BETHESDA, Md., Oct. 30,
2019 /PRNewswire/ -- AGNC Investment Corp. ("AGNC" or the
"Company") (Nasdaq: AGNC) today announced financial results for the
quarter ended September 30, 2019.
THIRD QUARTER 2019 FINANCIAL HIGHLIGHTS
- $0.42 comprehensive income per
common share, comprised of:
-
- $(0.03) net loss per common
share
- $0.45 other comprehensive income
("OCI") per common share on investments marked-to-market through
OCI
- $0.59 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization cost 1
-
- Includes $0.05 per common share
of dollar roll income associated with the Company's $10.1 billion average net long position in
forward purchases and sales of Agency mortgage-backed securities
("MBS") in the "to-be-announced" ("TBA") market
- Excludes $(0.10) per common share
of estimated "catch-up" premium amortization cost due to change in
projected constant prepayment rate ("CPR") estimates
- $16.55 tangible net book value
per common share as of September 30, 2019
-
- Decreased $(0.03) per common
share, or -0.2%, from $16.58 per
common share as of June 30, 2019
- $0.48 dividends declared per
common share for the third quarter
- 2.7% economic return on tangible common equity for the
quarter
-
- Comprised of $0.48 dividends per
common share and $(0.03) decrease in
tangible net book value per common share
OTHER THIRD QUARTER HIGHLIGHTS
- $102.6 billion investment
portfolio as of September 30, 2019, comprised of:
-
- $99.0 billion Agency MBS
- $1.9 billion net 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
September 30, 2019
-
- 10.0x average tangible net book value "at risk" leverage for
the quarter
- 13.5% portfolio CPR for the quarter
-
- 13.4% average projected portfolio CPR as of September 30,
2019
- 1.31% annualized net interest spread and TBA dollar roll income
for the quarter, excluding estimated "catch-up" premium
amortization cost
-
- Excludes -21 bps of "catch-up" premium amortization cost due to
change in projected CPR estimates
- 6.9 million shares, or $103
million, of common stock repurchased during the quarter
-
- Represents 1.3% of common stock outstanding as of June 30, 2019
- $14.90 per share average
repurchase price, inclusive of transaction costs
- $403 million of 6.50%
fixed-to-floating rate preferred equity issued in October 2019
-
- $390 million of proceeds from
offering, net of offering costs
- Announced $175 million redemption
of 7.750% Series B preferred stock
___________
- 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
"In the third quarter, financial
market volatility increased in response to weakening global
economic indicators and escalating U.S. - China trade tensions. The Federal
Reserve (the "Fed"), in turn and consistent with recent messaging,
lowered the federal funds target rate 25 basis points at each of
its July, September, and October meetings," said Gary Kain,
the Company's Chief Executive Officer and Chief Investment
Officer. "In addition, following a dislocation in government
repo markets, the Fed added substantial liquidity to the funding
markets beginning in mid-September through its open market
operations. The Fed also subsequently announced its intention to
continue its open market operations into 2020 and expand its
balance sheet through the acquisition of Treasury bills beginning
in mid-October and extending through at least the first quarter of
2020.
"As a result of this weakening global macroeconomic outlook and
monetary easing actions by central banks, interest rates declined,
and the yield curve flattened during the third quarter.
Spreads on Agency mortgage-backed securities correspondingly
widened relative to U.S. Treasury and interest rate swap hedges
during the quarter due in part to heightened prepayment concerns
and an increase in the supply of newly originated MBS associated
with the lower rate environment.
"As evidenced by our financial results, our portfolio was very
well-positioned for the current environment. Our holdings of
prepay-protected pools and lower coupon TBA securities have largely
insulated the portfolio from the negative effects of faster
prepayment speeds on generic pools and higher coupon TBAs.
Furthermore, larger prepayment risk premiums on Agency MBS, coupled
with a hedging strategy optimized for the current interest rate
landscape, have materially improved the expected returns on new and
existing investments."
"Despite volatile and challenging market conditions, AGNC's
economic return on tangible common equity for the third quarter was
2.7%, consisting of $0.48 in dividends and
a $(0.03) decrease in tangible net book value per common
share," commented Peter Federico, the Company's President and
Chief Operating Officer. "In addition, despite the
significant yield curve flattening, AGNC
generated $0.59 of net spread and dollar roll income,
excluding catch-up premium amortization, in the third quarter, as
our substantial hedge repositioning in recent quarters provided a
strong tailwind to our third quarter earnings and provided
stability in our net book value. Looking ahead, while funding
dynamics have been a headwind to earnings throughout the year and
continue to be challenging, we are encouraged by the recent actions
taken by the Fed to provide additional liquidity to the system.
We believe that the focus being placed on the issue by the
financial markets and the Fed should serve as a catalyst for the
implementation of additional short and medium term solutions to
improve and stabilize repo funding levels relative to other short
term interest rates."
