BETHESDA, Md., Jan. 25, 2021 /PRNewswire/ -- AGNC
Investment Corp. ("AGNC" or the "Company") (Nasdaq: AGNC) today
announced financial results for the quarter ended December 31, 2020.
FOURTH QUARTER 2020 FINANCIAL HIGHLIGHTS
- $1.16 comprehensive income per
common share, comprised of:
-
- $1.37 net income per common
share
- $(0.21) other comprehensive loss
("OCI") per common share on investments marked-to-market through
OCI
- $0.75 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization cost 1
-
- Includes $0.32 per common share
of dollar roll income associated with the Company's $33.8 billion average net long position in
forward purchases and sales of Agency mortgage-backed securities
("MBS") in the "to-be-announced" ("TBA") market
- Excludes $(0.20) per common share
of estimated "catch-up" premium amortization cost due to change in
projected constant prepayment rate ("CPR") estimates
- $16.71 tangible net book value
per common share as of December 31,
2020
-
- Increased $0.83 per common share,
or 5.2%, from $15.88 per common share
as of September 30, 2020
- $0.36 dividends declared per
common share for the fourth quarter
- 7.5% economic return on tangible common equity for the
quarter
-
- Comprised of $0.36 dividends per
common share and $0.83 increase in
tangible net book value per common share
OTHER FOURTH QUARTER HIGHLIGHTS
- $97.9 billion investment
portfolio as of December 31, 2020,
comprised of:
-
- $65.1 billion Agency MBS
- $31.5 billion net TBA mortgage
position
- $1.3 billion credit risk transfer
("CRT") and non-Agency securities
- 8.5x tangible net book value "at risk" leverage as of
December 31, 2020
-
- 8.4x average tangible net book value "at risk" leverage for the
quarter
- Cash and unencumbered Agency MBS totaled approximately
$5.4 billion as of December 31, 2020
-
- Excludes unencumbered CRT and non-Agency securities and assets
held at the Company's broker-dealer subsidiary, Bethesda
Securities
- 27.6% portfolio CPR for the quarter
-
- 17.6% average projected portfolio CPR as of December 31, 2020
- 2.02% annualized net interest spread and TBA dollar roll income
for the quarter, excluding estimated "catch-up" premium
amortization cost
-
- Excludes -47 bps of "catch-up" premium amortization cost due to
change in projected CPR estimates
- 6.6 million shares, or $101
million, of common stock repurchased during the quarter
2
-
- Represents 1.2% of common stock outstanding as of September 30, 2020
- $15.32 per share average
repurchase price, inclusive of transaction costs
2020 FULL YEAR HIGHLIGHTS
- $0.47 comprehensive income per
common share, comprised of:
-
- $(0.66) net loss per common
share
- $1.13 OCI per common share
- $2.70 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization cost 1
-
- Includes $0.77 per common share
of dollar roll income
- Excludes $(0.83) per common share
of estimated "catch-up" amortization cost
- $1.56 in dividends declared per
common share
- 3.5% economic return on tangible common equity for the year,
comprised of:
-
- $1.56 dividends per common
share
- $(0.95) decrease in tangible net
book value per common share, or (5.4)%, from $17.66 per common share as of December 31, 2019
- (1.6)% total stock return
- $1.4 billion of accretive capital
transactions during the year
-
- $439 million of At-the-Market
common equity offerings, net of offering costs
- $402 million of common share
repurchases, net of repurchase costs
- $575 million of 6.125%
fixed-to-floating rate preferred equity issued in February
___________
- 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.
- Includes share repurchases settling in January 2021.
MANAGEMENT REMARKS
"In the fourth quarter, AGNC
maintained the positive momentum of the prior two quarters,
generating a 7.5% economic return on tangible common equity for our
shareholders," said Gary Kain, the
Company's Chief Executive Officer and Chief Investment
Officer. "This strong performance drove an economic return
for the year ended December 31, 2020
of 3.5%, a remarkable result considering the extraordinarily
difficult market conditions that we faced in March as a result of
the COVID-19 pandemic. These results once again demonstrate
the importance and value of AGNC's disciplined investment framework
and best-in-class risk management. Moreover, the experience
of 2020 clearly illustrates the unique value of a predominately
Agency MBS portfolio. In times of significant market stress,
the Federal Reserve (the "Fed") has repeatedly shown a commitment
to support and stabilize the U.S. housing finance system, and 2020
was no exception, as the Fed purchased $1.5
trillion of Agency MBS during the year. Against this
backdrop, the active management of our portfolio ultimately
facilitated the recovery of substantially all of the tangible net
asset value decline experienced in the first quarter.
"Although economic headwinds associated with the pandemic remain,
longer-term interest rates increased modestly during the fourth
quarter, and the yield curve steepened. The yield on the
10-year U.S. Treasury ended the quarter at 0.92%, an increase of 23
basis points from the prior quarter and 41 basis points above the
intra-year low, while two-year Treasury rates remained relatively
unchanged. This uptick in longer term interest rates, should
it continue, will ultimately lead to a more benign prepayment
environment for mortgages. While Agency MBS have appreciated
along with the vast majority of financial assets over the past
several quarters, significant Fed purchases, the potential for
slower prepayments, and attractive funding levels that will likely
remain for an extended period of time should continue to support
the risk/return equation for levered investors in Agency MBS."
