UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 19, 2015
CYS Investments, Inc.
(Exact name of Registrant as specified in its charter)
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Maryland |
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001-33740 |
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20-4072657 |
(State or Other Jurisdiction of
Incorporation or Organization) |
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(Commission
File Number) |
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(I.R.S. Employer
Identification No.) |
890 Winter Street, Suite 200
Waltham, Massachusetts 02451
(Address of principal executive offices)
(Registrants telephone number, including area code): (617) 639-0440
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 7.01. |
Regulation FD Disclosure. |
On May 19, 2015, CYS Investments, Inc. (the
Company) announced that Kevin E. Grant, CFA, the Companys CEO and President, will deliver a presentation at the Wells Fargo Securities 2015 Specialty Finance Conference at JW Marriott Essex House New York in New York City on
Tuesday, May 19, 2015, at approximately 9:15 a.m. (Eastern Time). A copy of the presentation slides is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference in its entirety.
Item 9.01. |
Financial Statements and Exhibits. |
(d) Exhibits.
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Exhibit
No. |
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Description |
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99.1 |
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CYS Investments, Inc. Presentation Slides, dated May 19, 2015 |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
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CYS INVESTMENTS, INC. |
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Date: May 19, 2015 |
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By: |
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/s/ Thomas A. Rosenbloom |
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Thomas A. Rosenbloom Secretary |
INDEX TO EXHIBITS
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Exhibit
No. |
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Description |
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99.1 |
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CYS Investments, Inc. Presentation Slides, dated May 19, 2015 |
Exhibit 99.1
Exhibit 99.1
Investment Outlook
May 2015
Kevin E. Grant, CFA Chief Executive Officer and President
Wells Fargo Securities Specialty Finance Conference May 19, 2015
Forward-Looking Statements
This presentation
contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on managements beliefs and
assumptions, current expectations, estimates and projections. Such statements, including information relating to the Companys expectations for distributions, financing from the Federal Home Loan Bank, availability and cost of financing,
liquidity, counterparty risk, hedging, volatility, market conditions, monetary policy, the yield curve, the economy, interest expense, affordability, availability and valuation of housing and mortgages, movements in interest rates, actions by the
U.S. Government, the Federal Reserve and other government entities, the performance of the Companys target assets, the impact of current Federal Reserve voters on certain policies of the Federal Reserve, the policy views of central banks, and
the size of the mortgage market, are not considered historical facts and are considered forward-looking information under the federal securities laws. This information may contain words such as believes, plans,
expects, intends, estimates or similar expressions.
This information is
not a guarantee of the Companys future performance and is subject to risks, uncertainties and other important factors that could cause the Companys actual performance or achievements to differ materially from those expressed or implied
by this forward-looking information and include, without limitation, changes in the market value and yield of our assets, changes in interest rates and the yield curve, net interest margin, return on equity, availability and terms of financing and
hedging, the likelihood that proposed legislation is made law and the anticipated impact thereof, actions by the U.S. government or any agency thereof, including the Federal Reserve, and the effects of such actions and various other risks and
uncertainties related to our business and the economy, some of which are described in our filings with the SEC. Given these uncertainties, you should not rely on forward-looking information. The Company undertakes no obligations to update any
forward-looking information, whether as a result of new information, future events or otherwise.
2
CYS Overview
A Real Estate Investment Trust
Formed in January 2006
Agency Residential Mortgage Backed Securities
Target Assets
Senior Kevin Grant, CEO, President, Chairman
Management Frances Spark, CFO
Focus on Cost Self managed: highly scalable
Efficiency
Extensive and Financing lines with 48 lenders
Diverse Sources of Swap agreements with 20 counterparties
Financing
Company intends to distribute all or substantially all of its REIT
Dividend Policy taxable income
CYS Now Has Access to GSE Financing
Access to
Reliable, Low-Cost, Same-Day Funding
Term Range: Overnight to 30 years
Fixed or Floating Rate
Embedded Options Enhances Liquidity Management Diversifies Counterparty Risk Eliminates Hedging Limitations Provides Financial Flexibility
4
Cincinnati FHLB Membership:
Compelling Economics
+ Flexibility = Strategic Advantage
Total FHLB Advances
19992013 3 Month Rates LIBOR
$ in Millions April 2007December 2009 FHLB DNs
Treasury
1,000 7%
900 6%
800
700 5%
600 4%
500
3%
400
300 2%
200
1%
100
0 0%
Jul Jul Jul
-
1999 2000 2001 2002 2003 2004
2005 2006 2007 2008 2009 2010 2011 2012 2013 07Apr 07 07Oct 08Jan 08Apr 08 08Oct 09Jan 09Apr 09 09Oct
Enhanced Liquidity Increased borrowing capacity improves liability management.
