PASADENA, Calif., Nov. 7,
2017 /PRNewswire/ -- Western Asset Mortgage Capital
Corporation (the "Company" or "WMC") (NYSE: WMC) today reported its
results for the third quarter ended September 30, 2017.
THIRD QUARTER 2017 HIGHLIGHTS
- $0.31 per share common dividend
declared.
- GAAP net income of $22.8 million,
or $0.54 per basic and diluted
share.
- Core earnings plus drop income of $13.5
million, or $0.32 per basic
and diluted share.1,2
- 2.21% annualized net interest margin on our investment
portfolio.1,4
- Constant prepayment rate ("CPR") on the Company's Agency RMBS
portfolio of 11.2% for the quarter.
- $10.88 per share net book value
as of September 30, 2017, net of
third quarter common dividend.
- Economic return on book value was 5.2%1,3 for the
quarter.
- 7.3x leverage as of September 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. There was no drop
income for the three months ended September 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 solid
performance in the third quarter, generating an economic
return on book value of 5.2%, bringing our economic return for the
first nine months of 2017 to 15.0%," said Jennifer Murphy, Chief Executive Officer of the
Company. "In addition, core earnings plus drop income was
$0.32 per share, consistent with the
second quarter, as we continued to benefit from our repositioned
portfolio, our simplified hedge book and lower operating expenses.
Our third quarter dividend remained stable at $0.31 per share for the sixth consecutive
quarter, 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. Finally, we
are pleased to have recently completed a $115 million offering of 6.75% convertible senior
notes due in 2022. We believe that this financing will enable us to
acquire additional target investments and increase the earnings
power of our portfolio."
Anup Agarwal, Chief Investment
Officer of the Company, commented, "Our strong performance, for the
first nine months of 2017, is a result of a shift in our asset
composition and our ongoing focus on achieving operating
efficiencies. During the quarter, our portfolio experienced spread
tightening across the majority of its positions, which helped
support the increase in book value to $10.88 or 2.3%, at September 30, 2017. In
addition, we continued to benefit from our reconfigured hedge book,
which further reduced our effective borrowing costs during the
quarter, despite the increase in the Federal Funds rate in late
June."
"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 our strategy of investing in a diversified portfolio in a
number of sub-sectors of the mortgage market, including 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.
OPERATING RESULTS
The below table reflects a summary of our operating results:
|
|
For the Three
Months Ended
|
GAAP
Results
|
|
September 30,
2017
|
|
June 30,
2017
|
|
March 31,
2017
|
|
|
|
|
|
|
|
Net Interest
Income
|
|
$
|
18,565
|
|
|
$
|
19,648
|
|
|
$
|
19,693
|
|
Other Income
(Loss):
|
|
|
|
|
|
|
Realized gain (loss)
on sale of investments, net
|
|
1,830
|
|
|
(2,488)
|
|
|
21,258
|
|
Other than temporary
impairment
|
|
(7,225)
|
|
|
(6,579)
|
|
|
(6,097)
|
|
Unrealized gain
(loss), net
|
|
5,249
|
|
|
35,017
|
|
|
(5,140)
|
|
Gain (loss) on
derivative instruments, net
|
|
7,217
|
|
|
(18,555)
|
|
|
(4,697)
|
|
Other, net
|
|
216
|
|
|
222
|
|
|
403
|
|
Other Income
(loss)
|
|
7,287
|
|
|
7,617
|
|
|
5,727
|
|
Total
Expenses
|
|
4,240
|
|
|
4,466
|
|
|
4,866
|
|
Income (loss) before
income taxes
|
|
21,612
|
|
|
22,799
|
|
