PASADENA, Calif., March 5, 2018 /PRNewswire/ -- 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, 2017.

Fourth Quarter 2017 Highlights

  • December 31, 2017 book value per share of $11.15, net of fourth quarter common dividend of $0.31 per share declared on December 21, 2017.
  • GAAP net income of $21.4 million, or $0.51 per basic and diluted share.
  • Core earnings plus drop income of $13.0 million, or $0.31 per basic and diluted share.1,2
  • Economic return on book value was 5.3%1,3 for the quarter.
  • 1.79% annualized net interest margin on our investment portfolio. 1,4
  • Issued $115.0 million aggregate principal amount of 6.75% convertible senior unsecured notes, which included the underwriter's $15.0 million over-allotment.
  • 7.2x leverage as of December 31, 2017 (7.5x leverage when adjusted for net TBA positions).
  • Acquired $254.0 million in target assets, including $195.5 million credit sensitive assets.
  • Repurchased 125,722 common shares at an average price of $9.80 per share.

Full Year 2017 Highlights

  • Full year book value per common share increased by $0.88 per share to $11.15, net of annual dividends.
  • Maintained a consistent $0.31 per share quarterly common dividend throughout 2017 for total annual common dividends of $1.24 per share.
  • GAAP net income of $85.1 million, or $2.03 per basic and diluted share.
  • Core earnings plus drop income of $50.2 million, or $1.20 per basic and diluted share.1,2
  • Economic return on book value was 20.6%1,3 for the year.
  • 2.06% annualized net interest margin. 1,4
  • Repositioned our investment portfolio:
    • Acquired $1.8 billion in Agency CMBS and $402.7 million credit sensitive assets.
    • Reduced Agency RMBS exposure by $622.5 million and legacy Non-Agency exposure by $246.0 million.
  • Restructured our hedge positions, reducing our swap related interest expense by 48.3% year-over year.
  • Recorded total expenses of $17.8 million, a year-over-year decrease of $3.5 million or 16.3%.

1

Non – GAAP measure.

2

Drop income is income derived from the use of 'to-be-announced' forward contract ("TBA") dollar roll transactions which is a component of our gain (loss) on derivative instruments on our consolidated statement of operations, but is not included in core earnings. Drop income was approximately $181 thousand and $1.9 million for the three months and the year ended December 31, 2017, respectively.

3

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.

4

Includes interest-only securities accounted for as derivatives, total return swap and the cost of interest rate swaps.

MANAGEMENT COMMENTARY

"As we look back on 2017, we delivered an exceptional fourth quarter and full year, generating an economic return on book value of 5.3% for the fourth quarter and 20.6% for the year, driven by strong consistent quarterly earnings and an increase in our book value of 8.6% for the year," said Jennifer Murphy, Chief Executive Officer of the Company. "We are continuing to reap the benefits of our repositioned and diversified portfolio and our focus on achieving operational efficiencies. Our ability to draw upon the deep investment experience and team at Western Asset Management Company, our Manager, as well as the breadth of its global investment, risk management, and operational infrastructure continued to enable us to deliver on our primary goal of providing our shareholders with an attractive dividend that is supported by sustainable core earnings, as well as the potential for appreciation in the value of our portfolio. In 2018, we will continue to focus on the objectives of maintaining strong core earnings while preserving our book value through portfolio diversification and risk management, with the overriding goal of providing our shareholders with an attractive risk-adjusted total economic return."

Anup Agarwal, Chief Investment Officer of the Company, commented, "Our strong performance, for 2017, was driven by contributions across our holdings and reflects the benefit of our strategy of investing in a diversified portfolio in a number of subsectors of the mortgage market. In late 2016 and throughout 2017,  we implemented the repositioning of our portfolio with the primary objective of reducing our exposure to Agency RMBS and redeploying our capital into sectors that we believed provided more attractive risk-adjusted returns, which included Agency CMBS and credit sensitive investments, such as residential whole and bridge loans, re-performing loans that are packaged in well-structured securitization and commercial mezzanine loans, including junior tranches of Non-Agency CMBS. In 2018, under current market conditions we expect to look to add more credit sensitive investments, while continuing to reduce our Agency RMBS exposure.  Our strategy paid off in 2017 and although of course there are no guarantees we believe that it will do so in 2018 as well, despite the recent volatility seen in the broader fixed income markets. We believe that investing in a diversified portfolio across a number of sub-sectors of the mortgage market is appropriate in this environment, and in our opinion, positions us well to continue generating attractive risk-adjusted returns for our shareholders."

