<PAGE>
==============================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1995
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: 1-8996
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
The Registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) for Form 10-Q and is therefore filing this Form under the reduced disclosure
format.
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
--- ------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
Common Stock ($0.01 par value) 15,380,363 as of August 8, 1995
<PAGE>
CAPSTEAD MORTGAGE CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1995
INDEX
PART I. -- FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
ITEM 1. Financial Statements
Consolidated Balance Sheet -- June 30, 1995 and December 31, 1994.. 3
Consolidated Statement of Income -- Quarter and Six Months Ended
June 30, 1995 and 1994........................................... 4
Consolidated Statement of Cash Flows -- Six Months Ended
June 30, 1995 and 1994........................................... 5
Notes to Consolidated Financial Statements........................ 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............. 11
PART II. -- OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K........................... 18
SIGNATURES......................................................... 19
</TABLE>
-2-
<PAGE>
PART I. -- FINANCIAL INFORMATION
CAPSTEAD MORTGAGE CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands)
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
-------------- ------------------
(Unaudited)
<S> <C> <C>
Assets
Mortgage securities collateral $5,091,361 $5,270,103
Mortgage investments 3,502,956 3,305,984
---------- ----------
8,594,317 8,576,087
Less allowance for possible losses (5,900) (7,354)
---------- ----------
8,588,417 8,568,733
Cash and cash equivalents 29,889 21,741
Prepaids, receivables and other 77,114 70,415
Mortgage servicing rights 339,504 282,969
---------- ----------
$9,034,924 $8,943,858
========== ==========
Liabilities
Collateralized mortgage securities $4,828,950 $5,102,145
Short-term borrowings 3,506,836 3,190,582
Accounts payable and accrued expenses 16,132 11,568
Mortgage servicing rights
acquisitions payable 40,177 75,888
---------- ----------
8,392,095 8,380,183
---------- ----------
Stockholders' Equity
Preferred stock - $0.10 par value;
100,000 shares authorized:
$1.60 Cumulative Preferred Stock,
Series A, 519 and 623 shares
issued and outstanding ($8,512
aggregate liquidation preference) 8,326 8,720
$1.26 Cumulative Convertible
Preferred Stock, Series B, 30,459
and 30,277 shares issued and
outstanding ($346,623 aggregate
liquidation preference) 327,276 324,779
Common stock - $0.01 par value; 100,000
shares authorized; 15,334 and 15,304
shares issued and outstanding 153 153
Paid-in capital 311,269 310,766
Undistributed income (deficit) (2,227) (2,228)
Unrealized loss on debt and equity
securities (1,968) (78,515)
---------- ----------
642,829 563,675
---------- ----------
$9,034,924 $8,943,858
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
CAPSTEAD MORTGAGE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
------------------------- -----------------------
1995 1994 1995 1994
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Interest income:
Mortgage securities collateral $ 97,054 $ 90,667 $195,406 $172,136
Mortgage investments 55,926 45,152 109,673 89,421
-------- -------- -------- --------
Total interest income 152,980 135,819 305,079 261,557
-------- -------- -------- --------
Interest and related expenses:
Collateralized mortgage securities 91,608 85,941 185,793 163,019
Short-term borrowings 50,541 28,494 98,755 49,628
Mortgage insurance and other 2,943 3,292 5,871 7,249
Provision for possible losses 600 500 1,200 1,000
-------- -------- -------- --------
Total interest and related expenses 145,692 118,227 291,619 220,896
-------- -------- -------- --------
Net margin on mortgage assets 7,288 17,592 13,460 40,661
-------- -------- -------- --------
Mortgage servicing revenues:
Servicing fees 16,147 5,333 30,563 7,669
Other 4,691 423 7,465 544
-------- -------- -------- --------
Total mortgage servicing revenues 20,838 5,756 38,028 8,213
-------- -------- -------- --------
Mortgage servicing expenses:
Salaries and related costs 1,333 664 2,609 955
General, administrative and other 3,466 354 5,658 602
Amortization of mortgage servicing
rights 5,934 423 10,185 1,159
-------- -------- -------- --------
Total mortgage servicing expenses 10,733 1,441 18,452 2,716
-------- -------- -------- --------
Net margin on mortgage servicing
operations 10,105 4,315 19,576 5,497
-------- -------- -------- --------
Other revenues:
Gain on sales 1,832 160 3,132 2,157
CMO administration 861 1,193 1,844 2,027
Other 755 371 1,073 600
-------- -------- -------- --------
Total other revenues 3,448 1,724 6,049 4,784
-------- -------- -------- --------
Other expenses:
Salaries and related costs 1,718 1,954 3,280 4,374
General and administrative 1,384 1,647 2,700 3,069
-------- -------- -------- --------
Total other expenses 3,102 3,601 5,980 7,443
-------- -------- -------- --------
Net income $ 17,739 $ 20,030 $ 33,105 $ 43,499
======== ======== ======== ========
Net income $ 17,739 $ 20,030 $ 33,105 $ 43,499
Less cash dividends on preferred stock
(9,823) (9,706) (19,621) (19,386)
-------- -------- -------- --------
Net income available to common
stockholders $ 7,916 $ 10,324 $ 13,484 $ 24,113
======== ======== ======== ========
Net income per share:
Primary $0.52 $0.68 $0.88 $1.58
Fully diluted 0.51 0.67 0.88 1.55
Cash dividends paid per share:
Common $0.52 $0.83 $0.88 $1.66
Series A preferred 0.40 0.40 0.80 0.80
Series B preferred 0.31 0.31 0.63 0.63