|
20,554
|
|
Income tax provision
(benefit)
|
|
(1,155)
|
|
|
2,115
|
|
|
312
|
|
Net income
(loss)
|
|
$
|
22,767
|
|
|
$
|
20,684
|
|
|
$
|
20,242
|
|
|
|
|
|
|
|
|
Net income (loss) per
Common Share – Basic/Diluted
|
|
$
|
0.54
|
|
|
$
|
0.49
|
|
|
$
|
0.48
|
|
Non-GAAP
Results
|
|
|
|
|
|
|
Core earnings plus
drop income(1)
|
|
$
|
13,511
|
|
|
$
|
13,290
|
|
|
$
|
10,281
|
|
Core earnings plus
drop income per Common Share – Basic/Diluted
|
|
0.32
|
|
|
0.32
|
|
|
0.25
|
|
Weighted average
yield(2)
|
|
4.00
|
%
|
|
4.13
|
%
|
|
4.39
|
%
|
Effective cost of
funds(3)
|
|
1.99
|
%
|
|
2.17
|
%
|
|
2.81
|
%
|
Annualized net
interest margin(2)(3)
|
|
2.21
|
%
|
|
2.25
|
%
|
|
2.01
|
%
|
Annualized CPR on
Agency RMBS
|
|
11.2
|
%
|
|
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 September 30, 2017, the Company owned an aggregate
investment portfolio totaling $4.0
billion. The following table sets forth additional
information regarding the Company's portfolio as of
September 30, 2017 (dollars in thousands):
|
Net Weighted
Average Coupon
|
|
Principal Balance
|
|
Amortized Cost
|
|
Carrying
Value(4)
|
Agency
|
|
|
|
|
|
|
|
20-Year
mortgage
|
|
|
|
|
|
|
|
|
3.5
|
%
|
|
$
|
31,291
|
|
|
$
|
32,772
|
|
|
$
|
32,782
|
|
|
4.0
|
%
|
|
118,679
|
|
|
124,994
|
|
|
126,496
|
|
|
3.9
|
%
|
|
149,970
|
|
|
157,766
|
|
|
159,278
|
|
30-Year
mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.0
|
%
|
|
23,788
|
|
|
23,899
|
|
|
23,899
|
|
|
4.0
|
%
|
|
245,220
|
|
|
260,210
|
|
|
260,658
|
|
|
4.5
|
%
|
|
192,641
|
|
|
206,769
|
|
|
210,982
|
|
|
5.0
|
%
|
|
43,066
|
|
|
48,104
|
|
|
48,104
|
|
|
5.5
|
%
|
|
1,872
|
|
|
2,198
|
|
|
2,073
|
|
|
6.0
|
%
|
|
2,152
|
|
|
2,400
|
|
|
2,480
|
|
|
4.2
|
%
|
|
508,739
|
|
|
543,580
|
|
|
548,196
|
|
40-Year
mortgage
|
3.5
|
%
|
|
374,844
|
|
|
385,906
|
|
|
387,095
|
|
|
|
|
|
|
|
|
|
Agency RMBS IOs and
IIOs(1)
|
3.0
|
%
|
|
N/A
|
|
|
15,416
|
|
|
16,037
|
|
Agency RMBS IOs and
IIOs accounted for as derivatives (1)(2)
|
2.9
|
%
|
|
N/A
|
|
|
N/A
|
|
|
11,219
|
|
|
3.0
|
%
|
|
N/A
|
|
|
15,416
|
|
|
27,256
|
|
|
|
|
|
|
|
|
|
Agency
CMBS
|
2.9
|
%
|
|
2,087,948
|
|
|
2,090,095
|
|
|
2,103,185
|
|
Agency CMBS
Interest-Only Strips(1)
|
3.2
|
%
|
|
N/A
|
|
|
—
|
|
|
30
|
|
Agency CMBS IOs and
IIOs accounted for as derivatives (1)(2)
|
0.5
|
%
|
|
N/A
|
|
|
N/A
|
|
|
6,016
|
|
|
2.7
|
%
|
|
2,087,948
|
|
|
2,090,095
|
|
|
2,109,231
|
|
Subtotal
Agency
|
3.1
|
%
|
|
3,121,501
|
|
|
3,192,763
|
|
|
3,231,056
|
|
|
|
|
|
|
|
|
|
Non-Agency
RMBS
|
3.1
|
%
|
|
81,504
|
|
|
58,440
|
|
|
64,362
|
|
Non-Agency
CMBS
|
4.8
|
%
|
|
376,215
|
|
|
290,023
|
|
|
278,511
|
|
Subtotal
Non-Agency
|
4.5
|
%
|
|
457,719
|
|
|
348,463
|
|
|
342,873
|
|
|
|
|
|
|
|
|
|
Other
securities(3)
|
7.3
|
%
|
|
92,302
|
|
|
115,845
|
|
|
122,651
|
|
Subtotal MBS and
Other securities
|
3.3
|
%
|
|
3,671,522
|
|
|
3,657,071
|
|
|
3,696,580
|
|
Whole-Loans
|
|
|
|
|
|
|
|
Residential
Whole-Loans
|
4.5
|
%
|
|
187,521
|
|
|
187,778
|
|
|
191,439
|
|
Residential Bridge
Loans
|
10.0
|
%
|
|
54,716
|
|
|
54,912
|
|
|
54,912
|
|
Securitized
commercial loan(5)
|
9.0
|
%
|
|
24,941
|
|
|
24,941
|
|
|
24,952
|
|
Subtotal
Whole-Loans
|
6.1
|
%
|
|
267,178
|
|
|
267,631
|
|
|
271,303
|
|
Total
Portfolio
|
3.5
|
%
|
|
$
|
3,938,700
|
|
|
$
|
3,924,702
|
|
|
$
|
3,967,883
|
|
|
|
(1)
|
IOs and IIOs have no
principal balances and bear interest based on a notional
balance. The notional balance is used solely to determine
interest distributions on interest-only class of securities.
