BETHESDA, Md., July 24,
2019 /PRNewswire/ -- AGNC Investment Corp. ("AGNC" or the
"Company") (Nasdaq: AGNC) today announced financial results for the
quarter ended June 30, 2019.
SECOND QUARTER 2019 FINANCIAL HIGHLIGHTS
- $(0.15) comprehensive loss per
common share, comprised of:
-
- $(0.85) net loss per common
share
- $0.70 other comprehensive income
("OCI") per common share on investments marked-to-market through
OCI
- $0.49 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization cost 1
-
- Includes $0.04 per common share
of dollar roll income associated with the Company's $11.9 billion average net long position in
forward purchases and sales of Agency mortgage-backed securities
("MBS") in the "to-be-announced" ("TBA") market
- Excludes $(0.11) per common share
of estimated "catch-up" premium amortization cost due to change in
projected constant prepayment rate ("CPR") estimates
- $16.58 tangible net book value
per common share as of June 30, 2019
-
- Decreased $(0.65) per common
share, or -3.8%, from $17.23 per
common share as of March 31, 2019
- $0.50 dividends declared per
common share for the second quarter
- -0.9% economic return on tangible common equity for the
quarter
-
- Comprised of $0.50 dividends per
common share and $(0.65) decrease in
tangible net book value per common share
OTHER SECOND QUARTER HIGHLIGHTS
- $104.4 billion investment
portfolio as of June 30, 2019, comprised of:
-
- $91.6 billion Agency MBS
- $11.2 billion TBA mortgage
position
- $1.7 billion credit risk transfer
("CRT") and non-Agency securities
- 9.8x tangible net book value "at risk" leverage as of
June 30, 2019
-
- 10.0x average tangible net book value "at risk" leverage for
the quarter
- 10.0% portfolio CPR for the quarter
-
- 12.4% average projected portfolio life CPR as of June 30,
2019
- 1.00% annualized net interest spread and TBA dollar roll income
for the quarter, excluding estimated "catch-up" premium
amortization cost
-
- Excludes -22 bps of "catch-up" premium amortization cost due to
change in projected CPR estimates
- $190 million of common equity
raised, net of offering costs, pursuant to At-the-Market equity
offerings
___________
- Represents a non-GAAP measure. Please refer to a
reconciliation to the most applicable GAAP measure and additional
information regarding the use of non-GAAP financial information
later in this release.
MANAGEMENT REMARKS
"During the second quarter of 2019, generally weak global
economic data, benign inflation indicators, and ongoing
trade-related tensions led the Federal Reserve to shift its
monetary policy stance toward greater accommodation, signaling at
its May meeting that rate cuts were likely," said Gary Kain,
the Company's Chief Executive Officer and Chief Investment
Officer. "In response, interest rates declined materially,
the yield curve steepened modestly, and interest rate volatility
increased during the quarter. In aggregate, the 2-year U.S.
Treasury rate declined 0.51% from 2.26% as of March 31, 2019 to 1.75% as of June 30, 2019, while the 10-year U.S. Treasury
rate declined 0.40% from 2.41% as of March
31, 2019 to 2.01% as of June
30, 2019. The significant decline in interest rates
led to a meaningful increase in prepayment expectations, which,
coupled with a significant inversion of the front end of the curve,
drove spreads on Agency mortgage-backed securities wider relative
to U.S. Treasury and interest rate swap hedges during the
quarter.
"In the current low rate environment, asset selection will be a
key determinant of returns as prepayment speeds across the MBS
spectrum will vary widely based upon coupon and pool
characteristics. During the quarter, we took steps to further
insulate the portfolio from the higher risk areas of the mortgage
market by materially reducing our exposure to higher coupon, more
generic MBS. As such, the average speed on our portfolio in
the last prepayment release was only 10.8% CPR despite a
significant percentage of recent production, generic 30-year 4.0%
and 4.5% coupons prepaying at over 30% CPR. To this point,
while a low rate, faster prepayment environment can be a
significant threat to the performance of an Agency MBS portfolio,
it also provides an excellent opportunity to generate incremental
returns on equity."
"Given the uptick in interest rate volatility and the
underperformance of our Agency MBS portfolio relative to swap and
treasury hedges, AGNC's economic return on tangible common equity
for the second quarter was -0.9%, consisting of $0.50 in
dividends and a $(0.65) decrease in tangible net book
value per common share," commented Peter Federico, the
Company's President and Chief Operating Officer. "AGNC
generated $0.49 of net spread and dollar roll income,
excluding catch-up premium amortization, in the second quarter, as
elevated MBS repo funding rates and increased amortization expense
resulting from higher projected lifetime prepayment speeds
adversely impacted our earnings. Looking ahead, we expect
these headwinds to abate gradually as repo funding levels
ultimately reprice to the new short-term rate outlook and the
prepayment protection embedded in our asset portfolio mitigates the
impact of further increases in prepayment speeds."
TANGIBLE NET BOOK VALUE PER COMMON SHARE
As of June 30, 2019, the Company's tangible net book value
per common share was $16.58 per
share, a decrease of -3.8% compared to $17.23 per share as of March 31, 2019.
The Company's tangible net book value per common share excludes
$526 million, or $0.96 and $0.98 per
common share, of goodwill as of June 30, 2019 and
March 31, 2019, respectively.
INVESTMENT PORTFOLIO
As of June 30, 2019, the Company's investment portfolio
totaled $104.4 billion, comprised
of:
- $102.7 billion of Agency MBS and
TBA securities, including:
-
- $101.8 billion of fixed-rate
securities, comprised of:
-
- $82.7 billion 30-year fixed-rate
securities,
- $8.0 billion 30-year TBA
securities,
- $7.2 billion 15-year
securities,
- $3.2 billion 15-year TBA
securities, and
- $0.8 billion 20-year fixed-rate
securities;
- $0.9 billion of collateralized
mortgage obligations ("CMOs"), adjustable-rate and other Agency
securities;
- $1.7 billion of CRT and
non-Agency securities.
As of June 30, 2019, 30-year and 15-year fixed-rate Agency
securities represented 87% and 10%, of the Company's investment
portfolio, respectively, compared to 86% and 10%, respectively, as
of March 31, 2019.
