Capstead Mortgage Corporation (“Capstead” or the “Company”)
(NYSE: CMO) today announced financial results for the quarter ended
June 30, 2020.
Second Quarter 2020 Summary
- Recognized GAAP net income of $22.7 million or $0.19 per
diluted common share
- Generated core earnings of $21.9 million or $0.18 per
diluted common share, representing a 2.7% return on common equity
capital (10.8% annualized)
- Generated economic return of 14.3%
- Paid a second quarter dividend of $0.15 per common share,
unchanged from the previous two quarters
- Book value per common share increased $0.72 or 11.9% to
$6.79 per common share
- Agency-guaranteed residential adjustable-rate mortgage (ARM)
portfolio ended the quarter largely unchanged at $8.33
billion
- Leverage ended the quarter at 7.49 times long-term
investment capital
Second Quarter Earnings and Related
Discussion
Capstead reported GAAP net income of $22.7 million or $0.19 per
diluted common share for the quarter ended June 30, 2020, compared
to a net loss of $204.7 million or $(2.21) per diluted common share
for the quarter ended March 31, 2020. The Company reported core
earnings of $21.9 million or $0.18 per diluted common share for the
quarter ended June 30, 2020. This compares to core earnings of
$19.8 million or $0.16 per diluted common share for the quarter
ended March 31, 2020. See the “Non-GAAP Financial Measures” section
of this release for more information on core earnings.
Portfolio yields averaged 2.33% during the second quarter of
2020, a decrease of 16 basis points from 2.49% reported for the
first quarter of 2020. Yields declined primarily due to lower
coupon interest rates on loans underlying the Company’s portfolio
of agency-guaranteed residential ARM securities that have reset
based on lower prevailing interest rates as well as lower coupons
on acquisitions and changes in portfolio composition due to late
first quarter sales. Mortgage prepayments increased during the
quarter to an average annualized constant prepayment rate (“CPR”)
of 32.89%, compared to 26.71% CPR in the prior quarter. Portfolio
leverage was reduced to 7.49 to one at June 30, 2020 compared to
8.51 to one at March 31, 2020.
The following table illustrates the progression of Capstead’s
portfolio of residential mortgage investments for the quarter and
six months ended June 30, 2020 (dollars in thousands):
Quarter Ended
June 30, 2020
Six Months Ended
June 30, 2020
Residential mortgage investments,
beginning of period
$
8,503,171
$
11,222,182
Portfolio acquisitions (principal
amount)
614,366
1,408,593
Investment premiums on acquisitions
24,249
44,569
Portfolio runoff (principal amount)
(844,722
)
(1,756,821
)
Sales of investments (basis) (a)
(19,440
)
(2,620,297
)
Investment premium amortization
(15,388
)
(36,079
)
Increase in net unrealized gains on
securities classified as available-for-sale
65,664
65,753
Residential mortgage investments, end of
period
$
8,327,900
$
8,327,900
Decrease in residential mortgage
investments during the indicated periods
$
(175,271
)
$
(2,894,282
)
(a)
Portfolio sales that settled during the
second quarter of 2020 were entered into during the first quarter
and all realized losses associated with these sales were recognized
during the first quarter.
Rates on Capstead’s secured borrowings, after adjusting for
hedging activities, averaged 63 basis points lower at 1.09% during
the second quarter of 2020, compared to 1.72% for the prior
quarter. Borrowing rates before hedging activities averaged 0.68%
during the second quarter, a decline of 108 basis points over the
prior quarter benefiting from the Federal Reserve’s actions on
March 3rd and again on March 15th to reduce the Fed Funds rate by a
total of 150 basis points. Unhedged borrowing rates on new
borrowings under repurchase arrangements are now approximately 25
basis points. Secured borrowings ended the quarter at $7.58
billion.
Notional amounts of secured borrowings-related interest rate
swap agreements averaged $4.37 billion during the second quarter of
2020 with fixed swap rates averaging 1.38%, 24 basis points lower
than the prior quarter. At June 30, 2020, the Company held $4.60
billion notional amount of secured borrowings-related interest rate
swaps with fixed rates averaging 1.27%, an increase of $200 million
in notional amount and a decrease of 17 basis points in rate from
swaps held on March 31, 2020. Two-year swaps entered into recently
have fixed rates of approximately one to two basis points
reflecting market expectations for a prolonged period of low
short-term interest rates.
