BETHESDA, Md., Feb. 5, 2014 /PRNewswire/ -- American Capital
Mortgage Investment Corp. ("MTGE" or the "Company") (Nasdaq: MTGE)
today reported a net loss for the quarter ended December 31,
2013 of $(17.3) million, or
$(0.33) per share, and net book value
of $21.47 per share. Economic
loss for the period, defined as dividends per share plus the change
in net book value per share, was $(0.25) per share, or (1.1)% for the quarter. For
the full year 2013, MTGE reported a (4.7)% economic loss on
equity.
FOURTH QUARTER 2013 FINANCIAL HIGHLIGHTS
- $(0.33) per share of net loss
- Includes all unrealized gains and losses on investment and
hedging portfolios, due to fair value option election and no hedge
accounting
- $0.69 per share of net spread and
dollar roll income/(loss)
- Includes $(0.17) per share of
estimated net carry loss (also known as "dollar roll income/loss")
associated with the Company's net short position in agency mortgage
backed securities ("MBS") in the "to-be-announced" ("TBA")
market
- Includes approximately $0.08 per
share of "catch-up" premium amortization benefit due primarily to
change in projected constant prepayment rate ("CPR") estimates on
existing 15 year and 30 year fixed rate agency securities
- $0.84 per share of estimated
taxable income
- Estimated undistributed taxable income of $0.77 per share as of December 31, 2013, up $0.17 per share from $0.60 per share as of September 30, 2013
- $0.65 per share dividend declared
on December 18, 2013
- $21.47 per share net book value
as of December 31, 2013
- Decreased $(0.90) per share, or
(4.0)%, from $22.37 per share as of
September 30, 2013
- (1.1)% economic loss on equity for the quarter, or (4.4)%
annualized
- Comprised of a $0.65 per share
dividend, offset by a $(0.90) per
share decrease in net book value
- Completed acquisition of licensed mortgage servicer Residential
Credit Solutions, Inc. ("RCS")
ADDITIONAL FOURTH QUARTER 2013 HIGHLIGHTS
- $5.9 billion MBS investment
portfolio as of December 31, 2013
- $5.6 billion agency
securities
- $(0.8) billion net short TBA
mortgage position
- $1.0 billion non-agency
securities
- $39 million investment in
mortgage REIT equity securities as of December 31, 2013
- Consists of common stock investments across the agency mortgage
REIT sector
- 5.1x "at risk" leverage as of December
31, 2013
- 5.9x excluding net short TBA mortgage position as of
December 31, 2013
- 5.8x average "at risk" leverage for the quarter
- 6.8x excluding average net short TBA mortgage position for the
quarter
- 5.7% agency securities actual CPR for the quarter
- 7.3% projected life CPR for agency securities as of
December 31, 2013
- 2.30% annualized net interest rate spread as of December 31, 2013
- 2.27% annualized net interest rate spread and dollar roll
income/loss for the quarter
- Includes 19 bps of "catch-up" premium amortization benefit
due to change in projected CPR
- 1.5 million shares of common stock repurchased during the
quarter
- Represents approximately 3% of shares outstanding as of
September 30, 2013
- $19.42 per share average
repurchase price, net of expenses
- $139.1 million remains available
under current Board authorization for share repurchases
through December 31, 2014
FULL YEAR 2013 HIGHLIGHTS
- (4.7)% economic loss on equity
- Comprised of $3.05 per share in
dividends, offset by a $(4.27) per
share decrease in net book value
- $(1.59) per share of net loss
- Includes all unrealized gains and losses on investment and
hedging portfolios, due to fair value option election and no hedge
accounting
- $3.25 per share of estimated
taxable income
- Estimated undistributed taxable income of $0.77 per share as of December 31, 2013, down $(0.40) per share from $1.17 per share as of December 31, 2012
- 23.0 million shares of common stock issued during the year
- $25.40 per share average net
proceeds
- 7.6 million shares of common stock repurchased during the year
- Represents approximately 13% of shares outstanding as of
March 31, 2013
- $20.23 per share average
repurchase price, net of expenses
"Last year was an extremely volatile one for the fixed income
markets, and in particular for the agency MBS market," commented
Gary Kain, MTGE President and Chief
Investment Officer. "As such, our strategy emphasized risk
management over shorter term returns. However, as we
enter 2014, we feel considerably better about the interest rate
landscape and have transitioned to a more normal balance between
risk and return."
Mr. Kain continued, "At the same time, we are continuing to
broaden our investment capabilities with the successful closing of
our purchase of Residential Credit Solutions in November
2013. The combined platform not only gives us the ability to
invest in mortgage servicing rights, but also significantly
enhances our capabilities with respect to whole loan investments
and credit positions retained from future securitizations.
While these opportunities may be somewhat limited in the near term
given limited non-agency originations and significant competition
for these assets, we remain convinced that they will be an
important part of MTGE's long term success."
"While 2013 share price performance was disappointing, I am
heartened by the fact that MTGE has been able to produce a total
economic return, defined as a combination of our dividend and
change in book value, of over 45% in the less than two and
one-half years since our initial public offering," said
Malon Wilkus, MTGE Chair and Chief
Executive Officer. "This is a tremendous result when you
consider the challenging market conditions that have persisted
throughout the most recent half of our existence as a public
company."
"With MTGE's stock trading at a meaningful discount to its net
book value, we have continued to execute our common stock
repurchase program," Mr. Wilkus continued. "During 2013, we
repurchased 7.6 million shares of our common stock, or
approximately 13% of our shares outstanding as of March 31, 2013, at an average price of
$20.23. During the fourth
quarter, we repurchased almost 3% of our shares outstanding as
of September 30, 2013, at an average
price of $19.42. We believe
this repurchase activity has been accretive and in the best
interest of shareholders, and we remain committed to this program
under the right market conditions."
