BETHESDA, Md., April 28, 2014 /PRNewswire/ -- American Capital
Agency Corp. ("AGNC" or the "Company") (Nasdaq: AGNC) today
reported comprehensive income for the first quarter of 2014 of
$423 million, or $1.18 per common share, and net book value of
$24.49 per common share.
Economic return for the period, defined as dividends per common
share plus the change in net book value per common share, was a
gain of $1.21 per common share, or
5.1% for the quarter, or 20.5% on an annualized basis.
FIRST QUARTER 2014 FINANCIAL HIGHLIGHTS
- $1.18 comprehensive income per
common share, comprised of:
- $(0.41) net loss per common
share
- $1.59 other comprehensive income
("OCI") per common share
- Includes net unrealized gains on investments marked-to-market
through OCI
- $0.71 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization
- $0.64 per common share including
estimated "catch-up" premium amortization cost of $(0.07) per common share due to a change in
projected constant prepayment rate ("CPR") estimates
- Includes estimated net carry income (also known as "dollar roll
income") of $0.14 per common share
associated with the Company's average net long position in agency
mortgage backed securities ("MBS") in the "to-be-announced" ("TBA")
market
- $0.47 estimated taxable income
per common share
- Excludes $0.29 per common share
of net capital gains (including $0.14
per common share of TBA dollar roll income) applied against prior
year net capital loss carryforward
- $0.65 dividend per common share
declared on March 20, 2014
- $0.42 estimated undistributed
taxable income per common share as of March
31, 2014
- $24.49 net book value per common
share as of March 31, 2014
- Increased $0.56 per common share,
or 2.3%, from $23.93 per common share
as of December 31, 2013
- 5.1% economic return on common equity for the quarter, or 20.5%
annualized
- Comprised of $0.65 dividend per
common share and $0.56 increase in
net book value per common share
OTHER FIRST QUARTER HIGHLIGHTS
- $70.5 billion agency MBS
investment portfolio as of March 31,
2014
- Includes $14.1 billion net long
TBA mortgage position as of March 31,
2014
- $352 million investment in
mortgage REIT equity securities as of March
31, 2014
- Recognized $49 million, or
$0.14 per common share, of dividends
and gains from REIT equity securities during the quarter
- 7.6x "at risk" leverage as of March 31,
2014
- 5.9x leverage excluding net long TBA mortgage position as of
March 31, 2014
- 7.2x average "at risk" leverage during the quarter
- 6.7x average leverage during the quarter excluding net TBA
mortgage position
- 7% actual portfolio CPR for the quarter
- 8% average projected portfolio life CPR as of March 31, 2014
- Excludes net TBA mortgage position
- 1.43% annualized net interest rate spread and TBA dollar roll
income for the quarter
- 1.59% annualized net interest spread and TBA dollar roll income
for the quarter excluding 16 bps of "catch-up" premium amortization
cost due to change in projected CPR estimates, compared to 1.42%
for the prior quarter
- 3.4 million shares of common stock repurchased during the
quarter
- Represents 1% of common shares outstanding as of December 31, 2013
- $22.10 per share average
repurchase price, net of expenses
"We are pleased to see some stability return to the fixed-income
markets," commented Gary Kain,
President and Chief Investment Officer. "Against this
backdrop, AGNC was able to produce an economic return of just over
5% for the quarter, which equates to 20% on an annualized
basis. Additionally, we remain optimistic about the
outlook for the agency MBS market as low origination volumes and
conservative MBS positioning should compensate for the continued
tapering of the Federal Reserve's agency MBS and U.S. Treasury
purchases. To this point, April has been a very good month
for agency MBS providing a solid 'tailwind' for economic returns so
far during the second quarter."
Malon Wilkus, Chair and Chief
Executive Officer, commented, "2013 was a challenging year for
agency mortgage REITs and we are pleased that the significant
actions that we took during 2013, from repositioning our portfolio
to shrinking our capital base through the repurchase of our common
stock, helped drive our performance this quarter and positions us
well for the remainder of 2014."
NET BOOK VALUE
As of March 31, 2014, the
Company's net book value per common share was $24.49, or $0.56
higher than the December 31, 2013 net book value per common
share of $23.93, led by tighter
mortgage spreads on the Company's ≤ 15-year securities.
INVESTMENT PORTFOLIO
As of March 31, 2014, the
Company's investment portfolio totaled $70.5
billion of agency MBS, including $14.1 billion of net long TBA mortgage positions,
at fair value. The Company also held $352
million of investments in other agency mortgage REIT equity
securities.
The Company accounts for TBA dollar roll positions as derivative
instruments and recognizes dollar roll income in other income
(loss), net on the Company's financial statements. As of
March 31, 2014, the Company's net TBA mortgage portfolio had a
fair value and cost basis of approximately $14.1 billion and a net carrying value of
$(25) million reported in derivative
assets/(liabilities) on the Company's balance sheet.