As of June 30, 2019, the Company's fixed-rate securities'
weighted average coupon declined to 3.75%, compared to 3.83% as of
March 31, 2019, comprised of the following weighted average
coupons:
- 3.79% for 30-year fixed-rate securities;
- 3.35% for 15-year fixed rate securities; and
- 3.95% for 20-year fixed-rate securities.
The Company accounts for TBA securities (or "dollar roll funded
assets") as derivative instruments and recognizes dollar roll
income in other gain (loss), net on the Company's financial
statements. As of June 30, 2019, the Company's net TBA
position had a total fair value of $11.2
billion and a GAAP net carrying value of $84 million reported in derivative
assets/(liabilities) on the Company's balance sheet, compared to a
total fair value of $7.0 billion and
a GAAP net carrying value of $70
million as of March 31, 2019.
CONSTANT PREPAYMENT RATES
The Company's investment portfolio had a weighted average CPR of
10.0% for the second quarter, compared to 6.3% for the prior
quarter. The weighted average projected CPR for the remaining
life of the Company's Agency securities held as of June 30,
2019 was 12.4%, compared to 10.5% as of March 31, 2019.
The weighted average cost basis of the Company's investment
portfolio was 103.4% of par value as of June 30, 2019.
Net premium amortization cost on the Company's investment portfolio
for the second quarter was $(183)
million, or $(0.34) per common
share, which includes a "catch-up" premium amortization cost of
$(58) million, or $(0.11) per common share, due to changes in the
Company's projected CPR estimates for securities acquired prior to
the second quarter. This compares to net premium amortization
cost for the prior quarter of $(142)
million, or $(0.26) per common
share, including a "catch-up" premium amortization cost of
$(39) million, or $(0.07) per common share.
ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE
SPREAD
The Company's average asset yield on its investment portfolio,
excluding the net TBA position, was 2.99% for the second quarter,
compared to 3.14% for the prior quarter. Excluding "catch-up"
premium amortization, the Company's average asset yield was 3.24%
for the second quarter, compared to 3.31% for the prior quarter.
Including TBA securities and excluding "catch-up" premium
amortization, the Company's average asset yield for the second
quarter was 3.24%, compared to 3.33% for the prior quarter.
For the second quarter, the weighted average interest rate on
the Company's Agency repurchase agreements was 2.62%, compared to
2.64% for the prior quarter. The Company's average implied
TBA funding cost was 2.47% for the second quarter, compared to
2.60% for the prior quarter. Inclusive of interest rate
swaps, the Company's combined average cost of funds for the second
quarter was 2.24%, compared to 2.27% for the prior quarter.
The Company's annualized net interest spread, including TBA
securities and interest rate swaps, was 0.78% for the second
quarter, compared to 0.90% for the prior quarter. Excluding
"catch-up" premium amortization, the Company's combined annualized
net interest spread for the second quarter was 1.00%, versus 1.06%
for the prior quarter.
NET SPREAD AND DOLLAR ROLL INCOME
The Company recognized net spread and dollar roll income (a
non-GAAP financial measure) for the second quarter of $0.49 per common share, excluding $(0.11) per common share of "catch-up" premium
amortization cost, compared to $0.52
per common share for the prior quarter, excluding $(0.07) per common share of "catch-up" premium
amortization cost.
A reconciliation of the Company's net interest income to net
spread and dollar roll income and additional information regarding
the Company's use of non-GAAP measures are included later in this
release.
LEVERAGE
As of June 30, 2019, $85.1
billion of Agency repurchase agreements, $11.1 billion of TBA dollar roll positions (at
cost) and $0.3 billion of other debt
were used to fund the Company's investment portfolio. The
remainder, or approximately $1.2
billion, of the Company's repurchase agreements was used to
fund purchases of U.S. Treasury securities ("U.S. Treasury repo")
and is not included in the Company's leverage measurements.
Inclusive of its net TBA position and net payable/(receivable) for
unsettled investment securities, the Company's tangible net book
value "at risk" leverage ratio was 9.8x as of June 30, 2019,
compared to 9.4x as of March 31, 2019. The Company's
average "at risk" leverage for the second quarter was 10.0x
tangible net book value, compared to 9.3x for the prior
quarter.
As of June 30, 2019, the Company's Agency repurchase
agreements had a weighted average interest rate of 2.64%, compared
to 2.82% as of March 31, 2019, and a weighted average
remaining maturity of 80 days, compared to 81 days as of
March 31, 2019. As of June 30, 2019, $36.0 billion, or 42%, of the Company's Agency
repurchase agreements were funded through the Company's captive
broker-dealer subsidiary, Bethesda Securities, LLC.
As of June 30, 2019, the Company's Agency repurchase
agreements had remaining maturities of:
- $65.7 billion of three months or
less;
- $3.9 billion from three to six
months;
- $13.2 billion from six to twelve
months; and
- $2.3 billion from one to three
years.
HEDGING ACTIVITIES
As of June 30, 2019, interest rate swaps, swaptions and
U.S. Treasury positions equaled 91% of the Company's outstanding
balance of Agency repurchase agreements, net TBA position and other
debt, compared to 77% as of March 31, 2019.
As of June 30, 2019, the Company's interest rate swap
position totaled $75.0 billion in
notional amount, compared to $48.2
billion as of March 31, 2019. As of June 30,
2019, the Company's interest rate swap portfolio had an average
fixed pay rate of 1.72%, an average receive rate of 2.46% and an
average maturity of 3.3 years, compared to 2.01%, 2.69% and 4.3
years, respectively, as of March 31, 2019.
As of June 30, 2019, the Company had payer swaptions
outstanding totaling $4.4 billion,
compared to $2.6 billion as of
March 31, 2019. As of June 30, 2019, the Company
had short U.S. Treasury positions outstanding totaling $8.7 billion, compared to $21.2 billion as of March 31, 2019.
