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October 19, 2005

Submitted Via EDGAR and Facsimile

Yolanda Crittendon

Staff Accountant, Division of Corporate Finance

U.S. Securities and Exchange Commission

450 Fifth Street, N.W.

Mail Stop 4561

Washington, D.C. 20549

    Re:

    Capstead Mortgage Corporation (the “Company”)

Form 10-K for the year ended December 31, 2004

File No. 001-08896

Dear Ms. Crittendon:

     Our responses to the staff’s comments in the October 11, 2005 comment letter are set forth
below. To facilitate your review, the comments of the staff have been set forth below in italics
and are followed by our response.

Form 10-K

Exhibit 13

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations, page 38

    1.

    We have read and considered your response to comment 4(a). We continue to believe the use of
operating income and operating income per share is confusingly similar to other measures
calculated under GAAP. As such, please revise future filings accordingly to label this
measure in a manner that is dissimilar to descriptions used under GAAP.

Yolanda Crittendon

October 19, 2005

Page 2

    In our view the terms “operating income” and “operating income per share” clearly describe
the non-GAAP financial measure we have defined. Accordingly, in lieu of using a
less-descriptive label, we have improved our presentation to make it clear that we are
presenting a non-GAAP financial measure. This has been accomplished by presenting these
measures separately from GAAP data under a separate caption entitled: “Other data” and an
additional subcaption entitled “Non-GAAP financial measures.” We have also included a
footnote to the subcaption title which has been revised to lead with the following
explanatory sentence:

    Capstead utilizes two non-GAAP financial measures, operating income
(calculated excluding from net income depreciation on real estate
and any gain on asset sales and CMO redemptions) and operating
income per common share (calculated excluding from net income (loss)
per diluted common share depreciation on real estate, any gain on
asset sales and CMO redemptions, and the dilutive effects, if
present, of the Series B preferred shares) under the belief they
provide investors with useful supplemental measures of the Company’s
operating performance.

    Attached as Exhibit A is an excerpt from our draft September 30, 2005 quarterly report on
Form 10-Q where this information is presented. Note that we do not specifically mention
these non-GAAP financial measures anywhere in the narrative of the MDA.

    2.

    In reference to your response to comment 4(b), please revise future filings to explain the
reasons why management believes this non-GAAP financial measure provides useful information to
investors regarding the Company’s operating performance. Your current disclosure that
operating income is used to determine the funds available for reinvestment or distribution
indicates that you are using this as a measure of your liquidity. Also tell us what
consideration was given to disclosing this non-GAAP information separately from other GAAP
information included in your Results of Operations table under a heading clearly labeled as
“Other Data”.

    For our September 30, 2005 quarterly report on Form 10-Q, we have modified our disclosure to
delete any reference to determining funds available for reinvestment or distribution. See
discussion in response to question 1 above regarding revising our presentation to present
our non-GAAP financial measures under a separate heading labeled “Other Data.” Also, in our
footnote to this data (see Exhibit A), a cross-reference has been provided to a table
entitled “Comparison of Non-GAAP Financial Measures to Net Income and Net Income (Loss) per
Diluted Common Share.” Attached as Exhibit B is a draft of this table.

Yolanda Crittendon

October 19, 2005

Page 3

     We respectfully submit the foregoing for your consideration in response to your comment letter
dated October 11, 2005. If you have any further questions concerning this filing, please contact
me at (214) 874-2380.

    Sincerely,

    /s/ Phillip A. Reinsch

    Phillip A. Reinsch

    Chief Financial Officer

    cc:

    Cicely Lucky – U.S. Securities and Exchange Commission (via facsimile)

Andrew F. Jacobs – Capstead Mortgage Corporation (via facsimile)

David Barbour – Andrews Kurth LLP (via facsimile)

Muriel C. McFarling – Andrews Kurth LLP (via facsimile)

Howard Altshuler – Ernst Young (via facsimile)

EXHIBIT A

RESULTS OF OPERATIONS

Contributions to net operating results by source, net of related interest expense, were as follows
(in thousands, except per share amounts):

    Quarter Ended

    Nine Months Ended

    September 30

    September 30

    2005

    2004

    2005

    2004

    Mortgage securities and similar investments:

    Agency Securities

    $
    4,636

    $
    9,285

    $
    18,501

    $
    32,114

    Non-agency Securities

    296

    766

    1,292

    3,394

    CMBS

    151

    146

    431

    508

    CMO collateral

    201

    165

    345

    571

    Net margin on financial assets

    5,284

    10,362

    20,569

    36,587

    Real estate held for lease:

    Lease revenue net of related interest expense

    1,395

    1,428

    4,157

    4,241

    Real estate depreciation

    (927
    )

    (927
    )

    (2,781
    )

    (2,781
    )

    Net margin on real estate held for lease

    468

    501

    1,376

    1,460

    Other revenue (expense):

