Capstead Mortgage Corporation (“Capstead” or the “Company”)
(NYSE: CMO) today announced financial results for the quarter ended
March 31, 2021.
First Quarter 2021 Summary
- Recognized GAAP net income of $18.9 million or $0.15 per
diluted common share
- Generated core earnings of $17.4 million or $0.13 per
diluted common share, representing an annualized 7.7% return on
common equity capital
- Paid a $0.15 dividend per common share for the sixth
consecutive quarter
- Book value per common share decreased $0.10 to $6.66 per
common share
- Agency-guaranteed residential adjustable-rate mortgage (ARM)
portfolio ended the quarter at $7.4 billion
- Leverage ended the quarter at 6.79 times long-term
investment capital
First Quarter Earnings and Related
Discussion
Capstead reported GAAP net income of $18.9 million or $0.15 per
diluted common share for the quarter ended March 31, 2021, compared
to $23.3 million or $0.19 per diluted common share for the quarter
ended December 31, 2020. The Company reported core earnings of
$17.4 million or $0.13 per diluted common share for the quarter
ended March 31, 2021. This compares to core earnings of $19.7
million or $0.15 per diluted common share for the quarter ended
December 31, 2020. See the “Non-GAAP Financial Measures” section of
this release for more information on core earnings.
Yields on the Company’s portfolio of agency-guaranteed
residential ARM securities averaged 1.38% during the first quarter
of 2021, a decrease of 17 basis points from 1.55% reported for the
fourth quarter of 2020. Yields declined due primarily to lower
coupon interest rates on existing loans that reset lower based on
prevailing interest rates as well as higher yield adjustments for
investment premium amortization due to changes in lifetime
prepayment estimates. Mortgage prepayment rates decreased during
the quarter to an average annualized constant prepayment rate
(“CPR”) of 37.12%, compared to 38.67% CPR in the prior quarter.
Portfolio leverage decreased to 6.79 to one at March 31, 2021
compared to 7.26 to one at December 31, 2020.
The following table illustrates the progression of Capstead’s
portfolio of residential mortgage investments for the quarter ended
March 31, 2021 (dollars in thousands):
Residential mortgage investments, December
31, 2020
$
7,937,552
Portfolio acquisitions (principal
amount)
387,830
Investment premiums on acquisitions
16,394
Portfolio runoff (principal amount)
(893,995
)
Investment premium amortization
(20,887
)
Decrease in net unrealized gains on
securities classified as available-for-sale
(21,483
)
Residential mortgage investments, March
31, 2021
$
7,405,411
Decrease in residential mortgage
investments during the period
$
(532,141
)
Rates on Capstead’s secured borrowings, after adjusting for
hedging activities, averaged 17 basis points lower at 0.20% during
the first quarter of 2021, compared to 0.37% for the prior quarter.
Borrowing rates before hedging activities averaged 0.20% during the
first quarter, a decline of three basis points from the prior
quarter. Secured borrowings ended the quarter at $6.81 billion.
Notional amounts of secured borrowings-related interest rate
swap agreements averaged $2.99 billion during the first quarter of
2021 with fixed swap rates averaging 0.04%, 33 basis points lower
than the prior quarter. At March 31, 2021, the Company held $3.22
billion notional amount of secured borrowings-related interest rate
swaps with fixed rates averaging 0.06%, an increase of $250 million
in notional amount and two basis points in rate from swaps held on
December 31, 2020. The Company’s duration gap, a measure of
interest rate risk, decreased from approximately three and one-half
months at December 31st to three and one-quarter months at March
31, 2021 – see page 10 for further information.
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
1.43% for the quarter ended March 31, 2021. As an annualized
percentage of total assets, operating costs averaged 0.18% during
this period.
Book Value per Common Share
Book value per share as of March 31, 2021 was $6.66, a decrease
of $0.10 for the quarter primarily reflecting $0.22 in
portfolio-related declines in value and $0.05 in declines related
to capital activity, partially offset by $0.17 in
derivative-related increases. 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, “Our first
quarter results were impacted by our choice to not invest all of
our available capital at what we view as unacceptably low projected
risk-adjusted returns. As a consequence, we did not replace all of
our portfolio runoff for the second consecutive quarter during a
period of continued high mortgage prepayments, leading to lower
portfolio and leverage levels and lower earnings. This has
increased our flexibility to take advantage of more compelling
opportunities should they arise as the year unfolds.
