BETHESDA, Md., Oct. 24, 2018 /PRNewswire/ -- AGNC
Investment Corp. ("AGNC" or the "Company") (Nasdaq: AGNC) today
announced financial results for the quarter ended
September 30, 2018.
THIRD QUARTER 2018 FINANCIAL HIGHLIGHTS
- $0.03 comprehensive income per
common share, comprised of:
-
- $0.45 net income per common
share
- $(0.42) other comprehensive loss
("OCI") per common share on investments marked-to-market through
OCI
- $0.61 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization benefit 1
-
- Includes $0.15 per common share
of dollar roll income associated with the Company's $18.3 billion average net long position in
forward purchases and sales of Agency mortgage-backed securities
("MBS") in the "to-be-announced" ("TBA") market
- Excludes $0.01 per common share
of estimated "catch-up" premium amortization benefit due to change
in projected constant prepayment rate ("CPR") estimates
- $18.00 tangible net book value
per common share as of September 30, 2018
-
- Decreased $(0.41) per common
share, or -2.2%, from $18.41 per
common share as of June 30, 2018
- Excludes $526 million, or
$1.10 per common share, of goodwill
intangible asset as of September 30, 2018
- $0.54 dividends declared per
common share during the quarter
- 0.7% economic return on tangible common equity for the
quarter
-
- Comprised of $0.54 dividends per
common share and $(0.41) decrease in
tangible net book value per common share
OTHER THIRD QUARTER HIGHLIGHTS
- $81.8 billion investment
portfolio as of September 30, 2018, comprised of:
-
- $70.9 billion Agency MBS
- $9.4 billion TBA mortgage
position
- $1.5 billion credit risk transfer
("CRT") and non-Agency securities
- 8.2x tangible net book value "at risk" leverage as of
September 30, 2018
-
- 8.5x average tangible net book value "at risk" leverage for the
quarter
- 9.7% portfolio CPR for the quarter
-
- 6.8% average projected portfolio life CPR as of
September 30, 2018
- 1.30% annualized net interest spread and TBA dollar roll income
for the quarter, excluding estimated "catch-up" premium
amortization benefit
-
- Excludes 3 bps of "catch up" premium amortization benefit due
to change in projected CPR estimates
- Decreased from 1.35% for the prior quarter, excluding 7 bps of
"catch-up" premium amortization benefit
- $0.8 billion of accretive common
equity raised during the quarter, net of offering costs
___________
- 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
"Spurred by strong U.S. economic fundamentals, interest
rates trended higher in the third quarter, and, as expected, the
Federal Reserve continued its progression toward a neutral monetary
policy stance by raising the Federal Funds rate another 25 basis
points in September. While we believe that the near-term bias
for interest rates is modestly higher as a result of the strength
of the U.S. economy and the strong domestic labor market, our
expectation is that some combination of factors, including trade
policy, the challenging economic picture abroad, contained
inflation, and/or a correction in asset valuations will ultimately
cap the rate move over the next several quarters," said
Gary Kain, the Company's Chief
Executive Officer and Chief Investment Officer. "Within the
broader fixed income markets, Agency MBS assets continue to remain
attractive relative to credit alternatives. Although Agency spreads
to swap and Treasury benchmarks may widen if rates continue to
trend higher or if the yield curve flattens further, we believe
such an event would likely provide opportunities to improve the
long-term earnings durability of our portfolio," added Mr.
Kain.
"Against the backdrop of higher interest rates and a slight
underperformance of Agency MBS relative to our hedges, AGNC's
economic return on tangible common equity for the quarter was 0.7%,
consisting of $0.54 in dividends and
a $(0.41) decline in tangible net
book value per common share. Further, despite a modest decline from
the second to third quarter in the favorable funding benefit
resulting from the difference between our repo funding rate and the
rate we receive on our pay-fixed interest rate swaps, AGNC
generated $0.61 of net spread and
dollar roll income, excluding catch-up premium amortization, in the
third quarter," commented Peter
Federico, the Company's President and Chief Operating
Officer.
TANGIBLE NET BOOK VALUE PER COMMON SHARE
As of September 30, 2018, the Company's tangible net
book value per common share was $18.00 per share, a decline of -2.2% compared to
$18.41 per share as of June 30,
2018. The decline was primarily a function of higher interest
rates, as Agency MBS spreads to benchmark interest rates were
largely unchanged to slightly wider for the quarter.
The Company's tangible net book value per common share excludes
$526 million, or $1.10 per common share, of intangible assets as
of September 30, 2018, compared to $550
million, or $1.27 per common
share, of intangible assets as of June
30, 2018. During the third quarter, the Company
received a $42 million, or
$0.09 per common share, cash
termination fee in connection with the sale of MTGE Investment
Corp. ("MTGE") and corresponding termination of the Company's
management agreement with MTGE. Concurrent with the
termination, the Company wrote-off its intangible asset associated
with the management agreement of approximately $23 million, or $0.05 per common share.
