cmo-8k_20210108.htm

Maryland

001-08896

75-2027937

(State of Incorporation)

(Commission File No.)

(I.R.S. Employer

Identification No.)

8401 North Central Expressway

Suite 800

Dallas, Texas

75225

(Address of Principal Executive Offices)

(Zip Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425).
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 230.14a-12).
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)).
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)).


Title of each class	Trading Symbols	Name of each exchange on which registered
Common Stock ($0.01 par value)	CMO	New York Stock Exchange
7.50% Series E Cumulative Redeemable Preferred Stock ($0.10 par value)	CMOPRE	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

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. ☐

On January 8, 2021, the Compensation Committee (the “Committee”) of the Board of Directors of Capstead Mortgage Corporation (the “Company”) adopted the 2021 Annual Incentive Compensation Program applicable to the Company’s executive officers (the “2021 Annual Incentive Program”). The 2021 Annual Incentive Program is structurally similar to the 2020 Annual Incentive Compensation Program, except as described below. The 2021 Annual Incentive Program provides defined metrics against which the Company’s performance is to be measured, specifically absolute economic return, relative operating efficiency as well as individual goals and objectives for each of the executive officers. Payouts are determined formulaically, defining threshold, target and maximum performance levels based on multiples of base salary, thereby limiting the maximum annual incentive payout for each executive officer.

The only change for 2021 consisted of reducing the absolute economic return Target level to 5.0% from 6.0%. Each executive officer’s total award opportunity as measured at Target performance levels is equal to 125% of annual base salary on January 1, 2021.

The 2021 Annual Incentive Program is filed with this Form 8-K as Exhibit 10.1 and is incorporated by reference herein. This summary does not purport to be complete and is qualified in its entirety by reference to Exhibit 10.1.

An additional performance-based short-term incentive compensation program for executives provides for quarterly cash payments equal to per share dividends declared on the Company’s common stock multiplied by a notional amount of non-vesting or “phantom” shares of common stock, referred to as DERs. DERs are not attached to any stock or option awards. DERs outstanding during 2020 totaling 655,000 expired December 31, 2020. On January 8, 2021 the Committee awarded DERs totaling 662,000 expiring December 31, 2021 as follows:


	2020		2021
Executive Officer	DER Grants		DER Grants
Phillip A. Reinsch, President and Chief Executive Officer	200,000	200,000
Robert R. Spears, Jr., Executive Vice President and Chief Investment Officer	200,000	200,000
Roy S. Kim, Senior Vice President - Asset and Liability Management	140,000	140,000
Lance J. Phillips, Senior Vice President and Chief Financial Officer	115,000	122,000

Pursuant to the Amended and Restated 2014 Flexible Incentive Plan, on January 8, 2021, the Committee granted two forms of incentive compensation awards to the executive officers of the Company based on the closing price of the Company’s common stock on January 8, 2021, consisting of (a) restricted common stock and (b) performance units (the “Performance Units”).

The restricted common stock awards vest in full on the first business day of 2024 and were granted in the following share amounts determined by reference to the closing stock price on the date of grant with a value equal to 75% of each grantee’s annual base salary on January 1, 2021:


Executive Officer		Number of shares of Restricted Common Stock
Phillip A. Reinsch, President and Chief Executive Officer		82,381
Robert R. Spears, Jr., Executive Vice President and Chief Investment Officer		79,086
Roy S. Kim, Senior Vice President - Asset and Liability Management		56,678
Lance J. Phillips, Senior Vice President and Chief Financial Officer		49,428

Each executive officer will enter into a Restricted Stock Agreement with the Company in the form filed with this Form 8-K as Exhibit 10.2.

Prior to granting Performance Units, the Committee adopted long-term performance unit award criteria (the “2021 Long-Term Performance Unit Award Criteria”). The 2021 Long-Term Performance Unit Award Criteria are the same structurally as the criteria adopted by the Committee in 2020. The number of shares of common stock into which the Performance Units are convertible is dependent on the extent, if any, that defined relative economic return, absolute economic return and relative total stockholder return performance metrics are achieved during a three-year performance period ending December 31, 2023, as specifically outlined in the 2021 Long-Term Performance Unit Award Criteria. As in the past, the conversion ratio for the Performance Units will be adjusted to interpolate the appropriate conversion factors for any metrics that perform above related Threshold but below the Maximum performance levels. Accordingly, the Performance Units could expire without converting into any shares of common stock or could be convertible into as many as 200% of the number of Performance Units granted.

Each executive officer of the Company was granted the following Performance Units in amounts determined by reference to the closing stock price on the date of grant with a value equal to 75% of each grantee’s annual base salary on January 1, 2021 as measured at Target performance levels. These units are convertible into the indicated number of shares of common stock:


Executive Officer	Number of Performance Units	Number of shares of Common Stock into which the Performance Units are Convertible
		Below Threshold	Threshold	Target	Maximum
Phillip A. Reinsch, President and Chief Executive Officer	82,381	0	41,190	82,381	164,762
Robert R. Spears, Jr., Executive Vice President and Chief Investment Officer	79,086	0	39,543	79,086	158,172
Roy S. Kim, Senior Vice President - Asset and Liability Management	56,678	0	28,339	56,678	113,356


Lance J. Phillips, Senior Vice President and Chief Financial Officer	49,428	0	24,714	49,428	98,856

The common stock into which the Performance Units are convertible will be issued by the Company following the end of the three-year performance period and on or prior to March 15, 2024. Dividends accrue from the date of grant and will be paid in cash when and if the units convert into shares of common stock based on the number of shares ultimately issued.

The 2021 Long-Term Performance Unit Award Criteria is filed with this Form 8-K as Exhibit 10.3 and is incorporated by reference herein. This summary does not purport to be complete and is qualified in its entirety by reference to Exhibit 10.3.

Each executive officer will enter into a Performance Unit Agreement with the Company in the form filed with this Form 8-K as Exhibit 10.4.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

CAPSTEAD MORTGAGE CORPORATION

January 11, 2021	By:	/s/ Lance J. Phillips
		Lance J. Phillips
		Senior Vice President, Chief Financial Officer
		and Secretary

Exhibit No.	Description
10.1	2021 Annual Incentive Compensation Program
10.2	Form of Restricted Stock Agreement
10.3	2021 Long-Term Performance Unit Award Criteria
10.4	Form of Performance Unit Agreement
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)