At September 30, 2017, the notional balance for Agency RMBS
IOs and IIOs, Agency RMBS IOs and IIOs accounted for as
derivatives, Agency CMBS IOs and IIOs and Agency CMBS IOs and IIOs
accounted for as derivatives was $166.2 million, $131.8 million,
$5.3 million and $193.8 million, respectively.
|
(2)
|
Interest on these
securities is reported as a component of "Gain (loss) on derivative
instruments, net" in our Consolidated Statements of
Operations.
|
(3)
|
Other securities
include residual interests in asset-backed securities which have no
principal balance and an amortized cost of approximately $23.4
million.
|
(4)
|
All investments are
carried at their fair value with the exception of the residential
bridge loans, which are carried at their amortized cost.
|
(5)
|
The $24.9 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, 2017, the Company financed its portfolio
with $3.3 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
September 30, 2017 (dollars in thousands):
Repurchase
Agreements
|
|
Balance
|
|
Weighted
Average
Interest Rate (end of
period)
|
|
Weighted
Average
Remaining Maturity
(days)
|
Agency
RMBS
|
|
$
|
792,520
|
|
|
1.39
|
%
|
|
61
|
Agency
CMBS
|
|
2,019,010
|
|
|
1.39
|
%
|
|
32
|
Non-Agency
RMBS
|
|
48,443
|
|
|
2.85
|
%
|
|
41
|
Non-Agency
CMBS
|
|
192,015
|
|
|
2.96
|
%
|
|
36
|
Whole-Loans(1)
|
|
163,560
|
|
|
3.46
|
%
|
|
6
|
Residential Bridge
Loans
|
|
51,074
|
|
|
4.29
|
%
|
|
59
|
Other
Securities
|
|
69,634
|
|
|
3.36
|
%
|
|
22
|
Total
|
|
$
|
3,336,256
|
|
|
1.69
|
%
|
|
38
|
|
|
(1)
|
Whole-Loans includes
the repurchase agreements for Residential Whole-Loans and
Securitized Commercial Loans.
|
Hedging
At September 30, 2017 the Company had $1.5 billion notional value of pay-fixed interest
rate swaps, excluding forward starting swaps of $1.6 billion (approximately 7.0 months forward),
which have variable maturities between October 2, 2017 and
April 27, 2037.
The following tables summarize the average fixed pay rate,
average receive rate and average maturity for the Company's
interest rate swaps as of September 30, 2017:
(dollars in
thousands)
|
|
|
|
|
|
|
|
|
|
Remaining Term to
Maturity
|
|
Notional
Value
|
|
Average
Fixed
Pay
Rate
|
|
Average
Floating
Receive Rate
|
|
Average
Maturity
(Years)
|
Forward
Starting
|
1 year or
less
|
|
$
|
105,900
|
|
|
0.8
|
%
|
|
1.3
|
%
|
|
0.1
|
—
|
%
|
Greater than 1 year
and less than 3 years
|
|
600,000
|
|
|
1.6
|
%
|
|
1.3
|
%
|
|
2.1
|
—
|
%
|
Greater than 3 years
and less than 5 years
|
|
690,000
|
|
|
2.0
|
%
|
|
1.3
|
%
|
|
4.6
|
—
|
%
|
Greater than 5
years
|
|
1,682,300
|
|
|
2.5
|
%
|
|
0.1
|
%
|
|
10.7
|
95.3
|
%
|
Total
|
|
$
|
3,078,200
|
|
|
2.2
|
%
|
|
0.6
|
%
|
|
7.3
|
52.1
|
%
|
|
|
|
|
|
|
|
|
|
|
DIVIDEND
On September 21, 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 $14.99 per share in a combination of cash and
stock.
