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):

August 6, 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 [ ]

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.[ ]

Item 2.02.Results of Operations and Financial Condition

On August 6, 2018, Western Asset Mortgage Capital Corporation (the “Company”) issued a press release announcing its financial results for the fiscal quarter ended June 30, 2018. The text of the press release is furnished as exhibit 99.1 to this Form 8-K.

Item 7.01.Regulation FD Disclosure

On August 7, 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 August 6, 2018, issued by Western Asset Mortgage Capital Corporation
99.2	Presentation, dated August 6, 2018, 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:  August 6, 2018

EX-99.1

Exhibit 99.1

WESTERN ASSET MORTGAGE CAPITAL CORPORATION

ANNOUNCES SECOND QUARTER 2018 RESULTS

Conference Call and Webcast Scheduled for Tomorrow, Tuesday, August 7, 2018 at

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

Pasadena, CA, August 6, 2018– Western Asset Mortgage Capital Corporation (the “Company” or "WMC") (NYSE: WMC) today reported its results for the second quarter ended June 30, 2018.

SECOND QUARTER 2018 HIGHLIGHTS

▪ June 30, 2018 book value per share of $11.10, net of second quarter common dividend of $0.31 per share declared on June 21, 2018.

▪ GAAP net income of $1.5 million, or $0.03 per basic and diluted share.

▪ Core earnings plus drop income of $15.2 million, or $0.36 per basic and diluted share.^1,2  

▪ Economic return on book value was 0.4%^1,3 for the quarter.

▪ 2.05% annualized net interest margin on our investment portfolio. ^1,4,5 

▪ 7.3x leverage excluding securitized debt as of June 30, 2018 (10.0x leverage with securitized debt).

▪ Acquired $327.6 million in target assets, including $275.1 million of credit sensitive assets.

▪ Repurchased 63,300 shares of common stock at an average price of $9.88 per share.

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 statements of operations, but is not included in core earnings. Drop income was $281.0 thousand or $0.01 per share for the three months ended June 30, 2018.

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.

5 Excludes the consolidation of VIE trusts required under GAAP.

1

MANAGEMENT COMMENTARY

“I am pleased to report that we generated core earnings plus drop income of $0.36 per share during the second quarter, an increase of 7% from the first quarter of 2018, as we continue to realize the benefits of our diversified portfolio and differentiated investment strategy,” said Jennifer Murphy, Chief Executive Officer of the Company. “Our economic return on book value was 0.4% for the quarter and 5.1% for the first six months of 2018, in a market environment that has seen an increase in interest rate volatility. We paid a second quarter dividend of $0.31 per share, which was more than covered by our strong core earnings and has remained stable for nine quarters in a row. Each of these achievements reflects our commitment to generating attractive total returns for our shareholders while also providing for greater book value stability.”

Anup Agarwal, Chief Investment Officer of the Company, commented, “Our strong core earnings for the quarter are a reflection of our ongoing portfolio repositioning into credit sensitive investments and shifting away from Agency RMBS, which tends to be more interest rate sensitive. During the quarter, we acquired $327.6 million of target assets, including $275.1 million of credit sensitive investments. These purchases occurred across a number of sub-sectors of the mortgage market, but particularly in Residential Whole and Bridge Loans and Commercial Loans, where we continue to see attractive opportunities. This is consistent with our long-term goal of holding a diversified portfolio of securities that offer what we believe to be the best risk-adjusted returns over our investment horizon.

Our current expectations are for ongoing economic growth in the U.S. with the potential for modestly higher inflation. Residential and commercial real estate markets across the country remain healthy, based on continued strong employment and high levels of consumer confidence. Against this backdrop, we believe that our strategy of investing in a diversified portfolio in a number of sub-sectors of the mortgage market, particularly in credit-sensitive investments, continues to be appropriate, and in our opinion, positions us well to continue to generate attractive risk-adjusted total economic returns for our shareholders,” Mr. Agarwal concluded.

2

OPERATING RESULTS

The below table reflects a summary of our operating results:

	For the Three Months Ended
GAAP Results	June 30, 2018			March 31, 2018
Net Interest Income	$	19,020		$	19,030
Other Income (Loss):
Realized gain (loss) on sale of investments, net	(5,608		)	575
Other than temporary impairment	(2,974		)	(2,916		)
Unrealized gain (loss), net	(31,693		)	(68,961		)
Gain (loss) on derivative instruments, net	28,490			79,582
Other, net	(145		)	47
Other Income (loss)	(11,930		)	8,327
Total Expenses	5,601			5,315
Income (loss) before income taxes	1,489			22,042
Income tax provision (benefit)	36			313
Net income (loss)	$	1,453		$	21,729
Net income (loss) per Common Share – Basic/Diluted	$	0.03		$	0.52
Non-GAAP Results
Core earnings plus drop income(1)	$	15,155		$	14,149
Core earnings plus drop income per Common Share – Basic/Diluted	$	0.36		$	0.34
Weighted average yield(2)(4)	4.36		%	4.14		%
Effective cost of funds(3)(4)	2.58		%	2.44		%
Annualized net interest margin(2)(3)(4)	2.05		%	1.94		%
Annualized CPR on Agency RMBS	10.4		%	11.0		%

(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 and foreign currency 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.

