News

Capstead Mortgage Corporation Announces First Quarter 2020 Results

DALLAS–(BUSINESS WIRE)–Capstead Mortgage Corporation (“Capstead” or the “Company”) (NYSE: CMO) today announced financial results for the quarter ended March 31, 2020.

First Quarter 2020 Summary

  • Recognized a GAAP net loss of $204.7 million or $(2.21) per diluted common share
  • Generated core earnings of $19.8 million or $0.16 per diluted common share
  • Paid common dividend of $0.15 per common share
  • Reported book value of $6.07 per common share
  • Reported agency-guaranteed residential adjustable-rate mortgage (ARM) portfolio ended the quarter at $8.50 billion
  • Reported leverage ended the quarter at 8.51 times long-term investment capital

First Quarter Earnings and Related Discussion

Capstead reported a GAAP net loss of $204.7 million or $(2.21) per diluted common share for the quarter ended March 31, 2020, compared to net income of $32.7 million or $0.29 per diluted common share for the quarter ended December 31, 2019. The Company reported core earnings of $19.8 million or $0.16 per diluted common share for the quarter ended March 31, 2020. This compares to core earnings of $19.1 million or $0.15 per diluted common share for the quarter ended December 31, 2019. See the “Non-GAAP Financial Measures” section of this release for more information on core earnings.

Portfolio yields averaged 2.49% during the first quarter of 2020, a decrease of 18 basis points from 2.67% reported for the fourth quarter of 2019. Yields declined primarily due to lower coupon interest rates on loans underlying the Company’s portfolio of agency-guaranteed residential ARM securities as well as changes in lifetime prepayment estimates. Mortgage prepayments decreased during the quarter to an average annualized constant prepayment rate, or CPR, of 26.71%, compared to 29.39% CPR in the prior quarter. Portfolio balances averaged $11.12 billion during the first quarter before ending the quarter at $8.50 billion. The Company sold securities with a basis of $2.60 billion late in the quarter to maintain portfolio leverage at comfortable levels given disruptions experienced in the financial markets brought on by the COVID-19 pandemic. Portfolio leverage excluding $359 million in cash collateral for secured borrowings stood at 8.51 to one at March 31, 2020 compared to 8.77 to one at December 31, 2019.

The following table illustrates the progression of Capstead’s portfolio of residential mortgage investments for the quarter ended March 31, 2020 (dollars in thousands):

Residential mortgage investments, December 31, 2019

 

$

11,222,182

 

Portfolio acquisitions (principal amount)

 

 

794,227

 

Investment premiums on acquisitions

 

 

20,320

 

Portfolio runoff (principal amount)

 

 

(912,099

)

Sales of investments (basis)

 

 

(2,600,857

)

Investment premium amortization

 

 

(20,691

)

Increase in net unrealized gains on securities classified as available-for-sale

 

 

89

 

Residential mortgage investments, March 31, 2020

 

$

8,503,171

 

Decrease in residential mortgage investments during the period

 

$

(2,719,011

)

Rates on Capstead’s $8.38 billion in secured borrowings, after adjusting for hedging activities, averaged 25 basis points lower at 1.72% during the first quarter of 2020, compared to 1.97% for the prior quarter. Borrowing rates before hedging activities averaged 1.76% during the first quarter, a decline of 34 basis points over the prior quarter benefiting from the Federal Reserve’s actions on March 3rd and again on March 15th to reduce the Fed Funds rate by a total of 150 basis points. Unhedged borrowing rates on new borrowings under repurchase arrangements are now typically ranging from 20 to 35 basis points.

The Company’s portfolio of secured borrowings-related interest rate swaps averaged a notional amount of $7.10 billion during the first quarter of 2020. Fixed swap rates averaged 1.62% during the first quarter of 2020, 29 basis points lower than the prior quarter. At March 31, 2020, the Company held $4.40 billion notional amount of secured borrowings-related interest rate swaps with fixed rates averaging 1.44%, a decline of $3.00 billion in notional amount and 33 basis points in rate from swaps held on December 31, 2019.

Capstead operates a highly efficient, internally-managed investment platform, particularly compared to other mortgage REITs and has a competitive cost structure relative to a wide variety of high yielding investment vehicles. Operating costs expressed as an annualized percentage of long-term investment capital averaged 1.22% for the first quarter of 2020. As an annualized percentage of total assets, operating costs averaged 0.12% during this period.