OTHER GAIN (LOSS), NET
For the second quarter, the Company recorded a net loss of
$(547) million in other gain (loss),
net, or $(1.02) per common share,
compared to a net gain of $120
million, or $0.22 per common
share, for the prior quarter. Other gain (loss), net for the
second quarter was comprised of:
- $132 million of net realized
gains on sales of investment securities;
- $759 million of net unrealized
gains on investment securities measured at fair value through net
income;
- $88 million of interest rate swap
periodic income;
- $(1,107) million of net losses on
interest rate swaps;
- $(25) million of net losses on
interest rate swaptions;
- $(556) million of net losses on
U.S. Treasury positions;
- $22 million of TBA dollar roll
income;
- $141 million of net
mark-to-market gains on TBA mortgage positions; and
- $(1) million of other
miscellaneous losses.
OTHER COMPREHENSIVE INCOME
During the second quarter, the Company recorded other
comprehensive income of $379 million,
or $0.70 per common share, consisting
of net unrealized gains on the Company's Agency securities
recognized through OCI, compared to a $400
million, or $0.75 per common
share, of other comprehensive income for the prior quarter.
COMMON STOCK DIVIDENDS
During the second quarter, the Company declared dividends of
$0.18, $0.16 and $0.16 per
share to common stockholders of record as of April 30, May 31
and June 28, 2019, respectively,
totaling $0.50 per share for the
quarter, which were paid on May 9,
June 11, and July 10, 2019, respectively. Since its
May 2008 initial public offering
through the second quarter of 2019, the Company has declared a
total of $9.1 billion in common stock
dividends, or $40.36 per common
share.
STOCK REPURCHASE PROGRAM
The Company also announced that its Board of Directors has
authorized it to repurchase up to $1
billion of its outstanding shares of common stock through
December 31, 2020. The Company
may repurchase shares in the open market or privately negotiated
transactions or pursuant to a trading plan that may be adopted in
accordance with Rule 10b5-1 of the Securities and Exchange Act of
1934, as amended. The Company intends to repurchase shares
under the stock repurchase program only when the repurchase price
is less than its then-current estimate of its tangible net book
value per common share.
FINANCIAL STATEMENTS, OPERATING PERFORMANCE AND PORTFOLIO
STATISTICS
The following measures of operating performance include net
spread and dollar roll income; net spread and dollar roll income,
excluding "catch-up" premium amortization; economic interest
income; economic interest expense; estimated taxable income; and
the related per common share measures and financial metrics derived
from such information, which are non-GAAP financial measures.
Please refer to "Use of Non-GAAP Financial Information" later in
this release for further discussion of non-GAAP measures.
CONTACT:
Investors - (301) 968-9300
Media - (301) 968-9303
AGNC INVESTMENT
CORP.
|
CONSOLIDATED BALANCE
SHEETS
|
(in millions, except
per share data)
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
2019
|
|
2019
|
|
2018
|
|
2018
|
|
2018
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
(unaudited)
|
|
(unaudited)
|
Assets:
|
|
|
|
|
|
|
|
|
|
Agency securities, at
fair value (including pledged securities of
$87,582, $89,471, $78,619, $67,889 and $51,356,
respectively)
|
$
91,140
|
|
$
93,044
|
|
$
82,291
|
|
$
70,408
|
|
$
55,524
|
Agency securities
transferred to consolidated variable interest
entities, at fair value (pledged securities)
|
411
|
|
425
|
|
436
|
|
453
|
|
587
|
Credit risk transfer
securities, at fair value (including pledged
securities of $269, $142, $141, $44 and $0,
respectively)
|
1,117
|
|
1,129
|
|
1,012
|
|
997
|
|
936
|
Non-Agency
securities, at fair value (including pledged securities of
$0, $45, $45, $0 and $0, respectively)
|
603
|
|
672
|
|
548
|
|
507
|
|
60
|
U.S. Treasury
securities, at fair value (including pledged securities of
$1,152, $121, $0, $45 and $0, respectively)
|
1,152
|
|
121
|
|
46
|
|
109
|
|
-
|
REIT equity
securities, at fair value
|
-
|
|
-
|
|
-
|
|
-
|
|
46
|
Cash and cash
equivalents
|
870
|
|
929
|
|
921
|
|
1,071
|
|
863
|
Restricted
cash
|
789
|
|
517
|
|
599
|
|
456
|
|
447
|
Derivative assets, at
fair value
|
116
|
|
253
|
|
273
|
|
412
|
|
458
|
Receivable for
investment securities sold (including pledged
securities of $673, $439, $489, $443 and $31,
respectively)
|
679
|
|
439
|
|
489
|
|
524
|
|
31
|
Receivable under
reverse repurchase agreements
|
8,848
|
|
20,430
|
|
21,813
|
|
16,309
|
|
13,306
|
Goodwill and other
intangible asset, net
|
526
|
|
526
|
|
526
|
|
526
|
|
550
|
Other
assets
|
325
|
|
322
|
|
287
|
|
259
|
|
330
|
Total assets
|
$
106,576
|
|
$
118,807
|
|
$
109,241
|
|
$
92,031
|
|
$
73,138
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
$
86,266
|
|
$
86,685
|
|
$
75,717
|
|
$
65,734
|
|
$
48,839
|
Debt of consolidated
variable interest entities, at fair value
|
251
|
|
266
|
|
275
|
|
291
|
|
313
|
Payable for
investment securities purchased
|
878
|
|
1,125
|
|
1,204
|
|
23
|
|
1,503
|
Derivative
liabilities, at fair value
|
63
|
|
53
|
|
84
|
|
62
|
|
6
|
Dividends
payable
|
101
|
|
107
|
|
106
|
|
95
|
|
87
|
Obligation to return
securities borrowed under reverse
repurchase agreements, at fair value
|
7,754
|
|
19,275
|
|
21,431
|
|
15,549
|
|
12,898
|
Accounts payable and
other liabilities
|
917
|
|
795
|
|
518
|
|
650
|
|
450
|
Total
liabilities
|
96,230
|
|
108,306
|
|
99,335
|
|
82,404
|
|
64,096
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock -
aggregate liquidation preference of $735, $735,
$500, $500 and $500, respectively