During the third quarter, the Company completed a 43.7 million
share common equity offering for $817
million, or $18.68 per common
share, net of offering costs. The equity offering was
accretive to the Company's tangible net book value per common share
and further enhances the Company's operating cost efficiency as a
percent of equity capital.
INVESTMENT PORTFOLIO
As of September 30, 2018, the Company's investment
portfolio totaled $81.8 billion,
comprised of:
- $80.3 billion of Agency MBS and
TBA securities, including:
-
- $79.2 billion of fixed-rate
securities, comprised of:
-
- $62.2 billion 30-year fixed-rate
securities,
- $4.7 billion 30-year TBA
securities,
- $6.8 billion 15-year
securities,
- $4.7 billion 15-year TBA
securities, and
- $0.8 billion 20-year fixed-rate
securities;
- $0.8 billion of collateralized
mortgage obligations ("CMOs"); and
- $0.2 billion of adjustable-rate
securities; and
- $1.5 billion of CRT and
non-Agency securities.
As of September 30, 2018, inclusive of TBA securities,
30-year and 15-year Agency MBS fixed rate securities represented
82% and 14% of the Company's investment portfolio, respectively,
compared to 81% and 16%, respectively, as of June 30,
2018.
As of September 30, 2018, the Company's fixed-rate Agency MBS,
inclusive of TBA securities, had a weighted average coupon of
3.79%, compared to 3.69% as of June 30, 2018, comprised of the
following weighted average coupons:
- 3.85% for 30-year fixed-rate securities;
- 3.38% for 15-year fixed rate securities; and
- 3.94% 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, 2018, the Company's net
TBA position had a total fair value of $9.4
billion and a GAAP net carrying value of $(43) million reported in derivative
assets/(liabilities) on the Company's balance sheet, compared to a
total fair value of $20.0 billion and
a GAAP net carrying value of $105
million as of June 30, 2018.
CONSTANT PREPAYMENT RATES
The Company's investment portfolio had a weighted average CPR of
9.7% for the third quarter, unchanged from the prior quarter.
The weighted average projected CPR for the remaining life of the
Company's Agency securities held as of September 30, 2018 was
6.8%, compared to 7.1% as of June 30, 2018.
The weighted average cost basis of the Company's investment
portfolio was 104.0% of par value as of September 30,
2018. Net premium amortization cost on the Company's
investment portfolio for the third quarter was $(81) million, or $(0.18) per common share, which includes a
"catch-up" premium amortization benefit of $6 million, or $0.01 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 $(74)
million, or $(0.18) per common
share, including a "catch-up" premium amortization benefit of
$12 million, or $0.03 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 3.11% for the third
quarter, compared to 2.99% for the prior quarter. Excluding
"catch-up" premium amortization, the Company's average asset yield
was 3.07% for the third quarter, compared to 2.91% for the prior
quarter. Including TBA securities and excluding "catch-up" premium
amortization, the Company's average asset yield for the third
quarter was 3.18%, compared to 3.02% for the prior quarter.
For the third quarter, the weighted average interest rate on the
Company's Agency repurchase agreements was 2.20%, compared to 1.99%
for the prior quarter. The Company's average implied TBA
funding cost was 2.05% for the third quarter, compared to 1.75% for
the prior quarter. Inclusive of interest rate swaps, the
Company's combined average cost of funds for the third quarter was
1.88%, compared to 1.67% for the prior quarter.
The Company's annualized net interest spread, including TBA
securities and interest rate swaps, was 1.33% for the third
quarter, compared to 1.42% for the prior quarter. Excluding
"catch-up" premium amortization, the Company's combined annualized
net interest spread for the third quarter was 1.30%, versus 1.35%
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 $0.61 per common share, excluding $0.01 per common share of "catch-up" premium
amortization benefit, compared to $0.63 per common share for the prior quarter,
excluding $0.03 per common share of
"catch-up" premium amortization benefit. 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, 2018, $65.7
billion of Agency repo, $9.4
billion of TBA dollar roll positions (at cost) and
$0.3 billion of other debt were used
to fund the Company's investment portfolio. Inclusive of its
net TBA position and net payable/(receivable) for unsettled
securities, the Company's tangible net book value "at risk"
leverage ratio was 8.2x as of September 30, 2018, compared to
8.3x as of June 30, 2018. The Company's average "at
risk" leverage for the third quarter was 8.5x tangible net book
value, compared to 8.0x for the prior quarter, with the increase
partly due to the timing of equity offerings during the third and
second quarters.
As of September 30, 2018, the Company's Agency repurchase
agreements had a weighted average interest rate of 2.30%, an
increase from 2.18% as of June 30, 2018, and a weighted
average remaining days to maturity of 67 days, compared to 101 days
as of June 30, 2018. As of September 30, 2018,
$25.5 billion, or 39%, of the
Company's Agency repurchase agreements were funded through the
Company's captive broker-dealer subsidiary, Bethesda Securities,
LLC, compared to $21.2 billion, or
43%, as of June 30, 2018.
As of September 30, 2018, the Company's Agency repurchase
agreements had remaining maturities of:
- $52.1 billion of three months or
less;
- $9.5 billion from three to six
months;
- $1.1 billion from six to twelve
months; and
- $3.0 billion from one to three
years.