“Now that the transition from LIBOR- to SOFR-based ARM
production is largely complete and with the pronounced steepening
in the yield curve through higher longer term interest rates
year-to-date, we are seeing sizable increases in new ARM
production. This bodes well for investment opportunities going
forward. However, there remains strong demand for agency-guaranteed
ARM securities which could continue to limit our reinvestment
opportunities.
“We see mortgage prepayment rates peaking as the second quarter
progresses due in large part to increases in prevailing fixed-rate
mortgage rates of nearly 50 basis points since year-end leading to
lower portfolio runoff in the coming quarters. If longer-term
interest rates continue increasing in the coming quarters, further
declines in prepayments can be expected. Meanwhile, short-term
interest rates have remained at historical lows, with one-month
LIBOR declining three basis points to 11 basis points during the
quarter and two-year U.S. Treasury rates only increasing about 4
basis points since year end, indicative of market expectations for
little change in borrowing rates for some time to come.
“Book value declined by only 1.4% during the first quarter
despite continued high portfolio runoff and a significant increase
in longer-term interest rates, with the ten-year U.S. Treasury rate
increasing a surprising 82 basis points during the quarter. This
comparatively modest decline in book value was due in large part to
strong demand for agency-guaranteed ARM securities, fairly stable
yields on the shorter end of the yield curve and increases in value
of interest rate swaps held for hedging purposes.
“Since quarter-end, pricing levels for agency-guaranteed ARM
securities have been fairly stable relative to a further rise in
longer-term interest rates while April portfolio runoff reached
43.7% CPR. As of April 23rd, our last internal measurement date,
book value per share was lower by approximately $0.03, primarily
due to continued high portfolio runoff in April.
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 this 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, April 29, 2021 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 10155050.
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)
March 31, 2021
December 31, 2020
(unaudited)
Assets
Residential mortgage investments ($7.16
and $7.71 billion pledged at March 31, 2021 and December 31, 2020,
respectively)
$
7,405,411
$
7,937,552
Cash collateral receivable from derivative
counterparties
61,796
74,411
Derivatives at fair value
151
–
Cash and cash equivalents
259,233
257,180
Receivables and other assets
143,295
136,107
$
7,869,886
$
8,405,250
Liabilities
Secured borrowings
$
6,805,061
$
7,319,083
Derivatives at fair value
27,223
41,484
Unsecured borrowings
98,519
98,493
Common stock dividend payable
15,173
15,281
Accounts payable and accrued expenses
20,217
20,746
6,966,193
7,495,087
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 March 31, 2021 and December 31, 2020
250,946
250,946
Common stock - $0.01 par value; 250,000
shares authorized: 96,848 and 96,481 shares issued and outstanding
at March 31, 2021 and December 31, 2020, respectively
968
965
Paid-in capital
1,269,021
1,268,439
Accumulated deficit
(651,551
)
(651,071
)
Accumulated other comprehensive income
34,309
40,884
903,693
910,163
$
7,869,886
$
8,405,250
Long-term investment capital
(consists of stockholders’ equity and unsecured borrowings)
(unaudited)
$
1,002,212
$
1,008,656
Portfolio leverage (secured
borrowings divided by long-term investment capital) (unaudited)
6.79:1
7.26:1
Book value per common share (based
on shares of common stock outstanding and calculated using
preferred stock liquidation preferences) (unaudited)
$
6.66
$
6.76
CAPSTEAD MORTGAGE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per
share amounts) (unaudited)
Quarter Ended
March 31
2021
2020
Interest income
Residential mortgage investments
$
26,165
$
69,207
Other
13
403
26,178
69,610
Interest expense
Secured borrowings
(4,172
)
(45,256
)
Unsecured borrowings
(1,891
)
(1,900
)
(6,063
)
(47,156
)
20,115
22,454
Other (expense) income
Gain (loss) on derivative instruments
(net)
