Western Asset Mortgage Capital Corporation Declares First Quarter Dividend Of $0.95 Per Share; Announces Revisions To Annual And Quarterly Results; Filing Form 12b-25 With The Securities And Exchange Commission
PASADENA, Calif., April 2, 2013 /PRNewswire/ -- Western Asset Mortgage Capital Corporation (NYSE: WMC) announced today that its Board of Directors has declared a quarterly cash dividend of $0.95 per share for the first quarter of 2013. The dividend is payable on April 30, 2013 to common shareholders of record as of April 12, 2013, with an ex-dividend date of April 10, 2013.
In addition, during the process of preparing its 2012 financial statements, the Company discovered the methodology that was used to accrete interest income and to amortize the cost basis of certain of the Company's residential mortgage backed securities, which was based on a third party vendor's system, as well as the presentation with regard to certain items in its Statement of Cash Flows were not fully in accordance with generally accepted accounting principles in the United States ("GAAP"). The errors do not affect the Company's previously reported net income, shareholders' equity, total cash flow or book value. The resulting corrective measures resulted in a reclassification of a portion of the Company's previously reported net interest income to realized and unrealized gains, and a portion of operating cash flows to investing cash flows causing changes in certain line items on the Company's previously reported financial information.
As a result of the reclassification of a portion of the Company's previously reported net interest income to realized and unrealized gains, the previously reported Core Earnings of the Company, a non-GAAP measure which includes net interest income but excludes realized and unrealized gains, have been reduced from approximately $2.50 to approximately $2.32 per fully diluted share for the period from May 15, 2012 through December 31, 2012 and from approximately $1.05 to approximately $0.96 per fully diluted share for the quarter ended December 31, 2012. The corrections also caused an increase in previously reported Core Earnings from approximately $0.47 to approximately $0.53 per fully diluted share for the period from May 15 to June 30, 2012; a decrease from approximately $0.89 to approximately $0.79 per fully diluted share for the quarter ended September 30, 2012; and a decrease from approximately $1.36 to approximately $1.33 per fully diluted share for the period from May 15, 2012 to September 30, 2012.
The revised results for the fourth quarter and period from May 15, 2012 through December 31, 2012 are set forth in detail in the tables below.
The discovery of the above-described errors and the steps the Company is taking to correct them have delayed the completion of the Company's 2012 financial statements. As a result, the Company has delayed the filing of its 2012 Annual Report on Form 10-K and reported such delay by filing with the Securities and Exchange Commission ("SEC") a Form 12b-25 Notification of Late Filing, which can be found on the SEC's website and which contains additional information regarding these matters. The Company expects to complete and file its Form 10-K prior to April 15, 2013, as permitted by Rule 12b-25.
ABOUT WESTERN ASSET MORTGAGE CAPITAL CORPORATION
Western Asset Mortgage Capital Corporation is a REIT that invests primarily in Agency RMBS, which are residential mortgage-backed securities for which the principal and interest payments are guaranteed by a U.S. Government agency (such as GNMA) or a U.S. Government-sponsored entity (such as FNMA or FHLMC). The Company also invests opportunistically in its other target assets, which include residential mortgage-backed securities that are not guaranteed by a U.S. Government agency or sponsored entity, commercial mortgage-backed securities and other asset-backed securities. The Company is externally managed and advised by Western Asset Management Company, an investment advisor registered with the SEC and a wholly-owned subsidiary of Legg Mason, Inc.
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 quarterly report on Form 10-Q for the period ended September 30, 2012 filed with the 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.
| Western Asset Mortgage Capital Corporation |
||
| Balance Sheet (Unaudited) |
||
| (in thousands—except share and per share data) |
||
| December 31, 2012 |
||
| Assets: |
||
| Cash and cash equivalents |
$ |
56,292 |
| Residential mortgage-backed securities, at fair value |
5,212,581 |
|
| Accrued interest receivable |
17,361 |
|
| Due from counterparties |
54,142 |
|
| Derivative assets, at fair value |
24,344 |
|
| Other assets |
244 |
|
| Total Assets |
$ |
5,364,964 |
| Liabilities and Stockholders' Equity: |
||
| Liabilities: |
||
| Borrowings under repurchase agreements |
$ |
4,794,730 |
| Accrued interest payable |
6,561 |
|
| Derivative liability, at fair value |
4,771 |
|
| Cash overdraft payable |
5,666 |
|
| Accounts payable and accrued expenses |
988 |
|
| Underwriting and offering costs payable |
