Capstead Mortgage Corporation Declares $8.35 Common Dividend.

Business Editors

DALLAS--(BUSINESS WIRE)--Dec. 12, 2002

Capstead Mortgage Corporation (NYSE:CMO) announced today that it will pay a dividend of $8.35 per common share payable on Jan. 21, 2003 to stockholders of record as of Dec. 31, 2002. The dividend combines the regular fourth quarter dividend of $1.16 per common share with a special dividend of $7.19 per common share representing approximately $100 million of the Company's common stockholders' equity. Because of the significance of this distribution, the shares will not trade ex-dividend until Jan. 22, 2003. Common stockholders who sell their shares after the record date, and through the payment date, will also be selling their right to receive the dividend.

Commenting on the Company's operations and the dividend, Wesley R. Edens, Chairman of the Board and Chief Executive Officer said, "With the steady decline in size of Capstead's portfolio of adjustable-rate mortgage ("ARM") securities as a result of mortgage prepayments, the Company's capital is currently not optimally utilized. Returning a portion of equity capital to our common stockholders should serve to enhance future returns on remaining common equity, particularly under current market conditions, while maintaining adequate liquidity to take advantage of investment opportunities as they arise.

"We continue to evaluate suitable real estate-related investments, which may include credit-sensitive assets intended to produce attractive returns due largely to a higher risk of default and reduced liquidity compared to residential ARM securities. New investments such as these may help to provide more stability to future operating income; however, they may not offset the effects of declining earnings from our existing portfolio. Further, additional investment opportunities may not be available on a timely basis. As a result, we anticipate that quarterly operating income and common dividends will continue trending lower and this trend would likely be accelerated by any increases in short-term interest rates."

With the payment of this dividend in January 2003, dividends per common share applicable to the 2002 tax year will total $12.75. Each common dividend distribution applicable to the 2002 tax year will consist of approximately 40% ordinary taxable income and 60% return of capital to common stockholders. Final dividend characterization will not be known until subsequent to year-end and will be made available by the end of January 2003. All stockholders should consult their tax advisors to determine the proper characterization of their dividends.

The Company also announced it has established a tentative common dividend payment schedule for 2003 calling for quarterly distributions on or around the 21st of April, July, and October of 2003 and January of 2004. Actual dividend declarations will be subject to approval by the Board of Directors and based on the financial performance and capital requirements of the Company.

Capstead Mortgage Corporation, a real estate investment trust, earns income from investing in real estate-related assets and other investment strategies.

This document contains "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995) that inherently involve risks and uncertainties. The Company's actual results and liquidity can differ materially from those anticipated in these forward-looking statements because of changes in the level and composition of the Company's investments and unforeseen factors. As discussed in the Company's filings with the Securities and Exchange Commission, these factors may include, but are not limited to, changes in general economic conditions, the availability of suitable investments, fluctuations in, and market expectations for fluctuations in, interest rates and levels of mortgage prepayments, deterioration in credit quality and ratings, the effectiveness of risk management strategies, the impact of leverage, liquidity of secondary markets and credit markets, increases in costs and other general competitive factors. Relative to direct investments in real estate, these factors may include, but are not limited to, lessee performance under lease agreements, changes in general as well as local economic conditions and real estate markets, increases in competition and inflationary pressures, changes in the tax and regulatory environment including zoning and environmental laws, uninsured losses or losses in excess of insurance limits and the availability of adequate insurance coverage at reasonable costs.