Capstead Mortgage Corp. (NYSE:CMO) Q2 2020 Earnings Conference Call - Final Transcript

Jul 30, 2020 • 10:00 am ET


Capstead Mortgage Corp. (NYSE:CMO) Q2 2020 Earnings Conference Call - Final Transcript


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Good morning, and welcome to the Capstead Mortgage Second Quarter 2020 Conference Call. [Operator Instructions]

I would now like to turn the conference over to Lindsey Crabbe. Please go ahead.

Lindsey Crabbe

Good morning. Thank you for attending Capstead's second quarter earnings conference call. The second quarter earnings release issued yesterday, July 29, 2020, is 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. An archive of this webcast and a replay of this call will be available through October 28, 2020. Details of the replay are included in yesterday's release.

On the call 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.

To support the health and well-being of our employees and community and address the risk associated with the global COVID-19 pandemic, we have implemented our business continuity plan that enables our employees to work remotely. As such, please be patient with us as we answer questions.

Before we get started, I wanted to remind you that some of today's comments should 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.

In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the company's earnings release and the accompanying tables or schedules, which have been filed on Form 8-K with the SEC and may also be accessed through the company's website. 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, July 30, 2020. The company assumes no obligation to update any statements, including any forward-looking statements, made during this call.

With that, I'll turn the call over to Phil.

Phillip A. Reinsch

Thank you, Lindsey, and thanks to everyone for your interest in Capstead. After my remarks, Lance will give a recap of the second quarter, and then we'll open the call up for questions.

We're pleased to report excellent results for the current quarter. We outearned our $0.15 common dividend run rate by 20% even with significantly lower portfolio balances and less leverage, producing an annualized return on common equity of 10.8%. Common dividend itself was unchanged for three quarters now, and our core earnings met or exceeded the dividend in each of these quarters. We're likely the only mortgage REIT that can make that claim given the market disruptions experienced in March.

As importantly, our portfolio recovered strongly in value over the course of the second quarter, contributing the lion's share of a $0.72 increase in book value to $6.79 per common share. This 11.9% increase, together with the common dividend, resulted in an economic