Capstead Mortgage (CMO) 8-K Cautionary Statement Concerning Forward-looking Statements

CAPSTEAD

Information as of December 31, 2012

Investor Presentation

Exhibit 99.1

Safe Harbor Statement -

Private Securities Litigation Reform Act of 1995

Cautionary 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.

Forward-looking

statements

are

based

largely

on

the

expectations

of

management

and

are

subject

to

a

number

of

risks

and

uncertainties

including,

but

not

limited

to,

the

following:

In addition to the above considerations, actual results and liquidity are affected by other risks and uncertainties which could cause

actual results to be significantly different from those expressed or implied by any forward-looking statements included herein.  It is not

possible to identify all of the risks, uncertainties and other factors that may affect future results.  In light of these risks and uncertainties,

the forward-looking events and circumstances discussed herein may not occur and actual results could differ materially from those

anticipated or implied in the forward-looking statements.  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.

–

changes in general economic conditions;

–

fluctuations in interest rates and levels of mortgage

prepayments;

–

the effectiveness of risk management strategies;

–

the impact of differing levels of leverage employed;

–

liquidity of secondary markets and credit markets;

–

the availability of financing at reasonable levels and terms to

support investing on a leveraged basis;

–

the availability of new investment capital;

–

the availability of suitable qualifying investments from both

an investment return and regulatory perspective;

–

changes in legislation or regulation affecting Fannie Mae and

Freddie Mac (together, the “GSEs”) and similar federal

government agencies and related guarantees;

–

deterioration in credit quality and ratings of existing or future

issuances of GSE or Ginnie Mae Securities;

–

changes in legislation or regulation affecting exemptions for

mortgage REITs from regulation under the Investment

Company Act of 1940; and

–

increases in costs and other general competitive factors.

2

Company Summary

Proven Strategy

Experienced

Management Team

Aligned with

Stockholders

Overview of Capstead Mortgage Corporation

•

Founded in 1985, Capstead is the oldest publicly-traded Agency mortgage REIT.

•

At December 31, 2012, we had a residential ARM securities portfolio of $13.85 billion, supported

by long-term investment capital of $1.60 billion levered 8.00 times.*

•

Our five-year compound annual total return of 12.4% exceeded the Russell 2000 Index and the

NAREIT Mortgage REIT Index.**

•

We invest exclusively in residential adjustable-rate mortgage (ARM) securities issued and

guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.  Agency-guaranteed mortgage securities

are considered to have little, if any, credit risk.

•

Our

focus

on

short-duration

ARM

securities

augmented

with

2-year

interest

rate

swap

agreements

differentiates

us

from

our

peers

because

ARM

securities

reset

to

more

current

interest

rates

within

a

relatively

short

period

of

time.

This

allows

for

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.

With

this

strategy,

Capstead

is

recognized

as

the

most

defensively-positioned

Agency

mortgage

REIT

from

an

interest

rate

risk

perspective.

•

Our prudently leveraged portfolio provides financial flexibility

to manage changing market

conditions.

•

Our top four executive officers have over 85 years of combined mortgage finance industry

experience, including over 80 years at Capstead.

•

We

are

self-managed

with

low

operating

costs

and

a

focus

on

performance-based

compensation

for

our

executive

officers.

This

structure

greatly

enhances

the

alignment

of

management

interests

with

those

of

our

stockholders.

3

*

Long-term

investment

capital

includes

stockholders’

equity

and

unsecured

borrowings,

net

of

investments

in

related

unconsolidated

affiliates.

**

Compound

annual

growth

rate

is

based

on

cumulative

total

returns

assuming

an

investment

in

Capstead

was

made

December

31,

2007

and

dividends

were

reinvested.

Perpetual Preferred

Trust

Total Long-Term

   Common

Series A

Series B

Preferred

Investment Capital

NYSE Stock Ticker 

   CMO

CMOPRA

CMOPRB

Shares outstanding

96,229

186

16,493

Cost of preferred capital

11.44%

11.15%

8.49%

10.23%

Price as of March 1, 2013

$12.44

    $21.03

       $15.25

Book Value per common share

$13.58

Price as a multiple of 

December 31, 2012 book value

91.6%

Recorded value

$1,308,133

$2,604

$186,388

$99,978

$1,597,103

Market capitalization as of March 1, 2013

$1,197,089

$3,912

$251,518

$99,978

$1,552,497

(a)

As of December 31, 2012.  

Market Snapshot

(dollars in thousands, except per share amounts)

4

(a)

(a)

(a)

(a)

Capstead’s Prudent Use of Leverage

5

**

Borrowings under repurchase arrangements divided by long-term investment capital.