NET BOOK VALUE
As of December 31, 2013, the Company's net book value per
share was $21.47, or $(0.90) per share lower than the net book value
per share of $22.37 as of
September 30, 2013.
INVESTMENT PORTFOLIO
As of December 31, 2013, the Company's investment portfolio
included $5.6 billion of agency
securities, $(0.8) billion of net
short TBA securities, $1.0 billion of
non-agency securities, and $39
million of investments in agency mortgage REIT equity
securities.
The Company accounts for dollar roll positions as derivative
instruments and recognizes dollar roll income/loss in other gains
(losses), net on the Company's financial statements. As of
December 31, 2013, the Company's net short TBA mortgage
portfolio had a fair value and cost basis of approximately
$(0.8) billion, with a net carrying
value of $1.0 million reported in
derivative assets/(liabilities) on the Company's balance sheet.
As of December 31, 2013, the Company's agency MBS
investment portfolio was comprised of $4.4
billion of fixed rate investments, inclusive of the net
short TBA position, and $0.5 billion
of adjustable-rate securities.
As of December 31, 2013, the Company's agency fixed rate
mortgage investments were comprised of $2.5
billion ≤15 year securities, $0.2
billion 20 year securities, $2.5
billion 30 year securities, $(0.6)
billion 15 year net short TBA securities, $(0.2) billion 30 year net short TBA securities
and $26.8 million agency CMOs at fair
value. As of December 31, 2013, ≤15 year fixed rate
investments, inclusive of the net short TBA position, represented
39% of the Company's agency investment portfolio, a slight increase
from 38% as of September 30, 2013,
and 30 year fixed rate investments, inclusive of the net short TBA
position, represented 48% of the Company's agency investment
portfolio, a decrease from 53% as of September 30, 2013.
As of December 31, 2013, the Company's agency fixed rate
mortgage assets, inclusive of the net TBA position, had a weighted
average coupon of 3.45%, comprised of a weighted average coupon of
3.08% for ≤15 year securities, 3.30% for 20 year securities, 3.78%
for 30 year securities and 3.05% for agency CMOs.
As of December 31, 2013, the Company's $1.0 billion non-agency portfolio was comprised
of 46% Alt-A, 19% prime, 12% option ARM and 23% subprime
securities. As of December 31, 2013, the Company's
non-agency portfolio had a weighted average coupon of 1.43%,
comprised of a weighted average coupon of 2.00% for prime, 1.56%
for Alt-A, 0.54% for option ARM and 0.91% for subprime
securities.
AGENCY CONSTANT PREPAYMENT RATES
The actual CPR for the Company's agency portfolio during the
fourth quarter of 2013 was 5.7%, compared to 6.7% during the third
quarter of 2013. The CPR published in January 2014 for the Company's agency portfolio
held as of December 31, 2013 was 6.3%, and the weighted
average projected CPR for the remaining life of the Company's
agency securities held as of December 31, 2013 was 7.3%, which
was in line with September 30,
2013.
The Company amortizes and accretes premiums and discounts
associated with purchases of agency securities into interest income
over the estimated life of such securities based on actual and
projected CPRs using the effective yield method. The
amortization of premiums (net of any accretion of discounts) on the
agency portfolio for the quarter was $7.8
million, or $0.15 per
share. The Company recognized approximately $4.1 million, or $0.08 per share, of "catch-up" premium
amortization benefit during the quarter, as projected CPR estimates
fell for the Company's existing 15 year and 30 year,
fixed rate securities during the quarter. The projected
weighted average CPR estimates for the aggregate agency portfolio
were relatively unchanged from September 30,
2013, due mainly to a shift in portfolio composition towards
15 year and other higher CPR agency securities.
The weighted average cost basis of the Company's agency
securities was 104.4% of par and the unamortized agency net premium
was $246.6 million as of
December 31, 2013. As such, slower actual and projected
prepayments can have a meaningful positive impact, while faster
actual or projected prepayments can have a meaningful negative
impact on the Company's agency asset yields.
NON-AGENCY DISCOUNT ACCRETION
The weighted average cost basis of the Company's non-agency
portfolio was 60.7% of par as of December 31, 2013.
Discount accretion on the non-agency portfolio for the quarter was
$10.1 million, or $0.19 per share. The total net discount
remaining was $599.8 million as of
December 31, 2013, with $235.0
million designated as credit reserves.
ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE
SPREAD
The Company's average asset yield on its investment portfolio
for the fourth quarter was 3.25%, compared to 3.04% for the third
quarter. Excluding the impact of "catch-up" premium
amortization benefit recognized due to changes in projected CPR
estimates, the annualized weighted average yield on the Company's
investment portfolio was 3.06% for the fourth quarter, compared to
3.07% for the third quarter. The Company's average asset
yield as of December 31, 2013 was 3.18%, an 18 bps increase
from 3.00% as of September 30,
2013.
The Company's average cost of funds (derived from the cost of
repurchase agreements and interest rate swaps) decreased 22 bps to
0.99% for the fourth quarter, from 1.21% for the third
quarter. The Company's average cost of funds decreased 35 bps
to 0.88% as of December 31, 2013 from 1.23% as of September 30, 2013. The decrease in the
Company's average cost of funds was due to lower average swap costs
as a result of net terminations of swap positions during the
quarter.
The Company's average net interest rate spread, inclusive of
estimated dollar roll income/loss, for the fourth quarter was
2.27%, an increase of 64 bps from 1.63% for the third
quarter. Excluding estimated dollar roll loss, the Company's
average net interest rate spread for the fourth quarter was 2.25%,
compared to 1.82% for the third quarter. Excluding estimated
dollar roll income, the Company's average net interest rate spread
was 2.30% as of December 31, 2013, compared to 1.77% as of
September 30, 2013.
