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| 8-K - FORM 8-K - CAPSTEAD MORTGAGE CORP | d546464d8k.htm |
 CAPSTEAD
Information as of March 31, 2013 with Analysis Reflecting the
May 13, 2013 Issuance of our 7.50% Series E Cumulative Redeemable
Preferred Stock (NYSE Symbol CMOPRE) and the June 13, 2013
Redemption of our Existing Perpetual Preferred Shares
Investor Presentation
Exhibit 99.1 |
 Safe
Harbor Statement - Private Securities Litigation Reform Act of 1995
Cautionary Statement Concerning Forward-looking Statements
This
document
contains
“forward-looking
statements”
within
the
meaning
of
the
Private
Securities
Litigation
Reform
Act
of
1995.
Forward-looking
statements
include,
without
limitation,
any
statement
that
may
predict,
forecast,
indicate
or
imply
future
results,
performance
or
achievements,
and
may
contain
the
words
“believe,”
“anticipate,”
“expect,”
“estimate,”
“intend,”
“will
be,”
“will
likely
continue,”
“will
likely
result,”
or
words
or
phrases
of
similar
meaning.
Forward-looking
statements
are
based
largely
on
the
expectations
of
management
and
are
subject
to
a
number
of
risks
and
uncertainties
including,
but
not
limited
to,
the
following:
In
addition
to
the
above
considerations,
actual
results
and
liquidity
are
affected
by
other
risks
and
uncertainties
which
could
cause
actual
results
to
be
significantly
different
from
those
expressed
or
implied
by
any
forward-looking
statements
included
herein.
It
is
not
possible
to
identify
all
of
the
risks,
uncertainties
and
other
factors
that
may
affect
future
results.
In
light
of
these
risks
and
uncertainties,
the
forward-looking
events
and
circumstances
discussed
herein
may
not
occur
and
actual
results
could
differ
materially
from
those
anticipated
or
implied
in
the
forward-looking
statements.
Forward-looking
statements
speak
only
as
of
the
date
the
statement
is
made
and
the
Company
undertakes
no
obligation
to
update
or
revise
any
forward-looking
statements,
whether
as
a
result
of
new
information,
future
events
or
otherwise.
Accordingly,
readers
of
this
document
are
cautioned
not
to
place
undue
reliance
on
any
forward-looking
statements
included
herein.
–
changes in general economic conditions;
–
fluctuations in interest rates and levels of mortgage
prepayments;
–
the effectiveness of risk management strategies;
–
the impact of differing levels of leverage employed;
–
liquidity of secondary markets and credit markets;
–
the availability of financing at reasonable levels and terms to
support investing on a leveraged basis;
–
the availability of new investment capital;
–
the availability of suitable qualifying investments from both
an investment return and regulatory perspective;
–
changes in legislation or regulation affecting Fannie Mae and
Freddie Mac (together, the “GSEs”) and similar federal
government agencies and related guarantees;
–
deterioration in credit quality and ratings of existing or future
issuances of GSE or Ginnie Mae Securities;
–
changes in legislation or regulation affecting exemptions for
mortgage REITs from regulation under the Investment
Company Act of 1940; and
–
increases in costs and other general competitive factors.
2 |
 Company Summary
Proven Strategy
Experienced
Management Team
Aligned with
Stockholders
Overview of Capstead Mortgage Corporation
•
Founded
in
1985,
Capstead
is
the
oldest
publicly-traded
Agency
mortgage
REIT.
•
At
March
31,
2013,
we
had
a
residential
ARM
securities
portfolio
of
$13.85
billion,
supported
by
long-term
investment
capital
of
$1.59
billion
levered
8.06
times.*
•
Our
five-year
compound
annual
total
return
of
18.0%
exceeded
the
Russell
2000
Index
and
the
NAREIT
Mortgage
REIT
Index.**
•
We
invest
exclusively
in
residential
adjustable-rate
mortgage
(ARM)
securities
issued
and
guaranteed
by
Fannie
Mae,
Freddie
Mac
or
Ginnie
Mae.
