Western Asset Mortgage Capital Corporation Announces Second Quarter 2022 Results and Commences Strategic Alternatives Review Process
Conference Call and Webcast Scheduled for Tomorrow, Friday, August 5, 2022 at 12:00 p.m. Eastern Time/9:00 a.m. Pacific Time
PASADENA, Calif.–(BUSINESS WIRE)–Western Asset Mortgage Capital Corporation (the “Company” or “WMC”) (NYSE: WMC) today reported its results for the second quarter ended June 30, 2022.
BUSINESS UPDATE
The Company continues to execute on its business strategy to focus on residential real estate investments and to take actions to strengthen its balance sheet:
- In July 2022, effected a 1-for-10 reverse stock split, which is reflected retroactively in all share numbers herein;
- Also, in July 2022, completed its fourth securitization of $402.2 million of Residential Whole Loans, securing $351.9 million of long-term fixed rate financing which decreased recourse leverage to 2.4x;
- For the three months ended June 30, 2022, acquired $292.8 million of Residential Whole Loans in anticipation of the July 2022 securitization referenced above; and
- For the three months ended June 30, 2022, repurchased $7.2 million aggregate principal amount of its 6.75% Convertible Senior Unsecured Notes due in 2022 (“2022 Notes”) at an approximate 1% premium to par value, plus accrued and unpaid interest.
Today the Company also announced that its Board of Directors has authorized a review of strategic alternatives for the Company aimed at enhancing shareholder value, which may include a sale or merger of the Company. JMP Securities, A Citizens Company has been retained as exclusive financial advisor to the Company. No assurance can be given that the review being undertaken will result in a sale, merger, or other transaction involving the Company, and the Company has not set a timetable for completion of the review process. The Company does not intend to make any further statements regarding this process unless and until a definitive agreement for a transaction has been reached, or until the process of exploring strategic alternatives has ended.
For further information, interested parties may contact Tosh Chandra, Managing Director at JMP Securities, A Citizens Company (phone: +1 (212) 906-3500; email: tchandra@jmpsecurities.com).
SECOND QUARTER 2022 FINANCIAL RESULTS
The rising interest rate environment negatively impacted our second quarter GAAP financial results. Key measures for the quarter were as follows:
- GAAP book value per share was $23.23 at June 30, 2022.
- Economic book value(1) per share of $24.58at June 30, 2022.
- GAAP net loss attributable to common shareholders and participating securities of $22.4 million, or $3.71 per share.
- Distributable Earnings of $2.7 million, or $0.44 per basic and diluted share.
- Economic return(2) on GAAP book value was negative 14.6% for the quarter.
- 1.25% annualized net interest margin(3)(4) on our investment portfolio.
- Recourse leverage was 4.7x as of June 30, 2022, which decreased to 2.4x following the July Non-QM Residential Whole Loan securitization referenced above.
- On June 22, 2022, we declared a second quarter common dividend of $0.40 per share.
|
1. |
Economic book value is a non-GAAP financial measure. Refer to page 20 of this press release for the reconciliation of GAAP book value to non-GAAP economic book value. |
|
|
2. |
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. |
|
|
3. |
Includes interest-only securities accounted for as derivatives. |
|
|
4. |
Excludes the consolidation of VIE trusts required under GAAP. |
MANAGEMENT COMMENTARY
“Our quarterly results continue to reflect the ongoing challenges of interest rate volatility and fluctuating asset values, which again translated into credit spread widening across our holdings,” said Bonnie Wongtrakool, Chief Executive Officer of the Company. “This market volatility put pressure on our GAAP book value per share, which declined 15.0% from the prior quarter, while economic book value per share declined 12.4%. However, our financial results were positively impacted by higher net interest income, driven by our larger residential whole loan portfolio and lower prepayments in that portfolio. Consequently, our distributable earnings of $2.7 million, or $0.44 per share, in the second quarter, were up $2.3 million from the first quarter.”
