CYS Investments, Inc. (NYSE: CYS) (“CYS”, "we", "our", or the
“Company”) today announced financial results for the quarter ended
June 30, 2014.
Second Quarter 2014 Summary Results
- June 30, 2014 book value per
common share of $10.31 after declaring a $0.32 dividend per common
share on June 9, 2014, compared to our book value of $9.68 at March
31, 2014.
- June 30, 2014 leverage ratio of
6.35 to 1.
- GAAP net income available to common
shares of $153.2 million, or $0.95 per diluted common share.
- Core Earnings plus Drop Income of $53.2
million ($33.8 million core earnings and $19.4 million drop
income), or $0.33 per diluted common share ($0.21 Core Earnings and
$0.12 Drop Income).
- Operating expenses of 1.26% of average
stockholders' equity.
- Interest rate spread net of hedge
including Drop Income of 1.78%.
- Weighted average amortized cost of
Agency Residential Mortgage Backed Securities ("Agency RMBS") and
debt securities issued by the United States Department of Treasury
("U.S. Treasuries") of $102.69.
- Constant Prepayment Rate of 7.6% for
the quarter.
Market Commentary
The relatively calm and favorable U.S. interest rate environment
during the first quarter of 2014 continued in the second quarter of
2014, with 10 year U.S. Treasuries rates falling 19 basis points
("bps") in the second quarter of 2014 following a 31 bps decline in
the first quarter. On a global basis, this appealed to fixed
income-oriented investors, who continued to present strong bids for
fixed income assets globally, and sellers were few. The Agency RMBS
market experienced another strong quarter, largely recovering from
Agency RMBS cheapening in 2013. The yield on 10 year U.S.
Treasuries ended the second quarter of 2014 at 2.53%, or 228 bps
above the Federal Funds Target Rate ("Fed Funds Rate"). The current
yield curve reflects market consensus for a modest tightening of
Federal Reserve's (the "Fed") monetary policy in the coming
quarters, consistent with a prognosis that the Fed Funds Rate will
remain at the same level for the near term. During the second
quarter, the strength of the bond market recovery helped our book
value per common share increase over the quarter, and provided an
opportunity to adjust the risk profile of our portfolio. We added
to and lengthened our hedging position by replacing two swaps and
five caps with six new swaps, including three seven-year swaps. Two
of the seven-year swaps are cancelable in June 2015. On the asset
side, we added approximately $400 million in value to our Agency
RMBS backed by 30 year mortgages and $500 million in purchases of
U.S. Treasuries, for a total increase in the value of the Company's
investments of approximately $900 million. Through these activities
we seek to maintain our earnings power while reducing our interest
rate risk. The forward market in the Agency RMBS sector continued
to offer good opportunities. In the second quarter of 2014,
approximately 17.1% of our investments in securities at fair market
value, or approximately $2.4 billion, was deployed in forward
settling ("TBA") transactions taking advantage of the forward
market. This compared to 12.0%, or approximately $1.6 billion, at
the end of the first quarter. Year to date we have been active in
the TBA market due to favorable financing terms and positive dollar
roll gains.
Subsequent to June 30, 2014, we sold approximately $500 million
of three-year and $650 million of five-year U.S. Treasuries, and
replaced them with approximately $1.4 billion of higher yielding
Agency RMBS mostly backed by 30 year mortgages. We did this to
opportunistically capitalize on an attractive buying opportunity
and to increase the yield on our investment securities portfolio.
With interest rates generally stabilized and the Fed signaling a
2015 tightening, supply of Agency RMBS will likely continue to be
thin. We believe that macroeconomic factors and the interest rate
environment should limit prepayments on our existing Agency RMBS
and the supply of new ones; therefore, our July 2014 Agency RMBS
purchases represented a unique opportunity. The Fed has announced
that it expects to conclude its monthly Agency RMBS and U.S.
Treasuries purchase program in October 2014. As the Fed continues
to taper its asset purchases and ends its purchasing program, we
anticipate further Agency RMBS buying opportunities to occur, and
we have significant liquidity to take advantage of these
opportunities. Despite the lower leverage, we expect our portfolio
to continue to generate attractive earnings, and we hope to see
opportunities to deploy more of our capital at higher yields.