Agency-guaranteed
mortgage
securities
are
considered
to
have
little,
if
any,
credit
risk.
•
Our
focus
on
short-duration
ARM
securities
augmented
with
2-year
interest
rate
swap
agreements
differentiates
us
from
our
peers
because
ARM
securities
reset
to
more
current
interest
rates
within
a
relatively
short
period
of
time.
This
allows
for
the
recovery
of
financing
spreads
diminished
during
periods
of
rising
interest
rates
and
smaller
fluctuations
in
portfolio
values
from
changes
in
interest
rates
compared
to
fixed-rate
mortgage
securities.
With
this
strategy,
Capstead
is
recognized
as
the
most
defensively-positioned
Agency
mortgage
REIT
from
an
interest
rate
risk
perspective.
•
Our
prudently
leveraged
portfolio
provides
financial
flexibility
to
manage
changing
market
conditions.
•
Our
top
four
executive
officers
have
over
85
years
of
combined
mortgage
finance
industry
experience,
including
over
80
years
at
Capstead.
•
We
are
self-managed
with
low
operating
costs
and
a
focus
on
performance-based
compensation
for
our
executive
officers.
This
structure
greatly
enhances
the
alignment
of
management
interests
with
those
of
our
stockholders.
3
*
Long-term
investment
capital
includes
stockholders’
equity
and
unsecured
borrowings,
net
of
investments
in
related
unconsolidated
affiliates.
**
Compound
annual
growth
rate
is
based
on
cumulative
total
returns
assuming
an
investment
in
Capstead
was
made
March
31,
2008
and
dividends
were
reinvested. |
 Cost of
As Adjusted for Issuance of
March 31,
Preferred
Series E Preferred and Redemption
2013
Capital
of Series A and B Preferred
Long-term investment capital:
Trust preferred securities, net
$
99,978
8.49%
$
99,978
8.49%
Existing perpetual preferred stock:
Series A
2,604
11.44%
-
Series B
186,388
11.15%
-
(a)
188,992
11.15%
-
New Series E perpetual preferred stock
-
164,395
7.76%
(b)
Total mezzanine capital
288,970
10.23%
264,373
8.03%
(c)
Common equity capital
1,301,100
1,283,928
(d)
$
1,590,070
$
1,548,301
Quarterly perpetual preferred dividend requirement
$
5,270
$
3,188
(e)
Improvements in Capstead’s Capital Structure
(dollars in thousands, unaudited)
4
On May 13, 2013 we issued $170 million in perpetual preferred stock with a 7.50%
coupon and on June 13, 2013 we will complete the
redemption of our existing perpetual preferred stock using the proceeds of
this offering and cash on hand. These transactions will significantly lower our effective cost
of total mezzanine capital benefiting future earnings.
(a)
It
is
anticipated
that
nearly
all
of
our
Series
A
shares
will
convert
into
common
shares
because
it
is
economically
advantageous
to
do
so
and
that
none
of
our
Series
B
shares
will
convert
because
it
is
not
advantageous
to
do
so.
(b)
Reflects
the
May
13,
2013
issuance
of
6.8
million
shares
of
our
7.50%
Series
E
Cumulative
Redeemable
Preferred
Stock
(Liquidation
Preference:
$25.00
per
share)
(NYSE
Symbol:
CMOPRE),
for
$170
million
in
gross
proceeds
before
underwriting
fees
and
estimated
offering
expenses.
(c)
Between
October
2015
and
September
2016
the
effective
cost
of
our
trust
preferred
securities
will
decline
from
8.49%
to
7.56%
as
these
securities
enter
20
year
floating
rate
periods
that
we
have
hedged
using
interest
rate
swap
agreements.
This
will
further
lower
the
effective
cost
of
our
total
mezzanine
capital
to
7.68%.
(d)
As
adjusted
common
equity
capital
reflects
the
expected
payment
of
aggregate
Series
B
redemption
preferences
over
recorded
amounts
of
$19.8
million
($12.50
redemption
price
per
Series
B
preferred
share
less
$11.30
recorded
amount
per
Series
B
preferred
share)
and
the
conversion
of
all
Series
A
preferred
shares
into
common
shares.
