UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1993
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ______________
COMMISSION FILE NUMBER: 1-8896
CAPSTEAD MORTGAGE CORPORATION
(Exact name of Registrant as specified in its Charter)
MARYLAND 75-2027937
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 BRYAN TOWER, DALLAS, TEXAS 75201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 999-2323
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
------------------- ------------------------------------
Common Stock ($.01 par value) New York Stock Exchange
$1.60 Cumulative Preferred Stock,
Series A ($.10 par value) New York Stock Exchange
$1.26 Cumulative Convertible Preferred
Stock, Series B ($.10 par value) New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all documents and
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [_]
AT FEBRUARY 18, 1994 THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY
NONAFFILIATES WAS $610,883,000.
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AT FEBRUARY 18, 1994: 15,210,978
DOCUMENTS INCORPORATED BY REFERENCE:
(1) PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR
ENDED DECEMBER 31, 1993 ARE INCORPORATED BY REFERENCE INTO PARTS II AND IV.
(2) PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT DATED MARCH 14,
1994, ISSUED IN CONNECTION WITH THE ANNUAL MEETING OF STOCKHOLDERS OF THE
REGISTRANT, ARE INCORPORATED BY REFERENCE INTO PART III.
CAPSTEAD MORTGAGE CORPORATION
1993 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
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PART I
ITEM 1. BUSINESS............................................... 1
ITEM 2. PROPERTIES............................................. 9
ITEM 3. LEGAL PROCEEDINGS...................................... 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.... 9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS....................... 10
ITEM 6. SELECTED FINANCIAL DATA................................ 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................... 10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............ 10
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE................... 10
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..... 10
ITEM 11. EXECUTIVE COMPENSATION................................. 10
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT................................. 11
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......... 11
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.................................... 12
PART I
ITEM 1. BUSINESS.
ORGANIZATION
Capstead Mortgage Corporation ("CMC," or together with its special-purpose
finance subsidiaries and certain other entities, the "Company") was incorporated
on April 15, 1985 in the state of Maryland and commenced operations in September
1985. The Company operates as a mortgage conduit which purchases and
securitizes various types of single-family residential mortgage loans. In
addition, the Company has formed a mortgage servicing unit to function as the
primary mortgage servicer and master servicer for loans and servicing rights
acquired by the Company. The Company offers investors the opportunity to
participate in the income generated from servicing and investing in mortgage
loans, securitization activities and other portfolio strategies.
CMC, and its qualified real estate investment trust ("REIT") subsidiaries, have
elected to be taxed as a REIT and intend to continue to do so. As a result of
this election, CMC is not taxed at the corporate level on taxable income
distributed to stockholders, provided that certain REIT qualification tests are
met. Certain other subsidiaries, which are consolidated for financial reporting
purposes, are not consolidated for federal income tax purposes because such
entities were not established as REITs or qualified REIT subsidiaries. All
taxable income of these subsidiaries is subject to federal and state income
taxes, where applicable.
CONDUIT OPERATIONS
The Company offers to buy many different types of mortgage loan products. The
products include (i) fixed-rate mortgage loans which have a fixed rate of
interest for the life of the loan, (ii) adjustable-rate mortgage ("ARM") loans
which provide for a periodic adjustment of the mortgage interest rate based on a
specified margin over a specific financial index, and (iii) 5/25 mortgage loans
which provide for an initial interest rate that adjusts one time, approximately
five years following origination ("5/25 Mortgage Loans").
The Company purchases mortgage loans from mortgage banking companies, savings
banks, commercial banks, credit unions, mortgage brokers and other financial
intermediaries ("Correspondents") throughout the United States. Correspondents
must meet certain financial and performance requirements before they are
approved to participate in the Company's Correspondent Program. A purchase and
sale agreement is executed with each Correspondent that provides for recourse
against the Correspondent in the event of fraud or misrepresentation in the
process by which a mortgage loan is originated.
The Company has developed purchase guidelines for the acquisition of mortgage
loans based on the anticipated requirements of its mortgage pool insurers, and
management's assessment of the criteria used by nationally recognized
statistical rating organizations ("Rating Agencies") to analyze the quality of
the collateral pledged to mortgage-backed securities issued by the Company. The
Company does not itself underwrite the mortgage loan, but instead relies on the
credit review and analysis of its mortgage pool insurers (primarily General
Electric Mortgage Insurance Company). Each mortgage loan purchased is required
to have a commitment for insurance from a mortgage pool insurer. Detailed
purchase guidelines are provided to all Correspondents in the Company's Sellers
Guide.
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The principal amount of mortgage loans acquired by the Company at the time of
origination generally range from $203,150 to $650,000 per loan. Substantially
all of the mortgage loans acquired by the Company comply with the underwriting
criteria of the mortgage securities programs sponsored by the Federal Home Loan
Mortgage Corporation ("FHLMC") and the Federal National Mortgage Association
("FNMA"), except that their original outstanding principal amounts generally
exceed the maximum permissible amount ($203,150, effective January 1, 1993) for
such programs ("Nonconforming Mortgage Loans"). The average loan purchased in
1993 had an original principal balance of approximately $312,000.
Commitments are issued and obligate the Company to purchase mortgage loans from
the Correspondent for a specific period of time (typically 10 to 90 days), in a
specific aggregate principal amount and bearing a specified mortgage interest
rate and price. The Company currently issues three types of commitments:
mandatory, optional and best efforts. The Company receives a fee on optional
and best effort commitments, but not on mandatory commitments. However, if a
Correspondent fails to deliver a loan subject to a mandatory commitment, the
Correspondent is obligated to pay the Company the difference between the yield
the Company would have obtained on the mortgage loan and the yield available on
similar mortgage loans subject to mandatory commitments issued at the time of
such failure to deliver, plus a penalty.
MORTGAGE LOAN PORTFOLIO
The Company purchases mortgage loans from Correspondents on a daily basis. The
loans purchased are warehoused in the mortgage loan portfolio awaiting
determination of the long-term investment strategy to which the loan will be
directed. Periodically, mortgage loans are pledged to secure the issuance of
collateralized mortgage obligations ("CMOs"), publicly-offered, multi-class
mortgage pass-through certificates ("MPCs"), or AAA-rated private mortgage pass-
through securities ("Mortgage Pass-Throughs") by the Company's special-purpose
finance subsidiaries.
