8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

March 5, 2018

Western Asset Mortgage Capital Corporation

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE

(STATE OF INCORPORATION)

001-35543	27-0298092
(COMMISSION FILE NUMBER)	(IRS EMPLOYER ID. NUMBER)

385 East Colorado Boulevard	91101
Pasadena, California	(ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(626) 844-9400

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o

Item 2.02.Results of Operations and Financial Condition

On March 5, 2018, Western Asset Mortgage Capital Corporation (the “Company”) issued a press release announcing its financial results for the fiscal quarter and year ended December 31, 2017. The text of the press release is furnished as exhibit 99.1 to this Form 8-K.

Item 7.01Regulation FD Disclosure

On March 6, 2018, the Company will be holding its quarterly conference call in which it will discuss its financial results.  The presentation for such call is furnished herewith as Exhibit 99.2 to this Form 8-K.

Pursuant to the rules and regulations of the Securities and Exchange Commission, Exhibits 99.1 and 99.2 and the information set forth therein and herein are being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall they be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01.Financial Statements and Exhibits

(d)  Exhibits

Exhibit No.	Description
99.1	Press Release, dated March 5, 2018, issued by Western Asset Mortgage Capital Corporation
99.2	Investor Presentation, dated  March 5, 2018, issued by Western Asset Mortgage Capital Corporation

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

WESTERN ASSET MORTGAGE CAPITAL CORPORATION
By:	/s/ Adam C. E. Wright
	Name:	Adam C. E. Wright
	Title:	Assistant Secretary

Date:  March 5, 2018

EX-99.1

Exhibit 99.1

WESTERN ASSET MORTGAGE CAPITAL CORPORATION

ANNOUNCES FOURTH QUARTER AND FULL YEAR 2017 RESULTS

Conference Call and Webcast Scheduled for Tomorrow, Tuesday, March 6, 2018 at

11:00 a.m. Eastern Time/8:00 a.m. Pacific Time

Pasadena, CA, March 5, 2018 – 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.

1

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."

2

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.

3

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 mortage	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	%

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 believe 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:

5

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 6^th, 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

6

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.

7

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.

###

Investor Relations Contact:	Media Contact:
Larry Clark	Tricia Ross
Financial Profiles, Inc.	Financial Profiles, Inc.
(310) 622-8223	(310) 622-8226
lclark@finprofiles.com	tross@finprofiles.com

-Financial Tables to Follow-

8

Western Asset Mortgage Capital Corporation and Subsidiaries

Consolidated Balance Sheets

(in thousands—except share and per share data)

	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

9

Western Asset Mortgage Capital Corporation and Subsidiaries

Consolidated Balance Sheets (Continued)

(in thousands—except share and per share data)

	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

10

Western Asset Mortgage Capital Corporation and Subsidiaries

Consolidated Statements of Operations

(in thousands—except share and per share data)

	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.

11

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

12

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

13

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

14

EX-99.2

Fourth Quarter 2017 Investor Presentation March 6, 2017

We make forward-looking statements in this presentation that are subject to risks and uncertainties.  These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives.  When we use the words "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may" or similar expressions, we intend to identify forward-looking statements.  Statements regarding the following subjects, among others, may be forward- looking: our business and investment strategy; our projected operating results; our ability to obtain financing arrangements; financing and advance rates for MBS and our potential target assets; our expected leverage; general volatility of the securities markets in which we invest and the market price of our common stock; our expected investments; interest rate mismatches between MBS and our potential target assets and our borrowings used to fund such investments; changes in interest rates and the market value of MBS and our potential target assets; changes in prepayment rates on Agency MBS and Non-Agency MBS; effects of hedging instruments on MBS and our potential target assets; rates of default or decreased recovery rates on our potential target assets; the degree to which any hedging strategies may or may not protect us from interest rate volatility; impact of and changes in governmental regulations, tax law and rates, accounting guidance and similar matters; our ability to maintain our qualification as a REIT; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended; availability of investment opportunities in mortgage-related, real estate-related and other securities; availability of qualified personnel; estimates relating to our ability to make distributions to our stockholders in the future; our understanding of our competition; and market trends in our industry, interest rates, real estate values, the debt securities markets or the general economy. The forward-looking statements in this presentation are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us.  You should not place undue reliance on these forward-looking statements. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these factors are described in our filings with the SEC under the headings "Summary," "Risk factors," "Management's discussion and analysis of financial condition and results of operations" and "Business."  If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements.  Any forward-looking statement speaks only as of the date on which it is made.  New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us.  Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This presentation is not an offer to sell securities nor a solicitation of an offer to buy securities in any jurisdiction where the offer and sale is not permitted. 1 Safe Harbor Statement

