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CYS Investments, Inc. Announces Third Quarter 2012 Financial Results

(2) The Company's average unsettled Agency RMBS for the period is calculated by averaging the month end cost basis of unsettled Agency RMBS during the period.

(3) The Company's average repurchase agreements for the period is calculated by averaging the month end repurchase agreements balance during the period.

(4) The Company's average net assets for the period is calculated by averaging the month end net assets during the period.

(5) Our average common shares outstanding is calculated by averaging the daily common shares outstanding during the period.

(6) The Company's average yield on Agency RMBS for the period is calculated by dividing interest income from Agency RMBS by average Agency RMBS.

(7) The Company's average cost of funds and hedge for the period is calculated by dividing total interest expense, including net swap and cap interest income (expense), by average repurchase agreements.

(8) The Company's interest rate spread net of hedge for the period is calculated by subtracting average cost of funds and hedge from average yield on Agency RMBS.

(9) The Company's operating expense ratio is calculated by dividing operating expenses by average net assets.

(10) The Company's leverage ratio is 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 $745.3 million in scheduled and unscheduled principal repayments and prepayments, which equated to a constant prepayment rate (“CPR”) of approximately 17.3% and net amortization of premium of $29.5 million for the third quarter of 2012. This compared to $651.7 million in scheduled and unscheduled principal repayments and prepayments, which equated to a CPR of approximately 18.1% and net amortization of premium of $22.7 million for the second quarter of 2012. The decrease in CPR during the third quarter of 2012 was consistent with seasonal trends. However, the Company expects the fourth quarter 2012 CPR will increase due in part to the Federal Reserve Board's (the "Federal Reserve") announcement of an open-ended program to purchase an additional $40 billion of Agency RMBS per month until the unemployment rate, among other economic indicators, show signs of improvement. This program, when combined with the Federal Reserve's existing programs to extend its holdings' average maturity, and reinvest principal payments from its holdings of agency debt and Agency RMBS into Agency RMBS, is expected to increase the Federal Reserve's holdings of long-term securities by approximately $85 billion per month through the end of 2012.

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