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CYS Investments, Inc. Announces Third Quarter 2012 Financial Results

The CPR of the Company’s Agency RMBS portfolio was approximately 15.4% for the month of October 2012.

Dividend

The Company declared a common dividend of $0.45 per share with respect to the third quarter of 2012, compared to $0.50 for the second quarter of 2012. Using the closing share price of $14.09 on September 28, 2012, the third quarter dividend equates to an annualized dividend yield of 12.8%.

Portfolio

At September 30, 2012, the Company’s $22.6 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 0.7% 2009 production; 5.8% 2010 production; 24.2% 2011 production; and 69.3% 2012 production. Additional information about our Agency RMBS portfolio at September 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 $ 224,154 $ 238,674 $ 103.69 $ 106.48 N/A 3.50 % 16.0 %
15 Year Fixed Rate 11,142,835 11,854,179 104.04 106.38 N/A 3.26 % 16.1 %
20 Year Fixed Rate 910,489 967,434 104.87 106.25 N/A 3.22 % 11.2 %
30 Year Fixed Rate 5,293,159 5,685,772 105.83 107.42 N/A 3.79 % 16.5 %

Hybrid ARMs

3,652,347   3,850,880   103.07   105.44   69.3   2.92 % 21.8 %

Total/Weighted Average

$ 21,222,984   $ 22,596,939   $ 104.35   $ 106.47   69.3   (3) 3.33 % 17.4 %

(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 September 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 September 30, 2012, the Company had financed its portfolio with approximately $13.9 billion of borrowings under repurchase agreements with a weighted average interest rate of 0.42% and a weighted average maturity of approximately 29.2 days. In addition, the Company had payable for securities purchased of $6.1 billion. The Company’s leverage ratio at September 30, 2012 was 7.7 to 1. At September 30, 2012, the Company’s liquidity position was approximately $1.8 billion, consisting of unpledged Agency RMBS, U.S. Treasury securities and cash and cash equivalents. Below is a list of outstanding borrowings under repurchase agreements at September 30, 2012 (dollars in thousands):

Counterparty    

Total Outstanding Borrowings

 

% of Total

   

% of Net Assets At Risk (1)

   

Weighted Average Maturity in Days

Bank of America Securities LLC $ 1,153,279 8.3 % 2.5 % 47
Bank of Nova Scotia 651,503 4.7 0.8 43
Barclays Capital, Inc. 1,145,405 8.2 2.3 53
BNP Paribas Securities Corp 660,121 4.7 1.4 16
Cantor Fitzgerald & Co. 210,581 1.5 0.5 11
Citigroup Global Markets, Inc. 475,957 3.4 1.0 21
Credit Suisse Securities (USA) LLC 647,308 4.7 1.1 18
Daiwa Securities America, Inc. 293,674 2.1 0.6 42
Deutsche Bank Securities Inc. 537,262 3.9 1.2 21
Goldman Sachs & Co. 788,524 5.7 1.6 18
Guggenheim Liquidity Services, LLC 245,567 1.8 0.5 21
Industrial and Commercial Bank of China Financial Services LLC 825,251 5.9 1.6 18
ING Financial Markets LLC 394,666 2.8 0.9 14
Jefferies & Company, Inc. 82,559 0.6 0.2 17
KGS Alpha Capital Markets 94,653 0.7 0.2 23
LBBW Securities LLC 188,240 1.4 0.4 51
Mitsubishi UFJ Securities (USA), Inc. 498,179 3.6 1.0 45
Mizuho Securities USA, Inc. 556,893 4.0 1.3 13
Morgan Stanley & Co. Inc. 659,175 4.7 1.4 30
Nomura Securities International, Inc. 628,791 4.5 1.5 21
RBC Capital Markets, LLC 698,620 5.0 1.5 18
South Street Securities LLC 377,416 2.7 1.1 18
The Royal Bank of Scotland PLC 158,729 1.1 0.3 10
UBS Securities LLC 942,641 6.8 2.1 54
Wells Fargo Securities, LLC 996,983   7.2   1.4   18
$ 13,911,977   100.0   % 28.4   %

___

(1) Equal to the fair value of pledged securities plus accrued interest income, minus the sum of repurchase agreement liabilities and accrued interest expense divided by net assets.

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