Book
value
per
common
share
will
be
reduced
by
approximately
2%
because
of
the
redemption
preferences
paid
on
our
Series
B
preferred
shares,
dilution
from
the
conversion
of
Series
A
preferred
shares
into
common
shares,
and
the
establishment
of
a
new
redemption
preference
on
our
Series
E
preferred
shares.
(e)
The
redemption
of
our
Series
A
and
B
preferred
stock
and
issuance
of
our
Series
E
preferred
stock
will
reduce
quarterly
perpetual
preferred
dividends
by
approximately
$2.1
million,
improving
quarterly
EPS
by
over
2
cents
per
common
share. |
 33%
67%
43%
57%
Capstead’s Proven Short-Duration Investment Strategy
5
As of March 31, 2013
As of March 31, 2013
Low risk agency-guaranteed residential ARM securities financed primarily with
30-90 day “repo” borrowings, augmented with two-year
interest rate swap agreements for hedging purposes. Residential ARM Securities
Portfolio Repurchase Arrangements & Similar Borrowings
Total: $12.82 billion
* Based on fair market value as of the indicated balance sheet
date (unaudited). Total: $13.85 billion*
•
Most
of
our
securities
are
backed
by
well-seasoned
mortgage
loans
with
coupon
interest
rates
that
reset
at
least
annually
or
begin
doing
so
after
an
initial
fixed-rate
period
of
five
years
or
less.
•
We
have
long-term
relationships
with
numerous
repo
counterparties.
As
of
March
31,
2013,
we
had
borrowings
outstanding
with
24
counterparties.
•
First
quarter
2013
repo
borrowing
rates
averaged
41
basis
points,
down
from
45
basis
points
during
the
fourth
quarter
of
2012
(a
blended
rate
of
0.58%
after
considering
currently-
paying
interest
rate
swaps).
•
At
March
31,
2013
we
held
$4.20
billion
notional
amount
of
currently-paying
two-year
term
interest
rate
swaps
requiring
fixed-rate
payments
averaging
0.67%
with
average
maturities
of
12
months.
An
additional
$2.10
billion
notional
amount
of
forward-starting
swaps
were
held
at
quarter-end
that
will
begin
requiring
fixed-rate
payments
averaging
0.45%
for
two-year
terms
beginning
on
various
dates
between
June
2013
and
January
2014.
•
The
duration
of
our
investment
portfolio
and
related
borrowings
(adjusted
for
swap
positions)
was
approximately
ten
months
and
nine
months,
respectively,
at
March
31,
2013.
This
resulted
in
a
net
duration
gap
of
approximately
one
month.
Duration
is
a
measure
of
market
price
sensitivity
to
interest
rate
movements.
Longer-to-Reset
ARMs
$5.94 Billion
Current-Reset
ARMs
$7.91 Billion
Borrowings with rates
effectively fixed by
Currently-Paying Interest
Rate Swaps
$4.20 Billion
(excludes $2.10 Billion in
forward-starting swaps)
Remaining
Borrowings
$8.62 Billion |
 2013
2012
Q1
Q4
Q3
Q2
Q1
Yields on residential mortgage
investments:
(a)
Cash yields
2.57%
2.60%
2.65%
2.71%
2.74%
Investment premium amortization
(0.84)
(0.84)
(0.79)
(0.67)
(0.60)
Adjusted yields
1.73
1.76
1.86
2.04
2.14
Related borrowing rates:
(b)
Unhedged borrowing rates
0.41
0.45
0.41
0.37
0.32
Fixed swap rates
0.71
0.75
0.78
0.80
0.85
Adjusted borrowing rates
0.58
0.63
0.56
0.54
0.49
Financing spreads on residential mortgage investments
1.15
1.13
1.30
1.50
1.65
Annualized CPR
19.65
19.60
18.74
15.86
14.50
Net income per diluted common share
$0.31
$0.31
$0.35
$0.40
$0.44
2013
2012
Q1
Q4
Q3
Q2
Q1
Financing spreads on residential mortgage investments
1.15%
1.13%
1.30%
1.50%
1.65%
Impact of yields on other interest-earning assets
*
(0.05)
(0.07)
(0.05)
(0.06)
(0.06)
Impact of borrowing rates on unsecured borrowings
and other interest-paying
liabilities* (0.06)
(0.06)
(0.06)
(0.07)
(0.06)
Total financing spreads
1.04
1.00
1.19
1.37
1.52
Financing Spread Analysis
As of March 31, 2013 (unaudited)
6
(a)
Cash
yields
are
based
on
the
cash
component
of
interest
income.
