CYS Investments, Inc. Announces Second Quarter 2012 Financial Results

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.

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