2017 Quarterly Results

The below table reflects a summary of our operating results (dollars in thousands, except per share data):


For the Three Months Ended

GAAP Results

December 31, 2017


September 30, 2017


June 30, 2017


March 31, 2017









Net Interest Income

$

18,012



$

18,565



$

19,648



$

19,693


Other Income (Loss):








Realized gain (loss) on sale of investments, net

(2)



1,830



(2,488)



21,258


Other than temporary impairment

(2,972)



(7,225)



(6,579)



(6,097)


Unrealized gain (loss), net

(6,730)



5,249



35,017



(5,140)


Gain (loss) on derivative instruments, net

19,327



7,217



(18,555)



(4,697)


Other, net

190



216



222



403


Other Income (loss)

9,813



7,287



7,617



5,727


Total Expenses

4,206



4,240



4,466



4,866


Income (loss) before income taxes

23,619



21,612



22,799



20,554


Income tax provision (benefit)

2,215



(1,155)



2,115



312


Net income (loss)

$

21,404



$

22,767



$

20,684



$

20,242










Net income (loss) per Common Share – Basic/Diluted

$

0.51



$

0.54



$

0.49



$

0.48


Non-GAAP Results








Core earnings plus drop income(1)

$

12,998



$

13,511



$

13,290



$

10,281


Core earnings plus drop income per Common Share – Basic/Diluted

$

0.31



$

0.32



$

0.32



$

0.25


Weighted average yield(2)

3.82

%


4.00

%


4.13

%


4.39

%

Effective cost of funds(3)

2.22

%


1.99

%


2.17

%


2.81

%

Annualized net interest margin(2)(3)

1.79

%


2.21

%


2.25

%


2.01

%

Annualized CPR on Agency RMBS

10.0

%


11.2

%


9.9

%


10.5

%



(1)

For a reconciliation of GAAP Income to Core earnings, please refer to the Reconciliation of Core earnings at the end of this press release.

(2)

Includes interest-only securities accounted for as derivatives, foreign currency swaps and total return swaps.

(3)

Includes the net amount paid, including accrued amounts for interest rate swaps and premium amortization for MAC interest rate swaps during the periods.

Portfolio Composition

As of December 31, 2017, the Company owned an aggregate investment portfolio totaling $3.7 billion. The following tables sets forth additional information regarding the Company's investment portfolio as of December 31, 2017:

Portfolio Characteristics

Agency Portfolio

The following table summarizes certain characteristics of our Agency portfolio by issuer and investment category as of December 31, 2017 (dollars in thousands): 


Principal Balance


Amortized Cost


Fair Value


Net Weighted
Average Coupon

Agency RMBS:








20-Year mortgage

$

50,825



$

53,203



$

53,783



4.0

%

30-Year mortgage

224,041



239,751



241,642



4.4

%

40-Year mortgage

366,178



376,966



376,752



3.5

%

Agency RMBS Interest-Only Strips

N/A



14,750



15,437



2.9

%

Agency RMBS Interest-Only Strips, accounted for as derivatives

N/A



N/A



10,419



2.9

%

Total Agency RMBS

641,044



684,670



698,033



3.6

%













Agency CMBS

2,145,139



2,147,281



2,154,800



2.9

%

Agency CMBS Interest-Only Strips

N/A



—



10



3.2

%

Agency CMBS Interest-Only Strips, accounted for as derivatives

N/A



N/A



5,757



0.5

%

Total Agency CMBS

2,145,139



2,147,281



2,160,567



2.7

%

Total

$

2,786,183



$

2,831,951



$

2,858,600



3.0

%

Credit Sensitive Portfolio

The following table summarizes certain characteristics of our credit sensitive portfolio by investment category as of December 31, 2017 (dollars in thousands): 


Principal Balance


Amortized Cost


Fair Value


 Weighted
Average Coupon(1)

