BETHESDA, Md., Jan. 30, 2019 /PRNewswire/ -- AGNC
Investment Corp. ("AGNC" or the "Company") (Nasdaq: AGNC) today
announced financial results for the quarter ended December 31,
2018.
FOURTH QUARTER 2018 FINANCIAL HIGHLIGHTS
- $(0.90) comprehensive loss per
common share, comprised of:
-
- $(1.61) net loss per common
share
- $0.71 other comprehensive income
("OCI") per common share on investments marked-to-market through
OCI
- $0.53 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization cost 1
-
- Includes $0.05 per common share
of dollar roll income associated with the Company's $8.1 billion average net long position in forward
purchases and sales of Agency mortgage-backed securities ("MBS") in
the "to-be-announced" ("TBA") market
- Excludes $(0.03) per common share
of estimated "catch-up" premium amortization cost due to change in
projected constant prepayment rate ("CPR") estimates
- $16.56 tangible net book value
per common share as of December 31,
2018
-
- Decreased $(1.44) per common
share, or -8.0%, from $18.00 per
common share as of September 30,
2018
- Excludes $526 million, or
$0.98 per common share, of goodwill
intangible asset as of December 31,
2018
- $0.54 dividends declared per
common share during the quarter
- -5.0% economic return on tangible common equity for the
quarter
-
- Comprised of $0.54 dividends per
common share and $(1.44) decrease in
tangible net book value per common share
OTHER FOURTH QUARTER HIGHLIGHTS
- $91.6 billion investment
portfolio as of December 31, 2018,
comprised of:
-
- $82.7 billion Agency MBS
- $7.3 billion TBA mortgage
position
- $1.6 billion credit risk transfer
("CRT") and non-Agency securities
- 9.0x tangible net book value "at risk" leverage as of
December 31, 2018
-
- 8.4x average tangible net book value "at risk" leverage for the
quarter
- 7.4% portfolio CPR for the quarter
-
- 7.9% average projected portfolio life CPR as of December 31, 2018
- 1.17% annualized net interest spread and TBA dollar roll income
for the quarter, excluding estimated "catch-up" premium
amortization cost
-
- Excludes -8 bps of "catch up" premium amortization cost due to
change in projected CPR estimates
- Decreased from 1.30% for the prior quarter, excluding 3 bps of
"catch-up" premium amortization benefit
- $1.0 billion of accretive common
equity raised during the quarter, net of offering costs
-
- $786 million follow-on
offering
- $220 million At-the-Market
offerings
2018 FULL YEAR HIGHLIGHTS
- $(1.14) comprehensive loss per
common share, comprised of:
-
- $0.21 net income per common
share
- $(1.35) OCI per common share
- $2.35 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization benefit 1
-
- Includes $0.51 per common share
of dollar roll income
- Excludes $0.05 per common share
of estimated "catch-up" amortization benefit
- $2.16 dividends declared per
common share
- -4.9% economic return on tangible common equity, comprised
of:
-
- $2.16 dividends per common
share
- $(3.13) decrease in tangible net
book value per common share from $19.69 per common share as of December 31, 2017
- -2.5% total stock return
- $2.6 billion of accretive common
equity raised during the year, net of offering costs
-
- $2.2 billion follow-on equity
offerings
- $0.4 billion At-the-Market equity
offerings
___________
1.
|
Represents a non-GAAP
measure. Please refer to a reconciliation to the most
applicable GAAP measure and additional information regarding the
use of non-GAAP financial information later in this
release.
|
MANAGEMENT REMARKS
"Volatility in global financial
markets increased dramatically in the fourth quarter, reflecting a
risk-off investor sentiment driven by weaker U.S. and global
economic fundamentals, the government shutdown, ongoing trade
tensions with China, and
continuing political uncertainty in Europe," said Gary
Kain, the Company's Chief Executive Officer and Chief
Investment Officer. "In addition to the growing concerns
surrounding global economic growth, weaker inflation expectations
and significantly tighter financial conditions caused interest
rates to decline materially and led market participants to forecast
a more dovish Federal Reserve going forward. The yield on the
10 year U.S. Treasury bond peaked at 3.24% in early November before
falling to 2.69% at year end. Consistent with the increased
volatility and a broader risk-off move, spreads widened materially
across the fixed income spectrum, including on Agency
MBS. As a result, investment return expectations on
Agency MBS improved markedly during the quarter, leading us to
purchase approximately $10 billion in
Agency MBS, predominantly in December, as we patiently deployed the
new capital that we raised. We also began to reposition the
portfolio to a higher leverage target consistent with our
expectations for more favorable risk-adjusted returns and our
greater confidence in a relatively benign interest rate
outlook. To the extent that the investment landscape
continues to improve, we will continue to look for additional
opportunities to further increase leverage in an effort to optimize
shareholder returns."
"Our net book value in the in the fourth quarter was adversely
impacted by the combination of significant spread widening on
Agency MBS and by the increase in interest rate volatility, which
more than offset the benefit we experienced from the decline in
interest rates. As such, AGNC's economic return for the
quarter was -5.0%, consisting of $0.54 in dividends and a $1.44 decline in tangible net book value per
common share," commented Peter
Federico, the Company's President and Chief Operating
Officer. "Additionally, while our backloaded deployment
of capital during the fourth quarter was beneficial from an
economic perspective, the lower average portfolio balance
negatively impacted our net spread and dollar roll income for the
quarter. Additionally, unusually large funding pressures at
year-end in the repo market were a headwind in the fourth quarter
but quickly abated in early January. Looking ahead, the
combination of an improved interest rate and spread environment,
coupled with a larger portfolio, should support attractive
risk-adjusted returns both in absolute terms and versus competing
strategies."
