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):

November 5, 2019

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.[ ]

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.01 par value	WMC	New York Stock Exchange

Item 2.02.Results of Operations and Financial Condition

On November 5, 2019, Western Asset Mortgage Capital Corporation (the “Company”) issued a press release announcing its financial results for the fiscal quarter ended September 30, 2019. The text of the press release is furnished as exhibit 99.1 to this Form 8-K.

Item 7.01.Regulation FD Disclosure

On November 6, 2019, 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 November 5, 2019, issued by Western Asset Mortgage Capital Corporation
99.2	Presentation, dated November 5, 2019, 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:  November 5, 2019

EX-99.1

Exhibit 99.1

WESTERN ASSET MORTGAGE CAPITAL CORPORATION

ANNOUNCES THIRD QUARTER 2019 RESULTS

Conference Call and Webcast Scheduled for Tomorrow, Wednesday, November 6, 2019 at

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

Pasadena, CA, November 5, 2019 – Western Asset Mortgage Capital Corporation (the “Company” or "WMC") (NYSE: WMC) today reported its results for the third quarter ended September 30, 2019.

THIRD QUARTER 2019 FINANCIAL HIGHLIGHTS

▪ September 30, 2019 book value per share of $10.60, net of third quarter common dividend of $0.31 per share declared on September 19, 2019.

▪ GAAP net income of $19.7 million, or $0.37 per basic and diluted share.

▪ Core earnings of $15.0 million, or $0.28 per basic and diluted share.¹ 

▪ Economic return on book value was 3.8% for the quarter.^1,2 

▪ 1.69% annualized net interest margin on our investment portfolio. ^1,3,4 

▪ 5.4x leverage excluding non-recourse debt as of September 30, 2019 (8.0x leverage including non-recourse debt).

OTHER THIRD QUARTER 2019 HIGHLIGHTS

▪ Issued $40.0 million aggregate principal amount of 6.75% convertible senior unsecured notes.

▪ Sold $562.3 of Agency MBS investments.

▪ Redeployed the capital to acquire $564.6 million of investments, consisting of:

* $237.5 million in Agency CMBS

* $129.7 million in Commercial Loans

* $80.7 million in Residential Whole Loans

* $108.7 million in Non-Agency CMBS

* $7.9 million in GSE Risk Transfer Securities

1  Non – GAAP measure.

2  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.

3   Includes interest-only securities accounted for as derivatives and the cost of interest rate swaps.

4 Excludes the consolidation of VIE trusts required under GAAP.

1

MANAGEMENT COMMENTARY

“I am very pleased to report that we delivered an economic return on book value of 3.8% for the quarter and 10.3% for the first nine months of 2019, in a market environment that continues to experience interest rate volatility.” said Jennifer Murphy, Chief Executive Officer of the Company. "Our solid performance for the quarter and year-to-date is the result of the strength of our diversified portfolio and our differentiated investment strategy. Our third quarter dividend remained stable at $0.31 per share for the fourteenth quarter in a row, reflecting our commitment to our long-term goal of generating attractive total returns for our shareholders, while also providing for greater book value stability.” said Ms. Murphy.

“We are pleased to have issued an additional $40.0 million of our 6.75% convertible senior unsecured notes due 2022 under our existing indenture, allowing us to further invest in our target assets, which we believe will enable us to enhance the overall earnings potential of the portfolio. The offering also supports our long term goal of growing the Company to achieve increased scale, which we believe will benefit shareholders over time,” Ms. Murphy added.

Harris Trifon, Chief Investment Officer of the Company, commented, “Our positive performance for the third quarter and year-to-date were driven by contributions across our diverse holdings in a number of subsectors of the mortgage market and reflect our efforts to increase our exposure to credit sensitive investments while also complementing these holdings with exposure to Agency MBS. We invested the proceeds from our May equity offering and our August debt offering relatively quickly, acquiring more of our target assets. During the quarter, we acquired $565 million of target assets, including $238 million of Agency MBS and $327 million of credit sensitive investments, consisting primarily of Residential Whole Loans, Commercial Whole Loans, Non-Agency CMBS and GSE Risk Transfer Securities, all areas where we continue to see opportunities to achieve attractive risk-adjusted returns."

“Our current expectations are for continued, yet moderate, U.S. economic growth along with subdued inflation expectations and an accommodative Federal Reserve monetary policy. We believe that credit spread sectors will continue to perform well in this environment and we will remain focused on our active approach to seeking the best relative value within our target universe. As such, we believe that our strategy of holding a diverse investment portfolio, with our focus on risk management, positions us well to continue generating favorable risk-adjusted returns for our shareholders,” concluded Mr. Trifon.

2

OPERATING RESULTS

The below table reflects a summary of our operating results:

	For the Three Months Ended
GAAP Results	September 30, 2019			June 30, 2019			March 31, 2019
	(in thousands-except share and per share data)
Net Interest Income	$	16,570		$	15,860		$	15,633
Other Income (Loss):
Realized gain (loss) on sale of investments, net	21,399			(8		)	(5,105		)
Other than temporary impairment	(1,819		)	(3,295		)	(1,232		)
Unrealized gain (loss), net	35,030			74,614			50,781
Gain (loss) on derivative instruments, net	(47,056		)	(71,530		)	(27,148		)
Other, net	918			532			236
Other Income (loss)	8,472			313			17,532
Total Expenses	5,377			5,081			5,277
Income (loss) before income taxes	19,665			11,092			27,888
Income tax provision (benefit)	(55		)	478			12
Net income (loss)	$	19,720		$	10,614		$	27,876
Net income (loss) per Common Share – Basic/Diluted	$	0.37		$	0.21		$	0.58
Non-GAAP Results
Core earnings (1)	$	15,014		$	15,758		$	15,492
Core earnings per Common Share – Basic/Diluted	$	0.28		$	0.31		$	0.32
Weighted average yield(2)(4)	4.53		%	4.94		%	5.17		%
Effective cost of funds(3)(4)	3.05		%	2.94		%	3.25		%
Annualized net interest margin(2)(3)(4)	1.69		%	2.14		%	2.36		%

(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.

