Western Asset Mortgage Capital (WMC) Tops Q1 EPS by 1c

Western Asset Mortgage Capital (NYSE: WMC) reported Q1 EPS of $0.10, $0.01 better than the analyst estimate of $0.09.

FIRST QUARTER 2021 FINANCIAL HIGHLIGHTS

During the first quarter we continued strengthening our balance sheet by reducing debt and leverage, while improving liquidity and shareholders' equity. First quarter financial results and highlights included the following:

• GAAP book value per share was $4.27 at March 31, 2021, an increase of 1.7% from $4.20 at December 31, 2020.
• Economic book value(2) per share of $4.02 at March 31, 2021.
• GAAP net income of $8.0 million, or $0.13 per basic and diluted share.
• Core earnings(1) of $6.1 million, or $0.10 per basic and diluted share.
• Economic return on GAAP book value(3) was 3.1% for the quarter.
• 2.19% annualized net interest margin (1)(4)(5) on our investment portfolio.
• Recourse leverage was 2.0x at March 31, 2021.
• On March 23, 2021, we declared a first quarter common dividend of $0.06 per share.
• Repurchased $6.7 million in aggregate principal amount of our convertible senior unsecured notes at an average discount of 6.3% to par value.

BUSINESS UPDATE

• In May 2021, we amended our Non-Agency CMBS and Non-Agency RMBS financing facility to, among other things, extend the facility for an additional 12 months and reduce the interest rate. The amended facility bears interest at a rate of three-month LIBOR plus 2.00%.
• In May 2021, we amended our Commercial Whole Loan Facility to, among other things, convert the term to a 12-month facility with up to a 12-month extension option, subject to the lender’s consent.

MANAGEMENT COMMENTARY

“The Company started the year with continued positive momentum, delivering a first quarter economic return on book value of 3.1%, driven by higher valuations on our residential mortgages and securitized commercial loans, as the economic outlook continued to improve with the anticipation of more businesses returning to normal across the country,” said Jennifer Murphy, Chief Executive Officer of the Company. “Our ongoing focus on strengthening our balance sheet and maintaining sufficient liquidity and low recourse leverage is enabling us to continue executing on our investment strategy. We believe we are well positioned to benefit from what we anticipate will be the continued recovery of asset values and earnings sustainability of our portfolio.

“We recorded GAAP net income of 8.0 million, or $0.13 per share, and core earnings of $0.10 per share during the first quarter. Our GAAP book value per share increased 1.7% during the quarter to $4.27 per share and has increased by 35.6% since June 30, 2020, when it reached its low, after the onset of the pandemic. Our commitment to shareholders remains protecting and growing the value of the portfolio, which will position us to deliver on our long-term objectives of generating sustainable core earnings that support an attractive dividend and enhancing value for our shareholders,” Ms. Murphy concluded.

Greg Handler, Interim Co-Chief Investment Officer of the Company, commented, “The equity and credit markets continued to improve in the first quarter, albeit at a slower pace than in the second half of 2020. This translated into higher valuations on a number of our portfolio holdings and an improvement in our book value. Our residential portfolio has performed well as the housing market remains strong, fueled by historically low mortgage rates, favorable consumer sentiment, and supported by national home price indices that have been rising at double-digit annual rates. However, some of our commercial real estate investments have yet to experience a similar recovery. While the outlook for commercial real estate has recently improved, there continues to be uncertainty around the timing and extent of a recovery in the performance of a number of property types. We expect these near-term challenges will eventually be overcome as COVID-19 restrictions begin to lift and these properties begin to return to more normal levels of operations.

“We believe that our focus on high-quality properties with borrowers that have meaningful equity positions in those properties should enable us to deliver attractive long-term risk-adjusted returns. We continue to work diligently on positioning our portfolio for potential future appreciation, which we believe will occur as the economy reopens,” Mr. Handler concluded.

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

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