2,382
(155,739
)
Loss on sale of investments (net)
–
(67,820
)
Compensation-related expense
(2,092
)
(2,204
)
Other general and administrative
expense
(1,465
)
(1,202
)
Miscellaneous other revenue (expense)
2
(142
)
(1,173
)
(227,107
)
Net income (loss)
18,942
(204,653
)
Less preferred stock dividends
(4,842
)
(4,842
)
Net income (loss) to common
stockholders
$
14,100
$
(209,495
)
Basic and diluted net income (loss) per
common share
$
0.15
$
(2.21
)
Weighted average common shares
outstanding
Basic
95,894
94,897
Diluted
96,230
94,897
Cash dividends declared per
share
Common
$
0.15
$
0.15
Series E preferred
0.47
0.47
CAPSTEAD MORTGAGE CORPORATION
QUARTERLY STATEMENTS OF OPERATIONS AND SELECT OPERATING STATISTICS
(in thousands, except per share amounts, percentages annualized,
unaudited)
2021
2020
Q1
Q4
Q3
Q2
Q1
Quarterly Statements of
Operations:
Interest income
Residential mortgage investments
$
26,165
$
31,372
$
37,571
$
48,111
$
69,207
Other
13
17
26
28
403
26,178
31,389
37,597
48,139
69,610
Interest expense
Secured borrowings
(4,172
)
(4,787
)
(4,809
)
(13,039
)
(45,256
)
Unsecured borrowings
(1,891
)
(1,910
)
(1,910
)
(1,900
)
(1,900
)
(6,063
)
(6,697
)
(6,719
)
(14,939
)
(47,156
)
20,115
24,692
30,878
33,200
22,454
Other (expense) income
Gain (loss) on derivative instruments
(net)
2,382
1,630
1,510
(6,948
)
(155,739
)
Loss on sale of investments (net)
–
–
–
–
(67,820
)
Compensation-related expense
(2,092
)
(1,759
)
(1,985
)
(2,330
)
(2,204
)
Other general and administrative
expense
(1,465
)
(1,269
)
(1,321
)
(1,219
)
(1,202
)
Miscellaneous other revenue (expense)
2
–
–
1
(142
)
(1,173
)
(1,398
)
(1,796
)
(10,496
)
(227,107
)
Net income (loss)
$
18,942
$
23,294
$
29,082
$
22,704
$
(204,653
)
Net income (loss) per diluted common
share
$
0.15
$
0.19
$
0.25
$
0.19
$
(2.21
)
Average diluted common shares
outstanding
96,230
96,088
96,024
95,887
94,897
Core earnings
$
17,360
$
19,667
$
19,868
$
21,917
$
19,811
Core earnings per diluted common share
0.13
0.15
0.16
0.18
0.16
Select Operating and Performance
Statistics:
Common dividends declared per share
0.15
0.15
0.15
0.15
0.15
Book value per common share
6.66
6.76
6.80
6.79
6.07
Average portfolio outstanding (cost
basis)
7,578,943
8,073,304
8,119,230
8,255,393
11,122,713
Average secured borrowings
6,884,328
7,407,784
7,447,333
7,646,755
10,336,879
Average long-term investment capital
(“LTIC”)
1,010,317
1,015,854
1,018,407
987,792
1,124,307
Constant prepayment rate (“CPR”)
37.12
%
38.67
%
39.97
%
32.89
%
26.71
%
Total financing spreads
1.01
1.19
1.47
1.52
0.66
Yields on residential mortgage
investments
1.38
1.55
1.85
2.33
2.49
Secured borrowing rates (a)
0.20
0.37
0.67
1.09
1.72
Financing spreads on residential mortgage
investments
1.18
1.19
1.18
1.25
0.77
Operating costs as a percentage of
LTIC
1.43
1.19
1.29
1.45
1.22
Quarterly economic return (change in book
value plus dividends)
0.74
1.62
2.36
14.33
(27.84
)
Return on common equity capital (b)
7.68
8.85
8.94
10.76
7.77
(a)
Secured borrowing rates exclude the
effects of amortization of the net unrealized gains (losses)
included in Accumulated other comprehensive income (“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 income (loss) and net
income (loss) per diluted common share to core earnings and core
earnings per common share:
2021
2020
Q1
Q4
Q3
Q2
Q1
Amount
Per
Share
Amount
Per
Share
Amount
Per
Share
Amount
Per
Share
Amount
Per
Share
Net income (loss)
$
18,942
$
0.15
$
23,294
$
0.19
$
29,082
$
0.25
$
22,704
$
0.19
$
(204,653
)
$
(2.21
)
Unrealized (gain) loss on non-designated
derivative instruments
(2,228
)
(0.02
)
(25,989
)
(0.27
)
(35,419
)
(0.37
)
(2,229
)
(0.02
)
56,182
0.59
Realized loss on termination of
non-designated derivative instruments
–
–
21,870
0.23
26,187
0.28
1,320
0.01
100,565
1.06
Amortization of net unrealized loss (gain)
on de-designated derivative instruments
646
0.00
492
0.00
18
0.00
122
0.00
(103
)
(0.00
)
Realized loss on sale of investments
–
–
–
–
–
–
–
–
67,820
0.72
Core earnings
$
17,360
$
0.13
$
19,667
$
0.15
$
19,868
$
0.16
$
21,917
$
0.18
$
19,811
$
0.16
The following reconciles total financing spreads to financing
spreads on residential mortgage investments:
2021
2020
Q1
Q4
Q3
Q2
Q1
