Western Asset Mortgage Capital Corporation Announces Fourth Quarter and Full Year 2022 Results
Conference Call and Webcast Scheduled for Tomorrow, Friday, March 3, 2023 at 11:00 a.m. Eastern Time/8:00 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 fourth quarter and the year ended December 31, 2022.
FULL YEAR HIGHLIGHTS
- The Company continues to execute on its business strategy to focus on residential real estate investments, completing securitizations of $834.2 million of Residential Whole Loans in the first and third quarters of 2022 (Arroyo 2022-1 and Arroyo 2022-2), which allowed the Company to secure $750.8 million of long-term fixed rate financing.
- The Company’s core assets have performed well in 2022, with $216.1 million received from the repayment or paydown of Residential Whole Loans.
- In addition, the Company took a series of actions in 2022 to deleverage, build liquidity and strengthen its balance sheet, including the sale of $56.4 million of Non-Agency RMBS and other securities and the repurchase of its outstanding 2022 Notes in full at maturity in October for $26.0 million.
- Furthermore, on February 3, 2023, the CRE 3 loan was sold to an unaffiliated third party for $8.8 million, which was equal to the fair value of the loan at December 31, 2022.
FOURTH QUARTER FINANCIAL 2022 RESULTS
- GAAP book value per share was $15.70 at December 31, 2022.
- Economic book value1 per share was $17.23 at December 31, 2022.
- GAAP Net loss attributable to common shareholders and participating securities of $828 thousand, or $0.14 per share.
- Distributable Earnings1 of $2.0 million, or $0.33 per basic and diluted share.
- Economic return1,2 on book value was a negative 1.0% for the quarter.
- Economic return1,2 on economic book value was negative 8.4% for the quarter.
- 1.24% annualized net interest margin1,3,4 on our investment portfolio.
- 2.9x recourse leverage as of December 31, 2022.
- On December 21, 2022, the Company declared a fourth quarter common dividend of $0.40 per share.
FULL YEAR 2022 FINANCIAL RESULTS
- GAAP Net loss attributable to common shareholders and participating securities of $89.1 million, or $14.77 per share.
- Distributable earnings1 of $7.3 million, or $1.20 per basic and diluted share.
- Economic return on book value1,2 was negative 46% for the year.
- 1.16% annualized net interest margin1,3,4 on our investment portfolio.
- Declared quarterly common dividends for a total annual common dividend of $1.60 per share, adjusted for the July 2022 1-for-10 reverse stock split.
|
(1) |
|
Non-GAAP measure. Refer to pages 16 through 21 for reconciliations. |
|
(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 and the cost of interest rate swaps. |
|
(4) |
|
Excludes the consolidation of VIE trusts required under GAAP. |
MANAGEMENT COMMENTARY
“In light of challenging market conditions, we continued to focus during the fourth quarter on strengthening our balance sheet and increasing our liquidity,” said Bonnie Wongtrakool, Chief Executive Officer of the Company. “We received approximately $40.0 million from the sale, repayment or paydowns of investments and used these proceeds to further reduce recourse debt.
“Our fourth quarter and full-year financial results reflect the volatility in interest rates and asset prices as well as higher funding costs. For the fourth quarter, our GAAP book value per share declined 3.2% from the prior quarter, while economic book value per share declined 10.5%. We generated lower net interest income during the quarter on a smaller average portfolio and higher interest costs, lower prepayments from our residential portfolio, and stable operating expenses. Consequently, our distributable earnings of $2.0 million, or $0.33 per share, in the fourth quarter, were down $300 thousand from the third quarter.
“We continue to move forward with our strategic review process, and to analyze alternatives that may involve a sale, merger, or other transaction involving the Company. The current market environment for mortgage REITs remains challenging, given the rapid rise in interest rates and the increased potential for an economic retrenchment, which has added complexity to our exploration of strategic partners.”
Greg Handler, Chief Investment Officer of the Company, added, “We continue to focus on maximizing the value of our portfolio and increasing our total liquidity. During the quarter, we received payoffs in our residential whole loan portfolio and sold down some of our non-agency residential securities. While spread widening put further pressure on the value of some of our assets, this was more than offset by spread tightening on our residential whole loans. We remain focused on monetizing our commercial holdings in a disciplined manner in order to continue strengthening our balance sheet and improving our liquidity.”
