BETHESDA, Md., Oct. 28,
2013 /PRNewswire/ -- American Capital Agency Corp. ("AGNC" or
the "Company") (Nasdaq: AGNC) today reported comprehensive income
for the third quarter of 2013 of $179
million, or $0.45 per common
share, and net book value of $25.27
per common share. Economic return for the period, defined as
dividends on common shares plus the change in net book value per
common share, was a gain of $0.56 per
common share, 2.2% for the quarter, or 8.7% on an annualized
basis.
THIRD QUARTER 2013 FINANCIAL HIGHLIGHTS
- $0.45 comprehensive income per
common share, comprised of:
- $(1.80) net loss per common
share
- $2.25 other comprehensive income
("OCI") per common share
- Includes net unrealized gains on investments marked-to-market
through OCI
- $0.58 net spread and dollar roll
income/loss per common share, comprised of:
- Interest income, net of cost of funds (including interest rate
swaps) and operating expenses
- $(0.03) per common share of
estimated net carry loss (also known as "dollar roll income/loss")
associated with the Company's net short position in agency mortgage
backed securities ("MBS") in the "to-be-announced" ("TBA")
market
- Includes $(0.03) per common share
of estimated "catch-up" premium amortization cost due to change in
projected constant prepayment rate ("CPR") estimates
- $0.29 estimated taxable income
per common share
- $0.80 dividend per common share
declared on September 19, 2013
- $0.57 estimated undistributed
taxable income per common share as of September 30, 2013
- Decreased $(0.50) per
common share from $1.07 per common
share as of June 30, 2013
- $25.27 net book value per common
share as of September 30, 2013
- Decreased $(0.24) per common
share, or (0.9)%, from $25.51 per
common share as of June 30, 2013
- 2.2% economic gain on common equity for the quarter, or 8.7%
annualized
- Comprised of $0.80 dividend per
common share and $(0.24) decrease in
net book value per common share
OTHER THIRD QUARTER HIGHLIGHTS
- $77.8 billion investment
portfolio as of September 30, 2013
- Net of $(7.3) billion net short
TBA mortgage position as of September 30, 2013
- 7.2x "at risk" leverage as of September 30, 2013
- 7.9x leverage excluding net short TBA mortgage position as of
September 30, 2013
- Decrease of 1.3x from June 30, 2013 "at risk" leverage of
8.5x
- 7.8x average "at risk" leverage during the quarter
- 7.8x average leverage during the quarter excluding net TBA
mortgage position
- 10% actual portfolio CPR for the quarter
- 8% actual portfolio CPR for the month of October 2013
- 8% average projected portfolio life CPR as of
September 30, 2013
- Excludes net TBA mortgage position
- 1.37% annualized net interest rate spread as of
September 30, 2013
- Increase from 1.24% annualized net interest rate spread as of
June 30, 2013
- Excludes net TBA mortgage position
- 1.14% annualized net interest rate spread and TBA dollar roll
income/loss for the quarter
- Includes -6 bps of estimated TBA dollar roll loss
- Includes -6 bps of "catch-up" premium amortization cost due to
change in projected CPR estimates
- 11.9 million shares of common stock repurchased during the
quarter
- Represents 3% of common shares outstanding as of June 30,
2013
- $22.16 per share average net
repurchase price
Commenting on the third quarter, Gary
Kain, President and Chief Investment Officer, said, "During
the third quarter, we continued to see substantial volatility in
both interest rates and mortgage spreads. Consistent with
what we said during our last earnings call in late July, we
remained disciplined in our approach to risk management and
prioritized book value preservation over short term earnings.
To this point, we continued to migrate the portfolio into shorter
maturity securities, lowered leverage somewhat, and maintained
relatively high hedge ratios. Given the changes we have made
to our portfolio and the significant reduction in risk positions
across the entire fixed-income landscape, we have gradually been
increasing our duration gap and begun to transition in the
direction of a more normal balance between risk and
return. That said, we remain acutely aware of the
idiosyncratic risk associated with the markets today given the
fixation on the actions of both the Federal Reserve and fiscal
debate in Washington."
Malon Wilkus, Chair and Chief
Executive Officer, commented, "Given AGNC's stock price relative to
estimated book value at various times during the third quarter, we
repurchased 11.9 million shares of our common stock at
approximately a 13% discount to our net book value per common share
as of June 30, 2013.
Furthermore, during the third quarter, the Board of Directors
increased the existing share repurchase authorization from
$500 million to $1 billion and extended the date of the
authorization through to December 31,
2014. As a management team, we remain committed to share
repurchases, when conditions are appropriate, as a means of
enhancing book value for our fellow shareholders."
NET BOOK VALUE
As of September 30, 2013, the
Company's net book value per common share was $25.27, or $(0.24)
lower than the June 30, 2013 net book value per common share
of $25.51.
INVESTMENT PORTFOLIO
As of September 30, 2013,
the Company's investment portfolio totaled $77.8 billion of agency securities, including
$(7.3) billion of net short TBA
mortgage positions, at fair value.
The Company accounts for TBA dollar roll positions as derivative
instruments and recognizes dollar roll income/loss in other income
(loss), net on the Company's financial statements. As of
September 30, 2013, the Company's net TBA mortgage portfolio
had a fair value and cost basis of approximately $(7.3) billion and $(7.1)
billion, respectively, and a net carrying value of
$(196) million reported in derivative
assets/(liabilities) on the Company's balance sheet.
As of September 30, 2013, the Company's investment
portfolio was comprised of $75.1
billion of fixed-rate securities, inclusive of the net short
TBA position; $1.0 billion of
adjustable-rate securities; and $1.7
billion of collateralized mortgage obligations ("CMOs"),
including principal and interest-only strips.
As of September 30, 2013, the Company's fixed-rate mortgage
assets were comprised of $42.1
billion less than or equal to 15-year securities,
$1.4 billion 20-year fixed-rate
securities, $38.8 billion 30-year
fixed-rate securities, $(2.0)
billion less than or equal to 15-year net short TBA securities
and $(5.2) billion 30-year net short
TBA securities, at fair value. As of September 30, 2013, less than or equal to
15-year fixed rate securities, inclusive of the net TBA position,
represented 52% of the Company's investment portfolio, an increase
from 42% as of June 30, 2013, and
30-year fixed rate securities, inclusive of the net TBA position,
represented 43% of the Company's investment portfolio, a decrease
from 56% as of June 30, 2013.
