American Capital Agency Corp. Reports $3.98 Comprehensive Income
Per Common Share And $32.49 Net Book Value Per Common Share
BETHESDA, Md., Oct. 29,
2012 /PRNewswire/ -- American Capital Agency Corp. ("AGNC" or
the "Company") (Nasdaq: AGNC) today reported comprehensive income
for the third quarter of 2012 of $1.3
billion, or $3.98 per common
share, and net book value of $32.49
per common share. Economic return, defined as dividends on
common shares plus the change in net book value per common share,
for the period was $4.33 per common
share, or 59% on an annualized basis.
THIRD QUARTER 2012 FINANCIAL HIGHLIGHTS
- $3.98 comprehensive income per
common share, comprised of:
- $0.25 net income per common
share
- $3.73 other comprehensive income
("OCI") per common share
- Driven by net unrealized gains on investments marked-to-market
through OCI
- $0.79 net spread income per
common share
- Comprised of interest income, net of cost of funds (including
interest rate swaps) and operating expenses
- $0.86 per common share, excluding
approximately $(0.07) per common
share of "catch-up" premium amortization cost due to change in
projected constant prepayment rate ("CPR") estimates
- $1.36 estimated taxable income
per common share
- $1.25 dividend per common share
declared on September 11, 2012
- $1.52 estimated undistributed
taxable income per common share as of September 30, 2012
- Represents an increase of $26
million from $492 million as
of June 30, 2012 to $518 million
as of September 30, 2012
- On a per share basis, decreased $0.09 per common share from June 30,
2012
- $32.49 net book value per common
share as of September 30, 2012
- Increased $3.08 per common share,
or 10%, from $29.41 per common share
as of June 30, 2012
- 59% annualized economic return on common shares
- Comprised of $1.25 dividend per
common share and $3.08 increase in
net book value per common share
OTHER THIRD QUARTER HIGHLIGHTS
- $90 billion investment portfolio
as of September 30, 2012
- 7.0x leverage as of September 30, 2012
- 7.1x average leverage for the quarter
- 9% actual portfolio CPR for the quarter
- 9% actual portfolio CPR for the month of October 2012
- 14% average projected portfolio life CPR as of
September 30, 2012
- 1.42% annualized net interest rate spread for the quarter
- 1.53% annualized net interest rate spread for the quarter,
excluding "catch-up" premium amortization cost due to change in
projected CPR estimates
- 1.50% net interest rate spread as of September 30,
2012
- $1.2 billion of net equity
proceeds raised during the quarter from a follow-on common stock
offering
"We are very pleased with AGNC's performance during the third
quarter as we were able to generate economic returns (dividends
plus gains in our net asset value per common share) of $4.33 per common share for the quarter, or 59% on
an annualized basis. Comprehensive income, which is
essentially a mark-to-market earnings measure, was a record
$1.3 billion or $3.98 per common share for the quarter.
Year-to-date, AGNC has generated $8.53 per common share of shareholder value
through the combination of $3.75 in
dividends and increases in net asset value of $4.78 per common share, or a year-to-date
annualized economic return of 41%," commented Gary Kain, President and Chief Investment
Officer.
"These results, coupled with our average actual CPR of 9% for
the third quarter (and 9% CPR in the latest prepayment release),
clearly demonstrate the benefits of active portfolio management,
especially in an evolving landscape. Looking ahead, we believe
prepayment speed increases will remain muted on our portfolio
despite today's record low mortgage rates and the Federal Reserve's
third quantitative easing program, commonly known as QE3."
"QE3 has presented both challenges and opportunities," said
Malon Wilkus, Chairman and Chief
Executive Officer. "We believe we are well positioned for the
prepayment environment resulting from QE3. As the market has
tried to assess and adjust to the impacts of QE3, we have
experienced volatility in the price of our stock. Thus, our
Board of Directors has authorized us to acquire up to $500 million of our common shares through
December 31, 2013. As prudent
stewards of your capital, we will seek to acquire common shares
only when it is meaningfully accretive to our net book value per
common share thereby further enhancing shareholder value."
NET BOOK VALUE
As of September 30, 2012, the
Company's net book value per common share was $32.49, or $3.08
higher than the June 30, 2012 net book value per common share
of $29.41, reflecting net price
appreciation on the Company's investment portfolio in excess of net
losses on the Company's hedge portfolio during the quarter.
The Company's investment portfolio appreciated following the
implementation of QE3, an open-ended program by the Federal Reserve
to purchase agency securities, which was initiated during the third
quarter.
"Valuations of certain segments of the agency mortgage market
benefited materially with the announcement of QE3, while others did
not," commented Chris Kuehl, Senior
Vice President of Mortgage Investments. "We are pleased with
how our investment portfolio appreciated in the third quarter and
believe it will continue to perform relatively well in this
environment. In today's low rate, high prepayment risk
environment, asset selection will continue to be critical to future
performance."
INVESTMENT PORTFOLIO
As of September 30, 2012,
the Company's investment portfolio totaled $89.6 billion of agency securities, at fair
value, comprised of $87.9 billion of
fixed-rate securities, $1.0 billion
of adjustable-rate securities and $0.7
billion of collateralized mortgage obligations ("CMOs")
backed by fixed and adjustable-rate securities, including principal
and interest-only strips. As of September 30, 2012, the
Company's fixed-rate investment portfolio was comprised of
$28.6 billion </= 15-year
fixed-rate securities, $2.7 billion
20-year fixed-rate securities and $56.6
billion 30-year fixed-rate securities.