2022 QUARTERLY OPERATING RESULTS
The below table reflects a summary of our operating results:
|
|
For the Three Months Ended |
||||||||||||||
|
GAAP Results ($’s in thousands) |
December 31, 2022 |
|
September 30, 2022 |
|
June 30, 2022 |
|
March 31, 2022 |
||||||||
|
Net interest income |
$ |
4,771 |
|
|
$ |
5,699 |
|
|
$ |
6,235 |
|
|
$ |
4,283 |
|
|
Other income (loss): |
|
|
|
|
|
|
|
||||||||
|
Realized gain (loss), net |
|
(3,118 |
) |
|
|
(35 |
) |
|
|
(45,661 |
) |
|
|
12,145 |
|
|
Unrealized gain (loss), net |
|
2,427 |
|
|
|
(43,582 |
) |
|
|
16,185 |
|
|
|
(38,903 |
) |
|
Gain (loss) on derivative instruments, net |
|
(381 |
) |
|
|
4,882 |
|
|
|
4,781 |
|
|
|
6,936 |
|
|
Other, net |
|
105 |
|
|
|
(61 |
) |
|
|
(46 |
) |
|
|
(145 |
) |
|
Other Income (loss) |
|
(967 |
) |
|
|
(38,796 |
) |
|
|
(24,741 |
) |
|
|
(19,967 |
) |
|
Total expenses |
|
4,743 |
|
|
|
6,645 |
|
|
|
3,927 |
|
|
|
6,497 |
|
|
Income (loss) before income taxes |
|
(938 |
) |
|
|
(39,742 |
) |
|
|
(22,433 |
) |
|
|
(22,181 |
) |
|
Income tax provision (benefit) |
|
(105 |
) |
|
|
266 |
|
|
|
(46 |
) |
|
|
56 |
|
|
Net income (loss) |
|
(833 |
) |
|
|
(40,008 |
) |
|
|
(22,387 |
) |
|
|
(22,237 |
) |
|
Net income attributable to non-controlling interest |
|
(5 |
) |
|
|
2 |
|
|
|
— |
|
|
|
3,616 |
|
|
Net income (loss) attributable to common stockholders and participating securities |
$ |
(828 |
) |
|
$ |
(40,010 |
) |
|
$ |
(22,387 |
) |
|
$ |
(25,853 |
) |
|
Net income (loss) per common share – basic/diluted |
$ |
(0.14 |
) |
|
$ |
(6.63 |
) |
|
$ |
(3.71 |
) |
|
$ |
(4.30 |
) |
|
Non-GAAP Results |
|
|
|
|
|
|
|
||||||||
|
Distributable earnings(1) |
$ |
2,018 |
|
|
$ |
2,250 |
|
|
$ |
2,650 |
|
|
$ |
379 |
|
|
Distributable earnings per Common Share – Basic/Diluted(2) |
$ |
0.33 |
|
|
$ |
0.37 |
|
|
$ |
0.44 |
|
|
$ |
0.06 |
|
|
Weighted average yield(3)(4) |
|
5.02 |
% |
|
|
4.70 |
% |
|
|
4.30 |
% |
|
|
3.74 |
% |
|
Effective cost of funds(4) |
|
4.46 |
% |
|
|
3.90 |
% |
|
|
3.60 |
% |
|
|
3.41 |
% |
|
Annualized net interest margin(3)(4) |
|
1.24 |
% |
|
|
1.26 |
% |
|
|
1.25 |
% |
|
|
0.85 |
% |
|
(1) |
|
For a reconciliation of GAAP Income to Distributable Earnings, refer to page 16 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 December 31, 2022, the Company owned an aggregate investment portfolio with a fair market value totaling $2.4 billion. The following table presents information regarding the Company’s investment portfolio as of December 31, 2022 (dollars in thousands):
|
Investment |
|
Balance at |
|
Purchases |
|
Loan |
|
Principal Payments |
|
Proceeds from |
|
Transfers |
|
Realized |
|
Unrealized |
|
Premium |
|
Balance at |
||||||||||||||||
|
Agency RMBS and Agency RMBS IOs |
|
$ |
1,172 |
|
$ |
— |
|
|
N/A |
|
$ |
(103 |
) |
|
$ |
— |
|
|
|
N/A |
|
|
$ |
— |
|
|
$ |
(302 |
) |
|
$ |
— |
|
|
$ |
767 |
|
Non-Agency RMBS |
|
|
27,769 |
|
|
39,952 |
|
|
N/A |
|
|
(1,011 |
) |
|
|
(31,790 |
) |
|
|
N/A |
|
|
|
(2,396 |
) |
|
|
(9,197 |
) |
|
|
359 |
|
|
|
23,686 |
|
Non-Agency CMBS |
|
|
105,358 |
|
|
— |
|
|
N/A |
|
|
(6,554 |
) |
|
|
(10,152 |
) |
|
|
N/A |
|
|
|
(43,935 |
) |
|
|
40,104 |
|
|
|
615 |
|
|
|
85,436 |
|
Other securities(1) |
|
|
51,648 |
|
|
— |
|
|
N/A |
|
|
— |
|
|
|
(14,485 |
) |
|
|
N/A |
