EX-99.1 2 dex991.htm INVESTOR PRESENTATION Investor presentation
CAPSTEAD
As of September 30, 2010
Investor Presentation
Exhibit 99.1

Safe Harbor Statement -
Private Securities Litigation Reform Act of 1995
Cautionary Statement Concerning Forward-looking Statements
This
document
contains
“forward-looking
statements”
within
the
meaning
of
the
Private
Securities
Litigation
Reform
Act
of
1995.
Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results,
performance
or
achievements,
and
may
contain
the
words
“believe,”
“anticipate,”
“expect,”
“estimate,”
“intend,”
“project,”
“will
be,”
“will
likely continue,”
“will likely result,”
or words or phrases of similar meaning. These forward-looking statements are based largely on the
expectations of management and are subject to a number of risks and uncertainties including, but not limited to, the following:
In
addition
to
the
above
considerations,
actual
results
and
liquidity
are
affected
by
other
risks
and
uncertainties
set
forth
in
the
“Risk
Factors”
sections contained in the Company’s periodic filings with the SEC, which could cause actual results to be significantly different
from those expressed or implied by these forward-looking statements.  Any 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.  It is not possible to identify all of the risks, uncertainties and other factors that may affect
future results.  In light of these risks and uncertainties, the forward-looking events and circumstances discussed herein may not occur
and actual results could differ materially from those anticipated or implied in the forward-looking statements.  Accordingly, readers of
this document are cautioned not to place undue reliance on the forward-looking statements.
–
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;
–
increases in costs and other general competitive factors;
–
deterioration in credit quality and ratings;
–
the availability of suitable qualifying investments from both
an investment return and regulatory perspective;
–
the availability of residential mortgage pass-through
securities issued and guaranteed by government-sponsored
entities (“the GSEs”), currently Fannie Mae or Freddie Mac,
or by an agency of the federal government, currently Ginnie
Mae; and
–
changes
in
legislation
or
regulation
affecting
the
GSEs
and
similar federal government agencies and related
guarantees.
2

Company Summary
Proven Strategy
Experienced
Management Team
Company Overview
•
Founded in 1985; oldest publicly-traded agency mortgage REIT
•
Total investment portfolio of $7.94 billion*
•
Long-term investment capital of $1.11 billion levered 6.37 times*
•
Annualized 5-year return on average common equity of 14.0%**
•
Invests almost exclusively in residential adjustable-rate mortgage securities
issued and guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae
•
Prudently leveraged portfolio provides financial flexibility to manage
changing market conditions
•
Self-managed with low operating costs and a conservative incentive
compensation structure
•
Over 80 years of combined mortgage finance industry experience, including
72 years at Capstead
3
*    As of September 30, 2010.  Long-term investment capital includes stockholders’ equity and unsecured borrowings, net of investments in related unconsolidated affiliates.
**   Defined as average annualized net income available to common stockholders divided by average common equity capital from Q4’05 through Q3’10.

Market Snapshot
(dollars in thousands, except per share amounts)
4
Perpetual Preferred
Trust
Total Long-Term
Common
Series A
Series B
Preferred
Investment Capital
NYSE Stock Ticker
CMO
CMOPRA
CMOPRB
Shares outstanding
(a)
70,129
188
15,819
Cost of preferred capital
11.44%
11.28%
8.49%
10.28%
Price as of
November
8,
2010
$11.65
$20.40
$14.03
Book Value per common share
(a)
$11.77
Price as a multiple of September 30, 2010
book value
99.0%
Recorded value
(a)
$828,945
$2,630
$176,703
$99,978
$1,108,256
Market cap as of November
8,
2010
(b)
$817,003
$3,835
$221,941
$99,978
$1,142,757
  (a)   As of September 30, 2010. 
  (b)   Excludes common shares issued subsequent to quarter-end, if any.

