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SEC Filings

10-Q
AGNC INVESTMENT CORP. filed this Form 10-Q on 11/06/2014
Entire Document
 


 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Average Debt and Interest Rate Swaps Outstanding
 
2014
 
2013
 
2014
 
2013
Average repurchase agreements and other debt
 
$
46,694

 
$
78,845

 
$
51,516

 
$
71,862

Average notional amount of interest rate swaps 1
 
$
32,211

 
$
50,370

 
$
35,331

 
$
48,117

Average ratio of interest rate swaps to repurchase agreements and other debt outstanding
 
69
%
 
64
%
 
69
%
 
67
%
 
 
 
 
 
 
 
 
 
Weighted average pay rate on interest rate swaps
 
1.69
%
 
1.64
%
 
1.62
%
 
1.54
%
Weighted average receive rate on interest rate swaps
 
0.21
%
 
0.24
%
 
0.21
%
 
0.25
%
Weighted average net pay rate on interest rate swaps
 
1.48
%
 
1.40
%
 
1.41
%
 
1.29
%
 _______________________
1.
Average notional amount of interest rate swaps excludes forward starting swaps not in effect during the periods presented.
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. We enter into forward starting interest rate swaps based on a variety of factors, including our Manager's 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 swap portfolio, current and anticipated swap spreads and our desire to mitigate our exposure to specific sectors of the yield curve. As of September 30, 2014, we had $13.2 billion of forward starting interest rate swaps outstanding with a weighted average forward start date of 1.4 years through April 2019 and a weighted average fixed pay rate of 3.05%. As of September 30, 2013, we had no forward starting interest rate swaps outstanding.

Net Spread and Dollar Roll Income
The table below presents a reconciliation of our net interest income (the most comparable GAAP financial measure) to our net spread and dollar roll income and to our net spread and dollar roll income, excluding estimated "catch-up" premium amortization(non-GAAP financial measures) for the three and nine months ended September 30, 2014 and 2013 (dollars in millions):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Net interest income
$
269

 
$
413

 
$
850

 
$
1,234

Other periodic interest costs of interest rate swaps, net 1
(82
)
 
(131
)
 
(252
)
 
(320
)
Dividend from REIT equity securities
2

 

 
18

 

TBA dollar roll income 1
152

 
(12
)
 
338

 
325

Adjusted net interest income
341

 
270

 
954

 
1,239

  Operating expenses
35

 
42

 
106

 
130

Net spread and dollar roll income
306

 
228

 
848

 
1,109

Dividend on preferred stock
7

 
3

 
16

 
10

Net spread and dollar roll income available to common shareholders
299

 
225

 
832

 
1,099

Estimated "catch-up" premium amortization cost (benefit) due to change in CPR forecast
3

 
12

 
28

 
(75
)
Net spread and dollar roll income, excluding "catch-up" premium amortization, available to common shareholders
$
302

 
$
237

 
$
860

 
$
1,024

 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding - basic and diluted
352.8

 
390.6

 
353.5

 
381.2

Net spread and dollar roll income per common share - basic and diluted
$
0.85

 
$
0.58

 
$
2.35

 
$
2.88

Net spread and dollar roll income, excluding "catch-up" premium amortization, per common share - basic and diluted
$
0.86

 
$
0.61

 
$
2.43

 
$
2.69

_______________________
1.
Reported in gain (loss) on derivatives and other securities, net in our consolidated statements of comprehensive income

Net spread and dollar roll income, excluding "catch-up" premium amortization, for the three months ended September 30, 2014 increased by $0.25 per common share, despite a 14% decrease in average "at risk" leverage compared to the prior year period. Net spread income for the three months ended September 30, 2014 benefited from a larger TBA position and favorable implied financing rates available in the TBA dollar roll market. Our average net interest rate spread, inclusive of TBA dollar roll income,

42


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