,115
|
|
|
—
|
|
|
2,427
|
|
|
—
|
|
|
Net income (loss)
before provision for income tax
|
|
22,799
|
|
|
17,303
|
|
|
43,353
|
|
|
(19,001)
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
Unrealized (gain)
loss on investments and securitized debt
|
|
(35,017)
|
|
|
(21,510)
|
|
|
(29,877)
|
|
|
(32,278)
|
|
|
Other than temporary
impairment
|
|
6,579
|
|
|
6,356
|
|
|
12,676
|
|
|
17,153
|
|
|
Realized (gain) loss
on sale of investments
|
|
2,488
|
|
|
352
|
|
|
(18,770)
|
|
|
6,407
|
|
|
Realized (gain) loss
on foreign currency transactions
|
|
1
|
|
|
638
|
|
|
2
|
|
|
117
|
|
|
Unrealized (gain)
loss on foreign currency transactions
|
|
—
|
|
|
(651)
|
|
|
—
|
|
|
444
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
Instruments:
|
|
|
|
|
|
|
|
|
|
Net realized (gain)
loss on derivatives
|
|
175,512
|
|
|
995
|
|
|
174,711
|
|
|
(25,721)
|
|
|
Unrealized (gain)
loss on derivatives
|
|
(160,002)
|
|
|
7,572
|
|
|
(160,853)
|
|
|
72,127
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash stock-based
compensation expense
|
|
215
|
|
|
346
|
|
|
577
|
|
|
918
|
|
|
Total
adjustments
|
|
(10,224)
|
|
|
(5,902)
|
|
|
(21,534)
|
|
|
39,167
|
|
|
Core Earnings –
Non-GAAP Financial Measure
|
|
$
|
12,575
|
|
|
$
|
11,401
|
|
|
$
|
21,819
|
|
|
$
|
20,166
|
|
|
Basic Core Earnings
per Share of Common Stock and Participating Securities - Non-GAAP
Financial Measure
|
|
$
|
0.30
|
|
|
$
|
0.27
|
|
|
$
|
0.52
|
|
|
$
|
0.48
|
|
|
Diluted Core Earnings
per Share of Common Stock and Participating Securities - Non-GAAP
Financial Measure
|
|
$
|
0.30
|
|
|
$
|
0.27
|
|
|
$
|
0.52
|
|
|
$
|
0.48
|
|
|
Basic weighted
average common shares and participating securities
|
|
41,979,854
|
|
|
41,956,898
|
|
|
41,976,609
|
|
|
41,953,547
|
|
|
Diluted weighted
average common shares and participating securities
|
|
41,979,854
|
|
|
41,956,898
|
|
|
41,976,609
|
|
|
41,953,547
|
|
|
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 six months ended June 30, 2017 and June 30,
2016:
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
(dollars in
thousands)
|
|
June 30,
2017
|
|
June 30,
2016
|
|
June 30,
2017
|
|
June 30,
2016
|
|
Coupon interest
income
|
|
$
|
30,270
|
|
|
$
|
36,171
|
|
|
$
|
60,185
|
|
|
$
|
74,570
|
|
|
Premium amortization,
discount accretion and amortization of basis, net
|
|
(215)
|
|
|
(6,951)
|
|
|
(1,700)
|
|
|
(15,732)
|
|
|
Interest
income
|
|
30,055
|
|
|
29,220
|
|
|
58,485
|
|
|
58,838
|
|
|
Contractual interest
income, net of amortization of basis on Agency and Non-Agency
Interest-Only Strips, classified as
derivatives(1):
|
|
|
|
|
|
|
|
|
|
Coupon interest
income
|
|
2,372
|
|
|
3,464
|
|
|
4,413
|
|
|
7,610
|
|
|
Amortization of basis
(Non-GAAP Financial Measure)
|
|
(2,004)
|
|
|
(2,720)
|
|
|
(3,569)
|
|
|
(6,103)
|
|
|
Contractual interest
income, net on Foreign currency swaps(1)
|
|
—
|
|
|
94
|
|
|
—
|
|
|
207
|
|
|
Contractual interest
income, net on Total return swaps(1)
|
|
143
|
|
|
307
|
|
|
374
|
|
|
528
|
|
|
Subtotal
|
|
511
|
|
|
1,145
|
|
|
1,218
|
|
|
2,242
|
|
|
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
|
|
$
|
30,566
|
|
|
$
|
30,365
|
|
|
$
|
59,703
|
|
|
$
|
61,080
|
|
|
|
|
(1)
|
Reported in "Gain
(loss) on derivative instruments, net" in the Consolidated
Statements of Operations.
|
|
The following table
reconciles the Effective Cost of Funds (Non-GAAP financial measure)
with interest expense for the three and six months ended
June 30, 2017 and June 30, 2016:
|
|
|
|
Three months ended
June 30, 2017
|
|
Three months ended
June 30, 2016
|
|
(dollars in thousands)
|
|
Reconciliation
|
|
Cost of
Funds/Effective
Borrowing Costs
|
|
Reconciliation
|
|
Cost of
Funds/Effective
Borrowing Costs
|
|
Interest
expense
|
|
$
|
10,407
|
|
|
1.62
|
%
|
|
$
|
7,727
|
|
|
1.30
|
%
|
|
Net interest paid -
interest rate swaps
|
|
3,556
|
|
|
0.55
|
%
|
|
6,743
|
|
|
1.14
|
%
|
|
Effective Borrowing
Costs
|
|
$
|
13,963
|
|
|
2.17
|
%
|
|
$
|
14,470
|
|
|
2.44
|
%
|
|
Weighted average
repurchase borrowings
|
|
$
|
2,582,946
|
|
|
|
|
$
|
2,387,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30, 2017
|
|
Six months ended
June 30, 2016
|
|
(dollars in thousands)
|
|
Reconciliation
|
|
Cost of
Funds/Effective
Borrowing Costs
|
|
Reconciliation
|
|
Cost of
Funds/Effective
Borrowing Costs
|
|
Interest
expense
|
|
$
|
19,144
|
|
|
1.59
|
%
|
|
$
|
15,706
|
|
|
1.32
|
%
|
|
Net interest paid -
interest rate swaps
|
|
10,612
|
|
|
0.88
|
%
|
|
15,171
|
|
|
1.27
|
%
|
|
Effective Borrowing
Costs
|
|
$
|
29,756
|
|
|
2.47
|
%
|
|
$
|
30,877
|
|
|
2.59
|
%
|
|
Weighted average
repurchase borrowings
|
|
$
|
2,432,323
|
|
|
|
|
$
|
2,401,074
|
|
|
|
View original
content:http://www.prnewswire.com/news-releases/western-asset-mortgage-capital-corporation-announces-second-quarter-2017-results-300501552.html
SOURCE Western Asset Mortgage Capital Corporation