exv99w1

Quarter

Declaration Date

Record Date

Payable Date

First
Second
Third
Fourth

March 11
June 10
September 9
December 9

March 31
June 30
September 30
December 31

April 21
July 21
October 21
January 21, 2005

CAPSTEAD MORTGAGE CORPORATION
ANNOUNCES FOURTH QUARTER 2003 RESULTS,
SETS RECORD DATE FOR ANNUAL MEETING AND
ESTABLISHES COMMON DIVIDEND SCHEDULE FOR 2004

DALLAS — January 28, 2004 — Capstead Mortgage Corporation (NYSE: CMO) today reported net income of $13,096,000, or $0.56 per diluted common share, for the quarter ended December 31, 2003, compared to $20,411,000, or $1.03 per diluted common share, for the same quarter in 2002. Operating income, a non-GAAP financial measure calculated to exclude depreciation on real estate, gains on asset sales and redemptions of collateralized mortgage obligations (“CMOs”), and the dilutive effects of the Series B preferred shares, was $0.63 per common share for the fourth quarter of 2003, compared to $0.65 for the third quarter of 2003 and $0.95 for the fourth quarter of 2002. A table reconciling operating income per common share to net income per diluted common share (calculated in accordance with generally accepted accounting principles (“GAAP”)) is included in this release.

The Company reported net income of $60,659,000, or $2.60 per diluted common share, for the year ended December 31, 2003 compared to $96,123,000, or $4.85 per diluted common share reported in 2002.

The Company announced that the record date for determining stockholders entitled to notice of and to vote at the annual meeting of stockholders on April 22, 2004 will be the close of business on February 17, 2004. The Company’s proxy statement and annual report will be mailed to stockholders on or about March 5, 2004.

Fourth quarter operating income benefited from additions made to the Company’s portfolio of mortgage securities and similar investments during the second half of 2003 which offset portfolio runoff during this period and helped to partially offset declining portfolio yields. Acquisitions during the second half of 2003 totaled $441 million consisting primarily of adjustable-rate mortgage (“ARM”) Fannie Mae, Freddie Mac and Ginnie Mae securities (“Agency Securities”). In addition, the Company retained $146 million of high coupon fixed-rate collateral released from financed CMOs that is expected to earn improved financing spreads than when previously financed by CMO bonds. Operating income for the fourth quarter also benefited from several income items totaling nearly $700,000 that will not affect future quarterly

results and includes the recovery of an insurance deductible related to the dismissal of a stockholder class action suit brought against the Company in 1998.

Financing spreads (the difference between the yields earned on these investments and the rates charged on related borrowings) declined 22 basis points during the fourth quarter to 2.47%, all attributable to lower portfolio yields. The overall yield earned on the portfolio averaged 3.60% during the fourth quarter of 2003, compared to an average yield of 3.82% earned during the previous quarter and 3.97% for all of 2003. Yields on ARM securities fluctuate as coupon interest rates on the underlying mortgage loans reset to reflect current interest rates and are expected to continue to decline in the coming quarters. For example, if interest rates stabilize at current rates, the average yield on the portfolio could decline approximately 44 basis points by the fourth quarter of 2004. Actual yields will depend on portfolio composition as well as fluctuations in, and market expectations for fluctuations in, interest rates and levels of mortgage prepayments.

Average rates on related borrowings held steady at 1.13% during the last two quarters of 2003 and averaged a low 1.23% for the year. The Company’s borrowing rates depend on actions by the Federal Reserve to change short-term interest rates, market expectations of future changes in short-term interest rates and the extent of changes in financial market liquidity.

Commenting on Capstead’s operations and recent investing activity, Andrew F. Jacobs, President and Chief Executive Officer, said, “Mortgage prepayments on the Company’s portfolio of ARM securities moderated during the fourth quarter putting less pressure on portfolio balances and this trend is continuing into the first quarter of 2004. Market conditions during the latter half of 2003 allowed us to replace portfolio runoff during that period with acquisitions of attractively priced ARM securities. Additionally, we have acquired sufficient ARM securities scheduled for settlement in the first quarter to again replace runoff. If available, we will continue to pursue attractively priced acquisitions of adjustable-rate mortgage assets.

While we anticipate that managing a large portfolio of adjustable-rate mortgage assets will remain the core focus of our investment strategy, we also are continuing to investigate other real estate-related opportunities that can provide attractive risk-adjusted returns over the long term with relatively low sensitivity to changes in interest rates.”

