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)
|
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425).
|
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 230.14a-12).
|
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)).
|
☐ |
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 26, 2016 announcing third quarter 2016 results.
|
CAPSTEAD MORTGAGE CORPORATION | ||
October 26, 2016
|
By:
|
/s/ Phillip A. Reinsch |
Phillip A. Reinsch
|
||
President and Chief Executive Officer,
|
||
Chief Financial Officer and Secretary |
CONTACT:
|
Lindsey Crabbe
|
·
|
Generated earnings of $16.4 million or $0.13 per diluted common share ($19.2 million or $0.16 per diluted common share excluding a separation of service charge)
|
·
|
Paid common dividend of $0.23 per common share
|
·
|
Book value decreased by $0.01 due to changes in unrealized gains and losses on the portfolio and related swaps and by $0.10 returned to stockholders in the form of dividend distributions in excess of earnings
|
·
|
Yields on residential mortgage investments decreased eight basis points to 1.46% while rates on related secured borrowings were unchanged at 0.84%
|
·
|
Total financing spreads decreased eight basis points to 0.56% while financing spreads on residential mortgage investments, a non-GAAP financial measure, decreased eight basis points to 0.62%
|
·
|
Agency-guaranteed ARM portfolio and leverage ended the quarter at $13.58 billion and 9.09 times long-term investment capital, respectively
|
Quarter Ended
September 30, 2016
|
Nine Months Ended
September 30, 2016
|
|||||||
Residential mortgage investments, beginning of period
|
$
|
13,901,543
|
$
|
14,154,737
|
||||
Portfolio acquisitions (principal amount) at average lifetime purchased yields of 2.10% and 2.23%, respectively
|
779,620
|
2,243,808
|
||||||
Investment premiums on acquisitions*
|
27,462
|
76,011
|
||||||
Portfolio runoff (principal amount)
|
(1,071,071
|
)
|
(2,807,339
|
)
|
||||
Investment premium amortization
|
(36,076
|
)
|
(95,139
|
)
|
||||
(Decrease) Increase in net unrealized gains on securities classified as available-for-sale
|
(19,155
|
)
|
10,245
|
|||||
Residential mortgage investments, end of period
|
$
|
13,582,323
|
$
|
13,582,323
|
||||
Decrease in residential mortgage investments during the indicated periods
|
$
|
(319,220
|
)
|
$
|
(572,414
|
)
|
*
|
Residential mortgage investments typically are acquired at a premium to the securities’ unpaid principal balances. Investment premiums are recognized in earnings as portfolio yield adjustments using the interest method over the estimated lives of the related investments. As such, the level of mortgage prepayments impacts how quickly investment premiums are amortized.
|
Quarter Ended
September 30, 2016
|
Nine Months Ended
September 30, 2016
|
|||||||||||||||
Book value per common share, beginning of period
|
$
|
11.21
|
$
|
11.42
|
||||||||||||
Change in unrealized gains and losses on mortgage securities classified as available-for-sale
|
(0.20
|
)
|
0.11
|
|||||||||||||
Change in unrealized gains and losses on interest rate swap agreements designated as cash flow hedges of:
|
||||||||||||||||
Secured borrowings
|
0.19
|
(0.10
|
)
|
|||||||||||||
Unsecured borrowings
|
–
|
(0.17
|
)
|
|||||||||||||
(0.01
|
)
|
(0.1
|
)%
|
(0.16
|
)
|
(1.4
|
)%
|
|||||||||
Capital transactions:
|
||||||||||||||||
Dividend distributions in excess of earnings
|
(0.10
|
)
|
(0.9
|
)%
|
(0.16
|
)
|
(1.4
|
)%
|
||||||||
Book value per common share, end of period
|
$
|
11.10
|
$
|
11.10
|
||||||||||||
Decrease in book value per common share during the indicated periods
|
$
|
(0.11
|
)
|
(1.0
|
)%
|
$
|
(0.32
|
)
|
(2.8
|
)%
|
· |
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 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 Fannie Mae, Freddie Mac, Ginnie Mae, the Federal Home Loan Bank system and similar federal government agencies and related guarantees;
|
· |
changes in legislation or regulation affecting exemptions for mortgage REITs from regulation under the Investment Company Act of 1940;
|
· |
other changes in legislation or regulation affecting the mortgage and banking industries; and
|
· |
increases in costs and other general competitive factors.