“During the second quarter, we continued to implement our strategic portfolio shift towards a focus on residential real estate related investments as we acquired $293 million of residential whole loans with the view of executing our fourth whole-loan securitization, which we completed in early July. Additionally, we continued to strengthen our balance sheet during the quarter, selling approximately $42 million of investments, including Non-Agency RMBS and CMBS, as well as repurchasing another $7.2 million aggregate principal amount of our existing 2022 Notes at an approximate premium to par value of 1.0%. We are confident that we have sufficient liquidity to retire the remaining $27 million of outstanding 2022 Notes prior to their October maturity and to continue executing on our investment strategy,” Ms. Wongtrakool added.
“We believe that today’s announcement regarding our Board of Directors’ authorization to review strategic alternatives for the Company is the best path forward towards unlocking shareholder value. We have made significant progress in the last two years towards strengthening our balance sheet and improving our liquidity and the earnings power of the portfolio. However, we do not believe that these actions are being reflected in our stock price. Therefore, we are committed to considering alternatives that may involve a sale, merger, or other transaction involving the Company,” Ms. Wongtrakool concluded.
OPERATING RESULTS
The below table reflects a summary of our operating results:
|
|
For the Three Months Ended |
|||||||
|
GAAP Results |
June 30, 2022 |
|
March 31, 2022 |
|||||
|
|
($ in thousands) |
|||||||
|
|
|
|
||||||
|
Net Interest Income |
$ |
6,235 |
|
$ |
4,283 |
|
||
|
Other Income (Loss): |
|
|
||||||
|
Realized gain (loss), net |
|
(45,661 |
) |
|
12,145 |
|
||
|
Unrealized gain (loss), net |
|
16,185 |
|
|
(38,903 |
) |
||
|
Gain (loss) on derivative instruments, net |
|
4,781 |
|
|
6,936 |
|
||
|
Other, net |
|
(46 |
) |
|
(145 |
) |
||
|
Other Income (Loss) |
|
(24,741 |
) |
|
(19,967 |
) |
||
|
Total Expenses |
|
3,927 |
|
|
6,497 |
|
||
|
Income (loss) before income taxes |
|
(22,433 |
) |
|
(22,181 |
) |
||
|
Income tax provision (benefit) |
|
(46 |
) |
|
56 |
|
||
|
Net income (loss) |
$ |
(22,387 |
) |
$ |
(22,237 |
) |
||
|
Net income (loss) attributable to non-controlling interest |
|
— |
|
|
3,616 |
|
||
|
Net income (loss) attributable to common stockholders and participating securities |
$ |
(22,387 |
) |
$ |
(25,853 |
) |
||
|
|
|
|
||||||
|
Net income (loss) per Common Share – Basic/Diluted |
$ |
(3.71 |
) |
$ |
(4.30 |
) |
||
|
Non-GAAP Results |
|
|
||||||
|
Distributable Earnings(1) |
$ |
2,650 |
|
$ |
379 |
|
||
|
Distributable Earnings per Common Share – Basic/Diluted(2) |
$ |
0.44 |
|
$ |
0.06 |
|
||
|
Weighted average yield(3)(4) |
|
4.30 |
% |
|
3.74 |
% |
||
|
Effective cost of funds(4) |
|
3.60 |
% |
|
3.41 |
% |
||
|
