BETHESDA, Md., April 24,
2019 /PRNewswire/ -- AGNC Investment Corp. ("AGNC" or the
"Company") (Nasdaq: AGNC) today announced financial results for the
quarter ended March 31, 2019.
FIRST QUARTER 2019 FINANCIAL HIGHLIGHTS
- $1.22 comprehensive income per
common share, comprised of:
-
- $0.47 net income per common
share
- $0.75 other comprehensive income
("OCI") per common share on investments marked-to-market through
OCI
- $0.52 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization cost 1
-
- Includes $0.04 per common share
of dollar roll income associated with the Company's $8 billion average net long position in forward
purchases and sales of Agency mortgage-backed securities ("MBS") in
the "to-be-announced" ("TBA") market
- Excludes $(0.07) per common share
of estimated "catch-up" premium amortization cost due to change in
projected constant prepayment rate ("CPR") estimates
- $17.23 tangible net book value
per common share as of March 31,
2019
-
- Increased $0.67 per common share,
or 4.0%, from $16.56 per common share
as of December 31, 2018
- Excludes $526 million, or
$0.98 per common share, of goodwill
as of March 31, 2019
- $0.54 dividends declared per
common share for the first quarter
-
- Anticipated reduction of monthly dividend to $0.16 per common share, or $0.48 per quarter, beginning with the dividend to
be declared in May 2019
- Adjusted rate represents a dividend yield of 10.6% based on
April 23, 2019 closing stock
price
- 7.3% economic return on tangible common equity for the
quarter
-
- Comprised of $0.54 dividends per
common share and $0.67 increase in
tangible net book value per common share
OTHER FIRST QUARTER HIGHLIGHTS
- $102.2 billion investment
portfolio as of March 31, 2019,
comprised of:
-
- $93.5 billion Agency MBS
- $7.0 billion TBA mortgage
position
- $1.8 billion credit risk transfer
("CRT") and non-Agency securities
- 9.4x tangible net book value "at risk" leverage as of
March 31, 2019
-
- 9.3x average tangible net book value "at risk" leverage for the
quarter
- 6.3% portfolio CPR for the quarter
-
- 10.5% average projected portfolio life CPR as of March 31, 2019
- 1.06% annualized net interest spread and TBA dollar roll income
for the quarter, excluding estimated "catch-up" premium
amortization cost
-
- Excludes -16 bps of "catch up" premium amortization cost due to
change in projected CPR estimates
- $235 million of 6.875%
fixed-to-floating rate preferred equity issued during the
quarter
-
- $227 million of proceeds from
offering, net of offering cost
___________
|
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
"Following the challenging market
conditions experienced in the fourth quarter of 2018, financial
markets rebounded in the first quarter of 2019, with the S&P
500 recovering almost the entirety of its fourth quarter decline as
investor sentiment improved markedly. Weaker economic growth
both domestic and abroad, coupled with benign inflation indicators,
led the Federal Reserve to adopt a more neutral monetary policy
stance, signaling that further rate increases were unlikely in 2019
and that it would maintain a larger balance sheet than previously
expected," said Gary Kain, the Company's Chief Executive
Officer and Chief Investment Officer. "As a result, interest
rates decreased materially during the quarter, with the 10-year
U.S. Treasury rate declining 28 basis points from 2.69% as of
December 31, 2018 to 2.41% as of
March 31, 2019. Within the
fixed income markets, credit spreads recovered almost all of the
fourth quarter widening. Agency MBS also posted a strong
quarter but lagged the tightening seen in credit centric
products. The bulk of the recovery in Agency MBS valuations
relative to U.S. Treasury and interest rate swap hedges was
largely the result of lower interest rate volatility and the
performance of specified mortgage securities with favorable
prepayment characteristics. Despite expected returns having
declined modestly quarter over quarter, Agency MBS continue to
provide the best risk-adjusted returns among relevant assets,
particularly considering the Federal Reserve's neutral stance,
muted interest rate volatility and elevated credit asset
valuations. The benign interest rate environment
significantly reduces the probability of convexity costs eroding
the realized ROE on AGNC's levered Agency MBS position, thus
increasing the likelihood of achieving current return
expectations."
"Given the outperformance of our Agency MBS portfolio versus
hedges, AGNC's economic return on tangible common equity for the
first quarter of 2019 was very strong at 7.3%, consisting
of $0.54 in dividends and a $0.67 increase in
tangible net book value per common share," commented Peter
Federico, the Company's President and Chief Operating
Officer. "In addition, AGNC generated $0.52 of net
spread and dollar roll income, excluding catch-up premium
amortization, in the first quarter. Funding costs remained
elevated relative to LIBOR and premium amortization expense
increased as a result of higher projected prepayments following the
significant decline in interest rates over the last two
quarters. Looking ahead, with the Federal Reserve expected to
hold short term rates steady and an even more dovish stance
communicated by the European Central Bank, the LIBOR-repo rate
funding dynamic that AGNC enjoyed throughout 2018 is unlikely to
return to the previously favorable levels in the near term.