Non-Agency RMBS

$

119,748



$

85,520



$

90,832



3.8

%

Non-Agency RMBS IOs and IIOs

N/A



8,738



8,722



0.9

%

Non-Agency CMBS

379,183



292,034



278,604



4.8

%

Residential Whole Loans

232,270



233,101



237,423



4.5

%

Residential Bridge Loans

105,868



106,114



107,407



8.6

%

Securitized Commercial Loan

24,846



24,846



24,876



9.0

%

Other Securities

86,305



110,091



122,065



7.8

%


$

948,220



$

860,444



$

869,929



4.4

%

Portfolio Financing and Hedging

Financing

Repurchase Agreements

As of December 31, 2017, the Company had $3.3 billion of borrowings under master repurchase agreements with 16 of its 28 approved counterparties, bearing fixed interest rates with maturities of six months or less. The following table sets forth additional information regarding the Company's portfolio financing under the master repurchase agreements as of December 31, 2017 (dollars in thousands):

Repurchase Agreements


Balance


Weighted Average
Interest Rate (end
of period)


Weighted Average
Remaining
Maturity (days)

Agency RMBS


$

665,919



1.62

%


61

Agency CMBS


2,035,222



1.53

%


53

Non-Agency RMBS


46,530



2.76

%


41

Non-Agency CMBS


154,325



2.98

%


40

Whole-Loans and securitized commercial loan


189,270



3.66

%


8

Residential Bridge Loans


100,183



4.05

%


59

Other Securities


60,237



2.94

%


23

Total


$

3,251,686



1.86

%


51

Convertible Senior Unsecured Notes

In October 2017, the Company issued $115.0 million aggregate principal amount of 6.75% convertible senior unsecured notes, which included the underwriter's $15.0 million over-allotment for net proceeds of $111.1 million. The notes mature on October 1, 2022, unless earlier converted, redeemed or repurchased by the holders pursuant to their terms, and are not redeemable by the Company except during the final three months prior to maturity. The notes are convertible into, at the Company's election, cash, shares of the Company's common stock or a combination of both, subject to the satisfaction of certain conditions and during specified periods. The Company believes that this financing is an attractive source of longer term capital, which was more cost efficient than issuing straight equity.

Hedging

As of December 31, 2017, the Company had $1.7 billion notional value of pay-fixed interest rate swaps, excluding forward starting swaps of $1.5 billion (approximately 4 months forward), which have variable maturities between June 14, 2019 and April 27, 2037.

The following tables summarize the average pay rate and average maturity for the Company's interest rate swaps as of December 31, 2017:

Fixed Pay Rate Swap Transactions









(dollars in thousands)









Remaining Term to Maturity


Notional Value


Average
Fixed Pay
Rate


Average
Floating Receive
Rate


Average
Maturity
(Years)

Greater than 1 year and less than 3 years


600,000



1.6

%


1.5

%


1.8

Greater than 3 years and less than 5 years


960,000



2.0

%


1.4

%


4.3

Greater than 5 years


1,692,200



2.5

%


1.4

%


10.5

Total


$

3,252,200



2.2

%


1.4

%


7.1

Dividend

On December 21, 2017, the Company declared a regular cash dividend of $0.31 per share for each common share. Since its inception in May 2012, the Company has declared and paid total dividends of $15.30 per share in a combination of cash and stock.

Conference Call

The Company will host a conference call with a live webcast tomorrow, March 6th, at 11:00 a.m. Eastern Time/8:00 a.m. Pacific Time, to discuss financial results for the fourth quarter and year ended December 31, 2017.

Individuals interested in participating in 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 interested in listening to the conference call live via the Internet may do so by visiting the Investor Relations section of the Company's website at www.westernassetmcc.com.

The Company is enabling investors to pre-register for the earnings conference call so that they can expedite their entry into the call and avoid the need to wait for a live operator. In order to pre-register for the call, investors can visit http://dpregister.com/10116949 and enter in their contact information. Investors will then be issued a personalized phone number and pin to dial into the live conference call. Individuals can pre-register any time prior to the start of the conference call tomorrow.

A telephone replay will be available through March 20, 2018 by dialing (877) 344-7529 from the United States, or (412) 317-0088 from outside the United States, and entering conference ID 10116949.  A webcast replay will be available for 90 days.