TANGIBLE NET BOOK VALUE PER COMMON SHARE
As of
September 30, 2019, the Company's tangible net book value per
common share was $16.55 per share, a
decrease of -0.2% compared to $16.58
per share as of June 30, 2019. The Company's tangible net book value per
common share excludes $526 million,
or $0.97 and $0.96 per common share, of goodwill as of
September 30, 2019 and June 30, 2019, respectively.
INVESTMENT PORTFOLIO
As of September 30, 2019,
the Company's investment portfolio totaled $102.6 billion, comprised of:
- $100.9 billion of Agency MBS and
net TBA securities, including:
-
- $100.0 billion of fixed-rate
securities, comprised of:
-
- $90.1 billion 30-year fixed-rate
securities,
- $0.1 billion 30-year TBA
securities, net,
- $7.2 billion 15-year
securities,
- $1.8 billion 15-year TBA
securities, net, 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 September 30, 2019, 30-year and 15-year fixed-rate
Agency securities represented 88% and 9%, of the Company's
investment portfolio, respectively, compared to 87% and 10%,
respectively, as of June 30, 2019.
As of September 30, 2019, the Company's fixed-rate
securities' weighted average coupon was 3.65%, compared to 3.75% as
of June 30, 2019, comprised of the following weighted average
coupons:
- 3.69% for 30-year fixed-rate securities;
- 3.28% for 15-year fixed rate securities; and
- 3.87% 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 September 30, 2019, the Company's net
TBA position had a fair value of $1.9
billion, consisting of $10.4
billion long and $(8.5)
billion short TBA securities, and a GAAP net carrying value
of $47 million reported in derivative
assets/(liabilities) on the Company's balance sheet. As of
June 30, 2019, the Company's net TBA position had a fair value
of $11.2 billion, consisting of
$16.4 billion long and $(5.2) billion short TBA securities, and a GAAP
net carrying value of $84
million.
CONSTANT PREPAYMENT RATES
The Company's investment
portfolio had a weighted average CPR of 13.5% for the third
quarter, compared to 10.0% for the prior quarter. The
weighted average projected CPR for the remaining life of the
Company's Agency securities held as of September 30, 2019 was
13.4%, compared to 12.4% as of June 30, 2019.
The weighted average cost basis of the Company's investment
portfolio was 103.2% of par value as of September 30,
2019. Net premium amortization cost on the Company's
investment portfolio for the third quarter was $(192) million, or $(0.35) per common share, which includes a
"catch-up" premium amortization cost of $(55) million, or $(0.10) per common share, due to changes in the
Company's projected CPR estimates for securities acquired prior to
the third quarter. This compares to net premium amortization
cost for the prior quarter of $(183)
million, or $(0.34) per common
share, including a "catch-up" premium amortization cost of
$(58) million, or $(0.11) 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 2.91% for the third
quarter, compared to 2.99% for the prior quarter. Excluding
"catch-up" premium amortization, the Company's average asset yield
was 3.15% for the third quarter, compared to 3.24% for the prior
quarter. Including the net TBA position and excluding "catch-up"
premium amortization, the Company's average asset yield for the
third quarter was 3.16%, compared to 3.24% for the prior
quarter.
For the third quarter, the weighted average interest rate on the
Company's Agency repurchase agreements was 2.48%, compared to 2.62%
for the prior quarter. The Company's average implied TBA
funding cost was 2.00% for the third quarter, compared to 2.47% for
the prior quarter. Inclusive of interest rate swaps, the
Company's combined average cost of funds for the third quarter was
1.85%, compared to 2.24% for the prior quarter.
The Company's annualized net interest spread, including the net
TBA position and interest rate swaps, was 1.09% for the third
quarter, compared to 0.78% for the prior quarter. Excluding
"catch-up" premium amortization, the Company's combined annualized
net interest spread for the third quarter was 1.31%, versus 1.00%
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 third quarter of $0.59 per common share, excluding $(0.10) per common share of "catch-up" premium
amortization cost, compared to $0.49
per common share for the prior quarter, excluding $(0.11) 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 September 30, 2019, $90.2 billion of Agency repurchase agreements,
$1.8 billion of net TBA dollar roll
positions (at cost) and $0.2 billion
of other debt were used to fund the Company's investment
portfolio. The remainder, or approximately $0.4 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 September 30, 2019, unchanged from June 30,
2019. The Company's average "at risk" leverage for the third
quarter was 10.0x tangible net book value, also unchanged from the
prior quarter.
As of September 30, 2019, the Company's Agency repurchase
agreements had a weighted average interest rate of 2.48%, compared
to 2.64% as of June 30, 2019, and a weighted average remaining
maturity of 64 days, compared to 80 days as of June 30,
2019. As of September 30, 2019, $36.1 billion, or 40%, of the Company's Agency
repurchase agreements were funded through the Company's captive
broker-dealer subsidiary, Bethesda Securities, LLC.