As of September 30, 2012, 71% of the Company's fixed
rate investment portfolio was comprised of agency securities
backed by lower loan balance mortgages and loans originated under
the U.S. Government sponsored Home Affordable Refinance Program
("HARP"), which have favorable prepayment attributes and,
therefore, a lower risk of prepayment relative to generic agency
securities. The Company defines lower loan balance securities as
pools backed by original loan balances of up to $150,000 and HARP securities as pools backed by
100% refinance loans with original loan-to-values of >/=
80%. The remainder of the Company's portfolio was primarily
comprised of low coupon, new issuance fixed-rate agency
securities.
CONSTANT PREPAYMENT RATES
The actual CPR for the
Company's portfolio during the third quarter was 9%, a decrease
from 10% for the second quarter. The most recent CPR
published in October 2012 for the
Company's portfolio held as of September 30, 2012 was
9%. The weighted average projected CPR for the remaining life
of all of the Company's investments held as of September 30,
2012 was 14%, an increase from 12% as of June 30, 2012
primarily due to QE3 and record low mortgage rates.
The Company amortizes or accretes premiums and discounts
associated with purchases of agency securities into interest income
using the effective yield method over the estimated life of such
securities, incorporating both actual repayments to date and
projected CPRs over the remaining life of the security. The
weighted average cost basis of the Company's investment portfolio
was 105.4% as of September 30, 2012; therefore, faster actual
or projected prepayments can have a meaningful negative impact,
while slower actual or projected prepayments can have a meaningful
positive impact, on the Company's asset yields.
The amortization of premiums, net of any accretion of discounts,
on the investment portfolio for the quarter was $(219) million, or $(0.66) per common share, compared to
$(196) million, or $(0.65) per common share, for the prior
quarter. The change in the Company's weighted average
projected CPR estimate resulted in recognition of approximately
$(23) million, or $(0.07) per common share, of "catch-up" premium
amortization cost during the quarter, compared to approximately
$(33) million, or $(0.11) per common share, of "catch-up" premium
amortization cost during the prior quarter. The unamortized net
premium balance as of September 30, 2012 was $4.4 billion.
ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE
SPREAD
The Company's average asset yield for the third
quarter decreased 18 bps to 2.55%, from 2.73% for the second
quarter. Excluding the impact of "catch-up" premium
amortization cost recognized during the current and prior quarter
due to changes in projected CPR estimates, the annualized weighted
average yield on the Company's investment portfolio was 2.66% for
the current quarter, compared to 2.91% for the prior quarter.
The Company's average asset yield reported as of September 30,
2012 was 2.61%, a decrease of 20 bps from 2.81% as of June 30,
2012. The decline in the Company's average asset yield was
largely a function of the increase in forecasted prepayment speeds
associated with QE3 and record low mortgage rates.
The Company's average cost of funds (derived from the cost of
repurchase agreements ("repos"), other debt and interest rate
swaps) increased 5 bps to 1.13% for the third quarter, from 1.08%
for the second quarter. The Company's average cost of funds
as of September 30, 2012, decreased 8 bps to 1.11% from 1.19%
as of June 30, 2012. The decrease in the Company's average
cost of funds as of September 30,
2012, was primarily due to a lower ratio of interest rate
swaps to repurchase agreements and other debt outstanding, which
was 61% as of September 30, 2012, compared to 69% as of
June 30, 2012, partially offset by higher repo costs. The
Company's weighted average repo cost was 0.46% as of
September 30, 2012, compared to 0.42% as of June 30,
2012.
The Company's average net interest rate spread for the third
quarter was 1.42%, a decrease of 23 bps from the second quarter of
1.65%. Excluding the impact of "catch-up" premium
amortization cost during the current and prior quarter due to
changes in projected CPR estimates, the Company's average net
interest rate spread was 1.53% for the current quarter, a decrease
of 30 bps from the second quarter of 1.83%. As of
September 30, 2012, the Company's average net interest rate
spread was 1.50%, a decrease of 12 bps from the net interest rate
spread as of June 30, 2012 of 1.62%.
LEVERAGE AND HEDGING ACTIVITIES
As of
September 30, 2012, the Company had total repurchase
agreements and other debt outstanding of $80.3 billion, resulting in a leverage ratio of
7.1x. When adjusted for the net receivable for agency
securities not yet settled, the leverage ratio was 7.0x as of
September 30, 2012. Average leverage for the quarter was
7.1x, which the Company calculates as its daily weighted average
repurchase agreements and other debt balance outstanding divided by
its average month-ended stockholders' equity for the quarter.
The $79.3 billion borrowed under
repurchase agreements as of September 30, 2012 had original
maturities consisting of:
- $4.7 billion of one month or
less;
- $31.3 billion from one to three
months;
- $25.6 billion from three to six
months;
- $8.7 billion from six to nine
months;
- $7.5 billion from nine to twelve
months;
- $0.7 billion from twelve to
twenty-four months; and
- $0.8 billion from twenty-four to
thirty-six months.
The Company increased the weighted average original maturity of
its repurchase agreements to 141 days as of September 30,
2012, from 121 days as of June 30, 2012. As of
September 30, 2012, the Company's repurchase agreements had a
weighted average remaining days to maturity of 89 days, compared to
74 days as of June 30, 2012.