HEDGING ACTIVITIES
As of September 30, 2018, 95% of the Company's
outstanding balance of Agency repurchase agreements, other debt and
net TBA position was hedged with interest rate swaps, swaptions and
U.S. Treasury positions, compared to 99% as of June 30,
2018.
As of September 30, 2018, the Company's interest rate swap
position totaled $48.7 billion in
notional amount, compared to $47.9
billion as of June 30, 2018. The Company's
interest rate swap position as of September 30, 2018 included
$4.9 billion of forward starting
swaps, with an average forward start date of 0.5 years, compared to
$4.4 billion and 0.4 years,
respectively, as of June 30, 2018. Including
forward starting swaps, the Company's interest rate swap portfolio
had an average fixed pay rate of 2.01%, an average receive rate of
2.33% and an average maturity of 4.7 years as of September 30,
2018, compared to 1.93%, 2.34% and 4.6 years, respectively, as of
June 30, 2018. Excluding forward starting swaps, the
Company's interest rate swap portfolio had an average fixed pay
rate of 1.89% as of September 30, 2018, compared to 1.83% as
of June 30, 2018.
As of September 30, 2018, the Company had payer swaptions
outstanding totaling $5.6 billion,
unchanged from June 30, 2018. As of September 30,
2018, the Company had short U.S. Treasury positions outstanding
totaling $17.4 billion, compared to
$14.9 billion as of June 30,
2018.
OTHER GAIN (LOSS), NET
For the third quarter, the Company recorded a net gain of
$73 million in other gain (loss),
net, or $0.16 per common share,
compared to a net gain of $134
million, or $0.33 per common
share, for the prior quarter. Other gain (loss), net for the
third quarter was comprised of:
- $(40) million of net realized
losses on sales of investment securities;
- $(363) million of net unrealized
losses on investment securities measured at fair value through net
income;
- $56 million of interest rate swap
periodic income;
- $227 million of net gains on
interest rate swaps;
- $30 million of net gains on
interest rate swaptions;
- $172 million of net gains on U.S.
Treasury positions;
- $68 million of TBA dollar roll
income;
- $(123) million of net
mark-to-market losses on TBA mortgage positions; and
- $46 million of management and
termination fee income.
OTHER COMPREHENSIVE LOSS
During the third quarter, the Company recorded an other
comprehensive loss of $(193) million,
or $(0.42) per common share,
consisting of net unrealized losses on the Company's Agency
securities recognized through OCI, compared to a $(145) million, or $(0.36) per common share, other comprehensive
loss for the prior quarter.
THIRD QUARTER 2018 DIVIDEND DECLARATIONS
During the third quarter, the Company's Board of Directors
declared dividends of $0.18 per share
to common stockholders of record as of July
31, August 31 and September 28, 2018, respectively, totaling
$0.54 per share for the quarter,
which were paid on August 8,
September 11 and October 9, 2018, respectively. Since its
May 2008 initial public offering
through the third quarter of 2018, the Company has declared a total
of $8.2 billion in common stock
dividends, or $38.78 per common
share.
On September 14, 2018, the Company's Board of Directors
declared a third quarter dividend on its 7.750% Series B Cumulative
Redeemable Preferred Stock of $0.484375 per depositary share and on its Series
C Preferred Stock of $0.43750 per
depositary share. The dividends were paid on October 15, 2018
to preferred stockholders of record as of October 1, 2018.
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,
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
(unaudited)
|
Assets:
|
|
|
|
|
|
|
|
|
|
Agency
securities, at fair value (including pledged securities of
$67,889, $51,356, $51,434, $53,055 and $47,997,
respectively)
|
$
70,408
|
|
$
55,524
|
|
$
54,141
|
|
$
55,506
|
|
$
51,638
|
Agency
securities transferred to consolidated variable interest
entities, at fair value (pledged securities)
|
453
|
|
587
|
|
621
|
|
662
|
|
700
|
Credit risk
transfer securities, at fair value (including pledged
securities of $44, $0, $0, $0 and $0,
respectively)
|
997
|
|
936
|
|
884
|
|
876
|
|
717
|
Non-Agency
securities, at fair value
|
507
|
|
60
|
|
36
|
|
36
|
|
36
|
U.S. Treasury
securities, at fair value (including pledged securities of
$45, $0, $0, $0 and $0, respectively)
|
109
|
|
-
|
|
224
|
|
-
|
|
-
|
REIT equity
securities, at fair value
|
-
|
|
46
|
|
42
|
|
29
|
|
4
|
Cash and cash
equivalents
|
1,071
|
|
863
|
|
972
|
|
1,046
|
|
1,098
|
Restricted