18%
82%
10%
90%
Proven Investment & Financing Strategy
5
As of September 30, 2010
As of September 30, 2010
Residential ARM Securities Portfolio
Repurchase Agreements & Similar Borrowings
Total: $7.06 billion
*    Based on fair market value as of the indicated balance sheet date.  Excludes fixed-rate investments totaling $23 million.
Total: $7.92 billion*
Over 99% of the securities are backed by well-
seasoned mortgage loans with:
–
Coupon interest rates reset at least annually or
begin doing so after an initial fixed-rate period of
five years or less
Long-term relationships with numerous lending
counterparties:
–
20 active counterparties at September 30, 2010
Currently-paying interest rate hedge positions
consisted of $2.8 billion notional amount of two-year
interest rate swaps with average fixed rates of 1.17%
and average terms of 13 months at September 30,
2010.  Another $500 million in forward-starting two-
year swaps with average fixed rates of 0.69% begin
paying in January 2011.
The duration of the assets and liabilities was
approximately 8¾
months and 6½
months,
respectively at September 30, 2010 resulting in:
–
a net
duration
gap
of
approximately
2¼
months
at September 30, 2010
Longer-to-Reset
ARMs
$0.77 Billion
Current-Reset
ARMs
$7.15 Billion
Borrowings with
Maturities of
31-90 Days
$1.24 Billion
Borrowings with
Maturities of
30 Days or Less
$5.82 Billion
Low risk agency-guaranteed residential ARM securities financed primarily with 30-90 day “repo” borrowings

Portfolio Leverage &
Long-Term Investment Capital
6
$ in millions
Portfolio Leverage*
Long-Term Investment Capital
$661
$860
$1,114
$1,108
$1,112
$1,108
75%
75%
75%
75%
68%
58%
16%
16%
16%
16%
21%
27%
9%
15%
12%
9%
9%
9%
$
$250
$500
$750
$1,000
$1,250
12/31/07
12/31/08
12/31/09
3/31/10
6/30/10
9/30/10
Common Stock
Preferred Stock
Trust Prefered Securities, net
9.8x
7.8x
6.7x
6.4x
6.2x
6.4x
0.0x
2.0x
4.0x
6.0x
8.0x
12/31/07
12/31/08
12/31/09
3/31/10
6/30/10
9/30/10
$100
$179
$829
Common Stock
Preferred Stock
Trust Preferred Securities, net
From 12/31/07 to 9/30/10, portfolio leverage has decreased 35% from 9.8x to 6.4x and
long-term investment capital has increased 68%
**    Borrowings under repurchase agreements divided by long-term investment capital, which includes stockholders’ equity and unsecured borrowings, net of investments in related 
       unconsolidated affiliates.

2.22%
2.55%
3.09%
4.13%
5.22%
1.73%
3.53%
0.74%
0.66%
0.64%
1.69%
2.40%
2.35%
1.91%
1.56%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
12/31/08
12/31/09
3/31/10
6/30/10
9/30/10
Yield
Borrowing Rate
Financing Spread
$7.44
$7.56
$7.66
$7.92
90%
89%
85%
77%
60%
10%
11%
15%
23%
40%
$8.07
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
12/31/08
12/31/09
3/31/10
6/30/10
9/30/10
Current-Reset ARMs
Longer-to-Reset ARMs
Historical Financial Overview
7
$ in billions
Residential ARM Securities Portfolio*
Financing Spread on Mortgage Assets**
Book Value Per Common Share
Annualized Return on Average Common Equity***
$9.14
$11.99
$11.77
$11.82
$11.77
$0.00
$3.00
$6.00
$9.00
$12.00
12/31/08
12/31/09
3/31/10
6/30/10
9/30/10
21.0%
14.9%
17.2%
11.9%
8.9%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
12/31/08
12/31/09
3/31/10
6/30/10
9/30/10
For the year ended
For the quarter ended
Yield
Borrowing Rate
Financing Spread
Current-Reset ARMs
Longer-to-Reset ARMs
  *   Based on fair market value. Excludes fixed-rate investments totaling $23 million at September 30, 2010.
**  See page 16 for discussion of use of financing spread on mortgage assets, a non-GAAP financial measure.
***  Defined as annualized net income available to common stockholders divided by average common equity capital.

Financing Spreads
*    See page 16 for discussion of use of financing spread on mortgage assets, a non-GAAP financial measure.
**
Source: Bloomberg.
8
Financing Spread on Mortgage Assets*
Yield
Borrowing Rate
Fed Funds Rate
1-Month LIBOR
Yields on Mortgage Assets vs. Borrowing Rates
Fed Funds vs. 1-Month LIBOR**
Portfolio yields and financing spreads were adversely affected between March and July 2010 by the buyout of
a backlog of seriously delinquent loans by the GSEs
Repo borrowing rates remain at favorable levels with average repo borrowing rates of 0.29% at September 30,
2010 (0.63% including interest rate swaps)
With mortgage prepayments resulting from the GSE buyout programs subsiding, portfolio yields and financing
spreads are beginning to improve over lower levels experienced early in the third quarter
Avg. Spread on mortgage assets: 1.61%*

Third Quarter Highlights
Reported earnings of $23.7 million or $0.27 per diluted common
share
Financing spreads on mortgage assets declined 35 basis points
to average 1.56%, absorbing the last of the Fannie Mae and
Freddie Mac buy-outs of seriously delinquent loans from their
guarantee portfolios*
Portfolio runoff has moderated significantly after the conclusion of
the buy-out programs in July
Book value declined $0.05 to $11.77 per common share
Portfolio increased $264 million to $7.94 billion resulting in an
increase in portfolio leverage to 6.37 times long-term  investment
capital
9
*
See page 16 for discussion of use of financing spread on mortgage assets, a non-GAAP financial measure.

