BETHESDA, Md., Jan. 29,
2020 /PRNewswire/ -- AGNC Investment Corp. ("AGNC" or the
"Company") (Nasdaq: AGNC) today announced financial results for the
quarter ended December 31, 2019.
FOURTH QUARTER 2019 FINANCIAL HIGHLIGHTS
- $1.59 comprehensive income per
common share, comprised of:
-
- $1.56 net income per common
share
- $0.03 other comprehensive income
("OCI") per common share on investments marked-to-market through
OCI
- $0.57 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization benefit 1
-
- Includes $0.04 per common share
of dollar roll income associated with the Company's $7.0 billion average net long position in forward
purchases and sales of Agency mortgage-backed securities ("MBS") in
the "to-be-announced" ("TBA") market
- Excludes $0.09 per common share
of estimated "catch-up" premium amortization benefit due to change
in projected constant prepayment rate ("CPR") estimates
- $17.66 tangible net book value
per common share as of December 31,
2019
-
- Increased $1.11 per common share,
or 6.7%, from $16.55 per common share
as of September 30, 2019
- $0.48 dividends declared per
common share for the fourth quarter
- 9.6% economic return on tangible common equity for the
quarter
-
- Comprised of $0.48 dividends per
common share and $1.11 increase in
tangible net book value per common share
OTHER FOURTH QUARTER HIGHLIGHTS
- $107.9 billion investment
portfolio as of December 31, 2019,
comprised of:
-
- $98.9 billion Agency MBS
- $7.4 billion net TBA mortgage
position
- $1.6 billion credit risk transfer
("CRT") and non-Agency securities
- 9.4x tangible net book value "at risk" leverage as of
December 31, 2019
-
- 9.5x average tangible net book value "at risk" leverage for the
quarter
- 15.4% portfolio CPR for the quarter
-
- 10.8% average projected portfolio CPR as of December 31, 2019
- 1.33% annualized net interest spread and TBA dollar roll income
for the quarter, excluding estimated "catch-up" premium
amortization benefit
-
- Excludes 19 bps of "catch-up" premium amortization benefit due
to change in projected CPR estimates
2019 FULL YEAR HIGHLIGHTS
- $3.08 comprehensive income per
common share, comprised of:
-
- $1.16 net income per common
share
- $1.92 OCI per common share
- $2.16 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization cost 1
-
- Includes $0.17 per common share
of dollar roll income
- Excludes $(0.19) per common share
of estimated "catch-up" amortization cost
- $2.00 in dividends declared per
common share
- 18.7% economic return on tangible common equity for the year,
comprised of:
-
- $2.00 dividends per common
share
- $1.10 increase in tangible net
book value per common share, or 6.6%, from $16.56 per common share as of December 31, 2018
- 13.3% total stock return
- $1.1 billion of accretive capital
transactions during the year
-
- $190 million of At-the-Market
common equity offerings, net of offering costs
- $103 million of common share
repurchases, net of repurchase costs
- $235 million of 6.875%
fixed-to-floating rate preferred equity issued in March
- $403 million of 6.50%
fixed-to-floating rate preferred equity issued in October
- $175 million of 7.75%
fixed-to-floating rate preferred equity redeemed in November
___________
|
1.
|
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
"AGNC's very strong performance in the fourth quarter of 2019
concluded a tremendous year for the Company," said Gary Kain, the Company's Chief Executive Officer
and Chief Investment Officer. "Our economic return of
9.6% in the fourth quarter represents AGNC's best quarter since the
second quarter of 2014 and drove a total economic return of 18.7%
for the year. Looking ahead, we believe AGNC remains
extremely well-positioned to continue to generate attractive
risk-adjusted returns as a more benign interest rate environment
and favorable developments on the financing front should serve as a
positive tailwind for levered investors in Agency MBS as we enter
2020.
"In the fourth quarter, most financial assets benefited from
continued Federal Reserve monetary easing and reduced global trade
uncertainty following the announcement of the Phase One trade deal
between the United States and
China. Valuations associated with risk assets, including U.S.
equities, increased significantly as a result. In addition to
the Federal Reserve's quarter-point rate cut in October, the Fed
dramatically increased liquidity in the repo markets through its
Open Market Operations. The 10-year U.S. Treasury rate
increased 0.26% to 1.92% at year-end, up from 1.66% at the end of
the third quarter, as a result of the broader risk-on move by
global investors. Agency MBS valuations strengthened
materially during the quarter, with spreads to swaps recovering a
portion of the widening seen over the prior two quarters.
That said, valuations on Agency MBS remain attractive both in
absolute terms and relative to other fixed income assets."
"Our 9.6% economic return for the fourth quarter was comprised
of $0.48 of dividends per common
share and $1.11 increase in tangible
net book value per common share, driven primarily by the tightening
of Agency MBS spreads," commented Peter
Federico, the Company's President and Chief Operating
Officer. "In 2019, we maintained our low-cost advantage
in the residential mortgage REIT sector with aggregate operating
expenses of 80 basis points of our equity capital, which provides
investors with a significant advantage relative to our peers.