|
September 30, 2016
|
December 31, 2015
|
|||||||
(unaudited)
|
||||||||
Assets
|
||||||||
Residential mortgage investments ($13.09 and $13.54 billion pledged at September 30, 2016 and December 31, 2015, respectively)
|
$
|
13,582,323
|
$
|
14,154,737
|
||||
Cash collateral receivable from interest rate swap counterparties
|
73,191
|
50,193
|
||||||
Interest rate swap agreements at fair value
|
2,501
|
7,720
|
||||||
Cash and cash equivalents
|
83,697
|
54,185
|
||||||
Receivables and other assets
|
164,102
|
179,531
|
||||||
$
|
13,905,814
|
$
|
14,446,366
|
|||||
Liabilities
|
||||||||
Secured borrowings
|
$
|
12,431,839
|
$
|
12,958,394
|
||||
Interest rate swap agreements at fair value
|
46,954
|
26,061
|
||||||
Unsecured borrowings
|
98,065
|
97,986
|
||||||
Common stock dividend payable
|
22,687
|
25,979
|
||||||
Accounts payable and accrued expenses
|
36,159
|
39,622
|
||||||
12,635,704
|
13,148,042
|
|||||||
Stockholders’ equity
|
||||||||
Preferred stock - $0.10 par value; 100,000 shares authorized: 7.50% Cumulative Redeemable Preferred Stock, Series E, 8,204 and 8,156 shares issued and outstanding ($205,107 and $203,902 aggregate liquidation preferences) at September 30, 2016 and December 31, 2015, respectively
|
198,331
|
197,172
|
||||||
Common stock - $0.01 par value; 250,000 shares authorized: 95,989 and 95,825 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively
|
960
|
958
|
||||||
Paid-in capital
|
1,296,550
|
1,310,563
|
||||||
Accumulated deficit
|
(346,464
|
)
|
(346,464
|
)
|
||||
Accumulated other comprehensive income
|
120,733
|
136,095
|
||||||
1,270,110
|
1,298,324
|
|||||||
$
|
13,905,814
|
$
|
14,446,366
|
|||||
Long-term investment capital (consists of stockholders’ equity and unsecured borrowings) (unaudited)
|
$
|
1,368,175
|
$
|
1,396,310
|
||||
Portfolio leverage (secured borrowings divided by long-term investment capital) (unaudited)
|
9.09:1
|
9.28:1
|
||||||
Book value per common share (based on common shares outstanding and calculated assuming liquidation preferences for preferred stock) (unaudited)
|
$
|
11.10
|
$
|
11.42
|
Quarter Ended
September 30
|
Nine Months Ended
September 30
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Interest income:
|
||||||||||||||||
Residential mortgage investments
|
$
|
49,845
|
$
|
49,485
|
$
|
162,654
|
$
|
158,471
|
||||||||
Other
|
174
|
88
|
494
|
281
|
||||||||||||
50,019
|
49,573
|
163,148
|
158,752
|
|||||||||||||
Interest expense:
|
||||||||||||||||
Secured borrowings
|
(26,636
|
)
|
(22,272
|
)
|
(80,232
|
)
|
(61,584
|
)
|
||||||||
Unsecured borrowings
|
(1,970
|
)
|
(2,122
|
)
|
(5,923
|
)
|
(6,367
|
)
|
||||||||
(28,606
|
)
|
(24,394
|
)
|
(86,155
|
)
|
(67,951
|
)
|
|||||||||
21,413
|
25,179
