NEW YORK--(BUSINESS WIRE)--Jul. 18, 2012--
CYS Investments, Inc. (NYSE: CYS) (“CYS” or the “Company”) today
announced financial results for the quarter ended June 30, 2012.
Second Quarter 2012 Highlights
-
GAAP net income of $101.7 million, or $0.87 per diluted share.
-
Core Earnings of $44.8 million, or $0.38 per diluted share.
-
A component of the Company’s net income for the quarter was $15.0
million, or $0.13 per diluted share, of appreciation on forward
settling purchases (also referred to as “drop income”) that was
accounted for as net gain from investments on our statement of
operations and therefore excluded from our Core Earnings.
-
Operating expenses of 1.33% of average net assets.
-
June 30, 2012 net asset value of $13.52 per share after declaring a
$0.50 dividend per share on June 8, 2012.
-
Interest rate spread net of hedge of 1.71%.
-
Weighted average amortized cost of Agency RMBS of $103.47.
Public Offering
On July 16, 2012, the Company completed an underwritten public offering
of 46,000,000 shares of common stock at a public offering price of
$13.70 per share, raising approximately $622.2 million of net proceeds,
bring the total shares of common stock outstanding to 166,603,668 as of
July 16, 2012. The Company has invested all of the net proceeds of this
offering into Agency RMBS and interest rate swap and caps as indicated
below:
|
Asset Type
|
|
|
Coupon
|
|
|
Settle Date
|
|
|
Par Value (in
thousands)
|
|
|
Weighted Average
Price
|
|
15 Year Fixed Rate
|
|
|
3.00
|
%
|
|
|
July 2012
|
|
|
1,414,103
|
|
|
|
105.44
|
|
15 Year Fixed Rate
|
|
|
3.00
|
%
|
|
|
August 2012
|
|
|
150,000
|
|
|
|
105.33
|
|
15 Year Fixed Rate
|
|
|
3.00
|
%
|
|
|
October 2012
|
|
|
100,000
|
|
|
|
104.95
|
|
30 Year Fixed Rate
|
|
|
3.50
|
%
|
|
|
September 2012
|
|
|
1,150,000
|
|
|
|
105.59
|
|
30 Year Fixed Rate
|
|
|
3.50
|
%
|
|
|
October 2012
|
|
|
1,250,000
|
|
|
|
105.32
|
|
Hybrid ARMs
|
|
|
2.44
|
%
|
|
|
July 2012
|
|
|
148,853
|
|
|
|
104.52
|
|
Hybrid ARMs
|
|
|
2.40
|
%
|
|
|
August 2012
|
|
|
40,000
|
|
|
|
104.25
|
|
Hybrid ARMs
|
|
|
2.40
|
%
|
|
|
September 2012
|
|
|
200,000
|
|
|
|
104.10
|
|
Total/Weighted Average
|
|
|
|
|
|
|
|
|
$
|
4,452,956
|
|
|
|
$
|
105.33
|
|
Interest Rate Swaps
|
|
|
Expiration
Date
|
|
|
Fixed
Pay Rate
|
|
|
Floating
Receive Rate(1)
|
|
|
Notional
Amount
(in thousands)
|
|
Counterparty
|
|
|
|
|
|
|
|
|
|
Credit Suisse International (3)
|
|
|
7/13/2017
|
|
|
0.86
|
|
%
|
|
0.456
|
|
%
|
|
$
|
750,000
|
|
Interest Rate Caps
|
|
|
Expiration
Date
|
|
|
|
|
|
|
|
|
Notional
Amount
(in thousands)
|
|
Counterparty
|
|
|
|
|
|
|
|
Cap Rate
|
|
|
|
The Royal Bank of Scotland plc
|
|
|
7/16/2019
|
|
|
|
|
|
1.25
|
|
%
|
|
$
|
500,000
|
|
Morgan Stanley Capital Service, Inc.
|
|
|
7/16/2022
|
|
|
|
|
|
1.75
|
|
|
|
500,000
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,000,000
|
Second Quarter 2012 Results
The Company had net income of $101.7 million during the second quarter
of 2012, or $0.87 per diluted share, compared to net income of $69.1
million, or $0.66 per diluted share, in the first quarter of 2012.