As of March 31, 2014, the Company's investment portfolio
was comprised of $67.6 million of
fixed-rate securities, inclusive of the net long TBA position;
$1.2 billion of adjustable-rate
securities; and $1.7 billion of
collateralized mortgage obligations ("CMOs"), including principal
and interest-only strips.
As of March 31, 2014, the Company's fixed-rate mortgage
assets were comprised of:
- $29.6 billion ≤ 15-year
securities;
- $4.3 billion 15-year net long TBA
securities;
- $1.3 billion 20-year fixed-rate
securities;
- $22.5 billion 30-year fixed-rate
securities; and
- $9.8 billion 30-year net long TBA
securities, at fair value.
As of March 31, 2014, inclusive of net TBA positions, ≤
15-year fixed rate securities represented 48% of the Company's
investment portfolio, a decrease from 51% as of December 31,
2013, and 30-year fixed rate securities represented 46% of the
Company's investment portfolio, an increase from 43% as of
December 31, 2013.
As of March 31, 2014, the Company's fixed-rate mortgage
assets, inclusive of the net TBA position, had a weighted average
coupon of 3.50%, comprised of a weighted average coupon of 3.17%
for ≤ 15-year fixed rate securities, 3.50% for 20-year fixed-rate
securities and 3.84% for 30-year fixed-rate securities.
CONSTANT PREPAYMENT RATES
The actual CPR for the
Company's investment portfolio during the first quarter was 7%,
compared to 8% for the prior quarter. The weighted average
projected CPR for the remaining life of the Company's agency
securities held as of March 31, 2014 was 8%, an increase from
7% as of December 31, 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 104.8% of par value as of March 31, 2014; therefore,
faster actual or projected prepayments can have a meaningful
negative impact on the Company's asset yields, while slower actual
or projected prepayments can have a meaningful positive
impact.
Net premium amortization on the Company's investment portfolio
for the first quarter was $(142)
million, or $(0.40) per common
share, compared to $(117) million, or
$(0.31) per common share, for the
fourth quarter. The change in the Company's weighted average
projected CPR estimate resulted in recognition of approximately
$(25) million, or $(0.07) per common share, of "catch-up" premium
amortization cost during the first quarter, compared to
approximately $28 million, or
$0.07 per common share, of "catch-up"
premium amortization benefit during the fourth quarter. The
unamortized net premium balance as of March 31, 2014 was
$2.6 billion.
ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE
SPREAD
The Company's average asset yield on its agency
security portfolio for the first quarter was 2.54%, compared to
2.82% for the fourth quarter. The Company's average asset
yield for the first quarter includes 16 bps of "catch-up" premium
amortization cost due to changes in projected CPR estimates,
compared to 14 bps of "catch-up" premium amortization benefit
during the fourth quarter. Excluding the impact of "catch-up"
premium amortization cost/benefit, the Company's average asset
yield was 2.70% for the current quarter, compared to 2.68% for the
prior quarter. The Company's average asset yield reported as
of March 31, 2014 was 2.72%, an increase from 2.70% as of
December 31, 2013.
The Company's average cost of funds (derived from the cost of
repurchase agreements, other debt and interest rate swaps) for the
first quarter increased 10 bps to 1.35% from 1.25% for the fourth
quarter, while the Company's average cost of funds as of
March 31, 2014 increased 14 bps to 1.45% from 1.31% as of
December 31, 2013, reflective of a higher ratio of interest
rate swaps to repo and other debt outstanding during the
quarter.
The Company also recognized $48
million, or $0.14 per common
share, of estimated dollar roll income during the quarter, compared
to $(0.02) of dollar roll expense
during the prior quarter, due to a larger long TBA position during
the quarter.
The Company's average net interest rate spread and dollar roll
income for the quarter was 1.43%, a decrease of 13 bps from 1.56%
during the prior quarter. Excluding "catch-up" premium
amortization cost/benefit, the Company's average net spread and
dollar roll income for the quarter was 1.59%, an increase of 17 bps
from 1.42% for the prior quarter.
LEVERAGE
As of March 31, 2014, $49.6 billion of the Company's repurchase
agreements were used to fund acquisitions of agency securities
("agency repo"), while the remainder, or $0.1 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
March 31, 2014 was 5.9x. Inclusive of the net TBA
position, the Company's "at risk" leverage ratio as of
March 31, 2014 was 7.6x, or slightly higher than 7.5x as of
December 31, 2013. The
Company's average leverage ratio and average "at risk" leverage
ratio for the first quarter was 6.7x and 7.2x, respectively.
The Company's leverage ratios exclude equity allocated to
investments in REIT equity securities.
As of March 31, 2014, the Company's agency repo agreements
had a weighted average interest rate of 0.43%, a decrease from
0.45% as of December 31, 2013, while the weighted average
remaining days to maturity increased to 162 days as of March 31, 2014 from 124 days as of
December 31, 2013.