Portfolio leverage remained stable throughout 2012 at approximately eight times long-term investment capital.  In our view,

borrowing at current levels represents an appropriate and prudent use of leverage for an agency-guaranteed ARM securities

portfolio in today’s market conditions. 

Through September 2012, we raised $142 million in new common equity capital using our at-the-market continuous offering

program.  This program was suspended with the October 30, 2012 announcement of a $100 million common stock buy back

program.  As of December 31, 2012, we repurchased $35 million in

common shares under this authorization and an

additional $7 million in early January 2013.

33%

67%

42%

58%

Capstead’s Proven Short-Duration Investment Strategy

6

As of December 31, 2012

As of December 31, 2012

Low risk agency-guaranteed residential ARM securities financed primarily with 30-90 day “repo”

borrowings, augmented with two-year interest rate swap agreements for hedging purposes.

Residential ARM Securities Portfolio

Repurchase Arrangements & Similar Borrowings

Total: $12.78 billion

*    Based on fair market value as of the indicated balance sheet date. 

Total: $13.85 billion*

•

Most of our securities are backed by well-seasoned mortgage

loans with coupon interest rates that reset at least annually or

begin doing so after an initial fixed-rate period of five years or

less.

•

We have long-term relationships with numerous lending

counterparties.  As of December 31, 2012, we had borrowings

outstanding with 23 counterparties.

•

Fourth quarter 2012 unhedged borrowing rates averaged 45

basis points, up from 41 basis points during the third quarter

(0.63% after considering currently-paying interest rate swaps).

•

At December 31, 2012 we held $4.20 billion notional amount of 

currently-paying two-year interest rate swaps requiring fixed

rate payments averaging 0.75% with average maturities of nine

months.

An

additional

$2.40

billion

notional

amount

of

two-year

forward-starting swaps were held at year-end that will begin

requiring fixed rate payments averaging 0.47% for two-year

periods beginning on various dates between January 2013 and

December 2013.

•

The duration of our investment portfolio and related ‘repo’

borrowings

was

approximately

10

months

and

8¼

months,

respectively, at December 31, 2012.  This  resulted in a net

duration

gap

of

approximately

1¾

months.

Duration

is

a

measure of market price sensitivity to interest rate movements.

Longer-to-Reset

ARMs

$5.76 Billion

Current-Reset

ARMs

$8.09 Billion

Borrowings Hedged with

Currently-Paying

Interest Rate Swaps

$4.20 Billion

(excludes forward-

starting swaps)

Unhedged

Borrowings

$8.58 Billion

Financing Spread Analysis

As of December 31, 2012 (unaudited)

7

Capstead’s Stockholder Friendly Structure

8

Quarter

Year

Ended

Ended

Dec. 31, 2012

*

Dec. 31, 2012

*

Compensation-related expenses:

  Fixed:

Salaries and related deferred compensation match,

payroll taxes, insurance and other benefits

   0.22%

   0.23%

  Variable:

Incentive Compensation 

**

0.12

0.26

58% and 67% of quarter and

Dividend Equivalent Rights

0.05

0.06

year-to-date compensation -

Performance Stock Awards

0.11

0.12

related expenses, respectively,

Related deferred compensation match and payroll taxes

0.02

0.03

were performance-based

0.30

0.47

0.52

0.70

Other platform expenses

0.27

0.27

          0.79%

            0.97%

*

Expressed as a percentage of average long-term investment capital (LTIC). 

**

Incentive compensation is based on a 10% participation in returns on LTIC in excess of benchmark returns (greater of 10% or the average 10-year Treasury rate

plus 2.0%), capped at 50 basis points of LTIC and subject to Compensation Committee discretion.

•

Self-managed with low operating costs.

•

Our

board

of

directors

requires

management

to

hold

a

significant

amount

of

CMO

stock

based

on

a

multiple of each executive’s base salary. As of  February 25, 2013 our directors and executive officers

beneficially owned 1.8% of our common shares.

•

Pay structure is variable through compensation elements that focus on “pay for performance.”

•

Management is incented to grow the Company by issuing common equity capital when it is accretive to

book

value

and

earnings

as

opposed

to

increasing

compensation

or

external

management

fees.

•

Bottom line: our management prospers when our stockholders prosper.

*

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 December 31,

2012.  Net WAC is expressed as a percentage calculated on an annualized basis on the unpaid principal balance of the mortgage loans underlying these investments.  Fully indexed WAC

represents the weighted average coupon upon one or more resets using interest rate indexes and net margins, as of December 31, 2012. 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 December 31, 2012.