(4) Excludes the consolidation of VIE trusts required under GAAP.

3

Portfolio Composition

As of June 30, 2018, the Company owned an aggregate investment portfolio with a fair market value totaling $5.0 billion. The following tables sets forth additional information regarding the Company’s investment portfolio as of June 30, 2018:

Portfolio Characteristics

Agency Portfolio

The following table summarizes certain characteristics of our Agency portfolio by investment category as of June 30, 2018 (dollars in thousands): 

	Principal Balance		Amortized Cost		Fair Value		Net Weighted Average Coupon
Agency RMBS	$	403,154	$	416,621	$	402,853	3.6	%
Agency RMBS Interest-Only Strips	N/A		13,501		13,559		2.3	%
Agency RMBS Interest-Only Strips, accounted for as derivatives	N/A		N/A		9,247		2.7	%
Total Agency RMBS	403,154		430,122		425,659		3.1	%
Agency CMBS	2,141,182		2,144,520		2,064,579		3.0	%
Agency CMBS Interest-Only Strips	N/A		—		—		—	%
Agency CMBS Interest-Only Strips, accounted for as derivatives	N/A		N/A		4,923		0.5	%
Total Agency CMBS	2,141,182		2,144,520		2,069,502		2.8	%
Total	$	2,544,336	$	2,574,642	$	2,495,161	2.9	%

Credit Sensitive Portfolio

The following table summarizes certain characteristics of our credit sensitive portfolio by investment category as of June 30, 2018 (dollars in thousands): 

	Principal Balance		Amortized Cost		Fair Value		Weighted Average Coupon(1)
Non-Agency RMBS	$	115,776	$	81,226	$	84,909	4.4	%
Non-Agency RMBS IOs and IIOs	N/A		16,365		16,294		0.5	%
Non-Agency CMBS	421,642		337,924		331,393		5.2	%
Residential Whole Loans	329,153		332,069		335,149		4.9	%
Residential Bridge Loans	257,835		259,010		259,164		9.0	%
Securitized Commercial Loans(1)	1,295,940		1,298,295		1,309,195		5.3	%
Commercial Loans	70,638		70,300		70,717		7.3	%
Other Securities	83,717		96,296		108,001		8.6	%
	$	2,574,701	$	2,491,485	$	2,514,822	4.4	%

^{(1) In March 2018, the Company acquired a $67.8 million Non-Agency CMBS security which resulted in the consolidation of a variable interest entity and the recording of a $1.4 million securitized commercial loan and $1.3 billion of securitized debt. As of June 30, 2018, the fair value of the securitized loan was $1.3 billion and the securitized debt was $1.2 billion.}  

PORTFOLIO FINANCING AND HEDGING

Financing Activity

4

Repurchase Agreements

At June 30, 2018, the Company had $3.3 billion of borrowings under master repurchase agreements with 17 of its 28 approved counterpartieswith 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 June 30, 2018 (dollars in thousands):

Repurchase Agreements	Balance		Weighted Average Interest Rate (end of period)		Weighted Average Remaining Maturity (days)
Agency RMBS	$	404,498	2.18	%	56
Agency CMBS	1,923,906		2.21	%	93
Non-Agency RMBS	73,152		3.71	%	34
Non-Agency CMBS	249,055		3.77	%	52
Residential Whole-Loans	268,100		3.86	%	27
Residential Bridge Loans	256,488		4.32	%	62
Securitized commercial loans	7,620		3.94	%	20
Commercial Real Estate Loans	12,321		4.83	%	74
Other Securities	72,229		3.97	%	29
Total	$	3,267,369	2.71	%	74

Convertible Senior Unsecured Notes

At June 30, 2018, the Company had $115.0 million aggregate principal amount of 6.75% convertible senior unsecured notes. 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 initial conversion rate was 83.1947 shares of common stock per $1,000 principal amount of notes and represented a conversion price of $12.02 per share of common stock. The Company believes that this financing is an attractive source of longer term capital, which was more cost efficient than issuing straight equity.

Hedging Activity

At June 30, 2018, the Company had $3.0 billion notional value of pay-fixed interest rate swaps, excluding a forward starting swap of $0.2 billion (approximately 1.9 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 June 30, 2018:

5

(dollars in thousands)
Remaining Term to Maturity	Notional Value		Average Fixed Pay Rate		Average Floating Receive Rate		Average Maturity (Years)	Forward Starting
1 year or less	$	400,000	1.5	%	2.3	%	1.0	—	%
Greater than 1 year and less than 3 years	200,000		1.8	%	2.4	%	1.9	—	%
Greater than 3 years and less than 5 years	738,000		2.0	%	2.4	%	3.8	—	%
Greater than 5 years	1,816,600		2.5	%	2.4	%	10.3	10.9	%
Total	$	3,154,600	2.2	%	2.4	%	7.1	6.3	%

DIVIDEND

On June 21, 2018, 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 $15.92 per share in a combination of cash and stock.

