Print Page     Close Window     

SEC Filings

10-Q
AGNC INVESTMENT CORP. filed this Form 10-Q on 11/06/2015
Entire Document
 


1.
Includes agency repo, FHLB advances and debt of consolidated VIEs. 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 borrowings outstanding 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 of agency borrowings outstanding and net payables and receivables for unsettled agency securities 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 comprised of interest expense on our agency borrowings and the reclassification of accumulated OCI into interest expense related to previously de-designated interest rate swaps. Our agency borrowings primarily consist of agency repo agreements and FHLB advances. 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 agency borrowings outstanding, 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 U.S. Treasury positions. Our cost of funds also does not include the implied financing cost/benefit of our net TBA dollar roll position, but does however include interest rate swap hedge costs related to our TBA dollar roll funded assets. Consequently, our cost of funds measured as a percentage of our outstanding agency borrowings is higher than if we allocated a portion of our swap hedge costs to our TBA dollar roll funded assets.
The table below presents a reconciliation of our interest expense (the most comparable GAAP financial measure) to our adjusted net interest expense and cost of funds (non-GAAP financial measures) for the three and nine months ended September 30, 2015 and 2014 (dollars in millions):

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Adjusted Net Interest Expense and Cost of Funds
 
Amount
 
% 1
 
Amount
 
% 1
 
Amount
 
% 1
 
Amount
 
% 1
Interest expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency borrowing interest expense
 
$
53

 
0.49
%
 
$
50

 
0.41
%
 
$
165

 
0.45
%
 
$
170

 
0.44
%
Periodic interest costs of interest rate swaps previously designated as hedges under GAAP, net
 
24

 
0.22
%
 
38

 
0.33
%
 
79

 
0.21
%
 
121

 
0.31
%
Total interest expense
 
77

 
0.71
%
 
88

 
0.74
%
 
244

 
0.66
%
 
291

 
0.75
%
Other periodic interest costs of interest rate swaps, net
 
107

 
0.99
%
 
82

 
0.70
%
 
290

 
0.79
%
 
252

 
0.66
%
Total adjusted net interest expense and cost of funds
 
$
184

 
1.70
%
 
$
170

 
1.44
%
 
$
534

 
1.45
%
 
$
543

 
1.41
%
 _______________________
1.
Percent of our average agency borrowings outstanding for the period annualized.

The principal elements impacting our adjusted net interest expense are our average agency borrowings outstanding and interest rate swaps currently in effect ("current pay interest rate swaps") during the period as well as the average interest rate on our borrowings and the weighted average pay and receive rates on our interest rates swaps. The year over year increase in our cost of funds was largely due to higher swap costs as a function of increasing our ratio of interest rate swaps to our average agency borrowings outstanding. The following is a summary of the estimated impact of these elements on changes in our adjusted net interest expense for the three and nine months ended September 30, 2015 and 2014 (in millions):


40


© AGNC Investment Corp All Rights Reserved