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10-K
AGNC INVESTMENT CORP. filed this Form 10-K on 02/25/2015
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dividends we are required to distribute in order to maintain our REIT qualification status. However, because such measures are incomplete measures of our 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, our results computed in accordance with GAAP. In addition, because not all companies use identical calculations, our 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 our income tax returns, which occurs after the end of our fiscal year.

FISCAL YEAR 2014 COMPARED TO FISCAL YEAR 2013

Interest Income and Asset Yield
The following table summarizes our interest income for the fiscal years 2014 and 2013 (dollars in millions):
 
Fiscal Year 2014
 
Fiscal Year 2013
 
Amount
 
Yield
 
Amount
 
Yield
Cash/coupon interest income
$
1,945

 
3.63
 %
 
$
2,710

 
3.59
 %
Premium amortization
(473
)
 
(1.00
)%
 
(517
)
 
(0.82
)%
Interest income
$
1,472

 
2.63
 %
 
$
2,193

 
2.77
 %
Actual portfolio CPR
9
%
 
 
 
10
%
 
 
Projected life CPR as of period end
9
%
 
 
 
7
%
 
 
Average 30-year fixed rate mortgage rate as of period end 1
3.87
%
 
 
 
4.48
%
 
 
10-year U.S. Treasury rate as of period end
2.17
%
 
 
 
3.01
%
 
 
 _______________________
1.
Source: Freddie Mac Primary Fixed Mortgage Rate Mortgage Market Survey

The principal elements impacting our interest income are our average agency MBS portfolio size and the yield on our investments. The following is a summary of the estimated impact of each of these elements on the decline in interest income between fiscal years 2014 and 2013 (in millions):
Impact of Changes in Principal Elements Impacting
Interest Income
Fiscal Year 2014 vs. 2013
 
 
 
Due to Change in Average 1
 
Net
Decrease
 
Portfolio
Size
 
Asset
Yield
Interest Income
$
(721
)
 
$
(638
)
 
$
(83
)
______________________
1.
Variances that are the combined effect of changes in portfolio size and asset yield, but cannot be separately identified, are allocated to the portfolio size and asset yield variances based on their respective relative amounts.

The average par value of our agency MBS portfolio decreased by 29% for fiscal year 2014, reflective of a shift from agency MBS repo funded assets to TBA dollar roll funded assets and a smaller average capital base due to common stock share repurchases and realized losses on our portfolio during 2013. Because we recognize TBA dollar rolls as derivative instruments under GAAP, our reported interest income does not include our TBA dollar roll income, which we report in gain/loss on derivative instruments and other securities, net in our accompanying consolidated financial statements in this Annual Report on Form 10-K.
Our average asset yield for fiscal year 2014 was also impacted by changes in our asset composition and fluctuations in "catch-up" premium amortization adjustments recognized due to changes in our projected life CPR forecasts. Excluding "catch-up" premium amortization adjustments, our average asset yield for fiscal year 2014 was 2.72%, compared to 2.64% for fiscal year 2013.


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