LEVERAGE AND HEDGING ACTIVITIES
As of December 31, 2013, $6.6
billion of the Company's repurchase agreements were used to
fund acquisitions of agency and non-agency securities, while the
remaining $0.6 billion were used to
fund purchases of U.S. Treasury securities and are not included in
the Company's measurements of leverage. Including net short
TBA securities and excluding investments in RCS and REIT equity
securities, the Company's "at risk" leverage ratio was 5.1x as of
December 31, 2013 and averaged 5.8x during the fourth
quarter.
The $6.6 billion borrowed under
agency and non-agency repurchase agreements as of December 31,
2013 had remaining maturities consisting of:
- $3.0 billion of one month or
less;
- $0.8 billion between one and two
months;
- $1.5 billion between two and
three months;
- $0.6 billion between three and
six months;
- $0.2 billion between six and nine
months;
- $0.2 billion between nine and
twelve months; and
- $0.3 billion greater than twelve
months.
As of December 31, 2013, the Company's agency and
non-agency repurchase agreements had an average 90 days remaining
to maturity, consistent with September 30,
2013.
As of December 31, 2013, the Company had repurchase
agreements with 31 financial institutions and less than 7% of the
Company's equity was at risk with any one counterparty, with the
top five counterparties representing less than 25% of the Company's
equity at risk.
The Company's interest rate swap positions as of
December 31, 2013 totaled $3.2
billion in notional amount, at a weighted average
fixed pay rate of 1.18% and a weighted average receive rate of
0.24%. Including forward starting swaps, the Company's
interest rate swap portfolio had an average fixed pay rate of a
1.90% and a weighted average maturity of 5.4 years as of
December 31, 2013. The Company
enters into interest rate swaps with longer maturities with the
intention of protecting its net book value and longer term earnings
potential.
The Company also utilizes interest rate swaptions to mitigate
the Company's exposure to larger, more rapid increases in interest
rates. As of December 31, 2013, the Company held payer
swaption contracts with a total notional amount of $2.1 billion and a weighted average expiration of
0.9 years. These swaptions have an underlying weighted
average interest rate swap term of 7.5 years, with a weighted
average pay rate of 2.99%.
As a partial offset to its interest rate swaps and swaptions,
the Company held a $0.4 billion net
long position in U.S. Treasury securities and futures.
As of December 31, 2013, 84% of the Company's combined
repurchase agreement and net short TBA balance was hedged through
interest rate swaps, interest rate swaptions, and U.S. Treasury
securities and futures.
OTHER GAINS (LOSSES), NET
The Company has elected to record all investments at fair value
with all changes in fair value recorded in current GAAP earnings as
other gains (losses). In addition, the Company has not
designated any derivatives as hedges for GAAP accounting purposes
and therefore all changes in the fair value of derivatives are
recorded in current GAAP earnings as other gains (losses).
During the fourth quarter, the Company recorded $(62.3) million in other gains (losses), net, or
$(1.20) per share. Other gains
(losses), net, for the quarter are comprised of:
- $(86.8) million of net realized
loss on agency securities;
- $1.2 million of net realized gain
on non-agency securities;
- $(25.0) million of net unrealized
loss on agency securities;
- $13.1 million of net unrealized
gain on non-agency securities;
- $(8.8) million in realized loss
on periodic settlements of interest rate swaps;
- $26.0 million of net realized
gain on other derivatives and securities;
- $14.6 million of net unrealized
gain on other derivatives and securities; and
- $3.4 million of other operating
income related to the Company's investment in RCS.
Realized and unrealized net gains on other derivatives and
securities during the fourth quarter include $25.3 million of net gain on interest rate swaps
and swaptions, $(15.3) million of net
loss on U.S. treasury securities and futures, $39.1 million of net gains on TBA mortgage
positions, $(9.0) million of dollar
roll loss, and $0.5 million net gain
on investments in REIT equity securities.
During the fourth quarter, the Company recorded $7.5 million in other operating expense related
to its investment in RCS, including servicing expenses and
acquisition related costs.
ESTIMATED TAXABLE INCOME
Taxable income for the fourth quarter is estimated at
$0.84 per share, or $1.17 higher than GAAP net income per share.
The primary differences between tax and GAAP net income are (i)
unrealized gains and losses associated with interest rate swaps and
other derivatives and securities marked-to-market in current income
for GAAP purposes, but excluded from taxable income until realized
or settled, (ii) timing differences, both temporary and potentially
permanent, in the recognition of certain realized gains and losses
and (iii) temporary differences related to the amortization and
accretion of net premiums and discounts paid on investments.
The Company's estimated taxable income for the fourth quarter
excludes $(2.54) per share of
estimated net capital losses, which are not deductible from the
Company's ordinary taxable income but may be carried forward and
applied against future net capital gains for up to five
years. Additionally, the Company recorded $0.90 per share of gains on terminated swaps and
$0.06 per share of gains on
terminated or expired swaptions during the fourth quarter, which
for income tax purposes are deferred and amortized into future
ordinary taxable income over the remaining terms of the underlying
swaps.
STOCK REPURCHASE PROGRAM
During the fourth quarter, the Company made open market
purchases of 1.5 million shares of its common stock, or 3% of the
Company's outstanding shares as of September
30, 2013. The shares were purchased at an average net
repurchase price of $19.42 per share,
including expenses, totaling $30.0
million. During 2013, the Company purchased 7.6
million shares of its common stock, or approximately 13% of its
shares outstanding as of March 31,
2013, for total consideration of approximately $154.1 million, including expenses.
As of December 31, 2013, the Company had an additional
$139.1 million available under
current Board authorization for repurchases of its common stock
through December 31, 2014. The
Company intends to repurchase shares when the repurchase price is
less than its estimate of the current net book value per share.
FOURTH QUARTER 2013 DIVIDEND DECLARATION
On December 18, 2013, the Board of
Directors of the Company declared a fourth quarter dividend of
$0.65 per share, which was paid on
January 28, 2014, to common
stockholders of record as of December
31, 2013. Since the August
2011 initial public offering, the Company has declared and
paid a total of $285.0 million in
dividends, or $7.65 per share.