Investment
premium
amortization
is
determined
using
the
interest
method
and
incorporates
actual
and
anticipated
future
mortgage
prepayments.
Both
are
expressed
as
a
percentage
calculated
on
an
annualized
basis
on
average
amortized
cost
basis
for
the
indicated
periods.
(b)
Unhedged
borrowing
rates
represent
average
rates
on
repurchase
arrangements
and
similar
borrowings.
Fixed
swap
rates
represent
the
average
fixed
rates
on
currently-paying
interest
rate
swap
agreements
used
to
hedge
short-term
borrowing
rates.
Adjusted
borrowing
rates
reflect
unhedged
borrowing
rates
and
swap
rates
as
well
as
differences
between
variable
rate
payments
received
on
the
Company’s
currently-paying
swap
agreements,
which
typically
are
based
on
one-month
LIBOR,
and
unhedged
borrowing
rates
as
well
as
any
measured
hedge
ineffectiveness,
calculated
on
an
annualized
basis
on
average
outstanding
balances
for
the
indicated
periods.
Financing
spreads
on
residential
mortgage
investments,
a
non-GAAP
financial
measure,
differs
from
total
financing
spreads,
an
all-inclusive
GAAP
measure,
that
is
based
on
all
interest-earning
assets
and
all
interest-paying
liabilities.
The
Company
believes
that
presenting
financing
spreads
on
residential
mortgage
investments
provides
useful
information
for
evaluating
the
performance
of
the
Company’s
portfolio.
The
following
reconciles
these two
measures.
*
Other
interest-earning
assets
consist
of
overnight
investments
and
cash
collateral
receivable
from
interest
rate
swap
counterparties.
Other
interest-paying
liabilities
consist
of
long-term
unsecured
borrowings
(at
an
average
borrowing
rate
of
8.49%)
that
the
Company
considers
a
component
of
its
long-term
investment
capital
and
cash
collateral
payable
to
interest
rate
swap
counterparties. |
 *
Net
WAC,
or
weighted
average
coupon,
is
the
weighted
average
interest
rate
of
the
mortgage
loans
underlying
the
indicated
investments,
net
of
servicing
and
other
fees,
as
of
March
31,
2013.
Net
WAC
is
expressed
as
a
percentage
calculated
on
an
annualized
basis
on
the
unpaid
principal
balance
of
the
mortgage
loans
underlying
these
investments.
Fully
indexed
WAC
represents
the
weighted
average
coupon
upon
one
or
more
resets
using
interest
rate
indexes
and
net
margins
in
effect
as
of
March
31,
2013.
Gross
WAC
is
the
weighted
average
interest
rate
of
the
mortgage
loans
underlying
the
indicated
investments,
including
servicing
and
other
fees
paid
by
borrowers,
as
of
March
31,
2013.
NOTE:
Excludes
$8
million
of
fixed-rate
investments.