The Company utilizes repurchase agreements to finance the acquisition of
mortgage loans. A repurchase agreement is a form of short-term financing
pursuant to which the Company pledges mortgage loans in consideration for the
advance of funds at short-term interest rates generally tied to LIBOR. The
Company earns the difference between the mortgage interest rate and the interest
rate it owes on the short-term borrowings for the term of the repurchase
transaction, typically 30 to 60 days.
As noted above, the Company obtains a commitment by a mortgage pool insurer to
issue a mortgage pool insurance policy that will cover losses due to mortgagor
default in amounts generally ranging from 7% to 15% of the aggregate principal
amount of the mortgage loans comprising such pool. The mortgage pool insurance
is generally not in force during the warehousing of the mortgage loan, but
instead is activated at the time the mortgage loans are pledged as collateral
for a CMO, MPC or Mortgage Pass-Through unless an investor in the former
securitizations is willing to assume the credit risk for the entire issuance (a
"senior/subordinate" structure). The Company expects to use such
senior/subordinate structures extensively in 1994. During the warehousing
period, typically a period of 30 to 90 days, the Company retains the full risk
that the mortgage loan may default. Certain other risks are also not covered
during the warehousing period. These include bankruptcy and special hazards
which are not covered by standard hazard insurance policies (e.g. earthquakes),
as well as fraud or misrepresentation in the origination of the mortgage loan.
Defaults on mortgage loans during the warehousing period, if linked to fraud or
misrepresentation, may be mitigated by the Correspondent's
2
obligation to repurchase such mortgage loan. However, to the extent the
Correspondent does not perform the repurchase obligation, the Company may incur
a loss.
For a discussion of effects of interest rate changes on the Company's mortgage
loan portfolio, see the Registrant's Annual Report to Stockholders for the year
ended December 31, 1993 on page 49 and page 50 under the caption "Management's
Discussion and Analysis - Effects of Interest Rate Changes."
MORTGAGE PASS-THROUGH PORTFOLIO
The Company's long-term investment strategy includes the securitization of ARM
loans and 5/25 Mortgage Loans into Mortgage Pass-Throughs. This investment
strategy primarily makes use of ARM loans which, because of their adjustable
interest rates, are more likely to retain value in a rising interest rate
environment.
At the time mortgage loans are pledged as collateral for Mortgage Pass-Throughs,
the mortgage pool insurance policy is activated. The level of coverage under
any such mortgage pool insurance policy is determined by one or more Rating
Agencies, and is at a level necessary to allow the insured pool of mortgage
loans, or the securities such pools are pledged to secure, to be AAA-rated. At
such time, the Company also insures or reserves against bankruptcy and special
hazard risks, and reduces its exposure to losses from fraud or misrepresentation
in the origination of the mortgage loan.
The Company utilizes repurchase agreements to finance the Mortgage Pass-Through
portfolio. The formation of Mortgage Pass-Throughs greatly enhances the quality
of the underlying mortgage loans, thus enabling the Company to reduce its
borrowing costs below the level paid on non-rated loans, thereby enhancing the
interest spread.
For discussion of effects of interest rate changes on the Company's Mortgage
Pass-Through portfolio, see the Registrant's Annual Report to Stockholders for
the year ended December 31, 1993 on page 49 and 50 under the caption
"Management's Discussion and Analysis - Effects of Interest Rate Changes."
AGENCY SECURITIES PORTFOLIO
The Company also invests in fixed-rate agency securities (the "agency securities
portfolio") which consists of mortgage-backed securities guaranteed by
government sponsored entities such as FNMA, Government National Mortgage
Association or FHLMC. Because agency securities are the most widely traded
mortgage-backed securities, unique financing opportunities exist in the
marketplace that enable investors to achieve very attractive interest rate
spreads on the financing of such assets.
For discussion of effects of interest rate changes on the Company's agency
securities portfolio, see the Registrant's Annual Report to Stockholders for the
year ended December 31, 1993 on page 49 and 50 under the caption "Management's
Discussion and Analysis - Effects of Interest Rate Changes."
CMO INVESTMENT PORTFOLIO AND RELATED SECURITIZATION ACTIVITY
The Company's long-term investment strategy also includes the securitization of
fixed-rate and 5/25 Mortgage Loans, whereby such loans are pledged as collateral
for the issuance of CMOs or MPCs. Most of the Company's CMOs are structured as
financings in which the Company recognizes economic gains or losses over the
term of the collateral. MPCs and some CMOs are structured as
3
sales. Such sales preserve capital by limiting the amount invested in a
securitization, but at the same time may make quarterly income more volatile
than in the past because of the recognition of transactional gains or losses.
Beginning the fall of 1992, the Company has generally elected Real Estate
Mortgage Investment Conduit ("REMIC") status for tax purposes.
Each series of CMOs consists of multiple classes of bonds, each having its own
maturity. MPCs are structured in a similar fashion except that technically,
investors do not purchase bonds subject to an indenture; rather, they purchase
certificates evidencing undivided interests in a trust that owns the underlying
mortgage loans. The segmentation of CMOs into classes of bonds with varying
maturities along with mortgage pool insurance and other credit enhancements
provided to make all or most of the CMO bonds AAA-rated enables the Company to
issue the CMO classes with shorter scheduled maturities and lower interest rates
than the underlying mortgage loans. Each of these factors contributes to a
positive difference ("Interest Spread") between the payments received on the
mortgage loans pledged to secure such CMOs and the payments made on the CMOs
issued. Because the shorter-term classes of CMO bonds typically bear lower
rates of interest than longer-term classes, the Interest Spread on a CMO is
typically greatest in the early years of the CMO. As the mortgage loans are
repaid and the shorter-term classes of CMO bonds are retired, the average
interest cost of the CMOs outstanding increases. Thus, the Interest Spread will
decline over time.