Compelling Economics Fixed/Floating rates, amortizing structures, embedded options available out to 30 years.
Lowers hedging costs, expands REIT hedging limitations.
Lower Volatility Financing across the curve enables more closely matched book.
Counterparty Upgrade AAA/AA+ Rated, GSE Execution
5
Agency MBS Market Continues To See Strong Demand
15 Year: Hedged vs. Unhedged
15 Year Fixed Hedged with Swaps: April 2009 May 2015
5.00
4.50
4.00
3.50
3.00 Borrow Short May 15, 2015
Invest Long
2.50
2.00
1.50
1.00
0.50
0.00
AprJul Oct Jan AprJul Oct Jan AprJul Oct Jan AprJul Oct Jan AprJul Oct Jan Apr Jul Oct Jan Apr
0909 09101010 10111111 11 121212 12131313
131414 14 14 1515 -
5 Year Hedged (i) 15 Year Unhedged (ii)
Source: Bloomberg.
Note: Spreads calculated as: (i) 15 year CC Index = 50% 4 year swap, and (ii) 15 year Current Coupon Index
6
Agency MBS Market Continues To See Strong Demand
30 Year: Hedged vs. Unhedged
30 Year Fixed Hedged with Swaps: April 2009May 2015
2015 Apr-15
15,
May Jan-15 Oct-14
Jul-14 Apr-14 Jan-14 Unhedged
Oct-13 Year Jul-13
30 Apr-13 Short Jan-13
Long
Oct-12
Borrow Invest Jul-12 Apr-12
Jan-12
Oct-11
Jul-11 Apr-11 Hedged Jan-11 Year Oct-10
30
Jul-10 Apr-10 Jan-10 Oct-09 Jul-09
Apr-09 . 25 .
75 . 25 75 . 25 . 75 . 25 . . 75 25 . 75 .
5 4 4 3 3 2 2 1 1 0
Source: Bloomberg
Note: spread calculated as:30 year cc index 90% 5 year swap
7
End of QE Poses New Risks and New Opportunities
5
Year Swap vs. Fed Funds 30 Yr MBS15 Yr MBS Spread 7 Yr Cap/Floor Implied Vol
January 2005 May
2015 November 2012 May 2015 April 2012 May 2015
1.10
3.50 75.0
1.00 May 15, 2015
3.00 70.0
0.90
2.50 65.0
May 15, 2015 May 15, 2015
2.00 0.80 60.0
1.50 0.70 55.0
1.00 50.0
0.60
0.50 45.0
0.50
0.00
40.0
-0.50 0.40
35.0
-1.00 0.30
30.0
Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Nov Feb May Aug Nov Feb May Aug Nov Feb May AprJul Oct
Jan AprJul Oct Jan AprJul Oct Jan Apr
05 06 07 08 09 10 11 12 13 14 15 12 13 13 13 13 14 14 14 14
15 15 12 12131313 13141414 141515 -
12
Yield Curve 30 Year MBS Have Cheapened Volatility in the Cap/Floor ?Creates positive carry Meaningfully
Relative to 15 Year Markets Hit a Low in July 2013 MBS
Very low cost of financing
Good ROE
Hedge flexibility very important
Fed still
fighting deflation
Source: Bloomberg
8
Global Ten Year Yields:
Is U.S. Growth Out of
Sync with Rest of World?