The Company's interest rate swap positions as of
September 30, 2012 totaled $48.9
billion in notional amount and had an average fixed pay rate
of 1.43%, a weighted average receive rate of 0.35% and a weighted
average maturity of 4.3 years. During the quarter, the
Company increased its swap position, including forward starting
swaps ranging up to six months from September 30, 2012, by
$3.5 billion, while $3.2 billion of the Company's swaps were either
terminated or matured during the quarter. The new swap
agreements entered into during the quarter have an average maturity
of approximately 5.6 years from September 30, 2012 and a
weighted average fixed pay rate of 1.02%. The Company enters
into swaps with longer maturities with the intention of protecting
its net book value and longer term earnings potential.
The Company also utilizes interest rate swaptions to mitigate
exposure to larger changes in interest rates. During the
quarter, the Company added $2.0
billion of payer swaptions at a cost of $44 million, while $2.3
billion of payer swaptions from previous quarters expired
for a total loss of $13
million. As of September 30, 2012, the Company
had $8.6 billion in payer swaptions
outstanding at a market value of $57
million with an average option term of 19 months and an
average underlying interest rate swap term of 7.7 years.
As of September 30, 2012, 61% of the Company's outstanding
balances of repurchase agreements and other debt were hedged
through interest rate swap agreements, a decrease from 69% as of
June 30, 2012. Including swaps underlying the payer swaptions
noted above, this percentage increases to 72% as of
September 30, 2012, a decrease from 81% as of June 30,
2012.
OTHER INCOME (LOSS), NET
During the quarter, the
Company recorded a loss of $(250)
million in other income (loss), net, or $(0.75) per common share. Other income
(loss), net is comprised of:
- $210 million of net realized
gains on sales of agency securities;
- $(74) million of other interest
rate swap periodic interest costs (recognized in addition to
$(51) million of interest rate swap
costs recorded in interest expense);
- $(266) million of net unrealized
losses on interest rate swaps;
- $(98) million of interest rate
swap termination fees;
- $(156) million of net realized
losses on other derivative instruments and securities; and
- $134 million of net unrealized
gains on other derivative instruments and securities.
Other derivative instruments and securities generally represent
instruments that are used in addition to interest rate swaps (such
as swaptions, short or long positions in "to-be-announced" mortgage
securities ("TBA's"), treasury securities and treasury futures
contracts) to supplement the Company's interest rate risk
management strategies.
OTHER COMPREHENSIVE INCOME
During the quarter, the
Company recorded other comprehensive income of $1.2 billion, or $3.73 per common share, comprised of $1.2 billion of net unrealized gains on agency
securities and $51 million of net
unrealized gains on interest rate swaps. The net unrealized
gains on interest rate swaps consists of amortization of the
deferred loss that is reclassified into interest expense for
interest rate swaps that were de-designated as hedges in the third
quarter of 2011.
ESTIMATED TAXABLE INCOME
Estimated taxable income for
the third quarter was $1.36 per
common share, or $1.11 higher than
GAAP net income per common share. The primary differences
between tax and GAAP net income are (i) unrealized gains and losses
associated with interest rate swaps and other derivatives and
securities marked-to-market in current income for GAAP purposes,
but excluded from taxable income until realized or settled, (ii)
temporary differences related to the amortization of premiums paid
on investments and (iii) timing differences in the recognition of
certain realized gains and losses.
THIRD QUARTER 2012 DIVIDEND DECLARATIONS
On
September 11, 2012, the Board of Directors of the Company
declared a third quarter dividend on its common stock of
$1.25 per share, which was paid on
October 26, 2012 to common stockholders of record as of
September 21, 2012. Since its May
2008 initial public offering, the Company has paid a total
of $2.3 billion in common dividends,
or $22.61 per common share.
On September 13, 2012, the Board of Directors of the
Company declared a third quarter dividend on its 8.000% Series A
Cumulative Redeemable Preferred Stock of $0.50 per share. The dividend was paid on
October 15, 2012 to preferred stockholders of record as of
October 1, 2012.
The Company had approximately $518
million of estimated undistributed taxable income as of
September 30, 2012, or $1.52 per
common share, after adjusting for the third quarter common and
preferred dividends declared, but without adjustment for future
quarterly dividends not yet declared on the Company's 8.000% Series
A Cumulative Redeemable Preferred Stock.
FINANCIAL STATEMENTS, OPERATING PERFORMANCE AND PORTFOLIO
STATISTICS
The following measures of operating performance
include net spread income and estimated taxable income, which are
Non-GAAP financial measures. Please refer to "Use of Non-GAAP
Financial Information" later in this release for further discussion
of non-GAAP measures.
AMERICAN
CAPITAL AGENCY CORP.
|
CONSOLIDATED BALANCE SHEETS
|
(in
millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2012
|
|
June 30,
2012
|
|
March 31,
2012
|
|
December 31,
2011
|
|
September 30,
2011
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
(unaudited)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
securities, at fair value (including pledged securities of $85,223,
$71,809, $71,156, $50,405 and $36,166, respectively)
|
$
|
88,020
|
|
|
$
|
76,378
|
|
|
$
|
80,517
|
|
|
$
|
54,625
|
|
|
$
|
41,909
|
|
Agency
securities transferred to consolidated variable interest entities,
at fair value
|
1,620
|
|
|
1,544
|
|
|
53
|
|
|
58
|
|
|
61
|
|
U.S.