CONFERENCE CALL

The Company will host a conference call with a live webcast tomorrow, August 7^th, at 11:00 a.m. Eastern Time/8:00 a.m. Pacific Time, to discuss financial results for the second quarter 2018.

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/10122414 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 on August 7, 2018.

A telephone replay will be available through August 21, 2018 by dialing (877) 344-7529 from the United States, or (412) 317-0088 from outside the United States, and entering conference ID 10122414. 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, Residential Whole and Bridge Loans and Commercial 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; 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 annual report on Form 10-K for the period ended December 31, 2017 filed with the Securities and Exchange Commission (“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.

6

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-

7

Western Asset Mortgage Capital Corporation and Subsidiaries

Consolidated Balance Sheets

(in thousands—except share and per share data)

(Unaudited)

	June 30, 2018			December 31, 2017
Assets:
Cash and cash equivalents	$	16,295		$	48,024
Restricted cash	58,747			—
Agency mortgage-backed securities, at fair value ($2,440,683 and $2,833,595 pledged as collateral, at fair value, respectively)	2,495,161			2,858,600
Non-Agency mortgage-backed securities, at fair value ($432,352 and $266,189 pledged as collateral, at fair value, respectively)	432,596			378,158
Other securities, at fair value ($107,864 and $89,823 pledged as collateral, at fair value, respectively)	108,001			122,065
Residential Whole-Loans, at fair value ($335,149 and $237,423 pledged as collateral, at fair value, respectively)	335,149			237,423
Residential Bridge Loans ($236,359 and $64,526 at fair value and $259,339 and $106,673 pledged as collateral, respectively)	259,339			106,673
Securitized commercial loan, at fair value	1,309,195			24,876
Commercial Loans, at fair value ($20,515 and $0 pledged as collateral, at fair value, respectively)	70,717			—
Investment related receivable	37,286			7,665
Interest receivable	19,487			13,603
Due from counterparties	64,791			86,930
Derivative assets, at fair value	6,998			728
Other assets	3,571			2,161
Total Assets (1)	$	5,217,333		$	3,886,906
Liabilities and Stockholders’ Equity:
Liabilities:
Repurchase agreements, net	$	3,267,369		$	3,251,686
Convertible senior unsecured notes, net	109,401			108,743
Securitized debt, at fair value (includes $348,799 and $10,945 held by affiliates, respectively)	1,231,300			10,945
Interest payable (includes $976 and $70 on securitized debt held by affiliates, respectively)	10,309			8,322
Investment related payables	52,530			17,217
Due to counterparties	5,208			1,490
Derivative liability, at fair value	1,623			4,346
Accounts payable and accrued expenses	2,531			3,118
Payable to affiliate	3,062			2,041
Dividend payable	12,901			12,960
Other liabilities	59,308			—
Total Liabilities (2)	$	4,755,542		$	3,420,868
Commitments and contingencies
Stockholders’ Equity:
Common stock: $0.01 par value, 500,000,000 shares authorized, 41,616,379 and 41,794,079 outstanding, respectively	419			419
Preferred stock, $0.01 par value, 100,000,000 shares authorized and no shares outstanding	—			—
Treasury stock, at cost, 303,422 and 125,722 shares held, respectively	(2,965		)	(1,232		)
Additional paid-in capital	768,945			768,763
Retained earnings (accumulated deficit)	(304,608		)	(301,912		)
Total Stockholders’ Equity	461,791			466,038
Total Liabilities and Stockholders’ Equity	$	5,217,333		$	3,886,906

8

Western Asset Mortgage Capital Corporation and Subsidiaries

Consolidated Balance Sheets (Continued)

(in thousands—except share and per share data)

(Unaudited)

	June 30, 2018		December 31, 2017
(1) Assets of consolidated VIEs included in the total assets above:
Cash and cash equivalents	$	364	$	—
Restricted Cash	58,747		—
Residential Whole-Loans, at fair value ($335,149 and $237,423 pledged as collateral, at fair value, respectively)	335,149		237,423
Residential Bridge Loans ($236,359 and $64,526 at fair value and $259,339 and $106,673 pledged as collateral, respectively)	259,339		106,673
Securitized commercial loan, at fair value	1,309,195		24,876
Commercial Loans, at fair value ($20,515 and $0 pledged as collateral, at fair value, respectively)	20,515		—
Investment related receivable	37,286		7,665
Interest receivable	9,794		3,358
Other assets	548		—
Total assets of consolidated VIEs	$	2,030,937	$	379,995
(2) Liabilities of consolidated VIEs included in the total liabilities above:
Securitized debt, at fair value (includes $348,799 and $10,945 held by affiliates, respectively)	$	1,231,300	$	10,945
Interest payable (includes $976 and $70 on securitized debt held by affiliates, respectively)	2,687		70
Accounts payable and accrued expenses	678		189
Other liabilities	59,309		—
Total liabilities of consolidated VIEs	$	1,293,974	$	11,204