(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 September 30, 2019, 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 September 30, 2019:

Portfolio Characteristics

Agency Portfolio

The following table summarizes certain characteristics of our Agency portfolio by investment category as of September 30, 2019 (dollars in thousands): 

	Principal Balance		Amortized Cost		Fair Value		Net Weighted Average Coupon
Agency CMBS	$	1,659,501	$	1,690,898	$	1,803,058	3.3	%
Agency CMBS Interest-Only Strips, accounted for as derivatives	N/A		N/A		3,691		0.4	%
Total Agency CMBS	1,659,501		1,690,898		1,806,749		3.0	%
Agency RMBS	352,717		358,439		365,286		3.5	%
Agency RMBS Interest-Only Strips	N/A		9,209		10,940		2.6	%
Agency RMBS Interest-Only Strips, accounted for as derivatives	N/A		N/A		5,869		3.0	%
Total Agency RMBS	352,717		367,648		382,095		3.2	%
Total	$	2,012,218	$	2,058,546	$	2,188,844	3.1	%

Credit Sensitive Portfolio

The following table summarizes certain characteristics of our credit sensitive portfolio by investment category as of September 30, 2019 (dollars in thousands): 

	Principal Balance		Amortized Cost		Fair Value		Weighted Average Coupon(1)
Non-Agency RMBS	$	53,022	$	37,029	$	38,673	4.8	%
Non-Agency RMBS IOs and IIOs	N/A		8,396		8,582		0.6	%
Non-Agency CMBS	327,339		286,402		291,748		5.2	%
Residential Whole Loans	1,169,131		1,188,099		1,209,237		5.2	%
Residential Bridge Loans(2)	54,466		54,529		53,373		9.4	%
Securitized Commercial Loans(1)	698,484		700,746		701,835		5.0	%
Commercial Loans	442,032		441,103		442,032		7.5	%
Other Securities	73,220		76,758		83,012		7.0	%
	$	2,817,694	$	2,793,062	$	2,828,492	4.4	%

(1) In March 2019, the Company acquired $65.3 million of Non-Agency CMBS securities which resulted in the consolidation of a variable interest entity and the recording of a $904 million securitized commercial loan and $838 million of securitized debt. As of September 30, 2019, the fair value of the securitized loan was $677.6 million and the fair value securitized debt was $677.6 million.

(2) Includes Residential Bridge Loans carried at amortized cost of $5.3 million as of September 30, 2019. The fair value of these loans was $5.2 million as of September 30, 2019^. 

4

PORTFOLIO FINANCING AND HEDGING

Financing Activity

Repurchase Agreements

As of September 30, 2019, the Company had borrowings under 20 of its 33 master repurchase agreements. The following table sets forth additional information regarding the Company’s portfolio financing under the master repurchase agreements, which includes the outstanding balance under our $700 million residential whole loan and $150 million commercial whole financing facilities, as of September 30, 2019 (dollars in thousands):

	Outstanding Borrowings		Weighted Average Interest Rate		Weighted Average Remaining Days to Maturity
Short Term Borrowings:
Agency RMBS	$	366,488	2.31	%	49
Agency CMBS	1,640,190		2.36	%	29
Non-Agency RMBS	31,071		3.67	%	8
Non-Agency CMBS	201,751		3.28	%	28
Residential Whole-Loans	10,854		3.96	%	36
Residential Bridge Loans	50,092		4.26	%	28
Commercial Loans	137,821		4.33	%	28
Securitized Commercial Loan	32,893		3.13	%	9
Other Securities	57,061		3.55	%	30
Subtotal	2,528,221		2.63	%	31
Long Term Borrowings
Residential Whole-Loans (1)	271,887		3.68	%	653
Commercial Loans (1)	125,000		4.29	%	641
Subtotal	396,887		3.87	%	649
Total	$	2,925,108	2.80	%	115

(1) Certain Residential Whole Loans and Commercial Loans were financed under two longer term financing facilities. These facilities automatically roll until such time as they are terminated or until certain conditions of default. The weighted average remaining maturity days was calculated using expected weighted life of the underlying collateral.

Convertible Senior Unsecured Notes

In August 2019, the Company issued $40.0 million aggregate principal amount of its 6.75% convertible senior unsecured notes due 2022 (the "Reopened Notes") for net proceeds of $38.8 million. The Reopened Notes have substantially identical terms as the existing notes issued in October 2017.

At September 30, 2019, the Company had $155 million aggregate principal amount of 6.75% convertible senior unsecured notes outstanding. 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.

5

Mortgage-Backed Notes

The following table summarizes the residential mortgage-backed notes issued by the Company's securitization trust (the "Arroyo Trust") at September 30, 2019 (dollars in thousands):

Classes	Principal Balance		Coupon	Carrying Value		Contractual Maturity
Offered Notes:(1)
Class A-1	$	733,440	3.3%	$	733,438	4/25/2049
Class A-2	39,299		3.5%	39,298		4/25/2049
Class A-3	62,261		3.8%	62,259		4/25/2049
Class M-1	25,055		4.8%	25,055		4/25/2049
	860,055			860,050
Less: Deferred Financing Cost	N/A			5,491
Total	$	860,055		$	854,559

^{(1) The subordinate notes were retained by the Company.} 

The securitized debt of the Arroyo Trust can only be settled with the residential loans that serve as collateral for the securitized debt and are non-recourse to the Company.

Derivatives Activity

Interest Rates Swaps

At September 30, 2019, the Company had $3.5 billion notional value of pay-fixed interest rate swaps and $997.2 million notional value of variable pay rate swaps, which have variable maturities between May 2, 2020 and June 13, 2039.

