Press Release| Cypress Sharpridge Investments, Inc. Announces Fourth Quarter 2009
Financial Results | | NEW YORK, Feb 04, 2010 (BUSINESS WIRE) -- Cypress Sharpridge Investments, Inc. (NYSE: CYS) ("CYS" or the
"Company") today announced financial results for the quarter and year
ended December 31, 2009.
Fourth Quarter 2009 Highlights
-
GAAP net income of $7.0 million or $0.37 per diluted share, compared
to $23.2 million or $1.28 per diluted share in the third quarter of
2009.
-
Core Earnings of $9.7 million or $0.52 per diluted share, compared to
$5.6 million or $0.31 per diluted share in the third quarter of 2009.
-
Additionally, a component of the Company's net income for the quarter
was $0.6 million, or $0.03 per diluted share, of distributions from
collateralized loan obligations ("CLOs") that were accounted for under
the cost recovery method and thereby excluded from our interest income
and Core Earnings. This compared to $0.3 million, or $0.02 per diluted
share for the third quarter of 2009.
-
Net asset value of $13.02 per share after declaring a $0.55 dividend
per share on December 17, 2009, compared with $13.58 at September 30,
2009.
-
Interest rate spread net of hedge of 2.80%, compared to 2.67% in the
third quarter of 2009.
-
Weighted-average amortized cost of Agency RMBS of $101.4, compared to
$101.3 in the third quarter of 2009.
-
Non-investment expenses as a percentage of net assets of 3.21%,
compared to 3.31% in the third quarter of 2009.
Fourth Quarter 2009 Results
The Company had net income of $7.0 million during the fourth quarter of
2009, or $0.37 per diluted share, compared to $23.2 million or $1.28 per
diluted share in the third quarter of 2009. During the fourth quarter of
2009, the Company had Core Earnings of $9.7 million, or $0.52 per
diluted share, compared to $5.6 million, or $0.31 per diluted share in
the third quarter of 2009. 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
contracts.
Additionally, a component of the Company's net income for the fourth
quarter was $0.6 million, or $0.03 per diluted share, of distributions
from CLOs that were accounted for under the cost recovery method and
thereby excluded from our interest income and Core Earnings. This
compared to $0.3 million, or $0.02 per diluted share, for the third
quarter of 2009.
The Company's interest rate spread net of hedge increased to 2.80% for
the fourth quarter of 2009 from 2.67% in the third quarter of 2009. This
increase was largely due to a decrease in borrowing costs. Our average
cost of funds and hedge decreased to 1.21% during the fourth quarter,
compared to 1.61% during the third quarter of 2009.
The Company's net asset value per share on December 31, 2009 was $13.02
after declaring a $0.55 dividend per share on December 17, 2009,
compared with $13.58 at September 30, 2009.
|
Three Months Ended |
| Key Portfolio Statistics* |
December 31, 2009 |
|
September 30, 2009 |
|
Average Agency RMBS(1) |
$
|
1,525,385,088
|
|
|
$
|
958,108,753
|
|
|
Average repurchase agreements
|
|
1,321,392,786
|
|
|
|
771,241,276
|
|
|
Average net assets
|
|
252,305,141
|
|
|
|
239,130,371
|
|
|
Average yield on Agency RMBS (2)
|
|
4.01
|
%
|
|
|
4.28
|
%
|
|
Average cost of funds & hedge (3)
|
|
1.21
|
%
|
|
|
1.61
|
%
|
|
Interest rate spread net of hedge (4)
|
|
2.80
|
%
|
|
|
2.67
|
%
|
|
Leverage ratio (at period end) (5)
|
|
6.6:1
|
|
|
|
5.7:1
|
|
|
|
|
|
|
(1) Our average Agency RMBS for the period was calculated by
averaging the
cost basis of our settled Agency RMBS during the period.
|
|
(2) Our average yield on Agency RMBS for the period was calculated
by
dividing our interest income from Agency RMBS by our average
Agency RMBS.
|
|
(3) Our average cost of funds and hedge for the period was
calculated
by dividing our total interest expense, including our net swap
interest
income (expense), byour average repurchase agreements.
|
|
(4) Our interest rate spread net of hedge for the period was
calculated by
subtracting our average cost of funds and hedge from our average
yield on
Agency RMBS.
|
|
(5) Our leverage ratio was calculated by dividing total
liabilities by net
assets.
|
|
* All percentages are annualized.
|
Prepayments
The portfolio recorded $82.2 million in scheduled and unscheduled
principal repayments and prepayments and net amortization of premium
(including paydown losses) of $1.4 million for the three months ended
December 31, 2009.