Finally, despite increasing our investment portfolio by over
$5 billion during the fourth quarter,
our "at risk" leverage declined to 9.4x as of December 31, 2019 from 9.8x as of September 30, 2019, providing us additional
capacity to take advantage of favorable earnings environments going
forward. As a result, we are excited about AGNC's positioning
as we enter 2020."
TANGIBLE NET BOOK VALUE PER COMMON SHARE
As of December 31, 2019, the Company's tangible net book
value per common share was $17.66 per
share, an increase of 6.7% compared to $16.55 per share as of September 30, 2019,
as Agency MBS valuations significantly outperformed interest rate
hedges. The Company's tangible net book value per common
share excludes $526 million, or
$0.97 per common share, of goodwill
as of December 31, 2019 and September 30, 2019,
respectively.
INVESTMENT PORTFOLIO
As of December 31, 2019, the Company's investment portfolio
totaled $107.9 billion, comprised
of:
- $106.3 billion of Agency MBS and
net TBA securities, including:
-
- $105.5 billion of fixed-rate
securities, comprised of:
-
- $91.1 billion 30-year fixed-rate
securities,
- $5.2 billion 30-year TBA
securities, net,
- $6.2 billion 15-year
securities,
- $2.2 billion 15-year TBA
securities, net, and
- $0.8 billion 20-year fixed-rate
securities;
- $0.8 billion of collateralized
mortgage obligations ("CMOs"), adjustable-rate and other Agency
securities;
- $1.6 billion of CRT and
non-Agency securities.
As of December 31, 2019, 30-year and 15-year fixed-rate
Agency securities represented 89% and 8%, of the Company's
investment portfolio, respectively, compared to 88% and 9%,
respectively, as of September 30, 2019.
As of December 31, 2019, the Company's fixed-rate
securities' weighted average coupon was 3.60%, compared to 3.65% as
of September 30, 2019, comprised of the following weighted
average coupons:
- 3.63% for 30-year fixed-rate securities;
- 3.19% 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 December 31, 2019, the Company's net
TBA position had a fair value of $7.4
billion, consisting of $9.0
billion long and $(1.6)
billion short TBA securities, and a GAAP net carrying value
of $25 million reported in derivative
assets/(liabilities) on the Company's balance sheet. 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.
CONSTANT PREPAYMENT RATES
The Company's investment portfolio had a weighted average CPR of
15.4% for the fourth quarter, compared to 13.5% for the prior
quarter. The weighted average projected CPR for the remaining
life of the Company's Agency securities held as of
December 31, 2019 declined to 10.8%, from 13.4% as of
September 30, 2019, due to higher rates and changes in
portfolio composition.
The weighted average cost basis of the Company's investment
portfolio was 103.3% of par value as of December 31,
2019. Net premium amortization cost on the Company's
investment portfolio for the fourth quarter was $(84) million, or $(0.16) per common share, which includes a
"catch-up" premium amortization benefit of $48 million, or $0.09 per common share, due to changes in the
Company's projected CPR estimates for securities acquired prior to
the fourth quarter. This compares to net premium amortization
cost for the prior quarter of $(192)
million, or $(0.35) per common
share, including a "catch-up" premium amortization cost of
$(55) million, or $(0.10) 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 3.28% for the fourth quarter,
compared to 2.91% for the prior quarter. Excluding "catch-up"
premium amortization, the Company's average asset yield was 3.08%
for the fourth quarter, compared to 3.15% for the prior quarter.
Including the net TBA position and excluding "catch-up" premium
amortization, the Company's average asset yield for the fourth
quarter was 3.09%, compared to 3.16% for the prior quarter.
For the fourth quarter, the weighted average interest rate on
the Company's Agency repurchase agreements was 2.12%, compared to
2.48% for the prior quarter. The Company's average implied
TBA funding cost was 1.88% for the fourth quarter, compared to
2.00% for the prior quarter. Inclusive of interest rate
swaps, the Company's combined average cost of funds for the fourth
quarter was 1.76%, compared to 1.85% for the prior quarter.
The Company's annualized net interest spread, including the net
TBA position and interest rate swaps, was 1.52% for the fourth
quarter, compared to 1.09% for the prior quarter. Excluding
"catch-up" premium amortization benefit/cost, the Company's
combined annualized net interest spread for the fourth quarter was
1.33%, versus 1.31% 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 fourth quarter of $0.57 per common share, excluding $0.09 per common share of "catch-up" premium
amortization benefit, compared to $0.59 per common share for the prior quarter,
excluding $(0.10) 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 December 31, 2019, $89.1
billion of Agency repurchase agreements, $7.4 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 $0.1
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 9.4x as of December 31,
2019, compared to 9.8x as of September 30, 2019. The
Company's average "at risk" leverage for the fourth quarter was
9.5x tangible net book value, compared to 10.0x in the prior
quarter.