|
|
|
(2,252 |
) |
|
|
(7,923 |
) |
|
|
274 |
|
|
|
27,262 |
|
Total MBS and other securities |
|
|
185,947 |
|
|
39,952 |
|
|
N/A |
|
|
(7,668 |
) |
|
|
(56,427 |
) |
|
|
N/A |
|
|
|
(48,583 |
) |
|
|
22,682 |
|
|
|
1,248 |
|
|
|
137,151 |
|
Residential Whole Loans |
|
|
1,023,502 |
|
|
411,919 |
|
|
96 |
|
|
(216,135 |
) |
|
|
(11,736 |
) |
|
|
(2,256 |
) |
|
|
(101 |
) |
|
|
(108,207 |
) |
|
|
(5,937 |
) |
|
|
1,091,145 |
|
Residential Bridge Loans |
|
|
5,428 |
|
|
— |
|
|
— |
|
|
(2,670 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
91 |
|
|
|
— |
|
|
|
2,849 |
|
Commercial Loans |
|
|
130,572 |
|
|
— |
|
|
— |
|
|
(20,593 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(19,977 |
) |
|
|
— |
|
|
|
90,002 |
|
Securitized commercial loans |
|
|
1,355,808 |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(297,343 |
) |
|
|
26,638 |
|
|
|
1,085,103 |
|
REO |
|
$ |
43,607 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
$ |
(55,573 |
) |
|
$ |
2,255 |
|
|
$ |
11,966 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,255 |
|
Total Investments |
|
$ |
2,744,864 |
|
$ |
451,871 |
|
$ |
96 |
|
$ |
(247,066 |
) |
|
$ |
(123,736 |
) |
|
$ |
(1 |
) |
|
$ |
(36,718 |
) |
|
$ |
(402,754 |
) |
|
$ |
21,949 |
|
|
$ |
2,408,505 |
|
(1) |
|
At December 31, 2022 other securities include GSE Credit Risk Transfer securities with an estimated fair value of $22.3 million and student loans ABS with a fair value of $4.9 million. |
Portfolio Characteristics
Residential Real Estate Investments
The Company’s focus on residential real estate related investments includes 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 allows it to address attractive market opportunities.
Residential Whole Loans
The Company’s Residential Whole Loans generally have low loan-to-value ratios (“LTV’s”) and are comprised of 2,938 Non-QM adjustable rate mortgages and five investor fixed rate mortgages. The following table presents certain information about our Residential Whole-Loans investment portfolio as of December 31, 2022 (dollars in thousands):
|
|
|
|
|
|
|
Weighted Average |
|||||||||||
|
Current Coupon Rate |
|
Number of Loans |
|
Principal |
|
Original LTV |
|
Original |
|
Expected |
|
Contractual |
|
Coupon |
|||
|
2.01% – 3.00% |
|
39 |
|
$ |
22,277 |
|
66.3 |
% |
|
758 |
|
8.9 |
|
28.3 |
|
2.9 |
% |
|
3.01% – 4.00% |
|
402 |
|
|
214,402 |
|
66.3 |
% |
|
759 |
|
7.3 |
|
28.5 |
|
3.7 |
% |
|
4.01% – 5.00% |
|
1,337 |
|
|
453,811 |
|
64.1 |
% |
|
749 |
|
5.5 |
|
26.0 |
|
4.6 |
% |
|
5.01% – 6.00% |
|
901 |
|
|
363,197 |
|
65.6 |
% |
|
742 |
|
4.7 |
|
26.7 |
|
5.4 |
% |
|
6.01% – 7.00% |
|
249 |
|
|
105,933 |
|
69.9 |
% |
|
742 |
|
3.6 |
|
28.4 |
|
6.4 |
% |
|
7.01% – 8.00% |
|
15 |
|
|
5,681 |
|
75.2 |
% |
|
730 |
|
3.0 |
|
29.2 |
|
7.4 |
% |
|
Total |
|
2,943 |
|
$ |
1,165,301 |
|
65.6 |
% |
|
748 |
|
5.5 |
|
27.0 |
|
4.8 |
% |
|
(1) |
|
The original FICO score is not available for 231 loans with a principal balance of approximately $76.6 million at December 31, 2022. We have excluded these loans from the weighted average. |
The following table presents the aging of the Residential Whole Loans as of December 31, 2022 (dollars in thousands):
|
|
|
Residential Whole Loans |
||||||
|
|
|
No of Loans |
|
Principal |
|
