Capstead Mortgage Profit Falls; But Stock Up 4%

(RTTNews) - Capstead Mortgage Corp. (CMO) Wednesday reported second-quarter net income of $30 million, compared with $43 million last year.

Results for the recent quarter included dividend payments on preferred shares of about $6 million and redemption preference premiums payment of about $20 million.

Excluding the aforesaid dividend and premium payments, net income for the quarter was $4 million or $0.04 per share, compared with $38 million or $0.40 per share a year ago.

Excluding one-time effects of the preferred capital transactions, core earnings for the quarter were $0.27 per share.

Analysts polled by Thomson Reuters estimated earnings of $0.32 per share for the quarter. Analysts' estimates usually exclude one-time items.

Interest income for the quarter fell to $51.7 million from $66 million in the prior year, and missed analysts' expectations of $55.90 million.

Capstead is a real estate investment trust for federal income tax purposes. The company earns income from investing in a leveraged portfolio of residential adjustable-rate mortgage pass-through securities.

The company said that the second quarter saw abrupt shift in the market to higher long-term interest rates in due to concerns regarding the timing of the Federal Reserve reducing and ultimately ending its bond buying program.

"While we are not immune to this volatility, pricing for our portfolio of short-duration and well-seasoned ARM securities has held up reasonably well," the company said.

Capstead also said that the preferred capital transactions it executed during quarter reduced the cost of preferred capital to the benefit of future earnings and the performance of its investment portfolio against a backdrop of higher long-term interest rates bodes well.

Shares of the company gained $0.44 or 3.85 percent in after-hours trade on the Nasdaq at $11.86.