|
76,993
|
90,801
|
|||||||||||||
Other revenue (expense):
|
||||||||||||||||
Compensation-related expense
|
(1,299
|
)
|
(3,064
|
)
|
(6,565
|
)
|
(7,573
|
)
|
||||||||
Separation of service charge
|
(2,740
|
)
|
–
|
(2,740
|
)
|
–
|
||||||||||
Other general and administrative expense
|
(1,239
|
)
|
(1,309
|
)
|
(3,565
|
)
|
(3,628
|
)
|
||||||||
Miscellaneous other revenue
|
305
|
261
|
1,300
|
368
|
||||||||||||
(4,973
|
)
|
(4,112
|
)
|
(11,570
|
)
|
(10,833
|
)
|
|||||||||
Net income
|
$
|
16,440
|
$
|
21,067
|
$
|
65,423
|
$
|
79,968
|
||||||||
Net income available to common stockholders:
|
||||||||||||||||
Net income
|
$
|
16,440
|
$
|
21,067
|
$
|
65,423
|
$
|
79,968
|
||||||||
Less preferred stock dividends
|
(3,846
|
)
|
(3,809
|
)
|
(11,515
|
)
|
(11,339
|
)
|
||||||||
$
|
12,594
|
$
|
17,258
|
$
|
53,908
|
$
|
68,629
|
|||||||||
Net income per common share:
|
||||||||||||||||
Basic and diluted
|
$
|
0.13
|
$
|
0.18
|
$
|
0.56
|
$
|
0.72
|
||||||||
Weighted average common shares outstanding:
|
||||||||||||||||
Basic
|
95,678
|
95,530
|
95,647
|
95,500
|
||||||||||||
Diluted
|
95,866
|
95,721
|
95,799
|
95,695
|
||||||||||||
Cash dividends declared per share:
|
||||||||||||||||
Common
|
$
|
0.23
|
$
|
0.26
|
$
|
0.72
|
$
|
0.88
|
||||||||
Series E preferred
|
0.47
|
0.47
|
1.41
|
1.41
|
2016
|
2015
|
|||||||||||||||||||||||
Q3 | Q2 | Q1 | Q4 | Q3 |
Q2
|
|||||||||||||||||||
Quarterly Statements of Income:
|
||||||||||||||||||||||||
Interest income:
|
||||||||||||||||||||||||
Residential mortgage investments
|
$
|
49,845
|
$
|
53,309
|
$
|
59,500
|
$
|
57,518
|
$
|
49,485
|
$
|
50,341
|
||||||||||||
Other
|
174
|
128
|
192
|
60
|
88
|
99
|
||||||||||||||||||
50,019
|
53,437
|
59,692
|
57,578
|
49,573
|
50,440
|
|||||||||||||||||||
Interest expense:
|
||||||||||||||||||||||||
Secured borrowings
|
(26,636
|
)
|
(27,014
|
)
|
(26,582
|
)
|
(23,937
|
)
|
(22,272
|
)
|
(20,098
|
)
|
||||||||||||
Unsecured borrowings
|
(1,970
|
)
|
(1,976
|
)
|
(1,977
|
)
|
(2,087
|
)
|
(2,122
|
)
|
(2,122
|
)
|
||||||||||||
(28,606
|
)
|
(28,990
|
)
|
(28,559
|
)
|
(26,024
|
)
|
(24,394
|
)
|
(22,220
|
)
|
|||||||||||||
21,413
|
24,447
|
31,133
|
31,554
|
25,179
|
28,220
|
|||||||||||||||||||
Other revenue (expense):
|
||||||||||||||||||||||||
Compensation-related expense
|
(1,299
|
)
|
(2,042
|
)
|
(3,224
|
)
|
(2,627
|
)
|
(3,064
|
)
|
(2,160
|
)
|
||||||||||||
Separation of service charge
|
(2,740
|
)
|
–
|
–
|
–
|
–
|
–
|
|||||||||||||||||
Other general and administrative expense
|
(1,239
|
)
|
(1,157
|
)
|
(1,169
|
)
|
(1,170
|
)
|
(1,309
|
)
|
(1,170
|
)
|
||||||||||||
Miscellaneous other revenue
|
305
|
382
|
613
|
600
|
261
|
54
|
||||||||||||||||||
(4,973
|
)
|
(2,817
|
)
|
(3,780
|
)
|