As of March 31, 2014, the Company's agency repo agreements
had remaining maturities consisting of:
- $13.4 billion of one month or
less;
- $17.4 billion from one to three
months;
- $5.2 billion from three to six
months;
- $4.6 billion from six to nine
months;
- $4.2 billion from nine to twelve
months;
- $3.2 billion from twelve to
twenty-four months;
- $0.5 billion from twenty-four to
thirty-six months; and
- $1.0 billion of greater than
thirty-six months.
HEDGING ACTIVITIES
As of March 31, 2014, 94% 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 86% as of
December 31, 2013.
The Company's interest rate swap positions as of March 31,
2014 totaled $46.4 billion in
notional amount. During the quarter, the Company terminated
$2.8 billion of interest rate swaps
and entered into new swap agreements totaling $5.9 billion. The new swap agreements have a
weighted average fixed pay rate of 2.97%, an average forward start
date of 1.9 years and an average maturity of approximately 7.9
years as of March 31, 2014. Excluding $9.5 billion of forward starting swaps as of
March 31, 2014, the Company's interest rate swap portfolio had
an average fixed pay rate of 1.57% and a weighted average receive
rate of 0.21%, largely unchanged from December 31, 2013. Including forward starting
swaps, the Company's interest rate swap portfolio had an average
fixed pay rate of 1.87% and an average maturity of 4.9 years from
March 31, 2014, compared to 1.70% and 4.7 years, respectively,
as of December 31, 2013. 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 first quarter, the Company added $1.0 billion in notional amount of payer
swaptions, at a total cost of $15
million, while $7.3 billion of
payer swaptions from previous quarters expired or were terminated
resulting in net realized losses of $(81)
million. As of March 31, 2014, the Company had
payer swaptions totaling $8.0 billion
of notional value outstanding at a market value of $93 million and a cost basis of $194 million, with an average remaining option
term of 1.0 year and an average underlying interest rate swap term
of 5.7 years, compared to $14.3
billion notional value, $335
million market value, $258
million cost basis, 0.9 years remaining option term and 7.0
years average underlying swap term as of December 31, 2013.
During the quarter the Company also added a $1.0 billion notional value receiver swaption at
a cost of $3 million, a 1 year option
term and an underlying swap term of 10 years.
The Company utilizes long and short positions in U.S. Treasury
securities and U.S. Treasury futures to mitigate exposure to
changes in interest rates. As of March 31, 2014, the
Company had a net short position of $6.5
billion (market value) in U.S. Treasury securities and a
$901 million (market value) short
position in U.S. Treasury futures, a total net increase of
$7.2 billion from December 31, 2013.
OTHER INCOME (LOSS), NET
During the first quarter,
the Company recorded a net loss of $(397)
million in other income (loss), net, or $(1.12) per common share, compared to a net loss
of $(483) million, or $(1.29) per common share for the prior
quarter. Other income (loss), net for the first quarter was
comprised of:
- $(19) million of net realized
losses on sales of agency securities;
- $(297) million of net unrealized
losses on interest rate swaps and early termination fee income/cost
(excludes $43 million of unrealized
gains recognized in OCI);
- $(83) million of interest rate
swap periodic interest costs;
- $(105) million of net losses on
interest rate swaptions;
- $(9) million of net losses on
U.S. Treasury positions;
- $48 million of TBA dollar roll
income;
- $12 million of net mark-to-market
gains on TBA mortgage positions;
- $49 million of dividends and
gains from mortgage REIT equity securities; and
- $7 million of income from other
derivative instruments and securities.
OTHER COMPREHENSIVE INCOME
During the first quarter,
the Company recorded other comprehensive income of $564 million, or $1.59 per common share, driven primarily by
unrealized gains on the Company's agency securities.
ESTIMATED TAXABLE INCOME
Estimated taxable income for
the first quarter was $0.47 per
common share, or $0.88 higher than
the Company's 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) timing differences, both temporary and potentially
permanent, in the recognition of certain realized gains and losses
and (iii) temporary differences related to the amortization of net
premiums paid on investments.
The Company's estimated taxable income for the first quarter
excludes $0.29 per common share of
estimated net capital gains (including $0.14 per common share of TBA dollar roll income)
applied against the Company's prior year net capital loss
carryforward.
FIRST QUARTER 2014 DIVIDEND DECLARATIONS
On
March 20, 2014, the Board of Directors of the Company declared
a first quarter dividend on its common stock of $0.65 per share, unchanged from the prior
quarter, which was paid on April 28, 2014 to common
stockholders of record as of March 31, 2014. Since its
May 2008 initial public offering, the
Company has paid a total of $4.4
billion in common dividends, or $28.26 per common share.
On March 20, 2014, the Board of Directors of the Company
declared a first 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 April 15, 2014 to preferred stockholders of record as
of April 1, 2014.
As of March 31, 2014, the Company had approximately
$146 million of estimated
undistributed taxable income ("UTI"), or $0.42 per common share, net of dividends
declared. UTI excludes the Company's remaining prior year
non-deductible capital losses of $(1.7)
billion, or $(4.77) per common
share, as of March 31, 2014, which may be carried forward and
applied against future net capital gains through 2018.