As of December 31, 2013, the Company had approximately
$39.8 million of estimated
undistributed taxable income ("UTI"), or $0.77 per share, net of dividends declared.
UTI excludes the Company's net capital loss carryforwards and net
deferred gains from terminated or expired swaps and
swaptions. As of December 31, 2013, the Company had
estimated cumulative non-deductible net capital losses of
$(195.2) million, or $(3.80) per share, which may be carried forward
and applied against future net capital gains for up to five
years. Additionally, as of December 31, 2013, the
Company had estimated net deferred gains from terminated swaps of
$76.8 million, or $1.49 per share, and net deferred gains from
terminated or expired swaptions of $17.1
million, or $0.33 per share,
which will be amortized into future ordinary taxable income over
the remaining terms of the underlying swaps.
The Company also announced the tax characteristics of its 2013
dividends. The Company's 2013 common stock dividends of
$3.05 per share consisted entirely of
ordinary dividends, none of which were qualified dividends 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.MTGE.com.
INVESTMENT IN RESIDENTIAL CREDIT SOLUTIONS, INC.
On November 27, 2013, a
wholly-owned subsidiary of MTGE acquired RCS, a fully-licensed
mortgage servicer based in Fort Worth,
Texas. RCS has an experienced management team and a
fully-developed, scalable infrastructure. RCS has obtained
approvals from the Federal National Mortgage Association
("Fannie Mae"), the Federal Home Loan Mortgage Corporation
("Freddie Mac") and the Government National Mortgage Association
("Ginnie Mae") and the requisite
state licenses to hold and manage mortgage servicing rights
("MSRs"). As a result of the RCS acquisition, MTGE will be
able to opportunistically invest across a much wider spectrum of
the mortgage market, including MSRs, and new prime jumbo and other
whole loan investments. Currently, RCS manages a servicing
portfolio of approximately 53,000 loans, representing almost
$10 billion in unpaid principal
balance.
FINANCIAL STATEMENTS, OPERATING PERFORMANCE AND PORTFOLIO
STATISTICS
The following tables include certain measures of operating
performance, such as net spread income and estimated taxable
income, 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.
AMERICAN CAPITAL
MORTGAGE INVESTMENT CORP.
|
CONSOLIDATED
BALANCE SHEETS
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2013
|
|
September 30,
2013
|
|
June 30,
2013
|
|
March 31,
2013
|
|
December 31,
2012
|
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(audited)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
Agency securities, at
fair value
|
|
$
5,641,682
|
|
$
8,397,883
|
|
$
7,777,532
|
|
$
6,535,598
|
|
$
6,367,042
|
Non-agency
securities, at fair value
|
|
1,011,217
|
|
927,914
|
|
930,647
|
|
727,351
|
|
681,403
|
REIT equity
securities, at fair value
|
|
38,807
|
|
-
|
|
-
|
|
-
|
|
-
|
Treasury securities,
at fair value
|
|
637,342
|
|
855,815
|
|
1,002,784
|
|
-
|
|
-
|
Cash and cash
equivalents
|
|
206,398
|
|
204,129
|
|
316,975
|
|
311,252
|
|
157,314
|
Restricted
cash
|
|
21,005
|
|
36,725
|
|
45,869
|
|
32,158
|
|
28,493
|
Interest
receivable
|
|
20,620
|
|
26,924
|
|
23,815
|
|
19,209
|
|
18,265
|
Derivative assets, at
fair value
|
|
108,221
|
|
154,510
|
|
237,514
|
|
52,149
|
|
23,043
|
Receivable for
securities sold
|
|
608,646
|
|
201,968
|
|
162,571
|
|
121,816
|
|
-
|
Receivable under
reverse repurchase agreements
|
|
22,736
|
|
-
|
|
1,216,596
|
|
1,563,334
|
|
418,888
|
Other
assets
|
|
81,191
|
|
3,997
|
|
194
|
|
480
|
|
1,692
|
Total
assets
|
|
$
8,397,865
|
|
$
10,809,865
|
|
$
11,714,497
|
|
$
9,363,347
|
|
$
7,696,140
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
|
$
7,158,192
|
|
$
9,248,346
|
|
$
7,978,748
|
|
$
6,137,343
|
|
$
6,245,791
|
Payable for agency
and non-agency securities purchased
|
|
-
|
|
186,621
|
|
542,865
|
|
96,200
|
|
-
|
Payable for U.S.