As of December 31, 2019, the Company's Agency repurchase
agreements had a weighted average interest rate of 2.17%, compared
to 2.48% as of September 30, 2019, and a weighted average
remaining maturity of 55 days, compared to 64 days as of
September 30, 2019. As of December 31, 2019,
$35.5 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 December 31, 2019, the Company's Agency repurchase
agreements had remaining maturities of:
- $77.4 billion of three months or
less;
- $5.7 billion from three to six
months;
- $3.7 billion from six to twelve
months; and
- $2.3 billion from one to three
years.
HEDGING ACTIVITIES
As of December 31, 2019, interest rate swaps, swaptions and
U.S. Treasury positions equaled 102% of the Company's outstanding
balance of Agency repurchase agreements, net TBA position and other
debt, compared to 101% as of September 30, 2019.
As of December 31, 2019, the Company's interest rate swap
position totaled $79.1 billion in
notional amount, compared to $81.8
billion as of September 30, 2019. As of
December 31, 2019, the Company's interest rate swap portfolio
had an average fixed pay rate of 1.29%, an average receive rate of
1.59% and an average maturity of 2.7 years, compared to 1.35%,
1.98% and 2.8 years, respectively, as of September 30,
2019. As of December 31, 2019, 86%, 11% and 3% 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 79%, 14% and 7%, respectively, as of
September 30, 2019.
As of December 31, 2019, the Company had payer swaptions
outstanding totaling $8.9 billion,
compared to $8.7 billion as of
September 30, 2019. As of December 31, 2019, the
Company had net short U.S. Treasury positions outstanding totaling
$10.7 billion, compared to
$6.2 billion as of September 30,
2019.
OTHER GAIN (LOSS), NET
For the fourth quarter, the Company recorded a net gain of
$609 million in other gain (loss),
net, or $1.12 per common share,
compared to a net loss of $(104)
million, or $(0.19) per common
share, for the prior quarter. Other gain (loss), net for the
fourth quarter was comprised of:
- $107 million of net realized
gains on sales of investment securities;
- $(160) million of net unrealized
losses on investment securities measured at fair value through net
income;
- $85 million of interest rate swap
periodic income;
- $367 million of net gains on
interest rate swaps;
- $45 million of net gains on
interest rate swaptions;
- $136 million of net gains on U.S.
Treasury positions;
- $24 million of TBA dollar roll
income;
- $(3) million of net
mark-to-market losses on TBA securities; and
- $8 million of other miscellaneous
gains.
OTHER COMPREHENSIVE INCOME
During the fourth quarter, the Company recorded other
comprehensive income of $15 million,
or $0.03 per common share, consisting
of net unrealized gains on the Company's Agency securities
recognized through OCI, compared to a $246
million, or $0.45 per common
share, of other comprehensive income for the prior quarter.
COMMON STOCK DIVIDENDS
During the fourth quarter, the Company declared dividends of
$0.16 per share to common
stockholders of record as of October
31, November 29 and
December 31, 2019, respectively,
totaling $0.48 per share for the
quarter, which were paid on November
12 and December 10, 2019 and
January 10, 2020, respectively.
Since its May 2008 initial public
offering through the fourth quarter of 2019, the Company has
declared a total of $9.6 billion in
common stock dividends, or $41.32 per
common share.
The Company also announced the tax characteristics of its 2019
common stock dividends. The Company's distributions of $2.02 per common share for dividends declared
during the twelve month period ended November 30, 2019 consisted of $1.159504 ordinary dividend distributions and
$0.860496 non-dividend distributions
(also known as "return of capital") per common share for federal
income tax purposes. The dividend of $0.16 per common share declared on December 10, 2019, having a record date of
December 31, 2019, which was paid on
January 10, 2020, will be reported as
a 2020 distribution for federal income tax purposes. The Company's
distributions for dividends paid during the twelve months ended
December 31, 2019 on each series of
its preferred stock consisted entirely of ordinary dividend
distributions for federal income tax purposes. Stockholders
should receive an IRS Form 1099-DIV containing this information
from their brokers, transfer agents or other institutions.
For additional detail please visit the Company's website at
www.AGNC.com.