Recent Common Equity Issuances

During February, Capstead issued 1.6 million shares of common stock through an at-the-market continuous offering program at an average issue price of $8.21, net of fees and other costs, for net proceeds of $12.9 million. Additional amounts of equity capital may be raised in the future under continuous offering programs or by other means, subject to market conditions, compliance with federal securities laws and blackout periods.

Book Value per Common Share

Book value per share as of March 31, 2020 was $6.07, a decrease of $2.55 or 29.6% from the December 31, 2019 book value of $8.62, primarily reflecting $1.84 in derivative-related decreases in value and $0.69 in portfolio-related declines. Capstead’s investment strategy focuses on investments in agency-guaranteed residential mortgage pass-through securities, which are considered to have little, if any, credit risk and are collateralized by ARM loans with interest rates that reset periodically to more current levels.

Management Remarks

Commenting on current operating and market conditions, Phillip A. Reinsch, President and Chief Executive Officer, said, “The impact of the pandemic on the fixed income and equity markets in general and the mortgage markets in particular in March has been severe. Mortgage asset pricing deteriorated rapidly, even as derivatives held for hedging purposes declined in value with falling interest rates. Pricing for agency guaranteed residential mortgage pass-through securities was not immune as market participants sold their most liquid assets in attempts to restore liquidity and satisfy lending and derivative margin requirements. As a consequence, we experienced valuation declines in both our portfolio and swap positions.

“Throughout this volatile period, we were pleased with the continued availability of financing through our existing lending counterparties and our ability to seamlessly meet all of our funding requirements. We sold a portion of our portfolio late in March and reduced our swap positions in order to ensure we had sufficient flexibility to meet future projected liquidity requirements while maintaining portfolio leverage at comfortable levels. Even with these actions, we reported core earnings of $0.16 per common share, our second straight quarter of earnings at or above our recently increased quarterly dividend rate of $0.15 per common share.

“The Federal Reserve has taken a number of actions to support the financial system, including buying agency guaranteed mortgage securities and reducing the Fed Funds rate by a total of 150 basis points to a current range of 0% to 0.25%. These actions are broadly supportive to the mortgage markets, providing stability and lowering funding costs.

“ARM security pricing has improved since quarter end, contributing to an estimated 4% to 5% improvement in book value and our leverage now stands at approximately 7.8 times our long-term investment capital. Looking forward, we feel strongly that our portfolio is well positioned to generate attractive returns, even at lower leverage levels. Low funding costs together with attractive reinvestment opportunities should lead to improved financing spreads and returns on invested capital over the remainder of 2020.

“To support the health and well-being of our employees and community and address the risks associated with the global COVID-19 pandemic, we have implemented our business continuity plan that enables our employees to work remotely. During this trying time, our team has been able to fully operate our business and perform at high levels of execution.

“For the last 20 years, Capstead has operated as a cost-effective, internally managed REIT that invests in a leveraged portfolio of relatively short duration agency-guaranteed residential ARM securities with the goal of generating attractive risk-adjusted returns over the long-term.”

Non-GAAP Financial Measures

Management believes the presentation of core earnings and core earnings per common share, both non-GAAP financial measures, when analyzed in conjunction with the Company’s GAAP operating results, allows investors to more effectively evaluate the Company’s performance and provides investors management’s view of the Company’s economic performance. Management also believes that presenting financing spreads on residential mortgage investments, a non-GAAP financial measure, provides important information for evaluating the performance of the Company’s portfolio as opposed to total financing spreads because the non-GAAP measure speaks specifically to the performance of the Company’s investment portfolio. See the “Reconciliation of GAAP Measures to Non-GAAP Measures” section of this release.

Earnings Conference Call Details

An earnings conference call and live audio webcast will be hosted Thursday, April 30, 2020 at 9:30 a.m. ET. The conference call may be accessed by dialing toll free (877) 505-6547 in the U.S., (855) 669-9657 for Canada, or (412) 902-6660 for international callers. A live webcast of the conference call can be accessed via the investor relations section of the Company’s website at www.capstead.com and an archive of the webcast will be available up to the date of our next earnings press release. An audio replay can be accessed one hour after the end of the conference call, also up to the date of our next earnings press release, by dialing toll free (877) 344-7529 in the U.S., (855) 669-9658 for Canada, or (412) 317-0088 for international callers and entering conference number 10142563.