As of September 30, 2013, the Company's fixed-rate mortgage
assets, inclusive of the net TBA position, had a weighted average
coupon of 3.52%, comprised of a weighted average coupon of 3.22%
for less than or equal to 15-year fixed rate securities, 3.50%
for 20-year fixed-rate securities and 3.88% for 30-year fixed-rate
securities.
As of September 30, 2013, 65% of the Company's fixed-rate
securities, excluding the net TBA position, were comprised of
securities backed by lower loan balance mortgages and loans
originated under the U.S. Government sponsored Home Affordable
Refinance Program ("HARP"), which typically have a lower risk of
prepayment in a low or declining interest rate environment relative
to generic agency securities. The Company defines lower loan
balance securities as pools backed by original loan balances of up
to $150,000 and HARP securities as
pools backed by 100% refinance loans with original loan-to-values
of ≥ 80%. As of September 30, 2013, the weighted average
"pay-up" measured across the Company's fixed-rate mortgage asset
portfolio was approximately 0.16% over the corresponding generic
TBA price.
CONSTANT PREPAYMENT RATES
The actual CPR for the
Company's investment portfolio during the third quarter was 10%,
slightly lower than the prior quarter of 11%. The most recent
CPR published in October 2013 for the
Company's portfolio held as of September 30, 2013 was
8%. The weighted average projected CPR for the remaining life
of all of the Company's agency securities held as of
September 30, 2013 was 8%, an increase from 7% as of
June 30, 2013. The Company's net TBA dollar roll position is
not included in the CPR calculations above.
The Company amortizes or accretes premiums and discounts
associated with purchases of agency securities into interest income
using the effective yield method over the estimated life of such
securities, incorporating both actual repayments to date and
projected CPRs over the remaining life of the security. The
weighted average cost basis of the Company's investment portfolio
was 104.6% of par value as of September 30, 2013; therefore,
faster actual or projected prepayments can have a meaningful
negative impact, while slower actual or projected prepayments can
have a meaningful positive impact, on the Company's asset
yields.
Net premium amortization on the Company's investment portfolio
for the third quarter was $(168)
million, or $(0.43) per common
share, compared to $(98) million, or
$(0.25) per common share, for the
second quarter. The change in the Company's weighted average
projected CPR estimate resulted in recognition of approximately
$(12) million, or $(0.03) per common share, of "catch-up" premium
amortization cost during the third quarter, compared to
approximately $55 million, or
$0.14 per common share, of "catch-up"
premium amortization benefit during the second quarter. The
unamortized net premium balance as of September 30, 2013 was
$3.8 billion.
ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE
SPREAD
The Company's average asset yield on its agency
security portfolio for the third quarter was 2.59%, compared to
2.92% for the second quarter. Excluding the impact of
"catch-up" premium amortization cost/benefit recognized during the
current and prior quarter due to changes in projected CPR
estimates, the annualized weighted average yield on the Company's
agency security portfolio was 2.64% for the current quarter,
compared to 2.63% for the prior quarter. The Company's
average asset yield reported as of September 30, 2013 was
2.70%, largely unchanged from 2.71% as of June 30,
2013.
The Company's average cost of funds (derived from the cost of
repurchase agreements, other debt and interest rate swaps) for the
third quarter decreased 4 bps to 1.39% from 1.43% for the second
quarter. The Company's average cost of funds as of
September 30, 2013 decreased 14 bps to 1.33% from 1.47% as of
June 30, 2013. The decline in cost of funds was primarily due
to lower average swap costs associated with a smaller hedge
portfolio.
The Company's average net interest rate spread for the third
quarter was 1.20%, a decrease of 29 bps from the second quarter of
1.49%. Including estimated TBA dollar roll income/loss, the
Company's average net interest rate spread for the third quarter
was 1.14%, a decrease of 72 bps from 1.86% during the second
quarter. The Company's average net spread income for the
third quarter includes -6 bps of "catch-up" premium amortization
cost due to changes in projected CPR estimates, compared to 29 bps
of "catch-up" premium amortization benefit during the second
quarter. As of September 30, 2013, the Company's average
net interest rate spread was 1.37%, compared to 1.24%, as of
June 30, 2013.
LEVERAGE
As of September 30, 2013, $78.4 billion of the Company's repurchase
agreements were used to fund acquisitions of agency securities
("agency repo"), while the remainder, or $4.1 billion, was used to fund purchases of U.S.
Treasury securities and is not included in the Company's leverage
measurements. The Company's leverage ratio as of
September 30, 2013 was 7.9x. Inclusive of the net TBA
position, the Company's "at risk" leverage ratio as of
September 30, 2013 was 7.2x. The Company's average
leverage ratio and average "at risk" leverage ratio for the third
quarter was 7.8x.
As of September 30, 2013, the Company's agency repo
agreements had a weighted average interest rate of 0.44%, largely
unchanged from 0.45% as of June 30, 2013. As of
September 30, 2013, the Company's agency repo agreements had
remaining maturities consisting of:
- $30.9 billion of one month or
less;
- $26.3 billion from one to three
months;
- $12.0 billion from three to six
months;
- $1.9 billion from six to nine
months;
- $2.1 billion from nine to twelve
months;
- $2.3 billion from twelve to
twenty-four months;
- $2.2 billion from twenty-four to
thirty-six months; and
- $0.6 billion of greater than
thirty-six months.
As of September 30, 2013, the Company's agency repo
agreements had a weighted average remaining days to maturity of 112
days, compared to 119 days as of June 30, 2013.
HEDGING ACTIVITIES
As of September 30, 2013, 91%
of the Company's outstanding balance of repurchase agreements,
other debt and net TBA position was hedged through interest
rate swaps, swaptions and net Treasury positions, compared to 101%
as of June 30, 2013.
The Company's interest rate swap positions as of
September 30, 2013 totaled $50.2
billion in notional amount and had an average fixed pay rate
of 1.65%, a weighted average receive rate of 0.24% and a weighted
average maturity of 5.2 years. During the quarter, the
Company terminated $6.3 billion of
swaps and entered into new swap agreements totaling $0.9 billion. The new swap agreements entered
into during the quarter have an average maturity of approximately
10 years and a weighted average fixed pay rate of 2.95%. The
Company enters into swaps with longer maturities with the intention
of protecting its net book value and longer term earnings potential
against the impact of rising interest rates.