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)
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
|
2018
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Agency securities, at
fair value (including pledged securities of
$92,608, $93,688, $87,582, $89,471
and $78,619, respectively)
|
$
98,516
|
|
$
98,577
|
|
$
91,140
|
|
$
93,044
|
|
$
82,291
|
Agency securities
transferred to consolidated variable interest
entities, at fair value (pledged
securities)
|
371
|
|
393
|
|
411
|
|
425
|
|
436
|
Credit risk transfer
securities, at fair value (including pledged
securities of $309, $358, $269, $142
and $141, respectively)
|
976
|
|
1,134
|
|
1,117
|
|
1,129
|
|
1,012
|
Non-Agency securities,
at fair value (including pledged securities of
$0, $0, $0, $45 and $45,
respectively)
|
579
|
|
579
|
|
603
|
|
672
|
|
548
|
U.S. Treasury
securities, at fair value (including pledged securities
of
$97, $162, $1,152, $121 and $0,
respectively)
|
97
|
|
215
|
|
1,152
|
|
121
|
|
46
|
Cash and cash
equivalents
|
831
|
|
906
|
|
870
|
|
929
|
|
921
|
Restricted
cash
|
451
|
|
734
|
|
789
|
|
517
|
|
599
|
Derivative assets, at
fair value
|
190
|
|
175
|
|
116
|
|
253
|
|
273
|
Receivable for
investment securities sold (including pledged
securities of $0, $105, $673, $439
and $489, respectively)
|
-
|
|
105
|
|
679
|
|
439
|
|
489
|
Receivable under
reverse repurchase agreements
|
10,181
|
|
6,093
|
|
8,848
|
|
20,430
|
|
21,813
|
Goodwill
|
526
|
|
526
|
|
526
|
|
526
|
|
526
|
Other assets
|
364
|
|
324
|
|
325
|
|
322
|
|
287
|
Total
assets
|
$
113,082
|
|
$
109,761
|
|
$
106,576
|
|
$
118,807
|
|
$
109,241
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
$
89,182
|
|
$
90,612
|
|
$
86,266
|
|
$
86,685
|
|
$
75,717
|
Debt of consolidated
variable interest entities, at fair value
|
228
|
|
238
|
|
251
|
|
266
|
|
275
|
Payable for investment
securities purchased
|
2,554
|
|
3,094
|
|
878
|
|
1,125
|
|
1,204
|
Derivative liabilities,
at fair value
|
6
|
|
22
|
|
63
|
|
53
|
|
84
|
Dividends
payable
|
104
|
|
100
|
|
101
|
|
107
|
|
106
|
Obligation to return
securities borrowed under reverse
repurchase agreements, at fair
value
|
9,543
|
|
5,114
|
|
7,754
|
|
19,275
|
|
21,431
|
Accounts payable and
other liabilities
|
424
|
|
368
|
|
917
|
|
795
|
|
518
|
Total
liabilities
|
102,041
|
|
99,548
|
|
96,230
|
|
108,306
|
|
99,335
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock -
aggregate liquidation preference of $963, $735,
$735, $735 and $500,
respectively
|
932
|
|
711
|
|
711
|
|
711
|
|
484
|
Common stock - $0.01
par value; 540.9, 540.9, 547.8, 536.3 and
536.3 shares issued and outstanding,
respectively
|
5
|
|
5
|
|
5
|
|
5
|
|
5
|
Additional paid-in
capital
|
13,893
|
|
13,888
|
|
13,988
|
|
13,795
|
|
13,793
|
Retained
deficit
|
(3,886)
|
|
(4,473)
|
|
(4,194)
|
|
(3,467)
|
|
(3,433)
|
Accumulated other
comprehensive income (loss)
|
97
|
|
82
|
|
(164)
|
|
(543)
|
|
(943)
|
Total
stockholders' equity
|
11,041
|
|
10,213
|
|
10,346
|
|
10,501
|
|
9,906
|
Total
liabilities and stockholders' equity
|
$
113,082
|
|
$
109,761
|
|
$
106,576
|
|
$
118,807
|
|
$
109,241
|
|
|
|
|
|
|
|
|
|
|
Tangible net book
value per common share 1
|
$
17.66
|
|
$
16.55
|
|
$
16.58
|
|
$
17.23
|
|
$
16.56
|
AGNC INVESTMENT
CORP.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year Ended
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
768
|
|
$
676
|
|
$
693
|
|
$
705
|
|
$
2,842
|
Interest
expense
|
481
|
|
557
|
|
570
|
|
541
|
|
2,149
|
Net
interest income
|
287
|
|
119
|
|
123
|
|
164
|
|
693
|
Other gain (loss),
net:
|
|
|
|
|
|
|
|
|
|
Realized gain on sale
of investment securities, net
|
107
|
|
89
|
|
132
|
|
60
|
|
388
|
Unrealized gain (loss)
on investment securities measured at fair value
through net income, net
|
(160)
|
|
355
|
|
759
|
|
1,060
|
|
2,014
|
Gain (loss) on
derivative instruments and other securities, net
|
662
|
|
(548)
|
|
(1,438)
|
|
(1,000)
|
|
(2,324)
|
Total other gain
(loss), net
|
609
|
|
(104)
|
|
(547)
|
|
120
|
|
78
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
16
|
|
10
|
|
11
|
|
10
|
|
47
|
Other operating
expense
|
9
|
|
9
|
|
9
|
|
9
|