TANGIBLE NET BOOK VALUE PER COMMON SHARE
As of
December 31, 2018, the Company's tangible net book value per
common share was $16.56 per share, or
a decline of -8.0%, compared to $18.00 per share as of September 30, 2018,
as Agency MBS significantly underperformed interest rate hedges,
despite asset prices benefiting from the sharp decline in interest
rates at the end of the quarter.
The Company's tangible net book value per common share excludes
$526 million of goodwill as of
December 31 and September 30, 2018, or $0.98 and $1.10 per
common share, respectively.
During the fourth quarter, the Company raised $1.0 billion of accretive common equity, net of
offering costs, including $786
million, or $17.09 per common
share, from a follow-on equity offering and $220 million, or $17.64 per common share, from At-the-Market
equity offerings.
INVESTMENT PORTFOLIO
As of December 31, 2018, the
Company's investment portfolio totaled $91.6
billion, comprised of:
- $90.0 billion of Agency MBS and
TBA securities, including:
-
- $89.1 billion of fixed-rate
securities, comprised of:
-
- $73.7 billion 30-year fixed-rate
securities,
- $3.6 billion 30-year TBA
securities,
- $7.3 billion 15-year
securities,
- $3.7 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
- $1.6 billion of CRT and
non-Agency securities.
As of December 31, 2018, inclusive of TBA securities,
30-year and 15-year Agency MBS fixed rate securities represented
84% and 12%, of the Company's investment portfolio, respectively,
compared to 82% and 14%, respectively, as of September 30,
2018.
As of December 31, 2018, the Company's fixed-rate Agency
MBS, inclusive of TBA securities, had a weighted average coupon of
3.84%, compared to 3.79% as of September 30, 2018, comprised
of the following weighted average coupons:
- 3.90% for 30-year fixed-rate securities;
- 3.40% for 15-year fixed rate securities; and
- 3.95% for 20-year fixed-rate securities.
The Company accounts for TBA securities (or "dollar roll funded
assets") as derivative instruments and recognizes dollar roll
income in other gain (loss), net on the Company's financial
statements. As of December 31, 2018, the Company's net
TBA position had a total fair value of $7.3
billion and a GAAP net carrying value of $70 million reported in derivative
assets/(liabilities) on the Company's balance sheet, compared to a
total fair value of $9.4 billion and
a GAAP net carrying value of $(43)
million as of September 30, 2018.
CONSTANT PREPAYMENT RATES
The Company's investment
portfolio had a weighted average CPR of 7.4% for the fourth
quarter, compared to 9.7% for the prior quarter. The weighted
average projected CPR for the remaining life of the Company's
Agency securities held as of December 31, 2018 was 7.9%,
compared to 6.8% as of September 30, 2018.
The weighted average cost basis of the Company's investment
portfolio was 103.5% of par value as of December 31,
2018. Net premium amortization cost on the Company's
investment portfolio for the fourth quarter was $(107) million, or $(0.21) per common share, which includes a
"catch-up" premium amortization cost of $(16) million, or $(0.03) per common share, due to changes in the
Company's projected CPR estimates for securities acquired prior to
the fourth quarter. This compares to net premium amortization
cost for the prior quarter of $(81)
million, or $(0.18) per common
share, including a "catch-up" premium amortization benefit of
$6 million, or $0.01 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 3.13% for the fourth
quarter, compared to 3.11% for the prior quarter. Excluding
"catch-up" premium amortization, the Company's average asset yield
was 3.21% for the fourth quarter, compared to 3.07% for the prior
quarter. Including TBA securities and excluding "catch-up" premium
amortization, the Company's average asset yield for the fourth
quarter was 3.26%, compared to 3.18% for the prior quarter.
For the fourth quarter, the weighted average interest rate on
the Company's Agency repurchase agreements was 2.42%, compared to
2.20% for the prior quarter. The Company's average implied
TBA funding cost was 2.32% for the fourth quarter, compared to
2.05% for the prior quarter. Inclusive of interest rate
swaps, the Company's combined average cost of funds for the fourth
quarter was 2.09%, compared to 1.88% for the prior quarter.
The Company's annualized net interest spread, including TBA
securities and interest rate swaps, was 1.09% for the fourth
quarter, compared to 1.33% for the prior quarter. Excluding
"catch-up" premium amortization, the Company's combined annualized
net interest spread for the fourth quarter was 1.17%, versus 1.30%
for the prior quarter.
NET SPREAD AND DOLLAR ROLL INCOME
The Company
recognized net spread and dollar roll income (a non-GAAP financial
measure) for the fourth quarter of $0.53 per common share, excluding $(0.03) per common share of "catch-up" premium
amortization cost, compared to $0.61
per common share for the prior quarter, excluding $0.01 per common share of "catch-up" premium
amortization benefit. The decline in net spread and dollar
roll income in the fourth quarter was primarily driven by lower
investment balances early in the quarter, the Company's measured
pace of new capital deployment during the quarter and higher
funding cost due, in part, to year-end repo funding pressures.
A reconciliation of the Company's net interest income to net
spread and dollar roll income and additional information regarding
the Company's use of non-GAAP measures are included later in this
release.
LEVERAGE
As of December 31, 2018, $75.7 billion of Agency repo, $7.3 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 9.0x as of December 31, 2018,
compared to 8.2x as of September 30, 2018. The Company's
average "at risk" leverage for the fourth quarter was 8.4x tangible
net book value, compared to 8.5x for the prior quarter.