Further, we expect dollar roll specialness to remain relatively
minimal and amortization expense to remain relatively
constant. Against this backdrop, we anticipate reducing our
monthly common stock dividend to $0.16 per share beginning with the dividend to be
declared in May 2019."
TANGIBLE NET BOOK VALUE PER COMMON SHARE
As of
March 31, 2019, the Company's tangible net book value per
common share was $17.23 per share, an
increase of 4.0% compared to $16.56
per share as of December 31, 2018 due to wider mortgage
spreads and the strong performance of the Company's specified
Agency MBS holdings during the quarter.
The Company's tangible net book value per common share excludes
$526 million, or $0.98 per common share, of goodwill as of
March 31, 2019 and December 31, 2018.
INVESTMENT PORTFOLIO
As of March 31, 2019, the
Company's investment portfolio totaled $102.2 billion, comprised of:
- $100.4 billion of Agency MBS and
TBA securities, including:
-
- $99.5 billion of fixed-rate
securities, comprised of:
-
- $84.5 billion 30-year fixed-rate
securities,
- $3.5 billion 30-year TBA
securities,
- $7.2 billion 15-year
securities,
- $3.5 billion 15-year TBA
securities, and
- $0.8 billion 20-year fixed-rate
securities;
- $1.0 billion of collateralized
mortgage obligations ("CMOs"), adjustable-rate and other Agency
securities;
- $1.8 billion of CRT and
non-Agency securities.
As of March 31, 2019, 30-year and 15-year fixed-rate Agency
securities represented 86% and 10%, of the Company's investment
portfolio, respectively, compared to 84% and 12%, respectively, as
of December 31, 2018.
As of March 31, 2019, the Company's fixed-rate securities,
had a weighted average coupon of 3.83%, compared to 3.84% as of
December 31, 2018, comprised of the following weighted average
coupons:
- 3.88% for 30-year fixed-rate securities;
- 3.41% 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 March 31, 2019, the Company's net TBA
position had a total fair value of $7.0
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 $7.3 billion and
a GAAP net carrying value of $70
million as of December 31, 2018.
CONSTANT PREPAYMENT RATES
The Company's investment portfolio had a weighted average CPR of
6.3% for the first quarter, compared to 7.4% for the prior
quarter. The weighted average projected CPR for the remaining
life of the Company's Agency securities held as of March 31,
2019 was 10.5%, compared to 7.9% as of December 31, 2018.
The weighted average cost basis of the Company's investment
portfolio was 103.3% of par value as of March 31, 2019.
Net premium amortization cost on the Company's investment portfolio
for the first quarter was $(142)
million, or $(0.26) per common
share, which includes a "catch-up" premium amortization cost of
$(39) million, or $(0.07) per common share, due to changes in the
Company's projected CPR estimates for securities acquired prior to
the first quarter. This compares to net premium amortization
cost for the prior quarter of $(107)
million, or $(0.21) per common
share, including a "catch-up" premium amortization cost of
$(16) million, or $(0.03) per common share.
ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE
SPREAD
The Company's average asset yield on its investment portfolio,
excluding the net TBA position, was 3.14% for the first quarter,
compared to 3.13% for the prior quarter. Excluding "catch-up"
premium amortization, the Company's average asset yield was 3.31%
for the first quarter, compared to 3.21% for the prior quarter.
Including TBA securities and excluding "catch-up" premium
amortization, the Company's average asset yield for the first
quarter was 3.33%, compared to 3.26% for the prior quarter.
For the first quarter, the weighted average interest rate on the
Company's Agency repurchase agreements was 2.64%, compared to 2.42%
for the prior quarter. The Company's average implied TBA
funding cost was 2.60% for the first quarter, compared to 2.32% for
the prior quarter. Inclusive of interest rate swaps, the
Company's combined average cost of funds for the first quarter was
2.27%, compared to 2.09% for the prior quarter.
The Company's annualized net interest spread, including TBA
securities and interest rate swaps, was 0.90% for the first
quarter, compared to 1.09% for the prior quarter. Excluding
"catch-up" premium amortization, the Company's combined annualized
net interest spread for the first quarter was 1.06%, versus 1.17%
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 first quarter of $0.52 per common share, excluding $(0.07) per common share of "catch-up" premium
amortization cost, compared to $0.53
per common share for the prior quarter, excluding $(0.03) per common share of "catch-up" premium
amortization cost.
A reconciliation of the Company's net interest income to net
spread and dollar roll income and additional information regarding
the Company's use of non-GAAP measures are included later in this
release.
LEVERAGE
As of March 31, 2019, $86.3 billion of Agency repurchase agreements,
$6.9 billion of TBA dollar roll
positions (at cost) and $0.3 billion
of other debt were used to fund the Company's investment
portfolio. The remainder, or approximately $361 million, of the Company's repurchase
agreements was used to fund purchases of U.S. Treasury securities
("U.S. Treasury repo") and is not included in the Company's
leverage measurements. Inclusive of its net TBA position and
net payable/(receivable) for unsettled securities, the Company's
tangible net book value "at risk" leverage ratio was 9.4x as of
March 31, 2019, compared to 9.0x as of December 31,
2018. The Company's average "at risk" leverage for the first
quarter was 9.3x tangible net book value, compared to 8.4x for the
prior quarter.