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
CAPSTEAD MORTGAGE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30
----------------------------
1995 1994
--------- -----------
<S> <C> <C>
Operating activities:
Net income $ 33,105 $ 43,499
Noncash items
Amortization of discount and premium 6,521 2,503
Amortization of mortgage servicing rights 10,185 1,159
Depreciation and other amortization 1,292 803
Provision for possible losses 1,200 1,000
Net change in prepaids, receivables, other assets,
accounts payable and accrued expenses 2,390 (22,582)
Net gain from investing activities (3,132) (2,157)
--------- -----------
Net cash provided by operating activities 51,561 24,225
--------- -----------
Investing activities:
Mortgage securities collateral:
Principal collections on collateral 211,396 859,829
Decrease (increase) in accrued interest receivable 2,060 (3,934)
Decrease in short-term investments 11,212 145,653
Purchases of mortgage loans (61,270) (1,623,486)
Purchases of agency securities (479,059) (1,197,053)
Purchases of equity securities - (17,808)
Purchases of other mortgage securities (91,634) -
Purchases of mortgage servicing rights (78,838) (104,927)
Principal collections on mortgage investments 157,487 161,962
Purchases of hedge instruments (13,492) -
Proceeds from sales of hedge instruments 24,012 -
Proceeds from sales of mortgage assets 301,541 22,808
--------- -----------
Net cash used by investing activities (16,585) (1,756,956)
--------- -----------
Financing activities:
Collateralized mortgage securities:
Issuance of securities - 1,846,957
Principal payments on securities (278,268) (1,019,831)
Increase in accrued interest payable 1,395 1,351
Capital stock transactions 2,606 3,341
Dividends paid (33,104) (44,678)
(Decrease) increase in mortgage servicing
acquisitions payable (35,711) 36,394
Increase in short-term borrowings 316,254 840,761
--------- -----------
Net cash provided by financing activities (26,828) 1,664,295
--------- -----------
Net increase (decrease) in cash and cash equivalents 8,148 (68,436)
Cash and cash equivalents at beginning of period 21,741 87,760
--------- -----------
Cash and cash equivalents at end of period $ 29,889 $ 19,324
========= ===========
Noncash investing and financing activities:
Charges to allowance for possible losses $ 2,654 $ 1,095
Transfers from mortgage investments to mortgage
securities collateral $- $ 1,898,253
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
CAPSTEAD MORTGAGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(Unaudited)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the quarter and six months ended June 30,
1995 are not necessarily indicative of the results that may be expected for the
calendar year ending December 31, 1995. For further information refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1994.
Certain amounts for prior periods have been reclassified to conform to the 1995
presentation.
NOTE B -- MORTGAGE INVESTMENTS
Mortgage investments and the related average effective interest rates
(calculated excluding unrealized gains and losses) during the periods indicated
were as follows (dollars in thousands):
<TABLE>
<CAPTION>
Quarter Six Months
Ended Ended
As of June 30 June 30 June 30
---------------------- -------------- --------------
1995 1994 1995 1994 1995 1994
---------- ---------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans held for sale $ 5,288 $ - 7.59% -% 8.01% -%
Mortgage loan portfolio:
Fixed-rate mortgage loans 4,295 396,311 9.13 6.86 8.00 6.78
Medium-term mortgage loans 264 8,127 6.05 6.62 7.90 6.55
Adjustable-rate mortgage
loans 2,039 142,864 6.08 4.57 6.11 4.53
AAA-rated private mortgage
pass-through securities
portfolio:
Fixed-rate mortgage
securities 1,931 308,683 8.77 6.77 8.71 6.77
Medium-term mortgage
securities 456,092 477,203 6.99 6.86 6.98 6.87
Adjustable-rate mortgage
securities 860,800 677,834 6.80 5.08 6.65 5.13
Agency securities portfolio:
Fixed-rate mortgage
securities 500,642 504,650 6.32 6.44 6.34 6.45
Adjustable-rate mortgage
securities 1,337,863 1,064,127 6.11 4.55 5.90 4.55
Notes 333,742 - 6.95 - 6.93 -
---------- ----------
$3,502,956 $3,579,799
========== ==========
</TABLE>
-6-
<PAGE>
The Company classifies its mortgage investments by term and interest rate
characteristics of the underlying mortgage loans. Fixed-rate mortgage
investments (i) have fixed rates of interest for their entire terms, or (ii)
have an initial fixed rate period of ten years after origination and then adjust
annually based on a specified margin over 1-year United States Treasury
Securities ("1-year Treasuries"). Medium-term mortgage investments (i) have an
initial fixed-rate period of three or five years after origination and then
adjust annually based on a specified margin over 1-year Treasuries or (ii) have
initial interest rates that adjust one time, approximately five years following
origination of the mortgage loan, based on a specified margin over the Federal
National Mortgage Association ("FNMA") yields for 30-year fixed-rate commitments
at the time of adjustment. Adjustable-rate mortgage investments either (i)
adjust semiannually based on a specified margin over the 6-month London
Interbank Offered Rate ("LIBOR"), or (ii) adjust annually based on a specified
margin over 1-year Treasuries. Fixed-rate and adjustable-rate mortgage agency
securities consist of mortgage-backed securities issued by government-sponsored
entities, either the Federal Home Loan Mortgage Corporation ("FHLMC"), FNMA or
the Government National Mortgage Association ("GNMA"). Agency notes are
unsecured, fixed-rate notes issued by FNMA, FHLMC, or the Federal Home Loan Bank
Board ("FHLBB") and mature in 1997. Some agency notes may be redeemed earlier
by FNMA, FHLMC or FHLBB.