"The favorable earnings environment for levered Agency MBS
investments continued during the quarter, as evidenced by AGNC's
strong economic returns and our $0.75
of net spread and dollar roll income, excluding 'catch-up'
amortization cost," said Peter
Federico, the Company's President and Chief Operating
Officer. "Mortgage supply dynamics, together with the Fed's
significant purchase activity, continued to result in attractive
return opportunities in the TBA dollar roll market, though the
incremental benefit of these positions has begun to revert to
levels more in line with historical averages. Importantly,
AGNC generated this strong net spread and dollar roll income
despite operating with lower average tangible 'at risk' leverage
during the quarter of 8.4x, down from 8.9x in the third
quarter. In addition, consistent with our commitment to
disciplined risk management, our hedge ratio increased further in
the fourth quarter, ending the year at 80%, a very meaningful
increase from the intra-year low of 66% at the end of the second
quarter.
"Finally, we repurchased $101
million, or over 6.6 million shares, of our common stock
during the fourth quarter at accretive levels. For the full
year, our common stock repurchases totaled approximately
$402 million, or nearly 30 million
shares, demonstrating our commitment to shareholder-friendly
capital markets activities."
TANGIBLE NET BOOK VALUE PER COMMON SHARE
As of
December 31, 2020, the Company's
tangible net book value per common share was $16.71 per share, an increase of 5.2% for the
quarter, compared to $15.88 per share
as of September 30, 2020. The
Company's tangible net book value per common share excludes
$526 million, or $0.97 and $0.96 per
share, of goodwill as of December 31,
2020 and September 30, 2020,
respectively.
INVESTMENT PORTFOLIO
As of December 31, 2020, the Company's investment
portfolio totaled $97.9 billion,
comprised of:
- $96.6 billion of Agency MBS and
TBA securities, including:
-
- $96.1 billion of fixed-rate
securities, comprised of:
-
- $52.7 billion 30-year MBS,
- $24.5 billion 30-year TBA
securities,
- $9.5 billion 15-year MBS,
- $7.0 billion 15-year TBA
securities, and
- $2.5 billion 20-year MBS;
and
- $0.5 billion of collateralized
mortgage obligations ("CMOs"), adjustable-rate and other Agency
securities; and
- $1.3 billion of CRT and
non-Agency securities.
As of December 31, 2020, 30-year
and 15-year fixed-rate Agency securities represented 79% and 17%,
respectively, unchanged as of September 30,
2020.
As of December 31, 2020, the
Company's fixed-rate securities' weighted average coupon was 2.89%,
compared to 3.08% as of September 30,
2020, comprised of the following weighted average
coupons:
- 3.06% for 30-year fixed-rate securities;
- 2.16% for 15-year fixed rate securities; and
- 2.58% 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,
2020, the Company's TBA position had a fair value of
$31.5 billion and a GAAP net carrying
value of $275 million reported in
derivative assets/(liabilities) on the Company's balance sheet,
compared to $29.5 billion and
$76 million, respectively, as of
September 30, 2020.
CONSTANT PREPAYMENT RATES
The Company's investment
portfolio had a weighted average CPR of 27.6% for the fourth
quarter, compared to 24.3% for the prior quarter. The
weighted average projected CPR for the remaining life of the
Company's Agency securities held as of December 31, 2020 increased to 17.6% from 15.9%
as of September 30, 2020 largely due
to lower primary mortgage rates.
The weighted average cost basis of the Company's investment
portfolio was 104.0% of par value as of December 31, 2020. Net premium amortization
cost on the Company's investment portfolio for the fourth quarter
was $(266) million, or $(0.49) per common share, which includes
"catch-up" premium amortization cost of $(107) million, or $(0.20) 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 $(209)
million, or $(0.38) per common
share, including a "catch-up" premium amortization cost of
$(50) million, or $(0.09) 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 TBA position, was 1.64% for the fourth
quarter, compared to 2.28% for the prior quarter. Excluding
"catch-up" premium amortization, the Company's average asset yield
was 2.39% for the fourth quarter, compared to 2.59% for the prior
quarter. Including the TBA position and excluding "catch-up"
premium amortization, the Company's average asset yield for the
fourth quarter was 2.07%, compared to 2.30% for the prior
quarter.
For the fourth quarter, the weighted average interest rate on
the Company's Agency repurchase agreements was 0.38%, compared to
0.40% for the prior quarter. For the fourth quarter, the
Company's TBA position had an implied financing benefit of (0.54)%,
compared to a benefit of (0.58)% for the prior quarter.
Inclusive of interest rate swaps, the Company's combined average
cost of funds for the fourth quarter was 0.05%, compared to 0.15%
for the prior quarter.