Treasury securities purchased
|
|
-
|
|
-
|
|
498,867
|
|
-
|
|
-
|
Derivative
liabilities, at fair value
|
|
11,327
|
|
99,480
|
|
90,703
|
|
77,997
|
|
63,726
|
Dividend
payable
|
|
33,381
|
|
37,031
|
|
44,857
|
|
53,075
|
|
32,368
|
Obligation to return
securities borrowed under reverse repurchase agreements, at fair
value
|
22,530
|
|
-
|
|
1,181,829
|
|
1,558,429
|
|
421,077
|
Accounts payable and
other accrued liabilities
|
|
69,715
|
|
55,050
|
|
107,903
|
|
10,476
|
|
7,616
|
Total
liabilities
|
|
7,295,145
|
|
9,626,528
|
|
10,445,772
|
|
7,933,520
|
|
6,770,578
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
Preferred stock,
$0.01 par value; 50,000 shares authorized, 0 shares issued and
outstanding, respectively
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Common stock, $0.01
par value; 300,000 shares authorized, 51,356, 52,902, 56,071,
58,972 and 35,964 issued and outstanding, respectively
|
514
|
|
529
|
|
561
|
|
590
|
|
360
|
Additional paid-in
capital
|
|
1,201,826
|
|
1,231,797
|
|
1,293,824
|
|
1,355,687
|
|
772,008
|
Retained earnings
(deficit)
|
|
(99,620)
|
|
(48,989)
|
|
(25,660)
|
|
73,550
|
|
153,194
|
Total
stockholders' equity
|
|
1,102,720
|
|
1,183,337
|
|
1,268,725
|
|
1,429,827
|
|
925,562
|
Total liabilities
and stockholders' equity
|
|
$
8,397,865
|
|
$
10,809,865
|
|
$
11,714,497
|
|
$
9,363,347
|
|
$
7,696,140
|
|
|
|
|
|
|
|
|
|
|
|
Net book value per
share
|
|
$
21.47
|
|
$
22.37
|
|
$
22.63
|
|
$
24.25
|
|
$
25.74
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN CAPITAL
MORTGAGE INVESTMENT CORP.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in thousands,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
|
|
For the Year
Ended
December 31,
2013
|
|
|
December 31,
2013
|
|
September 30,
2013
|
|
June 30,
2013
|
|
March 31,
2013
|
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
|
Agency
securities
|
|
$
54,141
|
|
$
54,587
|
|
$
51,053
|
|
$
40,183
|
|
$
199,964
|
Non-agency
securities
|
|
15,497
|
|
15,847
|
|
12,731
|
|
11,293
|
|
55,368
|
Other
|
|
56
|
|
77
|
|
143
|
|
91
|
|
367
|
Interest
expense
|
|
(10,656)
|
|
(10,949)
|
|
(9,113)
|
|
(8,036)
|
|
(38,754)
|
Net interest income
|
|
59,038
|
|
59,562
|
|
54,814
|
|
43,531
|
|
216,945
|
|
|
|
|
|
|
|
|
|
|
|
Other gains
(losses), net:
|
|
|
|
|
|
|
|
|
|
|
Realized gain (loss)
on agency securities, net
|
|
(86,768)
|
|
(71,179)
|
|
(20,979)
|
|
8,674
|
|
(170,252)
|
Realized gain on
non-agency securities, net
|
|
1,246
|
|
5,884
|
|
8,307
|
|
1,419
|
|
16,856
|
Realized loss on
periodic settlements of
|
|
|
|
|
|
|
|
|
|
|
interest rate swaps,
net
|
|
(8,778)
|
|
(14,449)
|
|
(10,045)
|
|
(7,734)
|
|
(41,006)
|
Realized gain (loss)
on other derivatives
|
|
|
|
|
|
|
|
|
|
|
and securities,
net
|
|
25,898
|
|
65,258
|
|
23,865
|
|
(2,448)
|
|
112,573
|
Unrealized gain
(loss) on agency securities, net
|
|
(24,974)
|
|
80,894
|
|
(292,864)
|
|
(78,840)
|
|
(315,784)
|
Unrealized gain
(loss) on non-agency securities, net
|
|
13,088
|
|
(424)
|
|
(23,751)
|
|
30,478
|
|
19,391
|
Unrealized gain
(loss) on other derivatives and securities, net
|
14,628
|
|
(105,138)
|
|
213,307
|
|
(15,251)
|
|
107,546
|
Other operating
income
|
|
3,350
|
|
-
|
|
-
|
|
-
|
|
3,350
|
Total other gains (losses), net
|
|
(62,310)
|
|
(39,154)
|
|
(102,160)
|
|
(63,702)
|
|
(267,326)
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Management
fees
|
|
4,432
|
|
4,725
|
|
5,079
|
|
4,444
|
|
18,680
|
General and
administrative expenses
|
|
1,755
|
|
1,781
|
|
1,928
|
|
1,777
|
|
7,241
|
Other operating
expense
|
|
7,489
|
|
-
|
|
-
|
|
-
|
|
7,489
|
Total expenses
|
|
13,676
|
|
6,506
|
|
7,007
|
|
6,221
|
|
33,410
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss)
before excise tax
|
|
(16,948)
|
|
13,902
|
|
(54,353)
|
|
(26,392)
|
|
(83,791)
|
Excise tax
|
|
302
|
|
200
|
|
-
|
|
177
|
|
679
|
Net income
(loss)
|
|
$
(17,250)
|
|
$
13,702
|
|
$
(54,353)
|
|
$
(26,569)
|
|
$
(84,470)
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
per share - basic and diluted
|
|
$
(0.33)
|
|
$
0.25
|
|
$
(0.94)
|
|
$
(0.56)
|
|
$
(1.59)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic and diluted
|
52,028
|
|
54,515
|
|
57,982
|
|
47,469
|
|
53,015
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
per share
|
|
$
0.65
|
|
$
0.70
|
|
$
0.80
|
|
$
0.90
|
|
$
3.05
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN CAPITAL
MORTGAGE INVESTMENT CORP.
|
RECONCILIATIONS OF
GAAP NET INTEREST INCOME TO NET SPREAD
|
AND DOLLAR ROLL
INCOME(1)
|
(in thousands,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
|
|
For the
Year Ended
December 31,
2013
|
|
December 31,
2013
|
|
September 30,
2013
|
|
June 30,
2013
|
|
March 31,
2013
|
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
Agency
securities
|
$
54,141
|
|
$
54,587
|
|
$
51,053
|
|
$
40,183
|
|
$
199,964
|
Non-agency
securities and other
|
15,553
|
|
15,924
|
|
12,874
|
|
11,384
|
|
55,735
|
Interest
expense
|
(10,656)
|
|
(10,949)
|
|
(9,113)
|
|
(8,036)
|
|
(38,754)
|
Net interest income
|
59,038
|
|
59,562
|
|
54,814
|
|
43,531
|
|
216,945
|
Dividend
income from investments in REIT equity securities
(2)
|
977
|
|
-
|
|
-
|
|
-
|
|
977
|
Realized loss
on periodic settlements of interest rate swaps, net
|
(8,778)
|
|
(14,449)
|
|
(10,045)
|
|
(7,734)
|
|
(41,006)
|
Adjusted net interest income
|
51,237
|
|
45,113
|
|
44,769
|
|
35,797
|
|
176,916
|
Operating
expenses (3)
|
(6,187)
|
|
(6,506)
|
|
(7,007)
|
|
(6,221)
|
|
(25,921)
|
Net spread income
|
45,050
|
|
38,607
|
|
37,762
|
|
29,576
|
|
150,995
|
Dollar roll
income (loss)
|
(9,032)
|
|
(6,827)
|
|
23,214
|
|
8,033
|
|
15,388
|
Net spread and dollar roll income
|
$
36,018
|
|
$
31,780
|
|
$
60,976
|
|
$
37,609
|
|
$
166,383
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic and diluted
|
52,028
|
|
54,515
|
|
57,982
|
|
47,469
|
|
53,015
|
|
|
|
|
|
|
|
|
|
|
Net spread income per share - basic and
diluted
|
$
0.87
|
|
$
0.71
|
|
$
0.65
|
|
$
0.62
|
|
$
2.85
|
Net spread and dollar roll income per share
– basic and diluted
|
$
0.69
|
|
$
0.58
|
|
$
1.05
|
|
$
0.79
|
|
$
3.14
|
|
|
|
|
|
|
|
|
|
|
AMERICAN CAPITAL
MORTGAGE INVESTMENT CORP.