The right to receive the Interest Spread, along with the non-cash amortization
of collateral and bond premiums and discounts is referred to as the "CMO
Residual". CMO structures have evolved in recent years such that the Interest
Spread portion of CMO Residuals have been virtually eliminated by the formation
of additional CMO securities including various forms of interest-only and/or
principal-only securities. Interest-only securities represent ownership in an
undivided interest in interest payments on the underlying securities.
Principal-only securities represent ownership in an undivided interest in
principal payments on the underlying securities. Since the fall of 1992 the
Company typically has sold the CMO Residuals and retained for its CMO Investment
portfolio certain of the interest-only and/or principal-only securities formed
in connection with CMO and MPC issuances.
Interest-only and principal-only securities that are held by the Company in the
CMO Investment portfolio are carried at the present value of the future cash
flows expected to be received during the remaining terms of the investments,
discounted at a constant effective yield. Income recognized is the excess of
cash received over the reduction of the carrying value. In a falling interest
rate environment, prepayments on the underlying mortgage collateral generally
will be high and the Company could incur losses on investments in interest-only
securities. This happened during 1993. Conversely, in periods of rising
interest rates, interest-only securities will tend to perform very favorably
because the underlying mortgage collateral will generally prepay at slower
rates. This has been the Company's experience thus far in 1994. Principal-only
securities react differently to changes in interest rates. Lower interest rates
result in the recovery of this investment more rapidly thus increasing yields.
During periods of rising rates, it takes longer for the Company to recover its
investments thus lowering yields. Principal-only securities retained by the
Company generally represent a much smaller investment than interest-only
investments.
The Company may, from time-to-time, issue CMOs collateralized by ARM loans.
CMOs collateralized by ARM loans typically consist of one or more classes of
bonds having a maturity equal to the life of the underlying collateral. As the
interest rate received on the underlying collateral adjusts to changes in short-
term interest rates, the interest rate paid on the CMO adjusts by the
4
corresponding amount, thus the positive Interest Spread will remain relatively
constant over time.
At the time the loans are pledged for issuance of a CMO or MPC, the mortgage
pool insurance policy generally is activated. At such time, the Company also
insures or reserves against bankruptcy and special hazard risks, and reduces its
exposure to losses from fraud or misrepresentation in the origination of the
mortgage loan. Recently, the Company has issued CMOs with the
senior/subordinate structure where investors assume the credit risk by
purchasing subordinate classes of the securitization. The Company also has the
option to retain certain of the subordinate classes for its CMO Investment
portfolio. The yield on subordinate securities reflects risk assumed and,
therefore, the Company will not need to increase its provision for losses.
The issuance of CMOs typically eliminates the Company's short-term financing
risk associated with the mortgage loans that are pledged as collateral for such
CMOs (except in the case of any class of CMOs having a variable interest rate
collateralized by fixed-rate mortgage loans), as well as the risk that the
market value of such mortgage loans will decline. This is because each series
of CMOs is structured to be fully repaid out of the principal and interest
payments on the underlying mortgage loans, including reinvestment proceeds,
regardless of fluctuations in the market value of such mortgage loans.
For a discussion of effects of interest rate changes on the Company's CMO
investment portfolio, see the Registrant's Annual Report to Stockholders for the
year ended December 31, 1993 on page 49 and page 50 under the caption
"Management's Discussion and Analysis - Effects of Interest Rate Changes."
SERVICING OPERATIONS
- --------------------
The Company formed its mortgage servicing unit early in 1993, and as of December
31, 1993, serviced and master serviced mortgage loan portfolios of $2.4 billion
and $4.4 billion, respectively. This growth was accomplished primarily by
retaining servicing rights on mortgage loans purchased during the year and
master servicing rights on mortgage loans placed into securitizations during the
year. FNMA and FHLMC servicing approvals have been obtained so that the Company
can service conforming loans guaranteed by these government sponsored entities
and the Company has committed to bulk acquisitions of servicing rights for both
conforming and non-conforming mortgage loan portfolios totaling $1.6 billion to
be completed in early 1994.
Mortgage loan servicing includes collecting and accounting for payments of
principal and interest from borrowers, remitting such payments to investors,
holding escrow funds for payment of mortgage-related expenses such as taxes and
insurance, making advances to cover delinquent payments, inspecting the mortgage
premises as required, contacting delinquent mortgagors, supervising foreclosures
and property dispositions in the event of unremedied defaults, and generally
administering the loans. The Company receives fees for servicing residential
mortgage loans ranging generally from .25% to .38% per annum on the declining
principal balances of the loans. Servicing fees are collected by the Company
out of monthly mortgage payments.
For a discussion of effects of interest rate changes on the Company's servicing
operations investment portfolio, see the Registrant's Annual Report to
Stockholders for the year ended December 31, 1993 on page 49 and page 50 under
the caption "Management's Discussion and Analysis - Effects of Interest Rate
Changes."
5
OTHER INVESTMENT STRATEGIES
The Company may enter into other short- or long-term investment strategies as
the opportunities arise.
COMPETITION
In purchasing and pooling mortgage loans and in purchasing other mortgage-
related assets, the Company competes with savings banks, commercial banks,
mortgage and investment bankers, conduits, insurance companies, other lenders,
FNMA and FHLMC, many of whom may have greater financial resources than the
Company. The competition for loan servicing is equally diverse. Mortgage
banking companies, savings banks and commercial banks all engage in servicing
mortgage loans, some for others and some for their own portfolio. Additionally,
in issuing CMOs or other mortgage-backed securities, the Company will face
competition from other issuers of these securities and the securities themselves
will compete with other investment opportunities available to prospective
purchasers. An increase in the purchasing of long-term mortgage loans by others
may reduce the Company's ability to compete in the purchase of such loans and
may reduce the yields available to the Company. In addition, if FHLMC and FNMA
were to increase the dollar amount limitation on loans they are permitted to
purchase (currently $203,150), they would be able to purchase a greater
percentage of mortgage loans in the secondary market than they currently are
permitted to acquire, and the Company's ability to maintain or increase its
current acquisition levels could be adversely affected.