cash
|
456
|
|
447
|
|
386
|
|
317
|
|
294
|
Derivative
assets, at fair value
|
412
|
|
458
|
|
410
|
|
205
|
|
183
|
Receivable for
investment securities sold (including pledged
securities of $443, $31, $0, $0 and $149,
respectively)
|
524
|
|
31
|
|
-
|
|
-
|
|
521
|
Receivable
under reverse repurchase agreements
|
16,309
|
|
13,306
|
|
10,770
|
|
10,961
|
|
9,226
|
Goodwill and
other intangible asset, net
|
526
|
|
550
|
|
550
|
|
551
|
|
552
|
Other
assets
|
259
|
|
330
|
|
185
|
|
187
|
|
521
|
Total
assets
|
$
92,031
|
|
$
73,138
|
|
$
69,221
|
|
$
70,376
|
|
$
65,490
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
$
65,734
|
|
$
48,839
|
|
$
48,956
|
|
$
50,296
|
|
$
45,505
|
Debt of
consolidated variable interest entities, at fair value
|
291
|
|
313
|
|
336
|
|
357
|
|
380
|
Payable for
investment securities purchased
|
23
|
|
1,503
|
|
457
|
|
95
|
|
1,373
|
Derivative
liabilities, at fair value
|
62
|
|
6
|
|
32
|
|
28
|
|
62
|
Dividends
payable
|
95
|
|
87
|
|
80
|
|
80
|
|
77
|
Obligation to
return securities borrowed under reverse
repurchase agreements, at fair value
|
15,549
|
|
12,898
|
|
10,352
|
|
10,467
|
|
9,119
|
Accounts
payable and other liabilities
|
650
|
|
450
|
|
670
|
|
299
|
|
183
|
Total
liabilities
|
82,404
|
|
64,096
|
|
60,883
|
|
61,622
|
|
56,699
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
Preferred
stock - aggregate liquidation preference of $500
|
484
|
|
484
|
|
484
|
|
484
|
|
484
|
Common stock -
$0.01 par value;
|
|
|
|
|
|
|
|
|
|
477.8, 434.1,
391.3, 391.3 and 391.3 shares issued and outstanding,
respectively
|
5
|
|
4
|
|
4
|
|
4
|
|
4
|
Additional
paid-in capital
|
12,785
|
|
11,964
|
|
11,174
|
|
11,173
|
|
11,172
|
Retained
deficit
|
(2,343)
|
|
(2,299)
|
|
(2,358)
|
|
(2,562)
|
|
(2,729)
|
Accumulated
other comprehensive loss
|
(1,304)
|
|
(1,111)
|
|
(966)
|
|
(345)
|
|
(140)
|
Total
stockholders' equity
|
9,627
|
|
9,042
|
|
8,338
|
|
8,754
|
|
8,791
|
Total
liabilities and stockholders' equity
|
$
92,031
|
|
$
73,138
|
|
$
69,221
|
|
$
70,376
|
|
$
65,490
|
|
|
|
|
|
|
|
|
|
|
Tangible net book
value per common share 1
|
$
18.00
|
|
$
18.41
|
|
$
18.63
|
|
$
19.69
|
|
$
19.78
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
500
|
|
$
414
|
|
$
431
|
|
$
386
|
|
$
318
|
Interest
expense
|
312
|
|
237
|
|
206
|
|
174
|
|
140
|
Net interest
income
|
188
|
|
177
|
|
225
|
|
212
|
|
178
|
Other gain,
net:
|
|
|
|
|
|
|
|
|
|
Realized gain
(loss) on sale of investment securities, net
|
(40)
|
|
(74)
|
|
(2)
|
|
(16)
|
|
22
|
Unrealized
loss on investment securities measured at fair value
through net income, net
|
(363)
|
|
(94)
|
|
(523)
|
|
(65)
|
|
(31)
|
Gain on
derivative instruments and other securities, net
|
430
|
|
298
|
|
738
|
|
271
|
|
131
|
Management fee
income
|
46
|
|
4
|
|
4
|
|
4
|
|
4
|
Total other
gain, net
|
73
|
|
134
|
|
217
|
|
194
|
|
126
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Compensation
and benefits
|
14
|
|
10
|
|
10
|
|
12
|
|
10
|
Other
operating expense
|
31
|
|
8
|
|
8
|
|
9
|
|
8
|
Total operating
expense
|
45
|
|
18
|
|
18
|
|
21
|
|
18
|
Net
income
|
216
|
|
293
|
|
424
|
|
385
|
|
286
|
Dividend on
preferred stock
|
9
|
|
9
|
|
9
|
|
9
|
|
9
|
Issuance costs
of redeemed preferred stock
|
-
|
|
-
|
|
-
|
|
-
|
|
6
|
Net income
available to common stockholders
|
$
207
|
|
$
284
|
|
$
415
|
|
$
376
|
|
$
271
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
216
|
|
$
293
|
|
$
424
|
|
$
385
|
|
$
286
|
Unrealized
gain (loss) on investment securities measured at fair value
through other comprehensive income (loss), net
|
(193)
|
|
(145)
|
|
(621)
|
|
(205)
|
|
90
|
Comprehensive
income (loss)
|
23
|
|
148
|
|
(197)
|
|
180
|
|
376
|
Dividend on
preferred stock
|
9
|
|
9
|
|
9
|
|
9
|
|
9
|
Issuance costs
of redeemed preferred stock
|
-
|
|
-
|
|
-
|
|
-
|
|
6
|
Comprehensive
income (loss) available (attributable) to common
stockholders
|
$
14
|
|
$
139
|
|
$
(206)
|
|
$
171
|
|
$
361
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
462.3
|
|
404.9
|
|
391.3
|
|
391.3
|
|
364.7
|
Weighted average
number of common shares outstanding - diluted
|
462.7
|
|
405.2
|
|
391.5
|
|
391.5
|
|
364.9
|
Net income per
common share - basic and diluted
|
$
0.45
|
|
$
0.70
|
|
$
1.06
|
|
$
0.96
|
|
$
0.74
|
Comprehensive
income (loss) per common share - basic and diluted
|
$
0.03
|
|
$
0.34
|
|
$
(0.53)
|
|
$
0.44
|
|
$
0.99
|
Dividends declared
per common share
|
$
0.54
|
|
$
0.54
|
|
$
0.54
|
|
$
0.54
|
|
$
0.54
|
|
|
|
|
|
|
|
|
|
|
AGNC INVESTMENT
CORP.