As of September 30, 2019, the Company's Agency repurchase
agreements had remaining maturities of:
- $66.5 billion of three months or
less;
- $17.0 billion from three to six
months;
- $4.1 billion from six to twelve
months; and
- $2.5 billion from one to three
years.
HEDGING ACTIVITIES
As of September 30, 2019,
interest rate swaps, swaptions and U.S. Treasury positions equaled
101% of the Company's outstanding balance of Agency repurchase
agreements, forward settling investment securities, net TBA
position and other debt, compared to 91% as of June 30,
2019.
As of September 30, 2019, the Company's interest rate swap
position totaled $81.8 billion in
notional amount, compared to $75.0
billion as of June 30, 2019. As of
September 30, 2019, the Company's interest rate swap portfolio
had an average fixed pay rate of 1.35%, an average receive rate of
1.98% and an average maturity of 2.8 years, compared to 1.72%,
2.46% and 3.3 years, respectively, as of June 30, 2019.
As of September 30, 2019, 79%, 14% and 7% of the
Company's interest rate swap portfolio was linked to the
Overnight Index Swap Rate ("OIS"), three-month London Interbank
Offered Rate ("LIBOR") and Secured Overnight Financing Rate
("SOFR"), respectively, compared to 58%, 42% and 0%, respectively,
as of June 30, 2019.
As of September 30, 2019, the Company had payer swaptions
outstanding totaling $8.7 billion,
compared to $4.4 billion as of
June 30, 2019. As of September 30, 2019, the
Company had net short U.S. Treasury positions outstanding totaling
$6.2 billion, compared to
$8.7 billion as of June 30,
2019.
OTHER GAIN (LOSS), NET
For the third quarter, the
Company recorded a net loss of $(104)
million in other gain (loss), net, or $(0.19) per common share, compared to a net loss
of $(547) million, or $(1.02) per common share, for the prior
quarter. Other gain (loss), net for the third quarter was
comprised of:
- $89 million of net realized gains
on sales of investment securities;
- $355 million of net unrealized
gains on investment securities measured at fair value through net
income;
- $146 million of interest rate
swap periodic income;
- $(628) million of net losses on
interest rate swaps;
- $(19) million of net losses on
interest rate swaptions;
- $(189) million of net losses on
U.S. Treasury positions;
- $29 million of TBA dollar roll
income;
- $115 million of net
mark-to-market gains on TBA securities; and
- $(2) million of other
miscellaneous losses.
OTHER COMPREHENSIVE INCOME
During the third quarter,
the Company recorded other comprehensive income of $246 million, or $0.45 per common share, consisting of net
unrealized gains on the Company's Agency securities recognized
through OCI, compared to a $379
million, or $0.70 per common
share, of other comprehensive income for the prior quarter.
COMMON STOCK DIVIDENDS
During the third quarter, the
Company declared dividends of $0.16
per share to common stockholders of record as of July 31, August 30
and September 30, 2019, respectively,
totaling $0.48 per share for the
quarter, which were paid on August 9,
September 11, and October 9, 2019, respectively. Since its
May 2008 initial public offering
through the third quarter of 2019, the Company has declared a total
of $9.3 billion in common stock
dividends, or $40.84 per common
share.
STOCK REPURCHASE PROGRAM
The Company's Board of
Directors has authorized it to repurchase up to $1 billion of its outstanding shares of common
stock through December 31,
2020. During the third quarter, the Company repurchased 6.9
million shares, or $103 million, of
its common stock for an average repurchase price of $14.90 per common share, inclusive of transaction
costs. As of September 30, 2019, the Company had
$0.9 billion of common stock
remaining available for repurchase.
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.
AGNC INVESTMENT
CORP.