During the second quarter of 2012, the Company had Core Earnings of
$44.8 million, or $0.38 per diluted share, compared to $41.9 million, or
$0.39 per diluted share, in the first quarter of 2012. Core Earnings
represents a non-GAAP financial measure and is defined as net income
(loss) excluding (i) net realized gain (loss) on investments and
termination of swap contracts and (ii) net unrealized appreciation
(depreciation) on investments and swap and cap contracts. The $2.9
million quarter-over-quarter increase in Core Earnings was generally the
result of the assets settling that were purchased with the proceeds from
the February 1, 2012 public offering. The $0.01 quarter-over-quarter
decrease in Core Earnings per diluted share was generally the result of
a lower interest rate spread net of hedge, which decreased to 1.71%
during the second quarter of 2012, compared to 1.88% during the first
quarter of 2012.
Drop income is a component of our net income accounted for as net gain
from investments on our statement of operations and therefore excluded
from our Core Earnings. During the second quarter of 2012, the Company
generated drop income of approximately $15.0 million, or $0.13 per
diluted share, compared to approximately $15.4 million, or $0.15 per
diluted share, during the first quarter of 2012. During the second
quarter of 2012, the Company sold Agency RMBS with fast projected
prepayments, and replaced the sold assets with new issue forward
settling purchases of approximately $5.1 billion of Agency RMBS. These
purchases had a weighted average drop of approximately $0.18 per $100.00
par value per month, compared to forward purchases in the first quarter
of 2012 of approximately $4.4 billion of Agency RMBS with a weighted
average drop of approximately $0.21 per $100.00 par value per month. As
a result of the portfolio transactions discussed above, the Company
recognized $61.1 million of net realized gains on investments in the
second quarter of 2012, as compared to $5.2 million in the first quarter
of 2012.
The Company utilizes forward settling transactions for the majority of
its purchases. The benefit of purchasing assets in forward settling
transactions is that the Company can purchase assets with specified
stipulations such as average loan size and percentage of loans in a
particular state. This customization allows the Company to better manage
prepayments. In addition, forward settling purchases allow the Company
to obtain an asset at a discount (also referred to as “drop”) to its
current market value; however, the Company does not receive any interest
income on the asset until the forward transaction settles. Obtaining the
asset at a discount to market value reduces the impact of prepayments
and is accretive to net asset value.
The Company’s net asset value per share on June 30, 2012 was $13.52
after declaring a $0.50 dividend per share on June 8, 2012, compared
with $13.14 at March 31, 2012. The increase was primarily the result of
Agency RMBS outperforming swaps.
The Company’s operating expenses were $5.3 million, or 1.33% of average
net assets, for the second quarter of 2012, compared to $5.1 million, or
1.46% of average net assets, for the first quarter of 2012. The increase
in operating expenses was primarily the result of an increase in
compensation and benefits. However, expenses as a percentage of net
assets decreased as a result of the larger asset base.
|
(dollars in thousands)
|
|
Three Months Ended
|
|
Key Metrics*
|
|
June 30, 2012
|
|
March 31, 2012
|
|
Average Agency RMBS (1)
|
|
$
|
10,737,980
|
|
|
$
|
9,238,905
|
|
|
Average repurchase agreements (2)
|
|
$
|
9,497,267
|
|
|
$
|
8,194,067
|
|
|
Average net assets (3)
|
|
$
|
1,591,432
|
|
|
$
|
1,406,049
|
|
|
Average common shares outstanding (4)
|
|
116,881
|
|
|
104,620
|
|
|
Average yield on Agency RMBS (5)
|
|
2.62%
|
|
2.78%
|
|
Average cost of funds and hedge (6)
|
|
0.91%
|
|
0.90%
|
|
Interest rate spread net of hedge (7)
|
|
1.71%
|
|
1.88%
|
|
Operating expense ratio (8)
|
|
1.33%
|
|
1.46%
|
|
Leverage ratio (at period end) (9)
|
|
7.6:1
|
|
7.7:1
|
(1) The Company's average Agency RMBS for the period was calculated by
averaging the month end cost basis of settled Agency RMBS during the
period.
(2) The Company's average repurchase agreements for the period were
calculated by averaging the month end repurchase agreements balance
during the period.
