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Capstead Mortgage Corporation Announces First Quarter
Net Income and Declares First Quarter Common Dividend


    DALLAS, April 19 -- Capstead Mortgage Corporation


(NYSE: CMO) today reported net income of $24,649,000, or $0.69 per diluted


common share, for the quarter ended March 31, 2001, compared to net income for


the quarter ended March 31, 2000 of $11,670,000, or $0.22 per diluted common


share, and net income of $11,329,000, or $0.21 per diluted common share, for


the quarter ended December 31, 2000.  The Company also announced that the


Board of Directors declared a first quarter dividend of $0.49 per common


share, payable on May 21 to stockholders of record as of May 7, 2001.





    First Quarter Earnings and Related Discussion


    Income before gain on sale of mortgage assets for the first quarter of


2001 increased to $18,786,000, or $0.49 per diluted common share, from


$11,329,000, or $0.21 per diluted common share for the fourth quarter of 2000


and $11,670,000, or $0.22 per diluted common share for the first quarter of


2000.  Current quarter financing spreads (the difference between the yield


earned on mortgage investments and the rate charged on related borrowings)


improved over fourth quarter 2000 spreads as a result of actions taken by the


Federal Reserve during the first quarter to lower short-term interest rates by


a total of 150 basis points.  Current quarter spreads improved over first


quarter 2000 spreads because of higher yields earned on the mortgage


investment portfolio, which currently consists largely of adjustable-rate


mortgage ("ARM") Fannie Mae, Freddie Mac and Ginnie Mae securities.  Yields on


ARM securities steadily increased over the past year as coupon interest rates


on the underlying mortgage loans reset higher reflecting the rising interest


rate environment experienced during 2000.


    The overall yield earned on the mortgage investment portfolio averaged


7.06% during the first quarter of 2001, compared to 7.09% during the fourth


quarter of 2000 and 6.20% during the first quarter of 2000.  As expected,


yields on ARM securities peaked during the first quarter of 2001 and then


began declining, reflecting the current trend of declining interest rates that


has been evident since the Federal Reserve began lowering short-term interest


rates in January 2001.  Yields on ARM securities are expected to continue to


decline in the coming quarters.  For example, if interest rates stabilize at


current levels, yields on the Company's current holdings of ARM securities


could decline a total of 90 basis points by year-end.  Actual yields on the


ARM securities will depend on fluctuations in, and market expectations for


fluctuations in, interest rates and levels of mortgage prepayments.


    With its most recent action on April 18, 2001, the Federal Reserve has


reduced the Federal Funds Rate by a total of 200 basis points since the


beginning of this year in response to concerns over economic weakness.  The


50 basis point reductions on each of January 3, January 31 and March 20, 2001


contributed to a 76 basis point decline in the Company's average borrowing


rates to 5.81% during the first quarter.  Average borrowing rates were


6.57% during the fourth quarter of 2000 and 5.85% during the first quarter of


2000.  The Company's borrowing rates are expected to decline another 113 basis


points in the second quarter of 2001 as the full effect of the first quarter


interest rate reductions and most of the effect of the April rate reduction


are realized.  Any further changes in the Company's borrowing rates will


depend on future 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 any financial market liquidity concerns.


    The principal prepayment rates on holdings of ARM securities increased


during the first quarter and are anticipated to increase further during the


second quarter.  Currently, coupon interest rates on most of the mortgage


loans underlying these ARM securities are above prevailing fixed-rate mortgage


interest rates, which is expected to prompt higher levels of prepayments until


such time as these loans reset to lower levels as discussed above.  Annualized


prepayment rates on Ginnie Mae ARM securities averaged 28.2% during the first


quarter of 2001, significantly higher than the 18.4% annualized rate during


the fourth quarter of 2000 and the 14.9% level experienced in the first


quarter of 2000.  Annualized prepayment rates on Fannie Mae and Freddie Mac


ARM securities averaged 24.6% during the first quarter of 2001, compared to


23.5% during the prior quarter and 18.3% for the same period of 2000.  While


lower prepayment levels improve mortgage investment yields by allowing related


purchase premiums to be recognized in operating results over a longer period,


higher prepayment levels shorten the period over which the premiums are


amortized thus reducing investment yields.  As a result of the increased


prepayments, net amortization of purchase premiums on holdings of ARM


securities increased to $4.9 million during the first quarter, from


$3.1 million during the fourth quarter of 2000.  As of March 31, 2001, the net


premium on holdings of ARM securities was 1.15% of principal, or


$50.7 million.


    The Company's mortgage investment portfolio declined during the first


quarter of 2001 to $4.7 billion from $5.4 billion at year-end 2000 as a result


of portfolio runoff and the previously announced first quarter sale of over


$400 million of medium-term securities.  Purchases were limited to $87 million


of ARM securities.  Although acquisitions of credit-sensitive mortgage assets


have been limited, the Company continues to actively evaluate such investments


which, when combined with the prudent use of leverage, can provide attractive


returns.  The future size and composition of the Company's mortgage-related


investments will depend on market conditions, including the availability of


suitable investments at attractive pricing.