Published Management Remarks
Comment from the Company’s October 27, 2010 earnings press release:
“Sharply higher portfolio runoff resulting from the GSE buyout programs contributed to
significantly higher premium amortization and lower portfolio yields from March to July of this
year as well as temporarily lower average portfolio balances as capital made available from
this runoff was redeployed in a disciplined fashion.  July marked the final month of accelerated
runoff from the GSE buyout programs and represented our highest single month of runoff
because the GSE buyouts were focused on relatively low coupon Fannie Mae securities,
which make up the majority of our currently-resetting ARM securities.  In August annualized
portfolio runoff declined considerably to 21.5% (a 19.2% CPR) and has trended lower into the
fourth quarter with October runoff dropping to approximately 19.6% (a 17.1% CPR),
contributing to a substantial improvement in portfolio yields.
“Our third quarter acquisitions of primarily currently-resetting ARM securities more than
replaced
the
quarter’s
portfolio
runoff
and,
together
with
acquisitions
subsequent
to
quarter-
end, we have now replaced all of this year’s portfolio runoff through October.  If recent market
conditions
continue,
we
anticipate
reporting
an
increase
for
the
year
in
overall
portfolio
size.
“Our recent success in re-leveraging our investment capital, together with the favorable
prepay characteristics of our seasoned portfolio of agency-guaranteed ARM securities and the
continuing low borrowing rate environment, bolster our expectations for reporting significantly
improved operating results for the fourth quarter and into 2011.”
10

CAPSTEAD
CAPSTEAD
Appendix
11

Comparative Balance Sheet
(dollars in thousands, except per share amounts)
12
September 30, 2010
December 31, 2009
December 31, 2008
(unaudited)
Assets
Mortgage securities and similar investments
7,942,342
$
8,091,103
$
7,499,530
$ 
Cash collateral receivable from interest rate swap counterparties
38,738
30,485
53,676
Interest rate swap agreements at fair value
-
1,758
-
Cash and cash equivalents
177,637
409,623
96,839
Receivables and other assets
69,836
92,817
76,200
Investments in unconsolidated affiliates
3,117
3,117
3,117
8,231,670
$
8,628,903
$
7,729,362
$ 
Liabilities
Repurchase arrangements and similar borrowings
7,062,389
$
7,435,256
$
6,751,500
$ 
Unsecured borrowings
103,095
103,095
103,095
Interest rate swap agreements at fair value
22,763
9,218
46,679
Common stock dividend payable
18,233
37,432
22,728
Accounts payable and accrued expenses
16,912
29,961
44,910
7,223,392
7,614,962
6,968,912
Stockholders' Equity
Perpetual preferred stock
179,333
179,333
179,460
Common stock
673,245
661,724
618,369
Accumulated other comprehensive income (loss)
155,700
172,884
(37,379)
1,008,278
1,013,941
760,450
8,231,670
$
8,628,903
$
7,729,362
$ 
Long-term investment capital
(stockholders' equity and
Unsecured borrowings, net of investments in related
unconsolidated affiliates)
$1,108,256
$1,113,919
$860,428
Portfolio leverage
(borrowings
under
repurchase
arrangements
divided by long-term investment capital)
6.37:1
6.67:1
7.85:1
Book value per common share
(calculated
assuming
liquidation preferences for the Series A and B preferred stock)
$11.77
$11.99
$9.14