Leverage & Liquidity
The Company maintained its leverage levels during the second
quarter in order to minimize potential adverse impacts of an
expected return to volatility in interest rates in the second half
of 2014, ending the second quarter of 2014 with a leverage ratio of
6.35 to 1, compared to 6.32 to 1 at March 31, 2014.
At June 30, 2014, the Company’s liquidity position,
consisting of unpledged Agency RMBS, U.S. Treasuries and cash, was
approximately $1.5 billion, or 76.4% of stockholders' equity,
compared to $1.4 billion, or 75.3% of stockholders' equity, at
March 31, 2014.
Portfolio
During the second quarter of 2014, the Company increased its
Agency RMBS portfolio to $12.2 billion at June 30, 2014, from
$11.8 billion at March 31, 2014, adding $0.4 billion in value
to the portion of the Agency RMBS portfolio backed by 30 year
mortgages. We also purchased $0.5 billion of U.S. Treasuries. These
investing activities pushed the aggregate portfolio value to $14.2
billion at June 30, 2014, compared to $13.3 billion at March 31,
2014. Additionally, we added to and lengthened our hedging
positions. The Company made these adjustments in order to reduce
its duration gap, improve its liquidity and better position the
portfolio to take advantage of a possible Agency RMBS market
cheapening as the Fed continued to taper its asset purchase
activities into October 2014. The following tables detail the
Company's Agency RMBS and U.S. Treasuries ("Debt Securities")
portfolio at June 30, 2014 and March 31, 2014.
June 30, 2014 March 31,
2014 Fair Value (in billions) % of Total
Fair Value (in billions) % of Total 15
Year Fixed Rate $ 6.4 45 % $ 6.4 48 % 20 Year Fixed Rate 0.1 1 %
0.1 1 % 30 Year Fixed Rate 3.7 26 % 3.3 24 % Hybrid ARMs 2.0 14 %
2.0 15 % U.S. Treasury Securities 2.0 14 % 1.5 12 %
Total $ 14.2 100 % $ 13.3 100 %
The Company’s June 30, 2014 Debt Securities are summarized
below:
Face Value Fair Value
Weighted Average Asset Type (in
thousands) Cost/Face Fair
Value/Face
Yield(1)
Coupon CPR(2)
15 Year Fixed Rate $ 6,090,446 $ 6,368,659 $ 102.66
$ 104.57 1.99 % 3.15 % 6.2 % 20 Year Fixed Rate
75,567 82,467 103.01 109.13 1.14 % 4.50 % 22.0 % 30 Year Fixed Rate
3,511,537 3,725,156 103.97 106.08 2.73 % 3.99 % 5.9 % Hybrid ARMs
(3) 1,920,595 1,970,318 103.51 102.59 1.87 % 2.57 % 12.9 % U.S.
Treasury Securities 2,050,000 2,050,562 99.78
100.03 1.34 % 1.35 % NA Total $ 13,648,145 $
14,197,162 $ 102.69 $ 104.02 2.06 % 3.02 % 7.6
%
__________
(1) This is a forward yield and is calculated based on the cost
basis of the security at June 30, 2014.
(2) Constant prepayment rate ("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, 2014. Securities with no
prepayment history are excluded from this calculation.
(3) The weighted average months to reset of our Hybrid
Adjustable Rate Mortgages ("Hybrid ARM") portfolio was 61.1 at
June 30, 2014. 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 Hybrid
ARM and will reset annually.
Second Quarter 2014 Results
The Company had net income available to common shares of $153.2
million during the second quarter of 2014, or $0.95 per diluted
common share, compared to net income of $125.5 million, or $0.78
per diluted common share, in the first quarter of 2014. The
increase in net income available to common shares was largely
attributable to an increase in net realized and unrealized gains in
the second quarter of 2014.
During the second quarter of 2014, the Company had Core Earnings
plus Drop Income of $53.2 million, or $0.33 per diluted common
share (Core Earnings of $33.8 million, or $0.21 per diluted common
share, and Drop Income of $19.4 million, or $0.12 per diluted
common share), compared to $56.7 million, or $0.35 per diluted
common share (Core Earnings of $45.1 million, or $0.28 per diluted
common share, and Drop Income of $11.6 million, or $0.07 per
diluted common share), in the first quarter of 2014. The relative
shift in Core Earnings and Drop Income was due to an increase in
the TBA portion of the Company's portfolio relative to the rest of
the portfolio during the second quarter of 2014.