Fully
Average
Months
Principal
Investment
Amortized Cost Basis
Fair Market
Net
Indexed
Net
to
Balance
Premiums
($)
%
Value
WAC*
WAC*
Margins
Roll
Current-reset ARMs:
Fannie Mae Agency Securities
$
4,939,887
$118,124
$
5,058,011
102.39
$5,232,985
2.42%
2.23%
1.70%
5.0
Freddie Mac Agency Securities
1,727,847
46,919
1,774,766
102.72
1,837,610
2.62
2.35
1.84
5.6
Ginnie Mae Agency Securities
795,542
19,500
815,042
102.45
830,846
2.44
1.68
1.51
7.2
Residential Mortgage Loans
4,757
2
4,759
100.04
4,823
3.49
2.33
2.04
4.5
7,468,033
184,545
7,652,578
102.47
7,906,264
2.47
2.20
1.71
5.4
Longer-to-reset ARMs:
Fannie Mae Agency Securities
3,010,881
121,875
3,132,756
104.05
3,165,567
2.94
2.49
1.76
43.6
Freddie Mac Agency Securities
1,848,105
76,592
1,924,697
104.14
1,942,119
2.96
2.56
1.84
46.1
Ginnie Mae Agency Securities
787,244
29,978
817,222
103.81
832,107
2.96
1.67
1.51
29.6
5,646,230
228,445
5,874,675
104.05
5,939,793
2.95
2.40
1.75
42.5
$13,114,263
$412,990
$13,527,253
103.15
$13,846,057
2.68
2.29
1.73
21.3
Gross
WAC (rate paid by borrowers)* 3.29
Key Elements of Capstead’s ARM Portfolio
As of March 31, 2013 (dollars in thousands, unaudited)
7 |
 2013
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Thereafter
Expiring contracts
$1,100,000
0.81%
$700,000
0.96%
$300,000
0.87%
$
800,000
0.78%
$2,400,000
0.53%
Existing contracts
beginning two-year
payment terms
1,100,000
0.50
200,000
0.43
400,000
0.47
1,200,000
0.45
300,000
0.47
Improvement in fixed
swap rates *
0.31
0.53
0.40
0.33
0.06
Interest Rate Swap Agreement Rollforward
As of March 31, 2013 (dollars in thousands, unaudited)
8
To help mitigate exposure to higher interest rates, Capstead typically uses
currently-paying and forward- starting one-
and three-month LIBOR-indexed, pay-fixed, receive-variable,
interest rate swap agreements with two-year payment terms.
*
Based
on
the
difference
between
fixed
swap
rates
of
expiring
contracts
and
existing
contracts
as
of
March
31,
2013
that
begin
two-year
terms
during
the
indicated
periods.
There
can
be
no
assurance
interest
rate
swap
agreements
entered
into
subsequent
to
quarter-end
will
have
fixed
swap
rates
at
the
indicated
levels. |
 Capstead’s Stockholder Friendly Structure
9
Quarter Ended
March 31, 2013
*
Compensation-related expenses:
Fixed:
Salaries and related deferred compensation match,
payroll taxes, insurance and other benefits
0.23%
Variable:
Incentive Compensation
**
0.09
Dividend Equivalent Rights
0.05
54% of compensation-related
Performance Stock Awards
0.10
expenses were performance-based
Related deferred compensation match and payroll taxes
0.03
0.27
0.50
Other platform expenses
0.27
0.77%
-
Represents the lowest platform costs
in the industry.
*
Expressed as a percentage of average long-term investment capital (LTIC).
**
Incentive compensation is based on a 10% participation in returns on LTIC in excess
of benchmark returns (greater of 10% or the average 10-year Treasury rate
plus 2.0%), capped at 50 basis points of LTIC and subject to Compensation Committee
discretion. •
Self-managed with low operating costs.
•
Our board of directors requires management to hold a significant
amount of CMO stock based on a
multiple of each executive’s base salary. As of February 25, 2013 our
directors and executive officers beneficially owned 1.8% of our common
shares. •
Pay structure is variable through compensation elements that focus on “pay for
performance.” •
Management is incented to grow the Company by raising capital when it is accretive
to book value and earnings rather than for the purpose of increasing
compensation or external management fees. •
Bottom line: our management prospers when our stockholders prosper.
|
 Appendix
CAPSTEAD
10
*
*
*
*
* |
 Capstead’s First Quarter 2013 Highlights
•
Earnings of $34.9 million or $0.31
per diluted common share
•
Financing spreads on residential mortgage investments increased 2
basis points to 1.15%
•
Operating costs as a percentage of average long-term investment capital decreased
2 basis points to 0.77% •
Book value increased $0.02 to $13.60 per common share
•
Portfolio leverage ended the quarter at 8.06 times long-term investment capital
•
Comments from our April 24, 2013 earnings press release:
“First
quarter
results
reflect
stable
quarter
over
quarter
mortgage
prepayment
levels
on
our
agency-guaranteed
ARM
securities
portfolio
as
well
as
lower
borrowing
costs,
which
more
than
offset
slightly
lower
weighted
average
coupons
on
the
portfolio.