Dividend
The Company declared common dividends of $0.55 per share with respect to
the three months ended December 31, 2009, up from $0.35 per share for
the three months ended September 30, 2009. Using the closing share price
of $13.51 on December 31, 2009, the fourth quarter dividend equates to
an annualized dividend yield of 16.3%.
Portfolio
At December 31, 2009, the Company's $1.8 billion portfolio of Agency
RMBS was backed by: hybrid adjustable-rate mortgages ("ARMs") with 24 or
fewer months to reset ("Short Reset ARMs") (15.0%), hybrid ARMs with 25
to 60 months to reset ("Hybrid ARMs") (31.8%), fixed-rate mortgages
(45.3%) and monthly reset ARMs ("MTAs") (7.9%). Additional information
about our Agency RMBS portfolio at December 31, 2009 is summarized below:
|
|
|
|
Par Value |
|
Weighted Average |
|
|
Asset Type |
|
(in thousands) |
|
Cost |
Price |
MTR1 |
|
Coupon |
CPR2 |
|
|
MTAs
|
|
$
|
140,226
|
|
$
|
103.57
|
$
|
103.50
|
1
|
|
3.0
|
%
|
11.2
|
%
|
|
|
Short Reset ARMs
|
|
|
263,728
|
|
|
101.29
|
|
104.55
|
13.3
|
|
4.5
|
%
|
19.0
|
%
|
|
|
Hybrid ARMs
|
|
|
565,396
|
|
|
101.06
|
|
103.79
|
46.8
|
|
4.5
|
%
|
23.4
|
%
|
|
|
Fixed Rate |
|
|
814,716 |
|
|
101.26 |
|
102.63 |
NA |
|
4.5 |
% |
9.0 |
% |
|
|
Total/Weighted-Average
|
|
$ |
1,784,066 |
|
$ |
101.38 |
$ |
103.35 |
32.6 |
(3)
|
4.4 |
% |
16.6 |
% |
|
______________
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
"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.
|
|
(2)
|
|
"Constant Prepayment Rate" 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. Securities with
no prepayment history are excluded from this calculation.
|
|
(3)
|
|
Weighted average months to reset of our MTA, Short Reset ARM and
Hybrid ARM portfolio.
|
Financing, Leverage & Liquidity
At December 31, 2009, the Company had financed its portfolio with
approximately $1.4 billion of borrowings with repurchase agreements with
a weighted-average interest rate of 0.28% and a weighted-average
maturity of approximately 27.6 days. In addition, the Company had
payable for securities purchased of $229.8 million. The Company's
leverage ratio at December 31, 2009 was 6.6 to 1. At December 31, 2009,
the Company's liquidity position was approximately $153.0 million,
consisting of unpledged Agency RMBS, cash and cash equivalents. Below is
a list of outstanding borrowings under repurchase agreements at December
31, 2009.
| Counterparty |
|
Total Outstanding
Borrowings
|
|
% of Total |
|
|
Weighted Average
Maturity in Days
|
|
Bank of America Securities LLC
|
|
$
|
93,068,000
|
|
6.8
|
%
|
|
7
|
|
Barclays Capital, Inc.
|
|
|
107,654,754
|
|
7.8
|
|
|
60
|
|
BNP Paribas
|
|
|
99,865,000
|
|
7.3
|
|
|
29
|
|
Cantor Fitzgerald & Co
|
|
|
47,521,000
|
|
3.5
|
|
|
53
|
|
Credit Suisse First Boston
|
|
|
48,635,251
|
|
3.5
|
|
|
19
|
|
Daiwa Securities America, Inc.
|
|
|
51,031,000
|
|
3.7
|
|
|
8
|
|
Deutsche Bank Securities, Inc.
|
|
|
125,247,000
|
|
9.1
|
|
|
7
|
|
Goldman Sachs Group, Inc.
|
|
|
134,802,000
|
|
9.8
|
|
|
42
|
|
Greenwich Capital Markets, Inc.
|
|
|
135,004,688
|
|
9.8
|
|
|
5
|
|
ING Financial Markets LLC
|
|
|
78,581,000
|
|
5.7
|
|
|
22
|
|
Jefferies & Company, Inc.