About Western Asset Mortgage Capital Corporation

Western Asset Mortgage Capital Corporation is a real estate investment trust that invests in, acquires and manages a diverse portfolio assets consisting of Agency CMBS, Agency RMBS, Non-Agency RMBS, Non-Agency CMBS, ABS, GSE Risk Transfer Securities and Residential Whole and Bridge Loans. The Company's investment strategy may change, subject to the Company's stated investment guidelines, and is based on its manager Western Asset Management Company's perspective of which mix of portfolio assets it believes provide the Company with the best risk-reward opportunities at any given time. The Company is externally managed and advised by Western Asset Management Company, an investment advisor registered with the Securities and Exchange Commission and a wholly-owned subsidiary of Legg Mason, Inc. Please visit the Company's website at www.westernassetmcc.com

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; and  legislative and regulatory changes that could adversely affect the business of the Company. The Company undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law.

Use of Non-GAAP Financial Information

In addition to the results presented in accordance with GAAP, this release includes certain non-GAAP financial information, including core earnings, core earnings per share, drop income and drop income per share and certain financial metrics derived from non-GAAP information, such as weighted average yield, including IO securities; weighted average effective cost of financing, including swaps; weighted average net interest spread, including IO securities and swaps, which constitute non-GAAP financial measures within the meaning of Regulation G promulgated by the SEC. We believe that these measures presented in this release, when considered together with GAAP financial measures, provide information that is useful to investors in understanding our borrowing costs and net interest income, as viewed by us.  An analysis of any non-GAAP financial measure should be made in conjunction with results presented in accordance with GAAP.

-Financial Tables to Follow-

Western Asset Mortgage Capital Corporation and Subsidiaries

Consolidated Balance Sheets

(in thousands—except share and per share data)




(Unaudited)








December 31, 2017


December 31, 2016

Assets:





Cash and cash equivalents


$

48,024



$

46,172


Agency mortgage-backed securities, at fair value ($2,833,595 and $1,526,584 pledged as collateral, at fair value, respectively)


2,858,600



1,841,594


Non-Agency mortgage-backed securities, at fair value ($266,189 and $667,084 pledged as collateral, at fair value, respectively)


378,158



667,161


Other securities, at fair value ($89,823 and $67,762 pledged as collateral, at fair value, respectively)


122,065



67,762


Residential Whole-Loans, at fair value ($237,423 and $192,136 pledged as collateral, at fair value, respectively)


237,423



192,136


Residential Bridge Loans ($64,526 and $0 at fair value and $106,673 and $0 pledged as collateral, respectively)


106,673



—


Securitized commercial loan, at fair value


24,876



24,225


Investment related receivable


7,665



33,600


Accrued interest receivable


13,603



18,812


Due from counterparties


86,930



243,585


Derivative assets, at fair value


728



20,571


Other assets


2,161



398


Total Assets (1)


$

3,886,906



$

3,156,016


Liabilities and Stockholders' Equity:





Liabilities:





Borrowings under repurchase agreements, net


$

3,251,686



$

2,155,644


Convertible senior unsecured notes, net


108,743



—


Securitized debt, at fair value


10,945



10,659


Accrued interest payable


8,322



16,041


Investment related payables


17,217



341,458


Due to counterparties


1,490



740


Derivative liability, at fair value


4,346



182,158


Accounts payable and accrued expenses


3,118



3,255


Payable to affiliate


2,041



2,584


Dividend payable


12,960



12,995


Total Liabilities (2)


3,420,868



2,725,534


Commitments and contingencies





Stockholders' Equity:





Common stock, $0.01 par value, 500,000,000 shares authorized,  and 41,794,079 and 41,919,801 outstanding, respectively


419



419


Preferred stock, $0.01 par value, 100,000,000 shares authorized and no shares outstanding


—



—


Treasury stock, at cost 125,722 and 0 shares held, respectively


(1,232)



—


Additional paid-in capital


768,763



765,042


Retained earnings (accumulated deficit)


(301,912)



(334,979)


Total Stockholders' Equity


466,038



430,482


Total Liabilities and Stockholders' Equity


$

3,886,906



$

3,156,016


 

Western Asset Mortgage Capital Corporation and Subsidiaries

Consolidated Balance Sheets (Continued)

(in thousands—except share and per share data)




(Unaudited)





December 31, 2017


December 31, 2016

(1) Assets of consolidated VIEs included in the total assets above:





Residential Whole-Loans, at fair value ($237,423 and $192,136 pledged as collateral, at fair value, respectively)


$

237,423



$

192,136


Residential Bridge Loans ($64,526 and $0 at fair value and $106,673 and $0 pledged as collateral, respectively)