Treasury securities, at fair value (including pledged securities of
$101 and $0, respectively)
|
—
|
|
|
—
|
|
|
—
|
|
|
101
|
|
|
301
|
|
Cash and
cash equivalents
|
2,569
|
|
|
2,099
|
|
|
1,762
|
|
|
1,367
|
|
|
984
|
|
Restricted
cash
|
369
|
|
|
302
|
|
|
315
|
|
|
336
|
|
|
375
|
|
Derivative
assets, at fair value
|
292
|
|
|
64
|
|
|
184
|
|
|
82
|
|
|
55
|
|
Receivable
for securities sold (including pledged securities of $1,466,
$2,674, $1,442, $319 and $2,694, respectively)
|
2,326
|
|
|
2,877
|
|
|
1,706
|
|
|
443
|
|
|
2,698
|
|
Receivable
under reverse repurchase agreements
|
6,712
|
|
|
1,274
|
|
|
3,613
|
|
|
763
|
|
|
474
|
|
Other
assets
|
269
|
|
|
244
|
|
|
267
|
|
|
197
|
|
|
182
|
|
Total
assets
|
$
|
102,177
|
|
|
$
|
84,782
|
|
|
$
|
88,417
|
|
|
$
|
57,972
|
|
|
$
|
47,039
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
$
|
79,254
|
|
|
$
|
69,540
|
|
|
$
|
69,816
|
|
|
$
|
47,681
|
|
|
$
|
38,842
|
|
Other debt
(1)
|
1,008
|
|
|
954
|
|
|
50
|
|
|
54
|
|
|
57
|
|
Payable
for securities purchased
|
1,311
|
|
|
2,198
|
|
|
4,852
|
|
|
1,919
|
|
|
1,660
|
|
Derivative
liabilities, at fair value
|
1,562
|
|
|
1,250
|
|
|
827
|
|
|
853
|
|
|
793
|
|
Dividends
payable
|
430
|
|
|
384
|
|
|
286
|
|
|
314
|
|
|
257
|
|
Obligation to return securities borrowed under
reverse
|
7,265
|
|
|
1,269
|
|
|
3,816
|
|
|
899
|
|
|
473
|
|
repurchase agreements, at fair value
|
Accounts
payable and other accrued liabilities
|
74
|
|
|
51
|
|
|
52
|
|
|
40
|
|
|
17
|
|
Total
liabilities
|
90,904
|
|
|
75,646
|
|
|
79,699
|
|
|
51,760
|
|
|
42,099
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
8.000%
Series A Cumulative Redeemable Preferred Stock; $0.01 par value;
6.9, 6.9, 0.0, 0.0 and 0.0 shares issued and outstanding,
respectively; liquidation preference of $25 per share
($173)
|
167
|
|
|
167
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Common
stock, $0.01 par value; 600.0, 600.0, 300.0, 300.0, and 300.0
shares authorized; 341.6, 304.8, 300.0, 224.1 and 183.6 shares
issued and outstanding, respectively
|
3
|
|
|
3
|
|
|
3
|
|
|
2
|
|
|
2
|
|
Additional
paid-in capital
|
9,536
|
|
|
8,296
|
|
|
8,141
|
|
|
5,937
|
|
|
4,829
|
|
Retained
(deficit) earnings
|
(671)
|
|
|
(328)
|
|
|
317
|
|
|
(38)
|
|
|
67
|
|
Accumulated other comprehensive income
|
2,238
|
|
|
998
|
|
|
257
|
|
|
311
|
|
|
42
|
|
Total
stockholders' equity
|
11,273
|
|
|
9,136
|
|
|
8,718
|
|
|
6,212
|
|
|
4,940
|
|
Total
liabilities and stockholders' equity
|
$
|
102,177
|
|
|
$
|
84,782
|
|
|
$
|
88,417
|
|
|
$
|
57,972
|
|
|
$
|
47,039
|
|
|
|
|
|
|
|
|
|
|
|
Net
book value per common share
|
$
|
32.49
|
|
|
$
|
29.41
|
|
|
$
|
29.06
|
|
|
$
|
27.71
|
|
|
$
|
26.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN
CAPITAL AGENCY CORP.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in
millions, except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
September
30,
2012
|
|
June
30,
2012
|
|
March
31,
2012
|
|
December
31,
2011
|
|
September 30,
2011
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
|
520
|
|
|
$
|
504
|
|
|
$
|
514
|
|
|
$
|
353
|
|
|
$
|
327
|
|
Interest
expense (2)
|
139
|
|
|
120
|
|
|
106
|
|
|
90
|
|
|
95
|
|
Net
interest income
|
381
|
|
|
384
|
|
|
408
|
|
|
263
|
|
|
232
|
|
|
|
|
|
|
|
|
|
|
|
Other
(loss) income, net:
|
|
|
|
|
|
|
|
|
|
Gain on
sale of agency securities, net
|
210
|
|
|
417
|
|
|
216
|
|
|
112
|
|
|
263
|
|
(Loss)
gain on derivative instruments and other securities, net
(2)
|
(460)
|
|
|
(1,029)
|
|
|
47
|
|
|
(137)
|
|
|
(222)
|
|
Total
other (loss) income, net
|
(250)
|
|
|
(612)
|
|
|
263
|
|
|
(25)
|
|
|
41
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Management