As of March 31, 2019, the Company's Agency repurchase
agreements had a weighted average interest rate of 2.82%, compared
to 2.79% as of December 31, 2018, and a weighted average
remaining days to maturity of 81 days, compared to 49 days as of
December 31, 2018. As of March 31, 2019,
$35.6 billion, or 41%, of the
Company's Agency repurchase agreements were funded through the
Company's captive broker-dealer subsidiary, Bethesda Securities,
LLC, compared to $26.7 billion, or
35%, as of December 31, 2018.
As of March 31, 2019, the Company's Agency repurchase
agreements had remaining maturities of:
- $71.3 billion of three months or
less;
- $2.2 billion from three to six
months;
- $10.0 billion from six to twelve
months; and
- $2.8 billion from one to three
years.
HEDGING ACTIVITIES
As of March 31, 2019, 77% 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 94% as of
December 31, 2018.
As of March 31, 2019, the Company's interest rate swap
position totaled $48.2 billion in
notional amount, compared to $51.6
billion as of December 31, 2018. The Company's
interest rate swap position as of March 31, 2019 included
$4.0 billion of forward starting
swaps, with an average forward start date of 0.2 years, compared to
$5.7 billion and 0.5 years,
respectively, as of December 31, 2018. Including
forward starting swaps, the Company's interest rate swap portfolio
had an average fixed pay rate of 2.01%, an average receive rate of
2.69% and an average maturity of 4.3 years as of March 31,
2019, compared to 2.11%, 2.63% and 5.0 years, respectively, as of
December 31, 2018. Excluding forward starting swaps, the
Company's interest rate swap portfolio had an average fixed pay
rate of 1.96% as of March 31, 2019, compared to 1.98% as of
December 31, 2018.
As of March 31, 2019, the Company had payer swaptions
outstanding totaling $2.6 billion,
compared to $3.5 billion as of
December 31, 2018. As of March 31, 2019, the
Company had short U.S. Treasury positions outstanding totaling
$21.2 billion, compared to
$23.4 billion as of December 31,
2018.
OTHER GAIN (LOSS), NET
For the first quarter, the
Company recorded a net gain of $120
million in other gain (loss), net, or $0.22 per common share, compared to a net loss of
$(971) million, or $(1.93) per common share, for the prior
quarter. Other gain (loss), net for the first quarter was
comprised of:
- $60 million of net realized gains
on sales of investment securities;
- $1,060 million of net unrealized
gains on investment securities measured at fair value through net
income;
- $83 million of interest rate swap
periodic income;
- $(679) million of net losses on
interest rate swaps;
- $(27) million of net losses on
interest rate swaptions;
- $(456) million of net losses on
U.S. Treasury positions;
- $19 million of TBA dollar roll
income;
- $64 million of net mark-to-market
gains on TBA mortgage positions; and
- $(4) million of other
miscellaneous losses.
OTHER COMPREHENSIVE INCOME
During the first quarter,
the Company recorded other comprehensive income of $400 million, or $0.75 per common share, consisting of net
unrealized gains on the Company's Agency securities recognized
through OCI, compared to a $361
million, or $0.71 per common
share, of other comprehensive income for the prior quarter.
COMMON STOCK DIVIDENDS
During the first quarter, the
Company declared dividends of $0.18
per share to common stockholders of record as of January 31, February
28 and March 29, 2019,
respectively, totaling $0.54 per
share for the quarter, which were paid on February 11, March
11, and April 9, 2019,
respectively. Since its May
2008 initial public offering through the first quarter of
2019, the Company has declared a total of $8.8 billion in common stock dividends, or
$39.86 per common share.
Subsequent to the first quarter, the Company declared a dividend
of $0.18 per share to common
stockholders of record as of April 30,
2019, which will be paid on May
9, 2019. The Company also announced an anticipated
reduction of its monthly dividend to common stockholders to
$0.16 per common share, or
$0.48 per quarter, beginning with the
dividend to be declared in May
2019.