At June 30, 1995 the AAA-rated private mortgage pass-through securities
("Mortgage Pass-Throughs") and the agency securities were pledged to secure
short-term borrowings.
NOTE C -- NET INTEREST INCOME ANALYSIS
The following tables summarize interest income and interest expense and average
effective interest rates for the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
Quarter Ended June 30
--------------------------------------
1995 1994
------------------ ------------------
Average Average
Amount Rate Amount Rate
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income:
Mortgage securities collateral $ 97,054 7.61% $ 90,667 7.57%
Mortgage investments 55,926 6.54 45,152 5.93
-------- --------
Total interest income 152,980 135,819
-------- --------
Interest expense:
Collateralized mortgage securities 91,608 7.59 85,941 7.31
Short-term borrowings 50,541 5.89 28,494 4.26
-------- --------
Total interest expense 142,149 114,435
-------- --------
Net interest $ 10,831 $ 21,384
======== ========
<CAPTION>
Six Months Ended June 30
-------------------------------------
1995 1994
------------------- ----------------
Average Average
Amount Rate Amount Rate
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income:
Mortgage securities collateral $195,406 7.59% $172,136 7.71%
Mortgage investments 109,673 6.43 89,421 6.14
-------- --------
Total interest income 305,079 261,557
-------- --------
Interest expense:
Collateralized mortgage securities 185,793 7.58 163,019 7.08
Short-term borrowings 98,755 5.92 49,628 3.96
-------- --------
Total interest expense 284,548 212,647
-------- --------
Net interest $ 20,531 $ 48,910
======== ========
</TABLE>
-7-
<PAGE>
The following tables summarize the amount of change in interest income and
interest expense due to changes in interest rates versus changes in volume for
the quarter and six months ended June 30, 1995 compared to the same periods in
1994 (in thousands):
<TABLE>
<CAPTION>
Quarter Ended June 30, 1995
--------------------------------
Rate* Volume* Total
---------- -------- ----------
<S> <C> <C> <C>
Interest income:
Mortgage securities collateral $ 481 $ 5,906 $ 6,387
Mortgage investments 4,908 5,866 10,774
-------- ------- --------
Total interest income 5,389 11,772 17,161
-------- ------- --------
Interest expense:
Collateralized mortgage securities 3,319 2,348 5,667
Short-term borrowings 12,760 9,287 22,047
-------- ------- --------
Total interest expense 16,079 11,635 27,714
-------- ------- --------
Net interest $(10,690) $ 137 $(10,553)
======== ======= ========
<CAPTION>
Six Months Ended June 30, 1995
-------------------------------
Rate* Volume* Total
-------- ------- ---------
<S> <C> <C> <C>
Interest income:
Mortgage securities collateral $ (2,762) $26,032 $ 23,270
Mortgage investments 4,476 15,776 20,252
-------- ------- --------
Total interest income 1,714 41,808 43,522
-------- ------- --------
Interest expense:
Collateralized mortgage securities 11,752 11,022 22,774
Short-term borrowings 29,547 19,580 49,127
-------- ------- --------
Total interest expense 41,299 30,602 71,901
-------- ------- --------
Net interest $(39,585) $11,206 $(28,379)
======== ======= ========
</TABLE>
* The change in interest due to both volume and rate has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
NOTE D -- DISCLOSURES REGARDING FAIR VALUES OF DEBT AND EQUITY SECURITIES
The estimated fair values of debt and equity securities have been determined
using available market information and appropriate valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop these estimates. In addition, fair values fluctuate on a daily basis.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts that could be realized in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair values.
-8-
<PAGE>
The following tables summarize available-for-sale and held-to-maturity debt and
equity securities as of June 30, 1995 and December 31, 1994 (in thousands):
<TABLE>
<CAPTION>
June 30, 1995: Available-for-Sale Securities
----------------------------------------------
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Mortgage Pass-Throughs:
Fixed-rate mortgage
securities $ 1,889 $ 42 $ - $ 1,931
Medium-term mortgage
securities* 29,398 111 8,625 20,884
Adjustable-rate mortgage
securities 858,658 2,179 37 860,800
Adjustable-rate mortgage
agency securities 1,333,387 5,518 1,042 1,337,863
Other mortgage securities 93,771 1,171 1,285 93,657
---------- ------- ------- ----------
$2,317,103 $ 9,021 $10,989 $2,315,135
========== ======= ======= ==========
<CAPTION>
Held-to-Maturity Securities
----------------------------------------------
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Medium-term Mortgage Pass-
Throughs* $ 435,208 $ 7,591 $ - $ 442,799
Agency securities:
Fixed-rate mortgage securities 500,642 - 21,106 479,536
Notes 333,742 947 - 334,689
Mortgage securities collateral 4,997,704 4,042 58,609 4,943,137
---------- ------- ------- ----------
$6,267,296 $12,580 $79,715 $6,200,161
========== ======= ======= ==========
<CAPTION>
December 31, 1994: Available-for-Sale Securities
---------------------------------------------
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Debt securities:
Mortgage Pass-Throughs:
Fixed-rate mortgage
securities $ 427 $ - $ 18 $ 409
Medium-term mortgage
securities* 9,054 - 9,054 -
Adjustable-rate mortgage
securities 780,224 - 24,601 755,623
Adjustable-rate mortgage
agency securities 1,088,252 - 45,391 1,042,861
Other mortgage securities 10,369 1,734 810 11,293
---------- ------- ------- ----------
Total debt securities 1,888,326 1,734 79,874 1,810,186
Equity securities 1,113 - 375 738
---------- ------- ------- ----------
$1,889,439 $ 1,734 $80,249 $1,810,924
========== ======= ======= ==========
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
Held-to-Maturity Securities
--------------------------------------------
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Medium-term Mortgage
Pass-Throughs* $ 459,874 $ - $ 12,342 $ 447,532
Agency securities:
Fixed-rate mortgage securities 504,023 - 62,586 441,437
Notes 333,687 - 9,690 323,997
Mortgage securities collateral 5,258,810 7,159 61,700 5,204,269
---------- ---------- -------- ----------
$6,556,394 $7,159 $146,318 $6,417,235
========== ========== ======== ==========
</TABLE>
* Medium-term Mortgage Pass-Throughs held-to-maturity were held available-for-
sale until the third quarter of 1994. An unrealized loss at the transfer date
remains a component of the recorded mark to market for available-for-sale
securities and is being amortized over the remaining life of these
investments. At June 30, 1995 the unamortized balance of this unrealized loss
was $8.6 million.