fees
|
32
|
|
|
28
|
|
|
22
|
|
|
18
|
|
|
16
|
|
General
and administrative expenses
|
8
|
|
|
8
|
|
|
6
|
|
|
6
|
|
|
6
|
|
Total
expenses
|
40
|
|
|
36
|
|
|
28
|
|
|
24
|
|
|
22
|
|
Income
(loss) before income tax provision (benefit)
|
91
|
|
|
(264)
|
|
|
643
|
|
|
214
|
|
|
251
|
|
Income tax
provision (benefit)
|
5
|
|
|
(3)
|
|
|
2
|
|
|
5
|
|
|
1
|
|
Net
income (loss)
|
86
|
|
|
(261)
|
|
|
641
|
|
|
209
|
|
|
250
|
|
Dividend
on preferred stock
|
3
|
|
|
3
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
income (loss) available (attributable) to common
shareholders
|
$
|
83
|
|
|
$
|
(264)
|
|
|
$
|
641
|
|
|
$
|
209
|
|
|
$
|
250
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
$
|
86
|
|
|
$
|
(261)
|
|
|
$
|
641
|
|
|
$
|
209
|
|
|
$
|
250
|
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
Unrealized
gain (loss) on available-for-sale securities, net
|
1,190
|
|
|
689
|
|
|
(106)
|
|
|
214
|
|
|
536
|
|
Unrealized
gain (loss) on derivative instruments, net
(2)
|
51
|
|
|
52
|
|
|
52
|
|
|
54
|
|
|
(512)
|
|
Other
comprehensive income (loss)
|
1,241
|
|
|
741
|
|
|
(54)
|
|
|
268
|
|
|
24
|
|
Comprehensive income
|
1,327
|
|
|
480
|
|
|
587
|
|
|
477
|
|
|
274
|
|
Dividend
on preferred stock
|
3
|
|
|
3
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Comprehensive income available to common
shareholders
|
$
|
1,324
|
|
|
$
|
477
|
|
|
$
|
587
|
|
|
$
|
477
|
|
|
$
|
274
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding -
basic and
diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per common share - basic and diluted
|
$
|
0.25
|
|
|
$
|
(0.88)
|
|
|
$
|
2.66
|
|
|
$
|
0.99
|
|
|
$
|
1.39
|
|
Comprehensive income per common share - basic and
diluted
|
$
|
3.98
|
|
|
$
|
1.58
|
|
|
$
|
2.44
|
|
|
$
|
2.27
|
|
|
$
|
1.51
|
|
Estimated REIT taxable income per common share
- basic and diluted (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share
|
$
|
1.25
|
|
|
$
|
1.25
|
|
|
$
|
1.25
|
|
|
$
|
1.40
|
|
|
$
|
1.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN
CAPITAL AGENCY CORP.
|
RECONCILIATION OF GAAP NET INTEREST INCOME TO
ADJUSTED NET INTEREST INCOME AND NET SPREAD
INCOME(3)
|
(in
millions, except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
September
30,
2012
|
|
June
30,
2012
|
|
March
31,
2012
|
|
December
31,
2011
|
|
September 30,
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
|
520
|
|
|
$
|
504
|
|
|
$
|
514
|
|
|
$
|
353
|
|
|
$
|
327
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements and other debt
|
88
|
|
|
68
|
|
|
54
|
|
|
36
|
|
|
24
|
|
Interest
rate swap periodic costs(2)
|
51
|
|
|
52
|
|
|
52
|
|
|
54
|
|
|
71
|
|
Total
interest expense
|
139
|
|
|
120
|
|
|
106
|
|
|
90
|
|
|
95
|
|
Net
interest income
|
381
|
|
|
384
|
|
|
408
|
|
|
263
|
|
|
232
|
|
Other
interest rate swap periodic costs (4)
|
74
|
|
|
62
|
|
|
39
|
|
|
33
|
|
|
2
|
|
Adjusted
net interest income
|
307
|
|
|
322
|
|
|
369
|
|
|
230
|
|
|
230
|
|
Operating
expenses
|
40
|
|
|
36
|
|
|
28
|
|
|
24
|
|
|
22
|
|
Net spread
income
|
267
|
|
|
286
|
|
|
341
|
|
|
206
|
|
|
208
|
|
Dividend
on preferred stock
|
3
|
|
|
3
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net spread
income available to common shareholders
|
$
|
264
|
|
|
$
|
283
|
|
|
$
|
341
|
|
|
$
|
206
|
|
|
$
|
208
|
|
Weighted
average number of common shares outstanding - basic and
diluted
|
332.8
|
|
|
301.0
|
|
|
240.6
|
|
|
210.3
|
|
|
180.7
|
|
Net spread
income per common share - basic and diluted
|
$
|
0.79
|
|
|
$
|
0.94
|
|
|
$
|
1.42
|
|
|
$
|
0.98
|
|
|
$
|
1.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN
CAPITAL AGENCY CORP.