The following tables summarize the average fixed pay rate, average floating receive rate and average maturity for the Company’s fixed pay interest rate swaps as of September 30, 2019 (dollars in thousands):

Remaining Interest Rate Swap Term	Notional Value		Average Fixed Pay Rate		Average Floating Receive Rate		Average Maturity (Years)
1 year or less	$	200,000	1.8	%	2.3	%	0.7
Greater than 3 years and less than 5 years	1,182,500		2.5	%	2.2	%	4.4
Greater than 5 years	2,137,100		2.3	%	2.2	%	9.0
Total	$	3,519,600	2.4	%	2.2	%	7.0

6

The following table summarizes the average variable pay rate, average fixed receive rate and average maturity for the Company’s variable pay interest rate swaps as of September 30, 2019 (dollars in thousands):

Remaining Interest Rate Swap Term	Notional Amount		Average  Variable Pay Rate		Average Fixed Receive Rate		Average Maturity (Years)
Greater than 1 year and less than 3 years	$	225,000	2.3	%	2.4	%	1.6
Greater than 5 years	772,200		2.2	%	2.3	%	8.3
Total	$	997,200	2.3	%	2.4	%	6.8

Other Derivatives Instruments

The following table summarizes the Company’s other derivative instruments at September 30, 2019 (dollars in thousands):

Other Derivative Instruments	Notional Amount		Fair Value
Futures contracts, asset	$	60,300	$	808
Credit default swaps, asset	60,100		2,884
Other derivative instruments, assets			3,692
Futures contracts, liability	$	65,400	$	(1,518	)
Credit default swaps, liability	90,900		(6,502		)
Total other derivative instruments, liabilities			(8,020		)
Total other derivative instruments, net			$	(4,328	)

DIVIDEND

On September 19, 2019, 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 $17.47 per share in a combination of cash and stock.

CONFERENCE CALL

The Company will host a conference call with a live webcast tomorrow, November 6, 2019 at 11:00 a.m. Eastern Time/8:00 a.m. Pacific Time, to discuss financial results for the third quarter 2019.

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/10135841and 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.

7

A telephone replay will be available through November 21 , 2019 by dialing (877) 344-7529 from the United States, or (412) 317-0088 from outside the United States, and entering conference ID 10135841. 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 of 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, LLC'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, LLC, 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, 2018 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.

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 margin, 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)

(Unaudited)

	September 30, 2019			December 31, 2018
Assets:
Cash and cash equivalents	$	50,157		$	21,987
Restricted cash	36,456			55,808
Agency mortgage-backed securities, at fair value ($2,119,013 and $1,505,979 pledged as collateral, at fair value, respectively)	2,188,844			1,505,979
Non-Agency mortgage-backed securities, at fair value ($317,690 and $237,107 pledged as collateral, at fair value, respectively)	339,003			250,856
Other securities, at fair value ($82,875 and $59,780 pledged as collateral, at fair value, respectively)	83,012			59,906
Residential Whole Loans, at fair value ($1,209,237 and $1,041,885 pledged as collateral, at fair value, respectively)	1,209,237			1,041,885
Residential Bridge Loans ($48,054 and $211,999 at fair value and $50,675 and $221,486 pledged as collateral, respectively)	53,373			221,719
Securitized commercial loans, at fair value	701,835			1,013,511
Commercial Loans, at fair value ($422,032 and $196,123 pledged as collateral, at fair value, respectively)	442,032			216,123
Investment related receivable	32,033			42,945
Interest receivable	18,801			21,959
Due from counterparties	90,156			39,623
Derivative assets, at fair value	4,037			2,606
Other assets	5,505			2,488
Total Assets (1)	$	5,254,481		$	4,497,395
Liabilities and Stockholders’ Equity:
Liabilities:
Repurchase agreements, net	$	2,925,108		$	2,818,837
Convertible senior unsecured notes, net	148,542			110,060
Securitized debt, net ($612,282 and $949,626 at fair value and $75,095 and $246,802 held by affiliates, respectively)	1,466,841			949,626
Interest payable (includes $386 and $816 on securitized debt held by affiliates, respectively)	9,734			8,532
Investment related payables	71,146			—
Due to counterparties	2,096			17,781
Derivative liability, at fair value	8,088			10,130
Accounts payable and accrued expenses	3,585			3,858
Payable to affiliate	2,026			4,615
Dividend payable	16,499			14,916
Other liabilities	36,456			56,031
Total Liabilities (2)	$	4,690,121		$	3,994,386
Commitments and contingencies
Stockholders’ Equity:
Common stock: $0.01 par value, 500,000,000 shares authorized, 53,224,379 and 48,116,379 outstanding, respectively	532			481
Preferred stock, $0.01 par value, 100,000,000 shares authorized and no shares outstanding	—			—
Additional paid-in capital	884,978			833,810
Retained earnings (accumulated deficit)	(321,150		)	(331,282		)
Total Stockholders’ Equity	564,360			503,009
Total Liabilities and Stockholders’ Equity	$	5,254,481		$	4,497,395

9

Western Asset Mortgage Capital Corporation and Subsidiaries

Consolidated Balance Sheets (Continued)

(in thousands—except share and per share data)

(Unaudited)