Lower
borrowing
costs
reflect
lower
market
rates
during
the
quarter
as
well
as
the
rollover
to
lower
rates
of
a
significant
portion
of
our
currently-paying
swap
position.
Together,
these
factors
contributed
to
a
2
basis
point
increase
in
our
financing
spreads
to
1.15%,
with
earnings
remaining
at
$0.31
per
diluted
common
share.
We
also
posted
a
$0.02
increase
in
book
value
to
$13.60
per
common
share
reflecting
stable
quarter
over
quarter
pricing
levels
for
agency-
guaranteed
ARM
securities.
“Looking
forward
to
the
rest
of
2013,
we
are
optimistic
our
portfolio
will
continue
to
perform
well.
Mortgage
prepayment
levels
should
remain
manageable
in
the
coming
quarters
given
that
approximately
91%
of
the
mortgages
underlying
our
current-reset
ARM
securities
were
originated
prior
to
2008
and
carry
coupon
interest
rates
at
or
below
prevailing
fixed
mortgage
rates
diminishing
the
economic
advantage,
if
any,
of
refinancing.
This
should
help
contain
investment
premium
amortization
costs,
which
decreased
$0.9
million
this
quarter
to
$28.4
million.
Also,
further
declines
in
weighted
average
coupons
should
be
relatively
modest
given
that
an
increasing
number
of
mortgage
loans
underlying
our
current-reset
ARM
securities
are
at
or
near
fully-indexed
levels.
With
respect
to
our
borrowing
costs,
another
$1.80
billion
notional
amount
of
our
interest
rate
swaps
with
average
fixed
rates
of
0.87%
will
mature
over
the
remainder
of
2013
and
have
already
been
replaced
with
swaps
averaging
0.45%
allowing
for
further
declines
in
borrowing
costs
provided
market
rates
for
short-term
borrowings
remain
reasonable.
“We
remain
confident
in
and
focused
on
our
investment
strategy
of
managing
a
conservatively
leveraged
portfolio
of
agency-guaranteed
residential
ARM
securities
that
can
produce
attractive
risk-adjusted
returns
over
the
long
term
while
reducing,
but
not
eliminating,
sensitivity
to
changes
in
interest
rates.”
11 |
 Capstead’s Quarterly Income Statements
(dollars in thousands, except per share amounts, unaudited)
12
March
December
September
June
March
2013
2012
2012
2012
2012
Interest income:
Residential mortgage investments
58,468
$
60,948
$
63,463
$
65,787
$
65,733
$
Other
112
218
154
176
150
58,580
61,166
63,617
65,963
65,883
Interest expense:
Repurchase arrangements and similar borrowings
(18,468)
(20,672)
(17,875)
(16,451)
(14,103)
Unsecured borrowings
(2,187)
(2,187)
(2,186)
(2,187)
(2,187)
(20,655)
(22,859)
(20,061)
(18,638)
(16,290)
37,925
38,307
43,556
47,325
49,593
Other revenue (expense):
Miscellaneous other revenue (expense)
(30)
(24)
9
13
(169)
Incentive compensation
(351)
(515)
(781)
(1,295)
(1,538)
Salaries and benefits
(1,610)
(1,638)
(1,696)
(1,682)
(1,827)
Other general and administrative expense
(1,081)
(1,111)
(1,115)
(1,091)
(954)
(3,072)
(3,288)
(3,583)
(4,055)
(4,488)
Income before equity in earnings of unconsolidated affiliates
34,853
35,019
39,973
43,270
45,105
Equity in earnings of unconsolidated affiliates
65
65
64
65
65
Net income
34,918
35,084
40,037
43,335
45,170
Less cash dividends declared on preferred shares *
(5,270)
(5,270)
(5,270)
(5,268)
(5,213)
Net income available to common stockholders
29,648
$
29,814
$
34,767
$
38,067
$
39,957
$
Net income per diluted common share
$0.31
$0.31
$0.35
$0.40
$0.44
Average long-term investment capital
1,604,603
$
1,639,014
$
