Western Asset Mortgage Capital Corporation

Good day, everyone, and welcome to the Western Asset Mortgage Capital Corporation's fourth quarter and year-end 2020 earnings conference call. Today's call is being recorded and will be available for replay beginning at 5 p.m. Eastern Standard Time. At this time, all participants have been placed in a listen-only mode. The floor will be open for questions following today's presentation. Now, first, I'd like to turn the conference call over to Mr. Larry Clark, Investor Relations. Please go ahead, Mr. Clark.

Thank you, Jamie. I want to thank everyone for joining us today to discuss Western Asset Mortgage Capital Corporation's financial results for the fourth quarter of 2020. The company issued its earnings press release yesterday afternoon, and it's available in the Investor Relations section of the company's website at www.westernassetmcc.com. In addition, the company has included a slide presentation on the website that you can refer to during the call. With us today for management are Jennifer Murphy, Chief Executive Officer, Lisa Meyer, Chief Financial Officer, and Greg Handler and Sean Johnson, both Interim Co-Chief Investment Officers. Before I begin, I'd like to review the Safe Harbor Statement. This conference call will contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act. Actual outcomes and results could differ materially from those forecasts due to the impact of many factors beyond the control of the company. All forelooking statements included in this presentation are made only as of the date of this presentation and are subject to change without notice. Certain factors that could cause actual results to differ materially from those contained in the forelooking statements are included in the risk factor section of the company's reports filed with the SEC. Copies are available on the SEC's website. We disclaim any obligation to update our forelooking statements unless required by law. With that, I'll now turn the call over to Jennifer Murphy. Jennifer?

Thanks, Larry, and thank you all for joining us today. WMC finished 2020 with positive momentum, delivering a fourth-quarter economic return on book value of 4.7%, sequentially improved core earnings, and a dividend increase to $0.06 per share. We continue to focus on strengthening our balance sheet, lowering recourse leverage, reducing our exposure to mark-to-market funding, and and improving the earnings power of our portfolio. We took important actions on these in the fourth quarter, including extending some of our longer term financing at attractive levels and repurchasing $25 million of our outstanding convertible senior notes at an average discount of 13% to par value. We recorded gap net income of 10.8 million or 18 cents per share. Core earnings improved from 10 cents per share in the third quarter just 12 cents per share during the fourth quarter, reflecting lower operating expenses, partially offset by slightly lower portfolio leverage and a lower net interest margin. Our gap value per share increased 3.2% during the quarter to $4.20 per share, and has increased by 33% since June 30th, 2020, its lowest reported level after the onset of the pandemic. We believe we're well-positioned to benefit from what we anticipate will be the continued recovery of asset values, and improved earnings sustainability of our portfolio. In December, we announced that our board of directors has appointed Sean Johnson and Greg Tambler to serve as interim co-chief investment officers. You all know Sean, as he's been an integral part of the company's investment team and strategy since our initial public offering in 2012, and most recently served as deputy chief investment officer Sean has 31 years of investment experience and has a critical role at WMC and at Western Asset. Greg is the interim head of the mortgage and consumer credit team at Western. He's been investing in the mortgage sector for more than 18 years and is also a member of Western Asset's U.S. Broad Strategy Committee. We're pleased to welcome Greg and Sean to their expanded roles at the company. In addition, we've launched a comprehensive search for an experienced commercial real estate debt professional to fill out the leadership team. We'll continue to pursue our investment strategy to position the company in the most attractive sectors of the mortgage market by drawing on the breadth and depth of Western Assets Mortgage and Consumer Credit Team. We remain focused on 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. I'll now turn the call over to Sean and Greg to discuss the portfolio and investment outlook. Sean?