Fourth Quarter 2017 WMC Earnings Call Presenters Lisa Meyer Chief Financial Officer & Treasurer Jennifer W. Murphy Chief Executive Officer & President Anup Agarwal Chief Investment Officer 2

3 Overview of Western Asset Mortgage Capital Corporation Western Asset Mortgage Capital Corporation (“WMC”) is a public REIT that benefits from the leading fixed income management capabilities of Western Asset Management Company One of the largest U.S. fixed income asset managers with AUM of $442 billion(1) Structured Product AUM of $67.3 billion, of which $33.9 billion is invested in Agency RMBS and $33.4 billion in Non-Agency RMBS, CMBS, and ABS (1) Senior investment team members have worked together for approximately 12 years Extensive mortgage investing track record Publicly traded diversified mortgage REIT positioned to capture attractive current and long-term investment opportunities in the mortgage market Completed Initial Public Offering in May 2012 Please refer to page 17 for footnote disclosures.

4 Corporate Overview ▪ WMC is a diversified mortgage finance REIT supported by the deep investment experience of the morgage and asset backed investment and risk management teams of Western Asset Management Company ("Western Asset"), a leading global fixed income manager. ▪ Western Asset's depth and breadth of fixed income expertise, comprehensive platform, and global institutional relationships provide WMC key advantages: * Best-in-class portfolio and risk management capabilities; * Access to investment opportunities and financing relationship and terms reflective of Western Asset's global platform with over $400 billion AUM; * Operational excellence and efficiencies; and * Highest standards of financial reporting, disclosure and transparency. ▪ WMC has built a diversified portfolio of residential and commercial assets including MBS and whole loans with the objective of generating strong total returns with stable book value. ▪ WMC has paid a consistent dividend for 6 quarters, reflecting a philosophy of delivering a sustainable dividend that is not dilutive to book value.

5 Please refer to page 17 for footnote disclosures. Fourth Quarter Financial Highlights ▪ December 31, 2017 book value per share of $11.15(2), 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(4), or $0.31 per basic and diluted share. ▪ Economic return on book value was 5.3%(3) for the quarter. ▪ 1.79%(6) annualized net interest margin on our investment portfolio. ▪ 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 million in target assets, including $196 million credit sensitive assets. ▪ Repurchased 125,722 common shares at an average price of $9.80 per share.

6 Please refer to page 17 for footnote disclosures. Full Year 2017 Financial 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. ▪ Economic return on book value was 20.6% for the year. ▪ 2.06% annualized net interest margin. ▪ Repositioned our investment portfolio: • Acquired $1.8 billion in Agency CMBS and $403 million credit sensitive assets. • Reduced Agency RMBS exposure by $622 million and legacy Non-Agency exposure by $246 million. ▪ Restructured our hedge positions, reducing our swap related interest expense by 48% year- over year. ▪ Recorded total expenses of $17.8 million, a year-over-year decrease of $3.5 million or 16.3%.

Recent Performance 7 (3) (4) Please refer to page 17 for footnote disclosures. The repositioning of our portfolio that began in early 2017 enabled us to provide our shareholders with an attractive dividend that is supported by sustainable core earnings as well as appreciation in the value of our portfolio. Economic Return 6.0 4.0 2.0 0.0 Q1 2017 Q2 2017 Q3 2017 Q4 2017 4.8% 4.8% 5.2% 5.3% Book Value Per Share 12.0 10.0 8.0 6.0 4.0 2.0 0.0 3/31/17 6/30/2017 9/30/2017 12/31/2017 $10.45 $10.64 $10.88 $11.15 Dividend Per Share $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $0.00 Q1 2017 Q2 2017 Q3 2017 Q4 2017 0.31 0.31 0.31 0.31 Core Earnings Plus Drop Income Per Share $0.40 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $0.00 Q1 2017 Q2 2017 Q3 2017 Q4 2017 0.25 0.32 0.32 0.31