The Company's annualized net interest spread, including the TBA
position and interest rate swaps and excluding "catch-up" premium
amortization, for the fourth quarter was 2.02%, compared to 2.15%
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 $0.75 per common share, excluding $(0.20) per common share of "catch-up" premium
amortization cost, compared to $0.81
per common share for the prior quarter, excluding $(0.09) 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 December 31,
2020, $52.4 billion of Agency
repurchase agreements, $31.2 billion
of TBA dollar roll positions (at cost) and $0.2 billion of other debt were used to fund the
Company's investment portfolio. Inclusive of its TBA position
and net payable/(receivable) for unsettled investment securities,
the Company's tangible net book value "at risk" leverage ratio was
8.5x as of December 31, 2020,
compared to 8.8x as of September 30,
2020. The Company's average "at risk" leverage for the fourth
quarter was 8.4x tangible net book value, compared to 8.9x for the
prior quarter.
As of December 31, 2020, the
Company's Agency repurchase agreements had a weighted average
interest rate of 0.24%, compared to 0.37% as of September 30, 2020, and a weighted average
remaining maturity of 54 days, compared to 55 days as of
September 30, 2020. As of
December 31, 2020, $24.6 billion, or 47%, of the Company's Agency
repurchase agreements were funded through the Company's captive
broker-dealer subsidiary, Bethesda Securities, LLC.
As of December 31, 2020, the
Company's Agency repurchase agreements had remaining maturities
of:
- $42.9 billion of three months or
less;
- $7.3 billion from three to six
months; and
- $2.1 billion from six to twelve
months.
HEDGING ACTIVITIES
As of December 31, 2020, interest rate swaps, swaptions
and U.S. Treasury positions equaled 80% of the Company's
outstanding balance of Agency repurchase agreements, TBA position
and other debt, compared to 71% as of September 30, 2020.
As of December 31, 2020, the
Company's interest rate swap position totaled $43.2 billion in notional amount, compared to
$43.0 billion as of September 30, 2020. As of December 31, 2020, the Company's interest rate
swap portfolio had an average fixed pay rate of 0.15%, an average
receive rate of 0.08% and an average maturity of 5.1 years,
compared to 0.15%, 0.08% and 5.3 years, respectively, as of
September 30, 2020. As of
December 31, 2020, 71% and 29% of the
Company's interest rate swap portfolio were linked to the Secured
Overnight Financing Rate ("SOFR") and Overnight Index Swap Rate
("OIS"), respectively, compared to 69% and 31%, respectively, as of
September 30, 2020.
As of December 31, 2020, the
Company had payer swaptions outstanding totaling $10.4 billion, compared to $6.9 billion as of September 30, 2020. As of December 31, 2020, the Company had net short U.S.
Treasury positions outstanding totaling $13.1 billion, compared to $9.8 billion as of September 30, 2020.
OTHER GAIN (LOSS), NET
For the fourth quarter, the
Company recorded a net gain of $617
million in other gain (loss), net, or $1.13 per common share, compared to a net gain of
$381 million, or $0.69 per common share, for the prior
quarter. Other gain (loss), net for the fourth quarter was
comprised of:
- $133 million of net realized
gains on sales of investment securities;
- $(192) million of net unrealized
losses on investment securities measured at fair value through net
income;
- $(7) million of interest rate
swap periodic costs;
- $276 million of net gains on
interest rate swaps;
- $(7) million of net losses on
interest rate swaptions;
- $117 million of net gains on U.S.
Treasury positions;
- $176 million of TBA dollar roll
income;
- $125 million of net
mark-to-market gains on TBA securities; and
- $(4) million of other
miscellaneous losses.
OTHER COMPREHENSIVE LOSS
During the fourth quarter,
the Company recorded an other comprehensive loss of $(115) million, or $(0.21) per common share, consisting of net
unrealized losses on the Company's Agency securities recognized
through OCI, compared to $70 million,
or $0.13 per common share, of other
comprehensive income for the prior quarter.
COMMON STOCK DIVIDENDS
During the fourth quarter, the
Company declared dividends of $0.12
per share to common stockholders of record as of October 30, November
30 and December 31, 2020,
respectively, totaling $0.36 per
share for the quarter, which were paid on November 10 and December
9, 2020 and January 12, 2021,
respectively. Since its May
2008 initial public offering through the fourth quarter of
2020, the Company has declared a total of $10.4 billion in common stock dividends, or
$42.88 per common share.
The Company also announced the tax characteristics of its 2020
common stock dividends. The Company's distributions of $1.72 per common share for dividends declared
during December 2019 and the
twelve-month period ended December 31,
2020 consisted of $0.560492
ordinary dividend distributions and $1.159508 capital gain distributions per common
share for federal income tax purposes. Pursuant to rules
promulgated under the Internal Revenue Code, the dividend
distributions to common stockholders of record as of December 31, 2019 and December 31, 2020 of $0.16 and $0.12 per
common share, respectively, which were paid on January 10, 2020 and January 12, 2021, respectively, are both reported
as 2020 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 details, including the tax characteristics of the
Company's distributions for dividends paid during the twelve month
period ended December 31, 2020 on
each series of its preferred stock, please visit the Company's
website at www.AGNC.com.
STOCK REPURCHASE PROGRAM
During the fourth quarter,
the Company repurchased 6.6 million shares, or $101 million, of its common stock for an average
repurchase price of $15.32 per common
share, inclusive of transaction costs. As of December 31, 2020, $0.9
billion of common stock remained available for repurchase
pursuant to its stock repurchase program through December 31, 2021.