REGULATION AND RELATED MATTERS
The Company's mortgage servicing unit is subject to the rules and regulations of
FNMA and FHLMC with respect to securitizing and servicing mortgage loans. In
addition, there are other Federal and state statutes and regulations affecting
such activities. Moreover, the Company is required annually to submit audited
financial statements to FNMA and FHLMC and each regulatory entity has its own
financial requirements. The Company's affairs are also subject to examination
by FNMA and FHLMC at all times to assure compliance with applicable regulations,
policies and procedures. Many of the aforementioned regulatory requirements are
designed to protect the interests of consumers, while others protect the owners
or insurers of mortgage loans. Failure to comply with these requirements can
lead to loss of approved status, termination of servicing contracts without
compensation to the servicer, demands for indemnification or loan repurchases,
class action lawsuits and administrative enforcement actions.
EMPLOYEES
Until becoming fully self-administered on October 1, 1993, the Company was
managed by Capstead Advisers, Inc. (the "Manager"), a wholly-owned subsidiary of
Lomas Mortgage USA, Inc. ("LMUSA"), who provided all executive and
administrative personnel required by the Company under the terms of a management
agreement. The Company only had one employee, its Chairman and Chief Executive
Officer. See the Registrant's Annual Report to Stockholders for the year ended
December 31, 1993 on page 38 under the caption "Notes to Consolidated Financial
Statements - Note K - Management and Non-Competition Agreements." As of
December 31, 1993, the Company had 83 full-time employees.
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FEDERAL INCOME TAX
As used herein, "Capstead REIT" refers to CMC and the entities that are
consolidated with CMC for federal income tax purposes. Capstead REIT has
elected to be taxed as a REIT for federal income tax purposes and intends to
continue to do so. As a result of this election, Capstead REIT will not be
taxed at the corporate level on taxable income distributed to stockholders,
provided that certain REIT qualification tests are met.
If Capstead REIT fails to qualify as a REIT in any taxable year, it would be
subject to federal income tax at regular corporate rates and would not receive a
deduction for dividends paid to stockholders. If this were the case, the amount
of after-tax earnings available for distribution to stockholders would decrease
substantially.
CMC owns all of the issued and outstanding preferred stock of certain other
subsidiaries. These subsidiaries are not included in Capstead REIT for federal
income tax purposes, but are included with CMC for financial reporting purposes.
All taxable income of these subsidiaries is subject to federal and state income
taxes, where applicable. Capstead REIT's taxable income will include earnings
of these subsidiaries only upon payment to Capstead REIT by dividend of such
earnings.
To qualify as a REIT, Capstead REIT must meet certain income, asset,
distribution, and ownership tests. The following is a summary of the
qualifications.
GROSS INCOME TESTS. There are three percentage tests relating to the sources of
a company's gross income which must be satisfied for each taxable year. First,
at least 75% of the company's gross income must be real property related income,
which includes interest on loans secured by mortgages on real property and
commitment fees earned in connection with such mortgage loans. Second, at least
95% of the company's gross income must be derived from items of income that
qualify under the 75% test or from dividends, interest or gain from the sale or
disposition of stock or other securities. Third, gains from the sale of stock
(or other securities) held for less than one year, gains from sales of property
(other than foreclosure property) held primarily for sale and gains on the sale
of real property, including interests in mortgages on real property held for
less than four years must represent less than 30% of the company's gross income.
If a company fails to satisfy one or both of the 75% or 95% gross income tests
for any taxable year, it may nevertheless qualify as a REIT for such year if it
is entitled to relief under certain provisions of the Code. These relief
provisions are available if the company can establish that its failure to meet
such tests is due to reasonable cause and not due to willful neglect. It is not
possible to state whether in all circumstances Capstead REIT would be entitled
to the benefit of these relief provisions. If these relief provisions apply, a
100% tax is imposed upon the greater of the amounts by which the company failed
the 75% test or the 95% test. If the relief provisions are inapplicable to a
particular set of circumstances involving Capstead REIT, such company will not
qualify as a REIT. There are no comparable relief provisions which could
mitigate the consequences of a failure to satisfy the 30% income test.
ASSET TESTS. At the close of each quarter of its taxable year, Capstead REIT
must satisfy certain tests regarding its assets. First, at least 75% of the
value of the respective company's total assets must be represented by interests
in real property, interests in mortgages on real property, shares in
7
other real estate investment trusts, cash, cash items and government securities.
Second, of the investments in securities not included in the foregoing, the
value of any one issuer's securities owned by the company may not exceed 5% of
the value of the company's total assets and the company may not own more than
10% of any one issuer's outstanding voting securities. Certain relief provisions
apply with respect to these asset tests. If the asset tests are not met and the
relief provisions cannot be satisfied by, or are inapplicable to, Capstead REIT,
Capstead REIT will not qualify as a REIT.
REITs are permitted to hold assets in subsidiaries which are and have been 100%
owned by the REIT at all times during the period such subsidiaries existed
("qualified REIT subsidiaries"). For federal income tax purposes, all of the
assets, liabilities and items of income, deduction and credit of a qualified
REIT subsidiary are attributed to its parent.
DISTRIBUTION REQUIREMENTS. In order to qualify for certain benefits of REIT
status in any taxable year, including the deduction for dividends paid to
shareholders, a REIT is required to distribute to its stockholders dividends in
an amount at least equal to the sum of (i) 95% of its annual REIT taxable income
exclusive of net capital gain and prior to any deduction for dividends paid plus
(ii) 95% of its net after-tax income, if any, from foreclosure property minus
(iii) the amount, if any, of certain noncash income in excess of 5% of its REIT
taxable income exclusive of any net capital gain and prior to any deduction for
dividends paid. Any income not distributed is subject to tax at regular
corporate rates. Distributions declared before the time of filing of the
company's tax return for the taxable year and paid not later than the first
regular dividend payment following declaration will be deemed paid in such
taxable year for purposes of the distribution test. A nondeductible excise tax
equal to 4% will be imposed on the company for each calendar year to the extent
that dividends declared and distributed or deemed distributed before December 31
are less than the sum of (i) 85% of the company's "ordinary income" plus (ii)
95% of the company's capital gain net income plus (iii) income not distributed
in earlier years minus (iv) distributions in excess of income in earlier years
and (v) any amount of REIT taxable income for such year.