As of December 31, 2018, the Company's Agency repurchase
agreements had a weighted average interest rate of 2.79%, an
increase from 2.30% as of September 30, 2018, and a weighted
average remaining days to maturity of 49 days, compared to 67 days
as of September 30, 2018. As of December 31, 2018,
$26.7 billion, or 35%, of the
Company's Agency repurchase agreements were funded through the
Company's captive broker-dealer subsidiary, Bethesda Securities,
LLC, compared to $25.5 billion, or
39%, as of September 30, 2018.
As of December 31, 2018, the Company's Agency repurchase
agreements had remaining maturities of:
- $69.5 billion of three months or
less;
- $2.2 billion from three to six
months;
- $1.2 billion from six to twelve
months; and
- $2.8 billion from one to three
years.
HEDGING ACTIVITIES
As of December 31, 2018, 94%
of the Company's outstanding balance of Agency repurchase
agreements, net TBA position and other debt was hedged with
interest rate swaps, swaptions and U.S. Treasury positions,
compared to 95% as of September 30, 2018.
As of December 31, 2018, the Company's interest rate swap
position totaled $51.6 billion in
notional amount, compared to $48.7
billion as of September 30, 2018. The Company's
interest rate swap position as of December 31, 2018 included
$5.7 billion of forward starting
swaps, with an average forward start date of 0.5 years, compared to
$4.9 billion and 0.5 years,
respectively, as of September 30, 2018. Including
forward starting swaps, the Company's interest rate swap portfolio
had an average fixed pay rate of 2.11%, an average receive rate of
2.63% and an average maturity of 5.0 years as of December 31,
2018, compared to 2.01%, 2.33% and 4.7 years, respectively, as of
September 30, 2018. Excluding forward starting swaps,
the Company's interest rate swap portfolio had an average fixed pay
rate of 1.98% as of December 31, 2018, compared to 1.89% as of
September 30, 2018.
As of December 31, 2018, the Company had payer swaptions
outstanding totaling $3.5 billion,
compared to $5.6 billion as of
September 30, 2018. As of December 31, 2018, the
Company had short U.S. Treasury positions outstanding totaling
$23.4 billion, compared to
$17.4 billion as of
September 30, 2018.
OTHER GAIN (LOSS), NET
For the fourth quarter, the
Company recorded a net loss of $(971)
million in other gain (loss), net, or $(1.93) per common share, compared to a net gain
of $73 million, or $0.16 per common share, for the prior
quarter. Other gain (loss), net for the fourth quarter was
comprised of:
- $(21) million of net realized
losses on sales of investment securities;
- $683 million of net unrealized
gains on investment securities measured at fair value through net
income;
- $63 million of interest rate swap
periodic income;
- $(1,084) million of net losses on
interest rate swaps;
- $(65) million of net losses on
interest rate swaptions;
- $(611) million of net losses on
U.S. Treasury positions;
- $27 million of TBA dollar roll
income; and
- $37 million of net mark-to-market
gains on TBA mortgage positions
OTHER COMPREHENSIVE INCOME
During the fourth quarter,
the Company recorded other comprehensive income of $361 million, or $0.71 per common share, consisting of net
unrealized gains on the Company's Agency securities recognized
through OCI, compared to a $(193)
million, or $(0.42) per common
share, other comprehensive loss for the prior quarter.
FOURTH QUARTER 2018 DIVIDEND DECLARATIONS
During the
fourth quarter, the Company's Board of Directors declared dividends
of $0.18 per share to common
stockholders of record as of October
31, November 30 and
December 31, 2018, respectively,
totaling $0.54 per share for the
quarter, which were paid on November
9 and December 10, 2018 and
January 9, 2019, respectively.
Since its May 2008 initial public
offering through the fourth quarter of 2018, the Company has
declared a total of $8.5 billion in
common stock dividends, or $39.32 per
common share.
On December 11, 2018, the Company's Board of Directors
declared a fourth 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 January 15, 2019
to preferred stockholders of record as of January 1, 2019.
The Company also announced the tax characteristics of its 2018
common and preferred stock dividends. The Company's distributions
of $2.16 per common share for
dividends declared during the twelve month period ended
November 30, 2018 consisted of
$1.127208 ordinary dividend
distributions and $1.032792
non-dividend distributions (also known as "return of capital") per
common share for federal income tax purposes. The dividend of
$0.18 per common share declared on
December 11, 2018, which was paid on
January 9, 2019, will be reported as
a 2019 distribution for federal income tax purposes. The Company's
distributions of $1.93750 per Series
B depository share and $1.750000 per
Series C depository share for dividends paid during the twelve
months ended December 31, 2018
consisted of ordinary dividend distributions for federal income tax
purposes. Stockholders should receive an IRS Form 1099-DIV
containing this information from their brokers, transfer agents or
other institutions. For additional detail please visit the
Company's website at www.AGNC.com.
FINANCIAL STATEMENTS, OPERATING PERFORMANCE AND PORTFOLIO
STATISTICS
The following measures of operating performance
include net spread and dollar roll income; net spread and dollar
roll income, excluding "catch-up" premium amortization; economic
interest income; economic interest expense; estimated taxable
income; and the related per common share measures and financial
metrics derived from such information, which are non-GAAP financial
measures. Please refer to "Use of Non-GAAP Financial
Information" later in this release for further discussion of
non-GAAP measures.