|
CONSOLIDATED BALANCE
SHEETS
|
(in millions, except
per share data)
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
2019
|
|
2019
|
|
2019
|
|
2018
|
|
2018
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
(unaudited)
|
Assets:
|
|
|
|
|
|
|
|
|
|
Agency securities, at
fair value (including pledged securities of $93,688, $87,582,
$89,471, $78,619 and $67,889, respectively)
|
$
98,577
|
|
$
91,140
|
|
$
93,044
|
|
$
82,291
|
|
$
70,408
|
Agency securities
transferred to consolidated variable interest entities, at fair
value
(pledged securities)
|
393
|
|
411
|
|
425
|
|
436
|
|
453
|
Credit risk transfer
securities, at fair value (including pledged securities of $358,
$269,
$142, $141 and $44, respectively)
|
1,134
|
|
1,117
|
|
1,129
|
|
1,012
|
|
997
|
Non-Agency securities,
at fair value (including pledged securities of $0, $0, $45, $45
and
$0, respectively)
|
579
|
|
603
|
|
672
|
|
548
|
|
507
|
U.S. Treasury
securities, at fair value (including pledged securities of $162,
$1,152, $121,
$0 and $45, respectively)
|
215
|
|
1,152
|
|
121
|
|
46
|
|
109
|
Cash and cash
equivalents
|
906
|
|
870
|
|
929
|
|
921
|
|
1,071
|
Restricted
cash
|
734
|
|
789
|
|
517
|
|
599
|
|
456
|
Derivative assets, at
fair value
|
175
|
|
116
|
|
253
|
|
273
|
|
412
|
Receivable for
investment securities sold (including pledged securities of $105,
$673,
$439, $489 and $443, respectively)
|
105
|
|
679
|
|
439
|
|
489
|
|
524
|
Receivable under
reverse repurchase agreements
|
6,093
|
|
8,848
|
|
20,430
|
|
21,813
|
|
16,309
|
Goodwill
|
526
|
|
526
|
|
526
|
|
526
|
|
526
|
Other
assets
|
324
|
|
325
|
|
322
|
|
287
|
|
259
|
Total
assets
|
$
109,761
|
|
$
106,576
|
|
$
118,807
|
|
$
109,241
|
|
$
92,031
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
$
90,612
|
|
$
86,266
|
|
$
86,685
|
|
$
75,717
|
|
$
65,734
|
Debt of consolidated
variable interest entities, at fair value
|
238
|
|
251
|
|
266
|
|
275
|
|
291
|
Payable for investment
securities purchased
|
3,094
|
|
878
|
|
1,125
|
|
1,204
|
|
23
|
Derivative
liabilities, at fair value
|
22
|
|
63
|
|
53
|
|
84
|
|
62
|
Dividends
payable
|
100
|
|
101
|
|
107
|
|
106
|
|
95
|
Obligation to return
securities borrowed under reverse repurchase agreements, at
fair
value
|
5,114
|
|
7,754
|
|
19,275
|
|
21,431
|
|
15,549
|
Accounts payable and
other liabilities
|
368
|
|
917
|
|
795
|
|
518
|
|
650
|
Total
liabilities
|
99,548
|
|
96,230
|
|
108,306
|
|
99,335
|
|
82,404
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock -
aggregate liquidation preference of $735, $735, $735, $500 and
$500,
respectively
|
711
|
|
711
|
|
711
|
|
484
|
|
484
|
Common stock - $0.01
par value; 540.9, 547.8, 536.3, 536.3 and 477.8 shares issued
and
outstanding, respectively
|
5
|
|
5
|
|
5
|
|
5
|
|
5
|
Additional paid-in
capital
|
13,888
|
|
13,988
|
|
13,795
|
|
13,793
|
|
12,785
|
Retained
deficit
|
(4,473)
|
|
(4,194)
|
|
(3,467)
|
|
(3,433)
|
|
(2,343)
|
Accumulated other
comprehensive income (loss)
|
82
|
|
(164)
|
|
(543)
|
|
(943)
|
|
(1,304)
|
Total stockholders'
equity
|
10,213
|
|
10,346
|
|
10,501
|
|
9,906
|
|
9,627
|
Total liabilities and
stockholders' equity
|
$
109,761
|
|
$
106,576
|
|
$
118,807
|
|
$
109,241
|
|
$
92,031
|
|
|
|
|
|
|
|
|
|
|
Tangible net book
value per common share 1
|
$
16.55
|
|
$
16.58
|
|
$
17.23
|
|
$
16.56
|
|
$
18.00
|
|
|
|
|
|
|
|
|
|
|
AGNC INVESTMENT
CORP.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
2019
|
|
2019
|
|
2019
|
|
2018
|
|
2018
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
676
|
|
$
693
|
|
$
705
|
|
$
604
|
|
$
500
|
Interest
expense
|
557
|
|
570
|
|
541
|
|
418
|
|
312
|
Net interest
income
|
119
|
|
123
|
|
164
|
|
186
|
|
188
|
Other gain (loss),
net:
|
|
|
|
|
|
|
|
|
|
Realized gain (loss)
on sale of investment securities, net