Fair Value |
||
|
Current |
|
2,910 |
|
$ |
1,147,412 |
|
$ |
1,074,409 |
|
1-30 days |
|
14 |
|
|
6,983 |
|
|
6,678 |
|
31-60 days |
|
— |
|
|
— |
|
|
— |
|
61-90 days |
|
6 |
|
|
2,165 |
|
|
2,032 |
|
90+ days |
|
13 |
|
|
8,741 |
|
|
8,026 |
|
Total |
|
2,943 |
|
$ |
1,165,301 |
|
$ |
1,091,145 |
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 December 31, 2022 (fair value dollars in thousands):
|
|
|
|
|
Weighted Average |
|||||||||||||||
|
Category |
|
Fair Value |
|
Purchase |
|
Life (Years) |
|
Original LTV |
|
Original |
|
60+ Day |
|
6-Month |
|||||
|
Prime |
|
$ |
12,000 |
|
$ |
79.78 |
|
11.9 |
|
67.8 |
% |
|
748 |
|
1.2 |
% |
|
17.9 |
% |
|
Alt-A |
|
|
11,687 |
|
|
50.30 |
|
17.3 |
|
81.3 |
% |
|
661 |
|
17.5 |
% |
|
8.0 |
% |
|
Total |
|
$ |
23,687 |
|
$ |
65.24 |
|
14.5 |
|
74.5 |
% |
|
705 |
|
9.2 |
% |
|
13.0 |
% |
Commercial Real Estate Investments
Non-Agency CMBS
The following table presents certain characteristics of our Non-Agency CMBS portfolio as of December 31, 2022 (dollars in thousands):
|
|
|
|
|
Principal |
|
|
|
Weighted Average |
|||||
|
Type |
|
Vintage |
|
Balance |
|
Fair Value |
|
Life (Years) |
|
Original LTV |
|||
|
Conduit: |
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
2006-2009 |
|
$ |
69 |
|
$ |
67 |
|
0.6 |
|
88.7 |
% |
|
|
|
2010-2020 |
|
|
14,982 |
|
|
10,414 |
|
6.0 |
|
62.3 |
% |
|
|
|
|
|
|
15,051 |
|
|
10,481 |
|
6.0 |
|
62.5 |
% |
|
Single Asset: |
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
2010-2020 |
|
|
94,215 |
|
|
74,954 |
|
1.1 |
|
65.3 |
% |
|
Total |
|
|
|
$ |
109,266 |
|
$ |
85,435 |
|
1.7 |
|
65.0 |
% |
Commercial Loans
The following table presents our commercial loan investments as of December 31, 2022 (dollars in thousands):
|
Loan |
Loan Type |
Principal |
Fair Value |
Original |
Interest Rate |
Maturity |
Extension |
Collateral |
Geographic |
|||
|
CRE 3 |
Interest-Only Mezzanine loan |
$ |
90,000 |
$ |
8,777 |
58 |
% |
1-Month LIBOR plus 9.25% |
6/29/2021 |
None(1) |
Entertainment and Retail |
NJ |
|
CRE 4(2) |
Interest-Only First Mortgage |
|
22,204 |
|
22,050 |
63 |
% |
1-Month LIBOR plus 3.02% |
8/6/2025(2) |
None |
Retail |
CT |
|
CRE 5 |
Interest-Only First Mortgage |
|
24,535 |
|
24,433 |
62 |
% |
1-Month LIBOR plus 3.75% |
11/6/2023 (3) |
None |
Hotel |
NY |
|
CRE 6 |
Interest-Only First Mortgage |
|
13,207 |
|
13,151 |
62 |
% |
1-Month LIBOR plus 3.75% |
11/6/2023 (3) |
None |
Hotel |
CA |
|
CRE 7 |
Interest-Only First Mortgage |
|
7,259 |
|
7,229 |
62 |
% |
1-Month LIBOR plus 3.75% |
11/6/2023 (3) |
None |
Hotel |
IL, FL |
|
SBC 3(4) |
Interest-Only First Mortgage |
|
14,362 |
|
14,362 |
49 |
% |
One-Month LIBOR plus 4.35% |
1/6/2023 |
None |
Nursing Facilities |
CT |
|
|
|
$ |
171,567 |
$ |
90,002 |
|
|
|
|
|
|
|
|
(1) |
|
At December 31, 2022, CRE 3 was in default and was not eligible for extension. On February 3, 2023, it was sold to an unaffiliated third party for its fair value as of December 31, 2022. |
|
(2) |
|
CRE 4 was granted a 3 year extension through August 6, 2025, with a principal pay down of $16.2 million. |
|
(3) |
|
CRE 5, 6, and 7 were each granted a one-year extension through November 6, 2023. |
|
(4) |
|