9

Western Asset Mortgage Capital Corporation and Subsidiaries

Consolidated Statements of Operations

(in thousands—except share and per share data)

(Unaudited)

	Three months ended
	June 30, 2018			March 31, 2018
Net Interest Income
Interest income	$	57,154		$	39,727
Interest expense (includes $4,719, $248, $5,207 and $494 on securitized debt held by affiliates, respectively)	38,134			20,697
Net Interest Income	19,020			19,030
Other Income (Loss)
Realized gain (loss) on sale of investments, net	(5,608		)	575
Other than temporary impairment	(2,974		)	(2,916		)
Unrealized gain (loss), net	(31,693		)	(68,961		)
Gain (loss) on derivative instruments, net	28,490			79,582
Other, net	(145		)	47
Other Income (Loss)	(11,930		)	8,327
Expenses
Management fee to affiliate	2,259			2,180
Other operating expenses	1,555			969
General and administrative expenses:
Compensation expense	572			510
Professional fees	818			1,295
Other general and administrative expenses	397			361
Total general and administrative expenses	1,787			2,166
Total Expenses	5,601			5,315
Income before income taxes	1,489			22,042
Income tax provision (benefit)	36			313
Net income	$	1,453		$	21,729
Net income per Common Share – Basic	$	0.03		$	0.52
Net income per Common Share – Diluted	$	0.03		$	0.52
Dividends Declared per Share of Common Stock	$	0.31		$	0.31

10

Reconciliation of GAAP Net Income to Non-GAAP Core Earnings

(in thousands—except share and per share data)

(Unaudited)

The table below reconciles Net Income to Core Earnings for the three months ended June 30, 2018 and March 31, 2018:

	Three months ended
(dollars in thousands)	June 30, 2018			March 31, 2018
Net Income	$	1,453		$	21,729
Income tax provision (benefit)	36			313
Income before income taxes	1,489			22,042
Adjustments:
Investments:
Unrealized (gain) loss on investments, securitized debt and other liabilities	31,693			68,961
Other than temporary impairment	2,974			2,916
Realized (gain) loss on sale of investments	5,608			(575		)
Acquisition costs	163			41
Derivative Instruments:
Net realized (gain) loss on derivatives	(22,973		)	(79,118		)
Unrealized (gain) loss on derivatives	(4,268		)	(1,308		)
Amortization of discount on convertible senior unsecured notes	138			137
Non-cash stock-based compensation	50			75
Total adjustments	13,385			(8,871		)
Core Earnings	$	14,874		$	13,171
Basic Core Earnings per Common Share and Participating Securities	$	0.36		$	0.32
Diluted Core Earnings per Common Share and Participating Securities	$	0.36		$	0.32
Basic weighted average common shares and participating securities	41,707,291			41,844,798
Diluted weighted average common shares and participating securities	41,707,291			41,844,798

11

Reconciliation of Interest Income and Effective Cost of Funds

(dollars in thousands)

(Unaudited)

The following table reconciles total interest income to adjusted interest income which includes interest income on Agency and Non-Agency Interest-Only Strips classified as derivatives (Non-GAAP financial measure) for the three months ended June 30, 2018 and March 31, 2018:

	Three months ended
(dollars in thousands)	June 30, 2018			March 31, 2018
Coupon interest income	$	60,043		$	40,557
Premium amortization, discount accretion and amortization of basis, net	(2,889		)	(830		)
Interest income	57,154			39,727
Contractual interest income, net of amortization of basis on Agency and Non-Agency Interest-Only Strips, classified as derivatives(1):
Coupon interest income	1,011			1,422
Amortization of basis	(783		)	(1,191		)
Subtotal	228			231
Total adjusted interest income	$	57,382		$	39,958

(1)Reported in "Gain (loss) on derivative instruments, net" in the Consolidated Statements of Operations.

The following table reconciles the Effective Cost of Funds (Non-GAAP financial measure) with interest expense for three months ended June 30, 2018 and March 31, 2018:

	June 30, 2018					March 31, 2018
(dollars in thousands)	Reconciliation			Cost of Funds/Effective Borrowing Costs		Reconciliation		Cost of Funds/Effective Borrowing Costs
Interest expense	$	38,134		3.20	%	$	20,697	2.38	%
Net interest (received) paid - interest rate swaps	(1,044		)	(0.09	)%	1,059		0.12	%
Effective Borrowing Costs	$	37,090		3.11	%	$	21,756	2.50	%
Weighted average borrowings	$	4,780,990				$	3,526,311

12

EX-99.2

Second Quarter 2018 Investor Presentation August 6, 2018

Safe Harbor Statement 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

Second Quarter 2018 WMC Earnings Call Presenters Jennifer W. Murphy Lisa Meyer Anup Agarwal Chief Executive Officer & Chief Financial Officer & Chief Investment Officer President Treasurer 2

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 LLC One of the largest U.S. fixed income asset managers with AUM of $420 billion(1) • Structured Product AUM of $74.4 billion, of which $36.7 billion is invested in Agency RMBS and $37.7 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 3 Please refer to page 15 for footnote disclosures.