(3,197
|
)
|
(4,112
|
)
|
(3,276
|
)
|
|||||||||||||
Net income
|
$
|
16,440
|
$
|
21,630
|
$
|
27,353
|
$
|
28,357
|
$
|
21,067
|
$
|
24,944
|
||||||||||||
Net income per diluted common share
|
$
|
0.13
|
$
|
0.19
|
$
|
0.25
|
$
|
0.26
|
$
|
0.18
|
$
|
0.22
|
||||||||||||
Core earnings per diluted common share (a)
|
$
|
0.16
|
||||||||||||||||||||||
Average diluted common shares outstanding
|
95,866
|
95,786
|
95,745
|
95,718
|
95,721
|
95,689
|
||||||||||||||||||
Select Operating Statistics:
|
||||||||||||||||||||||||
Average portfolio outstanding (cost basis)
|
$
|
13,629,220
|
$
|
13,837,817
|
$
|
13,848,718
|
$
|
14,115,691
|
$
|
13,884,830
|
$
|
13,853,972
|
||||||||||||
Average long-term investment capital (“LTIC”)
|
1,380,006
|
1,388,476
|
1,398,088
|
1,431,338
|
1,475,333
|
1,501,740
|
||||||||||||||||||
Investment premium amortization
|
36,076
|
33,052
|
26,011
|
28,732
|
34,323
|
33,057
|
||||||||||||||||||
Constant prepayment rate (“CPR”)
|
25.80
|
%
|
23.19
|
%
|
18.23
|
%
|
19.62
|
%
|
23.21
|
%
|
21.98
|
%
|
||||||||||||
Total financing spreads
|
0.56
|
0.64
|
0.82
|
0.83
|
0.66
|
0.74
|
||||||||||||||||||
Financing spreads on residential mortgage investments, a non-GAAP financial measure
|
0.62
|
0.70
|
0.90
|
0.90
|
0.74
|
0.84
|
||||||||||||||||||
Operating costs as a percentage of LTIC
|
0.73
|
0.93
|
1.26
|
1.05
|
1.18
|
0.89
|
||||||||||||||||||
Return on common equity capital
|
4.62
|
6.55
|
8.58
|
8.57
|
5.80
|
7.02
|
(a)
|
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 the effect of a $2.7 million separation of service charge associated with the July resignation of the Company’s former chief executive as detailed below. Management believes presenting this metric on a core earnings basis provides useful, comparative information for evaluating the Company’s performance for the current period. The following reconciles this measure for the three months ended September 30, 2016:
|
Net income available to common stockholders/net income per diluted common share
|
$
|
12,594
|
$
|
0.13
|
||||
Addback: separation of service charge
|
2,740
|
0.03
|
||||||
Core earnings available to common stockholders/core earnings per diluted common share
|
$
|
15,334
|
$
|
0.16
|
2016
|
2015
|
2014
|
||||||||||||||||||||||||||||||
Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | |||||||||||||||||||||||||
Total financing spreads: (a)
|
||||||||||||||||||||||||||||||||
Yields on all interest-earning assets
|
1.45
|
%
|
1.53
|
%
|
1.69
|
%
|
1.62
|
%
|
1.40
|
%
|
1.42
|
%
|
1.66
|
%
|
1.61
|
%
|
||||||||||||||||
Borrowing rates on all interest-paying liabilities
|
0.89
|
0.89
|
0.87
|
0.79
|
0.74
|
0.68
|
0.65
|
0.63
|
||||||||||||||||||||||||
Total financing spreads
|
0.56
|
0.64