AGNC INVESTMENT
CORP.
|
CONSOLIDATED BALANCE
SHEETS
|
(in millions, except
per share data)
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Agency securities, at
fair value (including pledged securities of
$78,619, $67,889, $51,356, $51,434 and $53,055,
respectively)
|
$
82,291
|
|
$
70,408
|
|
$
55,524
|
|
$
54,141
|
|
$
55,506
|
Agency securities
transferred to consolidated variable interest entities, at fair
value (pledged securities)
|
436
|
|
453
|
|
587
|
|
621
|
|
662
|
Credit risk transfer
securities, at fair value (including pledged securities of $141,
$44, $0, $0 and $0, respectively)
|
1,012
|
|
997
|
|
936
|
|
884
|
|
876
|
Non-Agency
securities, at fair value (including pledged securities of $45, $0,
$0, $0 and $0, respectively)
|
548
|
|
507
|
|
60
|
|
36
|
|
36
|
U.S. Treasury
securities, at fair value (including pledged securities of $0, $45,
$0, $0 and $0, respectively)
|
46
|
|
109
|
|
-
|
|
224
|
|
-
|
REIT equity
securities, at fair value
|
-
|
|
-
|
|
46
|
|
42
|
|
29
|
Cash and cash
equivalents
|
921
|
|
1,071
|
|
863
|
|
972
|
|
1,046
|
Restricted
cash
|
599
|
|
456
|
|
447
|
|
386
|
|
317
|
Derivative assets, at
fair value
|
273
|
|
412
|
|
458
|
|
410
|
|
205
|
Receivable for
investment securities sold (including pledged securities of $489,
$443, $31, $0 and $0, respectively)
|
489
|
|
524
|
|
31
|
|
-
|
|
-
|
Receivable under
reverse repurchase agreements
|
21,813
|
|
16,309
|
|
13,306
|
|
10,770
|
|
10,961
|
Goodwill and other
intangible asset, net
|
526
|
|
526
|
|
550
|
|
550
|
|
551
|
Other
assets
|
287
|
|
259
|
|
330
|
|
185
|
|
187
|
Total assets
|
$
109,241
|
|
$
92,031
|
|
$
73,138
|
|
$
69,221
|
|
$
70,376
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
$
75,717
|
|
$
65,734
|
|
$
48,839
|
|
$
48,956
|
|
$
50,296
|
Debt of consolidated
variable interest entities, at fair value
|
275
|
|
291
|
|
313
|
|
336
|
|
357
|
Payable for
investment securities purchased
|
1,204
|
|
23
|
|
1,503
|
|
457
|
|
95
|
Derivative
liabilities, at fair value
|
84
|
|
62
|
|
6
|
|
32
|
|
28
|
Dividends
payable
|
106
|
|
95
|
|
87
|
|
80
|
|
80
|
Obligation to return
securities borrowed under reverse repurchase agreements, at fair
value
|
21,431
|
|
15,549
|
|
12,898
|
|
10,352
|
|
10,467
|
Accounts payable and
other liabilities
|
518
|
|
650
|
|
450
|
|
670
|
|
299
|
Total
liabilities
|
99,335
|
|
82,404
|
|
64,096
|
|
60,883
|
|
61,622
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock -
aggregate liquidation preference of $500
|
484
|
|
484
|
|
484
|
|
484
|
|
484
|
Common stock - $0.01
par value; 536.3, 477.8, 434.1, 391.3 and 391.3 shares issued and
outstanding, respectively
|
5
|
|
5
|
|
4
|
|
4
|
|
4
|
Additional paid-in
capital
|
13,793
|
|
12,785
|
|
11,964
|
|
11,174
|
|
11,173
|
Retained
deficit
|
(3,433)
|
|
(2,343)
|
|
(2,299)
|
|
(2,358)
|
|
(2,562)
|
Accumulated other
comprehensive loss
|
(943)
|
|
(1,304)
|
|
(1,111)
|
|
(966)
|
|
(345)
|
Total stockholders'
equity
|
9,906
|
|
9,627
|
|
9,042
|
|
8,338
|
|
8,754
|
Total liabilities and
stockholders' equity
|
$
109,241
|
|
$
92,031
|
|
$
73,138
|
|
$
69,221
|
|
$
70,376
|
|
|
|
|
|
|
|
|
|
|
Tangible net book
value per common share 1
|
$
16.56
|
|
$
18.00
|
|
$
18.41
|
|
$
18.63
|
|
$
19.69
|
AGNC INVESTMENT
CORP.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year Ended
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
604
|
|
$
500
|
|
$
414
|
|
$
431
|
|
$
1,949
|
Interest
expense
|
418
|
|
312
|
|
237
|
|
206
|
|
1,173
|
Net interest
income
|
186
|
|
188
|
|
177
|
|
225
|
|
776
|
Other gain (loss),
net:
|
|
|
|
|
|
|
|
|
|
Realized loss
on sale of investment securities, net
|
(21)
|
|
(40)
|
|
(74)
|
|
(2)
|
|
(137)
|
Unrealized
gain (loss) on investment securities measured at fair
value
through net income, net
|
683
|
|
(363)
|
|
(94)
|
|
(523)
|
|
(297)
|
Gain (loss) on
derivative instruments and other securities, net
|
(1,633)
|
|
430
|
|
298
|
|
738
|
|
(167)
|
Management fee
income
|
-
|
|
46
|
|
4
|
|
4
|
|
54
|
Total other
gain (loss), net
|
(971)
|
|
73
|
|
134
|
|
217
|
|
(547)
