Financial Data and Key Metrics Changes - The company incurred a GAAP net loss of $63.5 million this quarter, equating to $0.80 per diluted common share, while core earnings were reported at $14.8 million or $0.12 per diluted common share [13] - Portfolio yields averaged 2.82% during the quarter, an increase of 7 basis points from the previous quarter's 2.75% [14] - Book value increased by $0.50 per share during the second quarter, ending at $8.93 per common share [16] Business Line Data and Key Metrics Changes - The company increased its common dividend by 50% to $0.12 per share this quarter, reflecting confidence in producing strong risk-adjusted returns [7] - Portfolio-related borrowing costs increased by 12 basis points over the prior quarter, primarily due to higher hedging costs [15] Market Data and Key Metrics Changes - The company holds $7.5 billion in swap balances, representing 70% of outstanding repo balances, which positions it to benefit from anticipated Fed rate cuts [8] - The market is currently recalibrating expectations for Fed rate cuts, with projections shifting from 125 basis points to as much as 75 basis points this year [6] Company Strategy and Development Direction - The company aims to manage its borrowing costs effectively through the use of interest rate swaps, which have improved net interest margins [10] - The management is focused on maintaining a conservative approach to hedging while also being prepared for potential market fluctuations [29] Management's Comments on Operating Environment and Future Outlook - Management anticipates that prepayment speeds will remain elevated through the summer but expects a decline in the fourth quarter, contingent on the Fed's actions [18] - The company is confident in its ability to produce strong returns regardless of the pace of Fed rate cuts, indicating a robust risk management strategy [7] Other Important Information - The company experienced a decline in the value of its swap book on a mark-to-market basis due to a slight decline in rates this quarter [11] - The management has been working to improve the estimation process for prepayments to mitigate the impact of cyclicality and seasonality [25] Q&A Session Summary Question: When do you expect prepayment speeds to slow? - Management expects prepayment speeds to remain elevated this summer and to start receding in the fourth quarter, depending on the Fed's aggressiveness in cutting rates [18] Question: What is the expected prepayment speed? - Management indicated that current ARM speeds are in the mid-20s, with expectations of a decline to the low-20s over time [22] Question: How does the company estimate prepayment speeds? - The company uses multiple models to estimate prepayment speeds, considering both the forward curve and static curve [59] Question: What assumptions go into the prepayment estimates? - Management considers various factors, including the shape of the mortgage curve and the impact of Fed rate changes on prepayment speeds [60] Question: Is there a specific figure for the EPS impact of a 1% shift in CPR? - Management stated that they cannot provide a specific figure as it varies with the level of prepayments and amortization [38]

UNITED STATES Emerging growth filer o If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 OR ¨TR ...

Capstead Mortgage Corporation (CMO) Q1 2019 Earnings Conference Call April 25, 2019 9:00 AM ET Company Participants Lindsey Crabbe - Investor Relations Phil Reinsch - President & Chief Executive Officer Lance Phillips - Senior Vice President & Chief Financial Officer Robert Spears - Executive Vice President & Chief Investment Officer Conference Call Participants Eric Hagen - KBW Steve Delaney - JMP Securities Gabe Poggi - Shoals Capital Operator Good day, and welcome to the Capstead Mortgage Corporation Fir ...