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. Subsequently, in January 2023, the SBC 3 loan was partially paid down by $750 thousand and was granted another extension through August 4, 2023 with a 50 bps extension fee. |
Commercial Loan Payoffs
On September 16, 2022, CRE 8, which had an outstanding principal balance of $4.4 million collateralized by assisted living facilities, was paid off in full.
CRE 3 Loan
As of December 31, 2022, the CRE 3 junior mezzanine loan with an outstanding principal balance of $90.0 million was non-performing and past its maturity date of June 29, 2021. On October 25, 2022, the senior mezzanine lender notified the Company that it had consummated a strict foreclosure under the Uniform Commercial Code of its equity interest in the mortgage borrower, which had the effect of foreclosing out the Company’s subordinate pledge of equity in the retail facility that served as collateral for the junior mezzanine loan. As a result, as of December 31, 2022, the Company’s junior mezzanine loan remained outstanding but without the benefit of the primary collateral supporting the loan.
As a result of the foreclosure noted above, the Company marked down the value of its investment in the CRE 3 junior mezzanine loan from $26.9 million at June 30, 2022 to $8.8 million at September 30, 2022. On February 3, 2023, the CRE 3 loan was sold to an unaffiliated third party for its fair value at December 31, 2022 of $8.8 million.
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 other investors recognized a gain on the 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 December 31, 2022 (dollars in thousands):
|
Securities Pledged |
|
Repurchase |
|
Weighted Average |
|
Weighted Average |
||
|
Short Term Borrowings: |
|
|
|
|
|
|
||
|
Agency RMBS |
|
$ |
293 |
|
4.78 |
% |
|
32 |
|
Non-Agency RMBS(1) |
|
|
48,237 |
|
7.50 |
% |
|
26 |
|
Residential Whole Loans(2) |
|
|
— |
|
— |
% |
|
0 |
|
Residential Bridge Loans(2) |
|
|
— |
|
— |
% |
|
0 |
|
Commercial Loans(2) |
|
|
— |
|
— |
% |
|
0 |
|
Other securities |
|
|
1,776 |
|
7.09 |
% |
|
17 |
|
Total short-term borrowings |
|
|
50,306 |
|
7.47 |
% |
|
26 |
|
Long Term Borrowings: |
|
|
|
|
|
|
||
|
Non-Agency CMBS and Non-Agency RMBS Facility |
|
|
|
|
|
|
||
|
Non-Agency CMBS(1) |
|
|
55,154 |
|
6.30 |
% |
|
122 |
|
Non-Agency RMBS |
|
|
19,129 |
|
6.30 |
% |
|
122 |
|
Other Securities |
|
|
16,863 |
|
6.30 |
% |
|
122 |
|
Subtotal |
|
|
91,146 |
|
6.30 |
% |
|
122 |
|
Residential Whole Loan Facility |
|
|
|
|
|
|
||
|
Residential Whole Loans(2) |
|
|
3,633 |
|
6.66 |
% |
|
298 |
|
Commercial Whole Loan Facility |
|
|
|
|
|
|
||
|
Commercial Loans |
|
|
48,032 |
|
6.13 |
% |
|
307 |
|
Total long-term borrowings |
|
|
142,811 |
|
6.25 |
% |
|
189 |
|
Repurchase agreements borrowings |
|
$ |
193,117 |
|
6.57 |
% |
|
146 |
|
(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
The facility was recently extended on November 9, 2022 and matures on October 25, 2023. It bears interest at a rate of SOFR plus 2.25%, with a SOFR floor of 0.25%. We finance our Non-QM Residential Whole Loans held in RMI 2015 Trust under this facility. As of December 31, 2022, the Company has outstanding borrowings of $3.6 million. The borrowings are secured by $3.2 million in Non-QM loans and one REO property with a carrying value of $2.3 million as of December 31, 2022.