Corporate Overview ▪ WMC is a diversified mortgage finance REIT supported by the deep investment experience of the mortgage and asset-backed investment and risk management teams of Western Asset Management Company LLC ("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 relationships 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 while preserving book value. ▪ WMC has paid a consistent dividend for 9 quarters, reflecting a philosophy of delivering a sustainable dividend that is supported by the core earnings of our portfolio. 4

Second Quarter Financial Highlights ▪ June 30, 2018 book value per share of $11.10, net of second quarter common dividend of $0.31 declared on June 21, 2018. ▪ GAAP net income of $1.5 million, or $0.03 per basic and diluted common share. ▪ Core earnings plus drop income of $15.2 million(4), or $0.36 per basic and diluted common share. ▪ Economic return on book value was 0.4%(3) for the quarter. ▪ 2.05%(6) annualized net interest margin on our investment portfolio. ▪ 7.3x leverage excluding securitized debt as of June 30, 2018 (10.0x leverage with securitized debt). ▪ Acquired $327.6 million in target assets, including 275.1 million of credit sensitive assets. * $52.5 million in Agency CMBS * $5.0 million in Non-Agency CMBS * $55.6 million in Residential Whole-Loans * $184.7 million in Residential Bridge Loans * $29.8 million Commercial Loan ▪ Repurchased 63,300 shares of common stock at an average price of $9.88 per share. 5 Please refer to page 17 for footnote disclosures.

Recent Performance (3) Book Value Economic Return 12.0 6.0 10.0 8.0 4.0 6.0 $10.88 $11.15 $11.37 $11.10 5.3% 5.2% 4.8% 4.0 2.0 2.0 0.4% 0.0 0.0 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 (4) Dividend Per Share Core Earnings Plus Drop Income Per Share $0.35 $0.40 $0.30 $0.35 $0.30 $0.25 $0.25 $0.20 $0.20 $0.36 $0.15 $0.31 $0.31 $0.31 $0.31 $0.34 $0.15 $0.32 $0.31 $0.10 $0.10 $0.05 $0.05 $0.00 $0.00 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 6 Please refer to page 17 for footnote disclosures.

Portfolio Composition Agency RMBS Total Investment Portfolio ($ in millions) 2.0% Agency CMBS June 30, 2018 6.9% Non-Agency RMBS Agency RMBS $ 426 6.9% Agency CMBS 2,070 41.2% Non-Agency CMBS 2.0% Non-Agency RMBS 101 Residential Whole-Loans Non-Agency CMBS 331 4.9% GSE Credit Risk Transfer Securities 78 GSE Credit Risk Transfer Securities Residential Whole-Loans 335 Residential Bridge Loans(12) 259 Residential Bridge Loans (2) Securitized Commercial Loans 1,309 Securitized Commercial Commercial Loans 71 25.5% Loans 7.8% ABS 30 2.0% Commercial loans Total 5,010 1.0% Other Investments Select Sector Categories Agency RMBS Non-Agency RMBS, Whole-loans & Agency & Non-Agency CMBS, GSE CRT Securities Securitized Commercial Loans and Commercial Loans 39.9% 80.5% 16.6% 34.6% 54.7% 7.8% 15.2% 3.6% 4.9% 3.0% 28.3% 6.8% 2.1% 2.0% Agency CMBS Securitized Commercial Loans Non-Agency RMBS Residential Whole Loans Low-Loan Balance Modified (16) Lower Loan Balance(15) Legacy CMBS New-Issuance CMBS Residential Bridge Loans GSE CRT Securities MHA/HARP High LTV Other(14) CRE Mezz Commercial Loans Please refer to page 17 for footnote disclosures. 7

