Maryland
|
001-08896
|
75-2027937
|
(State of Incorporation)
|
(Commission File No.)
|
(I.R.S. Employer Identification No.)
|
8401 North Central Expressway
|
|
Suite 800
|
|
Dallas, Texas
|
75225
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425). |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 230.14a-12). |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)). |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)). |
ITEM 2.02. | RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
ITEM 9.01. | FINANCIAL STATEMENTS AND EXHIBITS |
(d) | Exhibits. |
99.1 | Press release issued by Capstead Mortgage Corporation dated October 23, 2013 announcing third quarter 2013 results. |
October 23, 2013
|
By:
|
/s/ Phillip A. Reinsch
|
|
|
|
Phillip A. Reinsch
|
|
|
|
Chief Financial Officer and
|
|
|
Executive Vice President
|
CONTACT:
|
Lindsey Crabbe
|
FOR IMMEDIATE RELEASE
|
(214) 874-2339
|
|
· | Generated 3rd quarter earnings of $0.23 per diluted common share on lower financing spreads primarily because of higher levels of mortgage prepayments |
· | October mortgage prepayment levels declined 33% from 3rd quarter levels creating the potential for significant increases in financing spreads and earnings for the 4th quarter |
· | Book value ended the 3rd quarter at $12.35 per common share |
· | Largely replaced portfolio runoff and have not sold any assets during 2013 |
· | Agency-guaranteed adjustable-rate mortgage (“ARM”) portfolio ended the 3rd quarter at $13.7 billion with leverage at 8.68 times long-term investment capital |
|
Quarter Ended
|
Nine Months Ended
|
||||||
|
September 30, 2013
|
September 30, 2013
|
||||||
Residential mortgage investments, beginning of period
|
$
|
13,811,497
|
$
|
13,860,158
|
||||
Decrease in unrealized gains on securities classified as available-for-sale
|
(27,539
|
)
|
(104,037
|
)
|
||||
Portfolio acquisitions (principal amount) at average lifetime purchased yields of 2.49% and 2.25%, respectively
|
1,001,105
|
2,754,491
|
||||||
Investment premiums on acquisitions
|
41,658
|
121,773
|
||||||
Portfolio runoff (principal amount)
|
(1,049,377
|
)
|
(2,793,013
|
)
|
||||
Investment premium amortization
|
(39,033
|
)
|
(101,061
|
)
|
||||
Residential mortgage investments, end of period
|
$
|
13,738,311
|
$
|
13,738,311
|
|
Quarter
Ended
|
Nine Months
Ended
|
||||||||||||||
|
September 30,
|
September 30,
|
||||||||||||||
|
2013
|
2013
|
||||||||||||||
Book value per common share, beginning of period
|
$
|
12.80
|
$
|
13.58
|
||||||||||||
|
||||||||||||||||
One-time effects of second quarter 2013 redemption of Series A and B preferred shares and issuance of Series E preferred shares
|
–
|
(0.28
|
)
|
|||||||||||||
Other capital transactions:
|
||||||||||||||||
Dividend distributions in excess of core earnings
|
(0.09
|
)
|
(0.13
|
)
|
||||||||||||
Accretion from common share repurchases
|
–
|
0.01
|
||||||||||||||
Increase related to stock awards
|
0.01
|
0.02
|
||||||||||||||
|
(0.08
|
)
|
(0.6
|
)%
|
(0.38
|
)
|
(2.8
|
)%
|
||||||||
Change in unrealized gains and losses on mortgage securities classified as available-for-sale
|
(0.29
|
)
|
(1.08
|
