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SEC Filings

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


 
 
Nine Months Ended September 30, 2014
Derivative and Other Hedging Instruments
 
Notional Amount
Long/(Short)
December 31, 2013
 
Additions
 
Settlement, Termination,
Expiration or
Exercise
 
Notional Amount
Long/(Short) September 30, 2014
 
Amount of
Gain/(Loss)
Recognized in
Income on
Derivatives 1
Net TBA securities
 
$
2,119

 
134,760

 
(119,620
)
 
$
17,259

 
$
637

Interest rate swaps
 
$
(43,250
)
 
(12,325
)
 
15,350

 
$
(40,225
)
 
(993
)
Payer swaptions
 
$
(14,250
)
 
(3,750
)
 
11,850

 
$
(6,150
)
 
(160
)
Receiver swaptions
 
$

 
2,500

 

 
$
2,500

 

U.S. Treasury securities - short position
 
$
(2,007
)
 
(21,830
)
 
19,138

 
$
(4,699
)
 
(262
)
U.S. Treasury securities - long position
 
$
3,927

 
9,963

 
(12,667
)
 
$
1,223

 
72

U.S. Treasury futures contracts - short position
 
$
(1,730
)
 
(2,190
)
 
3,190

 
$
(730
)
 
(55
)
TBA put option
 
$

 
(150
)
 
150

 
$

 

 
 
 
 
 
 
 
 
 
 
$
(761
)
  ________________________________
1.
Excludes a net gain of $71 million from investments in REIT equity securities, a net loss of $6 million from debt of consolidated VIEs, a net gain of $31 million from interest and principal-only securities and other miscellaneous net losses of $7 million recognized in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income.

 
 
Nine Months Ended September 30, 2013
Derivative and Other Hedging Instruments
 
Notional Amount
Long/(Short)
December 31, 2012
 
Additions
 
Settlement, Termination,
Expiration or
Exercise
 
Notional Amount
 Long/(Short) September 30, 2013
 
Amount of
Gain/(Loss)
Recognized in
Income on
Derivatives 1
Net TBA and forward settling agency securities
 
$
12,477

 
74,996

 
(94,799
)
 
$
(7,326
)
 
$
(756
)
Interest rate swaps
 
$
(46,850
)
 
(16,700
)
 
13,350

 
$
(50,200
)
 
967

Payer swaptions
 
$
(14,450
)
 
(23,800
)
 
18,050

 
$
(20,200
)
 
276

U.S. Treasury securities - short position
 
$
(11,835
)
 
(31,408
)
 
41,333

 
$
(1,910
)
 
434

U.S. Treasury securities - long position
 
$

 
19,654

 
(14,803
)
 
$
4,851

 
50

U.S. Treasury futures contracts - short position
 
$

 
(7,359
)
 
5,629

 
$
(1,730
)
 
14

TBA put option
 
$

 
(50
)
 

 
$
(50
)
 

 
 
 
 
 
 
 
 
 
 
$
985

  ______________________
1.
Excludes a net loss of $8 million from interest and principal-only securities, a net gain of $33 million from debt of consolidated VIEs and other miscellaneous net losses of $3 million recognized in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income.

Note 7. Pledged Assets
Our repurchase agreements and derivative contracts require us to fully collateralize our obligations under the agreements based upon our counterparties' collateral requirements and their determination of the fair value of the securities pledged as collateral, which fluctuates with changes in interest rates, credit quality and liquidity conditions within the investment banking, mortgage finance and real estate industries. In addition, obligations under our derivative agreements will typically vary over time based on similar factors as well as the remaining term of the derivative contract. We are also typically required to post initial collateral upon execution of derivative transactions, such as interest rate swap agreements and TBA contracts. If we breach any of these provisions, we will be required to fully settle our obligations under the agreements, which could include a forced liquidation of our pledged collateral.
Our repurchase agreement and derivative counterparties also apply a "haircut" to our pledged collateral, which means our collateral is valued at slightly less than market value and limits the amount we can borrow against our securities. This haircut reflects the underlying risk of the specific collateral and protects our counterparty against a change in its value. Our agreements do not specify the haircut; rather haircuts are determined on an individual transaction basis.
Consequently, the use of repurchase agreements and derivative instruments exposes us to credit risk relating to potential losses that could be recognized in the event that our counterparties fail to perform their obligations under such agreements. We minimize this risk by limiting our repurchase agreement and derivative counterparties to major financial institutions with acceptable credit ratings or to a registered clearinghouse, and we monitor our positions with individual counterparties. In the event of a

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