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)
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March 31,
|
|
2019
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
|
(unaudited)
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
Assets:
|
|
|
|
|
|
|
|
|
|
Agency securities, at
fair value (including pledged securities of
$89,471, $78,619, $67,889, $51,356
and $51,434, respectively)
|
$
93,044
|
|
$
82,291
|
|
$
70,408
|
|
$
55,524
|
|
$
54,141
|
Agency securities
transferred to consolidated variable interest
entities, at fair value (pledged securities)
|
425
|
|
436
|
|
453
|
|
587
|
|
621
|
Credit risk transfer
securities, at fair value (including pledged
securities of $142, $141, $44, $0 and $0, respectively)
|
1,129
|
|
1,012
|
|
997
|
|
936
|
|
884
|
Non-Agency securities,
at fair value (including pledged securities of
$45, $45, $0, $0 and $0, respectively)
|
672
|
|
548
|
|
507
|
|
60
|
|
36
|
U.S. Treasury
securities, at fair value (including pledged
securities of $121, $0, $45, $0 and $0, respectively)
|
121
|
|
46
|
|
109
|
|
-
|
|
224
|
REIT equity securities,
at fair value
|
-
|
|
-
|
|
-
|
|
46
|
|
42
|
Cash and cash
equivalents
|
929
|
|
921
|
|
1,071
|
|
863
|
|
972
|
Restricted
cash
|
517
|
|
599
|
|
456
|
|
447
|
|
386
|
Derivative assets, at
fair value
|
253
|
|
273
|
|
412
|
|
458
|
|
410
|
Receivable for
investment securities sold (including pledged
securities of $439, $489, $443, $31 and $0,
respectively)
|
439
|
|
489
|
|
524
|
|
31
|
|
-
|
Receivable under
reverse repurchase agreements
|
20,430
|
|
21,813
|
|
16,309
|
|
13,306
|
|
10,770
|
Goodwill and other
intangible asset, net
|
526
|
|
526
|
|
526
|
|
550
|
|
550
|
Other assets
|
322
|
|
287
|
|
259
|
|
330
|
|
185
|
Total
assets
|
$
118,807
|
|
$
109,241
|
|
$
92,031
|
|
$
73,138
|
|
$
69,221
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
$
86,685
|
|
$
75,717
|
|
$
65,734
|
|
$
48,839
|
|
$
48,956
|
Debt of consolidated
variable interest entities, at fair value
|
266
|
|
275
|
|
291
|
|
313
|
|
336
|
Payable for investment
securities purchased
|
1,125
|
|
1,204
|
|
23
|
|
1,503
|
|
457
|
Derivative liabilities,
at fair value
|
53
|
|
84
|
|
62
|
|
6
|
|
32
|
Dividends
payable
|
107
|
|
106
|
|
95
|
|
87
|
|
80
|
Obligation to return
securities borrowed under reverse
repurchase agreements, at fair value
|
19,275
|
|
21,431
|
|
15,549
|
|
12,898
|
|
10,352
|
Accounts payable and
other liabilities
|
795
|
|
518
|
|
650
|
|
450
|
|
670
|
Total
liabilities
|
108,306
|
|
99,335
|
|
82,404
|
|
64,096
|
|
60,883
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock -
aggregate liquidation preference of $735, $500,
$500, $500 and $500, respectively
|
711
|
|
484
|
|
484
|
|
484
|
|
484
|
Common stock - $0.01
par value; 536.3, 536.3, 477.8, 434.1 and
391.3 shares issued and outstanding, respectively
|
5
|
|
5
|
|
5
|
|
4
|
|
4
|
Additional paid-in
capital
|
13,795
|
|
13,793
|
|
12,785
|
|
11,964
|
|
11,174
|
Retained
deficit
|
(3,467)
|
|
(3,433)
|
|
(2,343)
|
|
(2,299)
|
|
(2,358)
|
Accumulated other
comprehensive loss
|
(543)
|
|
(943)
|
|
(1,304)
|
|
(1,111)
|
|
(966)
|
Total stockholders'
equity
|
10,501
|
|
9,906
|
|
9,627
|
|
9,042
|
|
8,338
|
Total liabilities and
stockholders' equity
|
$
118,807
|
|
$
109,241
|
|
$
92,031
|
|
$
73,138
|
|
$
69,221
|
|
|
|
|
|
|
|
|
|
|
Tangible net book
value per common share 1
|
$
17.23
|
|
$
16.56
|
|
$
18.00
|
|
$
18.41
|
|
$
18.63
|
AGNC INVESTMENT
CORP.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
2019
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
705
|
|
$
604
|
|
$
500
|
|
$
414
|
|
$
431
|
Interest
expense
|
541
|
|
418
|
|
312
|
|
237
|
|
206
|
Net interest
income
|
164
|
|
186
|
|
188
|
|
177
|
|
225
|
Other gain (loss),
net:
|
|
|
|
|
|
|
|
|
|
Realized gain (loss) on
sale of investment securities, net
|
60
|
|
(21)
|
|
(40)
|
|
(74)
|