The Company may repurchase shares in the open market or
privately negotiated transactions or pursuant to a trading plan
that may be adopted in accordance with Rule 10b5-1 of the
Securities Exchange Act of 1934, as amended. The Company
intends to repurchase shares of its common stock under the stock
repurchase program only when the repurchase price is less than its
then-current estimate of its tangible net book value per common
share.
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,
|
|
2020
|
|
2020
|
|
2020
|
|
2020
|
|
2019
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Agency securities, at fair value
(including pledged securities of
$53,698, $55,711, $69,956, $64,154 and $92,608,
respectively)
|
$
64,836
|
|
$
66,556
|
|
$
75,488
|
|
$
70,292
|
|
$
98,516
|
Agency securities transferred to
consolidated variable interest entities,
at fair value (pledged
securities)
|
295
|
|
323
|
|
344
|
|
358
|
|
371
|
Credit risk transfer securities, at
fair value (including pledged securities
of $455, $413, $479, $360 and $309,
respectively)
|
737
|
|
653
|
|
712
|
|
574
|
|
976
|
Non-Agency securities, at fair
value (including pledged securities of
$458, $455, $511, $437 and $0,
respectively)
|
546
|
|
512
|
|
599
|
|
552
|
|
579
|
U.S. Treasury securities, at fair
value (including pledged securities of
$0, $0, $1,136, $3,721 and $97,
respectively)
|
-
|
|
-
|
|
1,181
|
|
3,721
|
|
97
|
Cash and cash
equivalents
|
1,017
|
|
857
|
|
859
|
|
1,289
|
|
831
|
Restricted cash
|
1,307
|
|
1,557
|
|
1,306
|
|
1,978
|
|
451
|
Derivative assets, at fair
value
|
391
|
|
130
|
|
140
|
|
664
|
|
190
|
Receivable for investment
securities sold (including pledged securities
of $207, $10, $480, $0 and $0,
respectively)
|
210
|
|
10
|
|
489
|
|
-
|
|
-
|
Receivable under reverse repurchase
agreements
|
11,748
|
|
8,625
|
|
7,944
|
|
4,938
|
|
10,181
|
Goodwill
|
526
|
|
526
|
|
526
|
|
526
|
|
526
|
Other assets
|
204
|
|
219
|
|
265
|
|
245
|
|
364
|
Total
assets
|
$
81,817
|
|
$
79,968
|
|
$
89,853
|
|
$
85,137
|
|
$
113,082
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
|
$
52,366
|
|
$
54,566
|
|
$
69,685
|
|
$
66,540
|
|
$
89,182
|
Debt of consolidated variable
interest entities, at fair value
|
177
|
|
192
|
|
204
|
|
214
|
|
228
|
Payable for investment securities
purchased
|
6,157
|
|
5,887
|
|
1,468
|
|
3,273
|
|
2,554
|
Derivative liabilities, at fair
value
|
2
|
|
13
|
|
3
|
|
138
|
|
6
|
Dividends payable
|
90
|
|
90
|
|
92
|
|
113
|
|
104
|
Obligation to return securities
borrowed under reverse repurchase
agreements, at fair value
|
11,727
|
|
8,372
|
|
7,929
|
|
4,886
|
|
9,543
|
Accounts payable and other
liabilities
|
219
|
|
128
|
|
122
|
|
175
|
|
424
|
Total
liabilities
|
70,738
|
|
69,248
|
|
79,503
|
|
75,339
|
|
102,041
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
Preferred Stock - aggregate
liquidation preference of $1,538, $1,538,
$1,538, $1,538 and $963, respectively)
|
1,489
|
|
1,489
|
|
1,489
|
|
1,489
|
|
932
|
Common stock - $0.01 par value;
539.5, 545.2, 555.5, 567.7 and 540.9
shares issued and outstanding,
respectively
|
5
|
|
5
|
|
6
|
|
6
|
|
5
|
Additional paid-in
capital
|
13,972
|
|
14,053
|
|
14,191
|
|
14,334
|
|
13,893
|
Retained deficit
|
(5,106)
|
|
(5,661)
|
|
(6,100)
|
|
(6,592)
|
|
(3,886)
|
Accumulated other comprehensive
income
|
719
|
|
834
|
|
764
|
|
561
|
|
97
|
Total
stockholders' equity
|
11,079
|
|
10,720
|
|
10,350
|
|
9,798
|
|
11,041
|
Total
liabilities and stockholders' equity
|
$
81,817
|
|
$
79,968
|
|
$
89,853
|
|
$
85,137
|
|
$
113,082
|
|
|
|
|
|
|
|
|
|
|
Tangible net book
value per common share 1
|
$
16.71
|
|
$
15.88
|
|
$
14.92
|
|
$
13.62
|
|
$
17.66
|
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,
|
|
2020
|
|
2020
|
|
2020
|
|
2020
|
|
2019
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
Interest income
|
$
235
|
|
$
364
|
|
$
429
|
|
$
491
|
|
$
1,519
|
Interest expense
|
52
|
|
62
|
|
134
|
|
426
|
|
674
|
Net interest