The Company utilizes interest rate swaptions to mitigate
exposure to larger, more rapid increases in interest rates.
During the quarter, the Company added $9.5
billion in notional amount of payer swaptions at a cost of
$233 million, while $13.0 billion of payer swaptions from previous
quarters expired or were terminated resulting in net realized gains
of $277 million. As of
September 30, 2013, the Company had $20.2 billion of notional value in payer
swaptions outstanding at a market value of $374 million and a cost basis of $425 million, with an average option term of 1.0
year and an average underlying interest rate swap term of 7.0
years.
The Company also utilizes long and short positions in U.S.
Treasury securities and U.S. Treasury futures to mitigate exposure
to increases in interest rates. As of September 30,
2013, the Company had a net long position of $3.0 billion (market value) in U.S. Treasury
securities and short position of $2.2
billion (market value) in U.S. Treasury futures.
OTHER INCOME (LOSS), NET
During the third quarter,
the Company recorded a net loss of $(1.1)
billion in other income (loss), net, or $(2.74) per common share, compared to a net gain
of $1.5 billion, or $3.69 per common share for the prior
quarter. Other income (loss), net for the third quarter was
comprised of:
- $(733) million of net realized
losses on sales of agency securities;
- $(91) million of net unrealized
losses on interest rate swaps and early termination fee income/cost
(excludes $47 million of unrealized
gains recognized in OCI);
- $(131) million of interest rate
swap periodic interest costs;
- $277 million of net realized
gains on interest rate swaptions;
- $(411) million of net unrealized
losses on interest rate swaptions;
- $87 million of net gains on U.S.
Treasury positions;
- $(12) million of TBA dollar roll
loss;
- $(70) million of net
mark-to-market losses on TBA mortgage positions; and
- $12 million of net gains on other
derivative instruments and securities.
OTHER COMPREHENSIVE INCOME (LOSS)
During the third
quarter, the Company recorded other comprehensive income of
$0.9 billion, or $2.25 per common share, primarily due to the
reclassification of unrealized losses from accumulated OCI to
realized losses on sales of agency securities, net during the
quarter as the Company repositioned its investment portfolio.
ESTIMATED TAXABLE INCOME
Estimated taxable income for
the third quarter was $0.29 per
common share, or $2.09 higher than
GAAP net loss per common share.
The primary differences between tax and GAAP net income are (i)
unrealized gains and losses associated with interest rate swaps and
other derivatives and securities marked-to-market in current income
for GAAP purposes, but excluded from taxable income until realized
or settled, (ii) temporary differences related to the amortization
of premiums paid on investments and (iii) timing differences in the
recognition of certain realized gains and losses.
The Company's estimated taxable income for the third quarter
excludes $(2.17) of estimated net
capital losses, which are not deductible from the Company's
ordinary taxable income, and $0.57 of
estimated net deferred ordinary gains from terminated or expired
swaptions.
THIRD QUARTER 2013 DIVIDEND DECLARATIONS
On
September 19, 2013, the Board of Directors of the Company
declared a third quarter dividend on its common stock of
$0.80 per share, compared to
$1.05 per share declared in the prior
quarter, which was paid on October 28, 2013 to common
stockholders of record as of September 30, 2013. Since its
May 2008 initial public offering, the
Company has paid a total of $4.0
billion in common dividends, or $26.96 per common share.
On September 19, 2013, the Board of Directors of the
Company declared a third quarter dividend on its 8.000% Series A
Cumulative Redeemable Preferred Stock ("Series A Preferred Stock")
of $0.50 per share. The dividend was
paid on October 15, 2013 to preferred stockholders of record
as of October 1, 2013.
As of September 30, 2013, the Company had approximately
$219 million of estimated
undistributed taxable income ("UTI"), or $0.57 per common share, net of dividends
declared. UTI excludes the Company's non-deductible net
capital losses and net deferred gains from terminated or
expired swaptions. As of September 30, 2013, the Company
had estimated cumulative non-deductible net
capital losses of $(849)
million, or $(2.21) per common
share, which may be carried forward and applied against future net
capital gains for up to five years, and the Company had estimated
net deferred gains from terminated or expired swaptions of
$222 million, or $0.58 per common share, which will be amortized
into future ordinary taxable income over the remaining terms
of the underlying swaps.
STOCK REPURCHASE PROGRAM
During the third quarter,
the Company made open market purchases of approximately 11.9
million shares of its common stock, or 3% of the Company's
outstanding shares as of June 30,
2013. The shares were purchased at an average price of
$22.16 per share, including expenses,
totaling approximately $263 million.
Since commencing a stock repurchase program in the fourth quarter
of 2012, the Company has purchased approximately 14.8 million
shares of its common stock for total consideration of approximately
$347 million, including
expenses.
The Company also announced that its Board of Directors has
increased the Company's existing stock repurchase authorization
from $500 million to up to
$1 billion of its outstanding shares
of common stock and extended it through December 31, 2014. The Company intends to only
repurchase shares when the repurchase price is less than its
estimate of the current net book value per common share.
FINANCIAL STATEMENTS, OPERATING PERFORMANCE AND PORTFOLIO
STATISTICS
The following measures of operating performance
include net spread income and estimated taxable income, which are
Non-GAAP financial measures. Please refer to "Use of Non-GAAP
Financial Information" later in this release for further discussion
of non-GAAP measures.
AMERICAN CAPITAL
AGENCY CORP.
|
CONSOLIDATED BALANCE
SHEETS
|
(in millions, except
per share data)
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2013
|
|
June 30,
2013
|
|
March 31,
2013
|
|
December 31,
2012
|
|
September 30,
2012
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
(unaudited)
|
Assets:
|
|
|
|
|
|
|
|
|
|
Agency
securities, at fair value (including pledged securities of
$80,721,
$71,261, $70,094, $79,966, and $83,600,
respectively)
|
$
|
83,805
|
|
|
$
|
75,926
|
|
|
$
|
74,874
|
|
|
$
|
83,710
|
|
|
$
|
88,020
|
|
Agency
securities transferred to consolidated variable interest entities,
at
fair value (pledged securities)
|
1,204
|
|
|
1,281
|
|
|
1,421
|
|
|
1,535
|
|
|
1,620
|
|
U.S.