CONFERENCE CALL
The Company will host a conference call with a live webcast
tomorrow, November 8th, at
11:00 a.m. Eastern Time/8:00 a.m. Pacific Time, to
discuss financial results for the third 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/10113416 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 22, 2017 by dialing (877) 344-7529 from
the United States, or (412)
317-0088 from outside the United
States, and entering conference ID 10113416. 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 CMBS, Agency RMBS, Non-Agency
CMBS, Non-Agency RMBS, Residential and Commercial Whole-Loans,
Bridge 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)
|
(Unaudited)
|
|
|
|
September 30,
2017
|
|
December 31,
2016
|
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
36,669
|
|
|
$
|
46,172
|
|
Mortgage-backed
securities and other securities, at fair value ($3,397,699 and
$2,261,430 pledged as collateral, at fair value,
respectively)
|
|
3,696,580
|
|
|
2,576,517
|
|
Residential
Whole-Loans, at fair value ($191,439 and $192,136 pledged as
collateral, at fair value, respectively)
|
|
191,439
|
|
|
192,136
|
|
Residential Bridge
Loans ($54,912 and $0 pledged as collateral,
respectively)
|
|
54,912
|
|
|
—
|
|
Securitized
commercial loan, at fair value
|
|
24,952
|
|
|
24,225
|
|
Investment related
receivable
|
|
9,551
|
|
|
33,600
|
|
Accrued interest
receivable
|
|
13,025
|
|
|
18,812
|
|
Due from
counterparties
|
|
88,932
|
|
|
243,585
|
|
Derivative assets, at
fair value
|
|
5,011
|
|
|
20,571
|
|
Other
assets
|
|
4,134
|
|
|
398
|
|
Total Assets
(1)
|
|
$
|
4,125,205
|
|
|
$
|
3,156,016
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity:
|
|
|
|
|
Liabilities:
|
|
|
|
|
Borrowings under
repurchase agreements, net
|
|
$
|
3,336,256
|
|
|
$
|
2,155,644
|
|
Securitized debt, at
fair value
|
|
10,979
|
|
|
10,659
|
|
Accrued interest
payable
|
|
4,859
|
|
|
16,041
|
|
Investment related
payables
|
|
296,317
|
|
|
341,458
|
|
Due to
counterparties
|
|
2,320
|
|
|
740
|
|
Derivative liability,
at fair value
|
|
986
|
|
|
182,158
|
|
Accounts payable and
accrued expenses
|
|
2,588
|
|
|
3,255
|
|
Payable to
affiliate
|
|
1,920
|
|
|
2,584
|
|
Dividend
payable
|
|
12,995
|
|
|
12,995
|
|
Total
Liabilities (2)
|
|
3,669,220
|
|
|
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
|
|
765,898
|
|
|
765,042
|
|
Retained earnings
(accumulated deficit)
|
|
(310,332)
|
|
|
(334,979)
|
|
Total Stockholders'
Equity
|
|
455,985
|
|
|
430,482
|
|
Total Liabilities and
Stockholders' Equity
|
|
$
|
4,125,205
|
|
|
$
|
3,156,016
|
|
Western Asset
Mortgage Capital Corporation and Subsidiaries
|
Consolidated
Balance Sheets (Continued)
|
(in
thousands—except share and per share data)
|
(Unaudited)
|
|
|
|
September 30,
2017
|
|
December 31,
2016
|
(1) Assets of consolidated VIEs
included in the total assets above:
|
|
|
|
|
Residential
Whole-Loans, at fair value ($191,439 and $192,136 pledged as
collateral, at fair value, respectively)
|
|
$
|
191,439
|
|
|
$
|
192,136
|
|
Residential Bridge
Loans ($54,912 and $0 pledged as collateral,
respectively)
|
|
54,912
|
|
|
—
|
|
Securitized
commercial loan, at fair value
|
|
24,952
|
|
|
24,225
|
|
Investment related
receivable
|
|
7,178
|
|
|
1,241
|
|