Commercial Whole Loan Facility
The facility was recently extended on November 9, 2022 and matures on November 3, 2023. It bears interest at a rate of SOFR plus 2.25%. As of December 31, 2022, the outstanding balance under this facility was $48.0 million. The borrowing is secured by the performing commercial loans that are held in CRE LLC, with an estimated fair market value of $66.9 million as of December 31, 2022.
Non-Agency CMBS and Non-Agency RMBS Facility
The facility was extended on May 2, 2022 and matures on May 2, 2023. It bears interest at a rate of SOFR plus 2.00%. As of December 31, 2022, the outstanding balance under this facility was $91.1 million. The borrowing is secured by investments with an estimated fair market value of $129.9 million as of December 31, 2022.
Convertible Senior Unsecured Notes
2022 Notes
As of December 31, 2022, the Company had repaid in full the aggregate principal amount outstanding of the 2022 Notes upon their maturity on October 1, 2022.
2024 Notes
As of December 31, 2022, the Company had $86.3 million aggregate principal amount outstanding of the 2024 Notes. The 2024 Notes mature on September 15, 2024, unless earlier converted, redeemed by the holders pursuant to their terms or repurchased by us, and are not redeemable by us except during the final three months prior to maturity.
Residential Mortgage-Backed Notes
As of December 31, 2022, the Company had completed four Residential Whole Loan securitizations. The mortgage-backed notes are non-recourse to the Company and effectively financed $1.1 billion of Residential Whole Loans as of December 31, 2022.
Arroyo 2019-2
The following table summarizes the residential mortgage-backed notes issued by the Company’s Arroyo 2019-2 securitization trust at December 31, 2022 (dollars in thousands):
|
Classes |
Principal Balance |
Coupon |
Carrying Value |
Contractual |
|||
|
Offered Notes: |
|
|
|
|
|||
|
Class A-1 |
$ |
168,131 |
3.3 |
% |
$ |
168,131 |
4/25/2049 |
|
Class A-2 |
|
9,017 |
3.5 |
% |
|
9,017 |
4/25/2049 |
|
Class A-3 |
|
14,286 |
3.8 |
% |
|
14,286 |
4/25/2049 |
|
Class M-1 |
|
25,055 |
4.8 |
% |
|
25,055 |
4/25/2049 |
|
Subtotal |
$ |
216,489 |
|
$ |
216,489 |
|
|
|
Less: Unamortized Deferred Financing Costs |
|
N/A |
|
|
2,604 |
|
|
|
Total |
$ |
216,489 |
|
$ |
213,885 |
|
|
The Company retained the subordinate bonds, and these bonds had a fair market value of $27.0 million on December 31, 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 December 31, 2022 (dollars in thousands):
|
Classes |
Principal Balance |
Coupon |
Carrying Value |
Contractual |
|||
|
Offered Notes: |
|
|
|
|
|||
|
Class A-1A |
$ |
74,425 |
1.7 |
% |
$ |
74,425 |
3/25/2055 |
|
Class A-1B |
|
8,831 |
2.1 |
% |
|
8,831 |
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 |
|
126,476 |
|
|
126,476 |
|
|
|
Less: Unamortized Deferred Financing Costs |
|
N/A |
|
|
1,542 |
|
|
|
Total |
$ |
126,476 |
|
$ |
124,934 |
|
|
The Company retained the subordinate bonds and these bonds had a fair market value of $19.3 million at December 31, 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 December 31, 2022 (dollars in thousands):
|
Classes |
Principal Balance |
Coupon |
Carrying Value |
Contractual |
|||
|
Offered Notes: |
|
|
|
|
|||
|
Class A-1A |
$ |
212,307 |
2.5 |
% |
$ |
194,438 |
12/25/2056 |
|
Class A-1B |
|
82,942 |
3.3 |
% |
|
73,259 |
12/25/2056 |
|
Class A-2 |
|
21,168 |
3.6 |
% |
|
17,054 |
12/25/2056 |
|
Class A-3 |
|
28,079 |
3.7 |
% |
|
21,308 |
12/25/2056 |
|
Class M-1 |
|
17,928 |
3.7 |
% |
|
12,160 |
12/25/2056 |
|
Subtotal |
|
362,424 |
|
|
318,219 |
|
|
|
Less: Unamortized Deferred Financing Costs |
|
N/A |
|
|
— |
|
|
|
Total |
$ |
362,424 |
|
$ |
318,219 |
|
|
The Company retained the subordinate bonds and these bonds had a fair market value of $33.1 million at December 31, 2022. The retained Arroyo 2022-1 subordinate bonds are eliminated in consolidation.