STOCK REPURCHASE PROGRAM
During the first quarter,
the Company made open market purchases of 3.4 million shares of its
common stock, or 1% of the Company's outstanding shares as of
December 31, 2013. The shares were purchased at an average
price of $22.10 per share, including
expenses, totaling $74 million. Since
commencing a stock repurchase program in the fourth quarter of
2012, the Company has purchased 46.3 million shares of its common
stock, or 12% of the Company's outstanding shares at its peak in
March 2013, for total consideration
of $1.0 billion, including
expenses. As of March 31, 2014,
the Company had $1 billion remaining
available under current Board of Director authorization for
repurchases of its common stock through December 31, 2014.
FINANCIAL STATEMENTS, OPERATING PERFORMANCE AND PORTFOLIO
STATISTICS
The following measures of operating performance
include net spread and dollar roll 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
2014
|
|
2013
|
|
2013
|
|
2013
|
|
2013
|
|
(unaudited)
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
securities, at fair value (including pledged securities
of $51,850,
$62,205, $80,721, $71,261, and $70,094,
respectively)
|
$
|
54,960
|
|
|
$
|
64,482
|
|
|
$
|
83,805
|
|
|
$
|
75,926
|
|
|
$
|
74,874
|
|
Agency
securities transferred to consolidated variable interest entities,
at fair value (pledged securities)
|
1,417
|
|
|
1,459
|
|
|
1,204
|
|
|
1,281
|
|
|
1,421
|
|
U.S.
Treasury securities, at fair value (including pledged securities
of
$196, $3,778, $4,710 and $2,569,
respectively)
|
196
|
|
|
3,822
|
|
|
4,823
|
|
|
3,671
|
|
|
—
|
|
REIT
equity securities, at fair value
|
352
|
|
|
237
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Cash and cash
equivalents
|
1,726
|
|
|
2,143
|
|
|
2,129
|
|
|
2,923
|
|
|
2,826
|
|
Restricted cash
|
269
|
|
|
101
|
|
|
77
|
|
|
1,216
|
|
|
499
|
|
Derivative assets, at fair
value
|
686
|
|
|
1,194
|
|
|
1,246
|
|
|
1,876
|
|
|
480
|
|
Receivable for securities sold (including
pledged securities of $772, $622, $1,417, $1,338, and
$484, respectively)
|
799
|
|
|
652
|
|
|
1,807
|
|
|
2,070
|
|
|
734
|
|
Receivable under reverse repurchase agreements
|
6,685
|
|
|
1,881
|
|
|
1,808
|
|
|
9,430
|
|
|
12,291
|
|
Other
assets
|
228
|
|
|
284
|
|
|
372
|
|
|
270
|
|
|
244
|
|
Total
assets
|
$
|
67,318
|
|
|
$
|
76,255
|
|
|
$
|
97,271
|
|
|
$
|
98,663
|
|
|
$
|
93,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
|
$
|
49,729
|
|
|
$
|
63,533
|
|
|
$
|
82,473
|
|
|
$
|
72,451
|
|
|
$
|
66,260
|
|
Debt of
consolidated variable interest entities, at fair value
|
874
|
|
|
910
|
|
|
736
|
|
|
783
|
|
|
862
|
|
Payable for
securities purchased
|
324
|
|
|
118
|
|
|
979
|
|
|
3,167
|
|
|
259
|
|
Derivative
liabilities, at fair value
|
417
|
|
|
422
|
|
|
1,015
|
|
|
1,544
|
|
|
1,217
|
|
Dividends
payable
|
232
|
|
|
235
|
|
|
311
|
|
|
420
|
|
|
499
|
|
Obligation to return securities borrowed
under reverse
|
6,658
|
|
|
1,848
|
|
|
1,801
|
|
|
9,931
|
|
|
12,548
|
|
repurchase agreements, at fair
value
|
Accounts
payable and other accrued liabilities
|
270
|
|
|
492
|
|
|
71
|
|
|
87
|
|
|
82
|
|
Total
liabilities
|
58,504
|
|
|
67,558
|
|
|
87,386
|
|
|
88,383
|
|
|
81,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
352.8,
356.2, 384.3, 396.2, and 396.5 shares issued and outstanding,
respectively
|
4
|
|
|
4
|
|
|
4
|
|
|
4
|
|
|
4
|
|
Additional
paid-in capital
|
10,332
|
|
|
10,406
|
|
|
10,992
|
|
|
11,255
|
|
|
11,261
|
|
Retained
(deficit) earnings
|
(870)
|
|
|
(497)
|
|
|
(160)
|
|
|
852
|
|
|
(557)
|
|
Accumulated
other comprehensive (loss) income
|
(819)
|
|
|
(1,383)
|
|
|
(1,118)
|
|
|
(1,998)
|
|
|
767
|
|
Total stockholders'
equity
|
8,814
|
|