|
RECONCILIATION OF GAAP NET
INTEREST INCOME TO NET SPREAD AND DOLLAR ROLL INCOME (NON-GAAP
MEASURE) 3
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
GAAP net interest
income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
500
|
|
$
414
|
|
$
431
|
|
$
386
|
|
$
318
|
Interest
expense
|
312
|
|
237
|
|
206
|
|
174
|
|
140
|
GAAP net interest
income
|
188
|
|
177
|
|
225
|
|
212
|
|
178
|
TBA dollar
roll income, net 4,5
|
68
|
|
70
|
|
62
|
|
78
|
|
87
|
Interest rate
swap periodic income (cost) 4,9
|
56
|
|
41
|
|
(9)
|
|
(21)
|
|
(26)
|
Dividend
income from REIT equity securities 4
|
1
|
|
1
|
|
1
|
|
1
|
|
-
|
Adjusted net interest
and dollar roll income
|
313
|
|
289
|
|
279
|
|
270
|
|
239
|
Other operating
income (expense):
|
|
|
|
|
|
|
|
|
|
Management fee
income
|
46
|
|
4
|
|
4
|
|
4
|
|
4
|
Less
management agreement termination fee income
|
(42)
|
|
-
|
|
-
|
|
-
|
|
-
|
Operating
expense
|
(45)
|
|
(18)
|
|
(18)
|
|
(21)
|
|
(18)
|
Less
non-recurring write-off of intangible asset and other
expenses associated with termination of management
agreement
|
26
|
|
-
|
|
-
|
|
-
|
|
-
|
Total operating
income (expense), net
|
(15)
|
|
(14)
|
|
(14)
|
|
(17)
|
|
(14)
|
Net spread and dollar
roll income
|
298
|
|
275
|
|
265
|
|
253
|
|
225
|
Dividend on
preferred stock
|
9
|
|
9
|
|
9
|
|
9
|
|
9
|
Net spread and dollar
roll income available to common stockholders
|
289
|
|
266
|
|
256
|
|
244
|
|
216
|
Estimated
"catch-up" premium amortization cost (benefit) due to change in
CPR forecast 11
|
(6)
|
|
(12)
|
|
(21)
|
|
3
|
|
12
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, available to common stockholders
|
$
283
|
|
$
254
|
|
$
235
|
|
$
247
|
|
$
228
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
462.3
|
|
404.9
|
|
391.3
|
|
391.3
|
|
364.7
|
Weighted average
number of common shares outstanding - diluted
|
462.7
|
|
405.2
|
|
391.5
|
|
391.5
|
|
364.9
|
Net spread and dollar
roll income per common share - basic
|
$
0.63
|
|
$
0.66
|
|
$
0.65
|
|
$
0.62
|
|
$
0.59
|
Net spread and dollar
roll income per common share - diluted
|
$
0.62
|
|
$
0.66
|
|
$
0.65
|
|
$
0.62
|
|
$
0.59
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, per common share - basic
|
$
0.61
|
|
$
0.63
|
|
$
0.60
|
|
$
0.63
|
|
$
0.63
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, per common share - diluted
|
$
0.61
|
|
$
0.63
|
|
$
0.60
|
|
$
0.63
|
|
$
0.62
|
|
|
|
|
|
|
|
|
|
|
AGNC INVESTMENT
CORP.