NOTE:  Excludes $9 million of fixed-rate investments.

Fully

Average

Months

Principal

Investment

Amortized Cost Basis 

Fair Market

Net

Indexed

Net

to

Balance

Premiums

($)

%

Value

WAC*

WAC*

Margins

Roll

Current-reset ARMs:

Fannie Mae Agency Securities

$

5,106,160

$121,326

$

5,227,486

102.38

$5,411,503

2.45%

2.29%

1.70%

5.2

Freddie Mac Agency Securities

1,801,631

49,091

1,850,722

102.72

1,917,255

2.67

2.42

1.84

6.2

Ginnie Mae Agency Securities

722,922

16,563

739,485

102.29

754,178

2.48

1.70

1.51

6.2

Residential Mortgage Loans

5,031   

20

5,051

100.40

5,119

  3.51

   2.38

    2.04

     4.5

7,635,744

187,000

7,822,744

102.45

8,088,055

2.51

2.27

1.71

5.5

Longer-to-reset ARMs:

Fannie Mae Agency Securities

2,840,886

112,623

2,953,509

103.96

2,981,497

2.97

2.61

1.76

43.7

Freddie Mac Agency Securities

1,799,277

73,606

1,872,883

104.09

1,888,667

2.97

2.67

1.84

47.4

Ginnie Mae Agency Securities

843,827

31,685

875,512

103.75

892,941

  3.01

   1.68

   1.51

  30.1

5,483,990

217,914

5,701,904

103.97

5,763,105

  2.98

   2.48

   1.75

   42.8

$13,119,734

$404,914

$13,524,648

103.09

$13,851,160

  2.70

   2.36

   1.73

    21.1

Gross WAC (rate paid by borrowers)*

3.33

Key Elements of Capstead’s ARM Portfolio

As of December 31, 2012 (dollars in thousands, unaudited)

9

CAPSTEAD

Appendix

CAPSTEAD

10

*

*

*

*

*

Capstead’s Fourth Quarter 2012 Highlights

•

Earnings of $35.1 million or $0.31

per diluted common share

•

Financing spreads on residential mortgage investments declined 17 basis points to 1.13%

•

Book value

decreased $0.30 to $13.58 per common share

•

Repurchased $42 million in common shares through early January 2013

•

Portfolio leverage maintained at eight times long-term investment capital

•

Operating costs as a percentage of average long-term investment capital decreased 9 basis points to 0.79%

•

Comments from our January 30, 2013 earnings press release:

“During

the

fourth

quarter

yields

on

our

portfolio

were

pressured

by

moderately

higher

mortgage

prepayments

as

well

as

lower

coupon

resets

reflecting

declines

in

recent

quarters

in

the

six-

and

twelve-month

LIBOR

indexes.

Meanwhile,

our

borrowing

costs

were higher, in part reflecting higher market rates over year-end as well as an increase in our currently-paying swap position. 

Together, these factors contributed to a 17 basis point decline in our financing spreads to 1.13%, and a $0.04 reduction in our

earnings to $0.31 per diluted common share.

“Although results have trended lower in recent quarters, we expect 2013 results will be more stable.  This belief reflects our

confidence in our investment strategy of investing solely in short-duration ARM securities.  Approximately 93% of the mortgages

underlying our current-reset ARM securities were originated prior to 2008 and carry coupon interest rates at or below prevailing

fixed

mortgage

rates

diminishing

the

economic

advantage,

if

any,

of

refinancing.

Additionally,

refinancing

for

many

of

these

homeowners continues to be hampered by low housing prices and credit problems.  Newer originations, primarily held in our longer-

to-reset portfolio, remain more susceptible to refinancing because it is easier for many of these borrowers to qualify for new

mortgages

and

it

may

be

more

attractive

to

do

so

from

a

rate

perspective

in

the

current

low

mortgage

interest

rate

environment.

On

an

overall

basis,

we

expect

mortgage

prepayment

levels

to

remain

manageable

in

the

coming

quarters

absent

additional

government intervention to lower mortgage interest rates beyond the Federal Reserve's current bond buying program.  This should

help

contain

investment

premium

amortization

costs,

which

increased

$2.2

million

this

quarter

to

$29.3

million.

Also,

further

declines in weighted average coupons should be muted given that an increasing number of mortgage loans underlying our current-

reset

ARM

securities

are

at

or

near

fully-indexed

levels,

which

now

reflect

six-

and

twelve-month

indices

that

have

largely

returned

to the lower levels prevailing in late 2010.  With respect to our borrowing costs, we have experienced lower market rates

subsequent

to

year-end.