Treasury securities (including pledged securities of $4,583 and
$2,569,
respectively)
|
4,823
|
|
|
3,671
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Cash and
cash equivalents
|
2,129
|
|
|
2,923
|
|
|
2,826
|
|
|
2,430
|
|
|
2,569
|
|
Restricted cash
|
77
|
|
|
1,216
|
|
|
499
|
|
|
399
|
|
|
369
|
|
Derivative assets, at fair value
|
1,246
|
|
|
1,876
|
|
|
480
|
|
|
301
|
|
|
292
|
|
Receivable for securities sold (including
pledged securities of $1,417,
$1,338, $484, $0, and $1,466, respectively)
|
1,807
|
|
|
2,070
|
|
|
734
|
|
|
—
|
|
|
2,326
|
|
Receivable under reverse repurchase agreements
|
1,808
|
|
|
9,430
|
|
|
12,291
|
|
|
11,818
|
|
|
6,712
|
|
Other
assets
|
372
|
|
|
270
|
|
|
244
|
|
|
260
|
|
|
269
|
|
Total
assets
|
$
|
97,271
|
|
|
$
|
98,663
|
|
|
$
|
93,369
|
|
|
$
|
100,453
|
|
|
$
|
102,177
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
|
$
|
82,473
|
|
|
$
|
72,451
|
|
|
$
|
66,260
|
|
|
$
|
74,478
|
|
|
$
|
79,254
|
|
Debt of
consolidated variable interest entities, at fair value
|
736
|
|
|
783
|
|
|
862
|
|
|
937
|
|
|
1,008
|
|
Payable
for securities purchased
|
979
|
|
|
3,167
|
|
|
259
|
|
|
556
|
|
|
1,311
|
|
Derivative liabilities, at fair value
|
1,015
|
|
|
1,544
|
|
|
1,217
|
|
|
1,264
|
|
|
1,562
|
|
Dividends payable
|
311
|
|
|
420
|
|
|
499
|
|
|
427
|
|
|
430
|
|
Obligation to return securities borrowed under
reverse
|
1,801
|
|
|
9,931
|
|
|
12,548
|
|
|
11,763
|
|
|
7,265
|
|
repurchase agreements, at fair
value
|
Accounts
payable and other accrued liabilities
|
71
|
|
|
87
|
|
|
82
|
|
|
132
|
|
|
74
|
|
Total
liabilities
|
87,386
|
|
|
88,383
|
|
|
81,727
|
|
|
89,557
|
|
|
90,904
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock -
$0.01 par value; 10.0 shares authorized:
|
|
|
|
|
|
|
|
|
|
8.000% Series A Cumulative Redeemable Preferred Stock; 6.9
shares
issued and outstanding; liquidation preference
of $25 per share ($173)
|
167
|
|
|
167
|
|
|
167
|
|
|
167
|
|
|
167
|
|
Common stock - $0.01
par value; 600.0 shares authorized:
|
|
|
|
|
|
|
|
|
|
384.3, 396.2, 396.5, 338.9, and 341.6 shares issued and
outstanding,
respectively
|
4
|
|
|
4
|
|
|
4
|
|
|
3
|
|
|
3
|
|
Additional paid-in capital
|
10,992
|
|
|
11,255
|
|
|
11,261
|
|
|
9,460
|
|
|
9,536
|
|
Retained
(deficit) earnings
|
(160)
|
|
|
852
|
|
|
(557)
|
|
|
(289)
|
|
|
(672)
|
|
Accumulated other comprehensive (loss) income
|
(1,118)
|
|
|
(1,998)
|
|
|
767
|
|
|
1,555
|
|
|
2,239
|
|
Total stockholders'
equity
|
9,885
|
|
|
10,280
|
|
|
11,642
|
|
|
10,896
|
|
|
11,273
|
|
Total liabilities and
stockholders' equity
|
$
|
97,271
|
|
|
$
|
98,663
|
|
|
$
|
93,369
|
|
|
$
|
100,453
|
|
|
$
|
102,177
|
|
|
|
|
|
|
|
|
|
|
|
Net book value per
common share
|
$
|
25.27
|
|
|
$
|
25.51
|
|
|
$
|
28.93
|
|
|
$
|
31.64
|
|
|
$
|
32.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN CAPITAL
AGENCY CORP.
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
(in millions, except
per share data)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
|
2013
|
|
2013
|
|
2013
|
|
2012
|
|
2012
|
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
|
558
|
|
|
$
|
545
|
|
|
$
|
547
|
|
|
$
|
570
|
|
|
$
|
520
|
|
|
Interest expense
(1)
|
145
|
|
|
131
|
|
|
140
|
|
|
147
|
|
|
139
|
|
|
Net interest
income
|
413
|
|
|
414
|
|
|
407
|
|
|
423
|
|
|
381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (loss)
income, net:
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain on sale
of agency securities, net
|
(733)
|
|
|
17
|
|
|
(26)
|
|
|
353
|
|
|
210
|
|
|
(Loss) gain on
derivative instruments and other securities, net
(1)
|
(339)
|
|
|
1,444
|
|
|
(98)
|
|
|
89
|
|
|
(460)
|
|
|
Total other (loss)
income, net
|
(1,072)
|
|
|
1,461
|
|
|
(124)
|
|
|
442
|
|
|
(250)
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Management
fees
|
35
|
|
|
37
|
|
|
33
|
|
|
31
|
|
|
32
|
|
|
General and
administrative expenses
|
7
|
|
|
9
|
|
|
9
|
|
|
9
|
|
|
8
|
|
|
Total
expenses
|
42
|
|
|
46
|
|
|
42
|
|
|
40
|
|
|
40
|
|
|
(Loss) income
before income tax provision
|
(701)
|
|
|
1,829
|
|
|
241
|
|
|
825
|
|
|
91
|
|
|
Income tax
provision
|
—
|
|
|
—
|
|
|
10
|
|
|
15
|
|
|
5
|
|
|
Net (loss)
income
|
(701)
|
|
|
1,829
|
|
|
231
|
|
|
810
|
|
|
86
|
|
|
Dividend on preferred
stock
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
Net (loss) income
(attributable) available to common shareholders
|
$
|
(704)
|
|
|
$
|
1,826
|
|
|
$
|
228
|
|
|
$
|
807
|
|
|
$
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
$
|
(701)
|
|
|
$
|
1,829
|
|
|
$
|
231
|
|
|
$
|
810
|
|
|
$
|
86
|
|
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain
(loss) on available-for-sale securities, net