(3) The Company's average net assets for the period were calculated by
averaging the month end net assets during the period.
(4) Our average common shares outstanding was calculated by averaging
the daily common shares outstanding during the period.
(5) The Company's average yield on Agency RMBS for the period was
calculated by dividing interest income from Agency RMBS by average
Agency RMBS.
(6) The Company's average cost of funds and hedge for the period was
calculated by dividing total interest expense, including net swap and
cap interest income (expense), by average repurchase agreements.
(7) The Company's interest rate spread net of hedge for the period was
calculated by subtracting average cost of funds and hedge from average
yield on Agency RMBS.
(8) The Company's operating expense ratio is calculated by dividing
operating expenses by average net assets.
(9) The Company's leverage ratio was calculated by dividing (i) the
Company's repurchase agreements balance plus payable for securities
purchased minus receivable for securities sold by (ii) net assets.
* All percentages are annualized.
Prepayments
The portfolio recorded $651.7 million in scheduled and unscheduled
principal repayments and prepayments, which equated to a constant
prepayment rate (“CPR”) of approximately 18.1% and net amortization of
premium of $22.7 million for the second quarter of 2012. This compared
to $543.2 million in scheduled and unscheduled principal repayments and
prepayments, which equated to a CPR of approximately 17.2% and net
amortization of premium of $16.9 million for the first quarter of 2012.
The increase in prepayments and repayments occurred due to a further
decrease in mortgage interest rates during the second quarter of 2012.
Dividend
The Company declared a common dividend of $0.50 per share with respect
to the second quarter of 2012, the same as for the first quarter of
2012. Using the closing share price of $13.77 on June 29, 2012, the
second quarter dividend equates to an annualized dividend yield of 14.5%.
Portfolio
At June 30, 2012, the Company’s $14.1 billion portfolio of Agency RMBS
was backed by fixed-rate mortgages and hybrid adjustable-rate mortgages
(“Hybrid ARMs”) with 0 to 84 months to reset. The Agency RMBS portfolio
is made up of 1.1% 2009 production; 10.5% 2010 production; 42.1% 2011
production; and 46.3% 2012 production. Additional information about our
Agency RMBS portfolio at June 30, 2012 is summarized below:
|
|
|
Par Value
|
|
Fair Value
|
|
Weighted Average
|
|
Asset Type
|
|
(in thousands)
|
|
Cost/Par
|
|
Fair
Value/Par
|
|
MTR(1)
|
|
Coupon
|
|
CPR(2)
|
|
10 Year Fixed Rate
|
|
$
|
239,966
|
|
|
$
|
253,746
|
|
|
$
|
103.79
|
|
|
$
|
105.74
|
|
|
N/A
|
|
3.50
|
%
|
|
15.7
|
%
|
|
15 Year Fixed Rate
|
|
8,130,084
|
|
|
8,575,298
|
|
|
103.34
|
|
|
105.48
|
|
|
N/A
|
|
3.38
|
%
|
|
14.4
|
%
|
|
20 Year Fixed Rate
|
|
138,700
|
|
|
149,688
|
|
|
103.14
|
|
|
107.92
|
|
|
N/A
|
|
4.50
|
%
|
|
21.1
|
%
|
|
30 Year Fixed Rate
|
|
1,832,303
|
|
|
1,937,542
|
|
|
105.43
|
|
|
105.74
|
|
|
N/A
|
|
3.87
|
%
|
|
—
|
%
|
|
Hybrid ARMs
|
|
3,015,667
|
|
|
3,161,861
|
|
|
102.63
|
|
|
104.85
|
|
|
67.4
|
|
|
3.09
|
%
|
|
18.6
|
%
|
|
Total/Weighted Average
|
|
$
|
13,356,720
|
|
|
$
|
14,078,135
|
|
|
$
|
103.47
|
|
|
$
|
105.40
|
|
|
67.4
|
|
(3)
|
3.40
|
%
|
|
15.8
|
%
|
(1) MTR, or “Months to Reset” is the number of months
remaining before the fixed rate on a hybrid ARM becomes a variable rate.
At the end of the fixed period, the variable rate will be determined by
the margin and the pre-specified caps of the ARM. After the fixed
period, 100% of the hybrid ARMS in the portfolio reset annually.