Government Ten Year Yields
UK, US, Canada, Germany, Japan
August 2011May 2015
3.00
August 2011May 2015
2.50
USGG10YR (0.047)
2.00 GBTPGR10 (0.619)
GCAN10YR (0.684)
1.50
1.00
GDBR10 (1.533)
0.50
GJGB10 (0.639)
0.00
AugOct Dec Feb Apr Jun Aug Oct Dec Feb
Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr
11 11 11 12 12 12 12 12 12 13 13 13 13 13 13 14 14 14 14
14 14 15 15
Source: Bloomberg, May 15, 2015
9
Actual Economic Performance: Sluggish vs. Fed Projections
Source: Board of Governors of the Federal Reserve, March 2015
Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents, March 2015 Advance release of table 1 of the Summary of Economic Projections to be released with
the FOMC minutes
Percent
Central tendency1 Range2
Variable 2015 2016 2017
Longer run 2015 2016 2017 Longer run
Change in real GDP 2.3 to 2.7 2.3 to 2.7 2.0 to 2.4 2.0 to 2.3 2.1 to 3.1
2.2 to 3.0 1.8 to 2.5 1.8 to 2.5
2.6 to 3.0 2.5 to 3.0 2.3 to 2 5 2.0 to 2.3 2.1 to 3.2 2.1 to 3.0 2.0 to 2.7
1.8 to 2.7
5.0 to 5.2 4.9 to 5.1 4.8 to 5.1 5.0 to 5.2 4.8 to 5.3 4.5 to 5.2 4.8 to 5.5 4.9 to 5.8
5.2 to 5.3 5.0 to 5.2 4.9 to 5.3 5.2 to 5.5 5.0 to 5.5 4.9 to 5.4 4.7 to 5.7 5.0 to 5.8
0.6 to 0.8 1.7 to 1.9 1.9 to 2.0 2.0 0.6 to 1.5 l.6 to 2.4 1.7 to 2. 2 2.0
1.0 to 1.6 1.7 to 2.0 1.8 to 2.0 2.0 1.0 to 2.2 l.6 to 2.1 1.8 to 2.2 2.0
Core PCE inflation3 1.3 to 1.4 1.5 to 1.9 l.8 to 2.0 1.2 to 1.6 1.5 to 2.4 1.7 to 2.2
December projection 1.5 to 1.8 1.7 to 2.0 1.8 to 2.0 1.5 to 2.2 l.6 to 2.1 l.8 to 2.2
NOTE: Projections of change in real gross domestic product (GDP) and projections for both measures of inflation are
percent changes from the fourth quarter of the previous year to the fourth quarter of the year indicated. PCE inflation and core PCE inflation are the percentage rates of change in, respectively, the price index for personal consumption expenditures
(PCE) and the price index for PCE excluding food and energy. Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated. Each participants projections are based on his or
her assessment of appropriate monetary policy. Longer-run projections represent each participants assessment of the rate to which each variable would be expected to converge under appropriate monetary policy and in the absence of Further
shocks to the economy. The December projections were made in conjunction with the meeting of the Federal Open Market Committee on December 16-17, 2014.
1. The central tendency excludes the three highest and three lowest projections for each variable in each year.
2. The range for a variable in a given year includes all participants projections, from lowest to highest, for that variable in that year.
3. Longer-run projections for core PCE inflation are not collected.
10
Transition to a Normalized Yield Curve:
Will the
Fed Push Outor Pull InForward Rate Guidance?
Overview of FOMC Participants Assessments of
Can the Economy Withstand the
Appropriate Monetary Policy Implied Path of 10 Year UST?
Appropriate Timing
of Policy Firming
16 15 Ten Year Treasury
of August 2011May 2015
Number Participants 12 and Implied Projection
8 %
3.5
4 2 3.0
0 2.5 +25
2015 2016
Appropriate Pace Yield 2.0
of Policy Firming
Target Fed Funds Rate at Year
End 1.5 -25
% 5.0 1.0
4.5
0.5
4.0
3.5 0.0
3.0 Aug Dec Apr Aug Dec Apr Aug Dec Apr
Aug Dec Apr Aug Dec Apr
2.5 11 11 12 12 12
13 13 13 14 14 14 15 15 15 16
2.0
1.5 Creates Significant Headwinds for the Economy
Housing Will Struggle
1.0 Corporate
Interest Expense will rise
0.5
0.0
2015 2016 2017 Longer Run
11
Source: Federal Reserve March 2015 Forecast, Bloomberg, CYS
2015-16 Fed Voters:
New Perspectives, Changing
Outlooks
Hawkish Neutral Dovish
Board of Governors
Fischer Yellen Tarullo Powell
Brainard Steins Successor Raskins Successor
2015 Voters
Richmond: Atlanta: New York: Chicago: Lacker Lockhart Dudley Evans
San Francisco: Williams
2016 Voters
Cleveland: St. Louis: New York:
Mester Bullard Dudley
Kansas City: Boston: George Rosengren
Source: federalreserve.gov, Barclays, Macroeconomic Advisers, LLC, Bank of America Merrill Lynch, Bloomberg, Wall Street
Journal, Indiana University, Marketwatch, Thomson Reuters, Federal Reserve
Bank of Atlanta, Federal Reserve
Bank of Chicago, Federal Reserve Bank of Cleveland, Maryland Consumer Rights Coalition, Boston Globe, Businessweek, Newsweek, Washington Post, CNBC. 12
Central Banks:
Decidedly More Accommodative
Focus on Global Deflation Risk
Hawkish Neutral Dovish
USA EU
Yellin Draghi
India Canada UK Japan Japan
Rajan Poloz Carney Kuroda Kuroda
China China
Xiaochuan Xiaochuan
Australia Australia
Stevens Stevens
New Zealand New Zealand
Wheeler Wheeler
Brazil Brazil
Tombini Tombini
13
GSE/Legislative Reform: Stuck in the Mud
Legislative Level of GSE Credit Risk
Proposal Government Involvement Implication Sharing Status
Corker-Warner Bill Limited: Only under Completely wound down over 5 10% first-loss piece is sold to Corker-Warner under committee
Introduced 6/25/13 catastrophic scenarios where years private entities discussion but not yet put to vote.