Failure to distribute 95% of REIT taxable income would disqualify a company from
certain benefits of REIT status. Under certain circumstances a company may
correct a failure to meet the distribution requirements by paying "deficiency
dividends" to stockholders in a later year. It is the present intent of
Capstead REIT to pay "deficiency dividends" if necessary to retain the benefits
of their status as REITs.
If a REIT recognizes net income from the sale or disposition of property (other
than foreclosure property) held primarily for sale rather than investment, such
income will be subject to a 100% penalty tax. This rule will not apply to real
estate assets of a REIT that have been held for four years or more if (i) the
REIT makes seven or fewer sales of such property during the taxable year or (ii)
the aggregate adjusted bases of all the property sold during the taxable year
does not exceed 10% of the adjusted bases of all the REIT's assets at the
beginning of the REIT's taxable year. Certain other requirements may also need
to be satisfied.
STOCK OWNERSHIP TESTS. In order for a company to qualify as a REIT the
Company's shares must be held by at least 100 stockholders during approximately
9/10 of the taxable year and during the last half of each taxable year not more
than 50% (in value) of the company's outstanding stock may be owned directly or
indirectly by five or fewer individuals. The company must demand written
statements each year from the record holders of designated
8
percentages of its shares disclosing the actual owners of such shares. A list of
those persons failing or refusing to comply with such demand must be maintained
as a part of the company's records. Federal income tax regulations further
require that a stockholder failing or refusing to comply with the company's
written demand must submit with his or her tax returns a similar statement
disclosing the actual ownership of the company shares and certain other
information.
SPECIAL CONSIDERATIONS - TAX-EXEMPT AND CERTAIN OTHER INVESTORS
For CMOs issued after December 31, 1991, pursuant to regulations not yet
published, the portion of any dividend paid to stockholders attributable to
"excess inclusion income" on the retained residual interests in such CMOs would
be subject to certain rules. Such rules include (i) the characterization of
excess inclusion income as unrelated business income for tax-exempt stockholders
(including employee benefit plans and individual retirement accounts) and (ii)
the inability of a stockholder to offset excess inclusion income with net
operating losses (subject to certain exceptions applicable to thrift
institutions). Generally, tax-exempt entities are subject to federal income tax
on excess inclusion income and other unrelated business income in excess of
$1,000 per year. Excess inclusion income is generally taxable income with
respect to a residual interest in excess of a specified return on investment in
the residual interest. In some cases, all taxable income with respect to a
residual interest may be considered excess inclusion income. Until regulations
or other guidance is issued, Capstead REIT will use methods it believes are
appropriate for calculating the amount of excess inclusion income, if any it
recognizes from CMOs issued after December 31, 1991, and allocating any excess
inclusion income to its stockholders. Excess inclusion rules will most likely
not apply to any CMO issued by any subsidiary of CMC on or before December 31,
1991. The Company's exposure for CMOs issued subsequent to that has been
limited by the prepayment performance of these investments and the fact that
beginning in the fall of 1992 the Company generally has sold the related CMO
Residuals.
A REIT is subject to tax on the portion of any "excess inclusion income"
allocable to any shareholder which is a "disqualified organization" as defined
in the REMIC provisions of the Code. If the ownership of CMC shares by any such
organization would subject Capstead REIT to any tax on such income, such shares
shall be immediately redeemable at the option of CMC. See "Description of CMC
Capital Stock."
The foregoing is general in character. Reference should be made to the
pertinent Code Sections and the Regulations issued thereunder for a
comprehensive statement of applicable federal income tax consequences.
ITEM 2. PROPERTIES.
The Company's operations are conducted primarily in Dallas, Texas on properties
leased by the Company.
ITEM 3. LEGAL PROCEEDINGS.
At December 31, 1993 there were no material pending legal proceedings, outside
the normal course of business, to which the Company or its subsidiaries were a
party or of which any of their property was the subject.
ITEM 4. RESULTS OF SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information required by this item is included in the Registrant's Annual
Report to Stockholders for the year ended December 31, 1993 on page 41 under the
caption "Note Q - Market and Dividend Information," and is incorporated herein
by reference, pursuant to General Instruction G(2).
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item is included in the Registrant's Annual
Report to Stockholders for the year ended December 31, 1993 on page 42 under the
caption "Selected Financial Data," and is incorporated herein by reference,
pursuant to General Instruction G(2).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by this item is included in the Registrant's Annual
Report to Stockholders for the year ended December 31, 1993 on pages 43 through
50 under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and is incorporated herein by reference,
pursuant to General Instruction G(2).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is included in the Registrant's Annual
Report to Stockholders for the year ended December 31, 1993 on pages 23 through
41, and is incorporated herein by reference, pursuant to General Instruction
G(2).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item is included in the Registrant's definitive
Proxy Statement dated March 14, 1994 on pages 3 through 6 under the captions
"Election of Directors" and "Executive Officers," and is incorporated herein by
reference, pursuant to General Instruction G(3).
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is included in the Registrant's definitive
Proxy Statement dated March 14, 1994 on pages 6 through 13 under the captions
"Executive Compensation," and "Report of the Compensation Committee on Executive
Compensation" and is incorporated herein by reference, pursuant to General
Instruction G(3).
10
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is included in the Registrant's definitive
Proxy Statement dated March 14, 1994 on page 15 under the caption "Security
Ownership of Certain Beneficial Owners and Management," and is incorporated
herein by reference, pursuant to General Instruction G(3).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is included in the Registrant's Annual
Report to Stockholders for the year ended December 31, 1993 on pages 38 and 39
under the caption "Notes to Consolidated Financial Statements - Note K -
Management and Non-Competition Agreements" and " - Note L - Transactions with
Affiliates of the Former Manager" and is incorporated herein by reference,
pursuant to General Instruction G(2).