The Company's net interest income was $44.9 million for the
second quarter of 2014, down approximately $11.1 million from $56.0
million in the first quarter of 2014, due to the higher proportion
of TBAs in the portfolio as compared to the cash bond component of
the portfolio in the second quarter of 2014 as explained above.
The Company’s interest rate spread net of hedge including Drop
Income was 1.78% for the second quarter of 2014, compared to 1.89%
for the first quarter of 2014. The overall decrease in interest
rate spread net of hedge was primarily due to the lower yield on
U.S. Treasuries.
The Company had a net realized and unrealized gain from
investments of $190.6 million, which included $33.1 million of net
realized gain for the second quarter of 2014, compared to a net
realized and unrealized gain from investments of $105.9 million,
which included $16.7 million of net realized gain, for the first
quarter of 2014.
The Company’s book value per common share on June 30, 2014
was $10.31, after declaring a $0.32 dividend per common share on
June 9, 2014, compared to $9.68 at March 31, 2014.
The Company’s operating expenses were $6.0 million, or 1.26% of
average stockholders' equity, for the second quarter of 2014,
compared to $5.8 million, or 1.25% of average stockholders' equity,
for the first quarter of 2014.
(in thousands)
Three Months Ended
Key Balance Sheet Metrics June 30, 2014
March 31, 2014 Average settled Debt Securities (1) $
11,599,873 $ 12,472,238 Average total Debt Securities (2) $
13,711,749 $ 13,454,972 Average repurchase agreements (3) $
9,981,049 $ 10,867,627 Average Debt Securities liabilities (4) $
12,092,925 $ 11,850,361 Average stockholders' equity (5) $
1,916,575 $ 1,861,121 Average common shares outstanding (6) 162,031
161,831 Leverage ratio (at period end) (7) 6.35:1 6.32:1
Key Performance Metrics* Average yield on settled Debt
Securities (8) 2.48 % 2.71 % Average yield on total Debt Securities
including Drop Income (9) 2.67 % 2.85 % Average cost of funds and
hedge (10) 1.08 % 1.04 % Adjusted average cost of funds and hedge
(11) 0.89 % 0.96 % Interest rate spread net of hedge (12) 1.40 %
1.67 % Interest rate spread net of hedge including Drop Income (13)
1.78 % 1.89 % Operating expense ratio (14) 1.26 % 1.25 %
__________
(1) The average settled Debt Securities is calculated by
averaging the month end cost basis of settled Debt Securities
during the period.
(2) The average total Debt Securities is calculated by averaging
the month end cost basis of total Debt Securities during the
period.
(3) The average repurchase agreements are calculated by
averaging the month end repurchase agreements balance during the
period.
(4) The average Debt Securities liabilities are calculated by
adding the average month end repurchase agreements balance plus
average unsettled Debt Securities during the period.
(5) The average stockholders' equity is calculated by averaging
the month end stockholders' equity during the period.
(6) The average common shares outstanding are calculated by
averaging the daily common shares outstanding during the
period.
(7) The 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)
stockholders' equity.
(8) The average yield on Debt Securities for the period is
calculated by dividing total interest income by average settled
Debt Securities.
(9) The average yield on total Debt Securities including Drop
Income for the period is calculated by dividing total interest
income plus Drop Income by average total Debt Securities.
(10) The average cost of funds and hedge for the period is
calculated by dividing interest expense by average repurchase
agreements.
(11) The adjusted average cost of funds and hedge for the period
is calculated by dividing interest expense by average total Debt
Securities liabilities.
(12) The interest rate spread net of hedge for the period is
calculated by subtracting average cost of funds and hedge from
average yield on settled Debt Securities.
(13) The interest rate spread net of hedge including Drop Income
for the period is calculated by subtracting adjusted average cost
of funds and hedge from average yield on total Debt Securities
including Drop Income.
(14) The operating expense ratio for the period is calculated by
dividing operating expenses by average stockholders' equity.
* All percentages are annualized.