|
8,697
|
|
|
9,885
|
|
|
10,280
|
|
|
11,642
|
|
Total liabilities and
stockholders' equity
|
$
|
67,318
|
|
|
$
|
76,255
|
|
|
$
|
97,271
|
|
|
$
|
98,663
|
|
|
$
|
93,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value per
common share
|
$
|
24.49
|
|
|
$
|
23.93
|
|
|
$
|
25.27
|
|
|
$
|
25.51
|
|
|
$
|
28.93
|
|
AMERICAN CAPITAL
AGENCY CORP.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
2014
|
|
2013
|
|
2013
|
|
2013
|
|
2013
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
|
399
|
|
|
$
|
542
|
|
|
$
|
558
|
|
|
$
|
545
|
|
|
$
|
547
|
|
Interest
expense 1
|
108
|
|
|
120
|
|
|
145
|
|
|
131
|
|
|
140
|
|
Net interest income
|
291
|
|
|
422
|
|
|
413
|
|
|
414
|
|
|
407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (loss)
income, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
gain on sale of agency securities, net
|
(19)
|
|
|
(667)
|
|
|
(733)
|
|
|
17
|
|
|
(26)
|
|
(Loss)
gain on derivative instruments and other securities, net
1
|
(378)
|
|
|
184
|
|
|
(339)
|
|
|
1,444
|
|
|
(98)
|
|
Total other (loss) income, net
|
(397)
|
|
|
(483)
|
|
|
(1,072)
|
|
|
1,461
|
|
|
(124)
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees
|
29
|
|
|
31
|
|
|
35
|
|
|
37
|
|
|
33
|
|
General
and administrative expenses
|
6
|
|
|
6
|
|
|
7
|
|
|
9
|
|
|
9
|
|
Total expenses
|
35
|
|
|
37
|
|
|
42
|
|
|
46
|
|
|
42
|
|
(Loss) income
before income tax provision
|
(141)
|
|
|
(98)
|
|
|
(701)
|
|
|
1,829
|
|
|
241
|
|
Income tax provision
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
10
|
|
Net (loss)
income
|
(141)
|
|
|
(101)
|
|
|
(701)
|
|
|
1,829
|
|
|
231
|
|
Dividend on preferred
stock
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
Net (loss) income
(attributable) available to common shareholders
|
$
|
(144)
|
|
|
$
|
(104)
|
|
|
$
|
(704)
|
|
|
$
|
1,826
|
|
|
$
|
228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
$
|
(141)
|
|
|
$
|
(101)
|
|
|
$
|
(701)
|
|
|
$
|
1,829
|
|
|
$
|
231
|
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on available-for-sale securities,
net
|
521
|
|
|
(311)
|
|
|
833
|
|
|
(2,813)
|
|
|
(837)
|
|
Unrealized gain on derivative instruments, net
1
|
43
|
|
|
46
|
|
|
47
|
|
|
48
|
|
|
49
|
|
Other comprehensive
income (loss)
|
564
|
|
|
(265)
|
|
|
880
|
|
|
(2,765)
|
|
|
(788)
|
|
Comprehensive
income (loss)
|
423
|
|
|
(366)
|
|
|
179
|
|
|
(936)
|
|
|
(557)
|
|
Dividend on preferred
stock
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
Comprehensive
income (loss) available (attributable) to common
shareholders
|
$
|
420
|
|
|
$
|
(369)
|
|
|
$
|
176
|
|
|
$
|
(939)
|
|
|
$
|
(560)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding -
|
354.8
|
|
|
373.0
|
|
|
390.6
|
|
|
396.4
|
|
|
356.2
|
|
basic and
diluted
|
Net (loss) income
per common share - basic and diluted
|
$
|
(0.41)
|
|
|
$
|
(0.28)
|
|
|
$
|
(1.80)
|
|
|
$
|
4.61
|
|
|
$
|
0.64
|
|
Comprehensive
income (loss) per common share -
basic and
diluted
|
$
|
1.18
|
|
|
$
|
(0.99)
|
|
|
$
|
0.45
|
|
|
$
|
(2.37)
|
|
|
$
|
(1.57)
|
|
Estimated REIT
taxable income per common share -
|
$
|
0.47
|
|
|
$
|
0.65
|
|
|
$
|
0.29
|
|
|
$
|
1.04
|
|
|
$
|
0.50
|
|
basic and diluted
2
|
Dividends declared
per common share
|
$
|
0.65
|
|
|
$
|
0.65
|
|
|
$
|
0.80
|
|
|
$
|
1.05
|
|
|
$
|
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
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
2014
|
|
2013
|
|
2013
|
|
2013
|
|
2013
|
Interest
income
|
$
|
399
|
|
|
$
|
542
|
|
|
$
|
558
|
|
|
$
|
545
|
|
|
$
|
547
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements and other debt
|
65
|
|
|
74
|
|
|
98
|
|
|
83
|
|
|
91
|
|
Interest rate
swap periodic costs1
|
43
|
|
|
46
|
|
|
47
|
|
|
48
|
|
|
49
|
|
Total interest