About Capstead

Capstead is a self-managed real estate investment trust, or REIT, for federal income tax purposes. The Company earns income from investing in a leveraged portfolio of residential adjustable-rate mortgage pass-through securities, referred to as ARM securities, issued and guaranteed by government-sponsored enterprises, either Fannie Mae or Freddie Mac, or by an agency of the federal government, Ginnie Mae.

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. Actual results could differ materially from those projected in these forward-looking statements due to a variety of factors, including without limitation, fluctuations in interest rates, the availability of suitable qualifying investments, changes in mortgage prepayments, the availability and terms of financing, changes in market conditions as a result of federal corporate and individual tax law changes, changes in legislation or regulation affecting the mortgage and banking industries or Fannie Mae, Freddie Mac or Ginnie Mae securities, the availability of new investment capital, the liquidity of secondary markets and funding markets, our ability to maintain our qualification as a REIT for U.S. federal tax purposes, our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended, and other changes in general economic conditions. These and other applicable uncertainties, factors and risks are described more fully in the Company’s filings with the U.S. Securities and Exchange Commission.

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.

CAPSTEAD MORTGAGE CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except ratios, pledged and per share amounts)

 

 

 

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Residential mortgage investments ($8.50 and $10.83 billion pledged at March 31, 2020 and December 31, 2019, respectively)

 

$

8,503,171

 

 

$

11,222,182

 

Cash collateral receivable from secured borrowing counterparties

 

 

359,168

 

 

 

 

Cash collateral receivable from derivative counterparties

 

 

95,929

 

 

 

65,477

 

Derivatives at fair value

 

 

 

 

 

1,471

 

Cash and cash equivalents

 

 

329,448

 

 

 

105,397

 

Receivables and other assets

 

 

125,127

 

 

 

125,474

 

 

 

$

9,412,843

 

 

$

11,520,001

 

Liabilities

 

 

 

 

 

 

 

 

Secured borrowings

 

$

8,379,422

 

 

$

10,275,413

 

Derivatives at fair value

 

 

50,862

 

 

 

29,156

 

Unsecured borrowings

 

 

98,418

 

 

 

98,392

 

Common stock dividend payable

 

 

14,862

 

 

 

14,605

 

Accounts payable and accrued expenses

 

 

25,655

 

 

 

28,702

 

 

 

 

8,569,219

 

 

 

10,446,268

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred stock – $0.10 par value; 100,000 shares authorized: 7.50% Cumulative Redeemable Preferred Stock, Series E, 10,329 shares issued and outstanding ($258,226 aggregate liquidation preference) at March 31, 2020 and December 31, 2019

 

 

250,946

 

 

 

250,946

 

Common stock – $0.01 par value; 250,000 shares authorized: 96,395 and 94,606 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively

 

 

964

 

 

 

946

 

Paid-in capital

 

 

1,266,045

 

 

 

1,252,481

 

Accumulated deficit

 

 

(668,053

)

 

 

(444,039

)

Accumulated other comprehensive (loss) income

 

 

(6,278

)

 

 

13,399

 

 

 

 

843,624

 

 

 

1,073,733

 

 

 

$

9,412,843

 

 

$

11,520,001

 

 

 

 

 

 

 

 

 

 

Long-term investment capital (consists of stockholders’ equity and unsecured borrowings) (unaudited)

 

$

942,042

 

 

$

1,172,125

 

Portfolio leverage (secured borrowings less cash collateral for secured borrowings divided by long-term investment capital) (unaudited)

 

8.51:1

 

 

8.77:1

 

Book value per common share (based on share of common stock outstanding and calculated assuming liquidation preferences for preferred stock) (unaudited)

 

$

6.07

 

 

$

8.62

 

CAPSTEAD MORTGAGE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

 

 

 

Quarter Ended

March 31

 

 

 

2020

 

 

2019

 

Interest income:

 

 

 

 

 

 

 

 

Residential mortgage investments

 

$

69,228

 

 

$

83,807

 

Other

 

 

399

 

 

 

422

 

 

 

 

69,627

 

 

 

84,229

 

Interest expense:

 

 

 

 

 

 

 

 

Secured borrowings

 

 

(45,273

)

 

 

(63,779

)

Unsecured borrowings

 

 

(1,900

)

 

 

(1,891

)

 

 

 

(47,173

)

 

 

(65,670

)

 

 

 

