Capstead Mortgage Corp. (NYSE:CMO) Q1 2018 Earnings Conference Call - Preliminary Transcript

Apr 26, 2018 • 09:00 am ET


Capstead Mortgage Corp. (NYSE:CMO) Q1 2018 Earnings Conference Call - Preliminary Transcript


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Good day and welcome to the Capstead Mortgage Corporation First Quarter 2018 Earnings Conference Call. All participants will be in a listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Lindsey Crabbe. Please go ahead, ma'am.

Lindsey Crabbe

Good morning. Thank you for attending Capstead's first quarter earnings conference call. The first quarter earnings release was issued yesterday, April 25th, and was posted on our website at under the Investor Relations tab. The link to this webcast is also in the Investor Relations section of our website and an archive of the webcast will be available for 90 days. A replay of this call will be available through July 26, 2018. Details of the replay are included in yesterday's release.

With me today are Phil Reinsch, President and Chief Executive Officer; Robert Spears, Executive Vice President and Chief Investment Officer; and Lance Phillips, Senior Vice President and Chief Financial Officer. Before we get started, I want to remind you that some of today's comments could be considered forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and are based on certain assumptions and expectations of management. For a detailed list of all the risk factors associated with our business, please refer to our filings with the SEC which are available on our website. The information contained in this call is current only as of the date of this call, April 26, 2018. The company assumes no obligation to update any statement including any forward-looking statements made during this call.

With that, I'll turn it over to Phil.

Phillip Reinsch

Good morning. Welcome, everyone. I'll make a few brief comments and then we'll open the call up for questions. Regarding our financial results for the first quarter, we reported earnings of $0.16, $0.03 lower than fourth quarter results, $0.02 for the earnings difference from last quarter's due to non-recurring $1.9 million tax refund recorded in December in connection with the tax reform with the remaining difference primarily resulted lower incentive comp related accruals in the fourth quarter.

We declared and paid a $0.16 common dividend for the first quarter. Net interest margins were largely unchanged at $22.6 million and benefit the higher cash yields and lower mortgage prepayments largely offset higher borrowing rates and lower portfolio balances. Book value declined at relatively 1.5% or $0.15 a share to $10.10 and includes $0.06 of book value accretion from repurchasing 3.5% of our outstanding stock and a meaningful discount of book during the quarter.

Lastly, operating cost for our internally managed agency only platform remained at industry leading levels. Regarding the operating environment, we've seen fairly pronounced increases in market interest rates thus far in 2018 with 10-year treasury rates reaching 2.94% on February 21st and move a 54 basis points since yearend before exceeding the 2.74% at quarter end.

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