106,673



—


Securitized commercial loan, at fair value


24,876



24,225


Investment related receivable


7,665



1,241


Accrued interest receivable


3,358



1,622


Total assets of consolidated VIEs


$

379,995



$

219,224


(2) Liabilities of consolidated VIEs included in the total liabilities above:





Securitized debt, at fair value


$

10,945



$

10,659


Accrued interest payable


70



85


Accounts payable and accrued expenses


189



2


Total liabilities of consolidated VIEs


$

11,204



$

10,746


 

Western Asset Mortgage Capital Corporation and Subsidiaries

Consolidated Statements of Operations

(in thousands—except share and per share data)

(Unaudited)



Three Months Ended(1)


The Year
Ended


December 31,
2017


September 30,
2017


June 30, 2017


March 31,
2017


December 31,
2017

Net Interest Income










Interest income

$

34,878



$

30,928



$

30,055



$

28,430



$

124,291


Interest expense

16,866



12,363



10,407



8,737



48,373


Net Interest Income

18,012



18,565



19,648



19,693



75,918


Other Income (Loss)










Realized gain (loss) on sale of investments, net

(2)



1,830



(2,488)



21,258



20,598


Other than temporary impairment

(2,972)



(7,225)



(6,579)



(6,097)



(22,873)


Unrealized gain (loss), net

(6,730)



5,249



35,017



(5,140)



28,396


Gain (loss) on derivative instruments, net

19,327



7,217



(18,555)



(4,697)



3,292


Other, net

190



216



222



403



1,031


Other Income (Loss)

9,813



7,287



7,617



5,727



30,444


Expenses










Management fee to affiliate

1,941



1,853



1,830



2,476



8,100


Other operating expenses

564



702



736



417



2,419


General and administrative expenses










Compensation expense

628



660



664



740



2,692


Professional fees

741



781



832



888



3,242


Other general and administrative expenses

332



244



404



345



1,325


Total general and administrative expenses

1,701



1,685



1,900



1,973



7,259


Total Expenses

4,206



4,240



4,466



4,866



17,778


Income (loss) before income taxes

23,619



21,612



22,799



20,554



88,584


Income tax provision (benefit)

2,215



(1,155)



2,115



312



3,487


Net income (loss)

$

21,404



$

22,767



$

20,684



$

20,242



$

85,097


Net income (loss) per Common Share – Basic

$

0.51



$

0.54



$

0.49



$

0.48



$

2.03


Net income (loss) per Common Share – Diluted

$

0.51



$

0.54



$

0.49



$

0.48



$

2.03


Dividends Declared per Share of Common Stock

$

0.31



$

0.31



$

0.31



$

0.31



$

1.24




(1)

Consolidated Statements of Operations for each of the three months ended March 31, 2017, June 30, 2017 September 30, 2017 and December 31, 2017 are unaudited.

Reconciliation of GAAP Net Income to Non-GAAP Core Earnings
(Unaudited)
(in thousands—except share and per share data)

The table below reconciles Net Income (Loss) to Core Earnings for each of the three months ended March 31, 2017, June 30, 2017, September 30, 2017 and December 31, 2017 and the year ended December 31, 2017:



Three Months Ended


The Year Ended

(dollars in thousands)


December 31,
2017


September 30,
2017


June 30,
2017


March 31,
2017


December 31,
2017

Net Income (loss) – GAAP


$

21,404



$

22,767



$

20,684



$

20,242



$

85,097


Provision for income tax


2,215



(1,155)



2,115



312



3,487


Net income (loss) before provision for income tax


23,619



21,612



22,799



20,554



88,584













Adjustments:











Investments:











Unrealized (gain) loss on investments and securitized debt


6,730



(5,249)



(35,017)



5,140



(28,396)


Other than temporary impairment


2,972



7,225



6,579



6,097



22,873


Realized (gain) loss on sale of investments


2



(1,830)



2,488



(21,258)



(20,598)


Realized (gain) loss on foreign currency transactions


—



(1)



1



1



1


Whole-Loans acquisition costs


39



—



76



31



146













Derivative Instruments:











Net realized (gain) loss on derivatives


(28,658)



(9,062)



175,512



(800)



136,992


Unrealized (gain) loss on derivatives


7,790



598



(160,002)



(851)



(152,465)













Amortization of discount on convertible senior note


137



—



—



—



137


Non-cash stock-based compensation expense


186



218



215



362



981


Total adjustments


(10,802)