|
0.82
|
0.83
|
0.66
|
0.74
|
1.01
|
0.98
|
||||||||||||||||||||||||
Financing spreads on residential mortgage investments, a non-GAAP financial measure:
|
||||||||||||||||||||||||||||||||
Cash yields on residential mortgage investments (b)
|
2.52
|
%
|
2.50
|
%
|
2.47
|
%
|
2.44
|
%
|
2.42
|
%
|
2.41
|
%
|
2.42
|
%
|
2.43
|
%
|
||||||||||||||||
Investment premium amortization (b)
|
(1.06
|
)
|
(0.96
|
)
|
(0.75
|
)
|
(0.81
|
)
|
(0.99
|
)
|
(0.95
|
)
|
(0.72
|
)
|
(0.77
|
)
|
||||||||||||||||
Yields on residential mortgage investments
|
1.46
|
1.54
|
1.72
|
1.63
|
1.43
|
1.46
|
1.70
|
1.66
|
||||||||||||||||||||||||
Unhedged secured borrowing rates (c)
|
0.69
|
0.67
|
0.65
|
0.48
|
0.45
|
0.41
|
0.38
|
0.36
|
||||||||||||||||||||||||
Hedged secured borrowing rates (c)
|
0.93
|
0.96
|
0.93
|
0.87
|
0.84
|
0.77
|
0.75
|
0.72
|
||||||||||||||||||||||||
Secured borrowing rates
|
0.84
|
0.84
|
0.82
|
0.73
|
0.69
|
0.62
|
0.59
|
0.56
|
||||||||||||||||||||||||
Financing spreads on residential mortgage investments
|
0.62
|
0.70
|
0.90
|
0.90
|
0.74
|
0.84
|
1.11
|
1.10
|
||||||||||||||||||||||||
CPR
|
25.80
|
23.19
|
18.23
|
19.62
|
23.21
|
21.98
|
16.66
|
17.58
|
(a) |
All interest-earning assets include residential mortgage investments, overnight investments and cash collateral receivable from interest rate swap counterparties. All interest-paying liabilities include unsecured borrowings and cash collateral payable to interest rate swap counterparties.
|
(b) |
Cash yields are based on the cash component of interest income. Investment premium amortization is determined using the interest method which incorporates actual and anticipated future mortgage prepayments. Both are expressed as a percentage calculated on average amortized cost basis for the indicated periods.
|
(c) |
Unhedged borrowing rates represent average rates on secured borrowings, before consideration of related currently-paying interest rate swap agreements. Hedged borrowing rates represent the average fixed-rate payments made on currently-paying interest rate swap agreements held for portfolio hedging purposes adjusted for differences between LIBOR-based variable-rate payments received on these swaps and unhedged borrowing rates, as well as the effects of any hedge ineffectiveness. Average fixed-rate swap payments were 0.75%, 0.73% and 0.69% for the third, second and first quarters of 2016, respectively, while the variable-rate payment adjustments equated to 0.18%, 0.23% and 0.24% on average currently-paying swap notional amounts outstanding for the same periods, respectively. During 2015 fixed-rate swap payments averaged 0.57% while variable-rate payment adjustments averaged 0.24% on average notional amounts outstanding.