11
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report:
1. The following financial statements of the Company, included in the
1993 Annual Report to Stockholders, are incorporated herein by
reference:
PAGE
----
Consolidated Statement of Income - Years
Ended December 31, 1993, 1992 and 1991........... *
Consolidated Balance Sheet -
December 31, 1993 and 1992....................... *
Consolidated Statement of Stockholders' Equity -
Three Years Ended December 31, 1993.............. *
Consolidated Statement of Cash Flows - Years
Ended December 31, 1993, 1992 and 1991........... *
Notes to Consolidated Financial Statements -
December 31, 1993................................ *
2. Financial statement schedules:
Schedule VIII-Valuation and Qualifying Accounts... 16
Schedule IX-Short-Term Borrowings................. 17
Schedule XII-Mortgage Loans on Real Estate........ 18
NOTE: All other schedules for which provision is made
in the applicable accounting regulation of the Securities
and Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been
omitted.
- ----------------
* Incorporated herein by reference from the Company's Annual Report
to Stockholders for the year ended December 31, 1993.
3. Exhibits:
Exhibit
Number
-------
3.1(a) Charter of the Company, which includes Articles of
Incorporation, Articles Supplementary for each outstanding
Series of Preferred Stock and all other amendments to such
Articles of Incorporation.(9)
3.1(b) Articles Supplementary ($1.26 Cumulative Convertible Preferred
Stock, Series B).(7)
3.2 Bylaws of the Company, as amended.(9)
10.16 Management Agreement between Capstead Mortgage Corporation and
Capstead Advisers, Inc. dated July 31, 1992.(8)
10.17 Amendment to Management Agreement dated March 31, 1993, between
the Registrant and Capstead Advisers, Inc.(9)
10.18 Second Amendment to Management Agreement dated September 3,
1993, between the Registrant and Capstead Advisers, Inc.*
10.19 Stock Option Agreement, dated June 16, 1992, between the Company
and Lomas Financial Corporation.(9)
10.20 Form of Loan Sale Agreement.(6)
10.21 1990 Employee Stock Option Plan(4)
10.22 1990 Directors' Stock Option Plan(5)
10.23 Employment Agreement dated August 1, 1992 between Capstead
Mortgage Corporation and Ronn K. Lytle.(7)
12
10.24 Restricted Stock Grant Agreement dated August 1, 1992 between
Capstead Mortgage Corporation and Ronn K. Lytle.(7)
11 Computation of earnings per share.*
12.1 Statement regarding computation of ratios of earnings to fixed
charges and preferred stock dividends.*
13 Portions of the Annual Report to Stockholders of the Company for
the year ended December 31, 1993.*
22.1 List of subsidiaries of the Company.*
24 Consent of Ernst & Young, Independent Auditors.*
- ------------------
(1) Incorporated by reference to the Company's Registration Statement on
Form S-11 (No. 2-97182) dated September 5, 1985.
(2) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1989.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1991.
(4) Incorporated by reference to the Company's Registration Statement on
Form S-8 (No. 33-40016) dated April 29, 1991.
(5) Incorporated by reference to the Company's Registration Statement on
Form S-8 (No. 33-40017) dated April 29, 1991.
(6) Incorporated by reference to Amendment No. 1 on Form 8 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991.
(7) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1992.
(8) Incorporated by reference to Amendment No. 1 of the Company's Registration
Statement on Form S-4 (No. 33-31260) dated October 27, 1992.
(9) Incorporated by reference to the Company's Registration Statement on
Form S-3 (No. 33-62212) dated May 6, 1993.
* Filed herewith.
(b) Reports on Form 8-K: None.
(c) Exhibits - The response to this section of ITEM 14 is submitted as a
separate section of this report.
(d) Financial Statement Schedules - The response to this section of ITEM 14
is submitted as a separate section of this report.
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
CAPSTEAD MORTGAGE CORPORATION
REGISTRANT
Date: March 29, 1994 By /s/ ANDREW F. JACOBS
-----------------------------------
Andrew F. Jacobs
Senior Vice President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated below and on the dates indicated.
/s/ RONN K. LYTLE Principal Executive March 29, 1994
- ------------------------------- Officer and Director
(Ronn K. Lytle)
/s/ ANDREW F. JACOBS Principal Financial March 29, 1994
- ------------------------------- and Accounting Officer
(Andrew F. Jacobs)
/s/ J. MICHAEL CORNWALL Director March 29, 1994
- -------------------------------
(J. Michael Cornwall)
/s/ DAVID G. FOX Director March 29, 1994
- -------------------------------
(David G. Fox)
/s/ BEVIS LONGSTRETH Director March 29, 1994
- ------------------------------
(Bevis Longstreth)
/s/ PAUL M. LOW Director March 29, 1994
- -------------------------------
(Paul M. Low)
/s/ HARRIET E. MIERS Director March 29, 1994
- -------------------------------
(Harriet E. Miers)
/s/ CHARLES B. MULLINS, M.D. Director March 29, 1994
- -------------------------------
(Charles B. Mullins, M.D.)
/s/ WILLIAM R. SMITH Director March 29, 1994
- -------------------------------
(William R. Smith)
/s/ LEWIS T. SWEET, JR. Director March 29, 1994
- -------------------------------
(Lewis T. Sweet, Jr.)
/s/ MARTIN TYCHER Director March 29, 1994
- -------------------------------
(Martin Tycher)
14
PORTIONS OF THE
ANNUAL REPORT ON FORM 10-K
ITEMS 14(A)(1), (2) AND (3)
FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
YEAR ENDED DECEMBER 31, 1993
CAPSTEAD MORTGAGE CORPORATION
DALLAS, TEXAS
15
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
CAPSTEAD MORTGAGE CORPORATION AND SUBSIDIARIES
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------- ---------- ------------------------- ----------- --------------
ADDITIONS
-------------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER
BEGINNING COSTS ACCOUNTS- DEDUCTIONS- BALANCE AT END
DESCRIPTION OF PERIOD AND EXPENSES DESCRIBE DESCRIBE * OF PERIOD
- ----------------------------------- ---------- ------------ ----------- ----------- --------------
Reserves and Allowances Deducted
From Mortgage Investments:
Year ended December 31, 1993
Allowance for losses............ $8,228,000 $2,800,000 - $4,101,000 $6,927,000
Year ended December 31, 1992
Allowance for losses............ $3,505,000 $7,750,000 - $3,027,000 $8,228,000
Year ended December 31, 1991
Allowance for losses............ $2,943,000 $1,707,000 - $1,145,000 $3,505,000
* Loss on sale of foreclosed properties and charge-offs of other mortgage
securities.