Capstead operates a highly efficient, internally-managed
investment platform, particularly compared to other mortgage REITs,
and has a competitive cost structure relative to a wide variety of
high yielding investment vehicles. Operating costs expressed as an
annualized percentage of long-term investment capital averaged
1.45% and 1.32% for the quarter and six months ended June 30, 2020.
As an annualized percentage of total assets, operating costs
averaged 0.16% and 0.14% during these periods.
Book Value per Common Share
Book value per share as of June 30, 2020 was $6.79, an increase
of $0.72 or 11.8% from the March 31, 2020 book value of $6.07,
primarily driven by $0.67 in portfolio-related increases in value.
Capstead’s investment strategy attempts to mitigate risks to book
value by focusing on investments in agency-guaranteed residential
mortgage pass-through securities, which are considered to have
little, if any, credit risk and are collateralized by ARM loans
with interest rates that reset periodically to more current levels.
Because of these characteristics, the fair value of the Company’s
portfolio is expected to be less vulnerable to significant pricing
declines caused by credit concerns or rising interest rates
compared to leveraged portfolios containing a significant amount of
non-agency-guaranteed securities or agency-guaranteed securities
backed by longer-duration fixed-rate loans. Fair value is impacted
by market conditions, including changes in interest rates and the
availability of financing at reasonable rates and leverage
levels.
Management Remarks
Commenting on current operating and market conditions, Phillip
A. Reinsch, President and Chief Executive Officer, said, “We are
pleased with our results this quarter after the pandemic-related
disruptions experienced in the fixed income markets in March.
Utilizing less leverage and holding a smaller investment portfolio,
we generated core earnings well in excess of our common dividend,
which we have held steady now for three quarters. We expect this
achievement to be largely unmatched in our industry in this
environment. Importantly, we enjoyed strong improvement in
portfolio valuations this quarter, leading to an 11.9% increase in
book value to $6.79 per common share. We expect these results will
also compare favorably with those of our industry peers.
“We began reinvesting portfolio runoff in late April and
replaced all of May and June runoff at very attractive levels.
While pricing levels for agency-guaranteed ARM securities have
increased steadily through quarter end, we expect to continue
replacing runoff in the coming quarters provided risk-adjusted
returns remain attractive. With borrowing costs declining markedly
in the second quarter due largely to the Federal Reserve’s March
actions to reduce the Fed Funds rate target range to zero to 25
basis points, portfolio returns have improved considerably despite
higher levels of mortgage prepayments spurred by lower prevailing
mortgage interest rates. We anticipate mortgage prepayments to
remain elevated for the rest of the year, particularly through the
end of the summer selling season. Our borrowing costs on the other
hand should continue declining sequentially as existing borrowings
and related swaps held for hedging purposes mature and are replaced
at lower levels.
“Over the next few years, we anticipate the Federal Reserve will
remain supportive of low short-term interest rates, while
eventually reducing support for longer term rates by curtailing U.S
Treasury and agency-guaranteed fixed-rate MBS purchases. As this
occurs the yield curve should steepen further, improving short
duration investment options, lowering mortgage prepayment levels
and increasing portfolio yields, while our borrowing costs should
remain relatively low.
“For the last 20 years, Capstead has operated as a
cost-effective, internally managed REIT that invests in a leveraged
portfolio of relatively short duration agency-guaranteed
residential ARM securities with the goal of generating attractive
risk-adjusted returns over the long-term. For investors seeking
risk-adjusted levered returns with a comparably higher degree of
safety from interest rate and credit risk, we believe Capstead
represents a reasonably compelling opportunity that is difficult to
find elsewhere in the markets.”
Non-GAAP Financial Measures
Management believes the presentation of core earnings and core
earnings per common share, both non-GAAP financial measures, when
analyzed in conjunction with the Company’s GAAP operating results,
allows investors to more effectively evaluate the Company’s
performance and provides investors management’s view of the
Company’s economic performance. Management also believes that
presenting financing spreads on residential mortgage investments, a
non-GAAP financial measure, provides important information for
evaluating the performance of the Company’s portfolio, as opposed
to total financing spreads, because the non-GAAP measure speaks
specifically to the performance of the Company’s investment
portfolio. See the “Reconciliation of GAAP Measures to Non-GAAP
Measures” section of this release.