Annualized net interest margin(3)(4) |
|
1.25 |
% |
|
0.85 |
% |
||
|
1. |
For a reconciliation of GAAP Income to Distributable Earnings, refer to page 18 of this press release. |
|
|
2. |
Presentation adjusted for effect of 1-for-10 reverse stock split subsequent to 6/30/2022. |
|
|
3. |
Includes interest-only securities accounted for as derivatives. |
|
|
4. |
Excludes the consolidation of VIE trusts required under GAAP. |
INVESTMENT PORTFOLIO
Investment Activity
As of June 30, 2022, the Company owned an aggregate investment portfolio with a fair market value totaling $2.7 billion. The following table summarizes certain characteristics of our portfolio by investment category as of June 30, 2022 (dollars in thousands):
|
|
Balance at |
|
Purchases |
|
Loan |
|
Principal |
|
Proceeds Sales |
|
Transfers |
|
Realized |
|
Unrealized |
|
Premium and |
|
Balance at
June 30, |
||||||||||||||||
|
Investment Type |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
|
Agency RMBS and Agency RMBS IOs |
$ |
1,172 |
$ |
— |
|
N/A |
$ |
(121 |
) |
$ |
— |
|
|
N/A |
$ |
— |
|
$ |
(266 |
) |
$ |
— |
|
$ |
785 |
||||||||||
|
Non-Agency RMBS |
|
27,769 |
|
39,952 |
|
N/A |
|
(749 |
) |
|
(27,729 |
) |
|
N/A |
|
(1,170 |
) |
|
(5,914 |
) |
|
39 |
|
|
32,198 |
||||||||||
|
Non-Agency CMBS |
|
105,358 |
|
— |
|
N/A |
|
(1,673 |
) |
|
(10,152 |
) |
|
N/A |
|
(43,934 |
) |
|
43,497 |
|
|
— |
|
|
93,096 |
||||||||||
|
Other securities(1) |
|
51,648 |
|
— |
|
N/A |
|
— |
|
|
(4,406 |
) |
|
N/A |
|
(478 |
) |
|
(6,268 |
) |
|
38 |
|
|
40,534 |
||||||||||
|
Total MBS and other securities |
|
185,947 |
|
39,952 |
|
N/A |
|
(2,543 |
) |
|
(42,287 |
) |
|
N/A |
|
(45,582 |
) |
|
31,049 |
|
|
77 |
|
|
166,613 |
||||||||||
|
Residential Whole Loans |
|
1,023,502 |
|
411,917 |
|
75 |
|
(155,171 |
) |
|
— |
|
|
— |
|
— |
|
|
(80,155 |
) |
|
(4,315 |
) |
|
1,195,853 |
||||||||||
|
Residential Bridge Loans |
|
5,428 |
|
— |
|
— |
|
(250 |
) |
|
— |
|
|
— |
|
— |
|
|
(83 |
) |
|
— |
|
|
5,095 |
||||||||||
|
Commercial Loans |
|
130,572 |
|
— |
|
— |
|
(4 |
) |
|
— |
|
|
— |
|
— |
|
|
(2,147 |
) |
|
— |
|
|
128,421 |
||||||||||
|
Securitized commercial loans |
|
1,355,808 |
|
— |
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
(125,782 |
) |
|
13,345 |
|
|
1,243,371 |
||||||||||
|
Real Estate Owned |
|
43,607 |
|
— |
|
N/A |
|
— |
|
|
(54,681 |
) |
|
— |
|
12,198 |
|
|
— |
|
|
N/A |
|
|
1,124 |
||||||||||
|
Total Investments |
$ |
2,744,864 |
$ |
451,869 |
$ |
75 |
$ |
(157,968 |
) |
$ |
(96,968 |
) |
$ |
— |
$ |
(33,384 |
) |
$ |
(177,118 |
) |
$ |
9,107 |
|
$ |
2,740,477 |
||||||||||
Portfolio Characteristics
Residential Real Estate Investments
The Company’s focus on residential real estate related investments will include but is not limited to non-qualified residential whole loans (“Non-QM Loans”), non-agency RMBS, and other related assets The Company believes this focus will allow it to address attractive market opportunities.