|
RECONCILIATION OF GAAP NET
INCOME TO ESTIMATED TAXABLE INCOME (NON-GAAP MEASURE)
3
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
Net income
|
$
216
|
|
$
293
|
|
$
424
|
|
$
385
|
|
$
286
|
Book to tax
differences:
|
|
|
|
|
|
|
|
|
|
Premium
amortization, net
|
(21)
|
|
(22)
|
|
(23)
|
|
(7)
|
|
(3)
|
Realized
gain/loss, net
|
(291)
|
|
(221)
|
|
(652)
|
|
(262)
|
|
(112)
|
Net capital
loss/(utilization of net capital loss carryforward)
|
(67)
|
|
109
|
|
245
|
|
20
|
|
(159)
|
Unrealized
gain/(loss), net
|
316
|
|
(46)
|
|
108
|
|
(55)
|
|
41
|
Other
|
(2)
|
|
-
|
|
(13)
|
|
1
|
|
(2)
|
Total book to tax differences
|
(65)
|
|
(180)
|
|
(335)
|
|
(303)
|
|
(235)
|
Estimated REIT
taxable income
|
151
|
|
113
|
|
89
|
|
82
|
|
51
|
Dividend on
preferred stock
|
9
|
|
9
|
|
9
|
|
9
|
|
9
|
Estimated REIT
taxable income, net of preferred stock dividend
|
$
142
|
|
$
104
|
|
$
80
|
|
$
73
|
|
$
42
|
Weighted average
number of common shares outstanding - basic
|
462.3
|
|
404.9
|
|
391.3
|
|
391.3
|
|
364.7
|
Weighted average
number of common shares outstanding - diluted
|
462.7
|
|
405.2
|
|
391.5
|
|
391.5
|
|
364.9
|
Estimated REIT
taxable income per common share - basic and diluted
|
$
0.31
|
|
$
0.26
|
|
$
0.20
|
|
$
0.19
|
|
$
0.12
|
|
|
|
|
|
|
|
|
|
|
Beginning cumulative
non-deductible net capital loss
|
$
711
|
|
$
602
|
|
$
357
|
|
$
337
|
|
$
496
|
Net capital
loss/(utilization of net capital loss carryforward)
|
(67)
|
|
109
|
|
245
|
|
20
|
|
(159)
|
Ending cumulative
non-deductible net capital loss
|
$
644
|
|
$
711
|
|
$
602
|
|
$
357
|
|
$
337
|
Ending cumulative
non-deductible net capital loss per common share
|
$
1.35
|
|
$
1.64
|
|
$
1.54
|
|
$
0.91
|
|
$
0.86
|
|
|
|
|
|
|
|
|
|
|
AGNC INVESTMENT
CORP.
|
NET INTEREST MARGIN
COMPONENTS BY FUNDING SOURCE 3
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
Adjusted net
interest and dollar roll income, excluding "catch-up"
premium amortization:
|
|
|
|
|
|
|
|
|
|
Economic interest
income:
|
|
|
|
|
|
|
|
|
|
Investment securities
- GAAP interest income 12
|
$
500
|
|
$
414
|
|
$
431
|
|
$
386
|
|
$
318
|
Estimated "catch-up"
premium amortization cost (benefit) due to change
in CPR forecast 11
|
(6)
|
|
(12)
|
|
(21)
|
|
3
|
|
12
|
TBA dollar roll
income - implied interest income 4,7
|
162
|
|
144
|
|
120
|
|
134
|
|
139
|
Economic interest
income, excluding "catch-up" premium amortization
|
656
|
|
546
|
|
530
|
|
523
|
|
469
|
Economic interest
expense:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
and other debt - GAAP interest expense
|
(312)
|
|
(237)
|
|
(206)
|
|
(174)
|
|
(140)
|
TBA dollar roll
income - implied interest expense 4,6
|
(94)
|
|
(74)
|
|
(58)
|
|
(56)
|
|
(52)
|
Interest rate swap
periodic income (cost) 4,9
|
56
|
|
41
|
|
(9)
|
|
(21)
|
|
(26)
|
Economic interest
expense
|
(350)
|
|
(270)
|
|
(273)
|
|
(251)
|
|
(218)
|
Dividend income from
REIT equity securities 4
|
1
|
|
1
|
|
1
|
|
1
|
|
-
|
Adjusted net interest
and dollar roll income, excluding "catch-up" premium
amortization
|
$
307
|
|
$
277
|
|
$
258
|
|
$
273
|
|
$
251
|
|
|
|
|
|
|
|
|
|
|
Net interest
spread, excluding "catch-up" amortization:
|
|
|
|
|
|
|
|
|
|
Average asset
yield:
|
|
|
|
|
|
|
|
|
|
Investment
securities - average asset yield
|
3.11%
|
|
2.99%
|
|
3.05%
|
|
2.84%
|
|
2.72%
|
Estimated
"catch-up" premium amortization cost (benefit) due to change
in CPR forecast
|
(0.04)%
|
|
(0.08)%
|
|
(0.15)%
|
|
0.02%
|
|
0.10%
|
Investment
securities average asset yield, excluding "catch-up" premium
amortization
|
3.07%
|
|
2.91%
|
|
2.90%
|
|
2.86%
|
|
2.82%
|
TBA securities
- average implied asset yield 7
|
3.54%
|
|
3.41%
|
|
3.08%
|
|
2.93%
|
|
2.99%
|
Average asset
yield, excluding "catch-up" premium amortization
8
|
3.18%
|
|
3.02%
|
|
2.94%
|
|
2.88%
|
|
2.87%
|
Average total
cost of funds:
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements and other debt - average funding cost
|
2.20%
|
|
1.99%
|
|
1.69%
|
|
1.43%
|
|
1.34%
|
TBA securities
- average implied funding cost 6
|
2.05%
|
|
1.75%
|
|
1.49%
|
|
1.23%
|
|
1.12%
|
Average cost of
funds, before interest rate swap cost of funds
8
|
2.18%
|
|
1.92%
|
|
1.62%
|
|
1.39%
|
|