|
711
|
|
711
|
|
484
|
|
484
|
|
484
|
Common stock - $0.01
par value; 547.8, 536.3, 536.3, 477.8 and
434.1 shares issued and outstanding, respectively
|
5
|
|
5
|
|
5
|
|
5
|
|
4
|
Additional paid-in
capital
|
13,988
|
|
13,795
|
|
13,793
|
|
12,785
|
|
11,964
|
Retained
deficit
|
(4,194)
|
|
(3,467)
|
|
(3,433)
|
|
(2,343)
|
|
(2,299)
|
Accumulated other
comprehensive loss
|
(164)
|
|
(543)
|
|
(943)
|
|
(1,304)
|
|
(1,111)
|
Total stockholders'
equity
|
10,346
|
|
10,501
|
|
9,906
|
|
9,627
|
|
9,042
|
Total liabilities and
stockholders' equity
|
$
106,576
|
|
$
118,807
|
|
$
109,241
|
|
$
92,031
|
|
$
73,138
|
|
|
|
|
|
|
|
|
|
|
Tangible net book
value per common share 1
|
$
16.58
|
|
$
17.23
|
|
$
16.56
|
|
$
18.00
|
|
$
18.41
|
AGNC INVESTMENT
CORP.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
2019
|
|
2019
|
|
2018
|
|
2018
|
|
2018
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
693
|
|
$
705
|
|
$
604
|
|
$
500
|
|
$
414
|
Interest
expense
|
570
|
|
541
|
|
418
|
|
312
|
|
237
|
Net interest
income
|
123
|
|
164
|
|
186
|
|
188
|
|
177
|
Other gain (loss),
net:
|
|
|
|
|
|
|
|
|
|
Realized gain (loss)
on sale of investment securities, net
|
132
|
|
60
|
|
(21)
|
|
(40)
|
|
(74)
|
Unrealized gain
(loss) on investment securities measured at fair value
through net income, net
|
759
|
|
1,060
|
|
683
|
|
(363)
|
|
(94)
|
Gain (loss) on
derivative instruments and other securities, net
|
(1,438)
|
|
(1,000)
|
|
(1,633)
|
|
430
|
|
298
|
Management fee
income
|
-
|
|
-
|
|
-
|
|
46
|
|
4
|
Total other gain
(loss), net
|
(547)
|
|
120
|
|
(971)
|
|
73
|
|
134
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
11
|
|
10
|
|
11
|
|
14
|
|
10
|
Other operating
expense
|
9
|
|
9
|
|
8
|
|
31
|
|
8
|
Total operating
expense
|
20
|
|
19
|
|
19
|
|
45
|
|
18
|
Net income
(loss)
|
(444)
|
|
265
|
|
(804)
|
|
216
|
|
293
|
Dividend on preferred
stock
|
13
|
|
10
|
|
9
|
|
9
|
|
9
|
Net income (loss)
available (attributable) to common stockholders
|
$
(457)
|
|
$
255
|
|
$
(813)
|
|
$
207
|
|
$
284
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
(444)
|
|
$
265
|
|
$
(804)
|
|
$
216
|
|
$
293
|
Unrealized gain
(loss) on investment securities measured at fair value
through other comprehensive income (loss), net
|
379
|
|
400
|
|
361
|
|
(193)
|
|
(145)
|
Comprehensive
income (loss)
|
(65)
|
|
665
|
|
(443)
|
|
23
|
|
148
|
Dividend on preferred
stock
|
13
|
|
10
|
|
9
|
|
9
|
|
9
|
Comprehensive
income (loss) available (attributable) to common
stockholders
|
$
(78)
|
|
$
655
|
|
$
(452)
|
|
$
14
|
|
$
139
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
537.8
|
|
536.7
|
|
504.2
|
|
462.3
|
|
404.9
|
Weighted average
number of common shares outstanding - diluted
|
537.8
|
|
537.2
|
|
504.2
|
|
462.7
|
|
405.2
|
Net income (loss)
per common share - basic
|
$
(0.85)
|
|
$
0.48
|
|
$
(1.61)
|
|
$
0.45
|
|
$
0.70
|
Net income (loss)
per common share - diluted
|
$
(0.85)
|
|
$
0.47
|
|
$
(1.61)
|
|
$
0.45
|
|
$
0.70
|
Comprehensive
income (loss) per common share - basic and diluted
|
$
(0.15)
|
|
$
1.22
|
|
$
(0.90)
|
|
$
0.03
|
|
$
0.34
|
Dividends declared
per common share
|
$
0.50
|
|
$
0.54
|
|
$
0.54
|
|
$
0.54
|
|
$
0.54
|
AGNC INVESTMENT
CORP.
|
RECONCILIATION OF
GAAP NET INTEREST INCOME TO NET SPREAD AND DOLLAR ROLL INCOME
(NON-GAAP MEASURE) 2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
2019
|
|
2019
|
|
2018
|
|
2018
|
|
2018
|
GAAP net interest
income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
693
|
|
$
705
|
|
$
604
|
|
$
500
|
|
$
414
|
Interest
expense
|
570
|
|
541
|
|
418
|
|
312
|
|
237
|
GAAP net interest
income
|
123
|
|
164
|
|
186
|
|
188
|
|
177
|
TBA dollar roll income,
net 3,4
|
22
|
|
19
|
|
27
|
|
68
|
|
70
|
Interest rate swap
periodic income (cost), net 3,9
|
88
|
|
83
|
|
63
|
|
56
|
|
41
|
Other interest and
dividend income 3
|
4
|
|
3
|
|
-
|
|
1
|
|
1
|
Adjusted net interest
and dollar roll income
|
237
|
|
269
|
|
276
|
|
313
|
|
289
|
Other operating
income (expense):
|
|
|
|
|
|
|
|
|
|
Operating
expense
|
(20)
|
|
(19)
|
|
(19)
|
|
(45)
|
|
(18)
|
Less non-recurring
write-off of intangible asset and other expenses
associated with termination of
management agreement
|
-
|
|
-
|
|
1
|
|
26
|
|
-
|
Management fee
income
|
-
|
|
-
|
|
-
|
|
46
|
|
4
|
Less management
agreement termination fee income
|
-
|
|
-
|
|
-
|
|
(42)
|
|
-
|
Total operating
income (expense), net
|
(20)
|
|
(19)
|
|
(18)
|
|
(15)
|
|
(14)
|
Net spread and dollar
roll income
|
217
|
|
250
|
|
258
|
|
298
|
|
275
|
Dividend on preferred
stock
|
13
|
|
10
|
|
9
|
|
9
|
|
9
|
Net spread and dollar
roll income available to common stockholders
|
204
|
|
240
|
|
249
|
|
289
|
|
266
|
Estimated "catch-up"
premium amortization cost (benefit) due to change in
CPR forecast 11
|
58
|
|
39
|
|
16
|
|
(6)
|
|
(12)
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, available to common stockholders
|
$
262
|
|
$
279
|
|
$
265
|
|
$
283
|
|
$
254
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
537.8
|
|
536.7
|
|
504.2
|
|
462.3
|
|
404.9
|
Weighted average
number of common shares outstanding - diluted
|
538.4
|
|
537.2
|
|
504.7
|
|
462.7
|
|
405.2
|
Net spread and dollar
roll income per common share - basic
|
$
0.38
|
|
$
0.45
|
|
$
0.49
|
|
$
0.63
|
|
$
0.66
|
Net spread and dollar
roll income per common share - diluted
|
$
0.38
|
|
$
0.45
|
|
$
0.49
|
|
$
0.62
|
|
$
0.66
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, per common share - basic
|
$
0.49
|
|
$
0.52
|
|
$
0.53
|
|
$
0.61
|
|
$
0.63
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, per common share - diluted
|
$
0.49
|
|
$
0.52
|
|
$
0.53
|
|
$
0.61
|
|
$
0.63
|
AGNC INVESTMENT
CORP.