losses on a pool of mortgages Either may become the front runner
exceeds 10% from the Senate side but both will
likely have private capital in the first
loss
place with several mechanisms
for risk sharing
Senate Banking Committee voted in
JohnsonCrapo Bill Based on Corker-Warner, GSEs wound down over 5 year Similar to Corker-Warner, 10% first-
favor of the bill 13-9 on May 15,
Committee Vote 5/15/14 limited: only on scenarios period, replaced by FMIC. loss piece is sold to private entities.
2014. Insufficient support to allow
where losses
on a pool of
the bill to be brought to the Senate
mortgages exceeds a 10%
floor for debate/vote.
private loss position
Warren, Schumer did not support,
unlikely support under new Chair
Shelby.
PATH Act Very limited: dissolves the Placed into receivership and Initially, a 10% risk-sharing No news. In
early 2013, the Path Act
Hensarling Bill GSEs completely and reduces completely liquidated program on new GSE
and FHA seemed to be the clear front-runner
Introduced 7/22/13 the scope of the FHA/VA business, although
private market on the House side. Passage of bill is
guarantee securitization is intended highly unlikely. The
final housing
eventually to replace GSEs finance reform, if it happens, could
be a compromise between the PATH
Act and whatever comes out of the
Senate.
Delaney-Carney-Himes Limited: Ginnie Mae is required GSEs will be slowly wound down 5% first-loss piece on
each new Re-introduced 3/19/15. Unlikely to
HR 1491 to provide an explicit and eventually converted into
Ginnie Mae securitization, as well be endorsed under Rep. Hensarling
Introduced 7/10/14 government guarantee
once private reinsurers with limited as a 10% pro-rata risk slice on the or Sen. Shelby leadership.
the 5%
risk slice is eroded capacities to take on mortgage top 95% of each Ginnie Mae
when one of the private credit
risk securitization
monoline insurers defaults
14
Economic Recovery Below Normal Pace
Total
Unemployed + All Marginally Attached + Total
Total Nonfarm Private Payroll Employment Employed Part Time for
Economic Reasons CPI-U All Items
Updated: 2015-05-06 Updated: 2015-05-08 Updated: 2015-04-17
U.S. Regular Conventional Gas Price Civilian Unemployment Rate Capacity Utilization: Manufacturing $ per gal
Updated: 2015-05-08 Updated: 2015-05-15 Updated: 2015-05-06
Source: Federal Reserve Bank of St. Louis
15
Housing Finance Has Not Rebounded
Monthly Supply
of Homes Home Ownership Rate Share of Government Guaranteed Mortgages
January 1963- present January 1965-
present 1990 2013 (%) %
Source: U.S. Census Bureau and National Association of Realtors, St Louis
Fed, www.census.gov
16
Mortgage Market Shrinkage Likely to Continue
Mortgage Debt Outstanding
2007-2014
11,500
4.0%
11,000 3.5%
Outstanding Mortgage Debt Outstanding
3.0%
10,500
Debt 2.5% Growth
2.0%
10,000 Rate
Mortgage 1.5%
9,500 1.0%
0.5%
9,000 0.0%
2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 -0.5%
-1.0%
Growth Rate -1.5%
-2.0%
Single Family
Mortgage Origination Volume
2000-2016E
Residential Mortgage Debt Decline Driven By:
1. Home prices now reset lower
2. Delevering Consumers/Homeowners
3. Psychology
of lower leverage
4. Low volume of new and existing home sales
5. All-cash home purchase transactions, and higher downpayments
6. Scheduled principal payments
7. High percentage of cash-in refis versus cash-out refis.
8. QM Rules Restrictive
Source:
http://www.federalreserve.gov/econresdata/releases/mortoutstand/current.htm
Source: U.S Department of Housing
and Urban Development and Federal Financial Institutions Examination Council. 2014, 2015 and 2016 data based on the March 2015 estimate of Freddie Macs Office of the Chief
Economist.