Residential Whole Loans
The Company’s Residential Whole Loans have low LTV’s and are comprised of 3,097 Non-QM adjustable rate mortgages and five investor fixed rate mortgages. The following table presents certain information about our Residential Whole Loans investment portfolio at June 30, 2022 (dollars in thousands):
|
|
|
|
|
|
|
Weighted Average |
||||||||
|
Current Coupon Rate |
|
Number of Loans |
|
Principal |
|
Original LTV |
|
Original |
|
Expected |
|
Contractual |
|
Coupon |
|
2.01% – 3.00% |
40 |
$ 22,650 |
66.3 % |
758 |
9.0 |
28.8 |
2.9 % |
|||||||
|
3.01% – 4.00% |
484 |
247,017 |
65.0 % |
757 |
6.2 |
28.2 |
3.7 % |
|||||||
|
4.01% – 5.00% |
1,451 |
498,639 |
63.6 % |
749 |
4.8 |
26.4 |
4.6 % |
|||||||
|
5.01% – 6.00% |
895 |
366,805 |
66.2 % |
742 |
4.0 |
27.5 |
5.5 % |
|||||||
|
6.01% – 7.00% |
216 |
98,409 |
71.7 % |
742 |
3.1 |
29.4 |
6.4 % |
|||||||
|
7.01% – 8.00% |
16 |
6,450 |
75.1 % |
737 |
2.7 |
29.6 |
7.4 % |
|||||||
|
Total |
3,102 |
1,239,970 |
65.4 % |
748 |
4.8 |
27.4 |
4.8 % |
|||||||
|
1. |
The original FICO score is not available for 250 loans with a principal balance of approximately $83.2 million at June 30, 2022. We have excluded these loans from the weighted average. |
The following table presents the aging of the Residential Whole Loans as of June 30, 2022:
|
|
Residential Whole Loans |
|||||||
|
|
No of |
Principal |
Fair Value |
|||||
|
Current |
3,073 |
$ |
1,226,815 |
$ |
1,183,917 |
|||
|
1-30 days |
8 |
|
2,213 |
|
2,142 |
|||
|
31-60 days |
1 |
|
359 |
|
361 |
|||
|
61-90 days |
— |
|
— |
|
— |
|||
|
90+ days |
20 |
|
10,583 |
|
9,433 |
|||
|
Total |
3,102 |
$ |
1,239,970 |
$ |
1,195,853 |
|||
Non-Agency RMBS
The following table presents the fair value and weighted average purchase price for each of our Non-agency RMBS categories, including IOs accounted for as derivatives, together with certain of their respective underlying loan collateral attributes and current performance metrics as of June 30, 2022 (fair value dollars in thousands):
|
|
|
|
|
Weighted Average |
|||||||||||||||
|
Category |
|
Fair |
|
Purchase |
|
Life (Years) |
|
Original LTV |
|
Original |
|
60+ Day |
|
CPR |
|||||
|
Prime |
$ |
14,181 |
$ |
79.99 |
9.9 |
67.8 |
% |
748 |
1.2 |
% |
22.0 |
% |
|||||||
|
Alt-A |
|
18,017 |
|
63.68 |
13.2 |
74.6 |
% |
675 |
12.8 |
% |
14.0 |
% |
|||||||
|
Total |
$ |
32,198 |
$ |
70.86 |
11.8 |
71.6 |
% |
707 |
7.7 |
% |
17.5 |
% |
|||||||
Commercial Real Estate Investments
Non-Agency CMBS
The following table presents certain characteristics of our Non-Agency CMBS portfolio as of June 30, 2022 (dollars in thousands):
|
|
|
|
|
Principal |
|
|
|
|
Weighted Average |
|||||
|
Type |
|
Vintage |
|
|
|
Fair Value |
|
Life (Years) |
|
Original LTV |
||||
|
Conduit: |
|
|
|
|
|
|||||||||
|
|
2006-2009 |
$ |
87 |
$ |
85 |
2.2 |
88.7 |
% |
||||||
|
|
2010-2020 |
|
14,982 |
|
10,715 |
7.1 |
62.3 |
% |
||||||
|
|
|
|
15,069 |
|
10,800 |
7.1 |
62.5 |
% |
||||||
|
Single Asset: |
|
|
|
|
|
|||||||||
|
|
2010-2020 |
|
99,079 |
|
82,296 |
1.5 |
65.0 |
% |
||||||
|
Total |
|
$ |
114,148 |
$ |
93,096 |
2.1 |
64.7 |
% |
||||||
The Company’s Commercial Loans and Non-Agency CMBS portfolios are performing according to expectations under the current market conditions. The Company believes there is a reasonable likelihood that many of the delinquent loans that serve as collateral for the Non-Agency CMBS will return to performing status in the coming months as the economy continues to reopen. However, there is no assurance that this will be the case.