|
89
|
|
132
|
|
60
|
|
(21)
|
|
(40)
|
Unrealized gain (loss)
on investment securities measured at fair value through net
income, net
|
355
|
|
759
|
|
1,060
|
|
683
|
|
(363)
|
Gain (loss) on
derivative instruments and other securities, net
|
(548)
|
|
(1,438)
|
|
(1,000)
|
|
(1,633)
|
|
430
|
Management fee
income
|
-
|
|
-
|
|
-
|
|
-
|
|
46
|
Total other gain
(loss), net
|
(104)
|
|
(547)
|
|
120
|
|
(971)
|
|
73
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
10
|
|
11
|
|
10
|
|
11
|
|
14
|
Other operating
expense
|
9
|
|
9
|
|
9
|
|
8
|
|
31
|
Total operating
expense
|
19
|
|
20
|
|
19
|
|
19
|
|
45
|
Net income
(loss)
|
(4)
|
|
(444)
|
|
265
|
|
(804)
|
|
216
|
Dividend on preferred
stock
|
13
|
|
13
|
|
10
|
|
9
|
|
9
|
Net income (loss)
available (attributable) to common stockholders
|
$
(17)
|
|
$
(457)
|
|
$
255
|
|
$
(813)
|
|
$
207
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
(4)
|
|
$
(444)
|
|
$
265
|
|
$
(804)
|
|
$
216
|
Unrealized gain (loss)
on investment securities measured at fair value through other
comprehensive income (loss), net
|
246
|
|
379
|
|
400
|
|
361
|
|
(193)
|
Comprehensive
income (loss)
|
242
|
|
(65)
|
|
665
|
|
(443)
|
|
23
|
Dividend on preferred
stock
|
13
|
|
13
|
|
10
|
|
9
|
|
9
|
Comprehensive
income (loss) available (attributable) to common
stockholders
|
$
229
|
|
$
(78)
|
|
$
655
|
|
$
(452)
|
|
$
14
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
546.4
|
|
537.8
|
|
536.7
|
|
504.2
|
|
462.3
|
Weighted average
number of common shares outstanding - diluted
|
546.4
|
|
537.8
|
|
537.2
|
|
504.2
|
|
462.7
|
Net income (loss)
per common share - basic
|
$
(0.03)
|
|
$
(0.85)
|
|
$
0.48
|
|
$
(1.61)
|
|
$
0.45
|
Net income (loss)
per common share - diluted
|
$
(0.03)
|
|
$
(0.85)
|
|
$
0.47
|
|
$
(1.61)
|
|
$
0.45
|
Comprehensive
income (loss) per common share - basic and diluted
|
$
0.42
|
|
$
(0.15)
|
|
$
1.22
|
|
$
(0.90)
|
|
$
0.03
|
Dividends declared
per common share
|
$
0.48
|
|
$
0.50
|
|
$
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
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
2019
|
|
2019
|
|
2019
|
|
2018
|
|
2018
|
GAAP net interest
income:
|
|
|
|
|
|
|
|
|
|
Interest income
|
$
676
|
|
$
693
|
|
$
705
|
|
$
604
|
|
$
500
|
Interest
expense
|
557
|
|
570
|
|
541
|
|
418
|
|
312
|
GAAP net interest
income
|
119
|
|
123
|
|
164
|
|
186
|
|
188
|
TBA dollar roll
income, net 3,4
|
29
|
|
22
|
|
19
|
|
27
|
|
68
|
Interest rate swap
periodic income, net 3,9
|
146
|
|
88
|
|
83
|
|
63
|
|
56
|
Other interest and
dividend income 3
|
4
|
|
4
|
|
3
|
|
-
|
|
1
|
Adjusted net interest
and dollar roll income
|
298
|
|
237
|
|
269
|
|
276
|
|
313
|
Other operating
income (expense):
|
|
|
|
|
|
|
|
|
|
Operating
expense
|
(19)
|
|
(20)
|
|
(19)
|
|
(19)
|
|
(45)
|
Less non-recurring
write-off of intangible asset and other expenses associated
with termination of management agreement
|
-
|
|
-
|
|
-
|
|
1
|
|
26
|
Management fee
income
|
-
|
|
-
|
|
-
|
|
-
|
|
46
|
Less management
agreement termination fee income
|
-
|
|
-
|
|
-
|
|
-
|
|
(42)
|
Total operating income
(expense), net
|
(19)
|
|
(20)
|
|
(19)
|
|
(18)
|
|
(15)
|
Net spread and dollar
roll income
|
279
|
|
217
|
|
250
|
|
258
|
|
298
|
Dividend on preferred
stock
|
13
|
|
13
|
|
10
|
|
9
|
|
9
|
Net spread and dollar
roll income available to common stockholders
|
266
|
|
204
|
|
240
|
|
249
|
|
289
|
Estimated "catch-up"
premium amortization cost (benefit) due to change in CPR
forecast
11
|
55
|
|
58
|
|
39
|
|
16
|
|
(6)
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization,
available to common stockholders
|
$
321
|
|
$
262
|
|
$
279
|
|
$
265
|
|
$
283
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
546.4
|
|
537.8
|
|
536.7
|
|
504.2
|
|
462.3
|
Weighted average