|
RECONCILIATION OF
GAAP NET INCOME TO ESTIMATED TAXABLE INCOME (NON-GAAP MEASURE)
2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
2019
|
|
2019
|
|
2018
|
|
2018
|
|
2018
|
Net
income/(loss)
|
$
(444)
|
|
$
265
|
|
$
(804)
|
|
$
216
|
|
$
293
|
Book to tax
differences:
|
|
|
|
|
|
|
|
|
|
Premium amortization,
net
|
67
|
|
54
|
|
15
|
|
(21)
|
|
(22)
|
Realized gain/loss,
net
|
886
|
|
627
|
|
928
|
|
(291)
|
|
(221)
|
Net capital
loss/(utilization of net capital loss carryforward)
|
320
|
|
(12)
|
|
(105)
|
|
(67)
|
|
109
|
Unrealized
(gain)/loss, net
|
(644)
|
|
(719)
|
|
140
|
|
316
|
|
(46)
|
Other
|
(1)
|
|
(9)
|
|
(1)
|
|
(2)
|
|
-
|
Total book to tax
differences
|
628
|
|
(59)
|
|
977
|
|
(65)
|
|
(180)
|
Estimated REIT
taxable income
|
184
|
|
206
|
|
173
|
|
151
|
|
113
|
Dividend on preferred
stock
|
13
|
|
10
|
|
9
|
|
9
|
|
9
|
Estimated REIT
taxable income, net of preferred stock dividend
|
$
171
|
|
$
196
|
|
$
164
|
|
$
142
|
|
$
104
|
Weighted average
number of common shares outstanding - basic
|
537.8
|
|
536.7
|
|
504.2
|
|
462.3
|
|
404.9
|
Weighted average
number of common shares outstanding - diluted
|
538.4
|
|
537.2
|
|
504.7
|
|
462.7
|
|
405.2
|
Estimated REIT
taxable income per common share - basic
|
$
0.32
|
|
$
0.37
|
|
$
0.33
|
|
$
0.31
|
|
$
0.26
|
Estimated REIT
taxable income per common share - diluted
|
$
0.32
|
|
$
0.36
|
|
$
0.32
|
|
$
0.31
|
|
$
0.26
|
|
|
|
|
|
|
|
|
|
|
Beginning cumulative
non-deductible net capital loss
|
$
170
|
|
$
182
|
|
$
644
|
|
$
711
|
|
$
602
|
Increase (decrease)
in net capital loss carryforward 5
|
320
|
|
(12)
|
|
(462)
|
|
(67)
|
|
109
|
Ending cumulative
non-deductible net capital loss
|
$
490
|
|
$
170
|
|
$
182
|
|
$
644
|
|
$
711
|
Ending cumulative
non-deductible net capital loss per common share
|
$
0.89
|
|
$
0.32
|
|
$
0.34
|
|
$
1.35
|
|
$
1.64
|
AGNC INVESTMENT
CORP.
|
NET INTEREST SPREAD
COMPONENTS BY FUNDING SOURCE 2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
2019
|
|
2019
|
|
2018
|
|
2018
|
|
2018
|
Adjusted net
interest and dollar roll income, excluding "catch-up"
premium amortization:
|
|
|
|
|
|
|
|
|
|
Economic
interest income:
|
|
|
|
|
|
|
|
|
|
Investment
securities - GAAP interest income 12
|
$
693
|
|
$
705
|
|
$
604
|
|
$
500
|
|
$
414
|
Estimated
"catch-up" premium amortization cost (benefit) due to change
in CPR forecast 11
|
58
|
|
39
|
|
16
|
|
(6)
|
|
(12)
|
TBA dollar
roll income - implied interest income 3,7
|
96
|
|
71
|
|
74
|
|
162
|
|
144
|
Economic
interest income, excluding "catch-up" premium
amortization
|
847
|
|
815
|
|
694
|
|
656
|
|
546
|
Economic
interest expense:
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements and other debt - GAAP interest expense
|
(570)
|
|
(541)
|
|
(418)
|
|
(312)
|
|
(237)
|
TBA dollar
roll income - implied interest expense 3,6
|
(74)
|
|
(52)
|
|
(47)
|
|
(94)
|
|
(74)
|
Interest rate
swap periodic income (cost) 3,9
|
88
|
|
83
|
|
63
|
|
56
|
|
41
|
Economic
interest expense
|
(556)
|
|
(510)
|
|
(402)
|
|
(350)
|
|
(270)
|
Other interest
and dividend income 3
|
4
|
|
3
|
|
-
|
|
1
|
|
1
|
Adjusted net
interest and dollar roll income, excluding "catch-up" premium
amortization
|
$
295
|
|
$
308
|
|
$
292
|
|
$
307
|
|
$
277
|
|
|
|
|
|
|
|
|
|
|
Net interest
spread, excluding "catch-up" amortization:
|
|
|
|
|
|
|
|
|
|
Average asset
yield:
|
|
|
|
|
|
|
|
|
|
Investment
securities - average asset yield
|
2.99%
|
|
3.14%
|
|
3.13%
|
|
3.11%
|
|
2.99%
|
Estimated
"catch-up" premium amortization cost (benefit) due to change
in CPR forecast
|
0.25%
|
|
0.17%
|
|
0.08%
|
|
(0.04)%
|
|
(0.08)%
|
Investment
securities average asset yield, excluding "catch-up" premium
amortization
|
3.24%
|
|
3.31%
|
|
3.21%
|
|
3.07%
|
|
2.91%
|
TBA securities
- average implied asset yield 7
|
3.21%
|
|
3.55%
|
|
3.66%
|
|
3.54%
|
|
3.41%
|
Average asset
yield, excluding "catch-up" premium amortization
8
|
3.24%
|
|
3.33%
|
|
3.26%
|
|
3.18%
|
|
3.02%
|
Average total
cost of funds:
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements and other debt - average funding cost
|
2.62%
|
|
2.64%
|
|
2.42%
|
|
2.20%
|
|
1.99%
|
TBA securities
- average implied funding cost 6
|
2.47%
|
|
2.60%
|
|
2.32%
|
|
2.05%
|
|
1.75%
|
Average cost
of funds, before interest rate swap periodic (income) cost
8
|
2.60%
|
|
2.64%
|
|
2.41%
|
|
2.18%
|
|
1.92%
|
Interest rate
swap periodic (income) cost of funds 10
|
(0.36)%
|
|
(0.37)%
|
|
(0.32)%
|
|
(0.30)%
|
|
(0.25)%
|
Average total
cost of funds