)
|
||||||||||||
Change in unrealized gains and losses on interest rate swap agreements designated as cash flow hedges of:
|
||||||||||||||||
Borrowings under repurchase arrangements
|
(0.10
|
)
|
0.09
|
|||||||||||||
Unsecured borrowings
|
0.02
|
0.14
|
||||||||||||||
|
(0.37
|
)
|
(2.9
|
)%
|
(0.85
|
)
|
(6.3
|
)%
|
||||||||
Book value per common share, end of period
|
$
|
12.35
|
$
|
12.35
|
||||||||||||
|
||||||||||||||||
Decrease in book value per common share during the indicated periods
|
$
|
(0.45
|
)
|
(3.5
|
)%
|
$
|
(1.23
|
)
|
(9.1
|
)%
|
· | 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, Freddie Mac and similar federal government agencies and related guarantees; |
· | other changes in legislation or regulation affecting the mortgage and banking industries; |
· | changes in market conditions as a result of Federal Reserve monetary policy or federal government fiscal challenges; |
· | deterioration in credit quality and ratings of existing or future issuances of Fannie Mae, Freddie Mac 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. |
September 30, 2013
|
December 31, 2012
|
|||||||
(unaudited)
|
||||||||
Assets
|
||||||||
Residential mortgage investments ($13.29 and $13.45 billion pledged under repurchase arrangements at September 30, 2013 and December 31, 2012, respectively)
|
$
|
13,738,311
|
$
|
13,860,158
|
||||
Cash collateral receivable from interest rate swap counterparties
|
27,829
|
49,972
|
||||||
Interest rate swap agreements at fair value
|
1,558
|
169
|
||||||
Cash and cash equivalents
|
235,102
|
425,445
|
||||||
Receivables and other assets
|
132,993
|
130,402
|
||||||
Investments in unconsolidated affiliates
|
3,117
|
3,117
|
||||||
|
$
|
14,138,910
|
$
|
14,469,263
|
||||
Liabilities
|
||||||||
Repurchase arrangements and similar borrowings
|
$
|
12,618,571
|
$
|
12,784,238
|
||||
Interest rate swap agreements at fair value
|
11,425
|
32,868
|
||||||
Unsecured borrowings
|
103,095
|
103,095
|
||||||
Common stock dividend payable
|
30,662
|
29,512
|
||||||
Accounts payable and accrued expenses
|
22,061
|
22,425
|
||||||
|
12,785,814
|
12,972,138
|
||||||
Stockholders’ equity
|
||||||||
Preferred stock - $0.10 par value; 100,000 shares authorized: | ||||||||
$1.60 Cumulative Preferred Stock, Series A, -0- and 186 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively
|
–
|
2,604
|
||||||
$1.26 Cumulative Convertible Preferred Stock, Series B, -0- and 16,493 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively
|
–
|
186,388
|
||||||
7.50% Cumulative Redeemable Preferred Stock, Series E, 6,800 and -0- shares issued and outstanding ($170,000 aggregate liquidation preference) at September 30, 2013 and December 31, 2012, respectively
|
164,310
|
–
|
||||||
Common stock - $0.01 par value; 250,000 shares authorized:95,761 and 96,229 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively
|
957
|
962
|
||||||
Paid-in capital
|
1,329,124
|
1,367,199
|
||||||
Accumulated deficit
|
(353,852
|
)
|
(353,938
|
)
|
||||
Accumulated other comprehensive income
|
212,557
|
293,910
|
||||||
|
1,353,096
|
1,497,125
|
||||||
|
$
|
14,138,910
|
$
|
14,469,263