Arroyo 2022-2
The following table summarizes the residential mortgage-backed notes issued by the Company’s Arroyo 2022-2 securitization trust at December 31, 2022 (dollars in thousands):
|
Classes |
Principal Balance |
Coupon |
Carrying Value |
Contractual |
|||
|
Offered Notes: |
|
|
|
|
|||
|
Class A-1 |
$ |
267,533 |
5.0 |
% |
$ |
260,217 |
7/25/2057 |
|
Class A-2 |
|
22,773 |
5.0 |
% |
|
21,983 |
7/25/2057 |
|
Class A-3 |
|
27,749 |
5.0 |
% |
|
26,619 |
7/25/2057 |
|
Class M-1 |
|
17,694 |
5.0 |
% |
|
15,216 |
7/25/2057 |
|
Subtotal |
|
335,749 |
|
|
324,035 |
|
|
|
Less: Unamortized Deferred Financing Costs |
|
N/A |
|
|
— |
|
|
|
Total |
$ |
335,749 |
|
$ |
324,035 |
|
|
The Company retained the subordinate bonds and these bonds had a fair market value of $40.2 million at December 31, 2022. The retained Arroyo 2022-2 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 December 31, 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 |
% |
$ |
108,591 |
9/11/2025 |
|
Class A-2 |
|
531,700 |
4.0 |
% |
|
477,678 |
9/11/2025 |
|
Class B |
|
136,400 |
4.2 |
% |
|
115,782 |
9/11/2025 |
|
Class C |
|
94,500 |
4.3 |
% |
|
76,304 |
9/11/2025 |
|
Class D |
|
153,950 |
4.4 |
% |
|
113,229 |
9/11/2025 |
|
Class E |
|
180,150 |
4.4 |
% |
|
99,858 |
9/11/2025 |
|
Class F |
|
153,600 |
4.4 |
% |
|
77,242 |
9/11/2025 |
|
Class X-1(1) |
|
n/a |
0.7 |
% |
|
7,430 |
9/11/2025 |
|
Class X-2(1) |
|
n/a |
0.2 |
% |
|
1,497 |
9/11/2025 |
|
|
$ |
1,370,691 |
|
$ |
1,077,611 |
|
|
|
(1) |
|
Class X-1 and X-2 are interest-only classes with notional balances of $652.1 million and $733.5 million as of December 31, 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 F bonds represents a controlling financial interest, which resulted in the consolidation of the trust during the quarter. The bond had a fair market value of $7.5 million on December 31, 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 December 31, 2022, that serves as collateral and is non-recourse to the Company.
Derivatives Activity
The following table summarizes the Company’s other derivative instruments at December 31, 2022 (dollars in thousands):
|
Other Derivative Instruments |
|
Notional Amount |
|
Fair Value |
|||
|
Interest rate swaps, asset |
|
$ |
60,000 |
|
$ |
1 |
|
|
Other derivative instruments, assets |
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|||
|
Interest rate swaps, liability |
|
|
98,000 |
|
|
(61 |
) |
|
Total other derivative instruments, liabilities |
|
|
|
|
(61 |
) |
|
|
Total other derivative instruments, net |
|
|
|
$ |
(60 |
) |
|
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