|
2.24%
|
|
2.27%
|
|
2.09%
|
|
1.88%
|
|
1.67%
|
Average net
interest spread, excluding "catch-up" premium
amortization
|
1.00%
|
|
1.06%
|
|
1.17%
|
|
1.30%
|
|
1.35%
|
AGNC INVESTMENT
CORP.
|
KEY
STATISTICS*
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Key Balance Sheet
Statistics:
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
2019
|
|
2019
|
|
2018
|
|
2018
|
|
2018
|
Investment
securities: 12
|
|
|
|
|
|
|
|
|
|
Fixed-rate Agency
MBS, at fair value - as of period end
|
$
90,627
|
|
$
92,502
|
|
$
81,753
|
|
$
69,844
|
|
$
55,119
|
Other Agency MBS, at
fair value - as of period end
|
$
924
|
|
$
967
|
|
$
974
|
|
$
1,017
|
|
$
992
|
Credit risk transfer
securities, at fair value - as of period end
|
$
1,117
|
|
$
1,129
|
|
$
1,012
|
|
$
997
|
|
$
936
|
Non-Agency MBS, at
fair value - as of period end
|
$
603
|
|
$
672
|
|
$
548
|
|
$
507
|
|
$
60
|
Total investment
securities, at fair value - as of period end
|
$
93,271
|
|
$
95,270
|
|
$
84,287
|
|
$
72,365
|
|
$
57,107
|
Total investment
securities, at cost - as of period end
|
$
91,953
|
|
$
95,090
|
|
$
85,569
|
|
$
74,691
|
|
$
58,875
|
Total investment
securities, at par - as of period end
|
$
88,931
|
|
$
92,091
|
|
$
82,693
|
|
$
71,844
|
|
$
56,320
|
Average investment
securities, at cost
|
$
92,610
|
|
$
89,952
|
|
$
77,182
|
|
$
64,346
|
|
$
55,329
|
Average investment
securities, at par
|
$
89,586
|
|
$
87,021
|
|
$
74,395
|
|
$
61,696
|
|
$
52,856
|
TBA
securities:
|
|
|
|
|
|
|
|
|
|
Net TBA portfolio -
as of period end, at fair value
|
$
11,170
|
|
$
6,955
|
|
$
7,322
|
|
$
9,393
|
|
$
20,003
|
Net TBA portfolio -
as of period end, at cost
|
$
11,086
|
|
$
6,885
|
|
$
7,252
|
|
$
9,436
|
|
$
19,898
|
Net TBA portfolio -
as of period end, carrying value
|
$
84
|
|
$
70
|
|
$
70
|
|
$
(43)
|
|
$
105
|
Average net TBA
portfolio, at cost
|
$
11,864
|
|
$
8,002
|
|
$
8,066
|
|
$
18,270
|
|
$
16,912
|
Average repurchase
agreements and other debt 13
|
$
86,147
|
|
$
82,070
|
|
$
68,499
|
|
$
56,265
|
|
$
47,823
|
Average stockholders'
equity 14
|
$
10,371
|
|
$
10,186
|
|
$
9,634
|
|
$
9,345
|
|
$
8,652
|
Tangible net book
value per common share 1
|
$
16.58
|
|
$
17.23
|
|
$
16.56
|
|
$
18.00
|
|
$
18.41
|
Tangible net book
value "at risk" leverage - average 15
|
10.0:1
|
|
9.3:1
|
|
8.4:1
|
|
8.5:1
|
|
8.0:1
|
Tangible net book
value "at risk" leverage - as of period end
16
|
9.8:1
|
|
9.4:1
|
|
9.0:1
|
|
8.2:1
|
|
8.3:1
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Statistics:
|
|
|
|
|
|
|
|
|
|
Investment
securities: 12
|
|
|
|
|
|
|
|
|
|
Average
coupon
|
3.88%
|
|
3.87%
|
|
3.83%
|
|
3.78%
|
|
3.71%
|
Average asset
yield
|
2.99%
|
|
3.14%
|
|
3.13%
|
|
3.11%
|
|
2.99%
|
Average asset yield,
excluding "catch-up" premium amortization
|
3.24%
|
|
3.31%
|
|
3.21%
|
|
3.07%
|
|
2.91%
|
Average coupon - as
of period end
|
3.88%
|
|
3.88%
|
|
3.86%
|
|
3.82%
|
|
3.74%
|
Average asset yield -
as of period end
|
3.21%
|
|
3.29%
|
|
3.31%
|
|
3.22%
|
|
3.03%
|
Average actual CPR
for securities held during the period
|
10.0%
|
|
6.3%
|
|
7.4%
|
|
9.7%
|
|
9.7%
|
Average forecasted
CPR - as of period end
|
12.4%
|
|
10.5%
|
|
7.9%
|
|
6.8%
|
|
7.1%
|
Total premium
amortization, net
|
$
(183)
|
|
$
(142)
|
|
$
(107)
|
|
$
(81)
|
|
$
(74)
|
TBA
securities:
|
|
|
|
|
|
|
|
|
|
Average coupon - as
of period end
|
3.01%
|
|
3.64%
|
|
4.03%
|
|
3.90%
|
|
3.75%
|
Average implied asset
yield 7
|
3.21%
|
|
3.55%
|
|
3.66%
|
|
3.54%
|
|
3.41%
|
Combined investment
and TBA securities - average asset yield,
excluding "catch-up" premium amortization 8
|
3.24%
|
|
3.33%
|
|
3.26%
|
|
3.18%
|
|
3.02%
|
Cost of
funds:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
- average funding cost
|
2.62%
|
|
2.64%
|
|
2.42%
|
|
2.20%
|
|
1.99%
|
TBA securities -
average implied funding cost 6
|
2.47%
|
|
2.60%
|
|
2.32%
|
|
2.05%
|
|
1.75%
|
Interest rate swaps -
average periodic (income) cost of funds 10
|
(0.36)%
|
|
(0.37)%
|
|
(0.32)%
|
|
(0.30)%
|
|
(0.25)%
|
Average total cost of
funds, inclusive of TBAs and interest rate swap
periodic (income) cost 8
|
2.24%
|
|
2.27%
|
|
2.09%
|
|
1.88%
|
|
1.67%
|
Repurchase agreements
- average funding cost as of period end
|
2.64%
|
|
2.82%
|
|
2.79%
|
|
2.30%
|
|
2.18%
|
Interest rate swaps -
average net pay/(receive) rate as of period end
17
|
(0.74)%
|
|
(0.68)%
|
|
(0.52)%
|
|
(0.32)%
|
|
(0.41)%
|
Net interest
spread:
|
|
|
|
|
|
|
|
|
|
Combined investment
and TBA securities average net interest spread
|