(2) CPR is a method of expressing the prepayment rate for a
mortgage pool that assumes that a constant fraction of the remaining
principal is prepaid each month or year. Specifically, the constant
prepayment rate is an annualized version of the prior three month
prepayment rate for those bonds held at June 30, 2012. Securities with
no prepayment history are excluded from this calculation.
(3) Weighted average months to reset of our hybrid ARM
portfolio.
Financing, Leverage & Liquidity
At June 30, 2012, the Company had financed its portfolio with
approximately $9.8 billion of borrowings under repurchase agreements
with a weighted average interest rate of 0.39% and a weighted average
maturity of approximately 27.3 days. In addition, the Company had
payable for securities purchased of $3.1 billion. The Company’s leverage
ratio at June 30, 2012 was 7.6 to 1. At June 30, 2012, the Company’s
liquidity position was approximately $1,039.6 million, consisting of
unpledged Agency RMBS, U.S. treasury bills and cash and cash
equivalents. Below is a list of outstanding borrowings under repurchase
agreements at June 30, 2012 (dollars in thousands):
|
Counterparty
|
|
Total
Outstanding
Borrowings
|
|
% of
Total
|
|
|
Amount
At Risk (1)
|
|
Weighted
Average
Maturity in
Days
|
|
Bank of America Securities LLC
|
|
$
|
509,687
|
|
|
5.2
|
|
%
|
|
$
|
28,867
|
|
|
29
|
|
Bank of Nova Scotia
|
|
477,432
|
|
|
4.9
|
|
|
|
17,592
|
|
|
42
|
|
Barclays Capital, Inc.
|
|
455,563
|
|
|
4.7
|
|
|
|
24,499
|
|
|
28
|
|
BNP Paribas Securities Corp
|
|
321,138
|
|
|
3.3
|
|
|
|
18,030
|
|
|
17
|
|
Cantor Fitzgerald & Co.
|
|
206,794
|
|
|
2.1
|
|
|
|
12,098
|
|
|
11
|
|
Citigroup Global Markets, Inc.
|
|
507,343
|
|
|
5.2
|
|
|
|
30,171
|
|
|
19
|
|
Credit Suisse Securities (USA) LLC
|
|
623,242
|
|
|
6.4
|
|
|
|
30,245
|
|
|
16
|
|
Daiwa Securities America, Inc.
|
|
239,800
|
|
|
2.5
|
|
|
|
14,820
|
|
|
23
|
|
Deutsche Bank Securities, Inc.
|
|
481,491
|
|
|
4.9
|
|
|
|
29,094
|
|
|
51
|
|
Goldman Sachs & Co.
|
|
657,611
|
|
|
6.7
|
|
|
|
36,581
|
|
|
34
|
|
Guggenheim Liquidity Services, LLC
|
|
261,811
|
|
|
2.7
|
|
|
|
16,236
|
|
|
21
|
|
Industrial and Commercial Bank of China Financial Services LLC
|
|
640,825
|
|
|
6.6
|
|
|
|
33,614
|
|
|
42
|
|
ING Financial Markets LLC
|
|
314,466
|
|
|
3.2
|
|
|
|
17,643
|
|
|
11
|
|
Jefferies & Company, Inc.
|
|
89,842
|
|
|
0.9
|
|
|
|
5,049
|
|
|
46
|
|
LBBW Securities LLC
|
|
186,363
|
|
|
1.9
|
|
|
|
10,496
|
|
|
52
|
|
Mitsubishi UFJ Securities (USA), Inc.
|
|
518,833
|
|
|
5.3
|
|
|
|
28,475
|
|
|
31
|
|
Mizuho Securities USA, Inc.
|
|
333,394
|
|
|
3.4
|
|
|
|
19,852
|
|
|
25
|
|
Morgan Stanley & Co. Inc.
|
|
295,705
|
|
|
3.0
|
|
|
|
16,237
|
|
|
39
|
|
Nomura Securities International, Inc.
