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SEC Filings

10-Q
AGNC INVESTMENT CORP. filed this Form 10-Q on 08/05/2016
Entire Document
 


Impact of Changes in the Principal Elements of Adjusted Net Interest Expense
Periods Ended June 30, 2016 and June 30, 2015
 
 
 
Due to Change in Average
 
Total Increase / (Decrease)
 
Borrowing / Swap Balance
 
Borrowing / Swap Rate
Three months ended:
 
 
 
 
 
Interest expense on mortgage borrowings
$
34

 
$
(4
)
 
$
38

Periodic interest rate swap costs 1
(44
)
 
(6
)
 
(38
)
Total change in adjusted net interest expense
$
(10
)
 
$
(10
)
 
$

 
 
 
 
 
 
Six months ended:
 
 
 
 
 
Interest expense on mortgage borrowings
$
57

 
$
(12
)
 
$
69

Periodic interest rate swap costs 1
(49
)
 
4

 
(53
)
Total change in adjusted net interest expense
$
8

 
$
(8
)
 
$
16

_______________________
1.
Includes amounts recognized in interest expense and in gain (loss) on derivatives and other securities, net in our consolidated statements of comprehensive income. The change due to interest rate reflects the net impact of the change in the weighted average fixed pay and variable receive rates.

The table below presents a summary of our average mortgage borrowings outstanding and our average interest rates swaps outstanding, excluding forward starting swaps, for the three and six months ended June 30, 2016 and 2015 (dollars in millions):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Average Ratio of Interest Rate Swaps Outstanding (Excluding Forward Starting Swaps) to Mortgage Borrowings Outstanding
 
2016
 
2015
 
2016
 
2015
Average mortgage borrowings
 
$
46,948

 
$
50,410

 
$
46,437

 
$
52,177

Average notional amount of interest rate swaps (excluding forward starting swaps)
 
$
33,742

 
$
35,592

 
$
34,776

 
$
34,265

Average ratio of interest rate swaps to mortgage borrowings
 
72
 %
 
71
 %
 
75
 %
 
66
 %
 
 
 
 
 
 
 
 
 
Weighted average pay rate on interest rate swaps
 
1.60
 %
 
1.67
 %
 
1.68
 %
 
1.65
 %
Weighted average receive rate on interest rate swaps
 
(0.64
)%
 
(0.26
)%
 
(0.59
)%
 
(0.25
)%
Weighted average net pay rate on interest rate swaps
 
0.96
 %
 
1.41
 %
 
1.09
 %
 
1.40
 %
 
For the three and six months ended June 30, 2016, we had an average balance of $3.4 billion and $3.6 billion, respectively, of forward starting interest rate swaps outstanding, compared to $10.4 billion and $11.7 billion, respectively, for the prior year period. Forward starting interest rate swaps do not impact our adjusted net interest expense and cost of funds until they commence accruing net interest settlements on their forward start dates. We enter into forward starting interest rate swaps based on a variety of factors, including our view of the forward yield curve and the timing of potential changes in short-term interest rates, time to deploy new capital, amount and timing of expirations of our existing interest rate swap portfolio, current and anticipated swap spreads and our desire to mitigate our exposure to specific sectors of the yield curve.
Including forward starting swaps and our net TBA position, our average ratio of interest rate swaps outstanding to our average mortgage borrowings and net TBA position (at cost) was 67% and 70% for the three and six months ended June 30, 2016, compared to 82% and 78%, respectively, for the prior year period.
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Average Ratio of Interest Rate Swaps Outstanding (Including Forward Starting Swaps) to Mortgage Borrowings and Net TBA Position
 
2016
 
2015
 
2016
 
2015
Average mortgage borrowings
 
$
46,948

 
$
50,410

 
$
46,437

 
$
52,177

Average net TBA position - at cost
 
8,238

 
5,973

 
8,191

 
6,462

Total average mortgage borrowings and net TBA position
 
$
55,186

 
$
56,383

 
$
54,628

 
$
58,639

Average notional amount of interest rate swaps (including of forward starting swaps)
 
$
37,105

 
$
46,025

 
$
38,418

 
$
45,953

Average ratio of interest rate swaps to mortgage borrowings and net TBA position
 
67
%
 
82
%
 
70
%
 
78
%


41


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