expense
|
108
|
|
|
120
|
|
|
145
|
|
|
131
|
|
|
140
|
|
Net interest
income
|
291
|
|
|
422
|
|
|
413
|
|
|
414
|
|
|
407
|
|
Other interest
rate swap periodic costs 3
|
(83)
|
|
|
(104)
|
|
|
(131)
|
|
|
(105)
|
|
|
(84)
|
|
Dividend on REIT
equity securities4
|
10
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
TBA dollar roll
income (loss) 17
|
48
|
|
|
(5)
|
|
|
(12)
|
|
|
195
|
|
|
142
|
|
Adjusted net interest
and dollar roll income
|
266
|
|
|
318
|
|
|
270
|
|
|
504
|
|
|
465
|
|
Operating
expenses
|
35
|
|
|
37
|
|
|
42
|
|
|
46
|
|
|
42
|
|
Net spread and dollar
roll income
|
231
|
|
|
281
|
|
|
228
|
|
|
458
|
|
|
423
|
|
Dividend
on preferred stock
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
Net spread and dollar
roll income available to common shareholders
|
228
|
|
|
278
|
|
|
225
|
|
|
455
|
|
|
420
|
|
Estimated
"catch-up" premium amortization cost (benefit) due to change in
CPR forecast
|
25
|
|
|
(28)
|
|
|
12
|
|
|
(55)
|
|
|
(32)
|
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, available to common shareholders
|
$
|
253
|
|
|
$
|
250
|
|
|
$
|
237
|
|
|
$
|
400
|
|
|
$
|
388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic and diluted
|
354.8
|
|
|
373.0
|
|
|
390.6
|
|
|
396.4
|
|
|
356.2
|
|
Net spread and dollar
roll income per common share - basic and diluted
|
$
|
0.64
|
|
|
$
|
0.75
|
|
|
$
|
0.58
|
|
|
$
|
1.15
|
|
|
$
|
1.18
|
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization, per
common share - basic and diluted
|
$
|
0.71
|
|
|
$
|
0.67
|
|
|
$
|
0.61
|
|
|
$
|
1.01
|
|
|
$
|
1.09
|
|
AMERICAN CAPITAL
AGENCY CORP.
|
RECONCILIATION OF
GAAP NET INCOME TO ESTIMATED TAXABLE INCOME2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
2014
|
|
2013
|
|
2013
|
|
2013
|
|
2013
|
Net (loss)
income
|
$
|
(141)
|
|
|
$
|
(101)
|
|
|
$
|
(701)
|
|
|
$
|
1,829
|
|
|
$
|
231
|
|
Book to tax
differences:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium
amortization, net
|
31
|
|
|
(21)
|
|
|
(6)
|
|
|
(75)
|
|
|
(34)
|
|
Realized
losses (gains), net
|
36
|
|
|
(92)
|
|
|
(255)
|
|
|
(15)
|
|
|
(53)
|
|
Capital
loss (carryforward)/excess over capital gains
5
|
(102)
|
|
|
936
|
|
|
849
|
|
|
—
|
|
|
—
|
|
Unrealized losses (gains), net
|
346
|
|
|
(480)
|
|
|
229
|
|
|
(1,324)
|
|
|
30
|
|
Other
|
—
|
|
|
2
|
|
|
—
|
|
|
(1)
|
|
|
6
|
|
Total book to tax
differences
|
311
|
|
|
345
|
|
|
817
|
|
|
(1,415)
|
|
|
(51)
|
|
Estimated REIT
taxable income
|
170
|
|
|
244
|
|
|
116
|
|
|
414
|
|
|
180
|
|
Dividend on preferred
stock
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
Estimated REIT
taxable income available to common shareholders
|
$
|
167
|
|
|
$
|
241
|
|
|
$
|
113
|
|
|
$
|
411
|
|
|
$
|
177
|
|
Weighted average
number of common shares outstanding - basic and
diluted
|
354.8
|
|
|
373.0
|
|
|
390.6
|
|
|
396.4
|
|
|
356.2
|
|
Estimated REIT
taxable income per common share - basic and diluted
|
$
|
0.47
|
|
|
$
|
0.65
|
|
|
$
|
0.29
|
|
|
$
|
1.04
|
|
|
$
|
0.50
|
|
Estimated cumulative
undistributed REIT taxable income per common share
6
|
$
|
0.42
|
|
|
$
|
0.59
|
|
|
$
|
0.57
|
|
|
$
|
1.07
|
|
|
$
|
1.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning cumulative
non-deductible capital losses
|
$
|
1,785
|
|
|
$
|
849
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Capital loss
(carryforward)/excess over capital gains
|
(102)
|
|
|
936
|
|
|
849
|
|
|
—
|
|
|
—
|
|
Ending cumulative
non-deductible capital losses
|
$
|
1,683
|
|
|
$
|
1,785
|
|
|
$
|
849
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Ending cumulative
non-deductible capital losses per common share
|
$
|
4.77
|
|
|
$
|
5.01
|
|
|
$
|
2.21
|
|
|
$
|
—
|
|
|
$
|
—
|
|
AMERICAN CAPITAL
AGENCY CORP.