Financing
At June 30, 2014, the Company had financed its portfolio
with approximately $9.9 billion of borrowings under repurchase
agreements with a weighted average interest rate of 0.30% and a
weighted average maturity of approximately 39 days. In addition,
the Company had payables for securities purchased net of receivable
for securities sold of $2.5 billion. This compared to $10.0 billion
of borrowings under repurchase agreements with a weighted average
interest rate of 0.31% and a weighted average maturity of
approximately 43 days and $1.6 billion of payable for securities
purchased net of receivable for securities sold at March 31,
2014.
During the second quarter of 2014, the Company did not
experience material changes in the availability of repurchase
agreement borrowings or to haircuts on the Debt Securities that the
Company uses as collateral for such borrowings. The Company has
taken steps to minimize its counterparty risk by diversifying its
borrowings across its global counterparties, and increasing the
number of counterparties from whom we may seek borrowings. The
Company added five counterparties during the second quarter of
2014, and at June 30, 2014, the Company did not have
repurchase agreements outstanding with any one counterparty greater
than 6% of the total outstanding borrowings. Since
December 31, 2013, we have increased the number of our master
repurchase agreements with financial institutions from 37 to 43 at
June 30, 2014. Below is a summary, by region, of outstanding
borrowings under repurchase agreements at June 30, 2014
(dollars in thousands):
Counterparty Region Number of
Counterparties Total Outstanding
Borrowings % of Total North America
15 $ 4,832,860 48.9 % Europe 10 2,648,584 26.9 % Asia 5
2,392,393 24.2 % Total 30 $ 9,873,837 100.0 %
Hedging
The Company utilizes interest rate swap and cap contracts to
hedge the interest rate risk associated with the financing of our
Agency RMBS and U.S. Treasuries portfolio. As of June 30,
2014, the Company had entered into interest rate swap contracts
with an aggregate notional amount of $7.3 billion, a weighted
average fixed rate of 1.34%, and a weighted average expiration of
4.2 years. The receive rate on the Company's interest rate swaps is
the three month London Interbank Offered Rate ("LIBOR"). At
June 30, 2014, the Company had entered into interest rate cap
contracts with a notional amount of $2.5 billion, a weighted
average cap rate of 1.28%, and a weighted average expiration of 5.6
years.
In the second quarter of 2014, the Company opened six new
interest rate swaps, consisting of three five-year swaps and three
seven-year swaps, of which two of the seven-year swaps are
cancelable in June 2015. We also closed two interest rate swaps and
five interest rate caps in the second quarter of 2014 due to
shorter maturities and/or higher interest rate cap strike prices in
the market. This combination of activities reduced the Company’s
exposure to interest rate risk by expanding and lengthening the
overall tenor of the Company’s hedge book. In addition, the swaps
will receive better cash flow if 3-month LIBOR increases long
before the cap strikes would be effective. Because we expect
interest rate volatility will increase during the second half of
2014 and in 2015, we believe these new hedges will position the
Company effectively for changes in the market environment that may
occur.
The Company's interest rate swap and cap contracts outstanding
at June 30, 2014 are described below (dollars in
thousands):
Interest
Rate Swaps Weighted Average Notional Fair
Expiration Year Fixed Pay Rate
Amount Value 2017 0.94 % $ 3,250,000 $ 12,506
2018 1.16 % 2,000,000 10,540 2019 1.75 % 800,000 (3,417 ) 2021 2.43
% 1,200,000 (5,896 ) Total 1.34 % $ 7,250,000 $
13,733
Interest Rate Caps Weighted
Average Notional Fair Expiration Year
Cap Rate Amount
Value 2019 1.34 % 800,000 32,908 2020 1.25 % 1,700,000
99,047 Total 1.28 % $ 2,500,000 $ 131,955
Drop Income
Drop Income is a component of our net realized and unrealized
gain (loss) on investments on our interim consolidated statements
of operations, and is therefore excluded from Core Earnings. Drop
Income is the difference between the spot price and the forward
settlement price for the same Agency RMBS on trade date. This
difference is also the economic equivalent of the assumed net
interest margin (yield less financing costs) of the Agency RMBS
from trade date to settlement date. The Company derives Drop Income
through utilization of forward settling transactions of Agency
RMBS.
The Company had Drop Income of $19.4 million, or $0.12 per
diluted common share during the second quarter of 2014, compared to
$11.6 million, or $0.07 per diluted common share, in the first
quarter of 2014.
