Western Asset Mortgage Capital (WMC) Tops Q4 EPS by 1c

Western Asset Mortgage Capital (NYSE: WMC) reported Q4 EPS of $0.30, $0.01 better than the analyst estimate of $0.29.

FOURTH QUARTER 2019 FINANCIAL HIGHLIGHTS

• December 31, 2019 book value per share of $10.55, net of fourth quarter common dividend of $0.31 per share declared on December 19, 2019.
• GAAP net income of $12.5 million, or $0.23 per basic and diluted share.
• Core earnings plus drop income of $15.8 million, or $0.30 per basic and diluted share.1,2
• Economic return on book value was a 2.5%1,3 for the quarter.
• 1.72% annualized net interest margin on our investment portfolio. 1,4,5
• 5.4x leverage excluding non-recourse debt as of December 31, 2019 (8.0x leverage including non-recourse debt).

"We delivered strong 2019 results for our shareholders, as the scale and scope of Western Asset's capabilities continue to provide us with strategic benefits," said Jennifer Murphy, Chief Executive Officer of the Company. "Total shareholder return for the year was 38.7%, driven by strong investment portfolio performance and consistent dividends, which we have maintained for 15 consecutive quarters. We generated an economic return on book value of 2.5% for the fourth quarter and 12.8% for the full year, reflecting our focus on active portfolio positioning and risk management. We continue to be committed to our primary objective of generating attractive total returns for our shareholders, while also providing for greater book value stability."

"We completed several significant capital markets transactions during the year. In May, we completed a $50 million equity offering, and in August and December, we issued an additional $90 million in total of our 6.75% convertible senior unsecured notes due in 2022, all enabling us to further invest in attractive assets. We believe this additional capital allowed us to enhance the overall earnings potential of the portfolio and supports our long-term goal of growing the company to gain better scale, which we believe will benefit our shareholders.

"In May, we completed a securitization of a portion of our residential whole loans involving the issuance of $919 million in mortgage-backed notes. This transaction represented the Company's first securitization and enabled us to finance assets with longer-term fixed rate financing at attractive levels. Our successful execution of this securitization reflected the Company's ability to leverage Western Asset's investment and operating platform, a strategic advantage for the Company and our shareholders," Ms. Murphy concluded.

Harris Trifon, Chief Investment Officer of the Company, commented, "Our positive performance for the fourth quarter and full year were driven by contributions across our diverse holdings in a number of subsectors of the mortgage market and reflects our efforts to increase our exposure to credit sensitive investments. During the quarter, we acquired $479 million of credit sensitive assets, including $49 million of Commercial Whole Loans, $249 million of Residential Whole Loans and $181 million of Non-Agency CMBS, all areas where we continue to see opportunities to achieve attractive risk-adjusted returns."

"Our current expectations are for continued, yet moderate, U.S. economic growth along with subdued inflation expectations and an ongoing accommodative Federal Reserve monetary policy. We believe that credit spread sectors will continue to perform well in 2020, and we will maintain our focus on areas where we see the best relative value within our target universe. We believe that the current moderate growth environment is accretive for real estate and consumers, and we remain constructive on both residential and commercial real estate. The U.S. housing sector continues to advance with demand driven by ongoing job growth, high consumer confidence and increased household formations, all against a backdrop of a very tight supply of entry-level homes. Commercial real estate fundamentals, meanwhile, remain positive, driven by the ongoing economic expansion. As such, we believe that our strategically diverse investment portfolio, focused on risk management, positions us well to continue generating strong core earnings while preserving our book value, with the overriding goal of providing our shareholders favorable risk-adjusted returns," concluded Mr. Trifon.

For earnings history and earnings-related data on Western Asset Mortgage Capital (WMC) click here.

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