|
|
251,848
|
|
|
2.6
|
|
|
|
12,906
|
|
|
23
|
|
RBC Capital Markets, LLC
|
|
461,531
|
|
|
4.7
|
|
|
|
27,512
|
|
|
31
|
|
South Street Securities LLC
|
|
398,060
|
|
|
4.1
|
|
|
|
24,472
|
|
|
18
|
|
The Royal Bank of Scotland PLC
|
|
167,529
|
|
|
1.7
|
|
|
|
10,020
|
|
|
11
|
|
UBS Securities LLC
|
|
658,336
|
|
|
6.8
|
|
|
|
37,477
|
|
|
17
|
|
Wells Fargo Securities, LLC
|
|
704,669
|
|
|
7.2
|
|
|
|
24,467
|
|
|
18
|
|
|
|
$
|
9,763,313
|
|
|
100.0
|
|
%
|
|
$
|
526,453
|
|
|
|
___
(1) Equal to the fair value of pledged securities plus accrued interest
income, minus the sum of repurchase agreement liabilities and accrued
interest expense.
Hedging
The Company utilizes interest rate swap and cap contracts to hedge the
interest rate risk associated with the financed portion of its Agency
RMBS portfolio. As of June 30, 2012, the Company had entered into 16
interest rate swap contracts with an aggregate notional amount of $5.2
billion, a weighted average fixed rate of 1.462% and a weighted average
expiration of 2.3 years. At June 30, 2012, the Company had entered into
seven interest rate cap contracts with a notional amount of $1.9
billion, a weighted average cap rate of 1.653% and a weighted average
expiration of 5.5 years. These interest rate swap and cap contracts are
described below (dollars in thousands):
|
Interest Rate Swaps
|
|
Expiration
|
|
Fixed
|
|
|
Floating
|
|
|
Notional
|
|
Fair
|
|
Counterparty
|
|
Date
|
|
Pay Rate
|
|
|
Receive Rate(1)
|
|
|
Amount
|
|
Value
|
|
The Royal Bank of Scotland plc
|
|
5/26/2013
|
|
1.6000
|
|
%
|
|
0.467
|
|
%
|
|
$
|
100,000
|
|
|
$(998
|
)
|
|
The Royal Bank of Scotland plc
|
|
6/30/2013
|
|
1.3775
|
|
|
|
0.461
|
|
|
|
300,000
|
|
|
(2,609
|
)
|
|
The Royal Bank of Scotland plc
|
|
7/15/2013
|
|
1.3650
|
|
|
|
0.467
|
|
|
|
300,000
|
|
|
(2,676
|
)
|
|
Goldman Sachs
|
|
12/15/2013
|
|
1.3088
|
|
|
|
0.468
|
|
|
|
400,000
|
|
|
(4,566
|
)
|
|
Goldman Sachs
|
|
12/16/2013
|
|
1.2640
|
|
|
|
0.468
|
|
|
|
400,000
|
|
|
(4,305
|
)
|
|
The Royal Bank of Scotland plc
|
|
12/16/2013
|
|
1.2813
|
|
|
|
0.468
|
|
|
|
500,000
|
|
|
(5,492
|
)
|
|
Deutsche Bank Group
|
|
12/17/2013
|
|
1.3225
|
|
|
|
0.468
|
|
|
|
400,000
|
|
|
(4,655
|
)
|
|
The Royal Bank of Scotland plc
|
|
7/1/2014
|
|
1.7200
|
|
|
|
0.461
|
|
|
|
100,000
|
|
|
(2,328
|
)
|
|
Nomura Global Financial Products, Inc.
|
|
7/16/2014
|
|
1.7325
|
|
|
|
0.467
|
|
|
|
250,000
|
|
|
(6,017
|
)
|
|
Deutsche Bank Group
|
|
8/16/2014
|
|
1.3530
|
|
|
|
0.466
|
|
|
|
200,000
|
|
|
(3,389
|
)
|
|
Goldman Sachs
|
|
9/23/2014
|
|
1.3120
|
|
|
|
0.468
|
|
|
|
500,000
|
|
|
(8,293
|
)
|
|
Deutsche Bank Group
|
|
10/6/2014
|
|
1.1725
|
|
|
|
0.469
|
|
|
|
240,000
|
|
|
(3,287
|
)
|
|
Goldman Sachs
|
|
2/14/2015
|
|
2.1450
|
|
|
|
0.467
|
|
|
|
500,000
|
|
|
(20,299
|
)
|
|
Nomura Global Financial Products, Inc.