Prepayments
The portfolio recorded $294.7 million in scheduled and
unscheduled principal repayments and prepayments, which equated to
a CPR of approximately 7.6% and net amortization of premium of
$11.1 million for the second quarter of 2014. This compared to
$279.8 million in scheduled and unscheduled principal repayments
and prepayments, which equated to a CPR of approximately 5.6% and
net amortization of premium of $10.3 million for the first quarter
of 2014. The CPR of the Company's Agency RMBS portfolio was
approximately 10.8% for the month of July 2014.
Dividend
The Company declared a common dividend of $0.32 per share for
the second quarter of 2014, unchanged from the first quarter of
2014. Using the closing share price of $9.02 on June 30, 2014,
the second quarter dividend equates to an annualized dividend yield
of 14.2%.
Share Repurchase Program
In November 2012, the Company's Board of Directors authorized
the repurchase of shares of common stock having an aggregate value
of up to $250 million. During the first and second quarter of 2014,
the Company did not repurchase any shares. As of June 30,
2014, the Company had approximately $134.3 million available for
future repurchases under the program. On July 21, 2014, the Company
announced that its Board of Directors has authorized the repurchase
of shares of the Company's common stock having an aggregate value
of up to $250 million, which includes the approximately $134.3
million available for repurchase under the November 2012
authorization. Accordingly, the Company now has $250 million
available to repurchase shares of its common stock.
Conference Call
The Company will host a conference call at 9:00 AM Eastern Time
on Tuesday, July 22, 2014, to discuss its financial results
for the quarter ended June 30, 2014. To participate in the
call by telephone, please dial 800.708.4539 at least 10 minutes
prior to the start time and reference the conference passcode
37666035#. International callers should dial 847.619.6396 and
reference the same passcode. The conference call will 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 Tuesday, July 22,
2014, at approximately 12:00 PM Eastern Time through Tuesday,
August 5, 2014 at approximately 11:00 AM Eastern Time. To access
this replay, please dial 888.843.7419 and enter the conference ID
number 37666035#. International callers should dial 630.652.3042
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.
Additional Information
The Company will make available additional quarterly information
for the benefit of its stockholders through a supplemental
presentation that will be available at the Company's website,
www.cysinv.com, contemporaneously with the filing of the Company's
quarterly report on Form 10-Q. The presentation will be available
on the Webcasts/Presentations tab of the Investor Relations section
of the Company's website.
About CYS Investments, Inc.
CYS Investments, Inc. is a specialty finance company that
primarily 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.
Forward-Looking Statements Disclaimer
This Report contains “forward-looking statements” made pursuant
to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995, including those relating to interest rate
volatility, the prices of Agency RMBS, earnings, deployment of
capital, yields, investment environment, interest rates, book value
per common share, hedges, forward settling transactions, forward
yield, prepayments, and the effect of actions of the U.S.
government, including the Fed, on our results. Forward-looking
statements typically are identified by use of the terms such as
“believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,”
“intend,” “should,” “may” or similar expressions. Forward-looking
statements are based on the Company's beliefs, assumptions and
expectations of the Company's future performance, taking into
account all information currently available to the Company. The
Company cannot assure you that actual results will not vary from
the expectations contained in the forward-looking statements. All
of the forward-looking statements are subject to numerous possible
events, factors and conditions, many of which are beyond the
control of the Company and not all of which are known to the
Company, including, without limitation, market conditions and those
described in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2013, and Quarterly Report on Form
10-Q for the quarter ended March 31, 2014, which have been filed
with the Securities and Exchange Commission. All forward-looking
statements speak only as of the date on which they are made. New
risks and uncertainties arise over time, and it is not possible to
predict those events or how they may affect us. Except as required