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Compensation
and benefits
|
11
|
|
14
|
|
10
|
|
10
|
|
45
|
Other
operating expense
|
8
|
|
31
|
|
8
|
|
8
|
|
55
|
Total operating
expense
|
19
|
|
45
|
|
18
|
|
18
|
|
100
|
Net income
(loss)
|
(804)
|
|
216
|
|
293
|
|
424
|
|
129
|
Dividend on
preferred stock
|
9
|
|
9
|
|
9
|
|
9
|
|
36
|
Net income (loss)
available (attributable) to common stockholders
|
$
(813)
|
|
$
207
|
|
$
284
|
|
$
415
|
|
$
93
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
(804)
|
|
$
216
|
|
$
293
|
|
$
424
|
|
$
129
|
Unrealized
gain (loss) on investment securities measured at fair value
through other comprehensive income (loss), net
|
361
|
|
(193)
|
|
(145)
|
|
(621)
|
|
(598)
|
Comprehensive
income (loss)
|
(443)
|
|
23
|
|
148
|
|
(197)
|
|
(469)
|
Dividend on
preferred stock
|
9
|
|
9
|
|
9
|
|
9
|
|
36
|
Comprehensive
income (loss) available (attributable) to common
stockholders
|
$
(452)
|
|
$
14
|
|
$
139
|
|
$
(206)
|
|
$
(505)
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
504.2
|
|
462.3
|
|
404.9
|
|
391.3
|
|
441.1
|
Weighted average
number of common shares outstanding - diluted
|
504.2
|
|
462.7
|
|
405.2
|
|
391.5
|
|
441.4
|
Net income (loss)
per common share - basic and diluted
|
$
(1.61)
|
|
$
0.45
|
|
$
0.70
|
|
$
1.06
|
|
$
0.21
|
Comprehensive
income (loss) per common share - basic and diluted
|
$
(0.90)
|
|
$
0.03
|
|
$
0.34
|
|
$
(0.53)
|
|
$
(1.14)
|
Dividends declared
per common share
|
$
0.54
|
|
$
0.54
|
|
$
0.54
|
|
$
0.54
|
|
$
2.16
|
AGNC INVESTMENT
CORP.
|
RECONCILIATION OF
GAAP NET INTEREST INCOME TO NET SPREAD AND DOLLAR ROLL INCOME
(NON-GAAP MEASURE) 2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year Ended
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
GAAP net interest
income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
604
|
|
$
500
|
|
$
414
|
|
$
431
|
|
$
1,949
|
Interest expense
|
418
|
|
312
|
|
237
|
|
206
|
|
1,173
|
GAAP net interest
income
|
186
|
|
188
|
|
177
|
|
225
|
|
776
|
TBA dollar roll income,
net 3,4
|
27
|
|
68
|
|
70
|
|
62
|
|
227
|
Interest rate swap
periodic income (cost), net 3,9
|
63
|
|
56
|
|
41
|
|
(9)
|
|
151
|
Dividend income from
REIT equity securities 3
|
-
|
|
1
|
|
1
|
|
1
|
|
3
|
Adjusted net interest
and dollar roll income
|
276
|
|
313
|
|
289
|
|
279
|
|
1,157
|
Other operating
income (expense):
|
|
|
|
|
|
|
|
|
|
Management fee
income
|
-
|
|
46
|
|
4
|
|
4
|
|
54
|
Less management
agreement termination fee income
|
-
|
|
(42)
|
|
-
|
|
-
|
|
(42)
|
Operating
expense
|
(19)
|
|
(45)
|
|
(18)
|
|
(18)
|
|
(100)
|
Less non-recurring
write-off of intangible asset and other expenses
associated with termination of
management agreement
|
1
|
|
26
|
|
-
|
|
-
|
|
27
|
Total operating
income (expense), net
|
(18)
|
|
(15)
|
|
(14)
|
|
(14)
|
|
(61)
|
Net spread and dollar
roll income
|
258
|
|
298
|
|
275
|
|
265
|
|
1,096
|
Dividend on preferred
stock
|
9
|
|
9
|
|
9
|
|
9
|
|
36
|
Net spread and dollar
roll income available to common stockholders
|
249
|
|
289
|
|
266
|
|
256
|
|
1,060
|
Estimated "catch-up"
premium amortization cost (benefit) due to change in
CPR forecast 11
|
16
|
|
(6)
|
|
(12)
|
|
(21)
|
|
(23)
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, available to common stockholders
|
$
265
|
|
$
283
|
|
$
254
|
|
$
235
|
|
$
1,037
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
504.2
|
|
462.3
|
|
404.9
|
|
391.3
|
|
441.1
|
Weighted average
number of common shares outstanding - diluted
|
504.7
|
|
462.7
|
|
405.2
|
|
391.5
|
|
441.4
|
Net spread and dollar
roll income per common share - basic
|
$
0.49
|
|
$
0.63
|
|
$
0.66
|
|
$
0.65
|
|
$
2.40
|
Net spread and dollar
roll income per common share - diluted
|
$
0.49
|
|
$
0.62
|
|
$
0.66
|
|
$
0.65
|
|
$
2.40
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, per common share - basic
|
$
0.53
|
|
$
0.61
|
|
$
0.63
|
|
$
0.60
|
|
$
2.35
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, per common share - diluted
|
$
0.53
|
|
$
0.61
|
|
$
0.63
|
|
$
0.60
|
|
$
2.35
|
AGNC INVESTMENT
CORP.