|
RECONCILIATIONS OF
GAAP NET INCOME TO ESTIMATED TAXABLE INCOME
(1)
|
(in thousands,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
|
|
For the
Year Ended
December 31,
2013
|
|
|
December 31,
2013
|
|
September 30,
2013
|
|
June 30,
2013
|
|
March 31,
2013
|
|
Net income
(loss)
|
|
$
(17,250)
|
|
$
13,702
|
|
$
(54,353)
|
|
$
(26,569)
|
|
$
(84,470)
|
Estimated book to
tax differences:
|
|
|
|
|
|
|
|
|
|
|
Unrealized (gains)
and losses, net
|
|
|
|
|
|
|
|
|
|
|
Agency
securities
|
|
24,974
|
|
(80,894)
|
|
292,864
|
|
78,840
|
|
315,784
|
Non-agency
securities
|
|
(13,088)
|
|
424
|
|
23,751
|
|
(30,478)
|
|
(19,391)
|
Derivatives and other
securities
|
|
(14,628)
|
|
105,138
|
|
(213,307)
|
|
15,251
|
|
(107,546)
|
Premium amortization,
net
|
|
(5,825)
|
|
44
|
|
(5,730)
|
|
1,864
|
|
(9,647)
|
Capital losses in
excess of capital gains (4)
|
|
132,029
|
|
63,131
|
|
-
|
|
-
|
|
195,160
|
Other realized
(gains) losses, net (4)
|
|
(66,985)
|
|
(55,220)
|
|
953
|
|
(1,360)
|
|
(122,612)
|
Excise tax and
other
|
|
4,441
|
|
164
|
|
(36)
|
|
206
|
|
4,775
|
Total book to tax
difference
|
|
60,918
|
|
32,787
|
|
98,495
|
|
64,323
|
|
256,523
|
Estimated taxable
income
|
|
$
43,668
|
|
$
46,489
|
|
$
44,142
|
|
$
37,754
|
|
$
172,053
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic and diluted
|
52,028
|
|
54,515
|
|
57,982
|
|
47,469
|
|
53,015
|
|
|
|
|
|
|
|
|
|
|
|
Net estimated
taxable income per share – basic and diluted
|
|
$
0.84
|
|
$
0.85
|
|
$
0.76
|
|
$
0.80
|
|
$
3.25
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN CAPITAL
MORTGAGE INVESTMENT CORP.
|
KEY PORTFOLIO
STATISTICS* (1)
|
(in thousands,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
|
|
For the
Year Ended
December 31,
2013
|
|
December 31,
2013
|
|
September 30,
2013
|
|
June 30,
2013
|
|
March 31,
2013
|
|
Ending agency
securities, at fair value
|
$
5,641,682
|
|
$
8,397,883
|
|
$
7,777,532
|
|
$
6,535,598
|
|
$
6,367,042
|
Ending agency
securities, at cost
|
$
5,820,194
|
|
$
8,551,421
|
|
$
8,011,964
|
|
$
6,477,165
|
|
$
6,229,770
|
Ending agency
securities, at par
|
$
5,573,593
|
|
$
8,179,581
|
|
$
7,597,458
|
|
$
6,117,534
|
|
$
5,904,666
|
Average agency
securities, at cost
|
$
7,674,009
|
|
$
8,424,136
|
|
$
7,288,238
|
|
$
6,012,033
|
|
$
5,841,326
|
Average agency
securities, at par
|
$
7,335,621
|
|
$
8,060,321
|
|
$
6,869,169
|
|
$
5,692,708
|
|
$
5,542,727
|
|
|
|
|
|
|
|
|
|
|
Ending non-agency
securities, at fair value
|
$
1,011,217
|
|
$
927,914
|
|
$
930,647
|
|
$
727,351
|
|
$
681,403
|
Ending non-agency
securities, at cost
|
$
927,131
|
|
$
856,915
|
|
$
859,224
|
|
$
632,178
|
|
$
616,707
|
Ending non-agency
securities, at par
|
$
1,526,918
|
|
$
1,472,299
|
|
$
1,500,219
|
|
$
1,050,021
|
|
$
1,045,891
|
Average non-agency
securities, at cost
|
$
902,518
|
|
$
857,048
|
|
$
751,723
|
|
$
618,957
|
|
$
605,956
|
Average non-agency
securities, at par
|
$
1,512,170
|
|
$
1,484,249
|
|
$
1,292,633
|
|
$
1,040,534
|
|
$
1,026,030
|
|
|
|
|
|
|
|
|
|
|
Net TBA portfolio -
as of period end, at fair value
|
$
(774,840)
|
|
$
(1,609,891)
|
|
$
90,795
|
|
$
4,490,697
|
|
NM
|
Net TBA portfolio -
as of period end, at cost
|
$
(775,859)
|
|
$
(1,556,881)
|
|
$
147,236
|
|
$
4,489,753
|
|
NM
|
Average net TBA
portfolio, at cost
|
$
(1,162,138)
|
|
$
(689,331)
|
|
$
3,378,283
|
|
$
746,793
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
Average total assets,
at fair value
|
$
9,899,105
|
|
$
10,619,499
|
|
$
10,265,857
|
|
$
8,222,549
|
|
$
7,334,654
|
Average agency and
non-agency repurchase agreements
|
$
7,654,594
|
|
$
8,298,648
|
|
$
7,083,080
|
|
$
5,832,005
|
|
$
5,894,642
|
Average stockholders'
equity
|
$
1,121,806
|
|
$
1,212,720
|
|
$
1,379,448
|
|
$
1,180,931
|
|
$
915,085
|
|
|
|
|
|
|
|
|
|
|
Average
coupon
|
3.04%
|
|
3.05%
|
|
3.20%
|
|
3.17%
|
|
3.23%
|
Average asset
yield
|
3.25%
|
|
3.04%
|
|
3.17%
|
|
3.11%