22,454

 

 

 

18,559

 

Other expense:

 

 

 

 

 

 

 

 

Loss on derivative instruments (net)

 

 

(155,739

)

 

 

(21,657

)

Loss on sale of investments

 

 

(67,820

)

 

 

 

Compensation-related expense

 

 

(2,204

)

 

 

(3,609

)

Other general and administrative expense

 

 

(1,202

)

 

 

(1,128

)

Miscellaneous other (expense) revenue

 

 

(142

)

 

 

89

 

 

 

 

(227,107

)

 

 

(26,305

)

Net loss

 

 

(204,653

)

 

 

(7,746

)

Less preferred stock dividends

 

 

(4,842

)

 

 

(4,842

)

Net loss to common stockholders

 

$

(209,495

)

 

$

(12,588

)

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per common share

 

$

(2.21

)

 

$

(0.15

)

 

 

 

 

 

 

 

 

 

Basic and diluted weighted average common shares outstanding

 

 

94,897

 

 

84,894

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share:

 

 

 

 

 

 

 

 

Common

 

$

0.15

 

 

$

0.08

 

Series E preferred

 

 

0.47

 

 

 

0.47

 

CAPSTEAD MORTGAGE CORPORATION

QUARTERLY STATEMENTS OF OPERATIONS AND SELECT OPERATING STATISTICS

(in thousands, except per share amounts, percentages annualized, unaudited)

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

 

Q1

 

 

Q4

 

 

Q3

 

 

Q2

 

 

Q1

 

Quarterly Statements of Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage investments

 

$

69,228

 

 

$

73,617

 

 

$

77,693

 

 

$

85,100

 

 

$

83,807

 

Other

 

 

399

 

 

 

666

 

 

 

1,065

 

 

 

600

 

 

 

422

 

 

 

 

69,627

 

 

 

74,283

 

 

 

78,758

 

 

 

85,700

 

 

 

84,229

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured borrowings

 

 

(45,273

)

 

 

(51,688

)

 

 

(62,800

)

 

 

(67,945

)

 

 

(63,779

)

Unsecured borrowings

 

 

(1,900

)

 

 

(1,910

)

 

 

(1,910

)

 

 

(1,900

)

 

 

(1,891

)

 

 

 

(47,173

)

 

 

(53,598

)

 

 

(64,710

)

 

 

(69,845

)

 

 

(65,670

)

 

 

 

22,454

 

 

 

20,685

 

 

 

14,048

 

 

 

15,855

 

 

 

18,559

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss (gain) on derivative instruments (net)

 

 

(155,739

)

 

 

15,142

 

 

 

(9,221

)

 

 

(74,842

)

 

 

(21,657

)

Loss on sale of investments (net)

 

 

(67,820

)

 

 

 

 

 

 

 

 

(1,365

)

 

 

 

Compensation-related expense

 

 

(2,204

)

 

 

(2,050

)

 

 

(566

)

 

 

(1,972

)

 

 

(3,609

)

Other general and administrative expense

 

 

(1,202

)

 

 

(1,105

)

 

 

(1,123

)

 

 

(1,138

)

 

 

(1,128

)

Miscellaneous other (expense) revenue

 

 

(142

)

 

 

 

 

 

58

 

 

 

2

 

 

 

89

 

 

 

 

(227,107

)

 

 

11,987

 

 

 

(10,852

)

 

 

(79,315

)

 

 

(26,305

)

Net (loss) income

 

$

(204,653

)

 

$

32,672

 

 

$

3,196

 

 

$

(63,460

)

 

$

(7,746

)

Net (loss) income per diluted common share

 

$

(2.21

)

 

$

0.29

 

 

$

(0.02

)

 

$

(0.80

)

 

$

(0.15

)

Average diluted common shares outstanding

 

 

94,897

 

 

 

94,293

 

 

 

90,945

 

 

 

84,934

 

 

 

84,894

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core earnings

 

$

19,811

 

 

$

19,109

 

 

$

14,798

 

 

$

14,780

 

 

$

15,471

 

Core earnings per diluted common share

 

 

0.16

 

 

 

0.15

 

 

 

0.11

 

 

 

0.12

 

 

 

0.12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Select Operating and Performance Statistics:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common dividends declared per share

 

 

0.15

 

 

 

0.15

 

 

 

0.12

 

 

 

0.12

 

 

 

0.08

 