In conclusion, Mr. Jacobs cautioned, “We expect Capstead’s operating income will continue to benefit from excellent financing spreads for the immediate future; however, opportunities to reinvest capital made available by maturing investments over the near term may not be of the size or have the return profile capable of generating sufficient returns to offset declining earnings from our existing portfolios. As a result, quarterly operating income and common dividends will likely continue trending lower from current levels.”

As of December 31, 2003, the Company’s book value per common share was $6.67, a decline of $0.38 during the current quarter and $1.56 since December 31, 2002. Book value declined from the prior year because of dividend payments in excess of quarterly net income (approximately $0.22 per share) and, more significantly, a reduction in the aggregate unrealized

gain on the Company’s investments (most of which are debt securities carried at fair value with changes in fair value reflected in stockholders’ equity) as a result of runoff caused by mortgage prepayments and lower underlying coupon interest rates, as discussed above. This unrealized gain can be expected to continue to decline with runoff and to fluctuate with changes in interest rates and market liquidity, and such changes will largely be reflected in book value per common share. Book value will also be affected by other factors, including the level of dividend distributions and depreciation charges on net-leased real estate; however, temporary changes in fair values of investments not carried at fair value on the Company’s balance sheet generally will not affect book value.

Capstead Mortgage Corporation, a real estate investment trust (“REIT”), earns income from investing in real estate-related assets and other investment strategies.

This document contains “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) that inherently involve risks and uncertainties. The Company’s actual results and liquidity can differ materially from those anticipated in these forward-looking statements because of changes in the level and composition of the Company’s investments and unforeseen factors. As discussed in the Company’s filings with the Securities and Exchange Commission, these factors may include, but are not limited to, changes in general economic conditions, the availability of suitable investments, fluctuations in, and market expectations for fluctuations in, interest rates and levels of mortgage prepayments, deterioration in credit quality and ratings, the effectiveness of risk management strategies, the impact of leverage, liquidity of secondary markets and credit markets, increases in costs and other general competitive factors. Relative to direct investments in real estate, these factors may include, but are not limited to, lessee performance under lease agreements, changes in general as well as local economic conditions and real estate markets, increases in competition and inflationary pressures, changes in the tax and regulatory environment including zoning and environmental laws, uninsured losses or losses in excess of insurance limits and the availability of adequate insurance coverage at reasonable costs.

CAPSTEAD MORTGAGE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)


			December 31, 2003			December 31, 2002

			(unaudited)
Assets
	Mortgage securities and similar investments ($2.0 billion pledged under repurchase arrangements)		$	2,195,117		$	2,431,519
	CMO collateral and investments			167,571			1,083,421

				2,362,688			3,514,940
	Real estate held for lease, net of accumulated depreciation			133,414			137,122
	Receivables and other assets			41,880			55,863
	Cash and cash equivalents			16,340			59,003

			$	2,554,322		$	3,766,928

Liabilities
	Repurchase arrangements and similar borrowings		$	1,975,178		$	2,145,656
	Collateralized mortgage obligations (“CMOs”)			166,807			1,074,779
	Borrowings secured by real estate			120,206			120,400
	Incentive fee payable to former affiliate			—			4,982
	Common stock dividend payable			8,829			116,585
	Accounts payable and accrued expenses			6,264			5,948

				2,277,284			3,468,350

Stockholders’ equity
	Preferred stock — $0.10 par value; 100,000 shares authorized:
		$1.60 Cumulative Preferred Stock, Series A, 211 and 219 shares issued and outstanding at December 31, 2003 and 2002, respectively ($3,468 aggregate liquidation preference)		2,956			3,058
		$1.26 Cumulative Convertible Preferred Stock, Series B, 15,819 and 15,820 shares issued and outstanding at December 31, 2003 and 2002, respectively ($180,025 aggregate liquidation preference)		176,707			176,708
	Common stock — $0.01 par value; 100,000 shares authorized; 14,015 and 13,962 shares issued and outstanding at December 31, 2003 and 2002, respectively			140			140
	Paid-in capital			456,198			458,919
	Accumulated deficit			(387,718	)		(387,718	)
	Accumulated other comprehensive income			28,755			47,471

				277,038			298,578

			$	2,554,322		$	3,766,928

Book value per common share			$	6.67		$	8.23

CAPSTEAD MORTGAGE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)


					Quarter Ended						Year Ended
					December 31						December 31

					2003			2002			2003			2002

					(unaudited)						(unaudited)
Interest income:
	Mortgage securities and similar investments				$	18,959		$	29,601		$	85,343		$	150,302
	CMO collateral and investments					3,041			19,907			34,101			114,353

