Cypress Sharpridge Investments, Inc. Announces First Quarter 2010 Financial Results

http://www.businesswire.com/news/home/20100422006905/en

NEW YORK--(Business Wire)--
Cypress Sharpridge Investments, Inc. (NYSE: CYS) ("CYS" or the "Company") today
announced financial results for the quarter ended March 31, 2010.

First Quarter 2010 Highlights

• GAAP net income of $10.1 million or $0.54 per diluted share, compared to $7.0
million or $0.37 per diluted share in the fourth quarter of 2009.

• Core Earnings of $10.4 million or $0.56 per diluted share, compared to $9.7
million or $0.52 per diluted share in the fourth quarter of 2009.

• A component of the Company`s net income for the quarter was $0.5 million, or
$0.02 per diluted share, of distributions from collateralized loan obligations
("CLOs") that were accounted for as a reduction of the cost basis and thereby
excluded from our interest income and Core Earnings. This compared to $0.6
million or $0.03 per diluted share for the fourth quarter of 2009.

• Net asset value of $13.03 per share after declaring a $0.55 dividend per share
on March 30, 2010, compared with $13.02 at December 31, 2009.

• Interest rate spread net of hedge of 2.72%, compared to 2.80% in the fourth
quarter of 2009.

• Weighted-average amortized cost of Agency RMBS of $101.4 at March 31, 2010,
the same as at December 31, 2009.

• Non-investment expenses as a percentage of net assets were 3.63%, compared to
3.21% in the fourth quarter of 2009.

First Quarter 2010 Results

The Company had net income of $10.1 million during the first quarter of 2010, or
$0.54 per diluted share, compared to $7.0 million or $0.37 per diluted share in
the fourth quarter of 2009. During the first quarter of 2010, the Company had
Core Earnings of $10.4 million, or $0.56 per diluted share, compared to $9.7
million, or $0.52 per diluted share in the fourth 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. The quarter-over-quarter increase in Core Earnings was generally
the result of an increase in the size of our Agency RMBS portfolio. During the
first quarter of 2010 the average Agency RMBS portfolio increased to $1.7
billion compared to $1.5 billion during the fourth quarter of 2009.

A component of the Company`s net income for the quarter was $0.5 million, or
$0.02 per diluted share, of distributions from CLOs that were accounted for as a
reduction of the cost basis and thereby excluded from our interest income and
Core Earnings. This compared to $0.6 million or $0.03 per diluted share for the
fourth quarter of 2009.

The Company`s interest rate spread net of hedge decreased to 2.72% for the first
quarter of 2010 from 2.80% in the fourth quarter of 2009. This decrease was
largely due to a decrease in the yield on Agency RMBS. Our average yield on
Agency RMBS decreased to 3.86% during the first quarter of 2010 compared to
4.01% during the fourth quarter of 2009.

The Company`s net asset value per share on March 31, 2010 was $13.03 after
declaring a $0.55 dividend per share on March 30, 2010, compared with $13.02 at
December 31, 2009.

The Company`s non-investment expenses as a percentage of net assets was 3.63%
for the quarter, compared to 3.21% in the fourth quarter of 2009. This change
was primarily the result of the increase in related party management
compensation resulting from the December 17, 2009 restricted stock grant.

Three Months Ended
Key Portfolio Statistics* March 31, 2010 December 31, 2009
Average Agency RMBS(1) $ 1,723,303,293 $ 1,525,385,088
Average repurchase agreements 1,524,644,235 1,321,392,786
Average net assets 249,412,135 252,305,141
Average yield on Agency RMBS (2) 3.86 % 4.01 %
Average cost of funds & hedge (3) 1.14 % 1.21 %
Interest rate spread net of hedge (4) 2.72 % 2.80 %
Leverage ratio (at period end) (5) 6.5:1 6.6:1

(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), by our 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 $144.7 million in scheduled and unscheduled principal
repayments and prepayments and net amortization of premium (including paydown
losses) of $2.2 million for the three months ended March 31, 2010. This compared
to $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.

In early March 2010, both Freddie Mac and Fannie Mae announced they would
purchase from the pools of mortgage loans underlying their mortgage pass-through
certificates all mortgage loans that are more than 120 days delinquent. Freddie
Mac implemented its purchase program in February 2010 with actual purchases
beginning in March 2010. Fannie Mae began their process in March 2010 and
announced it would implement the initial purchases over a period of three
months, beginning in April 2010. The impact of these programs thus far is
reflected in the CPR of the Company`s portfolio. Further, both agencies
announced that on an ongoing basis they would purchase loans from the pools of
mortgage loans underlying their mortgage pass-through certificates that became
120 days delinquent. For several months, we expect to experience elevated
prepayments as a result of these purchase programs, particularly in ARMs where
the credit experience is relatively poor. We believe our holdings of Agency RMBS
backed by 15 year mortgages will protect us from these prepayments as the
delinquency rate of 15 year mortgages is very low, according to data released by
Fannie Mae and Freddie Mac. Over the past quarter, we have focused our
investment activities largely in the 15 year market due to their stable
prepayments, relatively short cash flows, modest dollar prices, attractive
yield, and their very low delinquency rates. In April 2010, the effect of these
purchase programs on our portfolio was lower than expected. The constant
prepayment rate of our overall portfolio was 17.5% for the month of April 2010
compared to 22.0% for the first quarter of 2010.