Accrued interest
receivable
|
|
2,529
|
|
|
1,622
|
|
Total assets of
consolidated VIEs
|
|
$
|
281,010
|
|
|
$
|
219,224
|
|
|
|
|
|
|
(2) Liabilities of consolidated VIEs
included in the total liabilities above:
|
|
|
|
|
Securitized debt, at
fair value
|
|
$
|
10,979
|
|
|
$
|
10,659
|
|
Accrued interest
payable
|
|
82
|
|
|
85
|
|
Accounts payable and
accrued expenses
|
|
157
|
|
|
2
|
|
Total liabilities of
consolidated VIEs
|
|
$
|
11,218
|
|
|
$
|
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
|
|
|
September 30,
2017
|
|
June 30,
2017
|
|
March 31,
2017
|
Net Interest
Income
|
|
|
|
|
|
|
Interest
income
|
|
$
|
30,928
|
|
|
$
|
30,055
|
|
|
$
|
28,430
|
|
Interest
expense
|
|
12,363
|
|
|
10,407
|
|
|
8,737
|
|
Net Interest
Income
|
|
18,565
|
|
|
19,648
|
|
|
19,693
|
|
|
|
|
|
|
|
|
Other Income
(Loss)
|
|
|
|
|
|
|
Realized gain (loss)
on sale of investments, net
|
|
1,830
|
|
|
(2,488)
|
|
|
21,258
|
|
Other than temporary
impairment
|
|
(7,225)
|
|
|
(6,579)
|
|
|
(6,097)
|
|
Unrealized gain
(loss), net
|
|
5,249
|
|
|
35,017
|
|
|
(5,140)
|
|
Gain (loss) on
derivative instruments, net
|
|
7,217
|
|
|
(18,555)
|
|
|
(4,697)
|
|
Other, net
|
|
216
|
|
|
222
|
|
|
403
|
|
Other Income
(Loss)
|
|
7,287
|
|
|
7,617
|
|
|
5,727
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
Management fee to
affiliate
|
|
1,853
|
|
|
1,830
|
|
|
2,476
|
|
Other operating
expenses
|
|
702
|
|
|
736
|
|
|
417
|
|
General and
administrative expenses:
|
|
|
|
|
|
|
Compensation
expense
|
|
660
|
|
|
664
|
|
|
740
|
|
Professional
fees
|
|
781
|
|
|
832
|
|
|
888
|
|
Other general
and administrative expenses
|
|
244
|
|
|
404
|
|
|
345
|
|
Total general and
administrative expenses
|
|
1,685
|
|
|
1,900
|
|
|
1,973
|
|
Total
Expenses
|
|
4,240
|
|
|
4,466
|
|
|
4,866
|
|
|
|
|
|
|
|
|
Income before
income taxes
|
|
21,612
|
|
|
22,799
|
|
|
20,554
|
|
Income tax provision
(benefit)
|
|
(1,155)
|
|
|
2,115
|
|
|
312
|
|
Net
income
|
|
$
|
22,767
|
|
|
$
|
20,684
|
|
|
$
|
20,242
|
|
|
|
|
|
|
|
|
Net income per Common
Share – Basic
|
|
$
|
0.54
|
|
|
$
|
0.49
|
|
|
$
|
0.48
|
|
Net income per Common
Share – Diluted
|
|
$
|
0.54
|
|
|
$
|
0.49
|
|
|
$
|
0.48
|
|
Dividends Declared
per Share of Common Stock
|
|
$
|
0.31
|
|
|
$
|
0.31
|
|
|
$
|
0.31
|
|
Reconciliation of
GAAP Net Income to Non-GAAP Core Earnings
|
(in
thousands—except share and per share data)
|
(Unaudited)
|
|
The table below
reconciles Net Income to Core Earnings for the three months ended
September 30, June 30 and March 31, 2017:
|
|
|
|
Three months
ended
|
(dollars in
thousands)
|
|
September 30,
2017
|
|
June 30,
2017
|
|
March 31,
2017
|
Net Income
|
|
$
|
22,767
|
|
|
$
|
20,684
|
|
|
$
|
20,242
|
|
Income tax provision
(benefit)
|
|
(1,155)
|
|
|
2,115
|
|
|
312
|
|
Income before income
taxes
|
|
21,612
|
|
|
22,799
|
|
|
20,554
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
Unrealized (gain)
loss on investments and securitized debt
|
|
(5,249)
|
|
|
(35,017)
|
|
|
5,140
|
|
Other than temporary
impairment
|
|
7,225
|
|
|
6,579
|
|
|
6,097
|
|
Realized (gain) loss
on sale of investments, net
|
|
(1,830)
|
|
|
2,488
|
|
|
(21,258)
|
|
Realized (gain) loss
on foreign currency transactions
|
|
(1)
|
|
|
1
|
|
|
1
|
|
|