    Book Value per Common Share


    At March 31, 2001 book value per common share was $14.09, compared to


$13.11 at December 31, 2000, (calculated excluding the first quarter 2001


common dividend declared today, and assuming redemption of the Series A and B


preferred shares and conversion of the Series C preferred shares).  The


increase in book value reflects the positive impact on the market value of the


mortgage investment portfolio from lower prevailing interest rates.  The


market value of the mortgage investment portfolio will continue to fluctuate


with changes in interest rates and market liquidity, and such changes will be


reflected in book value per common share.


    The completion of a previously announced tender offer on March 19, 2001


resulted in the repurchase of 551,690 common shares at a purchase price of


$13.25 (after transaction costs).  The offer did not have a significant


immediate impact on book value per common share, although remaining


outstanding common shares will participate to a greater extent in future


earnings and changes in market value of the Company's mortgage assets.





    Capstead Mortgage Corporation, a real estate investment trust with assets


of over $7.7 billion, earns income from investing in mortgage 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, the liquidity of secondary markets and credit markets,


increases in costs and other general competitive factors.





                        CAPSTEAD MORTGAGE CORPORATION


                         CONSOLIDATED BALANCE SHEETS


                   (In thousands, except per share amounts)





                                       March 31, 2001     December 31, 2000


                                        (unaudited)


    Assets


     Mortgage investments               $4,682,937            $5,394,459


     CMO collateral and investments      3,020,161             3,126,878


                                         7,703,098             8,521,337


     Prepaids, receivables and other        70,599                67,399


     Cash and cash equivalents              13,373                21,761


                                        $7,787,070            $8,610,497


    Liabilities


     Borrowings under repurchase


      arrangements                      $4,168,018            $4,904,632


     Collateralized mortgage


      obligations ("CMOs")               2,998,224             3,103,874


     Accounts payable and accrued


      expenses                              17,604                31,112


                                         7,183,846             8,039,618


    Preferred stock subject to


     repurchase $0.56 Cumulative


     Convertible Preferred Stock,


     Series C, $0.10 par value;


     5,378 shares authorized, issued


     and outstanding March 31, 2001


     and December 31, 2000,


     respectively ($26,368 aggregate


     repurchase amount)                     25,210                25,210


    Stockholders' equity


     Preferred stock - $0.10 par


      value; 94,622 shares authorized:


       $1.60 Cumulative Preferred Stock,


        Series A, 374 shares issued


        and outstanding at both


        March 31, 2001 and


        December 31, 2000, respectively


        ($6,134 aggregate liquidation


        preference)                          5,228                 5,228


       $1.26 Cumulative Convertible


        Preferred Stock, Series B,


        15,845 shares issued and


        outstanding at March 31, 2001


        and December 31, 2000,


        respectively ($180,316 aggregate


        liquidation preference)            177,012               177,012


     Common stock - $0.01 par value;


      100,000 shares authorized; 24,725


      and 25,282 shares issued and


      outstanding at March 31, 2001


      and December 31, 2000, respectively      247                   253


     Paid-in capital                       733,340               740,613


     Accumulated deficit                  (378,127)             (396,882)


     Accumulated other comprehensive


      income                                40,314                19,445


                                           578,014               545,669


                                        $7,787,070            $8,610,497


    Book value per common share


     outstanding (A)                        $14.09                $13.11





    (A)  Calculated excluding the first quarter 2001 common dividend declared


         today, and assuming redemption of the Series A and B preferred shares


         and conversion of the Series C preferred shares.








                        CAPSTEAD MORTGAGE CORPORATION


                    CONSOLIDATED STATEMENTS OF OPERATIONS


                   (In thousands, except per share amounts)


                                 (Unaudited)





                                           Quarter Ended March 31


                                              2001        2000





    Interest income:


        Mortgage investments              $  87,542   $  84,900


        CMO collateral and investments       55,785      57,929


                Total interest income       143,327     142,829


    Interest and related expense:


        Borrowings under repurchase


         arrangements                        65,162      71,908


        CMO borrowings                       55,615      57,903


        Mortgage insurance and other            328         403


            Total interest and related


             expense                        121,105     130,214


              Net margin on mortgage


               assets                        22,222      12,615


    Other revenue (expense):


        Gain on sale of mortgage assets       5,863         ---


        CMO administration and other            719         784


        Other operating expense              (4,155)     (1,729)


            Total other operating


             revenue (expense)                2,427        (945)


    Net income                            $  24,649   $  11,670





    Net income                            $  24,649   $  11,670


    Less cash dividends on preferred


     stock                                   (5,894)     (6,271)