|
|
|
59,209,000
|
|
4.3
|
|
|
11
|
|
LBBW Securities LLC
|
|
|
58,992,000
|
|
4.3
|
|
|
15
|
|
MF Global, Ltd
|
|
|
122,066,000
|
|
8.9
|
|
|
60
|
|
Mizuho Securities USA, Inc.
|
|
|
81,474,579
|
|
6.0
|
|
|
20
|
|
Morgan Keegan & Co
|
|
|
41,894,000
|
|
3.1
|
|
|
4
|
|
South Street Securities LLC
|
|
|
87,662,300
|
|
6.4
|
|
|
50
|
|
|
|
$
|
1,372,707,572
|
|
100.0
|
%
|
|
28
|
Hedging
The Company utilizes interest rate swap contracts to hedge the interest
rate risk associated with the financed portion of its Agency RMBS
portfolio. At December 31, 2009, the Company had entered into four
interest rate swap contracts with an aggregate notional amount of $740.0
million and a weighted average fixed rate of 2.034% and a weighted
average expiration of 2.6 years. These interest rate swaps are described
below:
| As of December 31, 2009 |
|
|
|
|
|
|
|
|
Notional |
|
Fair |
| Counterparty |
|
Expiration Date |
|
Pay Rate |
|
Receive Rate |
|
Amount |
|
Value |
|
Deutsche Bank Group
|
|
April 2012
|
|
1.6910
|
%
|
|
3-Month LIBOR
|
|
$
|
240,000,000
|
|
$
|
(543,716
|
)
|
|
Deutsche Bank Group
|
|
June 2012
|
|
2.2660
|
%
|
|
3-Month LIBOR
|
|
|
200,000,000
|
|
|
(2,558,748
|
)
|
|
The Royal Bank of Scotland plc
|
|
July 2012
|
|
2.1250
|
%
|
|
3-Month LIBOR
|
|
|
200,000,000
|
|
|
(1,822,869
|
)
|
|
The Royal Bank of Scotland plc
|
|
November 2013
|
|
2.2125
|
%
|
|
3-Month LIBOR
|
|
|
100,000,000 |
|
|
1,131,487 |
|
|
|
|
|
|
|
|
|
$ |
740,000,000 |
|
$ |
(3,793,846 |
) |
Twelve Months Results
The Company had net income of $63.8 million during the year ended
December 31, 2009, or $4.75 per diluted share, compared to $(39.2)
million or $(5.50) per diluted share in 2008. During the year ended
December 31, 2009, the Company had Core Earnings of $26.4 million, or
$1.96 per diluted share, compared to $16.8 million, or $2.31 per diluted
share in 2008. The year-over-year increase in Core Earnings was
primarily the result of the increase in interest rate spread net of
hedge. During the year ended December 31, 2009, we had an interest rate
spread net of hedge of 3.01% compared to 1.57% in 2008 on similar levels
of average gross assets.
Additionally, a component of the Company's net income for the year was
$2.0 million, or $0.15 per diluted share, of distributions from CLOs
that were accounted for under the cost recovery method and thereby
excluded from our interest income and Core Earnings. This compared to
$2.7 million, or $0.37 per diluted share, for the year ended December
31, 2008.
Conference Call
The Company will host a conference call at 9:00 AM Eastern Time on
Friday, February 5, 2010, to discuss its financial results for the
quarter ended December 31, 2009. To participate in the event by
telephone, please dial 866.713.8566 at least 10 minutes prior to the
start time and reference the conference passcode 65744301. International
callers should dial 617.597.5325 and reference the same passcode. The
conference call will also be webcast live over the Internet and can be
accessed at the Company's Web site at www.cysinv.com.
To listen to the live webcast, please visit 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 Friday, February 5, 2010 at approximately 12:00 PM Eastern
Time through Friday, February 12 at approximately 11:00 AM Eastern Time.
To access this replay, please dial 888.286.8010 and enter the conference
ID number 17123510. International callers should dial 617.801.6888 and
enter the same conference ID number. A replay of the conference call
will also be archived on the Company's website at www.cysinv.com.
About Cypress Sharpridge Investments, Inc.
