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SEC Filings

10-K
AGNC INVESTMENT CORP. filed this Form 10-K on 02/27/2013
Entire Document
 


The table below presents a reconciliation of our interest expense (the most comparable GAAP financial measure) to our adjusted net interest expense (a non-GAAP financial measure) for fiscal years 2011 and 2010 (dollars in millions).

 
 
Fiscal Year 2011
 
Fiscal Year 2010
Adjusted Net Interest Expense and Cost of Funds
 
Amount
% (1)
 
Amount
% (1)
Interest expense:
 
 
 
 
 
 
Repurchase agreement and other debt interest expense
 
$
91

0.28
%
 
$
19

0.27
%
Periodic interest costs of interest rate swaps previously designated as hedges under GAAP, net
 
194

0.61
%
 
51

0.74
%
Amortization of termination fees on interest rate swaps designated as hedges under GAAP
 

%
 
6

0.09
%
Total interest expense
 
285

0.89
%
 
76

1.11
%
Other periodic interest costs of interest rate swaps, net
 
35

0.11
%
 

%
Total adjusted net interest expense and cost of funds
 
$
320

1.00
%
 
$
76

1.11
%
 _______________________
1.
Percent of our average repurchase agreements and other debt outstanding for the period.
The table below presents a summary of our debt and interest rate swaps outstanding for fiscal year 2011 and 2010 (dollars in millions).
 
 
Fiscal Year
Average Debt and Interest Rate Swaps Outstanding
 
2011
 
2010
Average repurchase agreements and other debt
 
$
31,840

 
$
6,865

Average notional amount of interest rate swaps
 
$
16,448

 
$
3,059

Average notional amount of interest rate swaps as a percentage of repurchase agreements and other debt
 
52
%
 
45
%
Weighted average pay rate on interest rate swaps
 
1.62
%
 
1.93
%

Our average interest rate swaps outstanding in the table above exclude our forward starting swaps not in effect during the periods presented. 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. As of December 31, 2011, we had $2.6 billion of forward starting interest rate swaps outstanding with forward start dates through May 2012, compared to $0.2 billion of interest rate swaps set to expire over the same time period. As of December 31, 2010, we had $1.7 billion of forward starting interest rate swaps outstanding with forward start dates through June 2011, compared to $0.3 billion of interest rate swaps set to expire over the same time period.
The period-over-period increase in our adjusted net interest expense was largely attributable to the increase in our investment portfolio and the corresponding increase in our average repurchase agreements and other debt balances outstanding partially offset by a lower cost of funds. Our lower cost of funds was reflective of a decrease in the weighted average pay rate on our interest rate swaps, which was partially offset by a higher ratio of interest rate swaps outstanding to repurchase agreements and other debt.
The following is a summary of the impact of changes from fiscal year 2011 to fiscal year 2010 in the principal elements of our total adjusted net interest expense and cost of funds (in millions):
Fiscal Year 2011 vs. Fiscal Year 2010
 
 
 
Due to Change in Average (1)
 
Increase
 
Volume
 
Interest Rate
Repurchase agreement and other debt interest expense
$
72

 
$
71

 
$
1

Periodic interest rate swap costs (2)
172

 
179

 
(7
)
Total adjusted net interest expense and cost of funds
$
244

 
$
250

 
$
(6
)
____________________
1.
Variances that are the combined effect of volume and yield, but cannot be separately identified, are allocated to the volume and yield variances based on their respective relative amounts.
2.
Includes amounts recognized in interest expense and in gain (loss) on derivatives and other securities in our consolidated statements of comprehensive income. Change due to interest rate reflects impact of change in the weighted average fixed pay rate, net of change in the weighted average receive rate.

53


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