Earnings Conference Call Details
An earnings conference call and live audio webcast will be
hosted Thursday, July 30, 2020 at 10:00 a.m. ET. The conference
call may be accessed by dialing toll free (877) 505-6547 in the
U.S., (855) 669-9657 for Canada, or (412) 902-6660 for
international callers. A live webcast of the conference call can be
accessed via the investor relations section of the Company’s
website at www.capstead.com and an archive of the webcast will be
available up to the date of our next earnings press release. An
audio replay can be accessed one hour after the end of the
conference call, also up to the date of our next earnings press
release, by dialing toll free (877) 344-7529 in the U.S., (855)
669-9658 for Canada, or (412) 317-0088 for international callers
and entering conference number 10146411.
About Capstead
Capstead is a self-managed real estate investment trust, or
REIT, for federal income tax purposes. The Company earns income
from investing in a leveraged portfolio of residential
adjustable-rate mortgage pass-through securities, referred to as
ARM securities, issued and guaranteed by government-sponsored
enterprises, either Fannie Mae or Freddie Mac, or by an agency of
the federal government, Ginnie Mae.
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,” “will be,”
“will likely continue,” “will likely result,” or words or phrases
of similar meaning. Actual results could differ materially from
those projected in these forward-looking statements due to a
variety of factors, including without limitation, fluctuations in
interest rates, the availability of suitable qualifying
investments, changes in mortgage prepayments, the availability and
terms of financing, changes in market conditions as a result of
federal corporate and individual tax law changes, changes in
legislation or regulation affecting the mortgage and banking
industries or Fannie Mae, Freddie Mac or Ginnie Mae securities, the
availability of new investment capital, the liquidity of secondary
markets and funding markets, our ability to maintain our
qualification as a REIT for U.S. federal tax purposes, our ability
to maintain our exemption from registration under the Investment
Company Act of 1940, as amended, and other changes in general
economic conditions. These and other applicable uncertainties,
factors and risks are described more fully in the Company’s filings
with the U.S. Securities and Exchange Commission.
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. Accordingly,
readers of this document are cautioned not to place undue reliance
on any forward-looking statements included herein.
CAPSTEAD MORTGAGE CORPORATION
CONSOLIDATED BALANCE SHEETS (in thousands, except ratios, pledged
and per share amounts)
June 30, 2020
December 31, 2019
(unaudited)
Assets
Residential mortgage investments ($7.97
and $10.83 billion pledged at June 30, 2020 and December 31, 2019,
respectively)
$
8,327,900
$
11,222,182
Cash collateral receivable from derivative
counterparties
103,618
65,477
Derivatives at fair value
–
1,471
Cash and cash equivalents
121,991
105,397
Receivables and other assets
115,062
125,474
$
8,668,571
$
11,520,001
Liabilities
Secured borrowings
$
7,575,294
$
10,275,413
Derivatives at fair value
49,575
29,156
Unsecured borrowings
98,443
98,392
Common stock dividend payable
15,041
14,605
Accounts payable and accrued expenses
17,329
28,702
7,755,682
10,446,268
Stockholders’ equity
Preferred stock - $0.10 par value; 100,000
shares authorized: 7.50% Cumulative Redeemable Preferred Stock,
Series E, 10,329 shares issued and outstanding ($258,226 aggregate
liquidation preference) at June 30, 2020 and December 31, 2019
250,946
250,946
Common stock - $0.01 par value; 250,000
shares authorized: 96,395 and 94,606 shares issued and outstanding
at June 30, 2020 and December 31, 2019, respectively
964
946
Paid-in capital
1,266,976
1,252,481
Accumulated deficit
(664,749
)
(444,039
)
Accumulated other comprehensive income
58,752
13,399
912,889
1,073,733
$
8,668,571
$
11,520,001
Long-term investment capital
(consists of stockholders’ equity and unsecured borrowings)
(unaudited)
$
1,011,332
$
1,172,125
Portfolio leverage (secured
borrowings divided by long-term investment capital) (unaudited)
7.49:1
8.77:1
Book value per common share (based
on share of common stock outstanding and calculated assuming