|
||||
Long-term investment capital (Stockholders’ equity and unsecured borrowings net of investments in related unconsolidated affiliates) (unaudited)
|
$
|
1,453,074
|
$
|
1,597,103
|
||||
Portfolio leverage (Repurchase arrangements and similar borrowings divided by long-term investment capital) (unaudited)
|
8.68:1
|
8.00:1
|
||||||
Book value per common share (based on common shares outstanding and calculated assuming liquidation preferences for preferred stock) (unaudited)
|
$
|
12.35
|
$
|
13.58
|
|
Quarter Ended
|
Nine Months Ended
|
||||||||||||||
|
September 30
|
September 30
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
Interest income:
|
||||||||||||||||
Residential mortgage investments
|
$
|
46,643
|
$
|
63,463
|
$
|
156,683
|
$
|
194,983
|
||||||||
Other
|
48
|
154
|
267
|
480
|
||||||||||||
|
46,691
|
63,617
|
156,950
|
195,463
|
||||||||||||
Interest expense:
|
||||||||||||||||
Repurchase arrangements and similar borrowings
|
(15,759
|
)
|
(17,875
|
)
|
(50,976
|
)
|
(48,429
|
)
|
||||||||
Unsecured borrowings
|
(2,186
|
)
|
(2,186
|
)
|
(6,560
|
)
|
(6,560
|
)
|
||||||||
|
(17,945
|
)
|
(20,061
|
)
|
(57,536
|
)
|
(54,989
|
)
|
||||||||
|
28,746
|
43,556
|
99,414
|
140,474
|
||||||||||||
Other revenue (expense):
|
||||||||||||||||
Miscellaneous other revenue (expense)
|
(86
|
)
|
9
|
(251
|
)
|
(147
|
)
|
|||||||||
Incentive compensation
|
(1,130
|
)
|
(781
|
)
|
(1,604
|
)
|
(3,614
|
)
|
||||||||
Salaries and benefits
|
(1,689
|
)
|
(1,696
|
)
|
(4,857
|
)
|
(5,205
|
)
|
||||||||
Other general and administrative expense
|
(1,203
|
)
|
(1,115
|
)
|
(3,382
|
)
|
(3,160
|
)
|
||||||||
|
(4,108
|
)
|
(3,583
|
)
|
(10,094
|
)
|
(12,126
|
)
|
||||||||
Income before equity in earnings of unconsolidated affiliates
|
24,638
|
39,973
|
89,320
|
128,348
|
||||||||||||
Equity in earnings of unconsolidated affiliates
|
64
|
64
|
194
|
194
|
||||||||||||
Net income
|
$
|
24,702
|
$
|
40,037
|
$
|
89,514
|
$
|
128,542
|
||||||||
Net income available to common stockholders:
|
||||||||||||||||
Net income
|
$
|
24,702
|
$
|
40,037
|
$
|
89,514
|
$
|
128,542
|
||||||||
Less dividends on preferred shares
|
(3,188
|
)
|
(5,270
|
)
|
(14,325
|
)
|
(15,751
|
)
|
||||||||
Less redemption preference premiums paid
|
–
|
–
|
(19,924
|
)
|
–
|
|||||||||||
|
$
|
21,514
|
$
|
34,767
|
$
|
55,265
|
$
|
112,791
|
||||||||
|
||||||||||||||||
Net income per common share:
|
||||||||||||||||
Basic
|
$
|
0.23
|
$
|
0.35
|
$
|
0.58
|
$
|
1.20
|
||||||||
Diluted
|
0.23
|
0.35
|
0.58
|
1.20
|
||||||||||||
|
||||||||||||||||
Weighted average common shares outstanding:
|
||||||||||||||||
Basic
|
95,268
|
98,071
|
95,139
|
93,808
|
||||||||||||
Diluted
|
95,416
|
98,512
|
95,373
|
94,236
|
||||||||||||
|
||||||||||||||||
Cash dividends declared per share:
|
||||||||||||||||
Common
|
$
|
0.310
|
$
|
0.360
|
$
|
0.930
|
$
|
1.190
|
||||||||
Series A Preferred
|
–
|
0.400
|
0.717
|
1.200
|
||||||||||||
Series B Preferred
|
–
|
0.315
|
0.567
|
0.945
|
||||||||||||
Series E Preferred
|
0.469
|
–
|
0.792
|
–
|
|
2013
|
2012
|
||||||||||||||||||
|
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
|||||||||||||||