number of common shares outstanding - diluted
|
547.1
|
|
538.4
|
|
537.2
|
|
504.7
|
|
462.7
|
Net spread and dollar
roll income per common share - basic
|
$
0.49
|
|
$
0.38
|
|
$
0.45
|
|
$
0.49
|
|
$
0.63
|
Net spread and dollar
roll income per common share - diluted
|
$
0.49
|
|
$
0.38
|
|
$
0.45
|
|
$
0.49
|
|
$
0.62
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization,
per common share - basic
|
$
0.59
|
|
$
0.49
|
|
$
0.52
|
|
$
0.53
|
|
$
0.61
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization,
per common share - diluted
|
$
0.59
|
|
$
0.49
|
|
$
0.52
|
|
$
0.53
|
|
$
0.61
|
|
|
|
|
|
|
|
|
|
|
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
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
2019
|
|
2019
|
|
2019
|
|
2018
|
|
2018
|
Net
income/(loss)
|
$
(4)
|
|
$
(444)
|
|
$
265
|
|
$
(804)
|
|
$
216
|
Book to tax
differences:
|
|
|
|
|
|
|
|
|
|
Premium amortization,
net
|
47
|
|
67
|
|
54
|
|
15
|
|
(21)
|
Realized gain/loss,
net
|
521
|
|
886
|
|
627
|
|
928
|
|
(291)
|
Net capital
loss/(utilization of net capital loss carryforward)
|
34
|
|
320
|
|
(12)
|
|
(105)
|
|
(67)
|
Unrealized
(gain)/loss, net
|
(428)
|
|
(644)
|
|
(719)
|
|
140
|
|
316
|
Other
|
(1)
|
|
(1)
|
|
(9)
|
|
(1)
|
|
(2)
|
Total book to
tax differences
|
173
|
|
628
|
|
(59)
|
|
977
|
|
(65)
|
Estimated REIT
taxable income
|
169
|
|
184
|
|
206
|
|
173
|
|
151
|
Dividend on preferred
stock
|
13
|
|
13
|
|
10
|
|
9
|
|
9
|
Estimated REIT
taxable income, net of preferred stock dividend
|
$
156
|
|
$
171
|
|
$
196
|
|
$
164
|
|
$
142
|
Weighted average
number of common shares outstanding - basic
|
546.4
|
|
537.8
|
|
536.7
|
|
504.2
|
|
462.3
|
Weighted average
number of common shares outstanding - diluted
|
547.1
|
|
538.4
|
|
537.2
|
|
504.7
|
|
462.7
|
Estimated REIT
taxable income per common share - basic
|
$
0.29
|
|
$
0.32
|
|
$
0.37
|
|
$
0.33
|
|
$
0.31
|
Estimated REIT
taxable income per common share - diluted
|
$
0.29
|
|
$
0.32
|
|
$
0.36
|
|
$
0.32
|
|
$
0.31
|
|
|
|
|
|
|
|
|
|
|
Beginning cumulative
non-deductible net capital loss
|
$
490
|
|
$
170
|
|
$
182
|
|
$
644
|
|
$
711
|
Increase (decrease)
in net capital loss carryforward 5
|
34
|
|
320
|
|
(12)
|
|
(462)
|
|
(67)
|
Ending cumulative
non-deductible net capital loss
|
$
524
|
|
$
490
|
|
$
170
|
|
$
182
|
|
$
644
|
Ending cumulative
non-deductible net capital loss per common share
|
$
0.97
|
|
$
0.89
|
|
$
0.32
|
|
$
0.34
|
|
$
1.35
|
|
|
|
|
|
|
|
|
|
|
AGNC INVESTMENT
CORP.
|
NET INTEREST SPREAD
COMPONENTS BY FUNDING SOURCE 2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
2019
|
|
2019
|
|
2019
|
|
2018
|
|
2018
|
Adjusted net
interest and dollar roll income, excluding "catch-up" premium
amortization:
|
|
|
|
|
|
|
|
|
|
Economic interest
income:
|
|
|
|
|
|
|
|
|
|
Investment securities
- GAAP interest income 12
|
$
676
|
|
$
693
|
|
$
705
|
|
$
604
|
|
$
500
|
Estimated "catch-up"
premium amortization cost (benefit) due to change in CPR
forecast 11
|
55
|
|
58
|
|
39
|
|
16
|
|
(6)
|
TBA dollar roll income
- implied interest income 3,7
|
81
|
|
96
|
|
71
|
|
74
|
|
162
|
Economic interest
income, excluding "catch-up" premium amortization
|
812
|
|
847
|
|
815
|
|
694
|
|
656
|
Economic interest
expense:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
and other debt - GAAP interest expense
|
(557)
|
|
(570)
|
|
(541)
|
|
(418)
|
|
(312)
|
TBA dollar roll income
- implied interest expense 3,6
|
(52)
|
|
(74)
|
|
(52)
|
|
(47)
|
|
(94)
|
Interest rate swap
periodic income (cost) 3,9
|
146
|
|
88
|
|
83
|
|
63
|
|
56
|
Economic interest
expense
|
(463)
|
|
(556)
|
|
(510)
|
|
(402)
|
|
(350)
|
Other interest and
dividend income 3
|
4
|
|
4
|
|
3
|
|
-
|
|
1
|
Adjusted net interest
and dollar roll income, excluding "catch-up" premium