|
2016
|
2015
|
2014
|
||||||||||||||||||||||||||||||
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
Q4
|
|||||||||||||||||||||||||
Total financing spreads
|
0.56
|
%
|
0.64
|
%
|
0.82
|
%
|
0.83
|
%
|
0.66
|
%
|
0.74
|
%
|
1.01
|
%
|
0.98
|
%
|
||||||||||||||||
Impact of yields on other interest-earning assets
|
0.01
|
0.01
|
0.03
|
0.01
|
0.03
|
0.04
|
0.04
|
0.05
|
||||||||||||||||||||||||
Impact of borrowing rates on other interest-paying liabilities
|
0.05
|
0.05
|
0.05
|
0.06
|
0.05
|
0.06
|
0.06
|
0.07
|
||||||||||||||||||||||||
Financing spreads on residential mortgage investments
|
0.62
|
0.70
|
0.90
|
0.90
|
0.74
|
0.84
|
1.11
|
1.10
|
|
September 30, 2016 |
December 31, 2015
|
||||||||||||||||||||||
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
|
$
|
5,645,483
|
$
|
170,604
|
$
|
5,816,087
|
$
|
5,948,140
|
$
|
132,053
|
$
|
161,400
|
||||||||||||
Longer-to-reset ARMs
|
4,385,376
|
148,715
|
4,534,091
|
4,558,231
|
24,140
|
(5,561
|
)
|
|||||||||||||||||
Fixed-rate
|
8
|
–
|
8
|
8
|
–
|
1
|
||||||||||||||||||
Ginnie Mae securities:
|
||||||||||||||||||||||||
Current-reset ARMs
|
1,754,527
|
59,226
|
1,813,753
|
1,820,112
|
6,359
|
6,268
|
||||||||||||||||||
Longer-to-reset ARMs
|
1,209,736
|
39,104
|
1,248,840
|
1,251,062
|
2,222
|
(7,579
|
)
|
|||||||||||||||||
$
|
12,995,130
|
$
|
417,649
|
$
|
13,412,779
|
$
|
13,577,553
|
$
|
164,774
|
$
|
154,529
|
|||||||||||||
Interest rate swap agreements: (b)
|
||||||||||||||||||||||||
Secured borrowings-related
|
$
|
7,850,000
|
$
|
(3,480
|
)
|
$
|
(3,068
|
)
|
$
|
6,576
|
||||||||||||||
Unsecured borrowings-related
|
100,000
|
(40,973
|
)
|
(40,973
|
)
|
(25,010
|
)
|
(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 $2 million and unsecuritized investments in residential mortgage loans with a cost basis of $3 million are not subject to fair value accounting and therefore have been excluded from this analysis. Capstead segregates its residential ARM securities based on the average length of time until the loans underlying each security reset to more current rates.
|
(b) |
To help mitigate exposure to higher interest rates, Capstead uses one-month LIBOR-indexed, pay-fixed, receive-variable interest rate swap agreements supplemented with longer-maturity secured borrowings when available at attractive rates and terms. The Company has also entered into $100 million notional amount of swap agreements with terms coinciding with the 20-year variable-rate terms of the Company’s unsecured borrowings. Swap positions are designated as cash flow hedges for accounting purposes and carried on the balance sheet at fair value with related unrealized gains or losses reflected as a component of Accumulated other comprehensive income in Stockholders’ equity. Related hedge ineffectiveness is recognized in Interest expense.
|
Period of Contract Expiration
|
Swap
Notional
Amounts
|
Average
Fixed
Rates
|
||||||
Fourth quarter 2016 (expired October 1, 2016)
|
$
|
800,000
|
0.66
|
%
|
||||
First quarter 2017
|
1,000,000
|
0.72
|
||||||
Second quarter 2017
|
900,000
|
0.74
|
||||||
Third quarter 2017
|
400,000
|
0.74
|
||||||
Fourth quarter 2017
|
1,500,000
|
0.79
|
||||||
First quarter 2018
|
1,700,000
|
0.76
|
||||||
Second quarter 2018
|
600,000
|
0.79
|
||||||
Third quarter 2018
|
400,000
|
0.88
|
||||||
Second quarter 2019
|
450,000
|
0.77
|
||||||
Third quarter 2019
|
100,000
|
0.68
|
||||||
$
|
7,850,000
|
ARM Type
|
Amortized
Cost Basis (a)
|
Net
WAC (b)
|
Fully
Indexed
WAC (b)
|
Average
Net
Margins (b)
|
Average
Periodic
Caps (b)
|
Average
Lifetime
Caps (b)
|
Months
To
Roll (c)
|
|||||||||||||||||||||
Current-reset ARMs:
|
||||||||||||||||||||||||||||
Fannie Mae Agency Securities
|
$
|
4,132,930
|
2.64
|
%
|
2.98
|
%
|
1.70
|
%
|
3.18
|
%
|
9.57
|