|
RECONCILIATION OF
GAAP NET INCOME TO ESTIMATED TAXABLE INCOME (NON-GAAP MEASURE)
2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year Ended
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
Net
income/(loss)
|
$
(804)
|
|
$
216
|
|
$
293
|
|
$
424
|
|
$
129
|
Book to tax
differences:
|
|
|
|
|
|
|
|
|
|
Premium
amortization, net
|
15
|
|
(21)
|
|
(22)
|
|
(23)
|
|
(51)
|
Realized
gain/loss, net
|
928
|
|
(291)
|
|
(221)
|
|
(652)
|
|
(236)
|
Net capital
loss/(utilization of net capital loss carryforward)
|
(105)
|
|
(67)
|
|
109
|
|
245
|
|
182
|
Unrealized
(gain)/loss, net
|
140
|
|
316
|
|
(46)
|
|
108
|
|
518
|
Other
|
(1)
|
|
(2)
|
|
-
|
|
(13)
|
|
(16)
|
Total book to tax differences
|
977
|
|
(65)
|
|
(180)
|
|
(335)
|
|
397
|
Estimated REIT
taxable income
|
173
|
|
151
|
|
113
|
|
89
|
|
526
|
Dividend on
preferred stock
|
9
|
|
9
|
|
9
|
|
9
|
|
36
|
Estimated REIT
taxable income, net of preferred stock dividend
|
$
164
|
|
$
142
|
|
$
104
|
|
$
80
|
|
$
490
|
Weighted average
number of common shares outstanding - basic
|
504.2
|
|
462.3
|
|
404.9
|
|
391.3
|
|
441.1
|
Weighted average
number of common shares outstanding - diluted
|
504.7
|
|
462.7
|
|
405.2
|
|
391.5
|
|
441.4
|
Estimated REIT
taxable income per common share - basic
|
$
0.33
|
|
$
0.31
|
|
$
0.26
|
|
$
0.20
|
|
$
1.11
|
Estimated REIT
taxable income per common share - diluted
|
$
0.32
|
|
$
0.31
|
|
$
0.26
|
|
$
0.20
|
|
$
1.11
|
|
|
|
|
|
|
|
|
|
|
Beginning cumulative
non-deductible net capital loss
|
$
644
|
|
$
711
|
|
$
602
|
|
$
357
|
|
$
357
|
Increase (decrease)
in net capital loss carryforward 5
|
(462)
|
|
(67)
|
|
109
|
|
245
|
|
(175)
|
Ending cumulative
non-deductible net capital loss
|
$
182
|
|
$
644
|
|
$
711
|
|
$
602
|
|
$
182
|
Ending cumulative
non-deductible net capital loss per common share
|
$
0.34
|
|
$
1.35
|
|
$
1.64
|
|
$
1.54
|
|
$
0.34
|
AGNC INVESTMENT
CORP.
|
NET INTEREST SPREAD
COMPONENTS BY FUNDING SOURCE 2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year Ended
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
Adjusted net
interest and dollar roll income, excluding "catch-up"
premium amortization:
|
|
|
|
|
|
|
|
|
|
Economic interest
income:
|
|
|
|
|
|
|
|
|
|
Investment securities
- GAAP interest income 12
|
$
604
|
|
$
500
|
|
$
414
|
|
$
431
|
|
$
1,949
|
Estimated "catch-up"
premium amortization cost (benefit) due to change in CPR forecast
11
|
16
|
|
(6)
|
|
(12)
|
|
(21)
|
|
(23)
|
TBA dollar roll
income - implied interest income 3,7
|
74
|
|
162
|
|
144
|
|
120
|
|
500
|
Economic interest
income, excluding "catch-up" premium amortization
|
694
|
|
656
|
|
546
|
|
530
|
|
2,426
|
Economic interest
expense:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
and other debt - GAAP interest expense
|
(418)
|
|
(312)
|
|
(237)
|
|
(206)
|
|
(1,173)
|
TBA dollar roll
income - implied interest expense 3,6
|
(47)
|
|
(94)
|
|
(74)
|
|
(58)
|
|
(273)
|
Interest rate swap
periodic income (cost) 3,9
|
63
|
|
56
|
|
41
|
|
(9)
|
|
151
|
Economic interest
expense
|
(402)
|
|
(350)
|
|
(270)
|
|
(273)
|
|
(1,295)
|
Dividend income from
REIT equity securities 3
|
-
|
|
1
|
|
1
|
|
1
|
|
3
|
Adjusted net interest
and dollar roll income, excluding "catch-up" premium
amortization
|
$
292
|
|
$
307
|
|
$
277
|
|
$
258
|
|
$
1,134
|
|
|
|
|
|
|
|
|
|
|
Net interest
spread, excluding "catch-up" amortization:
|
|
|
|
|
|
|
|
|
|
Average asset
yield:
|
|
|
|
|
|
|
|
|
|
Investment securities
- average asset yield
|
3.13%
|
|
3.11%
|
|
2.99%
|
|
3.05%
|
|
3.08%
|
Estimated "catch-up"
premium amortization cost (benefit) due to change in CPR
forecast
|
0.08%
|
|
(0.04)%
|
|
(0.08)%
|
|
(0.15)%
|
|
(0.04)%
|
Investment securities
average asset yield, excluding "catch-up" premium
amortization
|
3.21%
|
|
3.07%
|
|
2.91%
|
|
2.90%
|
|
3.04%
|
TBA securities -
average implied asset yield 7
|
3.66%
|
|
3.54%
|
|
3.41%
|
|
3.08%
|
|
3.40%
|
Average asset yield,
excluding "catch-up" premium amortization 8
|
3.26%
|
|
3.18%
|
|
3.02%
|
|
2.94%
|
|
3.11%
|
Average total cost of
funds:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
and other debt - average funding cost
|
2.42%
|
|
2.20%
|
|
1.99%
|
|
1.69%
|
|
2.11%
|
TBA securities -
average implied funding cost 6
|
2.32%
|
|
2.05%
|
|
1.75%
|
|
1.49%
|
|
1.85%
|
Average cost of
funds, before interest rate swap cost of funds
8
|
2.41%
|
|
2.18%
|
|
1.92%
|
|
1.62%
|
|
2.06%
|
Interest rate swap
periodic (income) cost 10
|
(0.32)%
|
|
(0.30)%
|
|
(0.25)%
|
|
0.06%
|
|
(0.22)%
|
Average total cost of
funds
|
2.09%
|
|
1.88%
|
|
1.67%
|
|
1.68%
|
|
1.84%
|
Average net interest
spread, excluding "catch-up" premium amortization
|
1.17%
|
|
1.30%
|
|
1.35%
|
|
1.26%
|
|
1.27%
|
AGNC INVESTMENT
CORP.