			Total interest income			22,000			49,508			119,444			264,655

Interest and related expense:
	Repurchase arrangements and similar borrowings					5,556			9,432			24,606			48,329
	CMO borrowings					2,775			20,510			33,926			116,069
	Mortgage insurance and other					91			128			392			596

			Total interest and related expense			8,422			30,070			58,924			164,994

				Net margin on financial assets		13,578			19,438			60,520			99,661

Real estate lease income						2,465			2,764			10,028			8,170

Real estate-related expense:
	Interest					1,057			1,536			4,327			4,750
	Depreciation					927			939			3,708			2,543

		Total real estate-related expense				1,984			2,475			8,035			7,293

			Net margin on real estate held for lease			481			289			1,993			877

Other revenue (expense):
	Gain on asset sales and CMO redemptions					9			2,824			4,560			4,725
	CMO administration and other					925			315			1,784			2,429
	Incentive fee payable to former affiliate					—			(948	)		(500	)		(4,982	)
	Other operating expense					(1,897	)		(1,507	)		(7,698	)		(6,587	)

			Total other revenue (expense)			(963	)		684			(1,854	)		(4,415	)

Net income					$	13,096		$	20,411		$	60,659		$	96,123

Net income					$	13,096		$	20,411		$	60,659		$	96,123
Less cash dividends paid on preferred stock						(5,068	)		(5,068	)		(20,273	)		(20,362	)

Net income available to common stockholders					$	8,028		$	15,343		$	40,386		$	75,761

Net income per common share:
	Basic				$	0.57		$	1.11		$	2.89		$	5.47
	Diluted					0.56			1.03			2.60			4.85
Cash dividends declared per share:
	Common — regular quarterly				$	0.630		$	1.160		$	3.100		$	5.560
	Common — special					—			7.190			—			7.190
	Series A Preferred					0.400			0.400			1.600			1.600
	Series B Preferred					0.315			0.315			1.260			1.260


					December 31, 2003												December 31, 2002

														Unrealized			Unrealized
					Principal		Premium					Market		Gains			Gains
					Balance		(Discount)			Basis		Value		(Losses)			(Losses)

Debt securities held available-for-sale:(a)
	Agency Securities:
			Fannie Mae/Freddie Mac:
				Fixed-rate	$	823	$	4		$	827	$	903	$	76		$	139
				ARMs:
				LIBOR/CMT		1,050,761		15,626			1,066,387		1,084,492		18,105			25,679
				COFI		90,669		(2,623	)		88,046		91,566		3,520			5,774
			Ginnie Mae ARMs			726,876		7,830			734,706		739,987		5,281			12,792

						1,869,129		20,837			1,889,966		1,916,948		26,982			44,384

		Non-agency securities:
			ARMs			58,072		541			58,613		59,619		1,006			1,504
		CMBS - adjustable rate				74,376		(9	)		74,367		74,376		9			82
	CMO collateral and investments					16,054		386			16,440		16,939		499			871

					$	2,017,631	$	21,755		$	2,039,386	$	2,067,882	$	28,496		$	46,841

Debt securities held-to-maturity: (b)
		Released CMO collateral:
			Agency Securities:
				Fixed-rate	$	1,249	$	8		$	1,257	$	1,370	$	113		$	192
			Non-agency securities:
				Fixed-rate		118,638		174			118,812		123,122		4,310			52
				ARMs		23,353		752			24,105		23,875		(230	)		—

						143,240		934			144,174		148,367		4,193			244
		CMO collateral				148,334		2,298			150,632		150,856		224			(3,844	)

					$	291,574	$	3,232		$	294,806	$	299,223	$	4,417		$	(3,600	)

CAPSTEAD MORTGAGE CORPORATION
MORTGAGE SECURITIES AND SIMILAR INVESTMENTS
YIELD/COST ANALYSIS
(Dollars in thousands)
(Unaudited)


				4th Quarter Average (a)								As of December 31, 2003
																	Projected			Lifetime
						Actual			Actual			Premiums					1st Quarter			Prepayment
				Basis		Yield/Cost			Runoff			(Discounts)			Basis (a)		Yield/Cost (b)			Assumptions