Additionally,

$2.90

billion

of

our

currently-paying

interest

rate

swaps

with

average

fixed

rates

of

0.85%

will

mature during 2013 and have already been largely replaced at significantly lower rates. 

“We

remain

confident

in

and

focused

on

our

investment

strategy

of

managing

a

conservatively

leveraged

portfolio

of

agency-

guaranteed residential ARM securities that can produce attractive risk-adjusted returns over the long term while reducing, but not

eliminating, sensitivity to changes in interest rates.”

11

Capstead’s Quarterly Income Statements

(dollars in thousands, except per share amounts) (unaudited)

12

*    The constant prepayment rate, or CPR, represents only prepayments.

Capstead’s Annual Income Statements –

Five Years Ended 2012

(dollars in thousands, except per share amounts) (unaudited)

13

December

December

December

December

December

2012

2011

2010

2009

2008

Interest income:

Residential mortgage investments

255,931

$        

243,077

$        

198,488

$        

313,676

$        

394,729

$        

Other

698

301

1,290

919

5,760

256,629

243,378

199,778

314,595

400,489

Interest expense:

Repurchase arrangements and similar borrowings

(69,101)

(57,328)

(47,502)

(120,083)

(249,706)

Unsecured borrowings

(8,747)

(8,747)

(8,747)

(8,747)

(8,747)

Other

-

(5)

(2)

-

-

(77,848)

(66,080)

(56,251)

(128,830)

(258,453)

178,781

177,298

143,527

185,765

142,036

Other revenue (expense):

Miscellaneous other revenue (expense)

(171)

(1,023)

(904)

(40,641)

(1,593)

Incentive compensation

(4,129)

(5,697)

(5,055)

(4,769)

(6,000)

Salaries and benefits

(6,843)

(6,701)

(6,097)

(5,655)

(4,978)

Other general and administrative expense

(4,271)

(3,932)

(4,834)

(5,696)

(3,801)

(15,414)

(17,353)

(16,890)

(56,761)

(16,372)

Income before equity in earnings of unconsolidated affiliates

163,367

159,945

126,637

129,004

125,664

Equity in earnings of unconsolidated affiliates

259

259

259

259

259

Net income

163,626

$        

160,204

$        

126,896

$        

129,263

$        

125,923

$        

Net income per diluted common share

$1.50

$1.75

$1.52

$1.66

$1.93

Average long-term investment capital

1,567,232

$     

1,284,057

$     

1,120,647

$     

1,032,853

$     

813,428

$        

Average balance of mortgage assets

13,190,380

10,839,749

7,665,796

7,604,530

7,630,958

Investment premium amortization

96,677

68,077

57,634

29,426

29,336

Average CPR*

Average financing spreads on residential mortgage investments

                   1.68

                   16.1%

Year Ended

                   16.6%

                   1.67

                   16.0%

                   1.93

                   29.1%

                   2.42

                   1.38

                   17.2%

*    The constant prepayment rate, or CPR, represents only prepayments.

Capstead’s Comparative Balance Sheets

(dollars in thousands, except per share amounts)

14

Experienced Management Team

15

Over 85 years of combined mortgage finance industry experience, including over 80 years at Capstead.

Andrew

F.

Jacobs

–

President

and

Chief

Executive

Officer,

Director

–

Has served as president and chief executive officer since 2003 and has held various executive positions at Capstead since 1988

–

Certified Public Accountant (“CPA”), member of the Executive Board of the National Association of Real Estate Investment Trusts

(“NAREIT”), chairman of NAREIT’s Council of Mortgage REITs, member of the Executive Committee of the Chancellors Council of

the University of Texas System, the Executive Council of the Real Estate Finance and Investment Center at the University of Texas

at Austin, the American Institute of Certified Public Accountants (“AICPA”), and the Financial Executives International (“FEI”)

Phillip

A.

Reinsch

–

Executive

Vice

President

and

Chief

Financial

Officer,

Secretary

–

Has

held

various

financial

accounting

and

reporting

positions

at

Capstead

since

1993

–

Formerly employed by Ernst & Young LLP as an audit senior manager focusing on mortgage banking and asset securitization

–

CPA, Member AICPA, FEI

Robert

A.

Spears

–

Executive

Vice

President,

Director

of

Residential

Mortgage

Investments

–

Has served in asset and liability management positions at Capstead since 1994

–

Formerly Vice President of secondary marketing with NationsBanc Mortgage Corporation

Michael

W.

Brown

–

Senior

Vice

President,

Asset

and

Liability

Management,

Treasurer

–

Has served in asset and liability management positions at Capstead since 1994

–

MBA, Southern Methodist University, Dallas, Texas