Condensed Quarterly Statements of Income:
|
||||||||||||||||||||
(in thousands, except per share amounts)
|
||||||||||||||||||||
Interest income, before investment premium amortization
|
$
|
85,724
|
$
|
85,322
|
$
|
86,965
|
$
|
90,497
|
$
|
90,768
|
||||||||||
Investment premium amortization
|
(39,033
|
)
|
(33,643
|
)
|
(28,385
|
)
|
(29,331
|
)
|
(27,151
|
)
|
||||||||||
Interest expense (a)
|
(17,881
|
)
|
(18,871
|
)
|
(20,590
|
)
|
(22,794
|
)
|
(19,997
|
)
|
||||||||||
|
28,810
|
32,808
|
37,990
|
38,372
|
43,620
|
|||||||||||||||
|
||||||||||||||||||||
Miscellaneous other revenue (expense)
|
(86
|
)
|
(135
|
)
|
(30
|
)
|
(24
|
)
|
9
|
|||||||||||
Incentive compensation
|
(1,130
|
)
|
(123
|
)
|
(351
|
)
|
(515
|
)
|
(781
|
)
|
||||||||||
Salaries and benefits
|
(1,689
|
)
|
(1,558
|
)
|
(1,610
|
)
|
(1,638
|
)
|
(1,696
|
)
|
||||||||||
Other general and administrative expense
|
(1,203
|
)
|
(1,098
|
)
|
(1,081
|
)
|
(1,111
|
)
|
(1,115
|
)
|
||||||||||
|
(4,108
|
)
|
(2,914
|
)
|
(3,072
|
)
|
(3,288
|
)
|
(3,583
|
)
|
||||||||||
Net income
|
24,702
|
29,894
|
34,918
|
35,084
|
40,037
|
|||||||||||||||
Less preferred dividends and redemption preference premiums paid
|
(3,188
|
)
|
(25,791
|
)
|
(5,270
|
)
|
(5,270
|
)
|
(5,270
|
)
|
||||||||||
Net income available to common stockholders
|
$
|
21,514
|
$
|
4,103
|
$
|
29,648
|
$
|
29,814
|
$
|
34,767
|
||||||||||
Net income per diluted common share
|
$
|
0.23
|
$
|
0.04
|
$
|
0.31
|
$
|
0.31
|
$
|
0.35
|
||||||||||
Core earnings per diluted common share (b)
|
0.27
|
|||||||||||||||||||
Average diluted common shares outstanding
|
95,416
|
95,397
|
95,450
|
97,329
|
98,512
|
|||||||||||||||
Select Operating Statistics:
|
||||||||||||||||||||
(dollars in millions, percentages annualized)
|
||||||||||||||||||||
Average portfolio outstanding (cost basis)
|
$
|
13,740
|
$
|
13,506
|
$
|
13,543
|
$
|
13,889
|
$
|
13,657
|
||||||||||
Average long-term investment capital (“LTIC”)
|
1,476
|
1,638
|
1,605
|
1,639
|
1,630
|
|||||||||||||||
Spreads on residential mortgage investments
|
0.87
|
%
|
1.00
|
%
|
1.15
|
%
|
1.13
|
%
|
1.30
|
%
|
||||||||||
Constant prepayment rate (“CPR”)
|
25.49
|
23.12
|
20.05
|
19.99
|
19.14
|
|||||||||||||||
Operating costs as a percentage of LTIC
|
1.08
|
0.68
|
0.77
|
0.79
|
0.88
|
|||||||||||||||
Return on common equity capital (c)
|
7.05
|
7.97
|
9.14
|
8.79
|
10.32
|
(a) | Includes $2.1 million in interest charges on unsecured borrowings net of related earnings of related unconsolidated affiliates. |
(b) | Core earnings per diluted common share is a non-GAAP financial measure that differs from the related GAAP measure of net income per diluted common share by excluding certain one-time effects of second quarter 2013 preferred capital redemption and issuance transactions as detailed below. Management believes presenting this metric on a core earnings basis provides useful, comparative information for evaluating the Company’s performance. The following reconciles this measure for the indicated periods: |
|
Quarter Ended
|
Nine Months Ended
|
||||||||||||||
|
June 30, 2013
|
September30, 2013
|
||||||||||||||