(8,101)



(10,148)



(11,278)



(40,329)


Core Earnings – Non-GAAP


$

12,817



$

13,511



$

12,651



$

9,276



$

48,255


Basic Core Earnings per Share of Common Stock and Participating Securities - Non-GAAP


$

0.31



$

0.32



$

0.30



$

0.22



$

1.15


Diluted Core Earnings per Share of Common Stock and Participating Securities - Non-GAAP


$

0.31



$

0.32



$

0.30



$

0.22



$

1.15


Basic weighted average common shares and participating securities


41,938,559



41,992,381



41,979,854



41,973,170



41,971,117


Diluted weighted average common shares and participating securities


41,938,559



41,992,381



41,979,854



41,973,170



41,971,117


Reconciliation of Interest Income and Effective Cost of Funds
(Unaudited, in thousands)

The following table reconciles total interest income to interest income including interest income on Agency and Non-Agency Interest-Only Strips classified as derivatives (Non-GAAP financial measure) for the each of the three months ended March 31, 2017, June 30, 2017, September 30, 2017 and December 31, 2017 and the year ended December 31, 2017:



Three Months Ended


The Year
Ended

(dollars in thousands)


December 31,
2017


September 30,
2017


June 30, 2017


March 31, 2017


December 31,
2017

Coupon interest income


$

36,544



$

31,223



$

30,270



$

29,915



$

127,952


Premium amortization, discount accretion and amortization of basis, net


(1,666)



(295)



(215)



(1,485)



(3,661)


Interest income


$

34,878



$

30,928



$

30,055



$

28,430



$

124,291


Contractual interest income, net of amortization of basis on Agency and Non-Agency Interest-Only Strips, classified as derivatives(1):











Coupon interest income


1,209



1,816



2,372



2,041



7,438


Amortization of basis (Non-GAAP Financial Measure)


(940)



(1,486)



(2,004)



(1,565)



(5,995)


Contractual interest income, net on Foreign currency swaps(1)


—



—



—



—



—


Contractual interest income, net on Total return swaps(1)


—



95



143



231



469


Subtotal


269



425



511



707



1,912


Total interest income, including interest income on Agency and Non-Agency Interest-Only Strips, classified as derivatives and other derivative instruments - Non-GAAP Financial Measure


$

35,147



$

31,353



$

30,566



$

29,137



$

126,203




(1)

Reported in gain (loss) on derivative instruments in the Consolidated Statement of Operations.

The following table reconciles the Effective Cost of Funds (Non-GAAP financial measure) with interest expense for each of the three months ended March 31, 2017, June 30, 2017, September 30, 2017 and December 31, 2017:



Three Months Ended



December 31, 2017


September 30, 2017


June 30, 2017


March 31, 2017

(dollars in thousands)


Interest


Effective

Borrowing

Costs


Interest


Effective
Borrowing
Costs


Interest


Effective
Borrowing
Costs


Interest


Effective
Borrowing
Costs

Interest expense


$

16,866



2.01

%


$

12,363



1.75

%


$

10,407



1.62

%


$

8,737



1.55

%

Net interest paid - interest rate swaps


1,798



0.21

%


1,672



0.24

%


3,556



0.55

%


7,056



1.26

%

Effective Borrowing Costs


$

18,664



2.22

%


$

14,035



1.99

%


$

13,963



2.17

%


$

15,793



2.81

%

Weighted average borrowings


$

3,334,251





$

2,797,062





$

2,582,946





$

2,280,026




The following table reconciles the Effective Cost of Funds (Non-GAAP financial measure) with interest expense for the years ended December 31, 2017 and 2016:



The Year Ended




December 31, 2017


December 31, 2016


 (dollars in thousands)


Interest


Effective
Borrowing
Costs


Interest


Effective
Borrowing
Costs


Interest expense


$

48,373



1.76

%


$

32,430



1.30

%


Net interest paid - interest rate swaps


14,082



0.51

%


27,231



1.10

%


Effective Borrowing Costs


$

62,455



2.27

%


$

59,661



2.40

%


Weighted average borrowings


$

2,832,926





$

2,486,490





 

Cision View original content:http://www.prnewswire.com/news-releases/western-asset-mortgage-capital-corporation-announces-fourth-quarter-and-full-year-2017-results-300608464.html

SOURCE Western Asset Mortgage Capital Corporation