|
RECONCILIATION OF GAAP NET INCOME TO ESTIMATED
TAXABLE INCOME(3)
|
(in
millions, except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
September
30,
2012
|
|
June
30,
2012
|
|
March
31,
2012
|
|
December
31,
2011
|
|
September 30,
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
86
|
|
|
$
|
(261)
|
|
|
$
|
641
|
|
|
$
|
209
|
|
|
$
|
250
|
|
Book to
tax differences:
|
|
|
|
|
|
|
|
|
|
Premium
amortization, net
|
55
|
|
|
43
|
|
|
(28)
|
|
|
20
|
|
|
34
|
|
Realized
loss (gain), net
|
167
|
|
|
54
|
|
|
(46)
|
|
|
28
|
|
|
3
|
|
Unrealized
loss (gain), net
|
128
|
|
|
647
|
|
|
(80)
|
|
|
86
|
|
|
47
|
|
Other
|
20
|
|
|
9
|
|
|
2
|
|
|
(5)
|
|
|
1
|
|
Total book
to tax differences
|
370
|
|
|
753
|
|
|
(152)
|
|
|
129
|
|
|
85
|
|
Estimated
REIT taxable income
|
456
|
|
|
492
|
|
|
489
|
|
|
338
|
|
|
335
|
|
Dividend
on preferred stock
|
3
|
|
|
3
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Estimated
REIT taxable income available to common shareholders
|
$
|
453
|
|
|
$
|
489
|
|
|
$
|
489
|
|
|
$
|
338
|
|
|
$
|
335
|
|
Weighted
average number of common shares outstanding - basic and
diluted
|
332.8
|
|
|
301.0
|
|
|
240.6
|
|
|
210.3
|
|
|
180.7
|
|
Estimated
REIT taxable income per common share - basic and diluted
|
$
|
1.36
|
|
|
$
|
1.62
|
|
|
$
|
2.03
|
|
|
$
|
1.61
|
|
|
$
|
1.86
|
|
Estimated
cumulative undistributed REIT taxable income per common share
(5)
|
$
|
1.52
|
|
|
$
|
1.61
|
|
|
$
|
1.28
|
|
|
$
|
0.80
|
|
|
$
|
0.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN
CAPITAL AGENCY CORP.
|
KEY
STATISTICS*
|
(in
millions, except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
September
30,
2012
|
|
June
30,
2012
|
|
March
31,
2012
|
|
December
31,
2011
|
|
September 30,
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate
agency securities, at fair value - as of period end
|
$
|
87,882
|
|
|
$
|
75,732
|
|
|
$
|
77,675
|
|
|
$
|
51,484
|
|
|
$
|
38,278
|
|
Adjustable-rate agency securities, at fair value - as
of period end
|
$
|
992
|
|
|
$
|
1,072
|
|
|
$
|
2,500
|
|
|
$
|
2,774
|
|
|
$
|
3,238
|
|
CMO agency
securities, at fair value - as of period end
|
$
|
191
|
|
|
$
|
568
|
|
|
$
|
228
|
|
|
$
|
247
|
|
|
$
|
246
|
|
Interest-only strips agency securities, at fair value
- as of period end
|
$
|
307
|
|
|
$
|
276
|
|
|
$
|
133
|
|
|
$
|
141
|
|
|
$
|
168
|
|
Principal-only strips agency securities, at fair
value - as of period end
|
$
|
268
|
|
|
$
|
274
|
|
|
$
|
34
|
|
|
$
|
37
|
|
|
$
|
40
|
|
Total
agency securities, at fair value - as of period end
|
$
|
89,640
|
|
|
$
|
77,922
|
|
|
$
|
80,570
|
|
|
$
|
54,683
|
|
|
$
|
41,970
|
|
Total
agency securities, at cost - as of period end
|
$
|
86,850
|
|
|
$
|
76,352
|
|
|
$
|
79,687
|
|
|
$
|
53,694
|
|
|
$
|
41,204
|
|
Total
agency securities, at par - as of period end
(6)
|
$
|
82,435
|
|
|
$
|
72,683
|
|
|
$
|
76,023
|
|
|
$
|
51,266
|
|
|
$
|
39,319
|
|
Average
agency securities, at cost
|
$
|
81,500
|
|
|
$
|
74,007
|
|
|
$
|
61,962
|
|
|
$
|
46,060
|
|
|
$
|
41,668
|
|
Average
agency securities, at par (6)
|
$
|
77,519
|
|
|
$
|
70,549
|
|
|
$
|
59,082
|
|
|
$
|
43,968
|
|
|
$
|
39,892
|
|
Average
repurchase agreements and other debt
|
$
|
75,106
|
|
|
$
|
67,997
|
|
|
$
|
57,480
|
|
|
$
|
42,184
|
|
|
$
|
38,484
|
|
Average
stockholders' equity (7)
|
$
|
10,602
|
|
|
$
|
9,071
|
|
|
$
|
6,984
|
|
|
$
|
5,564
|
|
|
$
|
4,872
|
|
Net book
value per common share as of period end (8)
|
$
|
32.49
|
|
|
$
|
29.41
|
|
|
$
|
29.06
|
|
|
$
|
27.71
|
|
|
$
|
26.90
|
|
Leverage -
average during the period (9)
|
7.1:1
|
|
7.5:1
|
|
8.2:1
|
|
7.6:1
|
|
7.9:1
|
Leverage -
as of period end (10)
|
7.0:1
|
|
7.6:1
|
|
8.4:1
|
|
7.9:1
|
|
7.7:1
|
|
|
|
|
|
|
|
|
|
|
Key
Performance Statistics:
|
|
|
|
|
|
|
|
|
|
Average
coupon (11)
|
3.81
|
%
|
|
3.96
|
%
|
|
4.15
|
%
|
|
4.31
|
%
|
|
4.40
|
%
|
Average
asset yield (12)
|
2.55
|
%
|
|
2.73
|
%
|
|
3.32
|
%
|
|
3.06
|
%
|
|
3.14
|
%
|
Average
cost of funds (13)
|
(1.13)
|
%
|
|
(1.08)
|
%
|
|
(1.01)
|
%
|
|
(1.16)
|
%
|
|
(1.00)
|
%
|
Average
net interest rate spread (14)
|
1.42
|
%
|
|
1.65
|
%
|
|
2.31
|
%
|
|
1.90
|
%
|
|
2.14
|
%
|
Average
coupon - as of period end
|
3.77
|
%
|
|
3.86
|
%
|
|
3.99
|
%
|
|
4.23
|
%
|
|
4.35
|
%
|
Average
asset yield - as of period end
|
2.61
|
%
|
|
2.81
|
%
|
|
3.06
|
%
|
|
3.07
|
%
|
|
3.18
|
%
|
Average
cost of funds - as of period end (15)
|
(1.11)
|
%
|
|
(1.19)
|
%
|
|
(0.99)
|
%
|
|
(1.13)
|
%
|
|
(1.24)
|
%
|
Average
net interest rate spread - as of period end
|
1.50
|
%
|
|
1.62
|
%
|
|
2.07
|
%
|
|
1.94
|
%
|
|
1.94
|
%
|
Average
actual CPR for securities held during the period
|
9
|
%
|
|
10
|
%
|
|
10
|
%
|
|
9
|
%
|
|
8
|
%
|