|
833
|
|
|
(2,813)
|
|
|
(837)
|
|
|
(734)
|
|
|
1,190
|
|
|
Unrealized gain on
derivative instruments, net (1)
|
47
|
|
|
48
|
|
|
49
|
|
|
50
|
|
|
51
|
|
|
Other comprehensive
income (loss)
|
880
|
|
|
(2,765)
|
|
|
(788)
|
|
|
(684)
|
|
|
1,241
|
|
|
Comprehensive
income (loss)
|
179
|
|
|
(936)
|
|
|
(557)
|
|
|
126
|
|
|
1,327
|
|
|
Dividend on preferred
stock
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
Comprehensive
income (loss) available (attributable) to common
shareholders
|
$
|
176
|
|
|
$
|
(939)
|
|
|
$
|
(560)
|
|
|
$
|
123
|
|
|
$
|
1,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding -
basic and diluted
|
390.6
|
|
|
396.4
|
|
|
356.2
|
|
|
340.3
|
|
|
332.8
|
|
|
|
Net (loss) income
per common share - basic and diluted
|
$
|
(1.80)
|
|
|
$
|
4.61
|
|
|
$
|
0.64
|
|
|
$
|
2.37
|
|
|
$
|
0.25
|
|
|
Comprehensive
income (loss) per common share - basic and diluted
|
$
|
0.45
|
|
|
$
|
(2.37)
|
|
|
$
|
(1.57)
|
|
|
$
|
0.36
|
|
|
$
|
3.98
|
|
|
Estimated REIT
taxable income per common share -
basic and diluted (2)
|
$
|
0.29
|
|
|
$
|
1.04
|
|
|
$
|
0.50
|
|
|
$
|
1.93
|
|
|
$
|
1.36
|
|
|
|
Dividends declared
per common share
|
$
|
0.8
|
|
|
$
|
1.05
|
|
|
$
|
1.25
|
|
|
$
|
1.25
|
|
|
$
|
1.25
|
|
|
AMERICAN CAPITAL
AGENCY CORP.
|
RECONCILIATION OF
GAAP NET INTEREST INCOME TO NET SPREAD AND DOLLAR ROLL
INCOME/LOSS(2)
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
2013
|
|
2013
|
|
2013
|
|
2012
|
|
2012
|
Interest
income
|
$
|
558
|
|
|
$
|
545
|
|
|
$
|
547
|
|
|
$
|
570
|
|
|
$
|
520
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements and other debt
|
98
|
|
|
83
|
|
|
91
|
|
|
97
|
|
|
88
|
|
Interest
rate swap periodic costs(1)
|
47
|
|
|
48
|
|
|
49
|
|
|
50
|
|
|
51
|
|
Total
interest expense
|
145
|
|
|
131
|
|
|
140
|
|
|
147
|
|
|
139
|
|
Net interest
income
|
413
|
|
|
414
|
|
|
407
|
|
|
423
|
|
|
381
|
|
Other
interest rate swap periodic costs (3)
|
131
|
|
|
105
|
|
|
84
|
|
|
77
|
|
|
74
|
|
Adjusted net interest
income
|
282
|
|
|
309
|
|
|
323
|
|
|
346
|
|
|
307
|
|
Operating expenses
|
42
|
|
|
46
|
|
|
42
|
|
|
40
|
|
|
40
|
|
Net spread
income
|
240
|
|
|
263
|
|
|
281
|
|
|
306
|
|
|
267
|
|
Dividend
on preferred stock
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
Net spread income
available to common shareholders
|
237
|
|
|
260
|
|
|
278
|
|
|
303
|
|
|
264
|
|
TBA
dollar roll (loss) income
|
(12)
|
|
|
195
|
|
|
142
|
|
|
98
|
|
|
—
|
|
Net spread and dollar
roll (loss) income available to common shareholders
|
$
|
225
|
|
|
$
|
455
|
|
|
$
|
420
|
|
|
$
|
401
|
|
|
$
|
264
|
|
Weighted average
number of common shares outstanding - basic and
diluted
|
390.6
|
|
|
396.4
|
|
|
356.2
|
|
|
340.3
|
|
|
332.8
|
|
Net spread income per
common share - basic and diluted
|
$
|
0.61
|
|
|
$
|
0.66
|
|
|
$
|
0.78
|
|
|
$
|
0.89
|
|
|
$
|
0.79
|
|
Net spread and dollar
roll (loss) income per common share - basic and diluted
|
$
|
0.58
|
|
|
$
|
1.15
|
|
|
$
|
1.18
|
|
|
$
|
1.18
|
|
|
$
|
0.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN CAPITAL
AGENCY CORP.
|
RECONCILIATION OF
GAAP NET INCOME TO ESTIMATED TAXABLE
INCOME(2)
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
2013
|
|
2013
|
|
2013
|
|
2012
|
|
2012
|
Net (loss)
income
|
$
|
(701)
|
|
|
$
|
1,829
|
|
|
$
|
231
|
|
|
$
|
810
|
|
|
$
|
86
|
|
Book to tax
differences:
|
|
|
|
|
|
|
|
|
|
Premium
amortization, net
|
(6)
|
|
|
(75)
|
|
|
(34)
|
|
|
(19)
|
|
|
55
|
|
Capital
losses in excess of capital gains (4)
|
849
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other
realized (gains) losses, net (4)
|
(255)
|
|
|
(15)
|
|
|
(53)
|
|
|
(16)
|
|
|
167
|
|
Unrealized losses (gains), net
|
229
|
|
|
(1,324)
|
|
|
30
|
|
|
(121)
|
|
|
128
|
|
Other
|
—
|
|
|
(1)
|
|
|
6
|
|
|
6
|
|
|
20
|
|
Total book
to tax differences
|
817
|
|
|
(1,415)
|
|
|
(51)
|
|
|
(150)
|
|
|
370
|
|
Estimated REIT
taxable income
|
116
|
|
|
414
|
|
|
180
|
|
|
660
|
|
|
456
|
|
Dividend
on preferred stock
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
Estimated REIT
taxable income available to common shareholders
|
$
|
113
|
|
|
$
|
411
|
|
|
$
|
177
|
|
|
$
|
657
|
|
|
$
|
453
|
|
Weighted average
number of common shares outstanding - basic and
diluted
|
390.6
|
|
|
396.4
|
|
|
356.2
|
|
|
340.3
|
|
|
332.8
|
|
Estimated REIT
taxable income per common share - basic and diluted
|
$
|
0.29
|
|
|
$
|
1.04
|
|
|
$
|
0.50
|
|
|
$
|
1.93
|
|
|
$
|
1.36
|
|
Estimated cumulative
undistributed REIT taxable income per common share
(5)
|
$
|
0.57
|
|
|
$
|
1.07
|
|
|
$
|
1.08
|
|
|
$
|
2.21
|
|
|
$
|
1.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN CAPITAL
AGENCY CORP.