|
36
|
Total operating
expense
|
25
|
|
19
|
|
20
|
|
19
|
|
83
|
Net income
(loss)
|
871
|
|
(4)
|
|
(444)
|
|
265
|
|
688
|
Dividend on preferred
stock
|
18
|
|
13
|
|
13
|
|
10
|
|
54
|
Issuance costs of
redeemed preferred stock
|
6
|
|
-
|
|
-
|
|
-
|
|
6
|
Net income (loss)
available (attributable) to common stockholders
|
$
847
|
|
$
(17)
|
|
$
(457)
|
|
$
255
|
|
$
628
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
871
|
|
$
(4)
|
|
$
(444)
|
|
$
265
|
|
$
688
|
Unrealized gain on
investment securities measured at fair value
through other comprehensive income
(loss), net
|
15
|
|
246
|
|
379
|
|
400
|
|
1,040
|
Comprehensive
income (loss)
|
886
|
|
242
|
|
(65)
|
|
665
|
|
1,728
|
Dividend on preferred
stock
|
18
|
|
13
|
|
13
|
|
10
|
|
54
|
Issuance costs of
redeemed preferred stock
|
6
|
|
-
|
|
-
|
|
-
|
|
6
|
Comprehensive
income (loss) available (attributable) to common
stockholders
|
$
862
|
|
$
229
|
|
$
(78)
|
|
$
655
|
|
$
1,668
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
541.4
|
|
546.4
|
|
537.8
|
|
536.7
|
|
540.6
|
Weighted average
number of common shares outstanding - diluted
|
542.6
|
|
546.4
|
|
537.8
|
|
537.2
|
|
541.4
|
Net income (loss)
per common share - basic
|
$
1.56
|
|
$
(0.03)
|
|
$
(0.85)
|
|
$
0.48
|
|
$
1.16
|
Net income (loss)
per common share - diluted
|
$
1.56
|
|
$
(0.03)
|
|
$
(0.85)
|
|
$
0.47
|
|
$
1.16
|
Comprehensive
income (loss) per common share - basic
|
$
1.59
|
|
$
0.42
|
|
$
(0.15)
|
|
$
1.22
|
|
$
3.09
|
Comprehensive
income (loss) per common share - diluted
|
$
1.59
|
|
$
0.42
|
|
$
(0.15)
|
|
$
1.22
|
|
$
3.08
|
Dividends declared
per common share
|
$
0.48
|
|
$
0.48
|
|
$
0.50
|
|
$
0.54
|
|
$
2.00
|
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
|
|
Year Ended
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
GAAP net interest
income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
768
|
|
$
676
|
|
$
693
|
|
$
705
|
|
$
2,842
|
Interest expense
|
481
|
|
557
|
|
570
|
|
541
|
|
2,149
|
GAAP net interest
income
|
287
|
|
119
|
|
123
|
|
164
|
|
693
|
TBA dollar roll income,
net 3,4
|
24
|
|
29
|
|
22
|
|
19
|
|
94
|
Interest rate swap
periodic income, net 3,8
|
85
|
|
146
|
|
88
|
|
83
|
|
402
|
Other interest and
dividend income 3
|
3
|
|
4
|
|
4
|
|
3
|
|
14
|
Adjusted net interest
and dollar roll income
|
399
|
|
298
|
|
237
|
|
269
|
|
1,203
|
Operating
expense
|
(25)
|
|
(19)
|
|
(20)
|
|
(19)
|
|
(83)
|
Net spread and dollar
roll income
|
374
|
|
279
|
|
217
|
|
250
|
|
1,120
|
Dividend on preferred
stock
|
18
|
|
13
|
|
13
|
|
10
|
|
54
|
Net spread and dollar
roll income available to common stockholders
|
356
|
|
266
|
|
204
|
|
240
|
|
1,066
|
Estimated "catch-up"
premium amortization cost (benefit) due to change in
CPR forecast 11
|
(48)
|
|
55
|
|
58
|
|
39
|
|
104
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, available to common stockholders
|
$
308
|
|
$
321
|
|
$
262
|
|
$
279
|
|
$
1,170
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
541.4
|
|
546.4
|
|
537.8
|
|
536.7
|
|
540.6
|
Weighted average
number of common shares outstanding - diluted
|
542.6
|
|
547.1
|
|
538.4
|
|
537.2
|
|
541.4
|
Net spread and dollar
roll income per common share - basic
|
$
0.66
|
|
$
0.49
|
|
$
0.38
|
|
$
0.45
|
|
$
1.97
|
Net spread and dollar
roll income per common share - diluted
|
$
0.66
|
|
$
0.49
|
|
$
0.38
|
|
$
0.45
|
|
$
1.97
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, per common share - basic
|
$
0.57
|
|
$
0.59
|
|
$
0.49
|
|
$
0.52
|
|
$
2.16
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, per common share - diluted
|
$
0.57
|
|
$
0.59
|
|
$
0.49
|
|
$
0.52
|
|
$
2.16
|
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
|
|
Year Ended
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
Net
income/(loss)
|
$
871
|
|
$
(4)
|
|
$
(444)
|
|
$
265
|
|
$
688
|
Book to tax
differences:
|
|
|
|
|
|
|
|
|
|
Premium amortization,
net
|
(77)
|
|
47
|
|
67
|
|
54
|
|
91
|
Realized gain/loss,
net
|
(504)
|
|
521
|
|
886
|
|
627
|
|
1,530
|
Net capital loss/(utilization
of net capital loss carryforward)
|
(130)
|
|
34
|
|
320
|
|
(12)
|
|
212
|
Unrealized (gain)/loss,