Commercial Loans
The following table presents our commercial loan investments as of June 30, 2022 (dollars in thousands):
|
Loan |
Loan Type |
Principal |
Fair |
Original |
Interest |
Maturity |
Extension |
Collateral |
Geographic |
||||||||||||
|
CRE 3 |
Interest-Only Mezzanine loan |
$ |
90,000 |
$ |
26,934 |
58 |
% |
1-Month LIBOR plus 9.25% |
6/29/2021 |
None(1) |
Entertainment and Retail |
NJ |
|||||||||
|
CRE 4 |
Interest-Only First Mortgage |
|
38,367 |
|
37,980 |
63 |
% |
1-Month LIBOR plus 3.02% |
8/6/2022 |
A One-Year Extension |
Retail |
CT |
|||||||||
|
CRE 5 |
Interest-Only First Mortgage |
|
24,535 |
|
24,362 |
62 |
% |
1-Month LIBOR plus 3.75% |
11/6/2022 |
Two One-Year Extensions |
Hotel |
NY |
|||||||||
|
CRE 6 |
Interest-Only First Mortgage |
|
13,207 |
|
13,114 |
62 |
% |
1-Month LIBOR plus 3.75% |
11/6/2022 |
Two One-Year Extensions |
Hotel |
CA |
|||||||||
|
CRE 7 |
Interest-Only First Mortgage |
|
7,259 |
|
7,208 |
62 |
% |
1-Month LIBOR plus 3.75% |
11/6/2022 |
Two One-Year Extensions |
Hotel |
IL, FL |
|||||||||
|
CRE 8 |
Interest-Only First Mortgage |
|
4,425 |
|
4,425 |
79 |
% |
1-Month LIBOR plus 4.85% |
12/6/2022 |
None |
Assisted Living Facilities |
FL |
|||||||||
|
SBC 3(2) |
Interest-Only First Mortgage |
|
14,362 |
|
14,398 |
49 |
% |
1-Month LIBOR plus 4.35% |
1/6/2023 |
None |
Nursing Facilities |
CT |
|||||||||
|
|
|
$ |
192,155 |
$ |
128,421 |
|
|
|
|
|
|
||||||||||
|
1. |
CRE 3 is in default and not eligible for an extension. |
|
|
2. |
During July 2022, the SBC 3 loan was granted a six month extension through January 6, 2023, with a 25 bps increase in rate and a 25 bps extension fee. |
Non-Performing Commercial Loan
The impact of COVID-19 pandemic has adversely impacted a broad range of industries in which our commercial loan borrowers operate and could impair their ability to fulfill their financial obligations to us, most significantly retail and hospitality assets. All but the one loan discussed below remain current.
CRE 3 Loan
As of June 30, 2022, the CRE 3 junior mezzanine loan with an outstanding principal balance of $90.0 million secured by a retail facility was non-performing and past its maturity date of June 29, 2021. We received some interest payments on this loan from a reserve that was exhausted in May 2021. We are currently in discussions with the borrower and certain other lenders regarding alternatives to address the situation which might include modifications of loan terms, deferral of payments, and the funding of new advances. There can be no assurance that these discussions will result in an outcome in which we would be repaid any amount of the loan and we may suffer further declines in fair value with respect to the mezzanine investment. We could experience a total loss of our investment under various scenarios, which at current levels would result in a $26.9 million reduction in the Company’s book value. Refer to Note 6 – Commercial Loans in the 10-Q for details.
Commercial Real Estate Owned
In February 2022, the Company along with other Hotel REO investors, sold the unencumbered hotel property which was foreclosed on in the third quarter of 2021 for $55.9 million. The Company and the other investors fully recovered their aggregate initial investment of $42.0 million. The Company and the other investors recognized a gain on sale of approximately $12.2 million.