Comparative Income Statement
(dollars in thousands, except per share amounts) (unaudited)
13
* See page 16 for discussion of use of financing spread on mortgage assets, a non-GAAP financial measure.
Quarter Ended
September
June
March
December
September
2010
2010
2010
2009
2009
Interest income:
Mortgage securities and similar investments
40,614
$         
47,634
$         
60,150
$         
70,458
$         
74,695
$         
Other
111
135
92
76
69
40,725
47,769
60,242
70,534
74,764
Interest expense:
Repurchase arrangements and similar borrowings
(11,096)
(11,146)
(13,368)
(21,697)
(26,802)
Unsecured borrowings
(2,186)
(2,187)
(2,187)
(2,187)
(2,186)
(13,282)
(13,333)
(15,555)
(23,884)
(28,988)
Net interest income
27,443
34,436
44,687
46,650
45,776
Other revenue (expense):
Impairment and related charges associated with
investments in commercial real estate loans
-
-
-
(39,673)
-
Miscellaneous other revenue (expense)
(427)
(98)
(205)
(75)
16
Incentive compensation expense
(983)
(1,330)
(1,415)
(1,334)
(1,058)
General and administrative expense
(2,424)
(3,314)
(2,695)
(3,038)
(2,713)
(3,834)
(4,742)
(4,315)
(44,120)
(3,755)
Income before equity in earnings of unconsolidated affiliates
23,609
29,694
40,372
2,530
42,021
Equity in earnings of unconsolidated affiliates
64
65
65
65
64
Net income
23,673
$         
29,759
$         
40,437
$         
2,595
$            
42,085
$         
Net income (loss) per diluted common share
$0.27
$0.35
$0.51
$(0.04)
$0.56
Average balance on mortgage assets
7,313,810
$    
7,460,379
$    
7,779,081
$    
7,851,662
$    
7,564,203
$    
Average financing spread on mortgage assets*
Average financing spread on all interest-earning assets
Investment premium amortization
17,689
$         
15,342
$         
13,466
$         
8,994
$            
8,311
$            
Portfolio runoff
1.56%
1.40%
35.6%
1.91%
1.71%
37.9%
2.40%
2.25%
21.6%
2.35%
2.14%
31.8%
2.40%
2.21%
20.9%

Yield / Cost Analysis
(dollars in thousands)
*
See page 16 for discussion of use of financing spread on mortgage assets, a non-GAAP financial measure.
14
Basis
Yield/Cost
Runoff
Basis
Yield/Cost
Runoff
Agency-guaranteed securities:
Fannie Mae/Freddie Mac:
   Fixed-rate
$             5,372
6.48%
24.3%
$             6,028
6.47%
27.2%
   ARMs
6,895,479
2.16
36.5
7,089,531
2.50
39.0
Ginnie Mae ARMs
388,334
2.92
13.2
339,804
3.26
13.5
7,289,185
2.20
35.7
7,435,363
2.54
38.0
Unsecuritized residential mortgage loans:
Fixed-rate
3,549
7.01
6.3
3,606
7.00
6.2
ARMs
7,518
3.80
7.4
7,806
3.83
14.2
11,067
4.83
7.1
11,412
4.83
11.9
Commercial loans
10,020
9.67
     -
10,034
9.55
          -
3,538
8.07
3.7
3,570
8.09
3.4
7,313,810
2.22
35.6
7,460,379
2.55
37.9
Other interest-earning assets
171,577
0.26
285,165
0.19
7,485,387
2.18
7,745,544
2.47
30-day to 90-day interest rates, as adjusted
     for hedging results
6,599,599
0.65
6,891,355
0.64
Structured financings
3,538
8.07
3,570
8.09
6,603,137
0.66
6,894,925
0.64
Unsecured borrowings
103,095
8.49
103,095
8.49
6,706,232
0.78
6,998,020
0.76
Capital employed/Total financing spread
$        779,155
1.40
$        747,524
1.71
Financing spread on mortgage assets*
1.56
1.91
Secured borrowings based on:
    Second Quarter 2010 Average
Collateral for structured financings
Third Quarter 2010 Average