|
KEY
STATISTICS*
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Key Balance Sheet
Statistics:
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
2018
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
Investment
securities: 12
|
|
|
|
|
|
|
|
|
|
Fixed-rate Agency MBS,
at fair value - as of period end
|
$
81,753
|
|
$
69,844
|
|
$
55,119
|
|
$
53,696
|
|
$
55,026
|
Other Agency MBS, at
fair value - as of period end
|
$
974
|
|
$
1,017
|
|
$
992
|
|
$
1,066
|
|
$
1,142
|
Credit risk transfer
securities, at fair value - as of period end
|
$
1,012
|
|
$
997
|
|
$
936
|
|
$
884
|
|
$
876
|
Non-Agency MBS, at fair
value - as of period end
|
$
548
|
|
$
507
|
|
$
60
|
|
$
36
|
|
$
36
|
Total investment
securities, at fair value - as of period end
|
$
84,287
|
|
$
72,365
|
|
$
57,107
|
|
$
55,682
|
|
$
57,080
|
Total investment
securities, at cost - as of period end
|
$
85,569
|
|
$
74,691
|
|
$
58,875
|
|
$
57,211
|
|
$
57,466
|
Total investment
securities, at par - as of period end
|
$
82,693
|
|
$
71,844
|
|
$
56,320
|
|
$
54,625
|
|
$
54,804
|
Average investment
securities, at cost
|
$
77,182
|
|
$
64,346
|
|
$
55,329
|
|
$
56,573
|
|
$
54,406
|
Average investment
securities, at par
|
$
74,395
|
|
$
61,696
|
|
$
52,856
|
|
$
53,986
|
|
$
51,914
|
TBA
securities:
|
|
|
|
|
|
|
|
|
|
Net TBA portfolio - as
of period end, at fair value
|
$
7,322
|
|
$
9,393
|
|
$
20,003
|
|
$
13,611
|
|
$
15,742
|
Net TBA portfolio - as
of period end, at cost
|
$
7,252
|
|
$
9,436
|
|
$
19,898
|
|
$
13,529
|
|
$
15,739
|
Net TBA portfolio - as
of period end, carrying value
|
$
70
|
|
$
(43)
|
|
$
105
|
|
$
82
|
|
$
3
|
Average net TBA
portfolio, at cost
|
$
8,066
|
|
$
18,270
|
|
$
16,912
|
|
$
15,585
|
|
$
18,355
|
Average repurchase
agreements and other debt 13
|
$
68,499
|
|
$
56,265
|
|
$
47,823
|
|
$
49,567
|
|
$
48,122
|
Average stockholders'
equity 14
|
$
9,634
|
|
$
9,345
|
|
$
8,652
|
|
$
8,535
|
|
$
8,741
|
Tangible net book
value per common share 1
|
$
16.56
|
|
$
18.00
|
|
$
18.41
|
|
$
18.63
|
|
$
19.69
|
Tangible net book
value "at risk" leverage - average 15
|
8.4:1
|
|
8.5:1
|
|
8.0:1
|
|
8.2:1
|
|
8.1:1
|
Tangible net book
value "at risk" leverage - as of period end
16
|
9.0:1
|
|
8.2:1
|
|
8.3:1
|
|
8.2:1
|
|
8.1:1
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Statistics:
|
|
|
|
|
|
|
|
|
|
Investment
securities: 12
|
|
|
|
|
|
|
|
|
|
Average
coupon
|
3.82%
|
|
3.77%
|
|
3.69%
|
|
3.70%
|
|
3.71%
|
Average asset
yield
|
3.13%
|
|
3.11%
|
|
2.99%
|
|
3.05%
|
|
2.84%
|
Average asset yield,
excluding "catch-up" premium amortization
|
3.21%
|
|
3.07%
|
|
2.91%
|
|
2.90%
|
|
2.86%
|
Average coupon - as of
period end
|
3.86%
|
|
3.82%
|
|
3.74%
|
|
3.70%
|
|
3.71%
|
Average asset yield -
as of period end
|
3.31%
|
|
3.22%
|
|
3.03%
|
|
2.93%
|
|
2.89%
|
Average actual CPR for
securities held during the period
|
7.4%
|
|
9.7%
|
|
9.7%
|
|
8.6%
|
|
10.1%
|
Average forecasted CPR
- as of period end
|
7.9%
|
|
6.8%
|
|
7.1%
|
|
7.6%
|
|
8.4%
|
Total premium
amortization, net
|
$
(107)
|
|
$
(81)
|
|
$
(74)
|
|
$
(69)
|
|
$
(96)
|
TBA securities -
average implied asset yield 7
|
3.66%
|
|
3.54%
|
|
3.41%
|
|
3.08%
|
|
2.93%
|
Combined investment
and TBA securities - average asset yield, excluding "catch-up"
premium amortization 8
|
3.26%
|
|
3.18%
|
|
3.02%
|
|
2.94%
|
|
2.88%
|
Cost of
funds:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements -
average funding cost
|
2.42%
|
|
2.20%
|
|
1.99%
|
|
1.69%
|
|
1.43%
|
TBA securities -
average implied funding cost 6
|
2.32%
|
|
2.05%
|
|
1.75%
|
|
1.49%
|
|
1.23%
|
Interest rate swaps -
average periodic (income) cost of funds 10
|
(0.32)%
|
|
(0.30)%
|
|
(0.25)%
|
|
0.06%
|
|
0.13%
|
Average total cost of
funds, inclusive of TBAs and interest rate swap
periodic (income) cost
8
|
2.09%
|
|
1.88%
|
|
1.67%
|
|
1.68%
|
|
1.52%
|
Repurchase agreements -
average funding cost as of period end
|
2.79%
|
|
2.30%
|
|
2.18%
|
|
1.82%
|
|
1.57%
|
Interest rate swaps -
average net pay/(receive) rate as of period end
17
|
(0.52)%
|
|
(0.32)%
|
|
(0.41)%
|
|
(0.08)%
|
|
0.30%
|
Net interest
spread:
|
|
|
|
|
|
|
|
|
|
Combined investment and
TBA securities average net interest spread
|
1.09%
|
|
1.33%
|
|
1.42%
|
|
1.38%
|
|
1.35%
|
Combined investment and
TBA securities average net interest spread,
excluding "catch-up" premium
amortization
|
1.17%
|
|
1.30%
|
|
1.35%
|
|
1.26%
|
|
1.36%
|
Expenses % of average
stockholders' equity - annualized 18
|
0.75%
|
|
0.81%
|
|
0.83%
|
|
0.84%
|
|
0.96%
|
Economic return
(loss) on tangible common equity - unannualized
19
|
(5.0)%
|
|
0.7%
|
|
1.7%
|
|
(2.6)%
|
|
2.3%
|
*Except as noted below, average numbers for each period are
weighted based on days on the Company's books and records. All