Book value per common share

 

 

6.07

 

 

 

8.62

 

 

 

8.60

 

 

 

8.93

 

 

 

9.43

 

Average portfolio outstanding (cost basis)

 

 

11,124,246

 

 

 

11,032,252

 

 

 

11,266,776

 

 

 

12,065,084

 

 

 

12,169,106

 

Average secured borrowings

 

 

10,337,773

 

 

 

10,195,180

 

 

 

10,481,080

 

 

 

11,193,335

 

 

 

11,156,608

 

Average long-term investment capital (“LTIC”)

 

 

1,124,307

 

 

 

1,172,897

 

 

 

1,146,916

 

 

 

1,149,388

 

 

 

1,161,815

 

Constant prepayment rate (“CPR”)

 

 

26.71

%

 

 

29.39

%

 

 

30.18

%

 

 

26.29

%

 

 

20.62

%

Total financing spreads

 

 

0.66

 

 

 

0.57

 

 

 

0.31

 

 

 

0.34

 

 

 

0.42

 

Yields on residential mortgage investments

 

 

2.49

 

 

 

2.67

 

 

 

2.76

 

 

 

2.82

 

 

 

2.75

 

Secured borrowing rates (a)

 

 

1.72

 

 

 

1.97

 

 

 

2.31

 

 

 

2.35

 

 

 

2.23

 

Financing spreads on residential mortgage investments

 

 

0.77

 

 

 

0.70

 

 

 

0.45

 

 

 

0.47

 

 

 

0.52

 

Operating costs as a percentage of LTIC (b)

 

 

1.22

 

 

 

1.07

 

 

 

0.58

 

 

 

1.09

 

 

 

1.32

 

Quarterly economic return (change in book value plus dividends)

 

 

(27.84

)

 

 

1.98

 

 

 

(2.35

)

 

 

(4.03

)

 

 

1.28

 

Return on common equity capital (c)

 

 

7.77

 

 

 

6.89

 

 

 

4.95

 

 

 

4.98

 

 

 

5.33

 

(a)

Secured borrowing rates exclude the effects of amortization of the net unrealized gains (losses) included in AOCI on de-designated derivative instruments and include net interest cash flows on non-designated derivative instruments to better compare the components of financing spreads on residential mortgage investments. See “Reconciliation of GAAP Measures to Non-GAAP Measures” for details on the impact of non-designated derivative instruments.

(b)

First quarter 2019 excludes the effects of adjustments to 2018 incentive compensation accruals totaling $(949,000) due to the Company’s 2018 outperformance relative to its peers.

(c)

Calculated using core earnings less preferred dividends on an annualized basis over average common equity for the period.

CAPSTEAD MORTGAGE CORPORATION

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

(in thousands, percentages annualized, unaudited)

The Company defines core earnings as GAAP net income (loss) excluding (a) unrealized (gain) loss on derivative instruments, (b) realized loss (gain) on termination of derivative instruments, (c) amortization of unrealized (gain) loss of derivative instruments held at the time of de-designation, (d) realized loss (gain) on securities. The following reconciles GAAP net (loss) income and net (loss) income per diluted common share to core earnings and core earnings per common share:

 

 

2020

 

 

2019

 

 

 

Q1

 

 

Q4

 

 

Q3

 

 

Q2

 

 

Q1

 

 

 

Amount

 

Per Share

 

 

Amount

 

Per Share

 

 

Amount

 

Per Share

 

 

Amount

 

Per Share

 

 

Amount

 

Per Share

 

Net (loss) income

 

$

(204,653

)

$

(2.21

)

 

$

32,672

 

$

0.29

 

 

$

3,196

 

$

(0.02

)

 

$

(63,460

)

$

(0.80

)

 

$

(7,746

)

$

(0.15

)

Unrealized (gain) loss on non-designated derivative instruments

 

 

56,182

 

 

0.59

 

 

 

(51,017

)

 

(0.54

)

 

 

(16,952

)

 

(0.19

)

 

 

59,388

 

 

0.70

 

 

 

26,237

 

 

0.31

 

Realized loss on termination of non-designated derivative instruments

 

 

100,565

 

 

1.06

 

 

 

39,312

 

 

0.42

 

 

 

31,673

 

 

0.35

 

 

 

24,202

 

 

0.28

 

 

 

 

 

 

Amortization of unrealized gain, net of unrealized losses on de-designated derivative instruments