8 Fourth Quarter Portfolio Income Attribution(10) Please refer to page 17 for footnote disclosures. Portfolio income(5) was $27.8 million for the quarter ended December 31, 2017. For the 3 Months Ended December 31, 2017 (In millions except per share data) Agency CMBS Agency RMBS Non-Agency CMBS Non-Agency RMBS Residential Whole- Loans Residential Bridge Loans Other Securities Securitized Commercial Loan Total Interest Income $ 15.5 $ 5.4 $ 6.2 1.3 $ 2.2 $ 1.5 $ 2.6 $ 0.3 $ 35.0 Interest expense(7) (8.5) (3.2) (1.3) (0.4) (1.8) (1.0) (0.5) — (16.7) Net swap interest expense (8) (1.4) (0.3) (0.1) — — — — — (1.8) Net Interest Income 5.6 1.9 4.8 0.9 0.4 0.5 2.1 0.3 16.5 Realized gain/(loss) — — (0.3) — — — 0.3 — — Unrealized gain/ (loss) (5.6) (5.0) (1.9) (0.6) 0.7 0.6 5.2 — (6.6) Gain (loss) on derivatives (15) 16.0 3.8 1.0 0.1 — — 0.1 — 21.0 OTTI(9) — (0.4) (2.5) — — — (0.2) — (3.1) Portfolio Income $ 16.0 $ 0.3 $ 1.1 $ 0.4 $ 1.1 $ 1.1 $ 7.5 $ 0.3 $ 27.8 BV Per Share Increase (Decrease) $ 0.38 $ 0.01 $ 0.03 $ 0.01 $ 0.02 $ 0.03 $ 0.18 $ 0.01 $ 0.67 Per Share Beginning book value $ 10.88 Portfolio Income(5) 0.67 Operating expenses and G&A (0.10) Dividend (0.31) Provision for Taxes (0.05) Convertible senior notes (equity portion) 0.06 Ending book value $ 11.15

9 Full Year Portfolio Income Attribution(10) Please refer to page 17 for footnote disclosures. Portfolio income(5) was $106.4 million for the year ended December 31, 2017. For the Year Ended December 31, 2017 (In millions except per share data) Agency CMBS Agency RMBS Non-Agency CMBS Non-Agency RMBS Residential Whole- Loans Residential Bridge Loans Other Securities Securitized Commercial Loan Total Interest Income $ 40.8 $ 26.2 $ 27.5 6.2 $ 8.5 $ 4.5 $ 11.3 $ 1.3 $ 126.3 Interest expense(7) (18.1) (11.3) (6.0) (1.9) (6.0) (2.2) (1.8) (0.2) (47.4) Net swap interest expense (8) (7.1) (4.6) (1.0) (1.3) — — (0.1) — (14.1) Net Interest Income 15.6 10.3 20.5 3.0 2.5 2.3 9.4 1.1 64.7 Realized gain/(loss) — (2.5) 0.7 22.2 — — 0.1 — 20.5 Unrealized gain/ (loss) 6.4 7.2 13.5 (13.0) 0.7 0.6 14.0 0.5 29.9 Gain (loss) on derivatives (15) 7.5 4.8 1.0 1.4 — — 0.1 — 14.8 OTTI(9) (0.1) (6.3) (15.1) — — — (2.0) — (23.5) Portfolio Income $ 29.4 $ 13.5 $ 20.6 $ 13.6 $ 3.2 $ 2.9 $ 21.6 $ 1.6 $ 106.4 BV Per Share Increase (Decrease) $ 0.70 $ 0.32 $ 0.49 $ 0.32 $ 0.08 $ 0.07 $ 0.52 $ 0.04 $ 2.54 Per Share Beginning book value $ 10.27 Portfolio Income(5) 2.55 Operating expenses and G&A (0.42) Dividend (1.24) Provision for Taxes (0.07) Convertible senior notes (equity portion) 0.06 Ending book value $ 11.15