The fair value of debt and equity securities was estimated using either (i)
quoted market prices when available, including quotes made by lenders in
connection with designating collateral for repurchase arrangements, (ii) offer
prices by the Company for similar mortgage assets, or (iii) expected
securitization results. Mortgage securities collateral has been permanently
financed through the issuance of collateralized mortgage securities and, as a
result, the exposure to changes in the fair value of the underlying assets (and
liabilities) is limited. For this reason, the table above presents the fair
value of the net projected cash flows of the mortgage securities collateral
after payments on the related collateralized mortgage securities using market
discount rates and prepayment assumptions.
The maturity of the Company's mortgage assets is directly affected by the rate
of principal prepayments by mortgagors and redemptions by issuers, including the
Company, of remaining debt securities outstanding (referred to as "clean-up
calls"). As a result, the actual maturity of the Company's mortgage assets
usually occurs well in advance of stated maturities. The Company anticipates
that through prepayments and exercising clean-up calls, a significant portion of
its higher cost collateralized mortgage securities will be retired within the
next several years and a residual amount of high coupon mortgage securities
collateral will be released and can be sold or continued to be held as
investments. Included in mortgage securities collateral is $28.7 million and
$4.6 million of collateral released from the related indentures at June 30, 1995
and December 31, 1994, respectively.
During the first quarter of 1995, $35.9 million of mortgage securities
collateral previously released from the related indentures pursuant to clean-up
calls was sold at gross realized gains of $966,000. No such sales occurred in
the quarter ended June 30, 1995. Similar sales aggregating $20.7 million, which
resulted in gross realized gains of $2,159,000, occurred during the six months
ended June 30, 1994. During the quarter ended June 30, 1995, debt and equity
securities held available for sale aggregating $171.3 million were sold for
gains of $1,688,000. No such sales of available-for-sale securities occurred
during the first quarter of 1995 or the six months ended June 30, 1994. The net
unrealized losses on available-for-sale securities included as a separate
component of stockholders' equity declined by $24.8 million and $76.5 million
during the three and six months ended June 30, 1995, respectively.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
-------------------
Purchase and commitment volumes have fallen significantly from previous year
levels due to the increase in mortgage interest rates in 1994 and corresponding
declines in mortgage loan originations. Although mortgage interest rates have
declined considerably since early February 1995, origination levels have not
increased appreciably. During the quarter ended June 30, 1995, the Company
purchased 93 mortgage loans totaling $25 million. During the six months ended
June 30, 1995, 226 mortgage loans were purchased totaling $60 million. This
compares to purchases of 2,008 mortgage loans totaling $554 million, and 5,640
mortgage loans totaling $1.6 billion during the same periods in 1994.
To meet the challenges of a smaller mortgage loan origination market in 1995,
the Company has implemented a strategy of selling individual mortgage loans to
private investors shortly after the commitment to purchase, instead of
accumulating $100 million or more of similar mortgage loans for an efficient
securitization (typically a publicly offered collateralized mortgage obligation
or "CMO"). This strategy allows the Company to offer more competitive pricing
and significantly reduces market risk associated with accumulating and
securitizing jumbo mortgage loans. During the quarter and six months ended June
30, 1995, $28 million and $93 million of mortgage loans were sold, respectively.
These sales, low purchase volume, and the first quarter 1995 formation of $160
million of AAA-rated private mortgage pass-through securities ("Mortgage Pass-
Throughs") has substantially reduced holdings of mortgage loans.
Of the $160 million of Mortgage Pass-Throughs formed during the first quarter of
1995, $137 million were backed by adjustable-rate mortgage ("ARM") loans. No
additional Mortgage Pass-Throughs were formed during the second quarter. In
addition to reducing exposure to fraud and credit risk, a primary benefit of
pooling mortgage loans into Mortgage Pass-Throughs is the improved liquidity of
AAA-rated securities over that of individual loans. As a result, when securing
short-term borrowings, the Company is able to negotiate more favorable terms.
The Company plans to continue to retain a large portfolio of primarily ARM
Mortgage Pass-Throughs.
During the quarter and six months ended June 30, 1995, the Company acquired $244
million and $344 million of ARM agency securities. These acquisitions replace
closed and pending asset sales and run-off of existing portfolio. Sales during
the second quarter included $38 million of ARM agency securities and another
$203 million were committed for sale in July. After considering these
acquisitions and sales, the Company's position in ARM investments has remained
largely unchanged from the $2 billion level held at the beginning of the second
quarter. The Company also added $100 million and $132 million of fixed-rate
unsecured agency notes to its available for sale portfolio during the quarter
and six months ended June 30, 1995, all of which were sold prior to quarter-end.
A strong bond market rally in May and June made these sales advantageous.