income
|
183
|
|
302
|
|
295
|
|
65
|
|
845
|
Other gain (loss),
net:
|
|
|
|
|
|
|
|
|
|
Realized gain on sale of investment
securities, net
|
133
|
|
346
|
|
153
|
|
494
|
|
1,126
|
Unrealized gain (loss) on
investment securities measured at fair value through
net income, net
|
(192)
|
|
(365)
|
|
679
|
|
197
|
|
319
|
Gain (loss) on derivative
instruments and other securities, net
|
676
|
|
400
|
|
(385)
|
|
(3,154)
|
|
(2,463)
|
Total other gain
(loss), net
|
617
|
|
381
|
|
447
|
|
(2,463)
|
|
(1,018)
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
17
|
|
13
|
|
13
|
|
13
|
|
56
|
Other operating expense
|
8
|
|
8
|
|
11
|
|
10
|
|
37
|
Total operating
expense
|
25
|
|
21
|
|
24
|
|
23
|
|
93
|
Net income
(loss)
|
775
|
|
662
|
|
718
|
|
(2,421)
|
|
(266)
|
Dividend on preferred
stock
|
25
|
|
25
|
|
25
|
|
21
|
|
96
|
Net income (loss)
available (attributable) to common stockholders
|
$
750
|
|
$
637
|
|
$
693
|
|
$
(2,442)
|
|
$
(362)
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
775
|
|
$
662
|
|
$
718
|
|
$
(2,421)
|
|
$
(266)
|
Unrealized gain (loss) on
investment securities measured at fair value through
other comprehensive income (loss), net
|
(115)
|
|
70
|
|
203
|
|
464
|
|
622
|
Comprehensive
income (loss)
|
660
|
|
732
|
|
921
|
|
(1,957)
|
|
356
|
Dividend on preferred
stock
|
25
|
|
25
|
|
25
|
|
21
|
|
96
|
Comprehensive
income (loss) available (attributable) to common
stockholders
|
$
635
|
|
$
707
|
|
$
896
|
|
$
(1,978)
|
|
$
260
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
544.8
|
|
553.2
|
|
560.3
|
|
548.0
|
|
551.6
|
Weighted average
number of common shares outstanding - diluted
|
546.4
|
|
554.3
|
|
560.8
|
|
548.0
|
|
551.6
|
Net income (loss)
per common share - basic
|
$
1.38
|
|
$
1.15
|
|
$
1.24
|
|
$
(4.46)
|
|
$
(0.66)
|
Net income (loss)
per common share - diluted
|
$
1.37
|
|
$
1.15
|
|
$
1.24
|
|
$
(4.46)
|
|
$
(0.66)
|
Comprehensive
income (loss) per common share - basic
|
$
1.17
|
|
$
1.28
|
|
$
1.60
|
|
$
(3.61)
|
|
$
0.47
|
Comprehensive
income (loss) per common share - diluted
|
$
1.16
|
|
$
1.28
|
|
$
1.60
|
|
$
(3.61)
|
|
$
0.47
|
Dividends declared
per common share
|
$
0.36
|
|
$
0.36
|
|
$
0.36
|
|
$
0.48
|
|
$
1.56
|
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,
|
|
2020
|
|
2020
|
|
2020
|
|
2020
|
|
2019
|
GAAP net
interest income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
235
|
|
$
364
|
|
$
429
|
|
$
491
|
|
$
1,519
|
Interest
expense
|
52
|
|
62
|
|
134
|
|
426
|
|
674
|
GAAP net interest
income
|
183
|
|
302
|
|
295
|
|
65
|
|
845
|
TBA dollar roll
income, net 3,4
|
176
|
|
155
|
|
78
|
|
16
|
|
425
|
Interest rate
swap periodic (cost) income, net 3,8
|
(7)
|
|
(13)
|
|
(59)
|
|
31
|
|
(48)
|
Other interest
and dividend income 3
|
-
|
|
-
|
|
1
|
|
2
|
|
3
|
Adjusted net interest and dollar
roll income
|
352
|
|
444
|
|
315
|
|
114
|
|
1,225
|
Operating
expense
|
(25)
|
|
(21)
|
|
(24)
|
|
(23)
|
|
(93)
|
Net spread and
dollar roll income
|
327
|
|
423
|
|
291
|
|
91
|
|
1,132
|
Dividend on
preferred stock
|
25
|
|
25
|
|
25
|
|
21
|
|
96
|
Net spread and dollar
roll income available to common stockholders
|
302
|
|
398
|
|
266
|
|
70
|
|
1,036
|
Estimated "catch-up" premium
amortization cost due to change in CPR
forecast 11
|
107
|
|
50
|
|
57
|
|
243
|
|
457
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization,
available to common stockholders
|
$
409
|
|
$
448
|
|
$
323
|
|
$
313
|
|
$
1,493
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
544.8
|
|
553.2
|
|
560.3
|
|
548.0
|
|
551.6
|
Weighted average
number of common shares outstanding - diluted
|
546.4
|
|
554.3
|
|
560.8
|
|
549.2
|
|
552.7
|
Net spread and dollar
roll income per common share - basic
|
$
0.55
|
|
$
0.72
|
|
$
0.47
|
|
$
0.13
|
|
$
1.88
|
Net spread and dollar
roll income per common share - diluted
|
$
0.55
|
|
$
0.72
|
|
$
0.47
|
|
$
0.13
|
|
$
1.87
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization,
per common share - basic