PORTFOLIO FINANCING AND HEDGING
Financing
The following table sets forth additional information regarding the Company’s portfolio financing arrangements as of June 30, 2022 (dollars in thousands):
|
Securities Pledged |
|
Repurchase Agreement |
|
Weighted Average |
|
Weighted Average |
||
|
Short-Term Borrowings: |
|
|
|
|||||
|
Agency RMBS |
$ |
329 |
1.82 |
% |
32 |
|||
|
Non-Agency RMBS(1) |
|
31,628 |
3.44 |
% |
1 |
|||
|
Residential Whole Loans (2) |
|
1,116 |
4.12 |
% |
26 |
|||
|
Residential Bridge Loans (2) |
|
4,166 |
4.13 |
% |
26 |
|||
|
Commercial Loans (2) |
|
6,463 |
4.73 |
% |
26 |
|||
|
Other Securities |
|
2,126 |
4.09 |
% |
18 |
|||
|
Total short term borrowings |
|
45,828 |
3.72 |
% |
8 |
|||
|
Long Term Borrowings: |
|
|
|
|||||
|
Non-Agency CMBS and Non-Agency RMBS Facility |
|
|
|
|||||
|
Non-Agency CMBS (1) |
|
55,155 |
2.28 |
% |
234 |
|||
|
Non-Agency RMBS |
|
21,943 |
2.28 |
% |
307 |
|||
|
Other Securities |
|
23,948 |
2.28 |
% |
308 |
|||
|
Subtotal |
|
101,046 |
2.28 |
% |
267 |
|||
|
Residential Whole Loan Facility |
|
|
|
|||||
|
Residential Whole Loans (2) |
|
344,544 |
3.61 |
% |
127 |
|||
|
Commercial Whole Loan Facility |
|
|
|
|||||
|
Commercial Loans |
|
63,658 |
2.64 |
% |
87 |
|||
|
Total long term borrowings |
|
509,248 |
3.23 |
% |
150 |
|||
|
Repurchase agreements borrowings |
$ |
555,076 |
3.27 |
% |
138 |
|||
|
1. |
Includes repurchase agreement borrowings on securities eliminated upon VIE consolidation. |
|
|
2. |
Repurchase agreement borrowings on loans owned are through trust certificates. The trust certificates are eliminated in consolidation. |
Residential Whole Loan Facility
As of June 30, 2022, the Company had outstanding borrowings of $344.5 million, with a weighted average interest rate of 3.61%. The borrowings are secured by $401.5 million in non QM loans.
Commercial Whole Loan Facility
As of June 30, 2022, the Company had approximately $63.7 million in borrowings, with a weighted average interest rate of 2.64% under its commercial whole loan facility. The borrowing is secured by loans with an estimated fair market value of $87.1 million as of June 30, 2022. On May 30, 2022, the Company extended the maturity date of the facility to November 4, 2022.
Non-Agency CMBS and Non-Agency RMBS Facility
As of June 30, 2022, the outstanding balance under the Company’s Non-Agency CMBS and Non-Agency RMBS financing facility was $101.0 million with a weighted average interest rate of 2.28%. The borrowing is secured by investments with an estimated fair market value of $161.0 million as of June 30, 2022. On May 2, 2022, the Company extended the maturity date of the facility for one-year to May 2, 2023.
Convertible Senior Unsecured Notes
2022 Notes
As of June 30, 2022, we had $27.0 million of the 2022 Notes outstanding. The 2022 Notes mature on October 1, 2022, unless earlier converted, redeemed, or repurchased by the holders pursuant to their terms, and are not redeemable by us except during the final three months prior to maturity.
2024 Notes
As of June 30, 2022, we had $86.3 million aggregate principal amount of the 2024 Notes outstanding. The 2024 notes mature on September 15, 2024, unless earlier converted, redeemed or repurchased by the holders pursuant to their terms, and are not redeemable by us except during the final three months prior to maturity.