During the quarter and six months ended June 30, 1995, the Company did not issue
any CMOs; however, the Company did acquire $16 million and $91 million of FNMA
trust interest-only securities, respectively, thus increasing the CMO investment
portfolio to $262 million at June 30, 1995, compared to a portfolio of $168
million at December 31, 1994 and $147 million at June 30, 1994.
-11-
<PAGE>
Derivative financial instruments, specifically 10-year U.S. Treasury interest
rate floors, were acquired as a partial hedge against prepayment exposure (see
"Effects of Interest Rate Changes"). These hedge positions were closed out in
June at gains aggregating $4,958,000 which were deferred.
The mortgage servicing portfolio (excluding pending transfers) increased during
the quarter to $20.6 billion with a weighted average interest rate of 7.30% and
earning an average annual service fee excluding ancillary revenue and earnings
on escrows (the "Average Service Fee") of 30.70 basis points. The June 30, 1995
balance of mortgage servicing rights related to this portfolio was $290.8
million (140.91 basis points, or a 4.59 multiple of the Average Service Fee).
Derivative financial instruments, specifically 10-year U.S. Treasury interest
rate floors and 3-month London Interbank Offered Rate ("LIBOR") interest rate
floors, were acquired as a partial hedge against prepayment exposure (see
"Effects of Interest Rate Changes"). Certain of these hedge positions were
closed out in June at gains aggregating $12,118,000, which were deferred. Open
hedge positions at June 30, 1995 consist of $700 million notional amount of
LIBOR floors which carried a $4.1 million unrealized gain at quarter-end.
Annualized portfolio run-off, consisting of prepayments and scheduled payments
on mortgage loans serviced, was 8.35% for the quarter, up from 6.15% in the
first quarter and is expected to be higher in the third quarter due to lower
prevailing interest rates and seasonal factors. Pending transfers as of quarter-
end totaled another $3.3 billion of mortgage servicing with a weighted average
interest rate of 7.48% and earning an Average Service Fee of 27.48 basis points.
At an average cost of 152.51 basis points, these servicing assets are being
acquired at a 5.55 multiple of the Average Service Fee. By early October, the
mortgage servicing portfolio is expected to be over $23.0 billion. The Company
currently plans to grow the mortgage servicing portfolio to more than $25
billion by the end of 1995.
The following table summarizes the Company's utilization of capital as of June
30, 1995 (in thousands):
<TABLE>
<CAPTION>
Capital
Assets Borrowings Employed
---------- -------------- ---------
<S> <C> <C> <C>
Mortgage loans held for sale and in
portfolio $ 11,886 $ - $ 11,886
Mortgage Pass-Through portfolio:
Fixed-rate mortgage securities 1,931 1,858 73
Medium-term mortgage securities 456,092 444,725 11,367
Adjustable-rate mortgage securities 860,800 832,125 28,675
Agency securities portfolio:
Fixed-rate mortgage securities 500,642 478,166 22,476
Adjustable-rate mortgage securities 1,337,863 1,299,891 37,972
Notes 333,742 339,501 (5,759)
CMO investment portfolio 5,091,361 4,929,520(a) 161,841
Mortgage servicing rights 339,504 50,177(b) 289,327
---------- ---------- --------
$8,933,821 $8,375,963 557,858
========== ==========
Other assets, net of other liabilities 84,971
--------
Total stockholders' equity $642,829
========
</TABLE>
(a) Includes approximately $100.6 million of related short-term borrowings.
(b) Represents amounts owed under contracts for bulk purchases of mortgage
servicing rights and $10 million drawn on a $200 million line of credit
secured by existing mortgage servicing rights.
-12-
<PAGE>
A significant impact of the rise in mortgage interest rates in 1994 was a
corresponding decline in value of most of the Company's mortgage assets
(excluding servicing rights). The decline in intermediate- and long-term
interest rates since early February 1995 has restored much of the value to these
assets. The effect is most apparent on the $2.3 billion of mortgage assets and
equity securities held-available-for-sale at June 30, 1995 where the unrealized
loss declined to only $2.0 million compared to $78.5 million at December 31,
1994. Changes in value and ongoing market value risk associated with remaining
mortgage securities will not have a direct impact on the earnings of the Company
as these assets are classified as held-to-maturity and can only be sold under
very limited circumstances.
Results of Operations
---------------------
Comparative net operating results (interest income or fee revenues, net of
related interest expense or direct operating costs), by source, were as follows
(in thousands, except percentages and per share amounts):
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Mortgage loans $ 176 $ 6,904 $ 891 $20,474
Mortgage Pass-Throughs 1,487 4,270 3,012 9,048
Agency securities 2,571 4,440 5,496 8,329
CMO investments 3,654 2,478 5,261 3,810
Mortgage servicing 10,105 4,315 19,575 5,497
Gain on sales 1,832 160 3,132 2,157
CMO administration 861 1,193 1,844 2,027
Other income 755 371 1,074 600
------- ------- ------- -------
Contribution to income 21,441 24,131 40,285 51,942
General and administrative
expenses (3,102) (3,601) (5,980) (7,443)
Provision for possible losses (600) (500) (1,200) (1,000)
------- ------- ------- -------
Net income $17,739 $20,030 $33,105 $43,499
======= ======= ======= =======
Net income per share:
Primary $ 0.52 $ 0.68 $ 0.88 $ 1.58
Fully diluted 0.51 0.67 0.88 1.55
Return on average stockholders'
equity 10.98% 12.45% 10.26% 13.51%
</TABLE>
Operating results for the quarter and six months ended June 30, 1995 declined
11.4% and 23.9% from those achieved in the same periods of 1994. Results were
significantly affected by a series of moves by the Federal Reserve beginning in
February 1994 raising short-term interest rates 3 percentage points. These
increases resulted in corresponding increases in the Company's borrowing costs
which had the effect of substantially reducing net interest spreads on mortgage
investments. However, second quarter results improved considerably from the
net income of 36 cents per common share in the first quarter of 1995 as for the
first time in more than a year the Federal Reserve did not increase short-term
rates in a three-month period.