17
Economics of Forward Purchase
Source: Bloomberg,
May 15, 2015
18
Portfolio Composition and Dividends
CYS Agency
RMBS and U.S. Treasury Portfolio1
$15.1B Agency RMBS and U.S. Treasuries Portfolio
CYS Common Stock Dividends September 2009 March 2015
Share Per
Annualized Dividends Dividend CommonYield
Dividend Special Dividend Annualized Dividend Yield (2)
1 As of 3/31/15
2 Annualized dividend yield is calculated using the stock price at the quarter end 19
Note: the December 2012 dividend was composed of $0.40 quarterly cash dividend, and $0.52 special cash dividend
Portfolio Characteristics
Coupon Face value
(in 000s) Fair value
(in 000s) Amortized cost Basis per Face value (in 000s) Loan Balance (in 000s) Loan Age (in months)(1) 3 month CPR(1)(2) Duration(3)
March 31, 2015
15 Year Agency Mortgage securuties
3.0%
$4,732,332 $4,967,991 $103.16 $276 13 7.8% 3.23
TBA 3.0% 927,200 $971,917 104.30 n/a n/a n/a 3.36
3.5% 1,400,050 1,488,990 103.46 234 30 10.3 2.71
4.0% 172,740 183,776 101.20 173 49 15.1 2.30
4.5%
25,157 26,974 102.66 250 62 21.4 1.67
Subtotal 7,257,479 7,639,648 103.32 263 18 8.7 3.12
20 Year Agency Mortgage securuties
4.5% 63,673 69,978 102.92 217 56 18.8 1.34
30
Year Agency Mortgage securuties
3.5% 379,605 399,101 104.66 345 3 n/a 3.92
TBA 3.5% 401,000 421,051 104.51 n/a n/a n/a 4.22
4.0% 3,884,445 4,164,986 105.43 291 9 11.4 3.13
TBA 4.0% 674,000 720,480 106.42 n/a n/a n/a 3.41
4.5% 320,319 350,152 107.68 279 31 16.8 1.48
Subtotal 5,659,369 6,055,770 105.56 295 10 11.9 3.20
Agency Hybrid ARMs 2.9% (4) 757,035 790,548 102.81 318 31 12.3 2.30
U.S. Treasuries 1.2% 500,000 501,334 99.51 n/a n/a n/a 3.71
Total $14,237,556 $15,057,278 $104.04 $279 16 10.3% 3.12
CYS Agency RMBS and U.S. Treasury Portfolio Characteristics*
* As of 3/31/15
(1) To-be-announced (TBA) securities are excluded from this calculation as they do not have a defined weighted-average loan
balance or age until mortgages have been assigned to the pool.
(2) Constant prepayment rate (CPR) represents the 3-month CPR of the Companys Agency RMBS held at
March 31, 2015. The CPR
experienced by the Companys Agency RMBS during the period may differ.
Securities with no prepayment history are excluded from
this calculation.
(3) Duration measures the market price volatility of financial instruments as interest rates change, using Dollar Value of
One Basis
Point, or DV01, methodology. We generally calculate duration using various third-party
financial models and empirical data.
Different models and methodologies can produce different duration numbers
for the same securities. Analytics provided by The
Yield Book® software.
(4) Represents the weighted-average coupon of Agency Hybrid ARMs.