10 Portfolio Composition Total Investment Portfolio, at fair value ($ in millions) December 31, 2017 Agency RMBS $ 698 Agency CMBS 2,161 Non-Agency RMBS 99 Non-Agency CMBS 279 Residential Whole-Loans 237 Residential Bridge Loans(14) 107 Other Investments(10) 147 Total $ 3,728 Agency & Non-Agency CMBSAgency RMBS Non-Agency RMBS, Whole-loans &CRT Securities Select Sector Categories Agency RMBS Agency CMBS Non-Agency RMBS Non-Agency CMBS Residential Whole-Loans Residential Bridge Loans Other Investments 19% 58% 3%7% 6% 3%4% Non-Agency RMBS Residential Whole-loans CRT and Other Securities 19.5% 67.6% 12.9% Low Loan Balance Low Loan Balance Modified Pools MHA/HARP High LTV Other 34.6% 54.0% 6.6% 4.8% Legacy CMBS New Issue & CRE Mezzanine Agency CMBS 4.6%6.8% 88.6% (16) (10) Please refer to page 17 for footnote disclosures. (19)

Portfolio Financing ($ in millions) December 31, 2017 Repurchase Agreements Outstanding Amounts Interest Rate Remaining Days to Maturity Agency RMBS $ 665.9 1.62% 61 Agency CMBS 2,035.2 1.53% 53 Non-Agency RMBS 46.5 2.76% 41 Non-Agency CMBS 154.3 2.98% 40 Whole-Loans and Securitized Commercial Loan 189.3 3.66% 8 Residential Bridge Loans 100.2 4.05% 59 Other Securities (12) 60.3 2.94% 23 Total $ 3,251.7 1.86% 51 11 n Master repurchase agreements with 28 counterparties n Outstanding borrowings with 16 counterparties n Capacity in excess of our current needs Please refer to page 17 for footnote disclosures. Financing Summary

12 Fixed Pay Interest Rate Swaps ($ in millions – as of December 31, 2017) Maturity Notional Amount Avg. Fixed Pay Rate Avg. Floating Receive Rate Average Maturity (Years) Greater than 1 year and less than 3 years 600.0 1.6% 0.9% 1.8 Greater than 3 years and less than 5 years 960.0 2.0% 0.9% 4.3 Greater than 5 years 1,692.2 2.5% 0.9% 10.5 Total $ 3,252.2 2.2% 0.9% 7.1 Hedging Summary Please refer to page 17 for footnote disclosures. Our net fixed pay interest rate swap(13) position is $3.3 billion. (13) Our interest rate swaps are comprised of: n $1.7 billion notional value of pay-fixed interest rate swaps, and n $1.5 billion forward starting swap (approximately 4.0 months forward), which has a maturity of April 27, 2028.

n Net Duration of Agency RMBS Pools and Agency CMBS portfolio: Negative 0.27 years 13 Duration as of December 31, 2017 Agency Holdings Key Rate Duration Contribution Total 6-Months 2-Year 5-Year 10-Year 20-Year 30-Year Agency RMBS 1.11 0.04 0.13 0.25 0.38 0.25 0.06 Agency CMBS 4.31 0.01 0.04 0.79 3.36 0.11 — Swaps and Futures (5.69) 0.13 (0.91) (0.83) (3.79) (0.29) — Total (0.27) 0.18 (0.74) 0.21 (0.05) 0.07 0.06 Please refer to page 17 for footnote disclosures.

14 ▪ U.S growth and inflation may rise with fiscal stimulus. ▪ Central banks are becoming less accommodative. ▪ Spread sectors should outperform but margins are thin for some sectors. ▪ Consumer and housing fundamentals remain at historically attractive levels. ▪ We expect elevated volatility in the near-term due to U.S. policy uncertainties and global political developments. ▪ Global economies are expected continue to experience improving growth from subdued levels. 2017 Macroeconomic Outlook Base case is for steady economic growth, where spread sectors are likely to outperform.