0.78%
|
|
0.90%
|
|
1.09%
|
|
1.33%
|
|
1.42%
|
Combined investment
and TBA securities average net interest spread,
excluding "catch-up" premium amortization
|
1.00%
|
|
1.06%
|
|
1.17%
|
|
1.30%
|
|
1.35%
|
Expenses % of average
stockholders' equity - annualized 18
|
0.77%
|
|
0.75%
|
|
0.75%
|
|
0.81%
|
|
0.83%
|
Economic return
(loss) on tangible common equity - unannualized
19
|
(0.9)%
|
|
7.3%
|
|
(5.0)%
|
|
0.7%
|
|
1.7%
|
*Except as noted below, average numbers for each period are
weighted based on days on the Company's books and records. All
percentages are annualized, unless otherwise noted.
Numbers in financial tables may not total due to rounding.
- Tangible net book value per common share excludes preferred
stock liquidation preference and goodwill and other intangible
asset, net.
- Table includes non-GAAP financial measures and/or amounts
derived from non-GAAP measures. Refer to "Use of Non-GAAP
Financial Information" for additional discussion of non-GAAP
financial measures.
- Amount reported in gain (loss) on derivatives instruments and
other securities, net in the accompanying consolidated statements
of operations.
- Dollar roll income represents the price differential, or "price
drop," between the TBA price for current month settlement versus
the TBA price for forward month settlement. Amount is net of
TBAs used for hedging purposes. Amount excludes TBA mark-to-market
adjustments.
- Includes decrease in net capital loss carryforwards due to
expiration of unutilized net capital loss carryforwards from prior
years.
- The implied funding cost of TBA dollar roll transactions is
determined using the "price drop" (Note 4) and market based
assumptions regarding the "cheapest-to-deliver" collateral that can
be delivered to satisfy the TBA contract, such as the anticipated
collateral's weighted average coupon, weighted average maturity and
projected 1-month CPR. The average implied funding cost for
all TBA transactions is weighted based on the Company's daily
average TBA balance outstanding for the period.
- The average implied asset yield for TBA dollar roll
transactions is extrapolated by adding the average TBA implied
funding cost (Note 6) to the net dollar roll yield. The net
dollar roll yield is calculated by dividing dollar roll income
(Note 4) by the average TBA cost basis outstanding for the
period.
- Amount calculated on a weighted average basis based on average
balances outstanding during the period and their respective asset
yield/funding cost.
- Represents periodic interest rate swap settlements.
Amount excludes interest rate swap termination fees and
mark-to-market adjustments.
- Represents interest rate swap periodic income/cost measured as
a percent of total mortgage funding (Agency repurchase agreements,
other debt and TBA securities).
- "Catch-up" premium amortization cost/benefit is reported in
interest income on the accompanying consolidated statements of
operations
- Investment securities include Agency MBS, CRT and non-Agency
securities. Amounts exclude TBA securities.
- Average repurchase agreements and other debt excludes U.S.
Treasury repurchase agreements.
- Average stockholders' equity calculated as the average
month-ended stockholders' equity during the quarter.
- Average tangible net book value "at risk" leverage during the
period was calculated by dividing the sum of the daily weighted
average Agency repurchase agreements, other debt and net TBA
position (at cost) outstanding for the period by the sum of average
stockholders' equity adjusted to exclude goodwill and other
intangible asset and investment in REIT equity securities.
Leverage excludes U.S. Treasury repurchase agreements.
- Tangible net book value "at risk" leverage as of period end was
calculated by dividing the sum of the amount outstanding under
Agency repurchase agreements, other debt, net TBA position (at
cost) and net receivable / payable for unsettled investment
securities outstanding by the sum of total stockholders' equity
adjusted to exclude goodwill and other intangible asset and
investment in REIT equity securities at period end. Leverage
excludes U.S. Treasury repurchase agreements.
- Includes forward starting swaps not yet in effect as of
reported period-end.
- Annualized Q4 2018 and Q3 2018 operating expenses exclude the
non-recurring write-off of the intangible asset and other expenses
associated with sale of MTGE Investment Corp. and the resulting
termination of the Company's management agreement with MTGE.