Residential Mortgage-Backed Notes
The Company has completed three Residential Whole Loan securitizations. The mortgage-backed notes issued are non-recourse to the Company and effectively finance $793.0 million of Residential Whole Loans.
Arroyo 2019-2
The following table summarizes the residential mortgage-backed notes issued by the Company’s Arroyo 2019-2 securitization trust at June 30, 2022 (dollars in thousands):
|
Classes |
|
Principal |
|
Coupon |
|
Carrying Value |
|
Contractual |
|||
|
Offered Notes: |
|
|
|
|
|||||||
|
Class A-1 |
$ |
203,885 |
3.3 |
% |
$ |
203,885 |
4/25/2049 |
||||
|
Class A-2 |
|
10,934 |
3.5 |
% |
|
10,934 |
4/25/2049 |
||||
|
Class A-3 |
|
17,323 |
3.8 |
% |
|
17,323 |
4/25/2049 |
||||
|
Class M-1 |
|
25,055 |
4.8 |
% |
|
25,055 |
4/25/2049 |
||||
|
|
|
257,197 |
|
|
257,197 |
|
|||||
|
Less: Unamortized Deferred Financing Cost |
|
N/A |
|
|
3,056 |
|
|||||
|
Total |
$ |
257,197 |
|
$ |
254,141 |
|
|||||
The Company retained the subordinate bonds and these bonds had a fair market value of $28.2 million at June 30, 2022. The retained Arroyo 2019-2 subordinate bonds are eliminated in consolidation.
Arroyo 2020-1
The following table summarizes the residential mortgage-backed notes issued by the Company’s Arroyo 2020-1 securitization trust at June 30, 2022 (dollars in thousands):
|
Classes |
|
Principal |
|
Coupon |
|
Carrying Value |
|
Contractual |
|||
|
Offered Notes: |
|
|
|
|
|||||||
|
Class A-1A |
$ |
82,908 |
1.7 |
% |
$ |
82,908 |
3/25/2055 |
||||
|
Class A-1B |
|
9,838 |
2.1 |
% |
|
9,838 |
3/25/2055 |
||||
|
Class A-2 |
|
13,518 |
2.9 |
% |
|
13,518 |
3/25/2055 |
||||
|
Class A-3 |
|
17,963 |
3.3 |
% |
|
17,963 |
3/25/2055 |
||||
|
Class M-1 |
|
11,739 |
4.3 |
% |
|
11,739 |
3/25/2055 |
||||
|
Subtotal |
|
135,966 |
|
|
135,966 |
|
|||||
|
Less: Unamortized Deferred Financing Costs |
|
N/A |
|
|
1,788 |
|
|||||
|
Total |
$ |
135,966 |
|
$ |
134,178 |
|
|||||
The Company retained the subordinate bonds and these bonds had a fair market value of $21.1 million at June 30, 2022. The retained Arroyo 2020-1 subordinate bonds are eliminated in consolidation.
Arroyo 2022-1
The following table summarizes the residential mortgage-backed notes issued by the Company’s Arroyo 2022-1 securitization trust at June 30, 2022 (dollars in thousands):
|
Classes |
|
Principal |
|
Coupon |
|
Fair Value |
|
Contractual |
|||
|
Offered Notes: |
|
|
|
|
|||||||
|
Class A-1A |
$ |
223,469 |
2.5 |
% |
$ |
211,365 |
12/25/2056 |
||||
|
Class A-1B |
|
82,942 |
3.3 |
% |
|
74,912 |
12/25/2056 |
||||
|
Class A-2 |
|
21,168 |
3.6 |
% |
|
18,250 |
12/25/2056 |
||||
|
Class A-3 |
|
28,079 |
3.7 |
% |
|
23,241 |
12/25/2056 |
||||
|
Class M-1 |
|
17,928 |
3.7 |
% |
|
14,000 |
12/25/2056 |
||||
|
Total |
$ |
373,586 |
|
$ |
341,768 |
|
|||||
The Company retained the subordinate bonds and these bonds had a fair market value of $32.4 million at June 30, 2022. The retained Arroyo 2022-1 subordinate bonds are eliminated in consolidation.
