Capstead Mortgage Corp., which reported one of the best performances in the mortgage banking industry last year, hit a bump in the first quarter of this year.

Capstead reported net income of $15.7 million, or 36 cents a share, for the quarter ended March 31, 1995. For the quarter a year earlier, it earned $23.5 million, or 90 cents a share.

Chairman and chief executive Ronn K. Lytle said the drop was largely attributable to the rise in short-term rates in late 1994 and early 1995. These increases resulted in higher borrowing costs that reduced the net interest spread on securities portfolio.

Capstead is unusual among mortgage banking companies in that it holds some of the loans it originates for investment. Others sell all of their originations in the secondary market.

"Since February, 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," Mr. Lytle said. "While this significant decrease in rates has not affected the company's borrowing costs, it has resulted in a significant improvement in the value of the company's mortgage securities investments. There is a growing consensus that the economic slowdown may be sufficient to convince the Federal Reserve not to increase short-term interest rates further this business cycle.

Mr. Lytle added that if borrowing costs remain stable, the net interest spread on its mortgage securities investments will widen as interest rates on investments in adjustable-rate mortgages adjust to a higher index.

"On an equally positive note, the company earned $9.5 million from mortgage servicing during the first quarter, compared with $1.2 million during the first quarter of 1994," he said. Capstead's mortgage servicing portfolio increased nearly $5 billion, to $19.2 billion. Portfolio runoff, consisting of prepayments and scheduled payments, was at an annual rate of 6.15%

Mr. Lytle added, "The mortgage servicing portfolio has been very productive, and we expect profits to continue to increase from this activity during 1995 to more than $40 million. We have contracted for $1.8 billion of additional mortgage servicing rights."

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