Since February 1995, intermediate- and long-term interest rates have declined
considerably in response to a spate of economic indicators suggesting a slowing
of the U.S. economy. While this significant decrease in rates had little effect
on borrowing costs in the second quarter, the Federal Reserve did reduce short-
term interest rates 0.25 of 1 percent in early July. This reduction will reduce
borrowing costs in the third quarter although the
-13-
<PAGE>
benefit may be partially offset by increased amortization of mortgage servicing
rights prompted by higher prepayments of mortgage loans. Any further short-term
interest rate cuts by the Federal Reserve will serve to improve already widening
net interest spreads on mortgage investments.
The net interest spread earned from mortgage loans contributed significantly
less to net operating results than in 1994 due primarily to significantly lower
average holdings of mortgage loans during 1995. Average holdings for the
quarter and six months ended June 30, 1995 were $11 million and $83 million,
respectively, compared to the $820 million and $1.1 billion held during the same
periods in 1994. Lower mortgage loan purchase volume, particularly in the
latter part of 1994 and in 1995, along with 1994 CMO issuances, the formation of
Mortgage Pass-Throughs and $93 million of sales in 1995 have substantially
reduced holdings of mortgage loans. This reflects the Company's current
position of significantly reducing market risk associated with aggregating and
securitizing jumbo mortgage loans (see the discussion above under "Financial
Condition").
Mortgage Pass-Throughs contributed less to net operating results compared to the
same periods in 1994 primarily due to higher borrowing costs offset somewhat by
higher yields and higher average portfolios outstanding. Borrowing costs for
this portfolio averaged 6.25% and 6.23% for the quarter and six months ended
June 30, 1995, respectively, compared to 4.33% and 3.98% for the same periods in
1994. Mortgage Pass-Through yields were higher at 6.87% and 6.77% for the
quarter and six months ended June 30, 1995, respectively, compared to 5.94% and
5.97% for the same periods in 1994, due primarily to the rise in ARM Mortgage
Pass-Through yields as the underlying ARM loans reset periodically (see "Effects
of Interest Rate Changes"). The average portfolio outstanding was $1.3 billion
for both the quarter and six months ended June 30, 1995, compared to $1.1
billion and $1.0 billion for the same periods in 1994. The increases are the
result of the formation of nearly $1 billion of Mortgage Pass-Throughs since
April 1, 1994, offset by portfolio run-off and a $350 million CMO issuance late
in 1994 that was secured largely by fixed-rate Mortgage Pass-Throughs.
Agency securities contributed less to net operating results compared to the same
periods in 1994 because of substantially higher borrowing costs and despite
sizable increases in average portfolio outstanding and higher agency security
yields. Borrowing costs were 5.95% and 5.88% in the quarter and six months
ended June 30, 1995 compared to 3.98% and 3.68% in the same periods in 1994.
The average agency securities portfolio outstanding was over $2.0 billion for
the quarter and six months ended June 30, 1995, compared to $1.1 billion and
$775 million for the same periods in 1994. Agency security yields were 6.32%
and 6.20% in the quarter and six months ended June 30, 1995 compared to 5.42%
and 5.73% in the same periods in 1994. The increase in average portfolio
outstanding was the result of the acquisition of $1.4 billion of ARM securities
and $466 million of fixed-rate unsecured agency notes since April 1, 1994.
Higher yields reflect investments made mid-1994 in newly issued ARM securities
that had not yet reset to a fully-indexed rate (either the 1-year treasury rate
or 6-month LIBOR, i.e. "teaser-rate ARM securities"). These teaser-rate ARM
securities produced an average yield of 5.95% during the quarter, 10 basis
points less than related borrowing costs. This negative spread reflects the
rapid rise in short-term interest rates late in 1994 and early 1995, well in
excess of upward adjustments in the interest rates on ARM securities. Yields on
these securities improved 49 basis points during the current quarter and 99
basis points year-to-date and are expected to continue to improve in future
quarters (see "Effects of Interest Rate Changes").
-14-
<PAGE>
CMO investments contributed more to net operating results during the quarter and
six months ended June 30, 1995, than in the same periods in 1994 primarily due
to the additional investment in FNMA trust interest-only securities during 1995.
Additionally, prepayments on mortgage securities collateral were still
relatively high in the first quarter of 1994 due to refinancing activity.
During the quarter and six months ended June 30, 1995, the Company received
principal collections on mortgage securities collateral totaling $128.4 million
and $211.4 million, respectively, compared to $282.1 million and $859.8 million
of run-off in the same periods in 1994. Lower levels of prepayments have the
effect of lowering amortization of bond discounts and improving operating
results.
Improved mortgage servicing results reflect growth in this operation. The first
quarter of 1994 was the first profitable quarter for mortgage servicing since
commencing operations in March 1993. Revenues have increased to $20.8 million
and $38.0 million for the quarter and six months ended June 30, 1995,
respectively, compared to approximately $5.8 million and $8.2 million during the
same periods in 1994. Direct operating costs have also increased, but not to
the same extent as revenues, which is reflective of efficiencies being gained in
the servicing process as the servicing portfolio continues to grow.
Amortization of servicing assets amounted to $5.9 million during the current
quarter.
