Exhibit 99.2
About Us:
We invest in a leveraged portfolio of almost exclusively residential adjustable-rate mortgage (“ARM”) securities issued and guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. ARM securities reset to more current interest rates within a relatively short period of time allowing for:
| • | | the expansion of financing spreads during periods of falling interest rates, |
| • | | the recovery of financing spreads diminished during periods of rising interest rates, and |
| • | | smaller fluctuations in portfolio values from changes in interest rates compared to fixed-rate mortgage securities. |
Experienced Management
Formed in 1985, Capstead’s experienced management team has over 80 years of combined mortgage finance industry experience.
Quality Assets
Agency-guaranteed residential mortgage securities are considered to have little, if any, credit risk, particularly given federal government support for Fannie Mae and Freddie Mac. These mortgage investments are highly liquid and can be financed with multiple funding providers through standard repurchase arrangements.
Proven Strategy
We prudently leverage our portfolio to provide the financial flexibility needed to successfully manage through periods of changing market conditions.
Third Quarter Highlights
| • | | Reported earnings of $23.7 million, or $0.27 per diluted common share. |
| • | | Book value of $11.77 per common share at September 30, 2010. |
| • | | Portfolio increased $264 million to $7.94 billion at September 30, 2010. |
| • | | Portfolio leverage increased to 6.37 times long-term investment capital at September 30, 2010. |
| • | | Total financing spreads averaged 1.40%, absorbing the last of the GSE buyouts of seriously delinquent loans. |
| • | | Portfolio runoff moderated significantly after conclusion of GSE buyout programs in July 2010. |
Quarterly Results
| | | | | | | | | | | | | | | | | | | | |
(In thousands, except per share data) | | Sept. 30,
2010 | | | June 30,
2010 | | | March 31,
2010 | | | Dec. 31,
2009* | | | Sept. 30,
2009 | |
Interest income: | | | | | | | | | | | | | | | | | | | | |
Mortgage securities and similar investments | | $ | 40,614 | | | $ | 47,634 | | | $ | 60,150 | | | $ | 70,458 | | | $ | 74,695 | |
Other interest-earning assets | | | 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 margins | | | 27,443 | | | | 34,436 | | | | 44,687 | | | | 46,650 | | | | 45,776 | |
Net income | | | 23,673 | | | | 29,759 | | | | 40,437 | | | | 2,595 | | | | 42,085 | |
Income (loss) available to common stockholders | | | 18,615 | | | | 24,700 | | | | 35,379 | | | | (2,464 | ) | | | 37,027 | |
Diluted earnings (loss) per common share | | | 0.27 | | | | 0.35 | | | | 0.51 | | | | (0.04 | ) | | | 0.56 | |
Common dividends per share | | | 0.26 | | | | 0.36 | | | | 0.50 | | | | 0.54 | | | | 0.56 | |
Common equity raises | | | — | | | | — | | | | 10,423 | | | | 1,715 | | | | 71,288 | |
Common shares outstanding (EOQ) | | | 70,129 | | | | 70,129 | | | | 70,116 | | | | 69,319 | | | | 69,098 | |
| * | In December 2009 the Company recorded $40 million in impairment and related charges, which nearly eliminated exposure to commercial real estate loans. |
Analysts
| | | | |
Firm | | Rating* | |
| Deutsche Bank | | | Hold | |
| FBR Capital Markets | | | Outperform | |
| JMP Securities LLC | | | Market Outperform | |
| Keefe, Bruyette & Woods | | | Outperform | |
| Lazard Capital | | | Hold | |
| Macquarie | | | Outperform | |
| RBC Capital Markets | | | Outperform | |
| Sandler O’ Neill | | | Hold | |
| Sterne Agee | | | Neutral | |
| Stifel Nicolaus | | | Buy | |
| Wunderlich | | | Hold | |
Ownership
| | | | |
Institution | | % of shares
Outstanding** | |
Wells Capital Management Inc. | | | 7.8 | % |
BlackRock Fund Advisors | | | 5.0 | % |
Vanguard Group Inc. | | | 3.7 | % |
RREEF America LLC | | | 3.4 | % |
GW Capital Inc. | | | 3.1 | % |
Thompson Siegel & Walmsley LLC | | | 2.8 | % |
Highland Capital Management LP | | | 2.4 | % |
State Street Global Advisors, Inc. | | | 2.2 | % |
Wellington Management Co. LLP | | | 2.2 | % |
Northern Trust Global Investments Ltd. | | | 2.1 | % |
| ** | % based on available filings as of November 3, 2010 and shares outstanding as of September 30, 2010. |
Common Stock Information
| | |
| NYSE Ticker: CMO | | |
Price as of 11/3/10: | | $11.34 |
52-wk High/Low: | | $14.68/$8.12 |
3Q Dividend: | | $0.26 |
Dividend yield: | | 9.2% |
(based on annualized 3Q dividend) | | |
3Q Avg Daily Vol: | | 893,000 shares |
Series A/Series B
Preferred Stock Info
NYSE Ticker: CMOPRA / CMOPRB
Prices as of 11/3/10: $20.40/$14.10
Call Price: $16.40 / $12.50
Liquidation Value: $16.40 / $11.38
Conversion Ratio: 1.6479 / 0.6366
Annualized Dividend: $1.60 / $1.26