%
|
5.9
|
|||||||||||||||
Freddie Mac Agency Securities
|
1,683,157
|
2.74
|
3.16
|
1.82
|
2.67
|
9.61
|
6.9
|
|||||||||||||||||||||
Ginnie Mae Agency Securities
|
1,813,753
|
2.30
|
2.12
|
1.51
|
1.06
|
8.30
|
6.3
|
|||||||||||||||||||||
Residential mortgage loans
|
1,913
|
3.80
|
2.91
|
2.08
|
1.63
|
11.04
|
4.9
|
|||||||||||||||||||||
(57% of total)
|
7,631,753
|
2.58
|
2.82
|
1.68
|
2.57
|
9.27
|
6.2
|
|||||||||||||||||||||
Longer-to-reset ARMs:
|
||||||||||||||||||||||||||||
Fannie Mae Agency Securities
|
2,528,932
|
2.72
|
3.18
|
1.62
|
3.33
|
7.73
|
41.8
|
|||||||||||||||||||||
Freddie Mac Agency Securities
|
2,005,159
|
2.73
|
3.21
|
1.66
|
2.80
|
7.80
|
43.0
|
|||||||||||||||||||||
Ginnie Mae Agency Securities
|
1,248,840
|
2.92
|
2.10
|
1.51
|
1.04
|
7.96
|
41.3
|
|||||||||||||||||||||
(43% of total)
|
5,782,931
|
2.76
|
2.95
|
1.61
|
2.65
|
7.80
|
42.1
|
|||||||||||||||||||||
$
|
13,414,684
|
2.66
|
2.88
|
1.65
|
2.60
|
8.64
|
21.7
|
|||||||||||||||||||||
Gross WAC (rate paid by borrowers) (d)
|
3.26
|
(a) |
Amortized cost basis represents the Company’s investment (unpaid principal balance plus unamortized investment premiums) before unrealized gains and losses. At September 30, 2016, the ratio of amortized cost basis to unpaid principal balance for the Company’s ARM holdings was 103.21. This table excludes $3 million in fixed-rate agency-guaranteed mortgage pass-through securities, residential mortgage loans and private residential mortgage pass-through securities held as collateral for structured financings.
|
(b) |
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 the indicated date. Net WAC is expressed as a percentage calculated on an annualized basis on the unpaid principal balances of the mortgage loans underlying these investments. As such, it is similar to the cash yield on the portfolio which is calculated using amortized cost basis. Fully indexed WAC represents the weighted average coupon upon one or more resets using interest rate indexes and net margins as of the indicated date. Average net margins represent the weighted average levels over the underlying indexes that the portfolio can adjust to upon reset, usually subject to initial, periodic and/or lifetime caps on the amount of such adjustments during any single interest rate adjustment period and over the contractual term of the underlying loans. ARM securities with initial fixed-rate periods of five years or longer typically have either 200 or 500 basis point initial caps with 200 basis point periodic caps. Additionally, certain ARM securities held by the Company are subject only to lifetime caps or are not subject to a cap. For presentation purposes, average periodic caps in the table above reflect initial caps until after an ARM security has reached its initial reset date and lifetime caps, less the current net WAC, for ARM securities subject only to lifetime caps. At quarter-end, 71% of current-reset ARMs were subject to periodic caps averaging 1.74%; 20% were subject to initial caps averaging 3.55%; 8% were subject to lifetime caps averaging 7.39%; and 1% were not subject to a cap. All longer-to-reset ARM securities at September 30, 2016 were subject to initial caps.
|
(c) |
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). After consideration of any applicable initial fixed-rate periods, at September 30, 2016 approximately 89%, 7% and 4% of the Company’s ARM securities were backed by mortgage loans that reset annually, semi-annually and monthly, respectively. Approximately 80% of the Company’s current-reset ARM securities have reached an initial coupon reset date, while none of its longer-to-reset ARM securities have reached an initial coupon reset date.
|
(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.
|