Portfolio Income Attribution(5) For the Three Months Ended June 30, 2018 (in thousands except per share data) Non- Non- Residential Residential Other Securitized Agency Agency Agency Agency Whole- Bride Investments Commercial Commercial CMBS RMBS CMBS RMBS Loans Loans(12) (10) Loans Loans(17) Total Interest Income $ 15,910 $ 4,265 7,679 $ 1,775 $ 3,703 $ 4,189 $ 2,234 $ 818 $ 2,237 $ 42,810 Interest expense(7) (10,561) (3,002) (2,519) (880) (2,949) (2,803) (805) (200) (73) (23,792) Net interest rate swap interest income(8) 767 198 46 30 — — 2 — 1,043 Net Interest Income 6,116 1,461 5,206 925 754 1,386 1,431 618 2,164 20,061 Realized gain/(loss) on investments (5,016) (4,531) (39) 2,221 — — 1,759 — — (5,606) Unrealized gain/ (loss) on investments (33,065) (577) 4,924 (1,205) (452) 92 (1,624) 375 (93) (31,625) Gain (loss) on derivative instruments, net(13) 20,032 5,168 1,202 793 — — 120 — — 27,315 OTTI(9) (74) (207) (2,753) (20) — — — — — (3,054) Portfolio Income (loss) $(12,007) $ 1,314 $ 8,540 $ 2,714 $ 302 $ 1,478 $ 1,686 $ 993 $ 2,071 $ 7,091 BV Per Share Increase (Decrease) $ (0.29) $ 0.03 $ 0.21 $ 0.07 $ 0.01 $ 0.04 $ 0.04 $ 0.02 $ 0.04 $ 0.17 per share Beginning book value $ 11.37 Portfolio Income(5) 0.17 Operating expenses and G&A (0.13) Dividends (0.31) Income tax benefit (provision) — Ending book value $ 11.10 8 Please refer to page 17 for footnote disclosures.

Adjusted* Portfolio Composition Agency RMBS Total Investment Portfolio ($ in millions) 2.0% Agency CMBS 6.9% June 30, 2018 Non-Agency RMBS Agency RMBS $ 426 6.9% Non-Agency CMBS Agency CMBS 2,070 41.2% 2.0% Non-Agency RMBS 101 Residential Whole-Loans 4.9% Non-Agency CMBS 409 GSE Credit Risk Transfer GSE Credit Risk Transfer Securities 78 Securities Residential Whole-Loans 335 Residential Bridge Loans Residential Bridge Loans(12) 259 Commercial Loans 71 Securitized Commercial 25.5% Loans ABS 30 7.8% Total 3,779 2.0% Commercial loans 1.0% Other Investments *Excludes consolidation of VIE Trusts required under GAAP Select Sector Categories Agency RMBS Non-Agency RMBS, Whole-loans & Agency & Non-Agency CMBS, GSE CRT Securities and Commercial Loans 39.9% 80.5% 16.6% 81.0% 7.8% 15.2% 4.9% 5.4% 6.8% 28.3% 2.9% 7.6% Non-Agency RMBS Residential Whole Loans 3.1% Low-Loan Balance Modified (16) Lower Loan Balance(15) Agency CMBS Legacy CMBS Residential Bridge Loans GSE CRT Securities MHA/HARP High LTV Other(14) New-Issuance CMBS CRE Mezz Please refer to page 17 for footnote disclosures. 9 Commercial Loans

Adjusted* Portfolio Income Attribution(5) For the Three Months Ended June 30, 2018 (in thousands except per share data) Non- Non- Residential Residential Other Agency Agency Agency Agency Whole- Bride Investments Commercial CMBS RMBS CMBS RMBS Loans Loans(12) (10) Loans Total Interest Income $ 15,910 $ 4,265 9,916 $ 1,775 $ 3,703 $ 4,189 $ 2,234 $ 818 $ 42,810 Interest expense(7) (10,561) (3,002) (2,592) (880) (2,949) (2,803) (805) (200) (23,792) Net interest rate swap interest income(8) 767 198 46 30 — — 2 — 1,043 Net Interest Income 6,116 1,461 7,370 925 754 1,386 1,431 618 20,061 Realized gain/(loss) on investments (5,016) (4,531) (39) 2,221 — — 1,759 — (5,606) Unrealized gain/ (loss) on investments (33,065) (577) 4,831 (1,205) (452) 92 (1,624) 375 (31,625) Gain (loss) on derivative instruments, net(13) 20,032 5,168 1,202 793 — — 120 — 27,315 OTTI(9) (74) (207) (2,753) (20) — — — — (3,054) Portfolio Income (loss) $(12,007) $ 1,314 $ 10,611 $ 2,714 $ 302 $ 1,478 $ 1,686 $ 993 $ 7,091 BV Per Share Increase (Decrease) $ (0.29) $ 0.03 $ 0.25 $ 0.07 $ 0.01 $ 0.04 $ 0.04 $ 0.02 $ 0.17 Beginning book value $ 11.37 Portfolio Income(5) 0.17 Operating expenses and G&A (0.13) Dividends (0.31) Income tax benefit (provision) — Ending book value $ 11.10 *Excludes consolidation of VIE trusts required under GAAP. 10 Please refer to page 17 for footnote disclosures.

Financing Summary ▪ Master repurchase agreements with 28 counterparties. ▪ Outstanding borrowings with 17 counterparties. ▪ Capacity in excess of our current needs. Portfolio Financing June 30, 2018 ($ in thousands) Weighted Average Weighted Average Outstanding Interest Rate Interest Remaining Days to Repurchase Agreements Amounts Rate Maturity Agency RMBS $ 404,498 2.18% 56 Agency CMBS 1,923,906 2.21% 93 Non-Agency RMBS 73,152 3.71% 34 Non-Agency CMBS 249,055 3.77% 52 Residential Whole-Loans 268,100 3.86% 27 Residential Bridge Loans 256,488 4.32% 62 Securitized Commercial Loan 7,620 3.94% 20 Commercial Loans 12,321 4.83% 74 Other Securities (10) 72,229 3.97% 29 Total/Wtd Avg $ 3,267,369 2.71% 74 11 Please refer to page 17 for footnote disclosures.

