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Capstead Mortgage Corporation Announces First Quarter 2009 Earnings.

Article Excerpt
First Quarter 2009 Highlights

* Earnings increased to $42.1 million or $0.58 per diluted common share

* Book value increased to $10.34 per common share

* Portfolio of almost exclusively agency-guaranteed residential ARM securities increased to $7.64 billion

* Portfolio leverage reduced to 7.30 times long-term investment capital

* Financing spreads increased to 2.16%

DALLAS -- Capstead Mortgage Corporation (NYSE: CMO) today reported net income of $42,076,000 for the quarter ended March 31, 2009 compared to $24,302,000 for the fourth quarter of 2008. After considering preferred share dividends, the Company earned $0.58 per diluted common share for the first quarter of 2009 compared to $0.32 for the fourth quarter of 2008. The Company paid a first quarter dividend of $0.56 per common share on April 20, 2009.

First Quarter Earnings and Related Discussion

Capstead's earnings for the first quarter of 2009 were higher than earnings for the fourth quarter of 2008 as higher net interest margins on the Company's interest-earning assets benefited from lower borrowing rates. These assets consist principally of a core portfolio of residential adjustable-rate mortgage, or ARM, securities issued and guaranteed by government-sponsored entities, either Fannie Mae or Freddie Mac, or by an agency of the federal government, Ginnie Mae. Average financing spreads increased to 216 basis points during the current quarter, a 99 basis point improvement over the fourth quarter of 2008. Borrowing rates declined as the Company's borrowings under repurchase agreements, including a portion of its relatively high cost longer-dated borrowings, were replaced at significantly lower rates than what was available during much of the fourth quarter.

Yields on the Company's total interest-earning assets averaged 4.61% during the first quarter of 2009, a decline of 27 basis points from an average of 4.88% during the fourth quarter of 2008, reflecting lower coupon interest rates on ARM loans underlying the portfolio that reset to more current interest rates and, to a lesser extent, lower yielding portfolio acquisitions. Mortgage prepayments remained at favorable levels, with portfolio runoff totaling $286 million in principal amount during the first quarter, representing an annualized runoff rate of 14%. This compares to $309 million during the fourth quarter of 2008, representing...