|
|
|
|
|
|
Derivative
Instruments:
|
|
|
|
|
|
|
Net realized (gain)
loss on derivatives
|
|
(9,062)
|
|
|
175,512
|
|
|
(801)
|
|
Unrealized (gain)
loss on derivatives
|
|
598
|
|
|
(160,002)
|
|
|
(851)
|
|
|
|
|
|
|
|
|
Non-cash stock-based
compensation
|
|
218
|
|
|
215
|
|
|
362
|
|
Total
adjustments
|
|
(8,101)
|
|
|
(10,224)
|
|
|
(11,310)
|
|
Core
Earnings
|
|
$
|
13,511
|
|
|
$
|
12,575
|
|
|
$
|
9,244
|
|
Basic Core Earnings
per Common Share and Participating Securities
|
|
$
|
0.32
|
|
|
$
|
0.30
|
|
|
$
|
0.22
|
|
Diluted Core Earnings
per Common Share and Participating Securities
|
|
$
|
0.32
|
|
|
$
|
0.30
|
|
|
$
|
0.22
|
|
Basic weighted
average common shares and participating securities
|
|
41,992,381
|
|
|
41,979,854
|
|
|
41,973,170
|
|
Diluted weighted
average common shares and participating securities
|
|
41,992,381
|
|
|
41,979,854
|
|
|
41,973,170
|
|
Reconciliation of
Interest Income and Effective Cost of Funds
|
(dollars in
thousands)
|
(Unaudited)
|
|
The following table
reconciles total interest income to adjusted interest income which
includes interest income on Agency and Non-Agency Interest-Only
Strips classified as derivatives (Non-GAAP financial measure) for
the three months ended September 30, June 30 and March 31,
2017:
|
|
|
|
Three months
ended
|
(dollars in
thousands)
|
|
September 30,
2017
|
|
June 30,
2017
|
|
March 31,
2017
|
Coupon interest
income
|
|
$
|
31,223
|
|
|
$
|
30,270
|
|
|
$
|
29,915
|
|
Premium amortization,
discount accretion and amortization of basis, net
|
|
(295)
|
|
|
(215)
|
|
|
(1,485)
|
|
Interest
income
|
|
30,928
|
|
|
30,055
|
|
|
28,430
|
|
Contractual interest
income, net of amortization of basis on Agency and Non-Agency
Interest-Only Strips, classified as
derivatives(1):
|
|
|
|
|
|
|
Coupon interest
income
|
|
1,816
|
|
|
2,372
|
|
|
2,041
|
|
Amortization of
basis
|
|
(1,486)
|
|
|
(2,004)
|
|
|
(1,565)
|
|
Contractual interest
income, net on Total return swaps(1)
|
|
95
|
|
|
143
|
|
|
231
|
|
Subtotal
|
|
425
|
|
|
511
|
|
|
707
|
|
Total adjusted
interest income
|
|
$
|
31,353
|
|
|
$
|
30,566
|
|
|
$
|
29,137
|
|
|
|
(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 three months ended September 30, June 30
and March 31, 2017:
|
|
|
|
Three months
ended
|
|
|
September 30,
2017
|
|
June 30,
2017
|
|
March 31,
2017
|
(dollars in thousands)
|
|
Reconciliation
|
|
Cost of
Funds/Effective
Borrowing Costs
|
|
Reconciliation
|
|
Cost of
Funds/Effective
Borrowing Costs
|
|
Reconciliation
|
|
Cost of
Funds/Effective
Borrowing Costs
|
Interest
expense
|
|
$
|
12,363
|
|
|
1.75
|
%
|
|
$
|
10,407
|
|
|
1.62
|
%
|
|
$
|
8,737
|
|
|
1.55
|
%
|
Net interest paid -
interest rate swaps
|
|
1,672
|
|
|
0.24
|
%
|
|
3,556
|
|
|
0.55
|
%
|
|
7,056
|
|
|
1.26
|
%
|
Effective Borrowing
Costs
|
|
$
|
14,035
|
|
|
1.99
|
%
|
|
$
|
13,963
|
|
|
2.17
|
%
|
|
$
|
15,793
|
|
|
2.81
|
%
|
Weighted average
repurchase borrowings
|
|
$
|
2,797,062
|
|
|
|
|
$
|
2,582,946
|
|
|
|
|
$
|
2,280,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
View original
content:http://www.prnewswire.com/news-releases/western-asset-mortgage-capital-corporation-announces-third-quarter-2017-results-300551292.html
SOURCE Western Asset Mortgage Capital Corporation