|
KEY
STATISTICS*
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
Key Balance Sheet
Statistics:
|
2013
|
|
2013
|
|
2013
|
|
2012
|
|
2012
|
Fixed-rate agency
securities, at fair value - as of period end
|
$
|
82,310
|
|
|
$
|
75,910
|
|
|
$
|
74,829
|
|
|
$
|
83,635
|
|
|
$
|
87,882
|
|
Adjustable-rate
agency securities, at fair value - as of period end
|
$
|
1,015
|
|
|
$
|
694
|
|
|
$
|
794
|
|
|
$
|
891
|
|
|
$
|
992
|
|
CMO agency
securities, at fair value - as of period end
|
$
|
1,244
|
|
|
$
|
141
|
|
|
$
|
157
|
|
|
$
|
173
|
|
|
$
|
191
|
|
Interest-only strips
agency securities, at fair value - as of period end
|
$
|
224
|
|
|
$
|
236
|
|
|
$
|
272
|
|
|
$
|
292
|
|
|
$
|
307
|
|
Principal-only strips
agency securities, at fair value - as of period end
|
$
|
216
|
|
|
$
|
226
|
|
|
$
|
243
|
|
|
$
|
254
|
|
|
$
|
268
|
|
Total agency
securities, at fair value - as of period end
|
$
|
85,009
|
|
|
$
|
77,207
|
|
|
$
|
76,295
|
|
|
$
|
85,245
|
|
|
$
|
89,640
|
|
Total agency
securities, at cost - as of period end
|
$
|
85,789
|
|
|
$
|
78,834
|
|
|
$
|
75,088
|
|
|
$
|
83,193
|
|
|
$
|
86,850
|
|
Total agency
securities, at par - as of period end (6)
|
$
|
82,003
|
|
|
$
|
74,966
|
|
|
$
|
71,253
|
|
|
$
|
78,788
|
|
|
$
|
82,435
|
|
Average agency
securities, at cost
|
$
|
86,407
|
|
|
$
|
74,816
|
|
|
$
|
78,009
|
|
|
$
|
80,932
|
|
|
$
|
81,500
|
|
Average agency
securities, at par (6)
|
$
|
82,751
|
|
|
$
|
70,851
|
|
|
$
|
73,922
|
|
|
$
|
76,710
|
|
|
$
|
77,519
|
|
Net TBA portfolio -
as of period end, at fair value
|
$
|
(7,256)
|
|
|
$
|
14,514
|
|
|
$
|
27,283
|
|
|
$
|
12,870
|
|
|
NM
|
Net TBA portfolio -
as of period end, at cost
|
$
|
(7,060)
|
|
|
$
|
15,285
|
|
|
$
|
27,294
|
|
|
$
|
12,775
|
|
|
NM
|
Net TBA portfolio -
as of period end, carrying value
|
$
|
(196)
|
|
|
$
|
(771)
|
|
|
$
|
(11)
|
|
|
$
|
95
|
|
|
NM
|
Average net TBA
portfolio, at cost
|
$
|
131
|
|
|
$
|
28,904
|
|
|
$
|
17,892
|
|
|
$
|
13,069
|
|
|
NM
|
Average repurchase
agreements and other debt
|
$
|
78,845
|
|
|
$
|
66,060
|
|
|
$
|
70,591
|
|
|
$
|
74,649
|
|
|
$
|
75,106
|
|
Average stockholders'
equity (7)
|
$
|
10,064
|
|
|
$
|
11,256
|
|
|
$
|
10,843
|
|
|
$
|
11,177
|
|
|
$
|
10,602
|
|
Net book value per
common share as of period end (8)
|
$
|
25.27
|
|
|
$
|
25.51
|
|
|
$
|
28.93
|
|
|
$
|
31.64
|
|
|
$
|
32.49
|
|
Leverage - average
during the period (9)
|
7.8:1
|
|
5.9:1
|
|
6.5:1
|
|
6.7:1
|
|
7.1:1
|
Leverage - average
during the period, including net TBA position
(10)
|
7.8:1
|
|
8.4:1
|
|
8.2:1
|
|
7.8:1
|
|
NM
|
Leverage - as of
period end (11)
|
7.9:1
|
|
7.0:1
|
|
5.7:1
|
|
7.0:1
|
|
7.0:1
|
Leverage - as of
period end, including net TBA position (12)
|
7.2:1
|
|
8.5:1
|
|
8.1:1
|
|
8.2:1
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Statistics:
|
|
|
|
|
|
|
|
|
|
Average coupon
(13)
|
3.5
|
%
|
|
3.63
|
%
|
|
3.68
|
%
|
|
3.77
|
%
|
|
3.81
|
%
|
Average asset yield
(14)
|
2.59
|
%
|
|
2.92
|
%
|
|
2.8
|
%
|
|
2.82
|
%
|
|
2.55
|
%
|
Average cost of funds
(15)
|
(1.39)
|
%
|
|
(1.43)
|
%
|
|
(1.28)
|
%
|
|
(1.19)
|
%
|
|
(1.13)
|
%
|
Average net interest
rate spread
|
1.2
|
%
|
|
1.49
|
%
|
|
1.52
|
%
|
|
1.63
|
%
|
|
1.42
|
%
|
Average net interest
rate spread, including estimated TBA dollar roll
income/loss (16)
|
1.14
|
%
|
|
1.86
|
%
|
|
1.87
|
%
|
|
1.84
|
%
|
|
NM
|
Average coupon - as
of period end
|
3.54
|
%
|
|
3.56
|
%
|
|
3.73
|
%
|
|
3.69
|
%
|
|
3.77
|
%
|
Average asset
yield - as of period end
|
2.7
|
%
|
|
2.71
|
%
|
|
2.75
|
%
|
|
2.61
|
%
|
|
2.61
|
%
|
Average cost of funds
- as of period end (17)
|
(1.33)
|
%
|
|
(1.47)
|
%
|
|
(1.32)
|
%
|
|
(1.22)
|
%
|
|
(1.11)
|
%
|
Average net interest
rate spread - as of period end
|
1.37
|
%
|
|
1.24
|
%
|
|
1.43
|
%
|
|
1.39
|
%
|
|
1.5
|
%
|
Average actual CPR
for securities held during the period
|
10
|
%
|
|
11
|
%
|
|
10
|
%
|
|
10
|
%
|
|
9
|
%
|
Average forecasted
CPR - as of period end
|
8
|
%
|
|
7
|
%
|
|
9
|
%
|
|
11
|
%
|
|
14
|
%
|
Total premium
amortization, net
|
$
|
(168)
|
|
|
$
|
(98)
|
|
|
$
|
(134)
|
|
|
$
|
(153)
|
|
|
$
|
(219)
|
|
Expenses % of average
total assets - annualized
|
0.15
|
%
|
|
0.19
|
%
|
|
0.18
|
%
|
|
0.16
|
%
|
|
0.17
|
%
|
Expenses % of average
stockholders' equity - annualized
|
1.66
|
%
|
|
1.64
|
%
|
|
1.57
|
%
|
|
1.42
|
%
|
|
1.5
|
%
|
Net comprehensive
income (loss) return on average common equity -
annualized (18)
|
7.1
|
%
|
|
(34.0)
|
%
|
|
(21.3)
|
%
|
|
4.4
|
%
|
|
50.4
|
%
|
Dividends declared
per common share
|
$
|
0.80
|
|
|
$
|
1.05
|
|
|
$
|
1.25
|
|
|
$
|
1.25
|
|
|
$
|
1.25
|
|
Economic return
(loss) on common equity - annualized (19)
|
8.7
|
%
|
|
(32.9)
|
%
|
|
(18.7)
|
%
|
|
4.9
|
%
|
|
58.6
|
%
|
*Except as noted below, average numbers for each period are
weighted based on days on the Company's books and records. All
percentages are annualized.
NM = Not meaningful. Prior to the fourth quarter of 2012, the
Company's net TBA position primarily consisted of short TBAs used