(11) Hedging Summary Fixed Pay Interest Rate Swaps ($ in millions – as of June 30, 2018) Avg. Fixed Pay Avg. Floating Average Maturity Maturity Notional Amount Rate Receive Rate (Years) Forward Starting Less than 1 Year $ 400.0 1.5% 2.3% 1.0 —% 1 Year to 3 Years 200.0 1.8% 2.4% 1.9 —% 3 Years to 5 Years 738.0 2.0% 2.4% 3.8 —% >5 Years 1,816.6 2.5% 2.4% 10.3 10.9% Total Fixed Pay Rate $ 3,154.6 2.2% 2.4% 7.1 6.3% Our interest rate swaps are comprised of: ▪ $3.0 billion notional value of pay-fixed interest rate swaps, and ▪ Forward starting swap of $0.2 billion (approximately 1.9 month forward), which has a maturity of August 29, 2028. 12 Please refer to page 17 for footnote disclosures.

Duration as of June 30, 2018 Agency Holdings Key Rate Duration Contribution Total 6-months 2-Year 5-Year 10-Year 20-Year 30-Year Agency RMBS 1.00 0.02 0.09 0.22 0.34 0.26 0.07 Agency CMBS 3.73 — 0.03 0.84 2.79 0.07 — Swaps and Futures (4.92) 0.11 (0.91) (0.39) (3.44) (0.29) — Total (0.19) 0.13 (0.79) 0.67 (0.31) 0.04 0.07 ▪ Net Duration of the Agency RMBS and Agency CMBS portfolio: (0.19) years. 13 Please refer to page 17 for footnote disclosures.

2018 Macroeconomic Outlook Base case is for steady economic growth, where spread sectors are likely to outperform. ▪ U.S. housing and commercial real estate markets continue to exhibit positive fundamentals and favorable outlook. ▪ Central banks are cautiously signaling their path to normalization. ▪ Core inflation is expected to modestly increase. ▪ We expect elevated volatility in the near-term due to U.S. policy uncertainties, including trade wars and global political developments. ▪ Global economies are expected to continue to experience improving growth from subdued levels. ▪ Spread sectors should outperform, but margins are thin for some sectors. 14

Portfolio View Credit sensitive mortgage sectors have performed relatively well and are expected to continue to offer attractive returns. We expect to increase our credit sensitive investments. ▪ Residential Whole-loans continue to perform in-line with our expectations. * We expect to continue to increase our holdings of residential whole and bridge loans as opportunities arise. ▪ Commercial loans continue to offer attractive risk-reward opportunities. ▪ Securitized prime jumbo mortgages offer attractive value as convexity is priced in. ▪ We remain constructive on Agency CMBS spreads and look to further reduce our exposure to Agency RMBS. 15

Target Investment Opportunities ▪ Strategic partnerships with seasoned originators. ▪ Short-term non owner occupied single or multi-unit residences. ▪ Attractive unlevered net yield of 7-8%. Residential Bridge Loans ▪ Average loan sizes approximately $250,000. ▪ Target loan to value of 85% based on "as is" appraised value. • Single asset single borrower commercial loans. ▪ Invest in deals where our manager has an opportunity to negotiate deal Commercial Real Estate structure and covenants. ▪ Attractive yields of Libor plus 600-900 bps. Loans ▪ Target floating rate assets and short term deals. ▪ Multifamily residential loans guaranteed by Fannie Mae and Freddie Mac. ▪ Outstanding balance of more than $400 billion with annual issuance in excess Agency CMBS 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 bullets and tight windows for principal payment. 16

Footnotes (1) As of June 30, 2018 (2) In March 2018, the Company acquired a $67.8 million Non-Agency CMBS security which resulted in the consolidation of a variable interest entity and the recording of a $1.4 billion securitized commercial loan and $1.3 billion of securitized debt. (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 and interest income on IOs and IIOs classified as derivatives. 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 $281 thousand for the three months ended June 30, 2018. (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, and are weighted averages for the quarter ended June 30, 2018. Also excludes the net income from the consolidation of VIE Trusts required under GAAP. (7) Convertible senior notes interest expense has been allocated based on deployment of proceeds from October 2017 through May 2018. (8) Net interest rate swaps interest income 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 and GSE Credit Risk Transfer securities. (11) 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. (12) The bridge loans acquired prior to October 25, 2017 are carried at amortized costs, 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 June 30, 2018 includes $236.4 million of residential bridge loans carried at fair value and $23.0 million of residential bridge loans carried at amortized costs. (13) Gain (loss) on derivative instruments, net (excluding cost of hedging) has been allocated based average duration contribution. (14) Other includes investor loans and low-FICO loans. (15) Lower loan balance pools generally consist of loans below $150,000. (16) Represents loans that have been modified to have 40-year maturities, with balance below $175,000. (17) The portfolio income attribution for securitized commercial loan is presented on an unconsolidated basis. 17