|
(2)
|
Unrealized gain (loss)
on investment securities measured at fair value
through net income, net
|
1,060
|
|
683
|
|
(363)
|
|
(94)
|
|
(523)
|
Gain (loss) on
derivative instruments and other securities, net
|
(1,000)
|
|
(1,633)
|
|
430
|
|
298
|
|
738
|
Management fee
income
|
-
|
|
-
|
|
46
|
|
4
|
|
4
|
Total other gain
(loss), net
|
120
|
|
(971)
|
|
73
|
|
134
|
|
217
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
10
|
|
11
|
|
14
|
|
10
|
|
10
|
Other operating
expense
|
9
|
|
8
|
|
31
|
|
8
|
|
8
|
Total operating
expense
|
19
|
|
19
|
|
45
|
|
18
|
|
18
|
Net income
(loss)
|
265
|
|
(804)
|
|
216
|
|
293
|
|
424
|
Dividend on preferred
stock
|
10
|
|
9
|
|
9
|
|
9
|
|
9
|
Net income (loss)
available (attributable) to common stockholders
|
$
255
|
|
$
(813)
|
|
$
207
|
|
$
284
|
|
$
415
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
265
|
|
$
(804)
|
|
$
216
|
|
$
293
|
|
$
424
|
Unrealized gain (loss)
on investment securities measured at fair value
through other comprehensive income (loss), net
|
400
|
|
361
|
|
(193)
|
|
(145)
|
|
(621)
|
Comprehensive
income (loss)
|
665
|
|
(443)
|
|
23
|
|
148
|
|
(197)
|
Dividend on preferred
stock
|
10
|
|
9
|
|
9
|
|
9
|
|
9
|
Comprehensive
income (loss) available (attributable) to common
stockholders
|
$
655
|
|
$
(452)
|
|
$
14
|
|
$
139
|
|
$
(206)
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
536.7
|
|
504.2
|
|
462.3
|
|
404.9
|
|
391.3
|
Weighted average
number of common shares outstanding - diluted
|
537.2
|
|
504.2
|
|
462.7
|
|
405.2
|
|
391.5
|
Net income (loss)
per common share - basic
|
$
0.48
|
|
$
(1.61)
|
|
$
0.45
|
|
$
0.70
|
|
$
1.06
|
Net income (loss)
per common share - diluted
|
$
0.47
|
|
$
(1.61)
|
|
$
0.45
|
|
$
0.70
|
|
$
1.06
|
Comprehensive
income (loss) per common share - basic and diluted
|
$
1.22
|
|
$
(0.90)
|
|
$
0.03
|
|
$
0.34
|
|
$
(0.53)
|
Dividends declared
per common share
|
$
0.54
|
|
$
0.54
|
|
$
0.54
|
|
$
0.54
|
|
$
0.54
|
AGNC INVESTMENT
CORP.
|
RECONCILIATION OF
GAAP NET INTEREST INCOME TO NET SPREAD AND DOLLAR ROLL INCOME
(NON-GAAP MEASURE) 2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
2019
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
GAAP net interest
income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
705
|
|
$
604
|
|
$
500
|
|
$
414
|
|
$
431
|
Interest
expense
|
541
|
|
418
|
|
312
|
|
237
|
|
206
|
GAAP net interest
income
|
164
|
|
186
|
|
188
|
|
177
|
|
225
|
TBA dollar roll
income, net 3,4
|
19
|
|
27
|
|
68
|
|
70
|
|
62
|
Interest rate swap
periodic income (cost), net 3,9
|
83
|
|
63
|
|
56
|
|
41
|
|
(9)
|
Other interest and
dividend income 3
|
3
|
|
-
|
|
1
|
|
1
|
|
1
|
Adjusted net interest
and dollar roll income
|
269
|
|
276
|
|
313
|
|
289
|
|
279
|
Other operating
income (expense):
|
|
|
|
|
|
|
|
|
|
Operating
expense
|
(19)
|
|
(19)
|
|
(45)
|
|
(18)
|
|
(18)
|
Less non-recurring
write-off of intangible asset and other expenses
associated with termination of management agreement
|
-
|
|
1
|
|
26
|
|
-
|
|
-
|
Management fee
income
|
-
|
|
-
|
|
46
|
|
4
|
|
4
|
Less management
agreement termination fee income
|
-
|
|
-
|
|
(42)
|
|
-
|
|
-
|
Total operating
income (expense), net
|
(19)
|
|
(18)
|
|
(15)
|
|
(14)
|
|
(14)
|
Net spread and dollar
roll income
|
250
|
|
258
|
|
298
|
|
275
|
|
265
|
Dividend on preferred
stock
|
10
|
|
9
|
|
9
|
|
9
|
|
9
|
Net spread and dollar
roll income available to common stockholders
|
240
|
|
249
|
|
289
|
|
266
|
|
256
|
Estimated "catch-up"
premium amortization cost (benefit) due to change in
CPR forecast 11
|
39
|
|
16
|
|
(6)
|
|
(12)
|
|
(21)
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, available to common stockholders
|
$
279
|
|
$
265
|
|
$
283
|
|
$
254
|
|
$
235
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
536.7
|
|
504.2
|
|
462.3
|
|
404.9
|
|
391.3
|
Weighted average