|
$
0.75
|
|
$
0.81
|
|
$
0.58
|
|
$
0.57
|
|
$
2.71
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization,
per common share - diluted
|
$
0.75
|
|
$
0.81
|
|
$
0.58
|
|
$
0.57
|
|
$
2.70
|
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,
|
|
2020
|
|
2020
|
|
2020
|
|
2020
|
|
2019
|
Net
income/(loss)
|
$
775
|
|
$
662
|
|
$
718
|
|
$
(2,421)
|
|
$
(266)
|
Book to tax
differences:
|
|
|
|
|
|
|
|
|
|
Premium amortization,
net
|
44
|
|
(11)
|
|
22
|
|
237
|
|
292
|
Realized gain/loss, net
|
(548)
|
|
(472)
|
|
-
|
|
2,555
|
|
1,535
|
Net
capital loss/(utilization of net capital loss
carryforward)
|
-
|
|
-
|
|
(426)
|
|
32
|
|
(394)
|
Unrealized (gain)/loss,
net
|
(121)
|
|
354
|
|
(291)
|
|
(263)
|
|
(321)
|
Other
|
5
|
|
-
|
|
(2)
|
|
(8)
|
|
(5)
|
Total book to tax
differences
|
(620)
|
|
(129)
|
|
(697)
|
|
2,553
|
|
1,107
|
Estimated REIT
taxable income
|
155
|
|
533
|
|
21
|
|
132
|
|
841
|
Dividend on preferred
stock
|
25
|
|
25
|
|
25
|
|
21
|
|
96
|
Estimated REIT
taxable income (loss), net of preferred stock dividend
|
$
130
|
|
$
508
|
|
$
(4)
|
|
$
111
|
|
$
745
|
Weighted average
number of common shares outstanding - basic
|
544.8
|
|
553.2
|
|
560.3
|
|
548.0
|
|
551.6
|
Weighted average
number of common shares outstanding - diluted
|
546.4
|
|
554.3
|
|
560.3
|
|
549.2
|
|
552.7
|
Estimated REIT
taxable income (loss) per common share - basic
|
$
0.24
|
|
$
0.92
|
|
$
(0.01)
|
|
$
0.20
|
|
$
1.35
|
Estimated REIT
taxable income (loss) per common share - diluted
|
$
0.24
|
|
$
0.92
|
|
$
(0.01)
|
|
$
0.20
|
|
$
1.35
|
|
|
|
|
|
|
|
|
|
|
Beginning cumulative
non-deductible net capital loss
|
$
-
|
|
$
-
|
|
$
426
|
|
$
394
|
|
$
394
|
Increase (decrease)
in net capital loss carryforward
|
-
|
|
-
|
|
(426)
|
|
32
|
|
(394)
|
Ending cumulative
non-deductible net capital loss
|
$
-
|
|
$
-
|
|
$
-
|
|
$
426
|
|
$
-
|
Ending cumulative
non-deductible net capital loss per common share
|
$
-
|
|
$
-
|
|
$
-
|
|
$
0.75
|
|
$
-
|
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,
|
|
2020
|
|
2020
|
|
2020
|
|
2020
|
|
2019
|
Adjusted net
interest and dollar roll income, excluding "catch-up"
premium amortization:
|
|
|
|
|
|
|
|
|
|
Economic interest
income:
|
|
|
|
|
|
|
|
|
|
Investment securities - GAAP
interest income 12
|
$
235
|
|
$
364
|
|
$
429
|
|
$
491
|
|
$
1,519
|
Estimated "catch-up" premium
amortization cost due to change in CPR
forecast 11
|
107
|
|
50
|
|
57
|
|
243
|
|
457
|
TBA dollar roll income
- implied interest income 3,6
|
129
|
|
114
|
|
74
|
|
48
|
|
365
|
Economic interest income, excluding
"catch-up" premium amortization
|
471
|
|
528
|
|
560
|
|
782
|
|
2,341
|
Economic interest
expense:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements and other
debt - GAAP interest expense
|
(52)
|
|
(62)
|
|
(134)
|
|
(426)
|
|
(674)
|
TBA
dollar roll income - implied interest benefit (expense)
3,5
|
47
|
|
41
|
|
4
|
|
(32)
|
|
60
|
Interest rate swap periodic (cost)
income, net 3,8
|
(7)
|
|
(13)
|
|
(59)
|
|
31
|
|
(48)
|
Economic interest
expense
|
(12)
|
|
(34)
|
|
(189)
|
|
(427)
|
|
(662)
|
Other
interest and dividend income 3
|
-
|
|
-
|
|
1
|
|
2
|
|
3
|
Adjusted net interest
and dollar roll income, excluding "catch-up" premium
amortization
|
$
459
|
|
$
494
|
|
$
372
|
|
$
357
|
|
$
1,682
|
|
|
|
|
|
|
|
|
|
|
Net interest
spread, excluding "catch-up" amortization:
|
|
|
|
|
|
|
|
|
|
Average asset
yield:
|
|
|
|
|
|
|
|
|
|
Investment securities
- average asset yield
|
1.64%
|
|
2.28%
|
|
2.39%
|
|
2.01%
|
|
2.09%
|
Estimated "catch-up"
premium amortization cost due to change in CPR
forecast
|
0.75%
|
|
0.31%
|
|
0.32%
|
|
0.99%
|
|
0.63%
|
Investment securities
average asset yield, excluding "catch-up" premium
amortization
|
2.39%
|
|
2.59%
|
|
2.71%
|
|
3.00%
|
|
2.72%
|
TBA securities -
average implied asset yield 6
|
1.53%
|
|
1.64%
|
|
1.90%
|
|
2.54%
|
|
1.73%
|
Average asset yield,
excluding "catch-up" premium amortization 7
|
2.07%
|
|
2.30%