by law, the Company is not obligated to, and does not intend to,
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
CYS INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except per share numbers)
June 30,
2014 March 31, 2014 December 31, 2013*
Assets:
Investments in securities, at fair value
(including pledged assets of $10,373,874, $10,484,331 and
$11,835,975, respectively)
$ 14,204,107 $ 13,314,680 $ 13,865,793 Derivative assets, at fair
value 165,487 261,522 295,707 Cash 16,736 13,396 4,992 Receivable
for securities sold and principal repayments 74,591 3,582 429,233
Interest receivable 32,790 33,984 36,731 Other assets 986
334 608 Total assets 14,494,697 13,627,498
14,633,064
Liabilities and stockholders'
equity: Liabilities: Repurchase agreements 9,873,837
10,014,048 11,206,950 Derivative liabilities, at fair value 19,799
17,767 29,458 Payable for securities purchased 2,562,827 1,641,598
1,556,821 Payable for cash received as collateral 12,944 37,956
37,938 Distribution payable 56,256 56,258 4,410 Accrued interest
payable (including accrued interest on repurchase agreements of
$3,838, $3,079 and $7,204, respectively) 20,284 14,982 24,613
Accrued expenses and other liabilities 3,034 1,616
4,218 Total liabilities 12,548,981 11,784,225
12,864,408
Stockholders' equity: Preferred Stock,
$25.00 par value, 50,000 shares authorized: 7.75% Series A
Cumulative Redeemable Preferred Stock, (3,000 shares issued and
outstanding, respectively, $75,000 in aggregate liquidation
preference) $ 72,369 $ 72,369 $ 72,369 7.50% Series B Cumulative
Redeemable Preferred Stock, (8,000 shares issued and outstanding,
respectively, $200,000 in aggregate liquidation preference) 193,531
193,531 193,531 Common Stock, $0.01 par value, 500,000 shares
authorized (162,019, 162,024 and 161,650 shares issued and
outstanding, respectively) 1,620 1,620 1,616 Additional paid in
capital 2,048,619 2,047,508 2,046,530 Accumulated deficit (370,423
) (471,755 ) (545,390 ) Total stockholders' equity $ 1,945,716
$ 1,843,273 $ 1,768,656
Total liabilities
and stockholders' equity $ 14,494,697 $ 13,627,498
$ 14,633,064
Book value per common share $
10.31 $ 9.68 $ 9.24
CYS INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended (In thousands, except per share numbers)
June 30, 2014 March 31, 2014 Interest income:
Interest income from Agency RMBS $ 65,420 $ 80,186 Other interest
income 6,558 4,181 Total interest income 71,978
84,367 Interest expense: Repurchase agreement
interest expense 7,583 9,423 Swap and cap interest expense 19,456
18,923 Total interest expense 27,039 28,346
Net interest income 44,939 56,021 Other income
(loss): Net realized gain (loss) on investments 33,118 16,670 Net
unrealized gain (loss) on investments 157,479 89,234 Net realized
gain (loss) on termination of swap and cap contracts (6,004 )
(9,323 ) Net unrealized gain (loss) on swap and cap contracts
(65,181 ) (16,240 ) Other income 50 119 Total other
income (loss) 119,462 80,460 Expenses: Compensation
and benefits 3,712 3,629 General, administrative and other 2,308
2,165 Total expenses 6,020 5,794 Net
income (loss) $ 158,381 $ 130,687 Dividends on
preferred stock (5,203 ) (5,203 ) Net income (loss) available to
common shares $ 153,178 $ 125,484 Net income (loss)
per common share basic & diluted $ 0.95 $ 0.78
Core Earnings:
Core Earnings represents a non-GAAP financial measure and is
defined as net income (loss) available to common shares excluding
net realized gain (loss) on investments, net unrealized gain (loss)
on investments, net realized gain (loss) on termination of swap and
cap contracts and net unrealized gain (loss) on swap and cap
contracts. Management uses Core Earnings to evaluate the effective
yield of the portfolio after operating expenses. 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 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 and unrealized gain
(loss) on investments and swap and cap contracts. In addition, the
Company's presentation of Core Earnings may not be comparable to
similarly-titled measures of other companies, which 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 (In thousands)
June 30,
2014 March 31, 2014 NET INCOME (LOSS)
AVAILABLE TO COMMON SHARES $ 153,178 $ 125,484 Net realized (gain)
loss on investments (33,118 ) (16,670 ) Net unrealized (gain) loss
on investments (157,479 ) (89,234 ) Net realized (gain) loss on
termination of swap and cap contracts 6,004 9,323 Net unrealized
(gain) loss on swap and cap contracts 65,181 16,240
Core Earnings $ 33,766 $ 45,143
CYS Investments, Inc.Richard E. Cleary, 617-639-0440Chief
Operating Officer
Cys Investments, Inc. (NYSE:CYS)
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