 

 

(103

)

 

(0.00

)

 

 

(1,858

)

 

(0.02

)

 

 

(3,119

)

 

(0.03

)

 

 

(6,715

)

 

(0.08

)

 

 

(3,020

)

 

(0.04

)

Realized loss on sale of investments

 

 

67,820

 

 

0.72

 

 

 

 

 

 

 

 

 

 

 

 

 

1,365

 

 

0.02

 

 

 

 

 

 

Core earnings

 

$

19,811

 

$

0.16

 

 

$

19,109

 

$

0.15

 

 

$

14,798

 

$

0.11

 

 

$

14,780

 

$

0.12

 

 

$

15,471

 

$

0.12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following reconciles total financing spreads to financing spreads on residential mortgage investments:

 

 

2020

 

 

2019

 

 

 

Q1

 

 

Q4

 

 

Q3

 

 

Q2

 

 

Q1

 

Total financing spreads

 

 

0.66

%

 

 

0.57

%

 

 

0.31

%

 

 

0.34

%

 

 

0.42

%

Impact of yields on other interest-earning assets*

 

 

0.02

 

 

 

0.01

 

 

 

0.00

 

 

 

0.01

 

 

 

0.00

 

Impact of borrowing rates on other interest-paying liabilities*

 

 

0.05

 

 

 

0.05

 

 

 

0.05

 

 

 

0.05

 

 

 

0.05

 

Impact of amortization of unrealized gain, net of unrealized losses on de-designated derivative instruments

 

 

(0.00

)

 

 

(0.07

)

 

 

(0.12

)

 

 

(0.24

)

 

 

(0.11

)

Impact of net cash flows received on non-designated derivative instruments

 

 

0.04

 

 

 

0.14

 

 

 

0.21

 

 

 

0.31

 

 

 

0.16

 

Financing spreads on residential mortgage investments

 

 

0.77

 

 

 

0.70

 

 

 

0.45

 

 

 

0.47

 

 

 

0.52

 

 

* Other interest-earning assets consist of overnight investments and cash collateral receivable from repo and derivative counterparties. Other interest-paying liabilities consist of unsecured borrowings and, at times, may consist of cash collateral payable to repo and derivative counterparties.

CAPSTEAD MORTGAGE CORPORATION

FAIR VALUE AND SWAP MATURITY DISCLOSURES

(in thousands, unaudited)

 

 

 

 

 

 

 

 

March 31, 2020

 

December 31,

2019

 

 

 

Unpaid

Principal

Balance

 

 

Investment

Premiums

 

 

Basis or

Notional

Amount

 

 

Fair

Value

 

 

Unrealized

Gains

(Losses)

 

 

Unrealized

Gains

(Losses)

 

Residential mortgage investments classified as available-for-sale: (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fannie Mae/Freddie Mac securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-reset ARMs

 

$

3,180,655

 

 

$

114,455

 

 

$

3,295,110

 

 

$

3,271,141

 

 

$

(23,969

)

 

$

33,573

 

Longer-to-reset ARMs

 

 

4,164,705

 

 

 

100,537

 

 

 

4,265,242

 

 

 

4,317,126

 

 

 

51,884

 

 

 

7,267

 

Ginnie Mae securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-reset ARMs

 

 

176,456

 

 

 

4,378

 

 

 

180,834

 

 

 

181,283

 

 

 

449

 

 

 

2,699

 

Longer-to-reset ARMs

 

 

698,715

 

 

 

16,357

 

 

 

715,072

 

 

 

732,064

 

 

 

16,992

 

 

 

1,728

 

 

 

$

8,220,531

 

 

$

235,727

 

 

$

8,456,258

 

 

$

8,501,614

 

 

$

45,356

 

 

$

45,267

 

Derivative instruments: (b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap agreements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured borrowings-related

 

 

 

 

 

 

 

 

 

$

4,400,000

 

 

$

(60,788

)

 

$

(2,814

)

 

$

(2,712

)

Unsecured borrowings-related

 

 

 

 

 

 

 

 

 

 

100,000

 

 

 

(49,824

)

 

 

(49,824

)

 

 

(29,156

)

Eurodollar futures contracts

 

 

 

 

 

 

 

 

 

 

500,000

 

 

 

(1,038

)

 

 

 

 

 

 

Contacts

Lindsey Crabbe

(214) 874-2339

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