|
|
2.56%
|
|
2.97%
|
|
2.50%
|
Average total cost of
funds:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
and other debt - average funding cost
|
0.38%
|
|
0.40%
|
|
0.76%
|
|
1.80%
|
|
0.96%
|
TBA securities -
average implied funding (benefit) cost 5
|
(0.54)%
|
|
(0.58)%
|
|
(0.09)%
|
|
1.67%
|
|
(0.27)%
|
Average cost of
funds, before interest rate swap periodic cost (income), net
7
|
0.02%
|
|
0.09%
|
|
0.61%
|
|
1.79%
|
|
0.67%
|
Interest rate swap
periodic cost (income), net 10
|
0.03%
|
|
0.06%
|
|
0.27%
|
|
(0.12)%
|
|
0.05%
|
Average total cost of
funds 9
|
0.05%
|
|
0.15%
|
|
0.88%
|
|
1.67%
|
|
0.72%
|
Average net interest
spread, excluding "catch-up" premium amortization
|
2.02%
|
|
2.15%
|
|
1.68%
|
|
1.30%
|
|
1.78%
|
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,
|
2020
|
|
2020
|
|
2020
|
|
2020
|
|
2019
|
Investment
securities:12
|
|
|
|
|
|
|
|
|
|
Fixed-rate Agency MBS, at fair
value - as of period end
|
$
64,615
|
|
$
66,278
|
|
$
75,165
|
|
$
69,901
|
|
$
98,074
|
Other Agency MBS, at fair value -
as of period end
|
$
516
|
|
$
601
|
|
$
667
|
|
$
749
|
|
$
813
|
Credit risk transfer securities, at
fair value - as of period end
|
$
737
|
|
$
653
|
|
$
712
|
|
$
574
|
|
$
976
|
Non-Agency MBS, at fair value - as
of period end
|
$
546
|
|
$
512
|
|
$
599
|
|
$
552
|
|
$
579
|
Total investment securities, at
fair value - as of period end
|
$
66,414
|
|
$
68,044
|
|
$
77,143
|
|
$
71,776
|
|
$
100,442
|
Total investment securities, at
cost - as of period end
|
$
63,701
|
|
$
65,024
|
|
$
73,828
|
|
$
69,343
|
|
$
98,670
|
Total investment securities, at par
- as of period end
|
$
61,270
|
|
$
62,449
|
|
$
70,878
|
|
$
66,735
|
|
$
95,561
|
Average investment securities, at
cost
|
$
57,194
|
|
$
63,893
|
|
$
71,787
|
|
$
97,889
|
|
$
93,606
|
Average investment securities, at
par
|
$
54,983
|
|
$
61,398
|
|
$
68,994
|
|
$
94,933
|
|
$
90,586
|
TBA
securities:
|
|
|
|
|
|
|
|
|
|
Net
TBA portfolio - as of period end, at fair value
|
$
31,479
|
|
$
29,536
|
|
$
20,543
|
|
$
21,222
|
|
$
7,429
|
Net
TBA portfolio - as of period end, at cost
|
$
31,204
|
|
$
29,460
|
|
$
20,413
|
|
$
20,648
|
|
$
7,404
|
Net
TBA portfolio - as of period end, carrying value
|
$
275
|
|
$
76
|
|
$
130
|
|
$
574
|
|
$
25
|
Average net TBA portfolio, at
cost
|
$
33,753
|
|
$
27,785
|
|
$
15,662
|
|
$
7,487
|
|
$
7,038
|
Average repurchase
agreements and other debt 13
|
$
53,645
|
|
$
61,008
|
|
$
69,552
|
|
$
93,538
|
|
$
88,677
|
Average stockholders'
equity 14
|
$
10,918
|
|
$
10,527
|
|
$
10,262
|
|
$
10,735
|
|
$
10,594
|
Tangible net book
value per common share 1
|
$
16.71
|
|
$
15.88
|
|
$
14.92
|
|
$
13.62
|
|
$
17.66
|
Tangible net book
value "at risk" leverage - average 15
|
8.4:1
|
|
8.9:1
|
|
8.8:1
|
|
9.9:1
|
|
9.5:1
|
Tangible net book
value "at risk" leverage - as of period end
16
|
8.5:1
|
|
8.8:1
|
|
9.2:1
|
|
9.4:1
|
|
9.4:1
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Statistics:
|
|
|
|
|
|
|
|
|
|
Investment
securities: 12
|
|
|
|
|
|
|
|
|
|
Average coupon
|
3.64%
|
|
3.73%
|
|
3.77%
|
|
3.68%
|
|
3.76%
|
Average asset yield
|
1.64%
|
|
2.28%
|
|
2.39%
|
|
2.01%
|
|
3.28%
|
Average asset yield, excluding
"catch-up" premium amortization
|
2.39%
|
|
2.59%
|
|
2.71%
|
|
3.00%
|
|
3.08%
|
Average coupon - as of period
end
|
3.39%
|
|
3.59%
|
|
3.71%
|
|
3.84%
|
|
3.68%
|
Average asset yield - as of period
end
|
2.33%
|
|
2.56%
|
|
2.64%
|
|
2.93%
|
|
3.07%
|
Average actual CPR for securities
held during the period
|
27.6%
|
|
24.3%
|
|
19.9%
|
|
12.2%
|
|
15.4%
|
Average forecasted CPR - as of
period end
|
17.6%
|
|
15.9%
|
|
16.6%
|
|
14.5%
|
|
10.8%
|
Total premium
amortization cost, net
|
$
(266)
|
|
$
(209)
|
|
$
(223)
|
|
$
(384)
|
|
$
(84)
|
TBA
securities:
|
|
|
|
|
|
|
|
|
|
Average coupon - as of period end
17
|
1.98%
|
|
2.06%
|
|
2.41%
|
|
3.02%
|
|
3.10%
|
Average implied asset yield
6
|
1.53%
|
|
1.64%
|
|
1.90%
|
|
2.54%
|
|
3.29%
|
Combined investment