	September 30, 2019		December 31, 2018
(1) Assets of consolidated VIEs included in the total assets above:
Cash and cash equivalents	$	1,959	$	674
Restricted Cash	36,456		55,808
Residential Whole Loans, at fair value ($1,209,237 and $1,041,885 pledged as collateral, at fair value, respectively)	1,209,237		1,041,885
Residential Bridge Loans ($46,159 and $211,766 at fair value and $50,675 and $221,486 pledged as collateral, respectively)	50,675		221,486
Securitized commercial loan, at fair value	701,835		1,013,511
Commercial Loans, at fair value ($212,032 and $196,123 pledged as collateral, at fair value, respectively)	212,032		196,123
Investment related receivable	32,033		42,945
Interest receivable	9,712		15,540
Other assets	253		178
Total assets of consolidated VIEs	$	2,254,192	$	2,588,150
(2) Liabilities of consolidated VIEs included in the total liabilities above:
Securitized debt, net ($612,282 and $949,626 at fair value and $75,095 and $246,802 held by affiliates, respectively)	$	1,466,841	$	949,626
Interest payable (includes $386 and $816 on securitized debt held by affiliates, respectively)	3,714		2,419
Accounts payable and accrued expenses	288		708
Other liabilities	36,456		56,033
Total liabilities of consolidated VIEs	$	1,507,299	$	1,008,786

10

Western Asset Mortgage Capital Corporation and Subsidiaries

Consolidated Statements of Operations

(in thousands—except share and per share data)

(Unaudited)

	Three months ended
	September 30, 2019			June 30, 2019			March 31, 2019
Net Interest Income
Interest income	$	55,652		$	53,818		$	52,033
Interest expense (includes $964, $1,106 and $2,338 on securitized debt held by affiliates, respectively)	39,082			37,958			36,400
Net Interest Income	16,570			15,860			15,633
Other Income (Loss)
Realized gain (loss) on sale of investments, net	21,399			(8		)	(5,105		)
Other than temporary impairment	(1,819		)	(3,295		)	(1,232		)
Unrealized gain (loss), net	35,030			74,614			50,781
Gain (loss) on derivative instruments, net	(47,056		)	(71,530		)	(27,148		)
Other, net	918			532			236
Other Income (Loss)	8,472			313			17,532
Expenses
Management fee to affiliate	1,800			1,832			1,735
Other operating expenses	1,589			1,253			1,598
General and administrative expenses:
Compensation expense	671			705			544
Professional fees	973			761			1,215
Other general and administrative expenses	344			530			185
Total general and administrative expenses	1,988			1,996			1,944
Total Expenses	5,377			5,081			5,277
Income before income taxes	19,665			11,092			27,888
Income tax provision (benefit)	(55		)	478			12
Net income (loss)	$	19,720		$	10,614		$	27,876
Net income (loss) per Common Share – Basic	$	0.37		$	0.21		$	0.58
Net income (loss) per Common Share – Diluted	$	0.37		$	0.21		$	0.58

11

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 September 30, 2019, June 30, 2019 and March 31, 2019:

	Three months ended
(dollars in thousands)	September 30, 2019			June 30, 2019			March 31, 2019
Net Income	$	19,720		$	10,614		$	27,876
Income tax provision (benefit)	(55		)	478			12
Net Income before income taxes	19,665			11,092			27,888
Adjustments:
Investments:
Unrealized (gain) loss on investments, securitized debt and other liabilities	(35,030		)	(74,614		)	(50,781		)
Other than temporary impairment	1,819			3,295			1,232
Realized (gain) loss on sale of investments	(21,399		)	8			5,105
One-time transaction costs	531			130			269
Derivative Instruments:
Net realized (gain) loss on derivatives	51,577			65,025			42,885
Net unrealized (gain) loss on derivatives	(2,499		)	10,519			(11,313		)
Amortization of discount on convertible senior unsecured notes	186			138			137
Non-cash stock-based compensation	164			165			70
Total adjustments	(4,651		)	4,666			(12,396		)
Core Earnings	$	15,014		$	15,758		$	15,492
Basic and Diluted Core Earnings per Common Share and Participating Securities	$	0.28		$	0.31		$	0.32
Basic and Diluted Core Earnings plus Drop Income per Common Share and Participating Securities	$	0.28		$	0.31		$	0.32
Basic weighted average common shares and participating securities	53,376,531			50,823,683			48,236,647
Diluted weighted average common shares and participating securities	53,376,531			50,823,683			48,236,647

Alternatively, our Core Earnings can also be derived as presented in the table below by starting net interest income adding interest income on Interest-Only Strips accounted for as derivatives and other derivatives, and net interest expense incurred on interest rate swaps and foreign currency swaps and forwards (a Non-GAAP financial measure) to arrive at adjusted net interest income. Then subtracting total expenses, adding non-cash stock based compensation, adding one-time transaction costs, adding amortization of discount on convertible senior notes and adding interest income on cash balances and other income (loss), net:

12

	Three months ended
(dollars in thousands)	September 30, 2019			June 30, 2019			March 31, 2019
Net interest income	$	16,570		$	15,860		$	15,633
Interest income from IOs and IIOs accounted for as derivatives	133			164			189
Net interest income from interest rate swaps	1,715			3,850			4,283
Adjusted net interest income	18,418			19,874			20,105
Total expenses	(5,377		)	(5,081		)	(5,277		)
Non-cash stock-based compensation	164			165			70
One-time transaction costs	531			130			269
Amortization of discount on convertible unsecured senior notes	186			138			137
Interest income on cash balances and other income (loss), net	1,092			532			188
Core Earnings	$	15,014		$	15,758		$	15,492

13

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 September 30, 2019, June 30, 2019 and March 31, 2019:

	Three months ended
(dollars in thousands)	September 30, 2019			June 30, 2019			March 31, 2019
Coupon interest income	$	60,411		$	57,792		$	54,771
Premium amortization, discount accretion and amortization of basis, net	(4,759		)	(3,974		)	(2,738		)
Interest income	55,652			53,818			52,033
Contractual interest income, net of amortization of basis on Agency and Non-Agency Interest-Only Strips, classified as derivatives(1):
Coupon interest income	723			819			784
Amortization of basis	(590		)	(655		)	(595		)
Subtotal	133			164			189
Total adjusted interest income	$	55,785		$	53,982		$	52,222

(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 September 30, 2019, June 30, 2019 and March 31, 2019:

	Three months ended
	September 30, 2019					June 30, 2019					March 31, 2019
(dollars in thousands)	Reconciliation			Cost of Funds/Effective Borrowing Costs		Reconciliation			Cost of Funds/Effective Borrowing Costs		Reconciliation			Cost of Funds/Effective Borrowing Costs
Interest expense	$	39,082		3.35	%	$	37,958		3.54	%	$	36,400		3.94	%
Adjustments:
Interest expense on Securitized debt from consolidated VIEs1	(6,657		)	(4.18	)%	(8,215		)	(4.26	)%	(9,157		)	(4.22	)%
Net interest (received) paid - interest rate swaps	(1,715		)	(0.15	)%	(3,850		)	(0.36	)%	(4,283		)	(0.46	)%
Effective Borrowing Costs	$	30,710		3.05	%	$	25,893		2.94	%	$	22,960		3.25	%
Weighted average borrowings	$	4,000,534				$	3,527,942				$	2,868,327

(1)    Excludes third-party sponsored securitized debt interest expense.

14

EX-99.2

Third Quarter 2019 Investor Presentation November 5, 2019

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

Third Quarter 2019 WMC Earnings Call Presenters Jennifer W. Murphy Lisa Meyer Harris Trifon 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 ("Western Asset") • One of the largest U.S. fixed income asset managers with AUM of $452.9 billion(1) ◦ The AUM of the Mortgage and Consumer Credit Group is $81.7 billion(1) ◦ Extensive mortgage and consumer credit investing track record • Publicly traded diversified mortgage REIT positioned to capture attractive current and long-term investment opportunities in the residential and commercial mortgage markets • Completed Initial Public Offering in May 2012 Please refer to page 19 for footnote disclosures. 3

Corporate Overview ▪ WMC is a diversified mortgage finance REIT supported by the deep investment experience of the mortgage and consumer credit group and risk management teams of 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; * Operational excellence and efficiencies; and * Highest standards of financial reporting, disclosure and transparency. ▪ WMC has built a barbell investment strategy pairing Agency commercial mortgage- backed securities ("Agency CMBS") and opportunistic Agency residential mortgage- backed securities ("Agency RMBS") with credit investments, which include residential and commercial loan exposure. ▪ WMC has paid a consistent dividend for 14 quarters, reflecting a philosophy of delivering a sustainable dividend that is supported by the core earnings of the portfolio. 4

Barbell Investment Strategy • An investment strategy designed to balance our interest rate investments with residential and commercial credit investments. • Primary goal of generating attractive returns while preserving book value. $5.0 Billion Hybrid Portfolio Comprised of Interest Rates and Credit Investments Interest Rate Investments Credit Investments • Agency CMBS • Residential Non-Qualified Mortgages ◦ Prepayment Protection • Commercial Loans ◦ Less Expensive to Hedge ◦ Bridge Loans ◦ Market > $700 Billion ◦ Large Transitional Loans • Agency RMBS • Non-Agency Securities ◦ Opportunistic Exposure 5

Target Investment Opportunities Interest Rate Investments ▪ Multifamily residential loans guaranteed by Fannie Mae and Freddie Mac. ▪ Market size of more than $700 billion with annual issuance in excess of $100 billion. Agency CMBS ▪ 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. Credit Investments ▪ Generally invest in transactions where our manager has an opportunity to Commercial Loans negotiate deal structure and covenants. ▪ Attractive yields of LIBOR plus 4% to 10%. ▪ Target floating rate assets and short term loans. • Strategic partnerships with seasoned originators. Non-Qualifying ▪ Mainly 3/1, 5/1, and 7/1 ARM loans. Residential Mortgages ▪ Coupon between 4.0% to 5.5%. ▪ Target loan to value below 70%. 6

Third Quarter Financial Highlights ▪ September 30, 2019 book value per share of $10.60, net of third quarter common dividend of $0.31 declared on September 19, 2019. ▪ GAAP net income of $19.7 million, or $0.37 per basic and diluted common share. ▪ Core earnings of $15.0 million(2), or $0.28 per basic and diluted common share. ▪ Economic return on book value was 3.8%(3) for the quarter. ▪ 1.69%(4) annualized net interest margin on our investment portfolio. ▪ 5.4x leverage excluding non-recourse debt as of September 30, 2019 (8.0x leverage including non-recourse debt). ▪ Issued an additional $40.0 million aggregate principal amount of 6.75% convertible senior unsecured notes due 2022. ▪ Sold $562.3 of Agency MBS investments. ▪ Redeployed the capital to acquire $564.6 million of investments, consisting of: * $237.5 million in Agency CMBS * $129.7 million in a Commercial Loan * $80.7 million in Residential Whole Loans * $108.7 million in Non-Agency CMBS * $7.9 million in GSE Risk Transfer Securities. Please refer to page 19 for footnote disclosures. 7

Recent Performance (3) Economic Return Book Value $12.00 4% $10.00 5.4% $8.00 2% 3.8% $6.00 $10.45 $10.70 $10.51 $10.60 1.1% 0% $4.00 $2.00 (3.3)% -2% $0.00 Q4 2018 Q1 2019 Q2 2019 Q3 2019 -4% Q4 2018 Q1 2019 Q2 2019 Q3 2019 Dividend Per Share Core Earnings Plus Drop Income Per Share (2) $0.35 $0.40 $0.30 $0.35 $0.30 $0.25 $0.25 $0.20 $0.20 $0.31 $0.31 $0.31 $0.31 $0.15 $0.34 $0.32 $0.15 $0.31 $0.28 $0.10 $0.10 $0.05 $0.05 $0.00 $0.00 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Please refer to page 19 for footnote disclosures. 8

WMC Returns as of September 30, 2019 Economic Return(3) Total Stock Return(19) 3 Years 5/5/12 to 3 Years 5/5/12 to QTD YTD Ended 9/30/2019 QTD YTD Ended 9/30/2019 3.8% 10.3% 24.7% 40.4% (0.2)% 26.9% 28.3% 35.6% Please refer to page 19 for footnote disclosures. 9