During the quarter and six months ended June 30, 1995, the Company sold $198.8
million and $298.4 million, respectively, of mortgage assets consisting of
agency securities, mortgage loans and mortgage securities collateral previously
released from CMOs pursuant to "clean-up calls."
General and administrative expenses were lower for the second quarter of 1995
compared to the same period in 1994 primarily due to lower bonus and incentive
compensation accruals and additional allocations of costs to the mortgage
servicing operation.
Liquidity and Capital Resources
-------------------------------
The Company's primary sources of funds include monthly principal and interest
payments on mortgage loans and mortgage securities, short-term borrowings,
excess cash flows on CMO investments, proceeds from securitizations and sales of
mortgage assets, servicing fees and other revenue from its mortgage servicing
portfolio, and equity offerings when available. The Company currently believes
that these funds are sufficient for the acquisition of additional mortgage loans
and other mortgage assets, repayments on short-term borrowings, growth of the
mortgage servicing portfolio and the payment of cash dividends as required for
Capstead's continued qualification as a Real Estate Investment Trust ("REIT").
It is the Company's policy to remain strongly capitalized and conservatively
leveraged.
During the first quarter, the Company began selling its mortgage loan
acquisitions directly to private investors in increments of up to $10 million
rather than accumulating the $100 million or more in mortgage loans necessary to
efficiently issue CMOs. Additionally, the Company may, from time to time, sell
a portion of its investments in other mortgage assets classified as available-
for-sale. Such sales may be accomplished by issuing publicly-offered, multi-
class Mortgage Pass-Through certificates ("MPCs"). This sale activity may
increase quarterly income volatility because of the recognition of transactional
gains or losses. Sales in 1995 were related to reducing holdings of mortgage
loans and collateral released from CMOs pursuant to clean-up calls and the sale
of certain agency securities.
-15-
<PAGE>
Short-term borrowings are primarily made under repurchase arrangements. The
Company has uncommitted repurchase facilities with investment banking firms to
finance mortgage loan holdings and the Mortgage Pass-Through portfolio, subject
to certain conditions. Interest rates on borrowings under these facilities are
based on overnight to 30-day LIBOR rates. The Company also enters into
repurchase and dollar repurchase arrangements with investment banking firms to
whom the Company pledges agency securities and other mortgage assets as
collateral. The terms and conditions of these arrangements, including interest
rates, are negotiated on a transaction-by-transaction basis. Other short-term
financing arrangements that the Company may use include entering into repurchase
transactions prior to the issuance of CMOs or MPCs whereby the Company may
pledge the mortgage assets that are expected to secure an issuance as collateral
for a repurchase transaction with the managing underwriter of the related
issuance.
At June 30, 1995 the Company had available a $200 million line of credit with an
investment banking firm to be secured by servicing assets, $120 million of which
is committed. Advances have separate maturities and rates of interest with
interest due monthly. Interest rates on advances under this facility are based
on LIBOR rates related to the term of the advance.
EFFECTS OF INTEREST RATE CHANGES
Changes in interest rates may impact the Company's earnings in various ways.
The Company's earnings depend, in part, on the difference between the interest
received on mortgage investments and the interest paid on related short-term
borrowings (primarily repurchase arrangements). The resulting spread may be
reduced in a rising interest rate environment. For ARM loans the risk of rising
short-term interest rates is offset to some extent by increases in the rates of
interest earned on these loans. Since ARM loans generally limit the amount of
such increase during any single interest rate adjustment period and over the
life of the loan, the interest rates on the repurchase arrangements can rise to
levels that may exceed the interest rates on the underlying ARM loans resulting
in a negative interest spread. This occurred in late 1994 on many of the
Company's ARM investments. Now that interest rates have stabilized, these
spreads have begun to recover. With the 0.25 of 1 percent reduction in short-
term interest rates by the Federal Reserve in early July 1995, further
improvement in spreads is expected. Rising interest rates may not only reduce
interest spreads, but also the volume of mortgage loan purchases as mortgage
loan origination activity slows, which may result in lower average mortgage loan
holdings during these periods.
In addition, earnings are impacted if long-term interest rates change during the
period after the Company has committed to purchase fixed-rate mortgage loans but
before these loans have been pledged to secure CMOs and MPCs or otherwise
committed for sale. If long-term interest rates increase during this period,
the interest payable on the CMOs issued will increase while the yield on the
underlying mortgage loans pledged to collateralize the CMOs will not change; as
a consequence, the interest spread on the CMO will be lower. Conversely, if
long-term interest rates decrease during this period, the interest payable on
the CMO issued will decrease, while the yield on the underlying mortgage loans
pledged to collateralize the CMO will not change; as a consequence, the interest
spread on the CMO will be higher. Similarly, proceeds received on the issuance
of MPCs and other sales, and related gains or losses, will be negatively
impacted by an increase in long-term interest rates during this period due to
the resulting decline in market value of the related collateral. Conversely,
these transactional gains or losses will be favorably impacted by a decrease in
long-term interest rates during this period.
-16-
<PAGE>
The Company historically has attempted to manage its exposure to long-term
interest rate changes in part by pricing CMO and MPC issuances prior to the
purchase of, but subsequent to the commitment to purchase, all of the mortgage
loans that will collateralize the issuances or from time to time, entering into
forward sale agreements for hedging purposes. Beginning in 1995 the Company
shortened the holding period for mortgage loan acquisitions to usually about a
week, in an effort to eliminate the market risk associated with aggregating and
securitizing mortgage loans.