liquidation preferences for preferred stock) (unaudited)
$
6.79
$
8.62
CAPSTEAD MORTGAGE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per
share amounts) (unaudited)
Quarter Ended
June 30
Six Months Ended
June 30
2020
2019
2020
2019
Interest income:
Residential mortgage investments
$
48,133
$
85,100
$
117,361
$
168,907
Other
22
600
421
1,022
48,155
85,700
117,782
169,929
Interest expense:
Secured borrowings
(13,055
)
(67,945
)
(58,328
)
(131,724
)
Unsecured borrowings
(1,900
)
(1,900
)
(3,800
)
(3,791
)
(14,955
)
(69,845
)
(62,128
)
(135,515
)
33,200
15,855
55,654
34,414
Other expense:
Loss on derivative instruments (net)
(6,948
)
(74,842
)
(162,687
)
(96,499
)
Loss on sale of investments (net)
–
(1,365
)
(67,820
)
(1,365
)
Compensation-related expense
(2,330
)
(1,972
)
(4,534
)
(5,581
)
Other general and administrative
expense
(1,219
)
(1,138
)
(2,421
)
(2,266
)
Miscellaneous other revenue (expense)
1
2
(141
)
91
(10,496
)
(79,315
)
(237,603
)
(105,620
)
Net income (loss)
22,704
(63,460
)
(181,949
)
(71,206
)
Less preferred stock dividends
(4,842
)
(4,842
)
(9,684
)
(9,684
)
Net income (loss) to common
stockholders
$
17,862
$
(68,302
)
$
(191,633
)
$
(80,890
)
Basic and diluted net income (loss) per
common share
$
0.19
$
(0.80
)
$
(2.01
)
$
(0.95
)
Weighted average common shares
outstanding:
Basic
95,655
84,934
95,276
84,914
Diluted
95,887
84,934
95,276
84,914
Cash dividends declared per
share:
Common
$
0.15
$
0.12
$
0.30
$
0.20
Series E preferred
0.47
0.47
0.94
0.94
CAPSTEAD MORTGAGE CORPORATION
QUARTERLY STATEMENTS OF OPERATIONS AND SELECT OPERATING STATISTICS
(in thousands, except per share amounts, percentages annualized,
unaudited)
2020
2019
Q2
Q1
Q4
Q3
Q2
Quarterly Statements of
Operations:
Interest income:
Residential mortgage investments
$
48,133
$
69,228
$
73,617
$
77,693
$
85,100
Other
22
399
666
1,065
600
48,155
69,627
74,283
78,758
85,700
Interest expense:
Secured borrowings
(13,055
)
(45,273
)
(51,688
)
(62,800
)
(67,945
)
Unsecured borrowings
(1,900
)
(1,900
)
(1,910
)
(1,910
)
(1,900
)
(14,955
)
(47,173
)
(53,598
)
(64,710
)
(69,845
)
33,200
22,454
20,685
14,048
15,855
Other (expense) income:
(Loss) gain on derivative instruments
(net)
(6,948
)
(155,739
)
15,142
(9,221
)
(74,842
)
Loss on sale of investments (net)
–
(67,820
)
–
–
(1,365
)
Compensation-related expense
(2,330
)
(2,204
)
(2,050
)
(566
)
(1,972
)
Other general and administrative
expense
(1,219
)
(1,202
)
(1,105
)
(1,123
)
(1,138
)
Miscellaneous other revenue (expense)
1
(142
)
–
58
2
(10,496
)
(227,107
)
11,987
(10,852
)
(79,315
)
Net income (loss)
$
22,704
$
(204,653
)
$
32,672
$
3,196
$
(63,460
)
Net income (loss) per diluted common
share
$
0.19
$
(2.21
)
$
0.29
$
(0.02
)
$
(0.80
)
Average diluted common shares
outstanding
95,887
94,897
94,293
90,945
84,934
Core earnings
$
21,917
$
19,811
$
19,109
$
14,798
$
14,780
Core earnings per diluted common share
0.18
0.16
0.15
0.11
0.12
Select Operating and Performance
Statistics:
Common dividends declared per share
0.15
0.15
0.15
0.12
0.12
Book value per common share
6.79
6.07
8.62
8.60
8.93
Average portfolio outstanding (cost
basis)
8,256,825
11,124,246
11,032,252
11,266,776
12,065,084
Average secured borrowings
7,647,613
10,337,773
10,195,180
10,481,080
11,193,335
Average long-term investment capital
(“LTIC”)
987,792
1,124,307
1,172,897
1,146,916
1,149,388
Constant prepayment rate (“CPR”)
32.89
%
26.71
%
29.39
%
30.18
%
26.29
%
Total financing spreads
1.52
0.66
0.57
0.31
0.34
Yields on residential mortgage
investments
2.33
2.49
2.67
2.76
2.82
Secured borrowing rates (a)
1.09
1.72
1.97
2.31
2.35
Financing spreads on residential mortgage
investments
1.25
0.77
0.70
0.45
0.47
Operating costs as a percentage of
LTIC
1.45
1.22
1.07
0.58
1.09
Quarterly economic return (change in book
value plus dividends)
14.33
(27.84
)
1.98
(2.35
)
(4.03
)
Return on common equity capital (b)
10.76
7.77
6.89
4.95
4.98
(a)
Secured borrowing rates exclude the
effects of amortization of the net unrealized gains (losses)
included in AOCI on de-designated derivative instruments and
include net interest cash flows on non-designated derivative
instruments to better compare the components of financing spreads
on residential mortgage investments. See “Reconciliation of GAAP
Measures to Non-GAAP Measures” for details on the impact of
non-designated derivative instruments.