Portfolio Composition 0.9% Total Investment Portfolio ($ in millions) 5.8% Agency RMBS September 30, 2019 Agency CMBS Agency CMBS $ 1,807 24.1% Non-Agency RMBS Agency RMBS 382 36.0% Non-Agency CMBS Non-Agency CMBS 292 Non-Agency RMBS 47 Residential Whole-Loans Residential Whole-Loans 1,209 1.1% Residential Bridge Loans Residential Bridge Loans(5) 53 Securitized Commercial (6) Securitized Commercial Loans 702 Loans 14.1% Commercial Loans 442 Commercial Loans Other Securities(7) 83 7.6% Other Securities Total $ 5,017 1.7% 8.8% Select Sector Categories Agency Portfolio Credit Sensitive Securities Loan Portfolio 2.2% 82.3% 69.1% 29.2% 0.2% 50.2% 19.7% 16.7% 18.4% 0.8% 2.0% 9.2% Agency CMBS Non-Agency RMBS Residential Whole Loans Agency CMBS IO's Non-Agency RMBS IO Residential Bridge Loans Agency RMBS Non-Agency CMBS Securitized Commercial Loans Agency RMBS IO's ABS and GSE CRT Securities Commercial Loan Please refer to page 19 for footnote disclosures. 10

Income Attribution(8) For the Three Months Ended September 30, 2019 (in thousands except per share data) Non- Non- Residential Residential Securitized Agency Agency Agency Agency Whole- Bride Other Commercial Commercial CMBS RMBS CMBS RMBS Loans Loans(5) Investments (7) Loans Loans(15) Total Interest Income(9) $13,804 $ 3,852 $ 4,744 $ 556 $ 13,953 $ 1,362 $ 2,205 $ 7,612 $ 8,615 $ 56,703 Interest expense(10) (11,943) (3,228) (1,640) (257) (10,779) (916) (562) (2,812) (6,945) (39,082) Net interest rate swap interest income(11) 1,438 139 59 76 — — 4 — — 1,716 Net Interest Income 3,299 763 3,163 375 3,174 446 1,647 4,800 1,670 19,337 Realized gain/(loss) on investments 20,268 1,559 (77) — — (353) — — 21,397 Unrealized gain/(loss) on investments(12) 25,656 1,473 3,406 970 2,141 568 535 135 (845) 34,039 Securitized debt unrealized gain/(loss) — — — — — — — — 746 746 Gain/(loss) on derivative instruments, net (13) (41,324) (3,984) (1,686) (2,196) — — 705 — — (48,485) OTTI(14) (29) (193) (1,587) (27) — — (155) — — (1,991) Portfolio Income (loss) $ 7,870 $ (382) $ 3,219 $ (878) $ 5,315 $ 661 $ 2,732 $ 4,935 $ 1,571 $ 25,043 BV Per Share Increase (Decrease) $ 0.15 $ (0.01) $ 0.06 $ (0.02) $ 0.10 $ 0.01 $ 0.05 $ 0.09 $ 0.03 $ 0.46 Please refer to page 19 for footnote disclosures. 11

Financing Summary Repurchase Agreements ▪ Borrowings under 20 of 33 master repurchase agreements. ▪ Capacity in excess of our current needs. Repurchase Agreement Financing September 30, 2019 ($ in thousands) Weighted Average Weighted Average Outstanding Interest Rate Interest Remaining Days to Borrowings Rate Maturity Short Term Borrowings Agency RMBS $ 366,488 2.31% 49 Agency CMBS 1,640,190 2.36% 29 Non-Agency RMBS 31,071 3.67% 8 Non-Agency CMBS 201,751 3.28% 28 Residential Whole-Loans 10,854 3.96% 36 Residential Bridge Loan 50,092 4.26% 28 Commercial loans 137,821 4.33% 28 Securitized commercial loans 32,893 3.13% 9 Other securities(7) 57,061 3.55% 30 Subtotal 2,528,221 2.63% 31 Long Term Borrowings Residential Whole-Loans(16) 271,887 3.68% 653 Commercial Loans(16) 125,000 4.29% 641 Subtotal 396,887 3.87% 649 Total/Weighted Average $ 2,925,108 2.80% 115 12 Please refer to page 19 for footnote disclosures.

Financing Summary Convertible Senior Unsecured Notes ▪ At September 30, 2019, the Company had $155.0 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. Mortgage-Backed Notes ▪ The following table summarizes the residential mortgage-backed notes issued by the Company's securitization trust (the "Arroyo Trust") at September 30, 2019 (dollars in thousands): Principal Contractual Classes Balance Coupon Carrying Value Maturity Offered Notes:(17) Class A-1 $ 733,440 3.3% $ 733,438 4/25/2049 Class A-2 39,299 3.5% 39,298 4/25/2049 Class A-3 62,261 3.8% 62,259 4/25/2049 Class M-1 25,055 4.8% 25,055 4/25/2049 860,055 860,050 Less: Deferred Financing Cost N/A 5,491 Total $ 860,055 $ 854,559 The securitized debt of the Arroyo Trust can only be settled with the residential loans that serve as collateral for the securitized debt and are non-recourse to the Company. 13 Please refer to page 19 for footnote disclosures.