75 |
|
| Payable to related party |
1,924 |
|
| Dividend payable |
27,041 |
|
| Total Liabilities |
4,841,756 |
|
| Stockholders' Equity: |
||
| Common stock, $0.01 par value, 500,000,000 shares authorized, 24,143,944 issued and outstanding |
241 |
|
| Preferred stock, $0.01 par value, 100,000,000 shares authorized and no shares outstanding |
- |
|
| Additional paid-in capital |
505,454 |
|
| Retained earnings |
17,513 |
|
| Total Stockholders' Equity |
523,208 |
|
| Total Liabilities and Stockholders' Equity |
$ |
5,364,964 |
| Western Asset Mortgage Capital Corporation |
||||||
| Statement of Operations (Unaudited) |
||||||
| (in thousands—except share and per share data) |
||||||
| For the Three Months Ended December 31, 2012 |
For the period |
|||||
| Net Interest Income: |
||||||
| Interest income |
$ |
33,248 |
$ |
53,318 |
||
| Interest expense |
5,434 |
8,094 |
||||
| Net Interest Income |
27,814 |
45,224 |
||||
| Other Income (Loss): |
||||||
| Interest income on cash balances |
9 |
11 |
||||
| Realized gain on sale of Residential mortgage-backed securities and other securities, net |
12,962 |
20,754 |
||||
| Other loss on Residential mortgage-backed securities |
(1,767) |
(3,206) |
||||
| Unrealized gain (loss) on Residential mortgage-backed securities and other securities, net |
(15,278) |
13,930 |
||||
| Gain (loss) on derivative instruments |
4,298 |
(13,106) |
||||
| Other Income (Loss), net |
224 |
18,383 |
||||
| Operating Expenses: |
||||||
| General and administrative (includes $156 and $367 non-cash stock based compensation, respectively) |
1,292 |
3,197 |
||||
| Management fee – related party |
1,924 |
3,133 |
||||
| Total Operating Expenses |
3,216 |
6,330 |
||||
| Net income available to Common Stock and participating securities |
$ |
24,822 |
$ |
57,277 |
||
| Earnings per Common Share – Basic |
$ |
1.04 |
$ |
3.64 |
||
| Earnings per Common Share - Diluted |
$ |
1.04 |
$ |
3.63 |
||
| Basic weighted average number of common shares outstanding |
23,843,944 |
15,715,711 |
||||
| Diluted weighted average number of common shares outstanding |
23,930,300 |
15,783,491 |
||||
| Dividends Declared per Share of Common Stock |
$ |
1.12 |
$ |
2.35 |
||
| Western Asset Mortgage Capital Corporation |
||||||
| Reconciliation of GAAP Net Income to Non-GAAP Core Earnings |
||||||
| (Unaudited) |
||||||
| (in thousands—except share and per share data) |
||||||
| For the Three Months Ended December 31, 2012 |
For the period from |
|||||
| Net Income – GAAP |
$ |
24,822 |
$ |
57,277 |
||
| Adjustments: |
||||||
| RMBS and other securities: |
||||||
| Unrealized (gain) loss on RMBS |
15,278 |
(13,929) |
||||
| Other loss on Residential mortgage-backed securities |
1,767 |
3,206 |
||||
| Realized gain on sale of RMBS, net |
(12,962) |
(20,754) |
||||
| Derivative Instruments: |
||||||
| Realized loss on termination of interest rate swaps |
10,932 |
10,928 |
||||
| Mark-to- market adjustments on interest rate swaps |
(20,768) |
(7,649) |
||||
| Mark-to- market adjustments on interest rate swaptions |
2,882 |
3,180 |
||||
| Mark-to- market adjustments on TBAs |
(1,837) |
(1,837) |
||||
| Mark-to-market adjustments on derivative instruments |
4,705 |
9,913 |
||||
| Basis amortization on Agency Interest-Only Strips – accounted for as derivatives |
(2,839) |
(4,849) |
||||
| Realized loss on Agency Interest-Only Strips – accounted for as derivatives |
820 |
820 |
||||
| Non-cash stock-based compensation expense |
156 |
367 |
||||
| Total adjustments |
(1,866) |
(20,604) |
||||
| Core Earnings – Non-GAAP Financial Measure |
$ |
22,956 |
$ |
36,673 |
||
| Basic Core Earnings per Share of Common Stock and Participating Securities - Non-GAAP Financial Measure |
$ |
0.96 |
$ |
2.33 |
||
| Diluted Core Earnings per Share of Common Stock and Participating Securities - Non-GAAP Financial Measure |
$ |
0.96 |
$ |
2.32 |
||
| Basic weighted average common shares and participating securities |
23,843,944 |
15,718,711 |
||||
| Diluted weighted average common shares and participating securities |
23,930,300 |
15,783,491 |
||||
| Reconciliation of Interest Income |
||||||
| (Unaudited, in thousands) |
||||||
| For the Three Months Ended December 31, 2012 |
For the period from |
|||||
| Coupon Interest |
$ |
50,644 |
$ |
80,103 |
||
| Discount accretion and (premium amortization), net |
(17,396) |
(26,785) |
||||
| Interest Income |
33,248 |
53,318 |
||||
| Contractual Interest income, net of amortization of premiums or discounts, net, on Agency Interest-Only Strips, classified as derivatives(1): |
||||||
| Coupon Interest |
4,998 |
8,570 |
||||
| Discount accretion and (premium amortization), net |
(2,837) |
(4,849) |
||||
| Subtotal |
2,161 |
3,721 |
||||
| Total interest income, including interest income on Agency Interest-Only Strips, classified as derivatives - Non-GAAP Financial Measure |
$ |
35,409 |
$ |
57,039 |
||
| (1) Reported in Loss on derivative instruments in the Statement of Operations. |
||||||
SOURCE Western Asset Mortgage Capital Corporation
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