    Gain on CMO redemption

    156

    –

    156

    –

    Other revenue

    320

    200

    731

    516

    Other interest expense

    (41
    )

    –

    (41
    )

    –

    Other operating expense

    (1,530
    )

    (1,576
    )

    (4,542
    )

    (4,907
    )

    Total other revenue (expense)

    (1,095
    )

    (1,376
    )

    (3,696
    )

    (4,391
    )

    Equity in earnings (losses) of unconsolidated
affiliates

    (42
    )

    –

    (42
    )

    –

    Net income

    4,615

    9,487

    18,207

    33,656

    Less cash dividends paid on preferred shares

    (5,064
    )

    (5,064
    )

    (15,192
    )

    (15,195
    )

    Net income available (loss attributable) to
common stockholders

    $
    (449
    )

    $
    4,423

    $
    3,015

    $
    18,461

    Net income per common share:

    Basic

    $
    (0.02
    )

    $
    0.27

    $
    0.16

    $
    1.20

    Diluted

    (0.02
    )

    0.27

    0.16

    1.19

    Other data:

    Regular common dividends declared per share

    0.02

    0.33

    0.30

    1.36

    Non-GAAP financial measures: *

    Operating income

    5,386

    10,414

    20,832

    36,437

    Operating income per common share

    0.02

    0.32

    0.30

    1.37

    *

    Capstead utilizes two non-GAAP financial measures, operating income (calculated excluding
from net income depreciation on real estate and any gain on asset sales and CMO redemptions)
and operating income per common share (calculated excluding from net income depreciation on
real estate, any gain on asset sales and CMO redemptions and the dilutive effects, if present,
of the Series B preferred shares) under the belief they provide investors with useful
supplemental measures of the Company’s operating performance. Depreciation on real estate is
excluded because it is not indicative of the change in value of the related real estate.
Gains are excluded because they are considered non-operating in nature and the amount and
timing of any such gains are dependent upon investment strategies and market conditions. The
Series B preferred shares are considered dilutive, for diluted net income per common share
purposes only, whenever annualized basic net income per common share exceeds $2.13 (the Series
B preferred share annualized dividend of $1.26 divided by the current conversion rate of
0.5918). Operating income per common share excludes the dilutive effects, if present, of the
Series B preferred shares because it is not economically advantageous to convert these shares
at market prices of both the common shares and Series B preferred shares; therefore few, if
any, Series B preferred share conversions are expected. See “Comparison of Non-GAAP Financial
Measures to Net Income and Net Income per Diluted Common Share.”

EXHIBIT B

COMPARISON OF NON-GAAP FINANCIAL MEASURES TO

NET INCOME AND NET INCOME (LOSS) PER DILUTED COMMON SHARE

The following table compares the calculation of operating income and operating income per common
share (both non-GAAP financial measures) to net income and net income (loss) per diluted common
share calculated in accordance with GAAP (in thousands, except per share amounts):

    Quarter Ended

    September 30, 2005

    September 30, 2004

    Operating

    Diluted

    Operating

    Diluted

    Net income

    $
    4,615

    $
    4,615

    $
    9,487

    $
    9,487

    Adjustments for:

    Depreciation on real estate

    927

    –

    927

    –

    Gains on CMO redemption

    (156
    )

    –

    –

    –

    Dividends on antidilutive preferred
shares preferred shares

    (5,064
    )

    (5,064
    )

    (4,983
    )

    (5,064
    )

    $
    322

    $
    (449
    )

    $
    5,431

    $
    4,423

    Weighted average common shares outstanding

    18,871

    18,871

    16,645

    16,645

    Net effect of dilutive securities:

    Stock options

    30

    –

    25

    25

    Preferred A shares

    –

    –

    303

    –

    18,901

    18,871

    16,973

    16,670

    Per common share

    $
    0.02

    $
    (0.02
    )

    $
    0.32

    $
    0.27

    Nine Months Ended

    September 30, 2005

    September 30, 2004

    Operating

    Diluted

    Operating

    Diluted

    Net income

    $
    18,207

    $
    18,207

    $
    33,656

    $
    33,656

    Adjustments for:

    Depreciation on real estate

    2,781

    –

    2,781

    –

    Gain on CMO redemption

    (156
    )

    –

    –

    –

    Dividends on antidilutive preferred shares

    (15,192
    )

    (15,192
    )

    (14,949
    )

    (14,949
    )

    $
    5,640

    $
    3,015

    $
    21,488

    $
    18,707

    Weighted average common shares outstanding

    18,867

    18,867

    15,387

    15,387

    Net effect of dilutive securities:

    Stock options

    48

    48

    33

    33

    Preferred A shares

    –

    –

    309

    309

    18,915

    18,915

    15,729

    15,729

    Per common share

    $
    0.30

    $
    0.16

    $
    1.37

    $
    1.19