number of common shares outstanding - diluted
|
537.2
|
|
504.7
|
|
462.7
|
|
405.2
|
|
391.5
|
Net spread and dollar
roll income per common share - basic
|
$
0.45
|
|
$
0.49
|
|
$
0.63
|
|
$
0.66
|
|
$
0.65
|
Net spread and dollar
roll income per common share - diluted
|
$
0.45
|
|
$
0.49
|
|
$
0.62
|
|
$
0.66
|
|
$
0.65
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, per common share - basic
|
$
0.52
|
|
$
0.53
|
|
$
0.61
|
|
$
0.63
|
|
$
0.60
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, per common share - diluted
|
$
0.52
|
|
$
0.53
|
|
$
0.61
|
|
$
0.63
|
|
$
0.60
|
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
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
2019
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
Net
income/(loss)
|
$
265
|
|
$
(804)
|
|
$
216
|
|
$
293
|
|
$
424
|
Book to tax
differences:
|
|
|
|
|
|
|
|
|
|
Premium amortization,
net
|
54
|
|
15
|
|
(21)
|
|
(22)
|
|
(23)
|
Realized gain/loss,
net
|
627
|
|
928
|
|
(291)
|
|
(221)
|
|
(652)
|
Net capital
loss/(utilization of net capital loss carryforward)
|
(12)
|
|
(105)
|
|
(67)
|
|
109
|
|
245
|
Unrealized (gain)/loss,
net
|
(719)
|
|
140
|
|
316
|
|
(46)
|
|
108
|
Other
|
(9)
|
|
(1)
|
|
(2)
|
|
-
|
|
(13)
|
Total book to tax
differences
|
(59)
|
|
977
|
|
(65)
|
|
(180)
|
|
(335)
|
Estimated REIT
taxable income
|
206
|
|
173
|
|
151
|
|
113
|
|
89
|
Dividend on preferred
stock
|
10
|
|
9
|
|
9
|
|
9
|
|
9
|
Estimated REIT
taxable income, net of preferred stock dividend
|
$
196
|
|
$
164
|
|
$
142
|
|
$
104
|
|
$
80
|
Weighted average
number of common shares outstanding - basic
|
536.7
|
|
504.2
|
|
462.3
|
|
404.9
|
|
391.3
|
Weighted average
number of common shares outstanding - diluted
|
537.2
|
|
504.7
|
|
462.7
|
|
405.2
|
|
391.5
|
Estimated REIT
taxable income per common share - basic
|
$
0.37
|
|
$
0.33
|
|
$
0.31
|
|
$
0.26
|
|
$
0.20
|
Estimated REIT
taxable income per common share - diluted
|
$
0.36
|
|
$
0.32
|
|
$
0.31
|
|
$
0.26
|
|
$
0.20
|
|
|
|
|
|
|
|
|
|
|
Beginning cumulative
non-deductible net capital loss
|
$
182
|
|
$
644
|
|
$
711
|
|
$
602
|
|
$
357
|
Increase (decrease)
in net capital loss carryforward 5
|
(12)
|
|
(462)
|
|
(67)
|
|
109
|
|
245
|
Ending cumulative
non-deductible net capital loss
|
$
170
|
|
$
182
|
|
$
644
|
|
$
711
|
|
$
602
|
Ending cumulative
non-deductible net capital loss per common share
|
$
0.32
|
|
$
0.34
|
|
$
1.35
|
|
$
1.64
|
|
$
1.54
|
AGNC INVESTMENT
CORP.
|
|
|
|
|
|
NET INTEREST SPREAD
COMPONENTS BY FUNDING SOURCE 2
|
|
|
|
|
|
(in millions, except
per share data)
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
2019
|
|
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
|
$
705
|
|
|
$
604
|
|
|
$
500
|
|
|
$
414
|
|
|
$
431
|
|
Estimated "catch-up"
premium amortization cost (benefit) due to change
in CPR forecast 11
|
39
|
|
|
16
|
|
|
(6)
|
|
|
(12)
|
|
|
(21)
|
|
TBA dollar roll income
- implied interest income 3,7
|
71
|
|
|
74
|
|
|
162
|
|
|
144
|
|
|
120
|
|
Economic interest
income, excluding "catch-up" premium amortization
|
815
|
|
|
694
|
|
|
656
|
|
|
546
|
|
|
530
|
|
Economic interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
and other debt - GAAP interest expense
|
(541)
|
|
|
(418)
|
|
|
(312)
|
|
|
(237)
|
|
|
(206)
|
|
TBA dollar roll income
- implied interest expense 3,6
|
(52)
|
|
|
(47)
|
|
|
(94)
|
|
|
(74)
|
|
|
(58)
|
|
Interest rate swap
periodic income (cost) 3,9
|
83
|
|
|
63
|
|
|
56
|
|
|
41
|
|
|
(9)
|
|
Economic interest
expense
|
(510)
|
|
|
(402)
|
|
|
(350)
|
|
|
(270)
|
|
|
(273)
|
|
Other interest and
dividend income 3
|
3
|
|
|
-
|
|
|
1
|
|
|
1
|
|
|
1
|
|
Adjusted net interest
and dollar roll income, excluding "catch-up" premium
amortization
|
$
308
|
|
|
$
292
|
|
|
$
307
|
|
|
$
277
|
|
|
$
258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest
spread, excluding "catch-up" amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average asset
yield:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
- average asset yield
|
3.14
|
%
|
|
3.13
|
%
|
|
3.11
|
%
|
|
2.99
|
%
|
|
3.05
|
%
|
Estimated "catch-up"
premium amortization cost (benefit) due to change
in CPR forecast
|
0.17
|
%
|
|
0.08
|
%
|
|
(0.04)
|
%
|
|
(0.08)
|
%
|
|
(0.15)
|
%
|
Investment securities
average asset yield, excluding "catch-up" premium
amortization
|
3.31
|
%
|
|
3.21
|
%
|
|
3.07
|
%
|
|
2.91
|
%
|
|
2.90
|
%
|
TBA securities -
average implied asset yield 7
|
3.55
|
%
|
|
3.66
|
%
|
|
3.54
|
%
|
|
3.41
|
%
|
|
3.08
|
%
|
Average asset yield,
excluding "catch-up" premium amortization 8
|
3.33
|
%
|
|
3.26
|
%
|
|
3.18
|
%
|
|
3.02
|
%
|
|
2.94
|
%
|
Average total cost of
funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
and other debt - average funding cost
|
2.64
|
%
|
|
2.42
|
%
|
|
2.20
|
%
|
|
1.99
|
%
|
|
1.69
|
%
|
TBA securities -
average implied funding cost 6
|
2.60
|
%
|
|
2.32
|
%
|
|
2.05
|
%
|
|
1.75
|
%
|
|
1.49
|
%
|
Average cost of funds,
before interest rate swap periodic (income) cost
8
|
2.64
|
%
|
|
2.41
|
%
|
|
2.18
|
%
|
|
1.92
|
%
|
|
1.62
|
%
|
Interest rate swap
periodic (income) cost of funds 10
|
(0.37)
|
%
|
|
(0.32)
|
%
|
|
(0.30)
|
%
|
|
(0.25)
|
%
|
|
0.06
|
%
|
Average total cost of
funds
|
2.27
|
%
|
|
2.09
|
%
|
|
1.88
|
%
|
|
1.67
|
%
|
|
1.68
|
%
|
Average net interest
spread, excluding "catch-up" premium amortization
|
1.06
|
%
|
|
1.17
|
%
|
|
1.30
|
%
|
|
1.35
|
%
|
|
1.26
|
%
|
AGNC INVESTMENT
CORP.
|
KEY
STATISTICS*
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Key Balance Sheet
Statistics:
|
March
31,
|
|
December
31,
|
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
2019
|
|
2018
|
|
|
2018
|
|
2018
|
|
2018
|
Investment
securities: 12
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate Agency MBS,
at fair value - as of period end
|
$
92,502
|
|
|
$
81,753
|
|
|
$
69,844
|
|
|
$
55,119
|
|
|
$
53,696
|
|
Other Agency MBS, at
fair value - as of period end
|
$
967
|
|
|
$
974
|
|
|
$
1,017
|
|
|
$
992
|
|
|
$
1,066
|
|
Credit risk transfer
securities, at fair value - as of period end
|
$
1,129
|
|
|
$
1,012
|
|
|
$
997
|
|
|
$
936
|
|
|
$
884
|
|
Non-Agency MBS, at
fair value - as of period end
|
$
672
|
|
|
$
548
|
|
|
$
507
|
|
|
$
60
|
|
|
$
36
|
|
Total investment
securities, at fair value - as of period end
|
$
95,270
|
|
|
$
84,287
|
|
|
$
72,365
|
|
|
$
57,107
|
|
|
$
55,682
|
|
Total investment
securities, at cost - as of period end
|
$
95,090
|
|
|
$
85,569
|
|
|
$
74,691
|
|
|
$
58,875
|
|
|
$
57,211
|
|
Total investment
securities, at par - as of period end
|
$
92,091
|
|
|
$
82,693
|
|
|
$
71,844
|
|
|
$
56,320
|
|
|
$
54,625
|
|
Average investment
securities, at cost
|
$
89,952
|
|
|
$
77,182
|
|
|
$
64,346
|
|
|
$
55,329
|
|
|
$
56,573
|
|
Average investment
securities, at par
|
$
87,021
|
|
|
$
74,395
|
|
|
$
61,696
|
|
|
$
52,856
|
|
|
$
53,986
|
|
TBA
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net TBA portfolio - as
of period end, at fair value
|
$
6,955
|
|
|
$
7,322
|
|
|
$
9,393
|
|
|
$
20,003
|
|
|
$
13,611
|
|
Net TBA portfolio - as
of period end, at cost
|
$
6,885
|
|
|
$
7,252
|
|
|
$
9,436
|
|
|
$
19,898
|
|
|
$
13,529
|
|
Net TBA portfolio - as
of period end, carrying value
|
$
70
|
|
|
$
70
|
|
|
$
(43)
|
|
|
$
105
|
|
|
$
82
|
|
Average net TBA
portfolio, at cost
|
$
8,002
|
|
|
$
8,066
|
|
|
$
18,270
|
|
|
$
16,912
|
|
|
$
15,585
|
|
Average repurchase
agreements and other debt 13
|
$
82,070
|
|
|
$
68,499
|
|
|
$
56,265
|
|
|
$
47,823
|
|
|
$
49,567
|
|
Average stockholders'
equity 14
|
$
10,186
|
|
|
$
9,634
|
|
|
$
9,345
|
|
|
$
8,652
|
|
|
$
8,535
|
|
Tangible net book
value per common share 1
|
$
17.23
|
|
|
$
16.56
|
|
|
$
18.00
|
|
|
$
18.41
|
|
|
$
18.63
|
|
Tangible net book