(b)
Calculated using core earnings less
preferred dividends on an annualized basis over average common
equity for the period.
CAPSTEAD MORTGAGE CORPORATION RECONCILIATION
OF GAAP MEASURES TO NON-GAAP MEASURES (in thousands, percentages
annualized, unaudited)
The Company defines core earnings as GAAP net income (loss)
excluding (a) unrealized (gain) loss on derivative instruments, (b)
realized loss (gain) on termination of derivative instruments, (c)
amortization of unrealized (gain) loss of derivative instruments
held at the time of de-designation, and (d) realized loss (gain) on
securities. The following reconciles GAAP net (loss) income and net
(loss) income per diluted common share to core earnings and core
earnings per common share:
2020
2019
Q2
Q1
Q4
Q3
Q2
Amount
Per
Share
Amount
Per
Share
Amount
Per
Share
Amount
Per
Share
Amount
Per
Share
Net income (loss)
$
22,704
$
0.19
$
(204,653
)
$
(2.21
)
$
32,672
$
0.29
$
3,196
$
(0.02
)
$
(63,460
)
$
(0.80
)
Unrealized (gain) loss on non-designated
derivative instruments
(2,229
)
(0.02
)
56,182
0.59
(51,017
)
(0.54
)
(16,952
)
(0.19
)
59,388
0.70
Realized loss on termination of
non-designated derivative instruments
1,320
0.01
100,565
1.06
39,312
0.42
31,673
0.35
24,202
0.28
Amortization of unrealized loss (gain) of
derivative instruments held at the time of de-designation
122
0.00
(103
)
(0.00
)
(1,858
)
(0.02
)
(3,119
)
(0.03
)
(6,715
)
(0.08
)
Realized loss on sale of investments
–
–
67,820
0.72
–
–
–
–
1,365
0.02
Core earnings
$
21,917
$
0.18
$
19,811
$
0.16
$
19,109
$
0.15
$
14,798
$
0.11
$
14,780
$
0.12
The following reconciles total financing spreads to financing
spreads on residential mortgage investments:
2020
2019
Q2
Q1
Q4
Q3
Q2
Total financing spreads
1.52
%
0.66
%
0.57
%
0.31
%
0.34
%
Impact of yields on other interest-earning
assets*
0.04
0.02
0.01
0.00
0.01
Impact of borrowing rates on other
interest-paying liabilities*
0.09
0.05
0.05
0.05
0.05
Impact of amortization of unrealized gain,
net of unrealized losses on de-designated derivative
instruments
0.01
0.00
(0.07
)
(0.12
)
(0.24
)
Impact of net cash flows received on
non-designated derivative instruments
(0.41
)
0.04
0.14
0.21
0.31
Financing spreads on residential mortgage
investments
1.25
0.77
0.70
0.45
0.47
*
Other interest-earning assets consist of
overnight investments and cash collateral receivable from secured
borrowing and derivative counterparties. Other interest-paying
liabilities consist of unsecured borrowings and, at times, may
consist of cash collateral payable to derivative counterparties
CAPSTEAD MORTGAGE CORPORATION
FAIR VALUE AND SWAP MATURITY DISCLOSURES (in thousands,
unaudited)
June 30, 2020
December 31,
2019
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
$
2,981,408
$
109,203
$
3,090,611
$
3,099,649
$
9,038
$
33,573
Longer-to-reset ARMs
4,217,150
115,606
4,332,756
4,419,459
86,703
7,267
Ginnie Mae securities:
Current-reset ARMs
160,813
3,994
164,807
166,318
1,511
2,699
Longer-to-reset ARMs
611,579
15,674
627,253
641,021
13,768
1,728
$
7,970,950
$
244,477
$
8,215,427
$
8,326,447
$
111,020
$
45,267
Derivative instruments: (b)
Interest rate swap agreements:
Secured borrowings-related
$
4,600,000
$
(59,595
)
$
(2,693
)
$
(2,712
)
Unsecured borrowings-related
100,000
(49,575
)
(49,575
)
(29,156
)
(a)
Unrealized gains and losses on residential
mortgage securities classified as available-for-sale are recorded
as a component of AOCI. Residential mortgage securities classified
as held-to-maturity with a cost basis of $922,000 and unsecuritized
investments in residential mortgage loans with a cost basis of
$531,000 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)
Unrealized Gains (Losses) are amounts
included in AOCI related to these positions as of the indicated
dates. The following reflects Capstead’s secured borrowings-related
swap positions, sorted by quarter of swap contract expiration.