percentages are annualized, unless otherwise noted.
Numbers in financial tables may not total due to rounding.
- Tangible net book value per common share excludes preferred
stock liquidation preference and goodwill and other intangible
asset, net.
- Table includes non-GAAP financial measures and/or amounts
derived from non-GAAP measures. Refer to "Use of Non-GAAP
Financial Information" for additional discussion of non-GAAP
financial measures.
- Amount reported in gain (loss) on derivatives instruments and
other securities, net in the accompanying consolidated statements
of operations.
- Dollar roll income represents the price differential, or "price
drop," between the TBA price for current month settlement versus
the TBA price for forward month settlement. Amount is net of
TBAs used for hedging purposes. Amount excludes TBA mark-to-market
adjustments.
- Includes decrease in net capital loss carryforwards due to
expiration of unutilized net capital loss carryforwards from prior
years.
- The implied funding cost of TBA dollar roll transactions is
determined using the "price drop" (Note 4) and market based
assumptions regarding the "cheapest-to-deliver" collateral that can
be delivered to satisfy the TBA contract, such as the anticipated
collateral's weighted average coupon, weighted average maturity and
projected 1-month CPR. The average implied funding cost for
all TBA transactions is weighted based on the Company's daily
average TBA balance outstanding for the period.
- The average implied asset yield for TBA dollar roll
transactions is extrapolated by adding the average TBA implied
funding cost (Note 6) to the net dollar roll yield. The net
dollar roll yield is calculated by dividing dollar roll income
(Note 4) by the average TBA cost basis outstanding for the
period.
- Amount calculated on a weighted average basis based on average
balances outstanding during the period and their respective asset
yield/funding cost.
- Represents periodic interest rate swap settlements.
Amount excludes interest rate swap termination fees and
mark-to-market adjustments.
- Represents interest rate swap periodic income/cost measured as
a percent of total mortgage funding (Agency repurchase agreements,
other debt and TBA securities).
- "Catch-up" premium amortization cost/benefit is reported in
interest income on the accompanying consolidated statements of
operations
- Investment securities include Agency MBS, CRT and non-Agency
securities. Amounts exclude TBA securities.
- Average repurchase agreements and other debt excludes U.S.
Treasury repurchase agreements.
- Average stockholders' equity calculated as the average
month-ended stockholders' equity during the quarter.
- Average tangible net book value "at risk" leverage during the
period was calculated by dividing the sum of the daily weighted
average Agency repurchase agreements, other debt and net TBA
position (at cost) outstanding for the period by the sum of average
stockholders' equity adjusted to exclude 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.
- Annualized Q4 2018 and Q3 2018 operating expenses exclude the
non-recurring write-off of the intangible asset and other expenses
associated with sale of MTGE Investment Corp. and the resulting
termination of the Company's management agreement with MTGE.
- Economic return (loss) on tangible common equity represents the
sum of the change in tangible net book value per common share and
dividends declared on common stock during the period over the
beginning tangible net book value per common share.
STOCKHOLDER CALL
AGNC invites stockholders,
prospective stockholders and analysts to attend the AGNC
stockholder call on January 31, 2019 at 8:30 am ET. Interested persons who do not
plan on asking a question and have internet access are encouraged
to utilize the free live webcast at www.AGNC.com. Those who
plan on participating in the Q&A or do not have internet
available may access the call by dialing (877) 300-5922 (U.S.
domestic) or (412) 902-6621 (international). Please advise the
operator you are dialing in for the AGNC Investment Corp.
stockholder call.
A slide presentation will accompany the call and will be
available at www.AGNC.com. Select the Q4 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 January 31, 2019. In addition, there will be a
phone recording available one hour after the live call on
January 31, 2019 through February 14,
2019. Those who are interested in hearing the recording of
the presentation, can access it by dialing (877) 344-7529 (U.S.
domestic) or (412) 317-0088 (international), passcode 10127312.
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.
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.