▪ Residential Whole-loans continue to perform in-line with our expectations. * We will continue to increase our holdings of bridge residential and commercial loans as opportunities arise. ▪ Re-performing loans provide attractive risk adjusted returns from a well-functioning securitization market and we expect to continue to invest in this sector. ▪ Commercial mezzanine loan opportunities continue to offer attractive risk-reward opportunities. ▪ Agency CMBS offers more attractive relative value than Agency RMBS. ▪ Securitized prime jumbo mortgages offer attractive value as convexity is priced in. Portfolio View Credit sensitive mortgage sectors have performed relatively well and are expected to continue to offer attractive returns. We remain constructive on Agency CMBS spreads. 15

Target Investment Opportunities Residential Bridge Loans ▪ Strategic partnerships with seasoned originators. ▪ Short-term non owner occupied single or multi-unit residences. ▪ Attractive unlevered net yield of 7-8%. ▪ Average loan sizes approximately $250,000. ▪ Target loan to value of 85% based on as is appraised value. Agency CMBS Single asset single borrower commercial loans ▪ Invest in deals where our manager drives deal structure and covenants ▪ Attractive yields of Libor plus 600-800 bps ▪ Target floating rate assets and short term deals Reperforming Loans ▪ Mortgages that were previously delinquent, but are now “re-performing” because payments on the mortgages have become current with or without the use of a loan modification ▪ See significant loan sales coming from Fannie Mae and Freddie Mac, as well as legacy holders ▪ Target loans with improved updated loan-to-value ratios, significant repayment history, and strong updated credit scores Commercial Real Estate Mezzanine ▪ Multifamily residential loans guaranteed by Fannie Mae and Freddie Mac ▪ Outstanding balance of more than $400 billion with annual issuance in excess of $40 billion. ▪ Prepayment protection in the form of defeasance, yield maintenance or points. ▪ Interest only securities receive the prepayment penalties. ▪ Principal bearing bonds have soft bullet and tight window for principal payment. 16

17 (1) As of December 31, 2017 (2) Reflects the $0.31 dividend declared on December 21, 2017 and paid on January 26, 2018. (3) Economic return, for any period, is calculated by taking the sum of (i) the total dividends declared and (ii) the change in net book value during the period and dividing by the beginning book value. (4) Core earnings is a non-GAAP measures which includes the cost of interest rate swaps, interest income on IOs and IIOs classified as derivatives, net interest income on foreign currency swaps and total return swaps. 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 $0.2 million for the three months ended December 31, 2017. (5) Non-GAAP measure which includes net interest margin (as defined in footnote 6), realized and unrealized gains or losses in the portfolio and other than temporary impairment. (6) Non-GAAP measures which include interest income, interest expense, the cost of interest rate swaps and interest income on IOs and IIOs classified as derivatives, foreign currency swaps and total return swap, and are weighted averages for the quarter ended December 31, 2017. (7) Convertible senior notes interest expense has been allocated based on deployment of proceeds during the quarter ended December 31, 2017. (8) Net interest rate swaps interest expense have been allocated based on average duration contribution. (9) Includes other than temporary impairment on IO's and IIO's accounted for as derivatives. (10) Other investments include ABS, GSE Credit Risk Transfer securities and a securitized commercial loan. (11) Portfolio income attribution uses total income defined as the sum of net interest income, realized gain, unrealized gain and other than temporary impairment. (12) Other securities includes ABS and GSE Credit Risk Transfer securities. (13) While we use hedging strategies as part of our overall portfolio management, these strategies are not designed to eliminate all risks in the portfolio. There can be no assurance as to the level or effectiveness of these strategies. (14) The bridge loans are carried at amortized costs as of the quarters ended March 31, 2017, June 30, 2017 and Septembers 30, 2017 since we did not elect the fair value option for these loans. For the bridge loans acquired subsequent to October, 25, 2017, we elected the fair value option to be consistent with the accounting of other investments. Accordingly, the carrying amount of the bridge loans as of December 31, 2017 includes $64.5 million of residential bridge loans carried at fair value and $42.1 million of residential bridge loans carried at amortized costs. (15) Gain (loss) on derivative instruments, net (excluding cost of hedging) has been allocated based average duration contribution. (16) Other includes low WALA and investor loans. (17) Non-GAAP measures which include interest expense, the cost of interest rate swaps, foreign currency swaps, and are weighted averages for the quarter ended December 31, 2017. (18) Non-GAAP measures consisting of interest income on the investment portfolio, including IOs and IOs classified as derivatives and are weighted average for the quarter ended December 31, 2017. (19) Lower loan balance pools generally consist of loans below $150,000. Footnotes