Net income available to common stockholders/net income per diluted common share
|
$
|
4,103
|
$
|
0.04
|
$
|
55,265
|
$
|
0.58
|
||||||||
Series A and B redemption preference premiums paid
|
19,924
|
0.21
|
19,924
|
0.21
|
||||||||||||
Series A and B preferred dividends accruing from the issue date of the Series E preferred shares to the Series A and B redemption date
|
1,741
|
0.02
|
1,741
|
0.02
|
||||||||||||
Core earnings available to common stockholders/core earnings per diluted common share
|
$
|
25,768
|
$
|
0.27
|
$
|
76,930
|
$
|
0.81
|
(c) | Second quarter 2013 return on common equity capital presented above is calculated excluding the one-time effects of the above-mentioned preferred capital transactions. Including these items, the return on common equity capital for the quarter was 1.27%. |
|
2013
|
2012
|
||||||||||||||||||||||||||
|
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
|||||||||||||||||||||
Yields on residential mortgage investments: (a)
|
||||||||||||||||||||||||||||
Cash yields
|
2.50
|
%
|
2.52
|
%
|
2.57
|
%
|
2.60
|
%
|
2.65
|
%
|
2.71
|
%
|
2.74
|
%
|
||||||||||||||
Investment premium amortization
|
(1.14
|
)
|
(0.99
|
)
|
(0.84
|
)
|
(0.84
|
)
|
(0.79
|
)
|
(0.67
|
)
|
(0.60
|
)
|
||||||||||||||
Adjusted yields
|
1.36
|
1.53
|
1.73
|
1.76
|
1.86
|
2.04
|
2.14
|
|||||||||||||||||||||
Related borrowing rates: (b)
|
||||||||||||||||||||||||||||
Unhedged borrowing rates
|
0.37
|
0.39
|
0.41
|
0.45
|
0.41
|
0.37
|
0.32
|
|||||||||||||||||||||
Fixed swap rates
|
0.59
|
0.65
|
0.71
|
0.75
|
0.78
|
0.80
|
0.85
|
|||||||||||||||||||||
Adjusted borrowing rates
|
0.49
|
0.53
|
0.58
|
0.63
|
0.56
|
0.54
|
0.49
|
|||||||||||||||||||||
Financing spreads on residential mortgage investments
|
0.87
|
1.00
|
1.15
|
1.13
|
1.30
|
1.50
|
1.65
|
|||||||||||||||||||||
CPR
|
25.49
|
23.12
|
20.05
|
19.99
|
19.14
|
16.31
|
14.97
|
(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 average amortized cost basis for the indicated periods. |
(b) | Unhedged borrowing rates represent average rates on repurchase agreements and similar borrowings, before consideration of related currently-paying swap agreements. |
|
2013
|
2012
|
||||||||||||||||||||||||||
|
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
|||||||||||||||||||||
Financing spreads on residential
mortgage investments
|
0.87
|
%
|
1.00
|
%
|
1.15
|
%
|
1.13
|
%
|
1.30
|
%
|
1.50
|
%
|
1.65
|
%
|
||||||||||||||
Impact of yields on other interest-earning assets*
|
(0.02
|
)
|
(0.05
|
)
|
(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
|
)
|
(0.06
|
)
|
(0.06
|
)
|
(0.07
|
)
|
(0.07
|
)
|
||||||||||||||
Total financing spreads
|
0.79
|
0.89
|
1.04
|
1.00
|
1.19
|
1.37
|
1.52
|
* | 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 a 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. |
September 30, 2013 |
December 31, 2012
|
|||||||||||||||||||||||
|
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) (b)
|
||||||||||||||||||||||||
Fannie Mae/Freddie Mac securities:
|
||||||||||||||||||||||||
Current-reset ARMs
|
$
|
6,283,955
|
$
|
159,068
|
$
|
6,443,023
|
$
|
6,645,305
|
$
|
202,282
|
$
|
250,550
|
