Lower Financing Spreads Hurt Capstead's 2004 Earnings.

Dallas -- Capstead Mortgage Corporation reported net income of $8,149,000, or $0.17 per diluted common share, for the quarter ended Dec. 31, 2004, compared to $13,096,000 or $0.56 per diluted common share, for the same period in 2003.

Operating income was $0.22 per common share for the fourth quarter of 2004, compared to $0.32 for the third quarter of 2004 and $0.63 for the fourth quarter of 2003.

The Company reported net income of $41,805,000, or $1.33 per diluted common share, for the year ended Dec. 31, 2004 compared to $60,659,000, or $2.60 per diluted common share reported in 2003.

Capstead, once one of the nation's biggest mortgage servicers, now operates as a real estate investment trust earning income from investing in real estate-related assets on a leveraged basis and from other investment strategies.

These investments primarily consist of residential adjustable-rate mortgage securities issued and guaranteed by government-sponsored entities, either Fannie Mae or Freddie Mac, or by Ginnie Mae.

Capstead has also made limited investments in credit-sensitive commercial real estate-related assets, including the direct ownership of real estate.

Fourth quarter 2004 operating income declined from the third quarter of 2004 as the benefits of portfolio growth and higher investment yields were offset by higher borrowing costs. Acquisitions of ARM securities totaled $604 million during the fourth quarter, more than offsetting portfolio runoff of $264 million and contributing to an increase in average portfolio outstanding for the quarter by over $500 million to $3.2 billion. Acquisitions totaled over $2.0 billion year-to-date, surpassing runoff of $881 million and resulting in an increase in the mortgage investments portfolio of over 50% for the year.