value "at risk" leverage - average 15
|
9.3:1
|
|
|
8.4:1
|
|
|
8.5:1
|
|
|
8.0:1
|
|
|
8.2:1
|
|
Tangible net book
value "at risk" leverage - as of period end
16
|
9.4:1
|
|
|
9.0:1
|
|
|
8.2:1
|
|
|
8.3:1
|
|
|
8.2:1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities: 12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
coupon
|
3.89
|
%
|
|
3.82
|
%
|
|
3.77
|
%
|
|
3.69
|
%
|
|
3.70
|
%
|
Average asset
yield
|
3.14
|
%
|
|
3.13
|
%
|
|
3.11
|
%
|
|
2.99
|
%
|
|
3.05
|
%
|
Average asset yield,
excluding "catch-up" premium amortization
|
3.31
|
%
|
|
3.21
|
%
|
|
3.07
|
%
|
|
2.91
|
%
|
|
2.90
|
%
|
Average coupon - as of
period end
|
3.88
|
%
|
|
3.86
|
%
|
|
3.82
|
%
|
|
3.74
|
%
|
|
3.70
|
%
|
Average asset yield -
as of period end
|
3.29
|
%
|
|
3.31
|
%
|
|
3.22
|
%
|
|
3.03
|
%
|
|
2.93
|
%
|
Average actual CPR for
securities held during the period
|
6.3
|
%
|
|
7.4
|
%
|
|
9.7
|
%
|
|
9.7
|
%
|
|
8.6
|
%
|
Average forecasted CPR
- as of period end
|
10.5
|
%
|
|
7.9
|
%
|
|
6.8
|
%
|
|
7.1
|
%
|
|
7.6
|
%
|
Total premium
amortization, net
|
$
(142)
|
|
|
$
(107)
|
|
|
$
(81)
|
|
|
$
(74)
|
|
|
$
(69)
|
|
TBA securities -
average implied asset yield 7
|
3.55
|
%
|
|
3.66
|
%
|
|
3.54
|
%
|
|
3.41
|
%
|
|
3.08
|
%
|
Combined investment
and TBA securities - average asset yield,
excluding "catch-up" premium amortization 8
|
3.33
|
%
|
|
3.26
|
%
|
|
3.18
|
%
|
|
3.02
|
%
|
|
2.94
|
%
|
Cost of
funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
- average funding cost
|
2.64
|
%
|
|
2.42
|
%
|
|
2.20
|
%
|
|
1.99
|
%
|
|
1.69
|
%
|
TBA securities -
average implied funding cost 6
|
2.60
|
%
|
|
2.32
|
%
|
|
2.05
|
%
|
|
1.75
|
%
|
|
1.49
|
%
|
Interest rate swaps -
average periodic (income) cost of funds 10
|
(0.37)
|
%
|
|
(0.32)
|
%
|
|
(0.30)
|
%
|
|
(0.25)
|
%
|
|
0.06
|
%
|
Average total cost of
funds, inclusive of TBAs and interest rate swap
periodic (income) cost 8
|
2.27
|
%
|
|
2.09
|
%
|
|
1.88
|
%
|
|
1.67
|
%
|
|
1.68
|
%
|
Repurchase agreements
- average funding cost as of period end
|
2.82
|
%
|
|
2.79
|
%
|
|
2.30
|
%
|
|
2.18
|
%
|
|
1.82
|
%
|
Interest rate swaps -
average net pay/(receive) rate as of period end
17
|
(0.68)
|
%
|
|
(0.52)
|
%
|
|
(0.32)
|
%
|
|
(0.41)
|
%
|
|
(0.08)
|
%
|
Net interest
spread:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined investment
and TBA securities average net interest spread
|
0.90
|
%
|
|
1.09
|
%
|
|
1.33
|
%
|
|
1.42
|
%
|
|
1.38
|
%
|
Combined investment
and TBA securities average net interest spread,
excluding "catch-up" premium
amortization
|
1.06
|
%
|
|
1.17
|
%
|
|
1.30
|
%
|
|
1.35
|
%
|
|
1.26
|
%
|
Expenses % of average
stockholders' equity - annualized 18
|
0.75
|
%
|
|
0.75
|
%
|
|
0.81
|
%
|
|
0.83
|
%
|
|
0.84
|
%
|
Economic return
(loss) on tangible common equity - unannualized
19
|
7.3
|
%
|
|
(5.0)
|
%
|
|
0.7
|
%
|
|
1.7
|
%
|
|
(2.6)
|
%
|
*Except as noted below, average numbers for each period are
weighted based on days on the Company's books and records. All
percentages are annualized, unless otherwise noted.
Numbers in financial tables may not total due to rounding.
- Tangible net book value per common share excludes preferred
stock liquidation preference and goodwill and other intangible
asset, net.
- 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 April 25, 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 Q1 2019 Earnings
Presentation link to download and print the presentation in advance
of the stockholder call.
An archived audio of the stockholder call combined with the
slide presentation will be available on the AGNC website after the
call on April 25, 2019. In addition, there will be a
phone recording available one hour after the live call on
April 25, 2019 through May 9,
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
10129960.
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.