Dividend

The Company declared a common dividend of $0.55 per share with respect to the
three months ended March 31, 2010, unchanged from $0.55 per share for the three
months ended December 31, 2009. Using the closing share price of $13.38 on March
31, 2010, the first quarter dividend equates to an annualized dividend yield of
16.4%.

Portfolio

At March 31, 2010, 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") (11.8%), hybrid ARMs with 25 to 60 months to reset
("Hybrid ARMs") (27.5%) and fixed-rate mortgages (60.7%). Additional information
about our Agency RMBS portfolio at March 31, 2010 is summarized below:

Par Value Weighted Average
Asset Type (in thousands) Cost Price MTR(1) Coupon CPR(2)
Short Reset ARMs $ 203,252 $ 101.35 $ 104.10 10.0 3.9 % 29.6 %
Hybrid ARMs 472,427 101.03 104.31 47.6 4.4 % 32.8 %
Fixed Rate 1,055,675 101.58 103.22 NA 4.5 % 12.3 %

Total/Weighted-Average $ 1,731,354 $ 101.40 $ 103.62 36.3(3) 4.4 % 22.0 %

(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 Short Reset ARM and Hybrid ARM
portfolio.

Financing, Leverage & Liquidity

At March 31, 2010, the Company had financed its portfolio with approximately
$1.5 billion of borrowings under repurchase agreements with a weighted-average
interest rate of 0.26% and a weighted-average maturity of approximately 35.83
days. In addition, the Company had payable for securities purchased of $82.4
million. The Company`s leverage ratio at March 31, 2010 was 6.5 to 1. At March
31, 2010, the Company`s liquidity position was approximately $121.7 million,
consisting of unpledged Agency RMBS, cash and cash equivalents. Below is a list
of outstanding repurchase agreements at March 31, 2010.

Counterparty Total Outstanding % of Amount at Risk (1) Weighted Average
Borrowings Total Maturity in Days
Bank of America Securities LLC $ 76,810,000 5.2 % $ 7,060,323 13
Barclays Capital, Inc. 127,776,683 8.6 7,854,216 67
BNP Paribas 96,585,000 6.5 4,741,406 82
Cantor Fitzgerald & Co. 51,024,000 3.4 3,079,678 54
Credit Suisse First Boston 47,964,756 3.2 1,985,462 19
Daiwa Securities America, Inc. 49,114,000 3.3 2,475,642 7
Deutsche Bank Securities, Inc. 145,270,000 9.8 10,768,509 12
Goldman Sachs Group, Inc. 167,577,000 11.3 8,801,572 60
Greenwich Capital Markets, Inc. 129,068,788 8.7 8,745,387 5
ING Financial Markets LLC 73,654,000 5.0 3,608,418 23
Jefferies & Company, Inc. 55,455,000 3.7 2,841,233 9
LBBW Securities LLC 105,386,000 7.1 5,883,111 19
MF Global, Ltd. 106,055,237 7.1 1,665,205 62
Mizuho Securities USA, Inc. 45,146,000 3.0 2,275,159 23
Morgan Keegan & Co. 39,382,000 2.6 1,153,369 5
Nomura Securities International, Inc. 42,539,350 2.9 2,367,805 26
South Street Securities LLC 128,781,354 8.6 9,451,537 49

$ 1,487,589,168 100.0 % $ 84,758,032

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

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 March
31, 2010, the Company had entered into four interest rate swap contracts with an
aggregate notional amount of $740.0 million, a weighted average fixed rate of
2.034% and a weighted average expiration of 2.4 years. These interest rate swaps
are described below:

As of March 31, 2010

Counterparty Expiration Date Pay Rate Receive Rate Notional Fair
Amount Value
Deutsche Bank Group April 2012 1.6910 % 3-Month LIBOR $ 240,000,000 $ (2,470,311 )
Deutsche Bank Group June 2012 2.2660 % 3-Month LIBOR 200,000,000 (4,178,718 )
The Royal Bank of Scotland plc July 2012 2.1250 % 3-Month LIBOR 200,000,000 (3,549,348 )
The Royal Bank of Scotland plc November 2013 2.2125 % 3-Month LIBOR 100,000,000 (341,251 )

$ 740,000,000 $ (10,539,628 )

Conference Call

The Company will host a conference call at 9:00 AM Eastern Time on Friday, April
23, 2010, to discuss its financial results for the quarter ended March 31, 2010.
To participate in the event by telephone, please dial 866.713.8564 at least 10
minutes prior to the start time and reference the conference passcode 84016405.
International callers should dial 617.597.5312 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, April 23, 2010 at approximately 12:00 PM
Eastern Time through Friday, April 30 at approximately 11:00 AM Eastern Time. To
access this replay, please dial 888.286.8010 and enter the conference ID number
48059711. 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 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.