1,629,566
$
1,544,380
$
1,454,495
$
Average balance of mortgage assets
13,542,932
13,888,637
13,657,286
12,922,725
12,280,065
Investment premium amortization
28,385
29,331
27,151
21,699
18,496
Average constant prepayment rate, or CPR (represents
only prepayments)
Average financing spreads on residential mortgage investments
1.50 Quarter Ended
1.15
19.7%
1.13
19.6%
15.9%
1.65
14.5%
1.30
18.7% *
With
the
issuance
of
our
new
7.50%
Series
E
preferred
shares,
and
subsequent
redemption
of
our
existing
preferred
shares,
cash
dividends
paid
on
preferred
shares
will
be
reduced
to
a
quarterly
run-rate
of
$3.2
million.
Second
quarter
2013
net
income
available
to
common
stockholders
will
reflect
a
short-term
preferred
capital
“overhang”
associated
with
the
timing
difference
between
the
May
13,
2013
issuance
of
our
Series
E
preferred
shares
and
the
June
13,
2013
redemption
of
our
existing
preferred
shares.
Second
quarter
net
income
available
to
common
stockholders
will
also
reflect
a
one-time
charge
of
$19.8
million
associated
with
the
expected
payment
of
Series
B
redemption
preferences. |
 Capstead’s Comparative Balance Sheets
(dollars in thousands, except per share amounts, unaudited)
13
March 31,
December 31,
December 31,
December 31,
December 31,
2013
2012
2011
2010
2009
Assets
Residential mortgage investments
13,854,405
$
13,860,158
$
12,264,906
$
8,515,691
$
8,081,050
$
Commercial loan investments
-
-
-
-
10,053
Cash collateral receivable from interest rate swap counterparties
40,233
49,972
48,505
35,289
30,485
Interest rate swap agreements at fair value
114
169
617
9,597
1,758
Cash and cash equivalents
471,510
425,445
426,717
359,590
409,623
Receivables and other assets
120,725
130,402
100,760
76,078
92,817
Investments in unconsolidated affiliates
3,117
3,117
3,117
3,117
3,117
14,490,104
$
14,469,263
$
12,844,622
$
8,999,362
$
8,628,903
$
Liabilities
Repurchase arrangements and similar borrowings
12,821,519
$
12,784,238
$
11,352,444
$
7,792,743
$
7,435,256
$
Cash collateral payable to interest rate swap counterparties
-
-
-
9,024
-
Interest rate swap agreements at fair value
24,763
32,868
31,348
16,337
9,218
Unsecured borrowings
103,095
103,095
103,095
103,095
103,095
Common stock dividend payable
30,349
29,512
38,184
27,401
37,432
Accounts payable and accrued expenses
20,286
22,425
26,844
23,337
29,961
13,000,012
12,972,138
11,551,915
7,971,937
7,614,962
Stockholders' Equity
Perpetual preferred stock
188,992
188,992
184,514
179,323
179,333
Common stock
1,006,982
1,014,223
903,653
674,202
661,724
Accumulated other comprehensive income
294,118
293,910
204,540
173,900
172,884
1,490,092
1,497,125
1,292,707
1,027,425
1,013,941
14,490,104
$
14,469,263
$
12,844,622
$
8,999,362
$
8,628,903
$
outstanding and calculated assuming liquidation preferences
for the Series A and B preferred stock) (unaudited)
$13.60
$13.58
$12.52
$12.02
$11.99
unsecured borrowings, net of investments in related
unconsolidated affiliates) (unaudited)
$1,590,070
$1,597,103
$1,392,685
$1,127,403
$1,113,919
borrowings divided by long-term investment capital) (unaudited)
8.06:1
8.00:1
8.15:1
6.91:1
6.67:1
Book
value
per
common
share
(based
on
common
shares
Long-term
investment
capital
(stockholders'
equity
and
Portfolio
leverage
(repurchase
arrangements
and
similar |
 Capstead’s Annual Income Statements –
