December 31, 2012
December 31, 2011
ARM Months to Reset
< 1 year
≥ 1 year and < 2 years
≥ 2 years and < 3 years
≥ 3 years and < 5 years
≥ 5 years
Total / Weighted Average
As of December 31, 2012 and 2011, we did not have investments in agency debenture securities.
RESULTS OF OPERATIONS
FISCAL YEAR 2012 COMPARED TO FISCAL YEAR 2011:
In addition to the results presented in accordance with GAAP, our results of operations discussed below include certain non-GAAP financial information, including adjusted net interest expense, net spread income and estimated taxable income and certain financial metrics derived from non-GAAP information, such as cost of funds and estimated undistributed taxable income. By providing users of our financial information with such measures in addition to the related GAAP measures, we believe it gives users greater transparency into the information used by our management in its financial and operational decision-making and, in the case of estimated taxable income, information that is directly related to the amount of 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 calendar year.
Interest Income and Asset Yield
The following table summarizes our interest income for fiscal year 2012 and 2011 (dollars in millions):
Fiscal Year 2012
Fiscal Year 2011
Cash interest income
Actual portfolio CPR
Projected life CPR as of period end
Average 30-year fixed-rate mortgage rate as of period end (1)
10-year U.S. Treasury rate as of period end
Source: Freddie Mac Primary Fixed Mortgage Rate Mortgage Market Survey
Interest income increased 90% to $2.1 billion for fiscal year 2012 from $1.1 billion for fiscal year 2011 due to a 115% increase in our average investment portfolio partially offset by a 37 basis point ("bps") decline in our weighted average asset yield. The increase in our average investment portfolio was a function of follow-on equity raises during fiscal years 2011 and 2012. The decline in our average asset yield is reflective of the decline in long-term interest rates of the period primarily due to the Federal Reserve's quantitative easing measures and the result of our acquiring lower yielding securities due to changes in portfolio composition, reinvestment of proceeds received from principal repayments and deployment of capital from follow-on equity raises. We believe the impact of the decline in long-term interest rates on our portfolio was partially mitigated by repositioning our portfolio into securities that our Manager believes have more favorable prepayment attributes in a historically low rate environment.