Forward Looking Statements Disclaimer

This press release contains statements that are "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, made pursuant to
the safe harbor provisions of the Private Securities Reform Act of 1995.
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, although some forward-looking statements
may be expressed differently. These forward-looking statements include, but are
not limited to, those relating to the mortgage purchase programs announced by
Freddie Mac and Fannie Mae and the effects of those programs on prepayment
rates. Forward-looking statements are based on our beliefs, assumptions and
expectations of our future performance, taking into account all information
currently available to us. These beliefs, assumptions and expectations are
subject to risks and uncertainties and can change as a result of many possible
events or factors, not all of which are known to us, including those described
in our Annual Report on Form 10-K for the year ended December 31, 2009, filed
with the Securities and Exchange Commission on February 10, 2010. If a change
occurs, our business, financial condition, liquidity and results of operations
may vary materially from those expressed in our forward-looking statements. 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, we are not
obligated to, and do not intend to, update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.

CYPRESS SHARPRIDGE INVESTMENTS, INC.
STATEMENTS OF ASSETS AND LIABILITIES

March 31, 2010 December 31,
(Unaudited) 2009*
ASSETS:
Investments in securities, at fair value (cost, $1,788,097,306 and $1,846,995,280, respectively) $ 1,808,070,824 $ 1,853,251,613
Interest rate swap contracts, at fair value - 1,131,487
Cash and cash equivalents 775,729 1,889,667
Receivable for securities sold 24,827,457 2,724,805
Interest receivable 6,807,387 6,886,816
Prepaid insurance 174,239 89,642
Prepaid and deferred offering costs 222,266 222,266

Total assets 1,840,877,902 1,866,196,296

LIABILITIES:
Repurchase agreements 1,487,589,168 1,372,707,572
Interest rate swap contracts, at fair value 10,539,628 4,925,333
Payable for securities purchased 82,390,486 229,838,772
Distribution payable 10,318,464 10,316,082
Accrued interest payable (including accrued interest on repurchase agreements of $230,248 and $353,856, respectively) 4,922,748 3,387,431
Related party management fee payable 353,408 356,873
Accrued expenses and other liabilities 317,790 373,251

Total liabilities 1,596,431,692 1,621,905,314

NET ASSETS $ 244,446,210 $ 244,290,982

Net Assets consist of:
Common Stock, $0.01 par value, 500,000,000 shares authorized (18,760,844 and 18,756,512 shares issued and outstanding, respectively) $ 187,608 $ 187,565
Additional paid in capital 309,698,999 309,368,569
Accumulated net realized gain (loss) on investments (97,911,278 ) (87,363,976 )
Net unrealized appreciation (depreciation) on investments 9,433,890 2,462,487
Undistributed net investment income 23,036,991 19,636,337

NET ASSETS $ 244,446,210 $ 244,290,982

NET ASSET VALUE PER SHARE $ 13.03 $ 13.02
* Derived from audited financial statements.

CYPRESS SHARPRIDGE INVESTMENTS, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended
March 31, 2010 December 31,
2009
INVESTMENT INCOME - Interest income $ 16,936,967 $ 15,767,509

EXPENSES:
Interest 986,412 1,061,974
Management fees 1,075,550 1,084,775
Related party management compensation 330,473 184,320
General, administrative and other 825,414 771,572

Total expenses 3,217,849 3,102,641

Net investment income 13,719,118 12,664,868

GAINS AND (LOSSES) FROM INVESTMENTS:
Net realized gain (loss) on investments (7,252,882 ) (1,464,269 )
Net unrealized appreciation (depreciation) on investments 13,717,185 (2,856,212 )

Net gain (loss) from investments 6,464,303 (4,320,481 )

GAINS AND (LOSSES) FROM SWAP CONTRACTS:
Net swap interest income (expense) (3,294,420 ) (2,976,830 )
Net unrealized appreciation (depreciation) on swap contracts (6,745,782 ) 1,669,336

Net gain (loss) from swap contracts (10,040,202 ) (1,307,494 )

NET INCOME $ 10,143,219 $ 7,036,893

NET INCOME PER COMMON SHARE-DILUTED $ 0.54 $ 0.37

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
Non-GAAP Reconciliation: 3/31/2010 12/31/2009
NET INCOME $ 10,143,219 $ 7,036,893
Net (gain) loss from investments (6,464,303 ) 4,320,481
Net unrealized (appreciation) depreciation on swap contracts 6,745,782 (1,669,336 )

Core Earnings $ 10,424,698 $ 9,688,038

Cypress Sharpridge Investments, Inc.
Richard E. Cleary, 212-612-3210
Chief Operating Officer

Copyright Business Wire 2010