|
|
3.08%
|
Average cost of funds
(5)
|
0.99%
|
|
1.21%
|
|
1.08%
|
|
1.10%
|
|
1.01%
|
Average net interest
rate spread
|
2.25%
|
|
1.82%
|
|
2.09%
|
|
2.01%
|
|
2.07%
|
Average net interest
rate spread, including estimated dollar roll income
(6)
|
2.27%
|
|
1.63%
|
|
2.30%
|
|
2.27%
|
|
NM
|
Average coupon as of
period end
|
2.93%
|
|
3.07%
|
|
3.10%
|
|
3.24%
|
|
3.17%
|
Average asset yield
as of period end
|
3.18%
|
|
3.00%
|
|
3.10%
|
|
3.00%
|
|
2.91%
|
Average cost of funds
as of period end
|
0.88%
|
|
1.23%
|
|
1.16%
|
|
1.10%
|
|
1.03%
|
Average net interest
rate spread as of period end
|
2.30%
|
|
1.77%
|
|
1.94%
|
|
1.90%
|
|
1.88%
|
Average actual CPR
for agency securities held during the period
|
5.7%
|
|
6.7%
|
|
7.4%
|
|
6.3%
|
|
6.5%
|
Average projected
life CPR for agency securities as of period end
|
7.3%
|
|
7.3%
|
|
6.3%
|
|
8.3%
|
|
9.3%
|
|
|
|
|
|
|
|
|
|
|
|
Leverage - average
during the period (7)
|
6.8x
|
|
6.8x
|
|
5.1x
|
|
4.9x
|
|
6.4x
|
Leverage - average
during the period, including net TBA position
|
5.8x
|
|
6.3x
|
|
7.6x
|
|
5.6x
|
|
NM
|
Leverage - as of
period end (8)
|
5.9x
|
|
7.0x
|
|
6.3x
|
|
4.3x
|
|
6.7x
|
Leverage - as of
period end, including net TBA position
|
5.1x
|
|
5.7x
|
|
6.4x
|
|
7.4x
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
Expenses % of average
total assets - annualized (9)
|
0.2%
|
|
0.2%
|
|
0.3%
|
|
0.3%
|
|
0.2%
|
Expenses % of average
stockholders' equity - annualized (9)(10)
|
2.2%
|
|
2.1%
|
|
2.0%
|
|
2.1%
|
|
2.0%
|
Net book value per
share as of period end
|
$
21.47
|
|
$
22.37
|
|
$
22.63
|
|
$
24.25
|
|
$
25.74
|
Dividends declared
per share
|
$
0.65
|
|
$
0.70
|
|
$
0.80
|
|
$
0.90
|
|
$
0.90
|
Net return on average
stockholders' equity
|
(6.0)%
|
|
4.5%
|
|
(15.8)%
|
|
(9.1)%
|
|
21.8%
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Average numbers for
each period are weighted based on days on the Company's books and
records. All percentages are annualized.
|
NM
|
Not meaningful. Prior
to the first quarter of 2013, the Company's net TBA position
consisted of short TBAs used for hedging purposes.
|
(1)
|
Table includes
non-GAAP financial measures. Refer to "Use of Non-GAAP Financial
Information" for additional discussion of non-GAAP financial
measures.
|
(2)
|
Dividend income from
investments in REIT equity securities is included in realized gain
(loss) on other derivatives and securities, net on the consolidated
statements of operations.
|
(3)
|
Excludes other
operating expenses related to the Company's investment in
RCS.
|
(4)
|
Capital losses in
excess of capital gains represents calendar year 2013 year-to-date
capital losses in excess of capital gains. The Company's estimated
taxable income for the fourth quarter excludes $(2.54) per share of
estimated net capital losses, which are not deductible from the
Company's ordinary taxable income but may be carried forward for up
to five years and applied against future net capital gains, as well
as $0.90 per share of gains on terminated swaps and $0.06 per share
of gains on terminated or expired swaptions, which for income tax
purposes are deferred and amortized into future ordinary taxable
income over the remaining terms of the underlying swaps.
|
(5)
|
Weighted average cost
of funds includes periodic settlements of interest rate
swaps.
|
(6)
|
Estimated dollar roll
income is net of short TBAs used for hedging purposes. Dollar roll
income excludes the impact of other supplemental hedges, and is
recognized in gain (loss) on derivative instruments and other
securities, net.
|
(7)
|
Leverage during the
period was calculated by dividing the Company's daily weighted
average agency and non-agency repurchase agreements for the period
by the Company's average month-ended stockholders' equity for the
period less investments in RCS and REIT equity securities. Leverage
excludes U.S. Treasury repurchase agreements.