Average
forecasted CPR - as of period end
|
14
|
%
|
|
12
|
%
|
|
9
|
%
|
|
14
|
%
|
|
13
|
%
|
Total
premium amortization, net
|
$
|
(219)
|
|
|
$
|
(196)
|
|
|
$
|
(100)
|
|
|
$
|
(121)
|
|
|
$
|
(113)
|
|
Expenses %
of average assets
|
0.17
|
%
|
|
0.18
|
%
|
|
0.16
|
%
|
|
0.19
|
%
|
|
0.18
|
%
|
Expenses %
of average stockholders' equity
|
1.50
|
%
|
|
1.59
|
%
|
|
1.60
|
%
|
|
1.74
|
%
|
|
1.75
|
%
|
Net
comprehensive income return on average common equity -
annualized (16)
|
50.4
|
%
|
|
21.5
|
%
|
|
33.7
|
%
|
|
34.0
|
%
|
|
22.3
|
%
|
Dividends
declared per common share
|
$
|
1.25
|
|
|
$
|
1.25
|
|
|
$
|
1.25
|
|
|
$
|
1.40
|
|
|
$
|
1.40
|
|
Economic
return on common equity - annualized
(17)
|
58.6
|
%
|
|
22.1
|
%
|
|
37.7
|
%
|
|
32.6
|
%
|
|
22.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*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.
- Other debt consists of debt outstanding in connection with
the consolidation of structured transactions under GAAP.
- The Company voluntarily discontinued hedge accounting under
GAAP for interest rate swaps as of September
30, 2011. Accumulated other comprehensive loss ("OCI")
on the Company's de-designated interest rate swaps as of
September 30, 2011 is being amortized
on a straight-line basis over the remaining swap terms into
interest expense. All other periodic interest costs,
termination fees and mark-to-market adjustments associated with
interest rate swaps are reported in other income (loss), net
pursuant to GAAP. Other income (loss), net includes
$74 million, $62 million, $39
million, $33 million and
$2 million of other periodic swap
interest costs for the three months ended September 30, 2012, June
30, 2012, March 31, 2012,
December 31, 2011 and September 30, 2011, respectively.
- Table includes non-GAAP financial measures. Refer to "Use
of Non-GAAP Financial Information" for additional discussion of
non-GAAP financial measures.
- Other interest rate swap periodic costs represent periodic
interest costs on the Company's interest rate swap portfolio in
excess of amounts reclassified from accumulated OCI into interest
expense. Other interest rate swap periodic costs does not include
termination fees or mark-to-market adjustments associated with
interest rate swaps.
- Estimated cumulative undistributed REIT taxable income as of
period end is net of common and preferred dividends declared during
the period, without adjustment for future quarterly dividends not
yet declared on the Company's 8.000% Series A Cumulative Redeemable
Preferred Stock. Amount divided by total common shares
outstanding as of each period end.
- Average agency securities, at par, excludes the underlying
unamortized principal balance ("UPB") of the Company's
interest-only securities.
- Average stockholders' equity calculated as the average
month-ended stockholders' equity during the quarter.
- Net book value per common share calculated as total
stockholders' equity, less the Company's 8.000% Series A Cumulative
Redeemable Preferred Stock liquidation preference of $25 per preferred share, divided by the number of
common shares outstanding as of period end.
- Leverage during the period was calculated by dividing the daily
weighted average repurchase agreements and other debt outstanding,
less repurchase agreements for treasury securities, for the period
by the average stockholders' equity for the period.
- Leverage at period end was calculated by dividing the sum of
the amount outstanding under repurchase agreements, net receivable
/ payable for unsettled agency securities and other debt by total
stockholders' equity at period end.
- Weighted average coupon for the period was calculated by
dividing the total coupon (or cash) interest income on agency
securities by average agency securities held at par.
- Weighted average asset yield for the period was calculated by
dividing the total interest income on agency securities (coupon
interest less amortization of premiums and discounts) by the
average amortized cost of agency securities held.
- Cost of funds includes repurchase agreements, other debt and
interest rate swaps (including de-designated swaps and swaps never
designated as hedges under GAAP), but excludes swap termination
fees and costs associated with other supplemental hedges such as
swaptions and short treasury or TBA positions. Weighted average
cost of funds for the period was calculated by dividing the total
cost of funds by the average repurchase agreements and other debt
outstanding, less repurchase agreements for treasury securities,
for the period.
- Net interest rate spread for the period was calculated by
subtracting the average cost of funds from the average asset
yield.