1.28%
|
Interest rate
swap periodic (income) cost 10
|
-0.30%
|
|
-0.25%
|
|
0.06%
|
|
0.13%
|
|
0.18%
|
Average total
cost of funds
|
1.88%
|
|
1.67%
|
|
1.68%
|
|
1.52%
|
|
1.46%
|
Average net
interest spread, excluding "catch-up" premium
amortization
|
1.30%
|
|
1.35%
|
|
1.26%
|
|
1.36%
|
|
1.41%
|
|
|
|
|
|
|
|
|
|
|
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,
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
Investment
securities: 12
|
|
|
|
|
|
|
|
|
|
Fixed-rate Agency MBS, at fair value - as of period end
|
$
69,844
|
|
$
55,119
|
|
$
53,696
|
|
$
55,026
|
|
$
51,104
|
Other
Agency MBS, at fair value - as of period end
|
$
1,017
|
|
$
992
|
|
$
1,066
|
|
$
1,142
|
|
$
1,234
|
Credit
risk transfer securities, at fair value - as of period
end
|
$
997
|
|
$
936
|
|
$
884
|
|
$
876
|
|
$
717
|
Non-Agency MBS, at fair value - as of period end
|
$
507
|
|
$
60
|
|
$
36
|
|
$
36
|
|
$
36
|
Total
investment securities, at fair value - as of period end
|
$
72,365
|
|
$
57,107
|
|
$
55,682
|
|
$
57,080
|
|
$
53,091
|
Total
investment securities, at cost - as of period end
|
$
74,691
|
|
$
58,875
|
|
$
57,211
|
|
$
57,466
|
|
$
53,206
|
Total
investment securities, at par - as of period end
|
$
71,844
|
|
$
56,320
|
|
$
54,625
|
|
$
54,804
|
|
$
50,795
|
Average
investment securities, at cost
|
$
64,346
|
|
$
55,329
|
|
$
56,573
|
|
$
54,406
|
|
$
46,808
|
Average
investment securities, at par
|
$
61,696
|
|
$
52,856
|
|
$
53,986
|
|
$
51,914
|
|
$
44,672
|
TBA
securities:
|
|
|
|
|
|
|
|
|
|
Net TBA
portfolio - as of period end, at fair value
|
$
9,393
|
|
$
20,003
|
|
$
13,611
|
|
$
15,742
|
|
$
19,409
|
Net TBA
portfolio - as of period end, at cost
|
$
9,436
|
|
$
19,898
|
|
$
13,529
|
|
$
15,739
|
|
$
19,433
|
Net TBA
portfolio - as of period end, carrying value
|
$
(43)
|
|
$
105
|
|
$
82
|
|
$
3
|
|
$
(24)
|
Average
net TBA portfolio, at cost
|
$
18,270
|
|
$
16,912
|
|
$
15,585
|
|
$
18,355
|
|
$
18,616
|
Average repurchase
agreements and other debt 13
|
$
56,265
|
|
$
47,823
|
|
$
49,567
|
|
$
48,122
|
|
$
41,406
|
Average stockholders'
equity 14
|
$
9,345
|
|
$
8,652
|
|
$
8,535
|
|
$
8,741
|
|
$
8,134
|
Tangible net book
value per common share 1
|
$
18.00
|
|
$
18.41
|
|
$
18.63
|
|
$
19.69
|
|
$
19.78
|
Tangible net book
value "at risk" leverage - average 15
|
8.5:1
|
|
8.0:1
|
|
8.2:1
|
|
8.1:1
|
|
7.9:1
|
Tangible net book
value "at risk" leverage - as of period end
16
|
8.2:1
|
|
8.3:1
|
|
8.2:1
|
|
8.1:1
|
|
8.0:1
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Statistics:
|
|
|
|
|
|
|
|
|
|
Investment
securities: 12
|
|
|
|
|
|
|
|
|
|
Average
coupon
|
3.77%
|
|
3.69%
|
|
3.70%
|
|
3.71%
|
|
3.72%
|
Average
asset yield
|
3.11%
|
|
2.99%
|
|
3.05%
|
|
2.84%
|
|
2.72%
|
Average
asset yield, excluding "catch-up" premium amortization
|
3.07%
|
|
2.91%
|
|
2.90%
|
|
2.86%
|
|
2.82%
|
Average
coupon - as of period end
|
3.82%
|
|
3.74%
|
|
3.70%
|
|
3.71%
|
|
3.67%
|
Average
asset yield - as of period end
|
3.22%
|
|
3.03%
|
|
2.93%
|
|
2.89%
|
|
2.85%
|
Average
actual CPR for securities held during the period
|
9.7%
|
|
9.7%
|
|
8.6%
|
|
10.1%
|
|
12.1%
|
Average
forecasted CPR - as of period end
|
6.8%
|
|
7.1%
|
|
7.6%
|
|
8.4%
|
|
8.5%
|
Total
premium amortization, net
|
$
(81)
|
|
$
(74)
|
|
$
(69)
|
|
$
(96)
|
|
$
(97)
|
TBA securities -
average implied asset yield 7
|
3.54%
|
|
3.41%
|
|
3.08%
|
|
2.93%
|
|
2.99%
|
Combined investment
and TBA securities - average asset yield,
excluding "catch-up" premium amortization 8
|
3.18%
|
|
3.02%
|
|
2.94%
|
|
2.88%
|
|
2.87%
|
Cost of
funds:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements - average funding cost
|
2.20%
|
|
1.99%
|
|
1.69%
|
|
1.43%
|
|
1.34%
|
TBA
securities - average implied funding cost 6
|
2.05%
|
|
1.75%
|
|
1.49%
|
|
1.23%
|
|
1.12%
|
Interest
rate swaps - average periodic (income) cost of funds
10
|
(0.30)%
|
|
(0.25)%
|
|
0.06%
|
|
0.13%
|
|
0.18%
|
Average
total cost of funds, inclusive of TBAs and interest rate swap
periodic (income) cost 8
|
1.88%
|
|
1.67%
|
|
1.68%
|
|
1.52%
|
|
1.46%
|
Repurchase agreements - average funding cost as of period
end
|
2.30%
|
|
2.18%
|
|
1.82%
|
|
1.57%
|
|
1.36%
|
Interest