    Net income available to common


     stockholders                         $  18,755   $   5,399


    Net income per common share:


        Basic                             $    0.75   $    0.22


        Diluted                                0.69        0.22


    Cash dividends declared per share:


        Common                            $   0.490   $   0.220


        Series A Preferred                    0.400       0.400


        Series B Preferred                    0.315       0.315


        Series C Preferred                    0.140       0.140


        Series D Preferred (converted


         into common shares


         December 28, 2000)                     ---       0.100








                        CAPSTEAD MORTGAGE CORPORATION


                            MARKET VALUE ANALYSIS


                                (In thousands)


                                 (Unaudited)





                                  March 31, 2001                  December 31,


                                                                      2000


                                                        Unrealized Unrealized


     Mortgage      Principal Premium              Market   Gains      Gains


    Investments    Balance  (Discount)  Basis     Value  (Losses)   (Losses)





    Held available


    -for-sale: (A)


    Agency securities:


     FNMA/FHLMC:


      Fixed-rate    $3,353     $16     $3,369     $3,586     $217       $219


      Medium-term  101,674     226    101,900    103,145    1,245      4,159


      ARMs:


       LIBOR/CMT 2,106,777  37,088  2,143,865  2,159,667   15,802      8,918


       COFI        203,353  (4,745)   198,608    205,514    6,906      3,908


     GNMA ARMs   2,018,225  18,312  2,036,537  2,048,611   12,074       (632)


                 4,433,382  50,897  4,484,279  4,520,523   36,244     16,572





    Non-agency


     securities     85,304      23     85,327     86,958    1,631      1,852





    CMBS -


     adjustable-


     rate           74,058    (589)    73,469     74,265      796        996





    CMO


     collateral and


     investments    67,864   2,935     70,799     71,462      663         25


                $4,660,608 $53,266 $4,713,874 $4,753,208  $39,334 (B)$19,445





    Held-to-maturity: (C)


     Non-agency


      securities    $1,201    $(10)    $1,191     $1,275      $84       $---


     CMO


      collateral 2,920,090  28,609  2,948,699  2,936,370  (12,329)   (13,122)


                $2,921,291 $28,599 $2,949,890 $2,937,645 $(12,245)  $(13,122)





    (A)  Investments held available-for-sale are marked to market through


         stockholders' equity as a component of "Accumulated other


         comprehensive income."  Gains or losses are recognized in operating


         results only if sold.





    (B)  "Accumulated other comprehensive income" at March 31, 2001 also


         includes a $980,000 adjustment for call right derivatives recorded as


         cash flow hedges with the January 1, 2001 adoption of new derivative


         accounting rules.





    (C)  Investments held-to-maturity are carried on the balance sheet at


         amortized cost.








                        CAPSTEAD MORTGAGE CORPORATION


                        PORTFOLIO YIELD/COST ANALYSIS


                            (Dollars in thousands)


                                 (Unaudited)





                                                            Proj-     Life-


                       1st Quarter         As of March 31,  ected     time


                         Average                 2001        2nd      Pre-


                         Actual   Actual   Premiums        Quarter   payment


                                                            Yield/ Assumptions


                 Basis   Yield/   Runoff  (Discounts)  Basis Cost


                         Cost


                  (A)                                   (A)   (B)      (B)





    Agency


     securities:


     FNMA/FHLMC:


      Fixed-


       rate       $3,395  9.89%      7%        $16     $3,369  9.60%    25%


      Medium-


       term      227,721  6.94      20         226    101,900  6.11     25


      ARMs:


       LIBOR


       /CMT    2,214,537  7.08      25      37,088  2,143,865  6.80      40


       COFI      202,308  7.36      12      (4,745)   198,608  6.72      15


     GNMA


      ARMs     2,140,864  6.93      28      18,312  2,036,537  6.56      26


               4,788,825  7.02      26      50,897  4,484,279  6.67      32





    Non-agency


     securities   90,531  8.23      33          13     86,518  7.99      30





    CMBS -


     adjustable


     -rate        73,595  8.35       4        (589)    73,469  7.39     ---


               4,952,951  7.06      26%    $50,321  4,644,266  6.71      32%





    Borrowings 4,534,101  5.81                     (4,168,018) 4.68


    Capital


     employed/


     financing


     spread     $418,850  1.25%                      $476,248  2.03%


    Return on


     assets (C)           1.80%                                2.49%





    (A)  Basis represents the Company's investment before mark-to-market.





    (B)  Projected yields reflect ARM coupon resets and lifetime prepayment


         assumptions as adjusted for expected prepayments over the next


         3 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)  The Company uses its liquidity to pay down borrowings.  Return on


         assets is calculated assuming the use of this liquidity to reduce borrowing costs.
SOURCE Capstead Mortgage Corporation
Web Site: http://www.capstead.com
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