|
KEY
STATISTICS*
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Key Balance Sheet
Statistics:
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
2014
|
|
2013
|
|
2013
|
|
2013
|
|
2013
|
Fixed-rate agency
securities, at fair value - as of period end
|
$
|
53,461
|
|
|
$
|
62,961
|
|
|
$
|
82,310
|
|
|
$
|
75,910
|
|
|
$
|
74,829
|
|
Adjustable-rate
agency securities, at fair value - as of period end
|
$
|
1,195
|
|
|
$
|
1,235
|
|
|
$
|
1,015
|
|
|
$
|
694
|
|
|
$
|
794
|
|
CMO agency
securities, at fair value - as of period end
|
$
|
1,289
|
|
|
$
|
1,308
|
|
|
$
|
1,244
|
|
|
$
|
141
|
|
|
$
|
157
|
|
Interest-only strips
agency securities, at fair value - as of period end
|
$
|
230
|
|
|
$
|
232
|
|
|
$
|
224
|
|
|
$
|
236
|
|
|
$
|
272
|
|
Principal-only strips
agency securities, at fair value - as of period end
|
$
|
202
|
|
|
$
|
205
|
|
|
$
|
216
|
|
|
$
|
226
|
|
|
$
|
243
|
|
Total agency
securities, at fair value - as of period end
|
$
|
56,377
|
|
|
$
|
65,941
|
|
|
$
|
85,009
|
|
|
$
|
77,207
|
|
|
$
|
76,295
|
|
Total agency
securities, at cost - as of period end
|
$
|
56,928
|
|
|
$
|
67,025
|
|
|
$
|
85,789
|
|
|
$
|
78,834
|
|
|
$
|
75,088
|
|
Total agency
securities, at par - as of period end 7
|
$
|
54,336
|
|
|
$
|
64,048
|
|
|
$
|
82,003
|
|
|
$
|
74,966
|
|
|
$
|
71,253
|
|
Average agency
securities, at cost
|
$
|
62,920
|
|
|
$
|
76,991
|
|
|
$
|
86,407
|
|
|
$
|
74,816
|
|
|
$
|
78,009
|
|
Average agency
securities, at par 7
|
$
|
60,103
|
|
|
$
|
73,527
|
|
|
$
|
82,751
|
|
|
$
|
70,851
|
|
|
$
|
73,922
|
|
Net TBA portfolio -
as of period end, at fair value
|
$
|
14,102
|
|
|
$
|
2,271
|
|
|
$
|
(7,256)
|
|
|
$
|
14,514
|
|
|
$
|
27,283
|
|
Net TBA portfolio -
as of period end, at cost
|
$
|
14,127
|
|
|
$
|
2,276
|
|
|
$
|
(7,060)
|
|
|
$
|
15,285
|
|
|
$
|
27,294
|
|
Net TBA portfolio -
as of period end, carrying value
|
$
|
(25)
|
|
|
$
|
(5)
|
|
|
$
|
(196)
|
|
|
$
|
(771)
|
|
|
$
|
(11)
|
|
Average net TBA
portfolio, at cost
|
$
|
4,534
|
|
|
$
|
(486)
|
|
|
$
|
131
|
|
|
$
|
28,904
|
|
|
$
|
17,892
|
|
Average repurchase
agreements and other debt
|
$
|
57,544
|
|
|
$
|
71,260
|
|
|
$
|
78,845
|
|
|
$
|
66,060
|
|
|
$
|
70,591
|
|
Average stockholders'
equity 8
|
$
|
8,975
|
|
|
$
|
9,432
|
|
|
$
|
10,064
|
|
|
$
|
11,256
|
|
|
$
|
10,843
|
|
Net book value per
common share as of period end 9
|
$
|
24.49
|
|
|
$
|
23.93
|
|
|
$
|
25.27
|
|
|
$
|
25.51
|
|
|
$
|
28.93
|
|
Leverage - average
during the period 10
|
6.7:1
|
|
7.6:1
|
|
7.8:1
|
|
5.9:1
|
|
6.5:1
|
Leverage - average
during the period, including net TBA position
11
|
7.2:1
|
|
7.5:1
|
|
7.8:1
|
|
8.4:1
|
|
8.2:1
|
Leverage - as of
period end 12
|
5.9:1
|
|
7.3:1
|
|
7.9:1
|
|
7.0:1
|
|
5.7:1
|
Leverage - as of
period end, including net TBA position 13
|
7.6:1
|
|
7.5:1
|
|
7.2:1
|
|
8.5:1
|
|
8.1:1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average coupon
14
|
3.60
|
%
|
|
3.59
|
%
|
|
3.50
|
%
|
|
3.63
|
%
|
|
3.68
|
%
|
Average asset yield
15
|
2.54
|
%
|
|
2.82
|
%
|
|
2.59
|
%
|
|
2.92
|
%
|
|
2.80
|
%
|
Average cost of funds
16
|
(1.35)
|
%
|
|
(1.25)
|
%
|
|
(1.39)
|
%
|
|
(1.43)
|
%
|
|
(1.28)
|
%
|
Average net interest
rate spread
|
1.19
|
%
|
|
1.57
|
%
|
|
1.20
|
%
|
|
1.49
|
%
|
|
1.52
|
%
|
Average net interest
rate spread, including estimated TBA dollar roll income/loss
17
|
1.43
|
%
|
|
1.56
|
%
|
|
1.14
|
%
|
|
1.86
|
%
|
|
1.87
|
%
|
Average coupon - as
of period end
|
3.65
|
%
|
|
3.58
|
%
|
|
3.54
|
%
|
|
3.56
|
%
|
|
3.73
|
%
|
Average asset
yield - as of period end
|
2.72
|
%
|
|
2.70
|
%
|
|
2.70
|
%
|
|
2.71
|
%
|
|
2.75
|
%
|
Average cost of funds
- as of period end 18
|
(1.45)
|
%
|
|
(1.31)
|
%
|
|
(1.33)
|
%
|
|
(1.47)