|
|
6/2/2016
|
|
1.9400
|
|
|
|
0.467
|
|
|
|
300,000
|
|
|
(13,722
|
)
|
|
Morgan Stanley Capital Services, Inc. (2)
|
|
12/19/2016
|
|
1.4263
|
|
|
|
0.509
|
|
|
|
250,000
|
|
|
(5,117
|
)
|
|
Credit Suisse International (3)
|
|
4/24/2017
|
|
1.3100
|
|
|
|
0.537
|
|
|
|
500,000
|
|
|
(5,584
|
)
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
5,240,000
|
|
|
$(93,337
|
)
|
|
Interest Rate Caps
|
|
Expiration
|
|
|
|
|
|
|
|
Notional
|
|
Fair
|
|
Counterparty
|
|
Date
|
|
|
|
|
Cap Rate
|
|
|
Amount
|
|
Value
|
|
The Royal Bank of Scotland plc
|
|
12/30/2014
|
|
|
|
|
2.0725
|
|
%
|
|
$
|
200,000
|
|
|
$
|
147
|
|
|
The Royal Bank of Scotland plc
|
|
10/15/2015
|
|
|
|
|
1.4275
|
|
|
|
300,000
|
|
|
987
|
|
|
The Royal Bank of Scotland plc
|
|
11/8/2015
|
|
|
|
|
1.3600
|
|
|
|
200,000
|
|
|
750
|
|
|
Credit Suisse International
|
|
5/23/2019
|
|
|
|
|
2.0000
|
|
|
|
300,000
|
|
|
8,801
|
|
|
Wells Fargo Bank, N.A.
|
|
6/1/2019
|
|
|
|
|
1.7500
|
|
|
|
300,000
|
|
|
10,043
|
|
|
ING Capital Markets, LLC
|
|
6/29/2019
|
|
|
|
|
1.5000
|
|
|
|
300,000
|
|
|
11,441
|
|
|
UBS AG
|
|
7/2/2019
|
|
|
|
|
1.5000
|
|
|
|
300,000
|
|
|
11,702
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
1,900,000
|
|
|
$
|
43,871
|
|
_______________
(1) Resets quarterly to 3-Month LIBOR
(2) The interest rate swap effective date is December 19, 2012 and does
not accrue any income or expense until that date.
(3) The interest rate swap effective date is April 24, 2013 and does not
accrue any income or expense until that date.
Conference Call
The Company will host a conference call at 9:00 AM Eastern Time on
Thursday, July 19, 2012, to discuss its financial results for the
quarter ended June 30, 2012. To participate in the event by telephone,
please dial 866.713.8563 at least 10 minutes prior to the start time and
reference the conference passcode 30403304. International callers should
dial 617.597.5311 and reference the same passcode. The conference call
will also be webcast live over the Internet and can be accessed at the
Company’s web site at http://www.cysinv.com.
To listen to the live webcast, please visit http://www.cysinv.com
at least 15 minutes prior to the start of the call to register,
download, and install necessary audio software. A dial-in replay will be
available on Thursday, July 19, 2012, at approximately 12:00 PM Eastern
Time through Thursday, August 2, 2012, at approximately 11:00 AM Eastern
Time. To access this replay, please dial 888.286.8010 and enter the
conference ID number 57013594. International callers should dial
617.801.6888 and enter the same conference ID number. A replay of the
conference call will also be archived on the Company’s website at http://www.cysinv.com.
About CYS Investments, Inc.
CYS Investments, Inc. is a specialty finance company that invests on a
leveraged basis in residential mortgage pass-through certificates for
which the principal and interest payments are guaranteed by Fannie Mae,
Freddie Mac or Ginnie Mae. The Company refers to these securities as
Agency RMBS. CYS Investments, Inc. has elected to be taxed as a real
estate investment trust for federal income tax purposes.
|
CYS INVESTMENTS, INC.