16
SCHEDULE IX - SHORT-TERM BORROWINGS
CAPSTEAD MORTGAGE CORPORATION AND SUBSIDIARIES
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ------------------------------------- -------------- ------------ -------------- -------------- ----------
WEIGHTED
MAXIMUM AVERAGE AVERAGE
WEIGHTED AMOUNT AMOUNT INTEREST
BALANCE AVERAGE OUTSTANDING OUTSTANDING RATE
CATEGORY OF AGGREGATE AT END INTEREST DURING THE DURING THE DURING THE
SHORT-TERM BORROWINGS OF PERIOD RATE PERIOD PERIOD(4) PERIOD(5)
- ------------------------------------- -------------- ----------- -------------- -------------- ----------
Year ended December 31, 1993:
Repurchase agreements(2).......... $2,044,776,000 3.89% $2,300,478,000 $2,033,598,000 3.61%
Dollar repurchase agreements(3)... $ 399,031,000 3.38% $ 604,094,000 $ 305,198,000 2.07%
Year ended December 31, 1992:
Notes payable(1).................. - - $ 25,000,000 $ 10,364,000 5.61%
Repurchase agreements(2).......... $1,449,209,000 4.09% $1,451,944,000 $1,367,986,000 4.33%
Year ended December 31, 1991
Notes payable(1).................. $ 25,000,000 6.75% $ 86,600,000 $ 19,708,000 7.01%
Repurchase agreements(2).......... $ 830,572,000 5.82% $1,071,816,000 $ 431,692,000 6.29%
Dollar repurchase agreements(3)... - - $ 48,666,000 $ 27,976,000 9.50%
(1) Notes payable consisted of borrowings under the Company's revolving lines of
credit with commercial banks.
(2) Repurchase agreements consisted of borrowings from investment banks with
terms typically not longer than 160 days with no provisions for extension of
maturity.
(3) Dollar repurchase agreements consisted of borrowings from investment banks
with mortgage-backed securities as collateral and terms typically not longer
than 60 days.
(4) The average amount outstanding during the period was computed by dividing
the total of the monthly weighted average outstanding principal balances by
12 months.
(5) The weighted average interest rate during the period was computed by
dividing the total of the monthly weighted average interest rates by 12
months.
17
SCHEDULE XII - MORTGAGE LOANS ON REAL ESTATE
CAPSTEAD MORTGAGE CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1993
COLUMN
COLUMN A COLUMN B COLUMN C COLUMN D E COLUMN F COLUMN G COLUMN H
- ----------------------------- ----------- -------- -------- ------- -------------- ----------------- ---------------
PRINCIPAL
AMOUNT
OF LOANS
CARRYING SUBJECT TO
FINAL PERIODIC FACE AMOUNT AMOUNT DELINQUENT
INTEREST MATURITY PAYMENT PRIOR OF OF PRINCIPAL
DESCRIPTION(1) RATE DATE TERMS LIENS MORTGAGES MORTGAGES OR INTEREST(4)
- ----------------------------- ----------- -------- -------- ------- -------------- ----------------- ---------------
$ -0- - $ 49,999( 77) 5.125% - Varies Monthly None $ 113,000 $ 113,000 $ -
13.500%
$ 50,000 - $ 99,999( 17) 3.875% - Varies Monthly None 1,463,000 1,463,000 84,000
12.250%
$100,000 - $ 149,999( 49) 4.250% - Varies Monthly None 6,355,000 6,355,000 248,000
10.750%
$150,000 - $ 199,999( 120) 4.125% - Varies Monthly None 21,147,000 21,147,000 178,000
11.250%
$200,000 - $ 249,999(2,695) 3.875% - Varies Monthly None 607,259,000 607,259,000 10,307,000
12.375%
$250,000 - $ 299,999(2,031) 3.625% - Varies Monthly None 555,505,000 555,505,000 8,948,000
11.375%
$300,000 - $ 349,999(1,103) 4.125% - Varies Monthly None 357,036,000 357,036,000 7,122,000
11.250%
$350,000 - $ 399,999( 720) 3.625% - Varies Monthly None 269,649,000 269,649,000 3,711,000
9.375%
$400,000 - $ 449,999( 392) 3.875% - Varies Monthly None 166,380,000 166,380,000 5,440,000
10.750%
$450,000 - $ 499,999( 279) 4.250% - Varies Monthly None 133,375,000 133,375,000 3,844,000
9.000%
$500,000 - $1,500,000( 576) 4.000% - Varies Monthly None 352,802,0000 352,802,000 7,600,000
10.000%
-------------- ---------------- -----------
$2,471,084,000 2,471,084,000 47,482,000
==============
Plus premium 1,562,000 -
---------------- -----------
$2,472,646,000(2) $47,482,000
================ ===========
See accompanying Notes to Schedule XII on the following page.
18
NOTES TO SCHEDULE XII
CAPSTEAD MORTGAGE CORPORATION AND SUBSIDIARIES
(1) The portfolio at December 31, 1993 consisted of single-family, conventional,
first mortgage loans. Principal amount of mortgage loans in the portfolio
totaling $900,936,000, or 36%, are adjustable-rate loans; and $318,319,000,
or 13%, are 30 year mortgage loans with one rate or payment change five
years from origination. The remaining $1,251,829,000, or 51%, are fixed-
rate level payment loans.
(2) The basis for valuing the mortgage loan portfolio for tax purposes is the
same as that used for financial reporting.