rate swaps - average net pay/(receive) rate as of period end
17
|
(0.32)%
|
|
(0.41)%
|
|
(0.08)%
|
|
0.30%
|
|
0.35%
|
Net interest
spread:
|
|
|
|
|
|
|
|
|
|
Combined
investment and TBA securities average net interest
spread
|
1.33%
|
|
1.42%
|
|
1.38%
|
|
1.35%
|
|
1.34%
|
Combined
investment and TBA securities average net interest spread,
excluding "catch-up" premium amortization
|
1.30%
|
|
1.35%
|
|
1.26%
|
|
1.36%
|
|
1.41%
|
Expenses % of average
stockholders' equity - annualized 2
|
0.81%
|
|
0.83%
|
|
0.84%
|
|
0.96%
|
|
0.89%
|
Economic return
(loss) on tangible common equity - unannualized
18
|
0.7%
|
|
1.7%
|
|
(2.6)%
|
|
2.3%
|
|
5.6%
|
*Except as noted below, average numbers for each period are
weighted based on days on the Company's books and records. All
percentages are annualized, unless otherwise noted.
Numbers in financial tables may not total due to rounding.
- Tangible net book value per common share excludes preferred
stock liquidation preference and goodwill and other intangible
asset, net.
- Annualized 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.
- Table includes non-GAAP financial measures and/or amounts
derived from non-GAAP measures. Refer to "Use of Non-GAAP
Financial Information" for additional discussion of non-GAAP
financial measures.
- Amount reported in gain (loss) on derivatives instruments and
other securities, net in the accompanying consolidated statements
of operations.
- Dollar roll income represents the price differential, or "price
drop," between the TBA price for current month settlement versus
the TBA price for forward month settlement. Amount is net of
TBAs used for hedging purposes. Amount excludes TBA mark-to-market
adjustments.
- The implied funding cost of TBA dollar roll transactions is
determined using the "price drop" (Note 5) 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 5) by the average TBA cost basis outstanding for the
period.
- Amount calculated on a weighted average basis based on average
balances outstanding during the period and their respective asset
yield/funding cost.
- Represents periodic interest rate swap settlements.
Amount excludes interest rate swap termination fees and
mark-to-market adjustments.
- Represents interest rate swap periodic income/cost measured as
a percent of total mortgage funding (Agency repurchase agreements,
other debt and TBA securities).
- "Catch-up" premium amortization cost/benefit is reported in
interest income on the accompanying consolidated statements of
operations
- Investment securities include Agency MBS, CRT and non-Agency
securities. Amounts exclude TBA securities.
- Average repurchase agreements and other debt excludes U.S.
Treasury repurchase agreements.
- Average stockholders' equity calculated as the average
month-ended stockholders' equity during the quarter.
- Average tangible net book value "at risk" leverage during the
period was calculated by dividing the sum of the daily weighted
average Agency repurchase agreements, other debt and net TBA
position (at cost) outstanding for the period by the sum of average
stockholders' equity adjusted to exclude investments in REIT equity
securities and goodwill and other intangible asset. 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 investments in REIT equity securities and
goodwill and other intangible asset at period end. Leverage
excludes U.S. Treasury repurchase agreements.
- Includes forward starting swaps not yet in effect as of
reported period-end.
- 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 25,
2018 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 2018 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 25, 2018. In addition, there will be a
phone recording available one hour after the live call on
October 25, 2018 through November 8,
2018. 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
10124456.
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 dividend income from
REIT equity securities (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. Related amounts available to
common stockholders exclude non-recurring issuance costs of
redeemed preferred stock.
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.