Total financing spreads
1.01
%
1.19
%
1.47
%
1.52
%
0.66
%
Impact of yields on other interest-earning
assets*
0.02
0.02
0.03
0.04
0.02
Impact of borrowing rates on other
interest-paying liabilities*
0.11
0.10
0.10
0.09
0.05
Impact of amortization of unrealized gain,
net of unrealized losses on de-designated derivative
instruments
0.04
0.01
0.00
0.01
0.00
Impact of net cash flows on non-designated
derivative instruments
0.00
(0.13
)
(0.42
)
(0.41
)
0.04
Financing spreads on residential mortgage
investments
1.18
1.19
1.18
1.25
0.77
*
Other interest-earning assets consist
primarily 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)
March 31, 2021
December 31,
2020
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
$
2,702,419
$
113,226
$
2,815,645
$
2,829,573
$
13,928
$
14,550
Longer-to-reset ARMs
3,836,173
136,789
3,972,962
4,013,791
40,829
59,968
Ginnie Mae securities
Current-reset ARMs
152,850
4,631
157,481
158,856
1,375
1,541
Longer-to-reset ARMs
384,767
11,488
396,255
403,191
6,936
8,492
$
7,076,209
$
266,134
$
7,342,343
$
7,405,411
$
63,068
$
84,551
Derivative instruments (b)
Interest rate swap agreements
Secured borrowings-related
$
3,224,500
$
4,041
$
(1,536
)
$
(2,182
)
Unsecured borrowings-related
100,000
(27,223
)
(27,223
)
(41,484
)
(a)
Capstead segregates its residential ARM
securities based on the average length of time until the loans
underlying each security reset to more current rates (less than 18
months for “current-reset” ARM securities, and 18 months or greater
for “longer-to-reset” ARM securities).
(b)
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
Second quarter 2022
$
400,000
0.02%
Third quarter 2022
1,200,000
0.01
Fourth quarter 2022
900,000
0.07
First quarter 2023
50,000
0.13
Third quarter 2023
100,000
0.03
Fourth quarter 2023
374,500
0.09
First quarter 2024
150,000
0.28
Second quarter 2024
50,000
0.34
$
3,224,500
After consideration of secured
borrowings-related derivative instruments, Capstead’s residential
mortgage investments and secured borrowings had durations as of
March 31, 2021 of approximately 13 months and 9¾ months,
respectively, for a net duration gap of approximately 3¼ 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 March 31,
2021) (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
$
2,097,018
2.29
%
1.91
%
1.65
%
2.88
%
6.97
%
6.8
Freddie Mac Agency Securities
718,627
2.52
2.01
1.74
2.14
6.11
8.2
Ginnie Mae Agency Securities
157,481
2.47
1.59
1.51
1.09
6.05
6.2
(40% of total)
2,973,126
2.35
1.92
1.66
2.61
6.71
7.1
Longer-to-reset ARMs
Fannie Mae Agency Securities
2,027,618
2.84
1.92
1.60
4.33
5.04
56.1
Freddie Mac Agency Securities
1,945,344
2.58
1.95
1.65
4.28
5.03
58.7
Ginnie Mae Agency Securities
396,255
3.56
1.57
1.50
1.00
5.00
34.9
(60% of total)
4,369,217
2.79
1.90
1.61
4.01
5.03
55.4
$
7,342,343
2.61
1.91
1.63
3.44
5.71
35.9
Gross WAC (rate paid by borrowers)(d)
3.25
(a)
Amortized cost basis represents the
Company’s investment (unpaid principal balance plus unamortized
investment premiums) before unrealized gains and losses. At March
31, 2021, the ratio of amortized cost basis to unpaid principal
balance for the Company’s ARM holdings was 103.76.
(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, 73% of current-reset ARMs were subject to periodic
caps averaging 1.91%; 19% were subject to initial caps averaging
3.14%; and 8% were subject to lifetime caps averaging 7.92%.
(c)
Months-to-roll is a measure of the average
length of time until the loans underlying each security reset to
more current rates. After consideration of any applicable initial
fixed-rate periods, at March 31, 2021 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 81% of the
Company’s current-reset ARM securities have reached an initial
coupon reset date. Approximately 17% of the Company’s current-reset
ARM securities are scheduled to reset in rate within three months,
38% are scheduled to reset in rate between four and six months, and
31% are scheduled to reset in rate between seven and 12 months.
(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/20210428006064/en/
Lindsey Crabbe (214) 874-2339
Capstead Mortgage (NYSE:CMO)
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