Commercial Mortgage-Backed Notes
CSMC 2014 USA
The following table summarizes CSMC 2014 USA’s commercial mortgage pass-through certificates at June 30, 2022 (dollars in thousands), which is non-recourse to the Company:
|
Classes |
|
Principal Balance |
|
Coupon |
|
Fair Value |
|
Contractual Maturity |
|||
|
Class A-1 |
$ |
120,391 |
3.3 |
% |
$ |
112,237 |
9/11/2025 |
||||
|
Class A-2 |
|
531,700 |
4.0 |
% |
|
502,516 |
9/11/2025 |
||||
|
Class B |
|
136,400 |
4.2 |
% |
|
125,513 |
9/11/2025 |
||||
|
Class C |
|
94,500 |
4.3 |
% |
|
83,954 |
9/11/2025 |
||||
|
Class D |
|
153,950 |
4.4 |
% |
|
142,388 |
9/11/2025 |
||||
|
Class E |
|
180,150 |
4.4 |
% |
|
141,159 |
9/11/2025 |
||||
|
Class F |
|
153,600 |
4.4 |
% |
|
110,014 |
9/11/2025 |
||||
|
Class X-1(1) |
|
N/A |
0.5 |
% |
|
12,347 |
9/11/2025 |
||||
|
Class X-2(1) |
|
N/A |
— |
% |
|
2,572 |
9/11/2025 |
||||
|
|
$ |
1,370,691 |
|
$ |
1,232,700 |
|
|||||
|
1. |
Class X-1 and X-2 are interest-only classes with notional balances of $652.1 million and $733.5 million as of June 30, 2022, respectively. |
The above table does not reflect the portion of the Class F bond held by the Company because the bond is eliminated in consolidation. The Company’s ownership interest in the Class F bonds represents a controlling financial interest, which resulted in consolidation of the trust. The bond had a fair market value of $10.7 million at June 30, 2022. The securitized debt of the CSMC USA can only be settled with the commercial loan with an outstanding principal balance of approximately $1.4 billion at June 30, 2022, that serves as collateral for the securitized debt and is non-recourse to the Company.
Derivatives Activity
|
|
The following table summarizes the Company’s derivative instruments at June 30, 2022 (dollars in thousands):
|
Other Derivative Instruments |
Notional Amount |
Fair Value |
|||||
|
Credit default swaps, asset |
$ |
2,030 |
$ |
365 |
|
||
|
TBA securities, asset |
|
100,000 |
|
1,383 |
|
||
|
Total derivative instruments, assets |
|
|
1,748 |
|
|||
|
|
|
|
|||||
|
Interest rate swaps, liability |
$ |
174,000 |
$ |
(1,158 |
) |
||
|
Credit default swaps, liability |
|
4,140 |
|
(714 |
) |
||
|
Total derivative instruments, liabilities |
|
|
(1,872 |
) |
|||
|
Total derivative instruments, net |
|
$ |
(124 |
) |
|||
DIVIDEND
For the quarter ended June 30, 2022, we declared a $0.40 dividend per share, generating a dividend yield of approximately 13.2% based on the stock closing price of $12.10 on June 30, 2022, adjusted for the 1-for-10 reverse stock split that occurred in July.
CONFERENCE CALL
The Company will host a conference call with a live webcast tomorrow, August 5, 2022 at 12:00 p.m. Eastern Time/9:00 a.m. Pacific Time, to discuss financial results for the second quarter 2022. Due to the pending strategic alternative review process, the Company will limit the conference call to its prepared remarks and will not be conducting a question and answer session during the call.
Individuals interested in listening to 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 interest
Contacts
Investor Relations Contact:
Larry Clark
Financial Profiles, Inc.
(310) 622-8223
lclark@finprofiles.com
Media Contact:
Tricia Ross
Financial Profiles, Inc.
(310) 622-8226
tross@finprofiles.com