Five Years Ended 2012
(dollars in thousands, except per share amounts, unaudited)
14
December
December
December
December
December
2012
2011
2010
2009
2008
Interest income:
Residential mortgage investments
255,931
$
243,077
$
198,488
$
313,676
$
394,729
$
Other
698
301
1,290
919
5,760
256,629
243,378
199,778
314,595
400,489
Interest expense:
Repurchase arrangements and similar borrowings
(69,101)
(57,328)
(47,502)
(120,083)
(249,706)
Unsecured borrowings
(8,747)
(8,747)
(8,747)
(8,747)
(8,747)
Other
-
(5)
(2)
-
-
(77,848)
(66,080)
(56,251)
(128,830)
(258,453)
178,781
177,298
143,527
185,765
142,036
Other revenue (expense):
Miscellaneous other revenue (expense)
(171)
(1,023)
(904)
(40,641)
(1,593)
Incentive compensation
(4,129)
(5,697)
(5,055)
(4,769)
(6,000)
Salaries and benefits
(6,843)
(6,701)
(6,097)
(5,655)
(4,978)
Other general and administrative expense
(4,271)
(3,932)
(4,834)
(5,696)
(3,801)
(15,414)
(17,353)
(16,890)
(56,761)
(16,372)
Income before equity in earnings of unconsolidated affiliates
163,367
159,945
126,637
129,004
125,664
Equity in earnings of unconsolidated affiliates
259
259
259
259
259
Net income
163,626
$
160,204
$
126,896
$
129,263
$
125,923
$
Net income per diluted common share
$1.50
$1.75
$1.52
$1.66
$1.93
Average long-term investment capital
1,567,232
$
1,284,057
$
1,120,647
$
1,032,853
$
813,428
$
Average balance of mortgage assets
13,190,380
10,839,749
7,665,796
7,604,530
7,630,958
Investment premium amortization
96,677
68,077
57,634
29,426
29,336
Average constant prepayment rate of CPR (represents only
prepayments)
Average financing spreads on residential mortgage investments
1.68
16.1% Year Ended
16.6%
1.67
16.0%
1.93
29.1%
2.42
1.38
17.2% |
 Experienced Management Team
15
Over 85 years of combined mortgage finance industry experience, including over 80
years at Capstead. Andrew F. Jacobs –
President and Chief Executive Officer, Director
–
Has served as president and chief executive officer since 2003 and has held various
executive positions at Capstead since 1988 –
Certified Public Accountant (“CPA”), member of the Executive Board of the
National Association of Real Estate Investment Trusts (“NAREIT”),
chairman of NAREIT’s Council of Mortgage REITs, member of the Executive Committee of the Chancellors Council of
the University of Texas System, the Executive Council of the Real Estate Finance
and Investment Center at the University of Texas at Austin, the American
Institute of Certified Public Accountants (“AICPA”), and the Financial Executives International (“FEI”)
Phillip A. Reinsch
–
Executive Vice President and Chief Financial Officer, Secretary
–
Has held various financial accounting and reporting positions at
Capstead since 1993
–
Formerly employed by Ernst & Young LLP as an audit senior manager focusing on
mortgage banking and asset securitization –
CPA, Member AICPA, FEI
Robert A. Spears
–
Executive Vice President, Director of Residential Mortgage Investments
–
Has served in asset and liability management positions at Capstead since 1994
–
Formerly Vice President of secondary marketing with NationsBanc Mortgage
Corporation Michael W. Brown –
Senior Vice President, Asset and Liability Management, Treasurer
–
Has served in asset and liability management positions at Capstead since 1994
–
MBA, Southern Methodist University, Dallas, Texas |