amortization
|
$
353
|
|
$
295
|
|
$
308
|
|
$
292
|
|
$
307
|
|
|
|
|
|
|
|
|
|
|
Net interest
spread, excluding "catch-up" amortization:
|
|
|
|
|
|
|
|
|
|
Average asset
yield:
|
|
|
|
|
|
|
|
|
|
Investment securities
- average asset yield
|
2.91%
|
|
2.99%
|
|
3.14%
|
|
3.13%
|
|
3.11%
|
Estimated "catch-up"
premium amortization cost (benefit) due to change in CPR
forecast
|
0.24%
|
|
0.25%
|
|
0.17%
|
|
0.08%
|
|
(0.04)%
|
Investment securities
average asset yield, excluding "catch-up" premium
amortization
|
3.15%
|
|
3.24%
|
|
3.31%
|
|
3.21%
|
|
3.07%
|
TBA securities -
average implied asset yield 7
|
3.19%
|
|
3.21%
|
|
3.55%
|
|
3.66%
|
|
3.54%
|
Average asset yield,
excluding "catch-up" premium amortization 8
|
3.16%
|
|
3.24%
|
|
3.33%
|
|
3.26%
|
|
3.18%
|
Average total cost of
funds:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
and other debt - average funding cost
|
2.48%
|
|
2.62%
|
|
2.64%
|
|
2.42%
|
|
2.20%
|
TBA securities -
average implied funding cost 6
|
2.00%
|
|
2.47%
|
|
2.60%
|
|
2.32%
|
|
2.05%
|
Average cost of funds,
before interest rate swap periodic (income) cost
8
|
2.43%
|
|
2.60%
|
|
2.64%
|
|
2.41%
|
|
2.18%
|
Interest rate swap
periodic (income) cost of funds 10
|
(0.58)%
|
|
(0.36)%
|
|
(0.37)%
|
|
(0.32)%
|
|
(0.30)%
|
Average total cost of
funds
|
1.85%
|
|
2.24%
|
|
2.27%
|
|
2.09%
|
|
1.88%
|
Average net interest
spread, excluding "catch-up" premium amortization
|
1.31%
|
|
1.00%
|
|
1.06%
|
|
1.17%
|
|
1.30%
|
|
|
|
|
|
|
|
|
|
|
AGNC INVESTMENT
CORP.
|
KEY
STATISTICS*
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Key Balance Sheet
Statistics:
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
2019
|
|
2019
|
|
2019
|
|
2018
|
|
2018
|
Investment
securities: 12
|
|
|
|
|
|
|
|
|
|
Fixed-rate Agency MBS,
at fair value - as of period end
|
$
98,090
|
|
$
90,627
|
|
$
92,502
|
|
$
81,753
|
|
$
69,844
|
Other Agency MBS, at
fair value - as of period end
|
$
880
|
|
$
924
|
|
$
967
|
|
$
974
|
|
$
1,017
|
Credit risk transfer
securities, at fair value - as of period end
|
$
1,134
|
|
$
1,117
|
|
$
1,129
|
|
$
1,012
|
|
$
997
|
Non-Agency MBS, at
fair value - as of period end
|
$
579
|
|
$
603
|
|
$
672
|
|
$
548
|
|
$
507
|
Total investment
securities, at fair value - as of period end
|
$
100,683
|
|
$
93,271
|
|
$
95,270
|
|
$
84,287
|
|
$
72,365
|
Total investment
securities, at cost - as of period end
|
$
98,763
|
|
$
91,953
|
|
$
95,090
|
|
$
85,569
|
|
$
74,691
|
Total investment
securities, at par - as of period end
|
$
95,629
|
|
$
88,880
|
|
$
92,091
|
|
$
82,693
|
|
$
71,844
|
Average investment
securities, at cost
|
$
92,764
|
|
$
92,610
|
|
$
89,952
|
|
$
77,182
|
|
$
64,346
|
Average investment
securities, at par
|
$
89,741
|
|
$
89,586
|
|
$
87,021
|
|
$
74,395
|
|
$
61,696
|
TBA
securities:
|
|
|
|
|
|
|
|
|
|
Net TBA portfolio - as
of period end, at fair value
|
$
1,867
|
|
$
11,170
|
|
$
6,955
|
|
$
7,322
|
|
$
9,393
|
Net TBA portfolio - as
of period end, at cost
|
$
1,820
|
|
$
11,086
|
|
$
6,885
|
|
$
7,252
|
|
$
9,436
|
Net TBA portfolio - as
of period end, carrying value
|
$
47
|
|
$
84
|
|
$
70
|
|
$
70
|
|
$
(43)
|
Average net TBA
portfolio, at cost
|
$
10,146
|
|
$
11,864
|
|
$
8,002
|
|
$
8,066
|
|
$
18,270
|
Average repurchase
agreements and other debt 13
|
$
87,938
|
|
$
86,147
|
|
$
82,070
|
|
$
68,499
|
|
$
56,265
|
Average stockholders'
equity 14
|
$
10,347
|
|
$
10,371
|
|
$
10,186
|
|
$
9,634
|
|
$
9,345
|
Tangible net book
value per common share 1
|
$
16.55
|
|
$
16.58
|
|
$
17.23
|
|
$
16.56
|
|
$
18.00
|
Tangible net book
value "at risk" leverage - average 15
|
10.0:1
|
|
10.0:1
|
|
9.3:1
|
|
8.4:1
|
|
8.5:1
|
Tangible net book
value "at risk" leverage - as of period end
16
|
9.8:1
|
|
9.8:1
|
|
9.4:1
|
|
9.0:1
|
|
8.2:1