Cypress Sharpridge Investments, Inc. is a specialty finance company that
invests on a leveraged basis in whole-pool 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. Cypress Sharpridge
Investments, Inc. has elected to be taxed as a real estate investment
trust for federal income tax purposes.
|
CYPRESS SHARPRIDGE INVESTMENTS, INC.
|
|
STATEMENTS OF ASSETS AND LIABILITIES
|
|
|
|
|
|
December 31, |
|
|
2009* |
|
2008** |
|
ASSETS:
|
|
|
|
|
|
Investments in securities, at fair value (cost, $1,846,995,280 and
$723,814,995, respectively)
|
|
$
|
1,853,251,613
|
|
|
$
|
690,509,973
|
|
|
Interest rate swap contracts, at fair value
|
|
|
1,131,487
|
|
|
|
-
|
|
|
Cash and cash equivalents
|
|
|
1,889,667
|
|
|
|
7,156,140
|
|
|
Receivable for securities sold
|
|
|
2,724,805
|
|
|
|
885,009
|
|
|
Interest receivable
|
|
|
6,886,816
|
|
|
|
3,828,586
|
|
|
Prepaid insurance
|
|
|
89,642
|
|
|
|
65,851
|
|
|
Prepaid and deferred offering costs
|
|
|
222,266 |
|
|
|
- |
|
|
Total assets
|
|
|
1,866,196,296 |
|
|
|
702,445,559 |
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
Repurchase agreements
|
|
|
1,372,707,572
|
|
|
|
587,485,241
|
|
|
Interest rate swap contracts, at fair value
|
|
|
4,925,333
|
|
|
|
12,503,520
|
|
|
Payable for securities purchased
|
|
|
229,838,772
|
|
|
|
-
|
|
|
Distribution payable
|
|
|
10,316,082
|
|
|
|
-
|
|
|
Accrued interest payable (including accrued interest on repurchase
agreements of $353,856 and $1,598,881, respectively)
|
|
|
3,387,431
|
|
|
|
2,327,208
|
|
|
Related party management fee payable
|
|
|
356,873
|
|
|
|
220,045
|
|
|
Accrued offering costs
|
|
|
-
|
|
|
|
510,569
|
|
|
Accrued expenses and other liabilities
|
|
|
373,251 |
|
|
|
598,127 |
|
|
Total liabilities
|
|
|
1,621,905,314 |
|
|
|
603,644,710 |
|
| NET ASSETS |
|
$ |
244,290,982 |
|
|
$ |
98,800,849 |
|
|
|
|
|
|
| Net Assets consist of: |
|
|
|
|
|
Common Stock, $0.01 par value, 500,000,000 shares authorized
(18,756,512 and 7,662,706 shares issued and outstanding,
respectively)
|
|
$
|
187,565
|
|
|
$
|
76,627
|
|
|
Additional paid in capital
|
|
|
309,368,569
|
|
|
|
201,941,407
|
|
|
Accumulated net realized gain (loss) on investments
|
|
|
(87,363,976
|
)
|
|
|
(68,887,694
|
)
|
|
Net unrealized appreciation (depreciation) on investments
|
|
|
2,462,487
|
|
|
|
(45,808,542
|
)
|
|
Undistributed net investment income
|
|
|
19,636,337 |
|
|
|
11,479,051 |
|
| NET ASSETS |
|
$ |
244,290,982 |
|
|
$ |
98,800,849 |
|
| NET ASSET VALUE PER SHARE |
|
$ |
13.02 |
|
|
$ |
12.89 |
|
|
* Unaudited
|
|
|
|
|
|
** Derived from audited financial statements
|
|
|
|
|
|
|
|
|
|
|
| CYPRESS SHARPRIDGE INVESTMENTS, INC. |
| STATEMENTS OF OPERATIONS |
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Year Ended |
|
|
December 31, 2009* |
|
|
December 31, 2009* |
|
INVESTMENT INCOME - Interest income
|
|
$ |
15,767,509 |
|
|
|
$ |
45,526,149 |
|
|
EXPENSES:
|
|
|
|
|
|
|
Interest
|
|
|
1,061,974
|
|
|
|
|
4,461,432
|
|
|
Management fees
|
|
|
1,084,775
|
|
|
|
|
3,633,005
|
|
|
Related party management compensation
|
|
|
184,320
|
|
|
|
|
985,053
|
|
|
General, administrative and other
|
|
|
771,572 |
|
|
|
|
2,395,611 |
|
|
Total expenses
|
|
|
3,102,641 |
|
|
|
|
11,475,101 |
|
|
Net investment income
|
|
|
12,664,868 |
|
|
|
|
34,051,048 |
|
|
GAINS AND (LOSSES) FROM INVESTMENTS:
|
|
|
|
|
|
|
Net realized gain (loss) on investments
|
|
|
(1,464,269
|
)
|
|
|
|
(48,338
|
)
|
|
Net unrealized appreciation (depreciation) on investments
|
|
|
(2,856,212 |
) |
|
|
|
39,561,355 |
|
|
Net gain (loss) from investments
|
|
|
(4,320,481 |
) |
|
|
|
39,513,017 |
|
|
GAINS AND (LOSSES) FROM SWAP CONTRACTS:
|
|
|
|
|
|
|
Net swap interest income (expense)
|
|
|
(2,976,830
|
)
|
|
|
|
(7,623,821
|
)
|
|
Net gain (loss) on termination of swap contracts
|
|
|
-
|
|
|
|
|
(10,804,123
|
)
|
|
Net unrealized appreciation (depreciation) on swap contracts
|
|
|
1,669,336 |
|
|
|
|
8,709,674 |
|
|
Net gain (loss) from swap contracts
|
|
|
(1,307,494 |
) |
|
|
|
(9,718,270 |
) |
|
NET INCOME
|
|
$ |
7,036,893 |
|
|
|
$ |
63,845,795 |
|
|
NET INCOME (LOSS) PER COMMON SHARE DILUTED
|
|
$ |
0.37 |
|
|
|
$ |
4.75 |
|
|
|
|
|
|
|
|
* Unaudited
|
Core Earnings:
Core Earnings represents a non-GAAP financial measure and is defined as
net income (loss) excluding net realized gain (loss) on investments, net
unrealized appreciation (depreciation) on investments, net realized gain
(loss) on termination of swap contracts and unrealized appreciation
(depreciation) on swap contracts. In order to evaluate the effective
yield of the portfolio, management uses Core Earnings to reflect the net
investment income of our portfolio as adjusted to include the net swap
interest income (expense). Core Earnings allows management to isolate
the interest income (expense) associated with our swaps in order to
monitor and project our borrowing costs and interest rate spread. 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 Company adopted Accounting Standards Codification ("ASC") 946, Clarification
of the Scope of Audit and Accounting Guide Investment Companies ("ASC
946"), prior to its deferral in February 2008, while most, if not
all, other public companies that invest only in Agency RMBS have not
adopted ASC 946. Under ASC 946, the Company uses financial reporting
specified for investment companies, and accordingly, its investments are
carried at fair value with changes in fair value included in earnings.
Most other public companies that invest only in Agency RMBS include most
changes in the fair value of their investments within shareholders'
equity, not in earnings. As a result, investors are not able to readily
compare the Company's results of operations to those of most of its
competitors. The Company believes that the presentation of its Core
Earnings is useful to investors because it provides a means of comparing
its Core Earnings to those of its competitors. In addition, because Core
Earnings isolates the net swap interest income (expense) it provides
investors with an additional metric to identify trends in the Company's
portfolio as they relate to the interest rate environment.
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 gain (loss) from investments. In addition, the
Company's presentation of Core Earnings may not be comparable to
similarly-titled measures of other companies, who 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 |
|
Years Ended |
| Non-GAAP Reconciliation: |
|
December 31, 2009 |
|
September 30, 2009 |
|
December 31, 2009 |
|
December 31, 2008 |
|
NET INCOME (LOSS)
|
|
$
|
7,036,893
|
|
|
$
|
23,218,430
|
|
|
$
|
63,845,795
|
|
|
$
|
(39,172,449
|
)
|
|
Net (gain) loss from investments
|
|
|
4,320,481
|
|
|
|
(24,410,936
|
)
|
|
|
(39,513,017
|
)
|
|
|
34,360,594
|
|
|
Net (gain) loss on termination of swap contracts
|
|
|
-
|
|
|
|
-
|
|
|
|
10,804,123
|
|
|
|
35,118,468
|
|
|
Net unrealized (appreciation) depreciation on swap contracts
|
|
|
(1,669,336 |
) |
|
|
6,781,362 |
|
|
|
(8,709,674 |
) |
|
|
(13,504,523 |
) |
|
Core Earnings
|
|
$ |
9,688,038 |
|
|
$ |
5,588,856 |
|
|
$ |
26,427,227 |
|
|
$ |
16,802,090 |
|
SOURCE: Cypress Sharpridge Investments, Inc.
Cypress Sharpridge Investments, Inc.
Richard E. Cleary, 212-612-3210
Chief Operating Officer
|
|