|
(8)
|
Leverage at period
end was calculated by dividing the sum of the amount outstanding
under the Company's agency and non-agency repurchase agreements and
the net receivable/payable for unsettled securities at period end
by the Company's stockholders' equity at period end less
investments in RCS and REIT equity securities. Leverage excludes
U.S. Treasury repurchase agreements.
|
(9)
|
Expenses exclude $7.5
million in other operating expense related to the
Company's investment in RCS, comprised of servicing expenses
and acquisition related costs
|
(10)
|
Average stockholders'
equity excludes investments in REIT equity securities and
RCS.
|
STOCKHOLDER CALL
MTGE invites shareholders, prospective shareholders and analysts
to attend the MTGE shareholder call on February 6, 2014 at 11:00
am ET. The call can be accessed through a live webcast, free
of charge, at www.MTGE.com or by dialing (888) 317-6016 (U.S.
domestic) or (412) 317-6016 (international). Please advise
the operator you are dialing in for the American Capital Mortgage
shareholder call. If you do not plan on asking a question on
the call and have access to the internet, please take advantage of
the webcast.
A slide presentation will accompany the call and will be
available at www.MTGE.com. Select the Q4 2013 Earnings Presentation
link to download and print the presentation in advance of the
shareholder call.
An archived audio of the shareholder call combined with the
slide presentation will be made available on the MTGE website after
the call on February 6, 2014.
In addition, there will be a phone recording available from
1:00 pm ET February 6, 2014 until 9:00 am ET February
21, 2014. If you are interested in hearing the
recording of the presentation, please dial (877) 344-7529 (U.S.
domestic) or (412) 317-0088 (international). The conference number
is 10039556.
For further information or questions, please contact MTGE's
Investor Relations Department at (301) 968-9220 or IR@MTGE.com.
ABOUT AMERICAN CAPITAL MORTGAGE INVESTMENT CORP.
American Capital Mortgage Investment Corp. is a real estate
investment trust that invests in and manages a leveraged portfolio
of agency mortgage investments, non-agency mortgage investments and
other mortgage-related investments. The Company is externally
managed and advised by American Capital MTGE Management, LLC, an
affiliate of American Capital, Ltd. ("American Capital"). For
further information please refer to www.MTGE.com.
ABOUT AMERICAN CAPITAL, LTD.
American Capital, Ltd. (Nasdaq: ACAS) is a publicly traded
private equity firm and global asset manager. American
Capital, both directly and through its asset management business,
originates, underwrites and manages investments in middle market
private equity, leveraged finance, real estate, energy &
infrastructure and structured products. American Capital manages
$20 billion of assets, including
assets on its balance sheet and fee earning assets under management
by affiliated managers, with $117
billion of total assets under management (including levered
assets). Through an affiliate, American Capital manages
publicly traded American Capital Agency Corp. (Nasdaq: AGNC) with
approximately $9 billion of net book
value, American Capital Mortgage Investment Corp. (Nasdaq: MTGE)
with approximately $1 billion of net
book value and American Capital Senior Floating, Ltd. (Nasdaq:
ACSF). From its eight offices in the U.S. and Europe, American Capital and its affiliate,
European Capital, will consider investment opportunities from
$10 million to $750 million.
For further information, please refer to
www.AmericanCapital.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 or
results. 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, the receipt of regulatory
approval or other closing conditions for a transaction, general
economic conditions, market conditions, conditions in the market
for agency and non-agency securities and mortgage related
investments, and legislative and regulatory changes that could
adversely affect the business of the Company. Certain
important 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 or
new information, or otherwise.
USE OF NON-GAAP FINANCIAL INFORMATION
In addition to the results presented in accordance with GAAP,
this release includes certain non-GAAP financial information,
including net spread income, estimated taxable income and certain
financial metrics derived from non-GAAP information, such as
estimated undistributed taxable income, which the Company's
management uses in its internal analysis of results, and believes
may be informative to investors.
Net spread income consists of adjusted net interest income, less
total operating expenses. Adjusted net interest income is interest
income less interest expense (or "GAAP net interest income"), less
other periodic interest rate swap interest costs reported in other
income (loss), net.
Estimated taxable income is pre-tax income calculated in
accordance with the requirements of the Internal Revenue Code
rather than GAAP. Estimated taxable income differs from GAAP income
because of both temporary and permanent differences in income and
expense recognition. Examples include (i) unrealized gains and
losses associated with interest rate swaps and other derivatives
and securities marked-to-market in current income for GAAP
purposes, but excluded from estimated taxable income until realized
or settled, (ii) timing differences, both temporary and potentially
permanent, in the recognition of certain realized gains and losses
and (iii) temporary differences related to the amortization of net
premiums or accretion of discounts on investments. Furthermore,
estimated taxable income can include certain information that is
subject to potential adjustments up to the time of filing of the
appropriate tax returns, which occurs after the end of the calendar
year of the Company.
The Company believes that these non-GAAP financial measures
provide information useful to investors because net spread income
is a financial metric used by management and investors and
estimated taxable income is directly related to the amount of
dividends the Company is required to distribute in order to
maintain its REIT tax qualification status. The Company also
believes that providing investors with net spread income, estimated
taxable income and certain financial metrics derived based on such
estimated taxable income, in addition to the related GAAP measures,
gives investors greater transparency to the information used by
management in its financial and operational decision-making.
However, because net spread income and estimated taxable income are
an incomplete measure of the Company's financial performance and
involve differences from net income computed in accordance with
GAAP, net spread income and estimated taxable income should be
considered as supplementary to, and not as a substitute for, the
Company's net income computed in accordance with GAAP as a measure
of the Company's financial performance. In addition, because not
all companies use identical calculations, the Company's
presentation of net spread income and estimated taxable income may
not be comparable to other similarly-titled measures of other
companies.
CONTACT:
Investors - (301) 968-9220
Media - (301) 968-9400
SOURCE American Capital Mortgage Investment Corp.