Residential ARM Portfolio Statistics
(dollars in thousands)
15
*   Fully indexed net weighted average coupon, or WAC, represents the coupon upon one or more resets using interest rates indices as of September 30, 2010 and the applicable                  
net margin.
Fully
Indexed
Average
Months
Principal
Cost Basis
Fair Market
Net
Net
Net
to
Balance
Premiums
($)
%
Value
WAC
WAC*
Margins
Roll
As of September
30, 2010
Current-reset ARMs:
Fannie Mae Agency Securities
$5,065,394
$
94,313
$5,159,707
101.86
$5,267,593
2.94%
2.31%
1.73%
5.1
Freddie Mac Agency Securities
1,464,996
29,659
1,494,655
102.02
1,531,532
3.52
2.43
1.94
6.5
Ginnie
Mae Agency Securities
335,677
2,438
338,115
100.73
344,802
3.25
1.79
1.53
5.1
Residential Mortgage Loans
7,380
62
7,442
100.83
7,382
3.46
2.52
2.06
4.5
6,873,447
126,472
6,999,919
101.84
7,151,309
3.08
2.32
1.77
5.4
Longer-to-reset ARMs:
Fannie
Mae Agency Securities
344,698
7,727
352,425
102.24
365,330
5.02
2.34
1.63
26.3
Freddie Mac Agency Securities
253,015
3,702
256,717
101.46
269,935
5.80
2.43
1.75
25.1
Ginnie Mae Agency Securities
128,192
4,678
132,870
103.65
133,390
3.34
1.77
1.50
37.0
725,905
16,107
742,012
102.22
768,655
4.99
2.26
1.65
27.8
$7,599,352
$142,579
$7,741,931
101.88
$7,919,964
3.26
2.32
1.75
7.5
Agency RMBS represent over 99% of the portfolio

Use of Financial Spread on Mortgage Assets,
a Non-GAAP Financial Measure
16
Financing Spread on
Mortgage Assets,
Total Financing Spread,
a
Non-GAAP
a
GAAP Measure
Financial
Measure
*
Interest
Income
(Expense)
Yield/Cost
Difference
Interest
Income
(Expense)
Yield/Cost
Corresponding
Second Quarter
2010
Yield/Cost
Interest income:
Mortgage assets
$
40,614
2.22%
$
–
$
40,614
2.22
%
2.55%
Other interest-earning assets
**
111
0.26
(111)
–
–
0.19
40,725
2.18
(111)
40,614
2.22
2.47
Interest expense:
Secured borrowings (borrowings under
repurchase agreements)
(11,096)
0.66
–
(11,096)
0.66
0.64
Unsecured borrowings
***
(2,186)
8.49
2,186
–
–
8.49
(13,282)
0.78
2,186
(11,096)
0.66
0.76
Net interest margin/financing spread
$
27,443
1.40
$
2,075
$
29,518
1.56
1.71
*
**
***
   Net interest margin on mortgage assets and Financing spread on mortgage assets are non-GAAP financial measures (based solely on
interest income and yields on the Company’s portfolio of mortgage securities, net of borrowings under repurchase agreements).  These
measures are similar to the all-inclusive GAAP measures, Total net interest margin and Total financing spread (based on all interest-
earning assets and all interest-bearing liabilities).
Other interest-earning assets consist of overnight investments and cash collateral receivable from interest rate swap counterparties.
Unsecured borrowings consist of junior subordinated notes with original terms of 30 years issued in 2005 and 2006 by Capstead to
statutory trusts formed to issue $3.1 million of the trusts’ common securities to Capstead and to privately place $100.0 million of preferred
securities to unrelated third party investors.  Capstead reflects its investment in the trusts as unconsolidated affiliates and considers the
unsecured borrowings, net of these affiliates, a component of its long-term investment capital.
Third Quarter 2010 (dollars in thousands)

Experienced Management Team
17
–
Has served as president and chief executive officer since 2003 and has held various executive positions at Capstead since 1988
–
Certified Public Accountant (“CPA”), member of the Board of Governors of the National Association of Real Estate Investment Trusts
(“NAREIT”), chairman of NAREIT’s Council of Mortgage REITs, member of the executive committee of the Chancellors Council of
the University of Texas System, the Executive Council of the Real Estate Finance and Investment Center at the University of Texas
at Austin, the American Institute of Certified Public Accountants (“AICPA”), and the Financial Executive International (“FEI”)
–
Has
held
various
financial
accounting
and
reporting
positions
at
Capstead
since
1993
–
Formerly employed by Ernst & Young LLP as an audit senior manager focusing on mortgage banking and asset securitization
–
CPA, Member AICPA, FEI
–
Has served in asset and liability management positions at Capstead since 1994
–
Formerly Vice President of secondary marketing with NationsBanc Mortgage Corporation
–
Has served in asset and liability management positions at Capstead since 1994
–
MBA, Southern Methodist University, Dallas, Texas
Over 80 years of combined mortgage finance industry experience, including 72 years at Capstead
Andrew
F.
Jacobs
–
President
and
Chief
Executive
Officer,
Director
Phillip A. Reinsch
–
Executive Vice President and Chief Financial Officer, Secretary
Robert
A.
Spears
–
Executive
Vice
President,
Director
of
Residential
Mortgage
Investments
Michael
W.
Brown
–
Senior
Vice
President,
Asset
and
Liability
Management,
Treasurer