||||||||||||
Longer-to-reset ARMs
|
4,736,386
|
195,650
|
4,932,036
|
4,941,501
|
9,465
|
43,772
|
||||||||||||||||||
Fixed-rate
|
47
|
–
|
47
|
50
|
3
|
5
|
||||||||||||||||||
Ginnie Mae securities :
|
||||||||||||||||||||||||
Current-reset ARMs
|
939,182
|
26,214
|
965,396
|
978,586
|
13,190
|
14,693
|
||||||||||||||||||
Longer-to-reset ARMs
|
1,118,904
|
44,690
|
1,163,594
|
1,161,066
|
(2,528
|
)
|
17,429
|
|||||||||||||||||
|
$
|
13,078,474
|
$
|
425,622
|
$
|
13,504,096
|
$
|
13,726,508
|
$
|
222,412
|
$
|
326,449
|
||||||||||||
Interest rate swap positions (c)
|
$
|
7,200,000
|
$
|
(9,867
|
)
|
$
|
(9,855
|
)
|
$
|
(32,539
|
)
|
(a) | Unrealized gains and losses on residential mortgage securities classified as available-for-sale are recorded as a component of Accumulated other comprehensive income in Stockholders’ equity. Gains or losses are generally recognized in earnings only if sold. Residential mortgage securities classified as held-to-maturity with a cost basis of $5 million and unsecuritized investments in residential mortgage loans with a cost basis of $7 million are not subject to mark-to-market accounting and therefore have been excluded from this analysis. |
(b) | Capstead classifies its residential ARM securities based on the average length of time until the loans underlying each security reset to more current rates (see page 12 of this release for further information). |
(c) | To help mitigate exposure to higher interest rates, Capstead typically uses currently-paying and forward-starting one-month LIBOR-indexed, pay-fixed, receive-variable, interest rate swap agreements with two-year interest payment terms. Additionally, the Company has entered into three forward-starting swap agreements with notional amounts totaling $100 million and terms coinciding with the variable-rate terms of the Company’s long-term unsecured borrowings that begin in 2015 and 2016 and end with their maturities in 2035 and 2036. Swap positions are carried on the balance sheet at fair value with related unrealized gains or losses arising while designated as cash flow hedges for accounting purposes reflected as a component of Accumulated other comprehensive income in Stockholders’ equity and related hedge ineffectiveness recognized in Interest expense. As of September 30, 2013, these swap positions had the following characteristics: |
Period of Contract Expiration
|
Notional
Amount
|
Average Fixed Rate
Payment Requirement
|
Fair
Value
|
Unrealized
Gains (Losses)
|
||||||||||||
Currently-paying contracts:
|
||||||||||||||||
Fourth quarter 2013
|
$
|
800,000
|
0.78
|
%
|
$
|
(419
|
)
|
$
|
(419
|
)
|
||||||
First quarter 2014
|
200,000
|
0.60
|
(221
|
)
|
(218
|
)
|
||||||||||
Second quarter 2014
|
400,000
|
0.51
|
(616
|
)
|
(606
|
)
|
||||||||||
Third quarter 2014
|
200,000
|
0.51
|
(440
|
)
|
(440
|
)
|
||||||||||
Fourth quarter 2014
|
500,000
|
0.58
|
(1,724
|
)
|
(1,723
|
)
|
||||||||||
First quarter 2015
|
1,100,000
|
0.50
|
(3,327
|
)
|
(3,327
|
)
|
||||||||||
Second quarter 2015
|
200,000
|
0.43
|
(394
|
)
|
(395
|
)
|
||||||||||
Third quarter 2015
|
400,000
|
0.47
|
(835
|
)
|
(835
|
)
|
||||||||||