net
|
(47)
|
|
(428)
|
|
(644)
|
|
(719)
|
|
(1,838)
|
Other
|
2
|
|
(1)
|
|
(1)
|
|
(9)
|
|
(9)
|
Total book to tax differences
|
(756)
|
|
173
|
|
628
|
|
(59)
|
|
(14)
|
Estimated REIT
taxable income
|
115
|
|
169
|
|
184
|
|
206
|
|
674
|
Dividend on
preferred stock
|
18
|
|
13
|
|
13
|
|
10
|
|
54
|
Estimated REIT
taxable income, net of preferred stock dividend
|
$
97
|
|
$
156
|
|
$
171
|
|
$
196
|
|
$
620
|
Weighted average
number of common shares outstanding - basic
|
541.4
|
|
546.4
|
|
537.8
|
|
536.7
|
|
540.6
|
Weighted average
number of common shares outstanding - diluted
|
542.6
|
|
547.1
|
|
538.4
|
|
537.2
|
|
541.4
|
Estimated REIT
taxable income per common share - basic
|
$
0.18
|
|
$
0.29
|
|
$
0.32
|
|
$
0.37
|
|
$
1.15
|
Estimated REIT
taxable income per common share - diluted
|
$
0.18
|
|
$
0.29
|
|
$
0.32
|
|
$
0.36
|
|
$
1.15
|
|
|
|
|
|
|
|
|
|
|
Beginning cumulative
non-deductible net capital loss
|
$
524
|
|
$
490
|
|
$
170
|
|
$
182
|
|
$
182
|
Increase (decrease)
in net capital loss carryforward
|
(130)
|
|
34
|
|
320
|
|
(12)
|
|
212
|
Ending cumulative
non-deductible net capital loss
|
$
394
|
|
$
524
|
|
$
490
|
|
$
170
|
|
$
394
|
Ending cumulative
non-deductible net capital loss per common share
|
$
0.73
|
|
$
0.97
|
|
$
0.89
|
|
$
0.32
|
|
$
0.73
|
AGNC INVESTMENT
CORP.
|
NET INTEREST SPREAD
COMPONENTS BY FUNDING SOURCE 2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year Ended
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
Adjusted net
interest and dollar roll income, excluding "catch-up"
premium amortization:
|
|
|
|
|
|
|
|
|
|
Economic interest
income:
|
|
|
|
|
|
|
|
|
|
Investment
securities - GAAP interest income 12
|
$
768
|
|
$
676
|
|
$
693
|
|
$
705
|
|
$
2,842
|
Estimated
"catch-up" premium amortization cost (benefit) due to
change
in CPR forecast
10
|
(48)
|
|
55
|
|
58
|
|
39
|
|
104
|
TBA dollar roll income - implied interest
income 3,6
|
58
|
|
81
|
|
96
|
|
71
|
|
306
|
Economic interest
income, excluding "catch-up" premium amortization
|
778
|
|
812
|
|
847
|
|
815
|
|
3,252
|
Economic interest
expense:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements and other debt - GAAP
interest expense
|
(481)
|
|
(557)
|
|
(570)
|
|
(541)
|
|
(2,149)
|
TBA dollar roll income - implied interest expense
3,5
|
(34)
|
|
(52)
|
|
(74)
|
|
(52)
|
|
(212)
|
Interest rate swap periodic income, net
3,8
|
85
|
|
146
|
|
88
|
|
83
|
|
402
|
Economic interest
expense
|
(430)
|
|
(463)
|
|
(556)
|
|
(510)
|
|
(1,959)
|
Other interest and dividend income
3
|
3
|
|
4
|
|
4
|
|
3
|
|
14
|
Adjusted net interest
and dollar roll income, excluding "catch-up" premium
amortization
|
$
351
|
|
$
353
|
|
$
295
|
|
$
308
|
|
$
1,307
|
|
|
|
|
|
|
|
|
|
|
Net interest
spread, excluding "catch-up" amortization:
|
|
|
|
|
|
|
|
|
|
Average
asset yield:
|
|
|
|
|
|
|
|
|
|
Investment securities - average asset
yield
|
3.28%
|
|
2.91%
|
|
2.99%
|
|
3.14%
|
|
3.08%
|
Estimated "catch-up" premium amortization cost
(benefit) due to change
in CPR forecast
|
(0.20)%
|
|
0.24%
|
|
0.25%
|
|
0.17%
|
|
0.11%
|
Investment securities average asset yield,
excluding "catch-up" premium
amortization
|
3.08%
|
|
3.15%
|
|
3.24%
|
|
3.31%
|
|
3.19%
|
TBA securities - average implied asset yield
6
|
3.29%
|
|
3.19%
|
|
3.21%
|
|
3.55%
|
|
3.30%
|
Average asset yield,
excluding "catch-up" premium amortization 7
|
3.09%
|
|
3.16%
|
|
3.24%
|
|
3.33%
|
|
3.20%
|
Average total cost of
funds:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements and other debt - average
funding cost
|
2.12%
|
|
2.48%
|
|
2.62%
|
|
2.64%
|
|
2.46%
|
TBA securities - average implied funding cost
5
|
1.88%
|
|
2.00%
|
|
2.47%
|
|
2.60%
|
|
2.26%
|
Average cost of funds, before interest rate swap
periodic income, net 7
|
2.10%
|
|
2.43%
|
|
2.60%
|
|
2.64%
|
|
2.44%
|
Interest rate swap periodic income, net
10
|
(0.34)%
|
|
(0.58)%
|
|
(0.36)%
|
|
(0.37)%
|
|
(0.42)%
|
Average total cost of
funds 9
|
1.76%
|
|
1.85%
|
|
2.24%
|
|
2.27%
|
|
2.02%
|
Average net interest
spread, excluding "catch-up" premium amortization
|
1.33%
|
|
1.31%
|
|
1.00%
|
|
1.06%
|
|
1.18%
|
AGNC INVESTMENT
CORP.
