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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(Mark One)

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

For the quarterly period ended March 31, 2013

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

For the transition period from         to

Commission File Number:  001-35543

Western Asset Mortgage Capital Corporation

(Exact name of Registrant as specified in its charter)

Western Asset Mortgage Capital Corporation

385 East Colorado Boulevard

Pasadena, California 91101

(Address of Registrant’s principal executive offices)

(626) 844-9400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 under the Securities Exchange Act of 1934).  Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

As of May 13, 2013, there were 24,304,503 shares, par value $0.01, of the registrant’s common stock issued and outstanding.

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EXPLANATORY NOTE

Western Asset Mortgage Capital Corporation (the “Company”) filed its Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 on May 15, 2013 (the “Original Form 10-Q”) and is filing this Amendment No. 1 to the Original Form 10-Q (this “Form 10-Q/A”) to restate Item 4. “Controls and Procedures.” This Form 10-Q/A corrects an inadvertent typographical error in Item 4 by including the Company’s management’s conclusion as to the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2013.

In connection with the filing of this Form 10-Q/A and pursuant to Rules 13a-14(a) or 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, we are including with this Form 10-Q/A certain currently dated certifications.

Except as necessary to provide the disclosure noted above, no other modifications or updates have been made to the Original Form 10-Q and this Form 10-Q/A does not describe events occurring after the Original Form 10-Q (including with respect to exhibits) or modify or update disclosures (including forward-looking statements) which may have been affected by events or changes in facts occurring after the date of the Original Form 10-Q. Information not affected by the Item described above, including among other items, the Company’s reported financial statements and management discussion and analysis of financial condition, remains unchanged and reflects the disclosures made at the time of, and as of the dates described in, the Original Form 10-Q. Accordingly, this Form 10-Q/A should be read in conjunction with the Company’s filings made with the United States Securities and Exchange Commission (the “SEC”) subsequent to the filing of the Original Form 10-Q, as information in such filings may update or supersede certain information contained in this Form 10-Q/A.

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ITEM 4.   Controls and Procedures.

(a)                                 Evaluation of Disclosure Controls and Procedures

A review and evaluation was performed by the Company’s management, including the Company’s Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of March 31, 2013, the end date of the period covered by this quarterly report on Form 10-Q.  A control system, no matter how well designed and operated can provide only reasonable, not absolute assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports.

As described below, management has identified a material weakness in the Company’s internal control over financial reporting and accordingly has concluded that the Company’s disclosure controls and procedures were not effective to give reasonable assurances to the timely collection, evaluation and disclosure of information relating to the Company that would potentially be subject to disclosure under the Exchange Act and the rules and regulations promulgated thereunder.  Internal control over financial reporting is an integral component of the Company’s disclosure controls and procedures.  Solely as a result of this material weakness described below, the Company’s management, including the CEO and CFO have concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2013.

(b)                                 Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.  Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and includes those policies and procedures that:

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

However, in assessing the Company’s disclosure controls and procedures as of December 31, 2012, the Company identified a material weakness in the Company’s internal control over financial reporting as described below.

A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

In connection with the preparation of the Company’s financial statements included in its annual report on Form 10-K, the Company discovered that the methodology used to accrete interest income and to amortize the cost basis of certain of the Company’s investments in RMBS did not comply with GAAP.   In order to correct these errors, the Company reclassified a portion of the Company’s net interest income to both realized and unrealized gains, and certain amounts previously reflected in operating cash flows to investing cash flows.

Following the identification of the errors described above, the Company determined that a material weakness existed in the Company’s internal control over financial reporting as of December 31, 2012 attributable to management’s supervision, review and acceptance procedures with respect to a third-party vendor’s methodology for and computation of interest income accretion and amortization of the cost basis of certain of the Company’s investments in RMBS.

For the three months ended March 31, 2013, the Company implemented procedures to remediate the material weakness which include confirming on no less than a quarterly basis: (i) the accuracy of prepayments speeds provided by the Company and utilized by its third party vendor; (ii) the implementation, application and methodology used by its third party vendor for purposes of calculating interest income accretion or amortization of the cost basis for each category of RMBS in the investment portfolio of the Company; (iii) that the aforementioned calculations have been done appropriately by recalculating the applicable interest income accretion or amortization of cost basis for a sample of each category of RMBS; and (iv) review portfolio reports provided by its third party vendor in order to identify exceptions and inconsistencies.  The Company believes that the new procedures, will remediate the material weakness described above.  However, the Company cannot provide any assurance that these remediation efforts will be successful or that its internal control over financial reporting will be effective as a result of these efforts.

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PART II – OTHER INFORMATION

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ITEM 6.  Exhibits

(a)                                 The following exhibits are filed as part of this report.

*Fully or partly previously filed.

**These interactive data files were previously furnished and not deemed filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act, and are not deemed filed for purposes of Section 18 of the Exchange Act, and otherwise are not subject to liability under those sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 to its quarterly report on Form 10-Q for the quarter ended March 31, 2013 to be signed on its behalf by the undersigned, thereunto duly authorized.

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