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SEC Filings

10-K
AGNC INVESTMENT CORP. filed this Form 10-K on 02/25/2015
Entire Document
 


Leverage  
Our leverage was 5.3 times and 7.3 times our stockholders' equity as of December 31, 2014 and 2013, respectively, measured as the sum of our agency MBS repo agreements, net receivable / payable for unsettled agency securities and debt of consolidated VIEs divided by the sum of our total stockholders' equity less the fair value of our investments in REIT equity securities as of period end. Since the individual agency mortgage REITs in which we invest employ similar leverage as within our agency portfolio, we acquire these securities on an unlevered basis and, therefore, exclude from our leverage measurements the portion of our stockholders' equity allocated to investments in other mortgage REITs. In addition, our measurement of leverage excludes repurchase agreements used to fund short-term investments in U.S. Treasury securities due to the highly liquid and temporary nature of these investments.
Inclusive of our net TBA position, our total "at risk" leverage was 6.9 times and 7.5 times our stockholders' equity as of December 31, 2014 and 2013, respectively. Since we recognize our TBA commitments as derivatives under GAAP, they are not included in our repo and other debt leverage calculations; however, a long TBA position carries similar risks as if we had purchased the underlying MBS assets and funded such purchases with on-balance sheet repo agreements. Similarly, a short TBA position has substantially the same effect as selling the underlying MBS assets and reducing our on-balance sheet repurchase commitments. (Refer to Liquidity and Capital Resources for further discussion of TBA dollar roll positions). Therefore, we commonly refer to our leverage adjusted for TBA positions as our "at risk" leverage.
The table below presents our average and quarter-end repo and other debt balance, net TBA position and leverage ratios for each of the three month periods listed below (dollars in millions):
 
 
Agency MBS Repurchase Agreements
and Other Debt 1
 
Net TBA Position
Long / (Short) 2 
 
Average
Leverage during the Period 1,3
 
Average Total
"At Risk" Leverage during the Period 1,4
 
Leverage
as of
Period End 1,5
 
"At Risk" Leverage
as of
Period End 1,6
Quarter Ended
 
Average Daily
Amount
 
Maximum
Daily Amount
 
Ending
Amount
 
Average Daily
Amount
 
Ending
Amount
 
December 31, 2014
 
$
45,554

 
$
49,170

 
$
49,150

 
$
18,492

 
$
14,576

 
4.9:1
 
6.9:1
 
5.3:1
 
6.9:1
September 30, 2014
 
$
46,694

 
$
50,989

 
$
44,368

 
$
15,680

 
$
17,769

 
5.0:1
 
6.7:1
 
4.8:1
 
6.7:1
June 30, 2014
 
$
50,448

 
$
52,945

 
$
48,362

 
$
13,963

 
$
18,184

 
5.6:1
 
7.1:1
 
5.0:1
 
6.9:1
March 31, 2014
 
$
57,544

 
$
63,117

 
$
50,454

 
$
4,534

 
$
14,127

 
6.7:1
 
7.2:1
 
5.9:1
 
7.6:1
December 31, 2013
 
$
71,260

 
$
80,706

 
$
62,124

 
$
(486
)
 
$
2,276

 
7.6:1
 
7.5:1
 
7.3:1
 
7.5:1
September 30, 2013
 
$
78,845

 
$
83,859

 
$
79,117

 
$
131

 
$
(7,060
)
 
7.8:1
 
7.8:1
 
7.9:1
 
7.2:1
June 30, 2013
 
$
66,060

 
$
71,102

 
$
71,102

 
$
28,904

 
$
15,285

 
5.9:1
 
8.4:1
 
7.0:1
 
8.5:1
March 31, 2013
 
$
70,591

 
$
75,580

 
$
67,122

 
$
17,892

 
$
27,294

 
6.5:1
 
8.2:1
 
5.7:1
 
8.1:1
_______________________
1.
Excludes U.S. Treasury repo agreements.
2.
Daily average and ending net TBA position outstanding measured at cost.
3.
Average leverage during the period was calculated by dividing the sum of our daily weighted average agency repurchase agreements and debt of consolidated VIEs outstanding for the period by the sum of our average month-end stockholders' equity less our average investment in REIT equity securities for the period.
4.
Average "at risk" leverage during the period includes the components of "average leverage during the period," plus our daily weighted average net TBA position (at cost) during the period.
5.
Leverage as of period end was calculated by dividing the sum of the amount outstanding under our agency MBS repurchase agreements, net payables and receivables for unsettled agency MBS securities and debt of consolidated VIEs by the sum of our total stockholders' equity less the fair value of our investment in REIT equity securities at period end.
6.
"At risk" leverage as of period end includes the components of "leverage as of period end," plus the cost basis (or contract price) of our net TBA position.

Interest Expense and Cost of Funds 

Our interest expense is primarily comprised of interest expense on our repurchase agreements and the reclassification of accumulated OCI into interest expense related to previously de-designated interest rate swaps. Upon our election to discontinue hedge accounting under GAAP as of September 30, 2011, the net deferred loss related to our de-designated interest rate swaps remained in accumulated OCI and is being reclassified from accumulated OCI into interest expense on a straight-line basis over the remaining term of each interest rate swap.
Our "adjusted net interest expense," also referred to as our "cost of funds" when stated as a percentage of our outstanding repurchase agreements and other debt balance, includes periodic interest costs on our interest rate swaps reported in gain (loss) on derivatives and other securities, net in our consolidated statements of comprehensive income. Our cost of funds does not include swap termination fees, forward starting swaps and costs associated with our other supplemental hedges, such as swaptions and short U.S. Treasury positions. Our cost of funds also does not include the implied financing cost/benefit of our net TBA dollar

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