Appendix

19 Book Value Roll Forward Please refer to page 17 for footnote disclosures. Book value increased by 2.5% and 8.6% during the fourth quarter and twelve month- ended 2017, respectively. Q4 2017 FY 2017 Amounts ($ in millions) Per Share Amounts ($ in millions) Per Share Beginning Book Value $ 456.0 $ 10.88 $ 430.5 $ 10.27 Convertible senior notes (equity portion) 2.7 0.06 2.7 0.06 Repurchase of common stock (1.2) N/A (1.2) N/A Common Dividend (13.0) (0.31) (51.9) (1.24) 444.5 10.63 380.1 9.09 Portfolio Income Net Interest Margin 16.7 0.40 64.8 1.55 Net realized gain (loss) on investments and derivatives 28.6 0.69 (116.4) (2.79) Net unrealized gain (loss) on investments and derivatives (14.5) (0.35) 181.5 4.34 Other than temporary impairment (3.0) (0.07) (23.5) (0.56) Net Portfolio Income 27.8 0.67 106.4 2.54 Operating expense (2.5) (0.06) (10.5) (0.25) General and administrative (excludes stock- based compensation) (1.6) (0.04) (6.5) (0.15) Income tax benefit (provision) (2.2) (0.05) (3.5) (0.08) Book Value at December 31, 2017 $ 466.0 $ 11.15 $ 466.0 $ 11.15

20 Agency Portfolio ($ in millions) Principal Balance Amortized Costs Fair Value Net WeightedAverage Coupon Agency CMBS $ 2,145.1 $ 2,147.3 $ 2,154.8 2.9% Agency CMBS IOs and IIOs N/A — 5.8 0.5% Agency RMBS 20-Year, 30-Year and 40-Year 641.0 669.9 672.2 3.9% Agency RMBS IOs and IIOs N/A 14.8 25.9 2.9% Total $ 2,786.2 $ 2,832.0 $ 2,858.6 3.0% Portfolio Composition as of December 31, 2017 Agency CMBS 75.3% Agency RMBS 40-Year mortgage 13.2% Agency RMBS 30-Year mortgage 8.5% Agency RMBS 20-Year mortgage 1.9% Agency RMBS IO & IIO 0.9% Agency CMBS IO & IIO 0.2%

21 Credit Sensitive Portfolio ($ in millions) Principal Balance Amortized Costs Fair Value Net WeightedAverage Coupon Non-Agency RMBS $ 119.7 $ 85.5 $ 90.8 3.8% Non-Agency RMBS IOs and IIOs N/A 8.7 8.7 0.9% Non-Agency CMBS 379.2 292.0 278.6 4.8% Residential Whole Loans 232.3 233.1 237.4 4.5% Residential Bridge Loans 105.9 106.2 107.4 8.6% Securitized Commercial Loan 24.8 24.8 24.9 9.0% Other Securities 86.3 110.1 122.1 7.8% $ 948.2 $ 860.4 $ 869.9 4.4% Portfolio Composition as of December 31, 2017 (Continued) Non-Agency RMBS: 10.4% Non-Agency RMBS IOs and IIOs: 1.0% Non-Agency CMBS: 32.0% Residential Whole Loans: 27.3% Residential Bridge Loans: 12.3% Securitized Commercial Loan: 2.9% Other Securities: 14.0%

22 Economic Return(1) Total Stock Return(2) QTD YTD 3 Years Ended 5/5/12 to 12/31/2017 QTD YTD 3 Years Ended 5/5/12 to 12/31/2017 5.3% 20.6% 8.8% 32.3% (2.0)% 11.1% 2.4% 26.3% WMC Returns as of December 31, 2017 (1) 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. (2) Total Stock return is calculated by taking the sum of: (i) the total dividends declared; and (ii) the change in stock price during the period and dividing by the beginning stock price.

Western Asset Mortgage Capital Corporation c/o Financial Profiles, Inc. 11601 Wilshire Blvd., Suite 1920 Los Angeles, CA 90025 www.westernassetmcc.com Investor Relations Contact: Larry Clark Tel: (310) 622-8223 lclark@finprofiles.com Contact Information