|
KEY
STATISTICS*
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Key Balance Sheet
Statistics:
|
December
31,
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
2019
|
|
2019
|
|
2019
|
|
2019
|
|
2018
|
Investment
securities: 12
|
|
|
|
|
|
|
|
|
|
Fixed-rate Agency MBS,
at fair value - as of period end
|
$
98,074
|
|
$
98,090
|
|
$
90,627
|
|
$
92,502
|
|
$
81,753
|
Other Agency MBS, at
fair value - as of period end
|
$
813
|
|
$
880
|
|
$
924
|
|
$
967
|
|
$
974
|
Credit risk transfer
securities, at fair value - as of period end
|
$
976
|
|
$
1,134
|
|
$
1,117
|
|
$
1,129
|
|
$
1,012
|
Non-Agency MBS, at fair
value - as of period end
|
$
579
|
|
$
579
|
|
$
603
|
|
$
672
|
|
$
548
|
Total investment
securities, at fair value - as of period end
|
$
100,442
|
|
$
100,683
|
|
$
93,271
|
|
$
95,270
|
|
$
84,287
|
Total investment
securities, at cost - as of period end
|
$
98,670
|
|
$
98,763
|
|
$
91,953
|
|
$
95,090
|
|
$
85,569
|
Total investment
securities, at par - as of period end
|
$
95,561
|
|
$
95,629
|
|
$
88,880
|
|
$
92,091
|
|
$
82,693
|
Average investment
securities, at cost
|
$
93,606
|
|
$
92,764
|
|
$
92,610
|
|
$
89,952
|
|
$
77,182
|
Average investment
securities, at par
|
$
90,586
|
|
$
89,741
|
|
$
89,586
|
|
$
87,021
|
|
$
74,395
|
TBA
securities:
|
|
|
|
|
|
|
|
|
|
Net TBA portfolio - as
of period end, at fair value
|
$
7,429
|
|
$
1,867
|
|
$
11,170
|
|
$
6,955
|
|
$
7,322
|
Net TBA portfolio - as
of period end, at cost
|
$
7,404
|
|
$
1,820
|
|
$
11,086
|
|
$
6,885
|
|
$
7,252
|
Net TBA portfolio - as
of period end, carrying value
|
$
25
|
|
$
47
|
|
$
84
|
|
$
70
|
|
$
70
|
Average net TBA
portfolio, at cost
|
$
7,038
|
|
$
10,146
|
|
$
11,864
|
|
$
8,002
|
|
$
8,066
|
Average repurchase
agreements and other debt 13
|
$
88,677
|
|
$
87,938
|
|
$
86,147
|
|
$
82,070
|
|
$
68,499
|
Average stockholders'
equity 14
|
$
10,594
|
|
$
10,347
|
|
$
10,371
|
|
$
10,186
|
|
$
9,634
|
Tangible net book
value per common share 1
|
$
17.66
|
|
$
16.55
|
|
$
16.58
|
|
$
17.23
|
|
$
16.56
|
Tangible net book
value "at risk" leverage - average 15
|
9.5:1
|
|
10.0:1
|
|
10.0:1
|
|
9.3:1
|
|
8.4:1
|
Tangible net book
value "at risk" leverage - as of period end
16
|
9.4:1
|
|
9.8:1
|
|
9.8:1
|
|
9.4:1
|
|
9.0:1
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Statistics:
|
|
|
|
|
|
|
|
|
|
Investment
securities: 12
|
|
|
|
|
|
|
|
|
|
Average
coupon
|
3.76%
|
|
3.87%
|
|
3.88%
|
|
3.87%
|
|
3.83%
|
Average asset
yield
|
3.28%
|
|
2.91%
|
|
2.99%
|
|
3.14%
|
|
3.13%
|
Average asset yield,
excluding "catch-up" premium amortization
|
3.08%
|
|
3.15%
|
|
3.24%
|
|
3.31%
|
|
3.21%
|
Average coupon - as of
period end
|
3.68%
|
|
3.76%
|
|
3.88%
|
|
3.88%
|
|
3.86%
|
Average asset yield -
as of period end
|
3.07%
|
|
3.08%
|
|
3.21%
|
|
3.29%
|
|
3.31%
|
Average actual CPR for
securities held during the period
|
15.4%
|
|
13.5%
|
|
10.0%
|
|
6.3%
|
|
7.4%
|
Average forecasted CPR
- as of period end
|
10.8%
|
|
13.4%
|
|
12.4%
|
|
10.5%
|
|
7.9%
|
Total premium
amortization cost, net
|
$
(84)
|
|
$
(192)
|
|
$
(183)
|
|
$
(142)
|
|
$
(107)
|
TBA
securities:
|
|
|
|
|
|
|
|
|
|
Average coupon - as of
period end 17
|
3.10%
|
|
2.99%
|
|
3.29%
|
|
3.64%
|
|
4.03%
|
Average implied asset
yield 6
|
3.29%
|
|
3.19%
|
|
3.21%
|
|
3.55%
|
|
3.66%
|
Combined investment
and TBA securities - average asset yield,
excluding "catch-up" premium amortization 7
|
3.09%
|
|
3.16%
|
|
3.24%
|
|
3.33%
|
|
3.26%
|
Cost of
funds:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements -
average funding cost
|
2.12%
|
|
2.48%
|
|
2.62%
|
|
2.64%
|
|
2.42%
|
TBA securities -
average implied funding cost 5
|
1.88%
|
|
2.00%
|
|
2.47%
|
|
2.60%
|
|
2.32%
|
Interest rate swaps -
average periodic income, net 10
|
(0.34)%
|
|
(0.58)%
|
|
(0.36)%
|
|
(0.37)%
|
|
(0.32)%
|
Average total cost of
funds, inclusive of TBAs and interest rate swap