(18) Hedging Summary The following tables provide additional information on our fixed pay interest rate swaps and the variable pay interest rate swap as of September 30, 2019 ($ in thousands): Fixed Pay Interest Rate Swaps Notional Average Fixed Average Variable Average Maturity Maturity Amount Pay Rate Receive Rate (Years) Less than 1 Year $ 200,000 1.8% 2.3% 0.7 3 Years to 5 Years 1,182,500 2.5% 2.2% 4.4 >5 Years 2,137,100 2.3% 2.2% 9.0 Total Fixed Pay Rate $ 3,519,600 2.4% 2.2% 7.0 Variable Pay Interest Rate Swaps Notional Average  Average Fixed Average Maturity Maturity Amount Variable Pay Rate Receive Rate (Years) 1 Year to 3 Years $ 225,000 2.3% 2.4% 1.6 >5 Years 772,200 2.2% 2.3% 8.3 Total Variable Pay Rate $ 997,200 2.3% 2.4% 6.8 14 Please refer to page 19 for footnote disclosures.

(18) Hedging Summary The following tables provide information on other derivative instruments as of September 30, 2019 ($ in thousands): Other Derivative Instruments Notional Amount Fair Value Futures contracts, asset $ 60,300 $ 808 Credit default swaps, asset 60,100 2,884 Other derivative instruments, assets 3,692 Futures contracts, liability $ 65,400 $ (1,518) Credit default swaps, liability 90,900 (6,502) Total other derivative instruments, liabilities (8,020) Total other derivative instruments, net $ (4,328) 15 Please refer to page 19 for footnote disclosures.

Duration as of September 30, 2019 Agency Holdings Key Rate Duration Contribution Total 6-months 2-Year 5-Year 10-Year 20-Year 30-Year Agency IO/IIO 0.02 0.01 0.01 0.01 — (0.01) — Agency RMBS 0.25 0.02 0.07 0.08 0.06 0.02 — Agency CMBS 4.09 0.01 0.06 0.76 3.03 0.23 — Swaps and Futures (3.99) 0.06 (0.19) (1.46) (3.31) 0.62 0.29 Repurchase Agreements (0.07) (0.07) — — — — — Total 0.30 0.03 (0.05) (0.61) (0.22) 0.86 0.29 16 Please refer to page 19 for footnote disclosures.

2019 Global Outlook Western Asset Long-Term Themes ▪ Global growth ongoing but slow by historical standards. ▪ Global inflation will require extraordinary monetary policy accommodation to normalize. Current Themes ▪ Global growth will prove to be resilient. ▪ Monetary policy will pivot to greater accommodation. 17

Portfolio View ▪ Credit sensitive mortgage sectors have performed relatively well and are expected to continue to offer attractive returns. During the third quarter we added credit sensitive mortgages and expect to continue to invest in this asset class for the remainder of 2019. * Commercial real estate fundamentals continue to be positive. We expect to continue to deploy capital in commercial loans and Non-Agency CMBS. * We expect to continue to opportunistically deploy capital in residential whole loans, mainly non-qualified mortgages. 18

Footnotes (1) As of September 30, 2019. (2) 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. There was no drop income for the three months ended September 30, 2019. (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) 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 September 30, 2019. Excludes the net income from the consolidation of VIE Trusts required under GAAP. (5) 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 September 30, 2019 includes $48.1 million of residential bridge loans carried at fair value and $5.3 million of residential bridge loans carried at amortized costs. (6) In March 2019, the Company acquired a $65.3 million Non-Agency CMBS security which resulted in the consolidation of a variable interest entity and the recording of a $904 million securitized commercial loan and $904 million of securitized debt. (7) Other investments include ABS and GSE Credit Risk Transfer securities. (8) Non-GAAP measure which includes net interest margin (as defined in footnote 4), realized and unrealized gains or losses in the portfolio and other than temporary impairment. (9) Non-GAAP measure which includes interest income on IO's and IIO's accounted for as derivatives and other income. (10) Convertible senior notes interest expense has been allocated based on fair value of investments at September 30, 2019. (11) Net interest rate swaps interest income have been allocated based on average duration contribution. (12) Non-GAAP measure which includes net unrealized losses on IO's and IIO's accounted for as derivatives. (13) Gain (loss) on derivative instruments, net, has been allocated based average duration contribution (excluding cost of hedging and gains or losses on IO's and IIO's accounted for as derivatives). (14) Includes other than temporary impairments on IO's and IIO's accounted for as derivatives. (15) The portfolio income attribution for securitized commercial loan is presented on a consolidated basis (16) Certain Residential Whole Loans and Commercial Loans were financed under two longer term repurchase agreements. The Company entered into a $700.0 million residential and $150.0 million commercial facility. These facilities automatically renew until such time as they are terminated or until certain conditions of default. The weighted average remaining maturity days was calculated using expected weighted life of the underlying collateral. (17) The subordinate notes were retained by the Company. (18) 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. (19) 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. 19

Supplemental Information

Book Value Roll Forward Amounts in 000's Per Share Book Value at June 30, 2019 $ 559,626 $ 10.51 Equity portion of our convertible senior unsecured notes 1,390 0.03 Allocated debt offering cost to equity component (41) — Common dividend (16,499) (0.31) 544,476 10.23 Portfolio Income Net interest margin(4) 19,263 0.36 Net realized gain (loss) on investments and derivatives (30,006) (0.57) Unrealized gain (loss) on investments and derivatives 37,777 0.71 Other than temporary impairment(14) (1,991) (0.04) Net portfolio income 25,043 0.46 Operating expenses (3,390) (0.06) General and administrative expenses, excluding equity based compensation (1,824) (0.03) Provision for taxes 55 — Book Value at September 30, 2019 $ 564,360 $ 10.60 20 Please refer to page 19 for footnote disclosures.