for hedging purposes.
- The Company voluntarily discontinued hedge accounting under
GAAP for interest rate swaps as of September
30, 2011. Accumulated other comprehensive loss ("OCI")
on the Company's de-designated interest rate swaps as of
September 30, 2011 is being amortized
on a straight-line basis over the remaining swap terms into
interest expense. All other periodic interest costs,
termination fees and mark-to-market adjustments associated with
interest rate swaps are reported in other income (loss), net
pursuant to GAAP.
- Table includes non-GAAP financial measures. Refer to "Use
of Non-GAAP Financial Information" for additional discussion of
non-GAAP financial measures.
- Other interest rate swap periodic costs represent periodic
interest costs on the Company's interest rate swap portfolio in
excess of amounts reclassified from accumulated OCI into interest
expense. Other interest rate swap periodic costs does not include
termination fees or mark-to-market adjustments associated with
interest rate swaps.
- Capital losses in excess of capital gains represents calendar
year 2013 year to date capital losses in excess of capital gains.
Capital losses in excess of capital gains are not deductible from
the Company's ordinary taxable income, but may be carried forward
for up to five years and applied against future net capital gains.
Other realized (gains) losses, net for the three months ended
September 30, 2013 includes
$222 million of net deferred ordinary
gains from expired or terminated swaptions, which will be amortized
into future ordinary taxable income over the remaining terms of the
underlying swaps.
- Estimated cumulative undistributed REIT taxable income ("UTI")
as of period end is net of common and preferred dividends declared
during the period. Amount divided by total common shares
outstanding as of each period end. UTI as of September 30, 2013 excludes the Company's
cumulative non-deductible net capital losses and cumulative net
deferred ordinary gains from terminated or expired swaptions.
- Agency securities at par value excludes the underlying
unamortized principal balance ("UPB") of the Company's
interest-only securities.
- Average stockholders' equity calculated as the average
month-ended stockholders' equity during the quarter.
- Net book value per common share calculated as total
stockholders' equity, less the Company's Series A Preferred Stock
liquidation preference of $25 per
preferred share, divided by the number of common shares outstanding
as of period end.
- Leverage during the period was calculated by dividing the daily
weighted average agency repurchase agreements and other debt
outstanding for the period by the average stockholders' equity for
the period. Leverage excludes U.S. Treasury repurchase
agreements.
- Leverage during the period, including net TBA position,
includes the components of "leverage - average during the period",
plus the Company's daily weighted average net TBA dollar roll
position (at cost) during the period.
- Leverage at period end was calculated by dividing the sum of
the amount outstanding under agency repurchase agreements, net
receivable / payable for unsettled agency securities and other debt
by total stockholders' equity at period end. Leverage excludes U.S.
Treasury repurchase agreements.
- Leverage at period end, including net TBA position, includes
the components of "leverage - as of period end", plus the Company's
net TBA dollar roll position (at cost) as of period end.
- Weighted average coupon for the period was calculated by
dividing the total coupon (or cash) interest income on agency
securities by average agency securities held at par.
- Weighted average asset yield for the period was calculated by
dividing the total interest income on agency securities (coupon
interest less amortization of premiums and discounts) by the
average amortized cost of agency securities held.
- Cost of funds includes repurchase agreements, other debt and
interest rate swaps, but excludes swap termination fees and costs
associated with other supplemental hedges such as swaptions and
short treasury or TBA positions. Weighted average cost of funds for
the period was calculated by dividing the total cost of funds by
the average repurchase agreements and other debt outstanding, less
repurchase agreements for treasury securities, for the period.
- Estimated TBA dollar roll income is net of short TBAs used for
hedging purposes. Dollar roll income excludes the impact of other
supplemental hedges, and is recognized in gain (loss) on derivative
instruments and other securities, net.
- Cost of funds as of period end includes repurchase agreements
and other debt outstanding, plus the impact of interest rate swaps
in effect as of each period end and forward starting swaps becoming
effective, net of swaps expiring, within three months of each
period end, but excludes costs associated with other supplemental
hedges such as swaptions and short treasury or TBA
positions.