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Statistics:
|
|
|
|
|
|
|
|
|
|
Investment
securities: 12
|
|
|
|
|
|
|
|
|
|
Average
coupon
|
3.86%
|
|
3.88%
|
|
3.87%
|
|
3.83%
|
|
3.78%
|
Average asset
yield
|
2.91%
|
|
2.99%
|
|
3.14%
|
|
3.13%
|
|
3.11%
|
Average asset yield,
excluding "catch-up" premium amortization
|
3.15%
|
|
3.24%
|
|
3.31%
|
|
3.21%
|
|
3.07%
|
Average coupon - as of
period end
|
3.76%
|
|
3.88%
|
|
3.88%
|
|
3.86%
|
|
3.82%
|
Average asset yield -
as of period end
|
3.08%
|
|
3.21%
|
|
3.29%
|
|
3.31%
|
|
3.22%
|
Average actual CPR for
securities held during the period
|
13.5%
|
|
10.0%
|
|
6.3%
|
|
7.4%
|
|
9.7%
|
Average forecasted CPR
- as of period end
|
13.4%
|
|
12.4%
|
|
10.5%
|
|
7.9%
|
|
6.8%
|
Total premium
amortization, net
|
$
(192)
|
|
$
(183)
|
|
$
(142)
|
|
$
(107)
|
|
$
(81)
|
TBA
securities:
|
|
|
|
|
|
|
|
|
|
Average coupon - as of
period end 17
|
2.99%
|
|
3.29%
|
|
3.64%
|
|
4.03%
|
|
3.90%
|
Average implied asset
yield 7
|
3.19%
|
|
3.21%
|
|
3.55%
|
|
3.66%
|
|
3.54%
|
Combined investment
and TBA securities - average asset yield, excluding "catch-up"
premium
amortization 8
|
3.16%
|
|
3.24%
|
|
3.33%
|
|
3.26%
|
|
3.18%
|
Cost of
funds:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
- average funding cost
|
2.48%
|
|
2.62%
|
|
2.64%
|
|
2.42%
|
|
2.20%
|
TBA securities -
average implied funding cost 6
|
2.00%
|
|
2.47%
|
|
2.60%
|
|
2.32%
|
|
2.05%
|
Interest rate swaps -
average periodic (income) cost of funds 10
|
(0.58)%
|
|
(0.36)%
|
|
(0.37)%
|
|
(0.32)%
|
|
(0.30)%
|
Average total cost of
funds, inclusive of TBAs and interest rate swap periodic (income)
cost 8
|
1.85%
|
|
2.24%
|
|
2.27%
|
|
2.09%
|
|
1.88%
|
Repurchase agreements
- average funding cost as of period end
|
2.48%
|
|
2.64%
|
|
2.82%
|
|
2.79%
|
|
2.30%
|
Interest rate swaps -
average net pay/(receive) rate as of period end
18
|
(0.63)%
|
|
(0.74)%
|
|
(0.68)%
|
|
(0.52)%
|
|
(0.32)%
|
Net interest
spread:
|
|
|
|
|
|
|
|
|
|
Combined investment
and TBA securities average net interest spread
|
1.09%
|
|
0.78%
|
|
0.90%
|
|
1.09%
|
|
1.33%
|
Combined investment
and TBA securities average net interest spread, excluding
"catch-up"
premium amortization
|
1.31%
|
|
1.00%
|
|
1.06%
|
|
1.17%
|
|
1.30%
|
Expenses % of average
stockholders' equity - annualized 19
|
0.73%
|
|
0.77%
|
|
0.75%
|
|
0.75%
|
|
0.81%
|
Economic return
(loss) on tangible common equity - unannualized
20
|
2.7%
|
|
(0.9)%
|
|
7.3%
|
|
(5.0)%
|
|
0.7%
|
|
|
|
|
|
|
|
|
|
|
*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.
- 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 includes
dollar roll income (loss) on long and short TBA securities. 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 net 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 net 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, forward settling
investment securities and net TBA position (at cost) outstanding
for the period by the sum of average stockholders' equity adjusted
to exclude goodwill. 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. Leverage excludes U.S. Treasury
repurchase agreements.
- Average TBA coupon, as of September 30,
2019 and June 30, 2019, is for
the long TBA position only.
- 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 October 31, 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 Q3 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 October 31, 2019. In addition, there will be a
phone recording available one hour after the live call on
October 31, 2019 through November 14,
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
10135532.
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.
CONTACT:
Investors - (301) 968-9300
Media - (301) 968-9303
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SOURCE AGNC Investment Corp.