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share numbers)
|
|
June 30, 2012
|
|
March 31, 2012
|
|
December 31, 2011*
|
|
ASSETS:
|
|
|
|
|
|
|
|
Investments in securities, at fair value (including pledged
assets
of $10,066,807, $8,806,898 and $8,412,295,
respectively)
|
|
$
|
14,162,935
|
|
|
$
|
13,388,839
|
|
|
$
|
9,466,128
|
|
Interest rate cap contracts, at fair value
|
|
43,871
|
|
|
4,548
|
|
|
5,966
|
|
Cash and cash equivalents
|
|
13,846
|
|
|
10,643
|
|
|
11,508
|
|
Receivable for securities sold and principal repayments
(including
pledged assets of $354,838, $0 and $0,
respectively)
|
|
365,583
|
|
|
116,918
|
|
|
5,550
|
|
Interest receivable
|
|
35,472
|
|
|
34,152
|
|
|
27,815
|
|
Other assets
|
|
1,421
|
|
|
805
|
|
|
1,090
|
|
Total assets
|
|
14,623,128
|
|
|
13,555,905
|
|
|
9,518,057
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
Repurchase agreements
|
|
9,763,313
|
|
|
8,234,669
|
|
|
7,880,814
|
|
Interest rate swap contracts, at fair value
|
|
93,337
|
|
|
84,941
|
|
|
79,476
|
|
Payable for securities purchased
|
|
3,058,300
|
|
|
3,634,983
|
|
|
463,302
|
|
Distribution payable
|
|
59,465
|
|
|
58,069
|
|
|
-
|
|
Accrued interest payable (including accrued interest on
repurchase
agreements of $3,920, $2,425 and $3,747,
respectively
|
|
15,696
|
|
|
15,564
|
|
|
15,617
|
|
Accrued expenses and other liabilities
|
|
3,163
|
|
|
1,887
|
|
|
1,390
|
|
Total liabilities
|
|
12,993,274
|
|
|
12,030,113
|
|
|
8,440,599
|
|
NET ASSETS
|
|
$
|
1,629,854
|
|
|
$
|
1,525,792
|
|
|
$
|
1,077,458
|
|
Net assets consist of:
|
|
|
|
|
|
|
|
Common Stock, $0.01 par value, 500,000 shares authorized
(120,595,
116,139 and 82,753 shares issued and outstanding,
respectively)
|
|
$
|
1,206
|
|
|
$
|
1,161
|
|
|
$
|
828
|
|
Additional paid in capital
|
|
1,496,613
|
|
|
1,434,836
|
|
|
997,884
|
|
Retained earnings
|
|
132,035
|
|
|
89,795
|
|
|
78,746
|
|
NET ASSETS
|
|
$
|
1,629,854
|
|
|
$
|
1,525,792
|
|
|
$
|
1,077,458
|
|
NET ASSET VALUE PER SHARE
|
|
$
|
13.52
|
|
|
$
|
13.14
|
|
|
$
|
13.02
|
|
________
|
|
|
|
|
|
|
|
* Derived from audited financial statements.
|
|
|
|
|
|
|
|
CYS INVESTMENTS, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
(In thousands, except per share numbers)
|
|
June 30, 2012
|
|
March 31, 2012
|
|
June 30, 2012
|
|
INVESTMENT INCOME
|
|
|
|
|
|
|
|
Interest income from Agency RMBS
|
|
$
|
70,352
|
|
|
$
|
64,147
|
|
|
$
|
134,499
|
|
|
Other income
|
|
1,395
|
|
|
1,222
|
|
|
2,617
|
|
|
Total investment income
|
|
71,747
|
|
|
65,369
|
|
|
137,116
|
|
|
EXPENSES:
|
|
|
|
|
|
|
|
Interest
|
|
8,993
|
|
|
6,853
|
|
|
15,846
|
|
|
Compensation and benefits
|
|
3,346
|
|
|
3,164
|
|
|
6,510
|
|
|
General, administrative and other
|
|
1,933
|
|
|
1,955
|
|
|
3,888
|
|
|
Total expenses
|
|
14,272
|
|
|
11,972
|
|
|
26,244
|
|
|
Net investment income
|
|
57,475
|
|
|
53,397
|
|
|
110,872
|
|
|
GAINS AND (LOSSES) FROM INVESTMENTS:
|
|
|
|
|
|
|
|
Net realized gain (loss) on investments
|
|
61,113
|
|
|
5,173
|
|
|
66,286
|
|
|
Net unrealized appreciation (depreciation) on investments
|
|
7,473
|
|
|
27,977
|
|
|
35,450
|
|
|
Net gain (loss) from investments
|
|
68,586
|
|
|
33,150
|
|
|
101,736
|
|
|
GAINS AND (LOSSES) FROM SWAP AND CAP CONTRACTS:
|
|
|
|
|
|
|
|
Net swap and cap interest income (expense)
|
|
(12,687
|
)
|
|
(11,506
|
)
|
|
(24,193
|
)
|
|
Net gain (loss) on termination of swap contracts
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net unrealized appreciation (depreciation) on swap and cap contracts
|
|
(11,669
|
)
|
|
(5,923
|
)
|
|
(17,592
|
)
|
|