Average fixed rates reflect related fixed-rate payment
requirements.
Period of Contract
Expiration
Swap Notional
Amounts
Average
Fixed Rates
Third quarter 2020
200,000
1.64
%
Fourth quarter 2020
200,000
2.04
Third quarter 2021
2,500,000
1.25
Fourth quarter 2021
900,000
1.61
First quarter 2022
400,000
1.37
Second quarter 2022
400,000
0.02
$
4,600,000
In addition to the effects on fixed swap rates of the Fed’s 150
basis point reductions to the Fed Funds rate in March, thus far in
2020 the Company has entered into only OIS-based swaps. After
consideration of secured borrowings-related derivative instruments,
Capstead’s residential mortgage investments and secured borrowings
had durations as of June 30, 2020 of approximately 14 months and
nine months, respectively, for a net duration gap of approximately
five months. Duration is a measure of market price sensitivity to
changes in interest rates. A shorter duration generally indicates
less interest rate risk.
CAPSTEAD MORTGAGE CORPORATION
RESIDENTIAL ARM SECURITIES PORTFOLIO STATISTICS (as of June 30,
2020) (in thousands, unaudited)
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
$
2,333,856
3.21
%
2.21
%
1.65
%
2.80
%
6.18
%
5.9
Freddie Mac Agency Securities
756,755
3.26
2.24
1.76
2.28
5.51
7.5
Ginnie Mae Agency Securities
164,807
3.32
1.69
1.52
1.12
5.53
4.9
Residential mortgage loans
436
4.17
4.69
2.09
1.76
11.25
6.1
(40% of total)
3,255,854
3.23
2.19
1.67
2.59
5.99
6.2
Longer-to-reset ARMs:
Fannie Mae Agency Securities
2,769,701
3.05
2.14
1.60
4.09
5.02
52.0
Freddie Mac Agency Securities
1,563,055
3.00
2.21
1.66
4.21
5.03
60.0
Ginnie Mae Agency Securities
627,253
3.68
1.66
1.50
1.00
5.00
43.9
(60% of total)
4,960,009
3.12
2.10
1.61
3.74
5.02
53.5
$
8,215,863
3.16
2.14
1.63
3.29
5.40
34.8
Gross WAC (rate paid by borrowers)(d)
3.79
(a)
Amortized cost basis represents the
Company’s investment (unpaid principal balance plus unamortized
investment premiums) before unrealized gains and losses. At June
30, 2020, the ratio of amortized cost basis to unpaid principal
balance for the Company’s ARM holdings was 103.07. This table
excludes approximately $1.0 million in fixed-rate agency-guaranteed
mortgage pass-through securities and residential mortgage loans as
well as 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 indices
and net margins as of the indicated date. Average net margins
represent the weighted average levels over the underlying indices
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, 67% of current-reset ARMs were subject to periodic
caps averaging 1.90%; 24% were subject to initial caps averaging
2.97%; and 8% were subject to lifetime caps averaging 7.01%.
(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 June 30, 2020
approximately 90%, 5% and 3% of the Company’s ARM securities were
backed by mortgage loans that reset annually, semi-annually and
monthly, respectively, while approximately 2% reset every five
years. Approximately 76% of the Company’s current-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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200729005905/en/
Lindsey Crabbe (214) 874-2339
Capstead Mortgage (NYSE:CMO)
Historical Stock Chart
From Jun 2024 to Jul 2024
Capstead Mortgage (NYSE:CMO)
Historical Stock Chart
From Jul 2023 to Jul 2024