Supplemental Information

Book Value Roll Forward Amounts in 000's Per Share Book Value at March 31, 2018 $ 473,814 $ 11.37 Repurchase of common stock (626) N/A Common dividend (12,901) (0.31) 460,287 11.06 Portfolio Income Net interest margin (6) 20,061 0.48 Net realized gain (loss) on investments and derivatives 17,345 0.42 Unrealized gain (loss) on investments and derivatives (27,261) (0.66) Other than temporary impairment (9) (3,054) (0.07) Net portfolio income 7,091 0.17 Operating expenses (3,814) (0.09) General and administrative expenses, excluding equity based compensation (1,737) (0.04) Provision for taxes (36) — Book Value at June 30, 2018 $ 461,791 $ 11.10 18 Please refer to page 17 for footnote disclosures.

Portfolio Composition as of June 30, 2018 Agency Portfolio ($ in millions) Principal Amortized Costs Fair Value Net Weighted Net Weighted Balance Average Coupon Average Yield Agency CMBS $ 2,141.2 $ 2,144.5 $ 2,064.6 3.0% 3.0% Agency CMBS IOs and IIOs(1) N/A — 4.9 0.5% 4.2% Agency RMBS 20-Year, 30-Year and 40-Year 403.2 416.6 402.9 3.6% 3.1% Agency RMBS IOs and IIOs(1) N/A 13.5 22.8 2.5% 7.3% Total $ 2,544.3 $ 2,574.6 $ 2,495.2 2.9% 3.0% (1) Excludes amortized cost basis of $7.6MM and $5.1MM of Agency RMBS IOs and IIOs and Agency CMBS IOs and IIOs, respectively, that are accounted for as derivatives. Agency CMBS 82.8% Agency RMBS 30-Year mortgage 2.4% Agency RMBS 20-Year mortgage 13.7% Agency RMBS IO & IIO 0.9% Agency CMBS IO & IIO 0.2% 19

Portfolio Composition as of June 30, 2018 (Continued) Credit Sensitive Portfolio ($ in millions) Principal Balance Amortized Costs Fair Value Net Weighted Net Weighted Average Coupon Average Yield Non-Agency RMBS $ 115.8 $ 97.6 $ 101.2 1.0% 6.5% Non-Agency CMBS 421.6 337.9 331.4 5.2% 8.7% Residential Whole Loans 329.2 332.1 335.1 4.9% 5.1% Residential Bridge Loans 257.8 259.0 259.2 9.0% 8.4% Securitized Commercial Loans 1,295.9 1,298.3 1,309.2 5.0% 4.9% Commercial Loans 70.6 70.3 70.7 8.0% 7.4% Other Securities(1) 83.7 96.3 108.0 8.6% 9.5% $ 2,574.6 $ 2,491.5 $ 2,514.8 4.3% 6.1% (1) Other Securities includes GSE Credit Risk Transfer securities and ABS. Commercial Loan: 2.8% Other Securities: 4.3% Non-Agency RMBS: 4.0% Securitized Commercial Loans: Non-Agency CMBS: 13.2% 52.1% Residential Whole Loans: 13.3% Residential Bridge Loans: 10.3% 20

Portfolio Composition as of June 30, 2018 (Continued) Adjusted Credit Sensitive Portfolio * ($ in millions) Principal Balance Amortized Costs Fair Value Net Weighted Net Weighted Average Coupon Average Yield Non-Agency RMBS $ 115.8 $ 97.6 $ 101.2 1.0% 6.5% Non-Agency CMBS 499.3 415.6 409.3 6.1% 9.3% Residential Whole Loans 329.2 332.1 335.1 4.9% 5.1% Residential Bridge Loans 257.8 259.0 259.2 9.0% 8.4% Commercial Loans 70.6 70.3 70.7 8.0% 7.4% Other Securities(1) 83.7 96.3 108.0 8.6% 9.5% $ 1,356.4 $ 1,270.9 $ 1,283.5 4.2% 7.7% (1) Other Securities includes GSE Credit Risk Transfer securities and ABS. Commercial Loans: 5.5% Other Securities: 8.4% Residential Bridge Loans: 20.2% Non-Agency RMBS: 7.9% Residential Whole Loans: Non-Agency CMBS: 31.9% 26.1% *Excludes consolidation of VIE Trusts required under GAAP 21

WMC Returns as of June 30, 2018 Economic Return(1) Total Stock Return(2) 3 Years 5/5/12 to 3 Years 5/5/12 to QTD Ended 6/30/2018 QTD Ended 6/30/2018 0.4% 11.7% 35.1% 10.7% 0.5% 31.7% (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. 22

Contact Information 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