Net gain (loss) from swap and cap contracts
|
|
(24,356
|
)
|
|
(17,429
|
)
|
|
(41,785
|
)
|
|
NET INCOME
|
|
$
|
101,705
|
|
|
$
|
69,118
|
|
|
$
|
170,823
|
|
|
NET INCOME PER COMMON SHARE - DILUTED
|
|
$
|
0.87
|
|
|
$
|
0.66
|
|
|
$
|
1.54
|
|
Core Earnings:
Core Earnings represents a non-GAAP financial measure and is defined as
net income (loss) excluding net gain (loss) from investments, net gain
(loss) on termination of swap contracts and net unrealized appreciation
(depreciation) on swap and cap contracts. In order to evaluate the
effective yield of the portfolio, management uses Core Earnings to
reflect the net investment income of our portfolio as adjusted to
include the net swap and cap interest income (expense). Core Earnings
allows management to isolate the interest income (expense) associated
with our swaps and caps in order to monitor and project our borrowing
costs and interest rate spread. In addition, management utilizes Core
Earnings as a key metric in conjunction with other portfolio and market
factors to determine the appropriate leverage and hedging ratios, as
well as the overall structure of the portfolio.
The Company adopted Accounting Standards Codification (“ASC”) 946, Clarification
of the Scope of Audit and Accounting Guide Investment Companies (“ASC
946”), prior to its deferral in February 2008, while most, if not
all, other public companies that invest only in Agency RMBS have not
adopted ASC 946. Under ASC 946, the Company uses financial reporting
specified for investment companies, and accordingly, its investments are
carried at fair value with changes in fair value included in earnings.
Most other public companies that invest only in Agency RMBS include most
changes in the fair value of their investments within shareholders’
equity, not in earnings. As a result, investors are not able to readily
compare the Company’s results of operations to those of most of its
competitors. The Company believes that the presentation of its Core
Earnings is useful to investors because it provides a means of comparing
its Core Earnings to those of its competitors. In addition, because Core
Earnings isolates the net swap and cap interest income (expense) it
provides investors with an additional metric to identify trends in the
Company’s portfolio as they relate to the interest rate environment.
The primary limitation associated with Core Earnings as a measure of the
Company’s financial performance over any period is that it excludes the
effects of net realized gain (loss) from investments. In addition, the
Company’s presentation of Core Earnings may not be comparable to
similarly-titled measures of other companies, who may use different
calculations. As a result, Core Earnings should not be considered as a
substitute for the Company’s GAAP net income (loss) as a measure of our
financial performance or any measure of our liquidity under GAAP.
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
(In thousands)
|
|
June 30, 2012
|
|
March 31, 2012
|
|
June 30, 2012
|
|
NET INCOME
|
|
$
|
101,705
|
|
|
$
|
69,118
|
|
|
$
|
170,823
|
|
|
Net (gain) loss from investments
|
|
(68,586
|
)
|
|
(33,150
|
)
|
|
(101,736
|
)
|
|
Net (gain) loss on termination of swap contracts
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net unrealized (appreciation) depreciation on swap and cap contracts
|
|
11,669
|
|
|
5,923
|
|
|
17,592
|
|
|
Core Earnings
|
|
$
|
44,788
|
|
|
$
|
41,891
|
|
|
$
|
86,679
|
|
Source: CYS Investments, Inc.
CYS Investments, Inc.
Richard E. Cleary, 617-639-0440
Chief
Operating Officer
|
View printer-friendly version