Adjusted* Portfolio Composition Total Investment Portfolio ($ in millions) September 30, 2019 Consolidated Third Party Company Sponsored Unconsolidated (As Reported) Consolidated Trust Securitization (Non GAAP) Agency CMBS $ 1,807 $ — $ — $ 1,807 Agency RMBS 382 — — 382 Non-Agency CMBS 292 90 — 382 Non-Agency RMBS 47 — 62 109 Residential Whole-Loans 1,209 — (909) 300 Residential Bridge Loans 53 — — 53 Securitized Commercial Loans 702 (702) — — Commercial Loans 442 — — 442 Other Securities(7) 83 — — 83 Total $ 5,017 $ (612) $ (847) $ 3,558 *Excludes consolidation of VIE Trusts required under GAAP 50.9% Agency RMBS Agency CMBS 3.1% Non-Agency RMBS 10.7% Non-Agency CMBS Residential Whole-Loans Residential Bridge Loans 8.4% Commercial Loans 1.5% 10.7% Other Securities 2.3% 12.4% Please refer to page 19 for footnote disclosures. 21

Adjusted* Portfolio Income Attribution(8) For the Three Months Ended September 30, 2019 (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(5) (7) Loans Total Interest Income(9) $ 13,804 $ 3,852 $ 6,628 $ 556 $ 13,953 $ 1,362 $ 2,205 $ 7,612 $ 49,972 Interest expense(10) (11,943) (3,228) (1,928) (257) (10,779) (916) (562) (2,812) (32,425) Net interest rate swap interest income(11) 1,438 139 59 76 — — 4 — 1,716 Net Interest Income 3,299 763 4,759 375 3,174 446 1,647 4,800 19,263 Realized gain/(loss) on investments 20,268 1,559 (77) — — (353) — 21,397 Unrealized gain/ (loss) on investments(12) 25,656 1,473 3,380 970 2,141 568 536 135 34,859 Gain (loss) on derivative instruments, net(13) (41,324) (3,984) (1,686) (2,196) — — 705 — (48,485) OTTI(14) (29) (193) (1,587) (27) — — (155) — (1,991) Portfolio Income (loss) $ 7,870 $ (382) $ 4,789 $ (878) $ 5,315 $ 661 $ 2,733 $ 4,935 $ 25,043 BV Per Share Increase (Decrease) $ 0.15 $ (0.01) $ 0.09 $ (0.02) $ 0.10 $ 0.02 $ 0.04 $ 0.09 $ 0.46 *Excludes the securitized commercial loan and debt from the consolidation of VIE trusts required under GAAP. Reflects only our interest in the Non-Agency CMBS security that was acquired. 22 Please refer to page 19 for footnote disclosures.

Adjusted Credit Sensitive Portfolio as of September 30, 2019 Adjusted Credit Sensitive Portfolio* ($ in millions) Principal Amortized Net Weighted Net Weighted Balance Costs Fair Value Average Coupon Average Yield Non-Agency RMBS $ 53,022 $ 37,029 $ 38,673 4.8% 4.9% Non-Agency RMBS IOs and IIOs N/A 8,396 8,582 0.6% 5.4% Non-Agency CMBS 416,743 375,874 381,302 5.8% 7.6% Residential Whole Loans 1,169,131 1,188,099 1,209,237 5.2% 5.6% Residential Bridge Loans 54,466 54,529 53,373 9.4% 9.8% Commercial Loans 442,032 441,103 442,032 7.5% 8.1% Other Securities(7) 73,220 76,758 83,012 7.0% 7.0% $ 2,208,614 $ 2,181,788 $ 2,216,211 4.4% 6.6% *Excludes consolidation of VIE Trusts required under GAAP Commercial Loans: 20.8% Other Securities: 3.9% Non-Agency RMBS: 1.8% Non-Agency RMBS IO and IIOs: 0.4% Residential Bridge Loans: 2.5% Non-Agency CMBS: 13.8% Residential Whole Loans: 56.9% Please refer to page 19 for footnote disclosures. 23

Commercial Loans as of September 30, 2019 ($ in millions) Acquisition Principal Fair Maturity Extension Loan Date Loan Type Balance Value LTV Interest Rate Date Option Collateral Interest-Only 1-Month LIBOR plus Three One-Year CRE 1 March 2018 Mezzanine loan 20.0 20.0 — 6.5% 11/15/2019 Extensions Hotel Interest-Only First 1-Month LIBOR plus One-Year CRE 2 June 2018 Mortgage 30.0 30.0 — 4.5% 6/9/2020 Extension Hotel Principal & Interest 1-Month LIBOR plus Two One-Year Nursing CRE 4 June 2019 First Mortgage 50.0 50.0 — 7.00% 1/11/2022 Extensions Facilities Interest-Only 1-Month LIBOR plus Two-Year First Entertainment CRE 5 August 2019 Mezzanine loan 90.0 90.0 — 9.25% 6/29/2021 Extension and and Retail Interest-Only First 1-Month LIBOR plus One-YearTwo One-Year Second CRE 6 September 2019 Mortgage 40.0 40.0 — 3.02% 8/6/2021 Extensions Retail Interest-Only One-Month LIBOR Two One-Year Nursing SBC 1 July 2018 First Mortgage 45.2 45.2 — plus 4.25% (1) 7/1/2020 Extensions Facilities September and Interest-Only First One-Month LIBOR One-Year Assisted Care SBC 2 October 2018 (4) Mortgage 115.5 115.5 — plus 5.3% (2) 9/6/2021 Extension Living Facilities Interest-Only One-Month LIBOR One-Year Nursing SBC 3 November 2018 First Mortgage 5.7 5.7 — plus 5.25% 12/1/2020 Extension Facilities Interest-Only One-Month LIBOR One-Year Apartment SBC 4 January 2019 First Mortgage 13.6 13.6 — plus 4.0% (3) 12/1/2021 Extension Complex Interest-Only One-Month LIBOR Nursing SBC 5 January 2019 First Mortgage 32.0 32.0 — plus 4.1% 7/1/2021 None Facilities $ 442.0 $ 442.0 Footnotes (1) Subject to LIBOR floor of 1.25%. (2) Subject to LIBOR floor of of 1.9% and LIBOR cap of 3.5%. (3) Subject to LIBOR floor of 2.0%. (4) Acquired $49.6 million of the loan in September 2018 and the remaining $65.9 million in October 2018. 24

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