Changes in interest rates also impact earnings recognized from CMO investments,
which consist of fixed-rate CMO residuals and interest-only and principal-only
securities. The amount of income that may be generated from the typical CMO
residual is dependent upon the rate of principal prepayments on the underlying
mortgage collateral. If mortgage interest rates fall significantly below the
interest rate on the collateral, principal prepayments will increase, reducing
or even eliminating the overall return on the investment in the CMO residual.
This is due primarily to the acceleration of the amortization of bond discounts,
a noncash item, as bond classes are repaid more rapidly than originally
anticipated. Conversely, if mortgage interest rates rise significantly above
the interest rate on the collateral, principal prepayments will typically
diminish, resulting in a greater overall return on the investment in the fixed-
rate CMO residual because of an increase in the period of time over which the
Company receives the larger positive interest spread. During periods of
increasing interest rates, the Company's volume of mortgage loan acquisitions
generally will diminish due, among other things, to decreased refinancing
activity.
Similarly, in a falling interest rate environment, prepayments on the mortgage
collateral underlying investments in interest-only securities generally will be
high and the Company could incur losses on these securities. Conversely, in
periods of rising interest rates, interest-only securities will tend to perform
favorably because the underlying mortgage collateral will generally prepay at
slower rates. Principal-only securities react differently to changes in
interest rates. Lower interest rates result in the recovery of these
investments 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.
Another effect of changes in interest rates is that when interest rates
decrease, the rate of prepayment of mortgage loans generally increases. To the
extent the proceeds of prepayments on the mortgage investment portfolios cannot
be reinvested at a rate of interest at least equal to the rate previously earned
on such investments, earnings may be adversely affected. In addition, the rates
of interest earned on ARM loans generally will decline during periods of falling
interest rates.
The above discussion regarding how changes in interest rates impact investments
in mortgage assets also applies to the Company's growing investment in mortgage
servicing rights. When interest rates rise, mortgage servicing rights become
more valuable since the average lives of the related mortgage loans tend to be
longer and earnings from large, temporarily held cash balances will be greater.
Conversely, lower interest rates will spur prepayments thus reducing the period
of time the Company can service the related loans. Because the Company began
mortgage servicing in 1993 and has acquired relatively low interest rate
servicing, exposure to lower interest rates is less than for other servicers
that acquired servicing portfolios in previous years when interest rates were
substantially higher.
-17-
<PAGE>
The Company's business plan is to build a mortgage banking operation with
investments in mortgage securities and mortgage servicing that should produce
reasonably balanced results in a rising or falling interest rate environment.
Hedging interest rate risk is imprecise and costly. To fully protect income
from every interest rate scenario would be cost prohibitive. The Company
expects to supplement its business plan with interest rate hedges from time to
time.
PART II. - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits: The following Exhibit is presented herewith:
--------
Exhibit 11 - Computation of Earnings Per Share for the quarter and six
months ended June 30, 1995 and 1994.
Exhibit 27 - Financial Data Schedule (electronic filing only).
(b) Reports on Form 8-K: None.
-------------------
-18-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAPSTEAD MORTGAGE CORPORATION
Date: August 7, 1995 By /s/ RONN K. LYTLE
------------------------------------
Ronn K. Lytle
Chairman and Chief Executive Officer
Date: August 7, 1995 By /s/ ANDREW F. JACOBS
------------------------------------
Andrew F. Jacobs
Senior Vice President - Control
and Treasurer
-19-
<PAGE>
EXHIBIT 11
CAPSTEAD MORTGAGE CORPORATION
COMPUTATION OF NET INCOME PER SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary:
Average number of common
shares outstanding 15,322 15,238 15,313 15,220
Incremental shares calculated
using the Treasury Stock method 4 9 4 46
------- ------- -------- --------
15,326 15,247 15,317 15,266
------- ------- -------- --------
Net income $17,739 $20,030 $ 33,105 $ 43,499
Less cash dividends paid on
convertible preferred stock:
Series A ($0.40 per share) (239) (266) (487) (538)
Series B ($0.315 per share) (9,584) (9,440) (19,134) (18,848)
------- ------- -------- --------
Net income available to common
stockholders $ 7,916 $10,324 $ 13,484 $ 24,113
======= ======= ======== ========
Primary net income per share $0.52 $0.68 $0.88 $1.58
Fully diluted:
Average number of common
shares outstanding 15,322 15,238 15,313 15,220
Assumed conversion of
convertible preferred stock:
Series A 548 606 554 619
Series B * * * *
Incremental shares calculated
using the Treasury Stock method 5 9 4 45
------- ------- -------- --------
15,875 15,853 15,871 15,884
======= ======= ======== ========
Net income $17,739 $20,030 $ 33,105 $ 43,499
Less cash dividends paid on
the Series B Preferred Stock (9,584) (9,440) (19,134) (18,848)
------- ------- -------- --------
Net income $ 8,155 $10,590 $ 13,971 $ 24,651
======= ======= ======== ========
Fully diluted net income per share $0.51 $0.67 $0.88 $1.55
</TABLE>
* The Series B Preferred Stock is not considered convertible for purposes of
calculating fully diluted net income per share as it is currently
antidilutive.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CAPSTEAD
MORTGAGE CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE
30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 29,889
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,034,924
<CURRENT-LIABILITIES> 3,563,145
<BONDS> 4,828,950
<COMMON> 153
0
337,276
<OTHER-SE> 315,400
<TOTAL-LIABILITY-AND-EQUITY> 9,034,924
<SALES> 0
<TOTAL-REVENUES> 349,156
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 30,303
<LOSS-PROVISION> 1,200
<INTEREST-EXPENSE> 284,548
<INCOME-PRETAX> 33,105
<INCOME-TAX> 0
<INCOME-CONTINUING> 33,105
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,105
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0.88
</TABLE>