periodic income, net
7,9
|
1.76%
|
|
1.85%
|
|
2.24%
|
|
2.27%
|
|
2.09%
|
Repurchase agreements -
average funding cost as of period end
|
2.17%
|
|
2.48%
|
|
2.64%
|
|
2.82%
|
|
2.79%
|
Interest rate swaps -
average net pay/(receive) rate as of period end
18
|
(0.30)%
|
|
(0.63)%
|
|
(0.74)%
|
|
(0.68)%
|
|
(0.52)%
|
Net interest
spread:
|
|
|
|
|
|
|
|
|
|
Combined investment and
TBA securities average net interest spread
|
1.52%
|
|
1.09%
|
|
0.78%
|
|
0.90%
|
|
1.09%
|
Combined investment and
TBA securities average net interest spread,
excluding "catch-up" premium
amortization
|
1.33%
|
|
1.31%
|
|
1.00%
|
|
1.06%
|
|
1.17%
|
Expenses % of average
stockholders' equity - annualized 19
|
0.94%
|
|
0.73%
|
|
0.77%
|
|
0.75%
|
|
0.75%
|
Economic return
(loss) on tangible common equity - unannualized
20
|
9.6%
|
|
2.7%
|
|
(0.9)%
|
|
7.3%
|
|
(5.0)%
|
*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.
|
|
1.
|
Tangible net book
value per common share excludes preferred stock liquidation
preference and goodwill.
|
2.
|
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.
|
3.
|
Amount reported in
gain (loss) on derivatives instruments and other securities, net in
the accompanying consolidated statements of operations.
|
4.
|
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.
|
5.
|
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.
|
6.
|
The average implied
asset yield for TBA dollar roll transactions is extrapolated by
adding the average TBA implied funding cost (Note 5) 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.
|
7.
|
Amount calculated on
a weighted average basis based on average balances outstanding
during the period and their respective asset yield/funding
cost.
|
8.
|
Represents periodic
interest rate swap settlements. Amount excludes interest rate
swap termination fees and mark-to-market adjustments.
|
9.
|
Cost of funds
excludes other supplemental hedges used to hedge a portion of the
Company's interest rate risk (such as swaptions and U.S. Treasury
positions) and U.S. Treasury repurchase agreements.
|
10.
|
Represents interest
rate swap periodic income/cost measured as a percent of total
mortgage funding (Agency repurchase agreements, other debt and net
TBA securities).
|
11.
|
"Catch-up" premium
amortization cost/benefit is reported in interest income on the
accompanying consolidated statements of operations
|
12.
|
Investment securities
include Agency MBS, CRT and non-Agency securities. Amounts
exclude TBA securities.
|
13.
|
Average repurchase
agreements and other debt excludes U.S. Treasury repurchase
agreements.
|
14.
|
Average stockholders'
equity calculated as the average month-ended stockholders' equity
during the quarter.
|
15.
|
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.
|
16.
|
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.
|
17.
|
Average TBA coupon,
as of December 31, September 30 and June 30, 2019, is for the long
TBA position only.
|
18.
|
Includes forward
starting swaps not yet in effect as of reported
period-end.
|
19.
|
Annualized Q4 2018
operating expenses exclude non-recurring expenses associated with
the sale of MTGE Investment Corp. and the resulting termination of
the Company's management agreement with MTGE.
|
20.
|
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 January 30, 2020 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 Q4 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 January 30, 2020. In addition, there will be a
phone recording available one hour after the live call on
January 30, 2020 through February 13,
2020. 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
10137880.
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") less (ii) total operating expense (GAAP
measure) adjusted for the fourth quarter of 2018 to exclude
non-recurring 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.