- Net comprehensive income (loss) return on average common equity
for the period was calculated by dividing comprehensive income
(loss) available (attributable) to common shareholders by average
common equity.
- Economic return (loss) on common equity represents the sum of
the change in net asset value per common share and dividends
declared on common stock during the period over the beginning net
asset value per common share.
STOCKHOLDER CALL
AGNC invites stockholders,
prospective stockholders and analysts to attend the AGNC
stockholder call on October 29, 2013 at 11:00 am ET. The stockholder call can be
accessed through a live webcast, free of charge, at
www.AGNC.com or by dialing (888) 317-6016 (U.S. domestic) or
(412) 317-6016 (international). Please advise the operator you are
dialing in for the American Capital Agency stockholder call.
If you do not plan on asking a question on the call and have access
to the internet, please take advantage of the webcast.
A slide presentation will accompany the call and will be
available at www.AGNC.com. Select the Q3 2013 Earnings
Presentation link to download and print the presentation in advance
of the Stockholder Call.
An archived audio of the shareholder call combined with the
slide presentation will be made available on the AGNC website after
the call on October 29, 2013. In addition, there will be
a phone recording available from 3:00 pm
ET October 29, 2013 until 9:00
am ET November 13, 2013. If
you are interested in hearing the recording of the presentation,
please dial (877) 344-7529 (U.S. domestic) or (412) 317-0088
(international). The conference number is
10035742.
For further information, please contact Investor Relations at
(301) 968-9300 or IR@AGNC.com.
ABOUT AMERICAN CAPITAL AGENCY CORP.
American Capital
Agency Corp. is a real estate investment trust ("REIT") that
invests in agency pass-through securities and collateralized
mortgage obligations for which the principal and interest payments
are guaranteed by a U.S. Government agency or a U.S.
Government-sponsored enterprise. The Company is externally
managed and advised by American Capital AGNC Management, LLC, an
affiliate of American Capital, Ltd. For further information,
please refer to www.AGNC.com.
ABOUT AMERICAN CAPITAL, LTD.
American Capital
(Nasdaq: ACAS) is a publicly traded private equity firm and
global asset manager. American Capital, both directly and
through its asset management business, originates, underwrites and
manages investments in middle market private equity, leveraged
finance, real estate, energy & infrastructure and structured
products. American Capital manages $21
billion, including assets on its balance sheet and fee
earning assets under management by affiliated managers, with
$119 billion of total assets under
management (including levered assets). Through an affiliate,
American Capital manages publicly traded American Capital Agency
Corp. (Nasdaq: AGNC) with approximately $10
billion of net book value and American Capital Mortgage
Investment Corp. (Nasdaq: MTGE) with approximately $1 billion of net book value. From its eight
offices in the U.S. and Europe,
American Capital and its affiliate, European Capital, will consider
investment opportunities from $10 million to
$750 million. For further information, please refer to
www.AmericanCapital.com.
FORWARD LOOKING STATEMENTS
This press release
contains forward-looking statements. Forward-looking
statements are based on estimates, projections, beliefs and
assumptions of management of the Company at the time of such
statements and are not guarantees of future performance.
Forward-looking statements involve risks and uncertainties in
predicting future results and conditions. Actual results
could differ materially from those projected in these
forward-looking statements due to a variety of important factors,
including, without limitation, changes in interest rates, changes
in the yield curve, changes in prepayment rates, the availability
and terms of financing, changes in the market value of the
Company's assets, general economic conditions, market conditions,
conditions in the market for agency securities, and legislative and
regulatory changes that could adversely affect the business of the
Company. Certain factors that could cause actual results to
differ materially from those contained in the forward-looking
statements, are included in the Company's periodic reports filed
with the Securities and Exchange Commission ("SEC"). Copies
are available on the SEC's website, www.sec.gov. The Company
disclaims any obligation to update or revise any forward-looking
statements based on the occurrence of future events, the receipt or
new information, or otherwise.
USE OF NON-GAAP FINANCIAL INFORMATION
In addition to
the results presented in accordance with GAAP, this release
includes certain non-GAAP financial information, including net
spread income, estimated taxable income and certain financial
metrics derived from non-GAAP information, such as estimated
undistributed taxable income, which the Company's management uses
in its internal analysis of results, and believes may be
informative to investors.
Net spread income consists of adjusted net interest income, less
total operating expenses. Adjusted net interest income is
interest income less interest expense (or "GAAP net interest
income"), less other periodic interest rate swap interest costs
reported in other income (loss), net.
Estimated taxable income is pre-tax income calculated in
accordance with the requirements of the Internal Revenue Code
rather than GAAP. Estimated taxable income differs from GAAP
income because of both temporary and permanent differences in
income and expense recognition. Examples include (i) unrealized
gains and losses associated with interest rate swaps and other
derivatives and securities marked-to-market in current income for
GAAP purposes, but excluded from estimated taxable income until
realized or settled, (ii) temporary differences related to the
amortization of premiums paid on investments and (iii) timing
differences in the recognition of certain realized gains and
losses. Furthermore, estimated taxable income can include certain
information that is subject to potential adjustments up to the time
of filing of the appropriate tax returns, which occurs after the
end of the calendar year of the Company.
The Company believes that these non-GAAP financial measures
provide information useful to investors because net spread income
is a financial metric used by management and investors and
estimated taxable income is directly related to the amount of
dividends the Company is required to distribute in order to
maintain its REIT tax qualification status. The Company also
believes that providing investors with net spread income, estimated
taxable income and certain financial metrics derived based on such
estimated taxable income, in addition to the related GAAP measures,
gives investors greater transparency to the information used by
management in its financial and operational decision-making.
However, because net spread income and estimated taxable income are
an incomplete measure of the Company's financial performance and
involve differences from net income computed in accordance with
GAAP, net spread income and estimated taxable income should be
considered as supplementary to, and not as a substitute for, the
Company's net income computed in accordance with GAAP as a measure
of the Company's financial performance. In addition, because not
all companies use identical calculations, the Company's
presentation of net spread income and estimated taxable income may
not be comparable to other similarly-titled measures of other
companies.
CONTACT:
Investors - (301) 968-9300
Media - (301) 968-9400
SOURCE American Capital Agency Corp.