|
%
|
|
(1.32)
|
%
|
Average net interest
rate spread - as of period end
|
1.27
|
%
|
|
1.39
|
%
|
|
1.37
|
%
|
|
1.24
|
%
|
|
1.43
|
%
|
Average actual CPR
for securities held during the period
|
7
|
%
|
|
8
|
%
|
|
10
|
%
|
|
11
|
%
|
|
10
|
%
|
Average forecasted
CPR - as of period end
|
8
|
%
|
|
7
|
%
|
|
8
|
%
|
|
7
|
%
|
|
9
|
%
|
Total premium
amortization, net
|
$
|
(142)
|
|
|
$
|
(117)
|
|
|
$
|
(168)
|
|
|
$
|
(98)
|
|
|
$
|
(134)
|
|
Expenses % of average
total assets - annualized
|
0.19
|
%
|
|
0.17
|
%
|
|
0.15
|
%
|
|
0.19
|
%
|
|
0.18
|
%
|
Expenses % of average
stockholders' equity - annualized
|
1.58
|
%
|
|
1.56
|
%
|
|
1.66
|
%
|
|
1.64
|
%
|
|
1.57
|
%
|
Net comprehensive
income (loss) return on average common equity -
annualized 19
|
19.4
|
%
|
|
(15.8)
|
%
|
|
7.1
|
%
|
|
(34.0)
|
%
|
|
(21.3)
|
%
|
Dividends declared
per common share
|
$
|
0.65
|
|
|
$
|
0.65
|
|
|
$
|
0.80
|
|
|
$
|
1.05
|
|
|
$
|
1.25
|
|
Economic return
(loss) on common equity - annualized 20
|
20.5
|
%
|
|
(10.8)
|
%
|
|
8.7
|
%
|
|
(32.9)
|
%
|
|
(18.7)
|
%
|
*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.
- 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 (see footnote 1 for additional
information).
- Dividends on REIT equity securities are reported in gain (loss)
on derivative instruments and other securities, net.
- 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.
- 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 excludes the Company's
cumulative non-deductible net capital losses.
- Agency securities at par value excludes the underlying
unamortized principal balance ("UPB") of the Company's
interest-only securities. Excludes TBAs.
- 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 sum of average stockholders'
equity less the average investment in REIT equity securities 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 the sum of total stockholders' equity less the fair value of
investments in REIT equity securities 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/loss is net of TBAs used for
hedging purposes. Dollar roll income/loss 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 April 29, 2014 at 11:00 am ET. Interested persons who do not plan
on asking a question and have access to the internet are encouraged
to utilize the free live webcast at www.AGNC.com. Those who
do plan on participating in the Q&A or do not have the internet
available may access the call 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.
A slide presentation will accompany the call and will be
available at www.AGNC.com. Select the Q1 2014 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 April 29, 2014. In addition, there will be a
phone recording available from 1:00 pm
ET April 29, 2014 until 9:00 am
ET May 13, 2014. 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
10044220.
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, Ltd.
(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 $19
billion of assets, including assets on its balance sheet and
fee earning assets under management by affiliated managers, with
$93 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 $9
billion of net book value, American Capital Mortgage
Investment Corp. (Nasdaq: MTGE) with approximately $1 billion of net book value and American Capital
Senior Floating, Ltd. (Nasdaq: ACSF). 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) timing differences, both temporary and
potentially permanent, in the recognition of certain realized gains
and losses and (iii) temporary differences related to the
amortization of net premiums paid on investments.
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.
SOURCE American Capital Agency Corp.