- Cost of funds as of period end includes repurchase agreements
and other debt outstanding, plus the impact of interest rate swaps
in effect as of each period end and forward starting swaps becoming
effective, net of swaps expiring, within three months of each
period end, but excludes costs associated with other supplemental
hedges such as swaptions and short treasury or TBA
positions.
- Net comprehensive income return on average common equity for
the period was calculated by dividing comprehensive income
available to common shareholders by average common equity.
- Economic return on common equity represents the sum of the
change in net asset value per common share and dividends declared
on common stock during the period over the beginning net asset
value per common share.
STOCKHOLDER CALL
AGNC invites stockholders,
prospective stockholders and analysts to attend the AGNC
stockholder call on November 1, 2012
at 8:30 am ET. The stockholder
call can be accessed through a live webcast, free of charge, at
www.AGNC.com or by dialing (877) 270-2148 (U.S. domestic) or
+1 (412) 902-6510 (international). Please advise the operator you
are dialing in for the American Capital Agency stockholder
call. If you do not plan on asking a question on the call and
have access to the internet, please take advantage of the webcast.
The stockholder call may be postponed depending on when equity
markets reopen following Hurricane Sandy.
A slide presentation will accompany the call and will be
available at www.AGNC.com. Select the Q3 2012 Earnings
Presentation link to download and print the presentation in advance
of the Stockholder Call.
An archived audio of the shareholder call combined with the
slide presentation will be made available on the AGNC website after
the call on November 1. In addition, there will be a phone
recording available from 2:00 pm ET November 1 until
9:00 am ET November 16. If you are interested in hearing the
recording of the presentation, please dial (877) 344-7529 (U.S.
domestic) or (412) 317-0088 (international). The conference
ID number is 10019151.
For further information, please contact Investor Relations at
(301) 968-9300 or IR@AGNC.com.
ABOUT AMERICAN CAPITAL AGENCY CORP.
American Capital
Agency Corp. is a real estate investment trust ("REIT") that
invests in agency pass-through securities and collateralized
mortgage obligations for which the principal and interest payments
are guaranteed by a U.S. Government agency or a U.S.
Government-sponsored entity. The Company is externally
managed and advised by American Capital AGNC Management, LLC, an
affiliate of American Capital, Ltd. For further information,
please refer to www.AGNC.com.
ABOUT AMERICAN CAPITAL, LTD.
American Capital, Ltd.,
is a publicly traded private equity firm and global asset
manager. American Capital, both directly and through its
asset management business, originates, underwrites and manages
investments in middle market private equity, leveraged finance,
real estate and structured products. American Capital manages
$17 billion of assets, including
assets on its balance sheet and fee earning assets under management
by affiliated managers, with $100
billion of total assets under management (including levered
assets). From its seven offices in the U.S. and Europe, American Capital and its affiliate,
European Capital, will consider investment opportunities from
$10 million to $500 million.
For further information, please refer to
www.AmericanCapital.com.
FORWARD LOOKING STATEMENTS
This press release contains
forward-looking statements. Forward-looking statements are
based on estimates, projections, beliefs and assumptions of
management of the Company at the time of such statements and are
not guarantees of future performance. 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 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 or new information, or
otherwise.
USE OF NON-GAAP FINANCIAL INFORMATION
In addition to
the results presented in accordance with GAAP, this release
includes certain non-GAAP financial information, including net
spread income, estimated taxable income and certain financial
metrics derived from non-GAAP information, such as estimated
undistributed taxable income, which the Company's management uses
in its internal analysis of results, and believes may be
informative to investors.
Net spread income consists of adjusted net interest income, less
total operating expenses. Adjusted net interest income is
interest income less interest expense (or "GAAP net interest
income"), less other periodic interest rate swap interest costs
reported in other income (loss), net.
Estimated taxable income is pre-tax income calculated in
accordance with the requirements of the Internal Revenue Code
rather than GAAP. Estimated taxable income differs from GAAP
income because of both temporary and permanent differences in
income and expense recognition. Examples include (i) unrealized
gains and losses associated with interest rate swaps and other
derivatives and securities marked-to-market in current income for
GAAP purposes, but excluded from estimated taxable income until
realized or settled, (ii) temporary differences related to the
amortization of premiums paid on investments and (iii) timing
differences in the recognition of certain realized gains and
losses. Furthermore, estimated taxable income can include certain
information that is subject to potential adjustments up to the time
of filing of the appropriate tax returns, which occurs after the
end of the calendar year of the Company.
The Company believes that these non-GAAP financial measures
provide information useful to investors because net spread income
is a financial metric used by management and investors and
estimated taxable income is directly related to the amount of
dividends the Company is required to distribute in order to
maintain its REIT tax qualification status. The Company also
believes that providing investors with net spread income, estimated
taxable income and certain financial metrics derived based on such
estimated taxable income, in addition to the related GAAP measures,
gives investors greater transparency to the information used by
management in its financial and operational decision-making.
However, because net spread income and estimated taxable income are
an incomplete measure of the Company's financial performance and
involve differences from net income computed in accordance with
GAAP, net spread income and estimated taxable income should be
considered as supplementary to, and not as a substitute for, the
Company's net income computed in accordance with GAAP as a measure
of the Company's financial performance. In addition, because not
all companies use identical calculations, the Company's
presentation of net spread income and estimated taxable income may
not be comparable to other similarly-titled measures of other
companies.
CONTACT:
Investors - (301) 968-9300
Media - (301) 968-9400
SOURCE American Capital Agency Corp.