- Economic return (loss) on tangible common equity represents the
sum of the change in tangible net book value per common share and
dividends declared on common stock during the period over the
beginning tangible net book value per common share.
STOCKHOLDER CALL
AGNC invites stockholders, prospective stockholders and analysts
to attend the AGNC stockholder call on July 25, 2019 at
8:30 am ET. Interested persons
who do not plan on asking a question and have internet access are
encouraged to utilize the free live webcast at
www.AGNC.com. Those who plan on participating in the
Q&A or do not have internet available may access the call by
dialing (877) 300-5922 (U.S. domestic) or (412) 902-6621
(international). Please advise the operator you are dialing in for
the AGNC Investment Corp. stockholder call.
A slide presentation will accompany the call and will be
available at www.AGNC.com. Select the Q2 2019 Earnings Presentation
link to download and print the presentation in advance of the
stockholder call.
An archived audio of the stockholder call combined with the
slide presentation will be available on the AGNC website after the
call on July 25, 2019. In addition, there will be a
phone recording available one hour after the live call on
July 25, 2019 through August 8,
2019. Those who are interested in hearing the recording of
the presentation, can access it by dialing (877) 344-7529 (U.S.
domestic) or (412) 317-0088 (international), passcode
10132872.
For further information, please contact Investor Relations at
(301) 968-9300 or IR@AGNC.com.
ABOUT AGNC INVESTMENT CORP.
AGNC Investment Corp. is an internally-managed real estate
investment trust ("REIT") that invests primarily in residential
mortgage-backed securities for which the principal and interest
payments are guaranteed by a U.S. Government-sponsored enterprise
or a U.S. Government agency. For further information, please
refer to www.AGNC.com.
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements.
Forward-looking statements are based on estimates, projections,
beliefs and assumptions of management of the Company at the time of
such statements and are not guarantees of future performance.
Forward-looking statements involve risks and uncertainties in
predicting future results and conditions. Actual results
could differ materially from those projected in these
forward-looking statements due to a variety of important factors,
including, without limitation, changes in interest rates, changes
in the yield curve, changes in prepayment rates, the availability
and terms of financing, changes in the market value of the
Company's assets, general economic conditions, market conditions,
conditions in the market for Agency securities, and legislative and
regulatory changes that could adversely affect the business of the
Company. Certain factors that could cause actual results to
differ materially from those contained in the forward-looking
statements, are included in the Company's periodic reports filed
with the Securities and Exchange Commission ("SEC"). Copies
are available on the SEC's website, www.sec.gov. The Company
disclaims any obligation to update or revise any forward-looking
statements based on the occurrence of future events, the receipt of
new information, or otherwise.
USE OF NON-GAAP FINANCIAL INFORMATION
In addition to the results presented in accordance with GAAP,
the Company's results of operations discussed in this release
include certain non-GAAP financial information, including "net
spread and dollar roll income," "net spread and dollar roll income,
excluding 'catch-up' premium amortization," "economic interest
income" and "economic interest expense" (both components of
"net spread and dollar roll income"), "estimated taxable income"
and the related per common share measures and certain financial
metrics derived from such non-GAAP information, such as "cost of
funds" and "net interest spread."
"Net spread and dollar roll income" is measured as (i) net
interest income (GAAP measure) adjusted to include TBA dollar roll
income, interest rate swap periodic income/cost and other interest
and dividend income (referred to as "adjusted net interest and
dollar roll income"), plus (ii) management fee income (GAAP
measure) and less (iii) total operating expense (GAAP measure),
which are adjusted to exclude non-recurring termination fee income
and one-time expenses associated with the termination of the
Company's management agreement with MTGE Investment Corp.
"Net spread and dollar roll income, excluding 'catch-up' premium
amortization," further excludes retrospective "catch-up"
adjustments to premium amortization cost or benefit due to changes
in projected CPR estimates.
By providing users of the Company's financial information with
such measures in addition to the related GAAP measures, the Company
believes users will have greater transparency into the information
used by the Company's management in its financial and operational
decision-making. The Company also believes that it is
important for users of its financial information to consider
information related to the Company's current financial performance
without the effects of certain transactions that are not
necessarily indicative of its current investment portfolio
performance and operations.
Specifically, in the case of "adjusted net interest and dollar
roll income," the Company believes the inclusion of TBA dollar roll
income is meaningful as TBAs, which are accounted for under GAAP as
derivative instruments with gains and losses recognized in other
gain (loss) in the Company's statement of operations, are
economically equivalent to holding and financing generic Agency MBS
using short-term repurchase agreements. Similarly, the
Company believes that the inclusion of periodic interest rate swap
settlements in such measure, which are recognized under GAAP in
other gain (loss), is meaningful as interest rate swaps are the
primary instrument the Company uses to economically hedge against
fluctuations in the Company's borrowing costs and inclusion of
periodic interest rate swap settlements is more indicative of the
Company's total cost of funds than interest expense alone. In
the case of "net spread and dollar roll income, excluding
'catch-up' premium amortization," the Company believes the
exclusion of "catch-up" adjustments to premium amortization cost is
meaningful as it excludes the cumulative effect from prior
reporting periods due to current changes in future prepayment
expectations and, therefore, exclusion of such "catch-up" cost or
benefit is more indicative of the current earnings potential of the
Company's investment portfolio. In the case of estimated
taxable income, the Company believes it is meaningful information
as it is directly related to the amount of dividends the Company is
required to distribute in order to maintain its REIT qualification
status.
However, because such measures are incomplete measures of the
Company's financial performance and involve differences from
results computed in accordance with GAAP, they should be considered
as supplementary to, and not as a substitute for, results computed
in accordance with GAAP. In addition, because not all
companies use identical calculations, the Company's presentation of
such non-GAAP measures may not be comparable to other
similarly-titled measures of other companies. Furthermore,
estimated taxable income can include certain information that is
subject to potential adjustments up to the time of filing the
Company's income tax returns, which occurs after the end of its
fiscal year.
A reconciliation of GAAP net interest income to non-GAAP "net
spread and dollar roll income, excluding 'catch-up' premium
amortization" and a reconciliation of GAAP net income to non-GAAP
"estimated taxable income" is included in this release.
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SOURCE AGNC Investment Corp.