Agency Securities:
	Fannie Mae/Freddie Mac:
		Fixed-rate		$	2,216		9.47	%		39	%	$	12		$	2,084		9.69	%		30	%
		ARMs:
			LIBOR/CMT		976,481		3.21			26			15,626			1,066,387		3.04			25
			COFI		92,924		4.74			31			(2,623	)		88,046		4.38			25
	Ginnie Mae ARMs				709,817		3.56			33			7,830			734,706		3.47			26

				$	1,781,438		3.44			29			20,845			1,891,223		3.28			25
Non-agency securities:
	Fixed-rate				131,781		5.98			56			174			118,812		6.31			32
	ARMs				88,303		3.51			38			1,293			82,718		3.22			40

					220,084		4.99			50			1,467			201,530		5.05			35
CMBS and other commercial loans					95,039		3.49			34			(9	)		74,367		2.27			—

					2,096,561		3.60			35		$	22,303			2,167,120		3.40			25

Borrowings					1,921,318		1.13									1,975,178		1.11

Capital employed/financing spread				$	175,243		2.47								$	191,942		2.29

	Return on assets (c)						2.55											2.38

CAPSTEAD MORTGAGE CORPORATION
COMPARISON OF OPERATING INCOME *
AND DILUTED INCOME PER COMMON SHARE
(In thousands, except per share amounts)
(Unaudited)


		December 31, 2003					September 30, 2003					December 31, 2002

		Operating			Diluted		Operating			Diluted		Operating			Diluted

Net income		$	13,096		$	13,096	$	14,779		$	14,779	$	20,411		$	20,411
Adjustments for Depreciation on real estate			927			—		927			—		939			—
	Gain on asset sales and CMO redemptions		(9	)		—		(1,411	)		—		(2,824	)		—
	Series B preferred dividends		(4,983	)		—		(4,982	)		—		(4,983	)		—

		$	9,031		$	13,096	$	9,313		$	14,779	$	13,543		$	20,411

Weighted average common shares outstanding			13,998			13,998		13,995			13,995		13,880			13,880
Net effect of dilutive securities:
	Preferred B shares		—			9,030		—			8,987		—			5,689
	Stock options and other preferred shares		343			343		353			353		303			303

			14,341			23,371		14,348			23,335		14,183			19,872

		$	0.63		$	0.56	$	0.65		$	0.63	$	0.95		$	1.03



(a)		Unrealized gains and losses on investments in debt securities classified as available-for-sale are recorded in stockholders’ equity as a component of “Accumulated other comprehensive income.” Gains or losses are recognized in operating results only if sold. Investments in real estate held for lease are not classified as debt securities. Consequently, these assets are not subject to mark-to-market accounting and therefore have been excluded from this analysis.

(b)		Investments in debt securities classified as held-to-maturity are carried on the balance sheet at amortized cost.



(a)		Basis represents Capstead’s investment before unrealized gains and losses. Actual asset yields, runoff rates, borrowing rates and resulting financing spread are presented on an annualized basis.

(b)		Projected annualized yields for the fourth quarter 2003 reflect ARM coupon resets and lifetime prepayment assumptions as adjusted for expected prepayments over the next three months, as of the date of this press release. Actual yields realized in future periods will largely depend upon (i) changes in portfolio composition, (ii) ARM coupon resets, (iii) actual prepayments and (iv) any changes in lifetime prepayment assumptions.

(c)		Capstead generally uses its liquidity to pay down borrowings. Return on assets is calculated on an annualized basis assuming the use of this liquidity to reduce borrowing costs.



*		Capstead reports operating income per common share (a non-GAAP financial measure calculated excluding depreciation on real estate, gain on asset sales and CMO redemptions, and the dilutive effects of the Series B preferred share) under the belief it provides investors with a useful supplemental measure of the Company’s operating performance. Operating income represents a measure of the amount of funds generated by operations, which may, at the discretion of Capstead’s Board of Directors, be used for reinvestment or distributed to common stockholders as dividends. Depreciation on real estate, although an expense deductible for federal income tax purposes and therefore an item that reduces Capstead’s REIT distribution requirements, is added back to arrive at operating income because it is a noncash expense. Gains are excluded because they are considered non-operating in nature and the amount and timing of any such gains are dependent upon future market conditions. Operating income per common share excludes the dilutive effects of the Series B preferred shares because it is not economically advantageous to convert these shares at the current market prices of both the common shares and Series B preferred shares. Consequently, few, if any, actual Series B conversions are expected. The Series B preferred shares are considered dilutive, for diluted net income per common share purposes only, whenever annualized basic net income per common share exceeds $2.20 (the Series B preferred share annualized dividend of $1.26 divided by the current conversion rate of 0.5730).