Capstead Mortgage Corp. posted a net loss of $11.8 million in the third quarter, the company said last week.

The real estate investment trust and mortgage bank reduced its short- term borrowings by more than $2 billion, causing its leverage ratio to fall to 5.8-to-1 at Sept. 30, from 8.7-to-1 June 30.

Capstead wrote down the value of its mortgage servicing rights by $144 million. However, unlike the company's $45 million servicing writedown in June, this accounting adjustment was more than offset by the use of U.S. Treasury securities as hedges: The hedges gained $171 million in value.

Lower interest rates also continued to depress the value of Capstead's investments in mortgage-backed securities.

The company wrote off $5 million of "investment premiums," $16 million of "CMO bond discounts," and took a $4 million impairment charge to write down certain collateralized mortgage obligation investments to fair market value.

These came in addition to the $45 million servicing writedown and $255 million of losses in mortgage-backed securities in the second quarter. Capstead's stock has fallen sharply since the June announcements. It is believed to be for sale, though company officials would not comment on that possibility.

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