and TBA securities - average asset yield, excluding "catch-
up" premium amortization 7
|
2.07%
|
|
2.30%
|
|
2.56%
|
|
2.97%
|
|
3.09%
|
Cost of
funds:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements - average
funding cost
|
0.38%
|
|
0.40%
|
|
0.76%
|
|
1.80%
|
|
2.12%
|
TBA
securities - average implied funding cost (benefit)
5
|
(0.54)%
|
|
(0.58)%
|
|
(0.09)%
|
|
1.67%
|
|
1.88%
|
Interest rate swaps - average
periodic expense (income), net 10
|
0.03%
|
|
0.06%
|
|
0.27%
|
|
(0.12)%
|
|
(0.34)%
|
Average total cost of funds,
inclusive of TBAs and interest rate swap periodic
expense (income), net 7,9
|
0.05%
|
|
0.15%
|
|
0.88%
|
|
1.67%
|
|
1.76%
|
Repurchase agreements - average
funding cost as of period end
|
0.24%
|
|
0.37%
|
|
0.41%
|
|
1.36%
|
|
2.17%
|
Interest rate swaps - average net
pay/(receive) rate as of period end 18
|
0.07%
|
|
0.07%
|
|
0.26%
|
|
0.79%
|
|
(0.30)%
|
Net interest
spread:
|
|
|
|
|
|
|
|
|
|
Combined investment and TBA
securities average net interest spread
|
1.55%
|
|
1.94%
|
|
1.42%
|
|
0.37%
|
|
1.52%
|
Combined investment and TBA
securities average net interest spread, excluding
"catch-up" premium amortization
|
2.02%
|
|
2.15%
|
|
1.68%
|
|
1.30%
|
|
1.33%
|
Expenses % of average
stockholders' equity - annualized
|
0.92%
|
|
0.80%
|
|
0.94%
|
|
0.86%
|
|
0.94%
|
Economic return
(loss) on tangible common equity - unannualized
19
|
7.5%
|
|
8.8%
|
|
12.2%
|
|
(20.2)%
|
|
9.6%
|
*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.
- 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 includes
dollar roll income (loss) on long and short TBA securities. Amount
excludes TBA mark-to-market adjustments.
- The implied funding cost/benefit 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/benefit 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 5) to the net dollar roll yield. The net
dollar roll yield is calculated by dividing dollar roll income
(Note 4) by the average net TBA balance (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.
- Cost of funds excludes other supplemental hedges used to hedge
a portion of the Company's interest rate risk (such as swaptions
and U.S. Treasury positions) and U.S. Treasury repurchase
agreements.
- Represents interest rate swap periodic cost/income measured as
a percent of total mortgage funding (Agency repurchase agreements,
other debt and net 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 goodwill. 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 goodwill. Leverage excludes U.S. Treasury
repurchase agreements.
- Average TBA coupon is for the long TBA position only.
- Includes forward starting swaps not yet in effect as of
reported period-end.
- Economic return (loss) on tangible common equity represents the
sum of the change in tangible net book value per common share and
dividends declared on common stock during the period over the
beginning tangible net book value per common share.
STOCKHOLDER CALL
AGNC invites stockholders,
prospective stockholders and analysts to attend the AGNC
stockholder call on January 26, 2021 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 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 2020 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 26, 2021. In addition, there will be a
phone recording available one hour after the call on
January 26, 2021 through February 9,
2021. 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
10150712.
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 within the meaning of the Private
Securities Litigation Reform Act. 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 other interest
and dividend income (referred to as "adjusted net interest and
dollar roll income") less (ii) total operating expense (GAAP
measure). "Net spread and dollar roll income, excluding
'catch-up' premium amortization," further excludes retrospective
"catch-up" adjustments to premium amortization cost 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.