20
Financial Information
Income Statement
(In thousands, except per share numbers) Interest income:
Interest income from Agency RMBS Other interest income
Total interest income Interest expense:
Repurchase agreement and FHLB advances interest expense Swap and cap interest expense
Total interest expense Net interest income Other income (loss):
Net realized gain (loss) on investments
Net
unrealized gain (loss) on investments
Net realized gain (loss) on termination of swap and cap contracts
Net unrealized gain (loss) on swap and cap contracts
Other income
Total other income (loss) Expenses:
Compensation
and benefits General, administrative and other
Total expenses Net income (loss) Dividends on preferred stock
Net income (loss) available to common shares Net income (loss) per common share basic & diluted
Core
Earnings Reconciliation
(In thousands)
NET INCOME (LOSS) AVAILABLE TO COMMON SHARES Net realized (gain) loss on investments Net unrealized (gain) loss on
investments Net realized (.gain) loss on termination of swap and cap contracts Net unrealized (gain) loss on swap and cap contracts Core earnings
Three Months Ended
March 31,2015
$ 80,060
790
80,850
9,642
27,468
37,110
43,740
18,253
75,689
(74,800)
40
16,614
3,554
2,203
5,757
$ 54,597
(5,203)
$ 49,394
$ 0.31
December 31, 2014
$ 82,338
1,261
83,599
9,156
26,650
35,806
47,793
42,305
99,135
(9,133)
(63,570)
50
68,787
2,997
2,027
5,024
$ 111,556
(5,203)
$ 106,353
$ 0.66
Three Months Ended
March 31, 2015
$ 49, 394
(18, 253)
(75,689)
2, 568
74,800
$ 32, 820
December 31, 2014
$ 106, 353
(42, 305)
(99, 135)
9,133
63, 570
$ 37, 616
Income Statement
Core Earnings Reconciliation
21
Summary Financial Data
(in thousands) Key Balance
Sheet Metrics Three Months Ended
March 31, 2015 December 31, 2014
Average settled Debt Securities (1) $ 12,653,266 $12.550.072
Average total Debt Securities (2) $ 14,810,062 $14.328.079
Average repurchase agreements and FHLB advances (3) $ 10,954,377 $10,854.239
Average Debt Securities liabilities (4) $ 13,111,173 $12.632.246
Average stockholders equity (5) $ 1,981.424 $1.960.831
Average common shares outstanding (6) 160.523 161.930
Leverage ratio (at period end) (7) 6.77:1 6.44:1
Book Value per common share $ 10.53 $ $10.50
Kev
Performance Metrics*
Average yield on settled Debt Securities (8)
Average yield on total Debt Securities including drop income (9)
Average cost of funds (10)
Average cost of funds and hedge (11)
Adjusted
average cost of funds and hedge (12)
Interest rate spread net of hedge (13)
Interest rate spread net of hedge including drop income (14)
Operating expense ratio (15)
Total stockholder return on common equity (16)
2.56% 2.57% 0.35% 1.36% 1.13% 1.20% 1.44% 1.16% 3.14%
2.66% 2.68% 0.34% 1.32% 1.13% 1.34% 1.55% 1.02% 6.51%
The table above includes calculations of the Companys Agency RMBS and U.S. Treasury Securities portfolio (Debt
Securities)
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 and
FHLB advances are calculated by averaging the month end repurchase agreements and FHLB advances balances during the period.
4. The average Debt Securities liabilities are calculated by adding the average month end repurchase agreements and FHLB advances balances 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
Companys repurchase agreements and FHLB advances balances 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. Drop income was $14.1 million and $12.5 million
for the three months ended March 31, 2015 and December 31, 2014, respectively. Drop income is a component of our net realized and unrealized gain (loss) on investments on our
consolidated statements of operations. rop
income is the difference between the spot price and the forward
settlement price for the same security on trade date. This difference is also the economic equivalent of the assumed net interest margin (yield minus financing costs)
of the bond from trade date to settlement date. We derive drop income through utilization of forward settling transactions.
10. The average cost of funds for the period is calculated by dividing repurchase agreement and FHLB advances interest
expense by average repurchase agreements and FHLB advances for the period.
11. The average cost of funds and
hedge for the period is calculated by dividing interest expense by average repurchase agreements.
12. The
adjusted average cost of funds and hedge for the period is calculated by dividing total interest expense by average total Debt Securities liabilities.
13. 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.
14. 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.
15. The
operating expense ratio for the period is calculated by dividing operating expenses by average stockholders equity. 22
16. Calculated by change in book value plus dividend distributions on common stock.
*All percentages are annualized except total stockholder return on common equity.
Investment Outlook
May 2015
Kevin E. Grant, CFA Chief Executive Officer and President
Wells Fargo Securities Specialty Finance Conference May 19, 2015
Cys Investments, Inc. (NYSE:CYS)
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