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Capstead Mortgage Corporation's earnings increased.

DALLAS: Capstead Mortgage Corporation's earnings increased $5.8 million to $22.6 million or $0.19 per diluted common share.

Net interest margins increased by $3.8 million as benefits of higher cash yields and a nearly 13% decline in mortgage prepayment activity outpaced higher borrowing rates. Agency-guaranteed residential adjustable-rate mortgage (ARM) portfolio and leverage ended the quarter at $13.45 billion and 9.22 times long-term investment capital, respectively.

Operating costs were lower in the fourth quarter than earlier in 2017 primarily due to adjustments to accruals for the Company's performance-based compensation programs. Expressed as a percentage of long-term investment capital, operating expenses averaged 0.62% annualized for the fourth quarter of 2017 and 0.71% for the full year. As a percentage of total assets, operating expenses averaged 0.06% and 0.07% during these periods. Capstead is a leader in terms of operating cost efficiency among mortgage REITs and has a competitive cost structure relative to a wide variety of high yielding investment vehicles.

Capstead's long-term investment capital, which consists of common and perpetual preferred stockholders' equity and long-term unsecured borrowings, decreased by $34.5 million during the fourth quarter of 2017 to $1.34 billion as a result of declines in portfolio valuations that outstripped increases in swap gains and, to a lesser extent, common stock repurchases. Portfolio valuations were negatively affected by rising shorter term interest rates without comparable increases in longer term rates. Portfolio leverage (secured borrowings divided by long-term investment capital) increased to 9.22 to one at December 31, 2017 from 9.09 to one at September 30, 2017.

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Publication:Daily the Pak Banker (Lahore, Pakistan)
Date:Feb 14, 2018
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