(average expiration: 11 months)
|
3,800,000
|
0.57
|
(7,976
|
)
|
(7,963
|
)
|
||||||||||
Forward-starting contracts:
|
||||||||||||||||
Fourth quarter 2015
|
1,200,000
|
0.45
|
(986
|
)
|
(985
|
)
|
||||||||||
First quarter 2016
|
1,700,000
|
0.51
|
(1,610
|
)
|
(1,612
|
)
|
||||||||||
Second quarter 2016
|
400,000
|
0.45
|
1,059
|
1,059
|
||||||||||||
(average expiration: 27 months)
|
3,300,000
|
0.48
|
(1,537
|
)
|
(1,538
|
)
|
||||||||||
(average expiration: 18 months)
|
$
|
7,100,000
|
$
|
(9,513
|
)
|
$
|
(9,501
|
)
|
||||||||
Forward-starting contracts expiring in 2035 and 2036 related to unsecured borrowings
|
$
|
100,000
|
4.09
|
$
|
(354
|
)
|
$
|
(354
|
)
|
ARM Type (a)
|
Amortized
Cost Basis (b)
|
Net
WAC (c)
|
Fully
Indexed
WAC (c)
|
Average
Net
Margins (c)
|
Average
Periodic
Caps (c)
|
Average
Lifetime
Caps (c)
|
Months
To
Roll (a)
|
|||||||||||||||||||||
Current-reset ARMs:
|
||||||||||||||||||||||||||||
Fannie Mae Agency Securities
|
$
|
4,751,970
|
2.35
|
%
|
2.17
|
%
|
1.70
|
%
|
3.27
|
%
|
10.11
|
%
|
5.4
|
|||||||||||||||
Freddie Mac Agency Securities
|
1,691,053
|
2.52
|
2.28
|
1.84
|
2.13
|
10.59
|
6.5
|
|||||||||||||||||||||
Ginnie Mae Agency Securities
|
965,396
|
2.46
|
1.64
|
1.51
|
1.04
|
8.97
|
7.6
|
|||||||||||||||||||||
4,546
|
3.49
|
2.27
|
2.04
|
1.51
|
10.97
|
4.5
|
||||||||||||||||||||||
|
7,412,965
|
2.40
|
2.12
|
1.71
|
2.73
|
10.07
|
5.9
|
|||||||||||||||||||||
Longer-to-reset ARMs:
|
||||||||||||||||||||||||||||
Fannie Mae Agency Securities
|
3,165,264
|
2.88
|
2.38
|
1.75
|
4.92
|
7.90
|
42.0
|
|||||||||||||||||||||
Freddie Mac Agency Securities
|
1,766,772
|
2.93
|
2.46
|
1.83
|
4.96
|
7.95
|
42.6
|
|||||||||||||||||||||
Ginnie Mae Agency Securities
|
1,163,594
|
2.80
|
1.62
|
1.51
|
1.07
|
7.87
|
30.4
|
|||||||||||||||||||||
|
6,095,630
|
2.88
|
2.26
|
1.73
|
4.19
|
7.91
|
40.0
|
|||||||||||||||||||||
|
$
|
13,508,595
|
2.62
|
2.18
|
1.72
|
3.39
|
9.10
|
21.2
|
||||||||||||||||||||
|
||||||||||||||||||||||||||||
Gross WAC (rate paid by borrowers) (d)
|
3.22
|
(a) | Capstead classifies its ARM securities based on the average length of time until the loans underlying each security reset to more current rates (“months-to-roll”) (less than 18 months for “current-reset” ARM securities, and 18 months or greater for “longer-to-reset” ARM securities). Once an ARM loan reaches its initial reset date, it will reset at least once a year to a margin over a corresponding interest rate index, subject to periodic and lifetime limits or caps. |
(b) | Amortized cost basis represents the Company’s investment (unpaid principal balance plus unamortized investment premiums) before unrealized gains and losses. As of September 30, 2013, the ratio of amortized cost basis to related unpaid principal balance for the Company’s ARM securities was 103.25. This table excludes $2 million in fixed-rate Agency Securities, $3 million in fixed-rate residential mortgage loans and $2 million in private residential mortgage pass-through securities held as collateral for structured financings. |
(d) | 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 the indicated balance sheet date. |