(3) Reconciliation of mortgage loans:
Balance at January 1, 1991.......... $ 209,528,000
Additions:
Purchases of mortgage loans....... 2,173,148,000
Amortization of discount.......... 700,000 2,173,848,000
------------- --------------
2,383,376,000
Deductions:
Principal collections............. 32,192,000
Sale of mortgage loans............ 6,515,000
Mortgage loans transferred to
mortgage securities collateral.... 1,484,947,000 1,523,654,000
------------- --------------
Balance at December 31, 1991........ 859,722,000
Additions:
Purchases of mortgage loans....... 5,488,051,000
Amortization of discount.......... 391,000 5,488,442,000
------------- --------------
6,348,164,000
Deductions:
Principal collections............. 90,011,000
Mortgage loans transferred to
mortgage securities collateral... 3,603,844,000
Sale of mortgage loans............ 965,217,000 4,659,072,000
------------- --------------
Balance at December 31, 1992........ 1,689,092,000
Additions:
Purchases of mortgage loans....... 4,410,950,000
Released CMO collateral........... 83,955,000
Amortization of discount.......... 73,000 4,494,978,000
------------- --------------
6,184,070,000
Deductions:
Principal collections............. 271,511,000
Mortgage loans transferred to
mortgage securities collateral... 995,513,000
Sale of mortgage loans............ 2,444,400,000 3,711,424,000
------------- --------------
Balance at December 31, 1993........ $2,472,646,000
==============
(4) Consists of all mortgage loans delinquent 60 days or more. Note that of
this total, $46,527,000 is covered by mortgage pool insurance which
effectively limits the Company's exposure to loss.
19
NOTES TO SCHEDULE XII - CONTINUED
CAPSTEAD MORTGAGE CORPORATION AND SUBSIDIARIES
(5) The geographic distribution of the Company's portfolio at December 31, 1993
was as follows:
NUMBER PRINCIPAL
STATE OF LOANS AMOUNT
----- --------- --------------
Alabama................ 24 $ 6,958,000
Arizona................ 36 12,586,000
Arkansas............... 8 2,973,000
California............. 3,775 1,157,448,000
Colorado............... 151 43,872,000
Connecticut............ 49 17,194,000
Delaware............... 13 3,274,000
District of Columbia... 104 32,439,000
Florida................ 275 84,437,000
Georgia................ 327 98,781,000
Hawaii................. 19 7,953,000
Illinois............... 71 22,098,000
Indiana................ 5 1,808,000
Iowa................... 2 505,000
Kansas................. 11 3,003,000
Kentucky............... 8 2,694,000
Louisiana.............. 74 21,412,000
Maryland............... 549 176,495,000
Massachusetts.......... 115 32,850,000
Michigan............... 130 40,181,000
Minnesota.............. 2 464,000
Mississippi............ 3 689,000
Missouri............... 84 28,017,000
Nebraska............... 10 3,493,000
Nevada................. 21 6,269,000
New Hampshire.......... 3 687,000
New Jersey............. 284 85,095,000
New Mexico............. 55 17,227,000
New York............... 100 32,314,000
North Carolina......... 26 7,508,000
Ohio................... 47 13,703,000
Oklahoma............... 65 18,509,000
Oregon................. 1 643,000
Pennsylvania........... 194 59,940,000
Rhode Island........... 6 1,327,000
South Carolina......... 16 4,435,000
Tennessee.............. 14 4,037,000
Texas.................. 485 149,494,000
Utah................... 19 6,153,000
Vermont................ 5 1,666,000
Virginia............... 683 204,439,000
Washington............. 184 53,807,000
Wisconsin.............. 6 2,207,000
--------- --------------
2,471,084,000
Plus premium........... 1,562,000
--------------
Total........ 8,059 $2,472,646,000
========= ==============
20
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER PAGE
- -------- ------------
3.1(a) Charter of the Company, which includes Articles of
Incorporation, Articles Supplementary for each outstanding
Series of Preferred Stock and all other amendments to such
Articles of Incorporation.(9)
3.1(b) Articles Supplementary ($1.26 Cumulative Convertible
Preferred Stock, Series B).(7)
3.2 Bylaws of the Company, as amended.(9)
10.16 Management Agreement between Capstead Mortgage Corporation
and Capstead Advisers, Inc. dated July 31, 1992.(8)
10.17 Amendment to Management Agreement dated March 31, 1993,
between the Registrant and Capstead Advisers, Inc.(9)
10.18 Second Amendment to Management Agreement dated September 3,
1993, between the Registrant and Capstead Advisers, Inc.*
10.19 Stock Option Agreement, dated June 16, 1992, between the
Company and Lomas Financial Corporation.(9)
10.20 Form of Loan Sale Agreement.(6)
10.21 1990 Employee Stock Option Plan(4)
10.22 1990 Directors' Stock Option Plan(5)
10.23 Employment Agreement dated August 1, 1992 between Capstead
Mortgage Corporation and Ronn K. Lytle.(7)
10.24 Restricted Stock Grant Agreement dated August 1, 1992
between Capstead Mortgage Corporation and Ronn K. Lytle.(7)
11 Computation of earnings per share.*
12.1 Statement regarding computation of ratios of earnings to
fixed charges and preferred stock dividends.*
13 Excerpts of the Annual Report to Stockholders of the
Company for the year ended December 31, 1993.*
22.1 List of subsidiaries of the Company.*
24 Consent of Ernst & Young, Independent Auditors.*
- ------------------
(1) Incorporated by reference to the Company's Registration Statement on Form
S-11 (No. 2-97182) dated September 5, 1985.
(2) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1989.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1991.
(4) Incorporated by reference to the Company's Registration Statement on Form
S-8 (No. 33-40016) dated April 29, 1991.
(5) Incorporated by reference to the Company's Registration Statement on Form
S-8 (No. 33-40017) dated April 29, 1991.
(6) Incorporated by reference to Amendment No. 1 on Form 8 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991.
(7) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1992.
(8) Incorporated by reference to Amendment No. 1 of the Company's Registration
Statement on Form S-4 (No. 33-31260) dated October 27, 1992.
(9) Incorporated by reference to the Company's Registration Statement on Form
S-3 (No. 33-62212) dated May 6, 1993.
* Filed herewith.
21