American Capital Agency Corp. Reports $0.36 Comprehensive Income
Per Common Share And $31.64 Net Book Value Per Common Share
BETHESDA, Md., Feb. 7,
2013 /PRNewswire/ -- American Capital Agency Corp. ("AGNC" or
the "Company") (Nasdaq: AGNC) today reported comprehensive income
for the fourth quarter of 2012 of $126
million, or $0.36 per common
share, and net book value of $31.64
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 $0.40 per common
share, or 5% on an annualized basis. For the full year, AGNC
reported a 32% economic return on common equity.
FOURTH QUARTER 2012 FINANCIAL HIGHLIGHTS
- $0.36 comprehensive income per
common share, comprised of:
- $2.37 net income per common
share
- $(2.01) other comprehensive
income (loss) ("OCI") per common share
- Driven by net unrealized losses on investments marked-to-market
through OCI
- $0.89 net spread income per
common share
- Comprised of interest income, net of cost of funds (including
interest rate swaps) and operating expenses
- $0.78 per common share, excluding
approximately $0.11 per common share
of "catch-up" premium amortization benefit due to change in
projected constant prepayment rate ("CPR") estimates
- Excludes $0.29 per common share
of estimated net carry income (also known as "dollar roll income")
associated with purchases of agency mortgage backed securities
("MBS") on a forward-settlement basis through the "to-be-announced"
("TBA") dollar roll market
- $1.93 estimated taxable income
per common share
- $1.25 dividend per common share
declared on December 14, 2012
- $2.18 estimated undistributed
taxable income per common share as of December 31, 2012
- Represents an increase of $222
million from $518 million as
of September 30, 2012 to $740
million as of December 31, 2012
- On a per share basis, increased $0.66 per common share from $1.52 as of September 30, 2012
- $31.64 net book value per common
share as of December 31, 2012
- Decreased $0.85 per common share,
or 2.6%, from $32.49 per common share
as of September 30, 2012
- 5% annualized economic return on common equity
- Comprised of $1.25 dividend per
common share and $0.85 decrease in
net book value per common share
OTHER FOURTH QUARTER HIGHLIGHTS
- $85 billion investment portfolio
as of December 31, 2012
- $98 billion including net TBA
mortgage position as of December 31,
2012
- 6.7x average leverage for the quarter
- 7.8x including average net TBA mortgage position during the
quarter
- 7.0x leverage as of December 31, 2012
- 8.2x including net TBA mortgage position as of
December 31, 2012
- 10% actual portfolio CPR for the quarter
- 11% actual portfolio CPR for the month of January 2013
- 11% average projected portfolio life CPR as of
December 31, 2012
- 1.63% annualized net interest rate spread for the quarter
- 1.44% excluding "catch-up" premium amortization benefit due to
change in projected CPR estimates
- 1.65% when further adjusted for estimated TBA dollar roll
income
- 1.39% net interest rate spread as of December 31, 2012
- 1.61% including net TBA mortgage position as of
December 31, 2012
- 2.7 million shares of common stock repurchased during the
quarter at an average net repurchase price of $29.00 per common share
2012 FULL YEAR FINANCIAL HIGHLIGHTS
- 32% economic return on common equity
- Comprised of $5.00 dividend per
common share and $3.93 increase in
net book value per common share
- $8.26 comprehensive income per
common share, comprised of:
- $4.17 net income per common
share
- $4.09 OCI per common share
- $6.87 estimated taxable income
per common share
- Estimated undistributed taxable income increased from
$0.80 per common share as of
December 31, 2011 to $2.18 per
common share as of December 31, 2012
- $3.93 per common share, or 14%,
increase in net book value from $27.71 per common share as of December 31,
2011 to $31.64 per common share as of
December 31, 2012
- Portfolio prepayments remained stable during 2012 at an average
actual portfolio CPR of 10% for the year
"The year 2012 was very successful for AGNC as we delivered a
32% economic return to our common shareholders," commented
John Erickson, Chief Financial
Officer and Executive Vice President. "Despite the implementation
of the Federal Reserve's third round of quantitative easing
("QE3"), our active management philosophy and focus on asset
selection across the entire agency MBS spectrum enabled us to
continue to extract significant value for our shareholders.
As we look to the future, we remain optimistic about our ability to
create value for our shareholders in both today's environment and
across a range of possible scenarios."
"Against the backdrop of record low interest rates, AGNC has
once again delivered extremely strong returns for our common
shareholders in 2012. In fact, this was our fourth year in a
row where we were able to produce total economic or mark-to-market
returns exceeding 30%," said Gary
Kain, President and Chief Investment Officer. "During
the fourth quarter, we adjusted our investment strategies to take
advantage of favorable financing opportunities in the TBA dollar
roll market, which significantly enhanced the net carry on our
agency mortgage positions. While dollar roll income is
recognized in 'other income' under GAAP, versus net interest income
for on balance sheet assets, AGNC will continue to prioritize
generating economic value over earnings geography.
Additionally, these opportunities are a direct result of the
Federal Reserve's large scale mortgage purchases under QE3 and thus
likely to remain in place for most of 2013 (and possibly
beyond)."
NET BOOK VALUE
As of December 31, 2012, the
Company's net book value per common share was $31.64, or $0.85
lower than the September 30, 2012 net book value per common
share of $32.49, reflective of lower
pricing on the Company's MBS portfolio, net of hedge gains, as some
of the initial gains on MBS recognized during the third quarter
immediately following the Federal Reserve's announcement of QE3
declined in the fourth quarter. Since June
30, 2012, or "pre-QE3", the Company's net book value
increased $2.23 per common share, or
7.6%.
INVESTMENT PORTFOLIO
As of December 31, 2012,
the Company's investment portfolio totaled $85.2 billion of agency securities and
$12.9 billion of net TBA mortgage
positions, at fair value.
Since commencing QE3, the Federal Reserve's purchases of agency
MBS have had the effect of lowering net interest rate spreads on
lower coupon agency MBS. However, the Federal Reserve's involvement
in the mortgage market has also made it more attractive to purchase
agency MBS on a forward-settlement basis through the TBA dollar
roll market.
TBA dollar roll transactions are a form of off-balance sheet
financing of agency MBS. The price differential between agency MBS
purchased for a forward settlement date through a TBA dollar roll
transaction and the price of agency MBS for settlement in the
current month is referred to as the "price drop". The price
drop is the economic equivalent of the net interest carry (interest
income less implied financing cost), also referred to as "dollar
roll income," on the agency MBS earned during the roll period.
Given the attractive terms available in the dollar roll market
throughout the fourth quarter, the Company maintained an average
net forward TBA position of $13.1
billion (cost basis) during the quarter.
The Company accounts for its 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 December 31, 2012, the Company's
net TBA mortgage portfolio had a fair value of $12.9 billion and a cost basis of $12.8 billion, for a net fair value of
$0.1 billion reported in derivative
assets/liabilities on the Company's balance sheet.
As of December 31, 2012, the Company's agency securities
were comprised of $83.6 billion of
fixed-rate securities, $0.9 billion
of adjustable-rate securities and $0.7
billion of collateralized mortgage obligations ("CMOs")
backed by fixed and adjustable-rate securities, including principal
and interest-only strips. As of December 31, 2012, the
Company's fixed-rate investment portfolio was comprised of
$30.0 billion ≤15-year fixed-rate
securities, $1.6 billion 20-year
fixed-rate securities and $52.0
billion 30-year fixed-rate securities, while the Company's
net TBA mortgage portfolio was comprised of $8.7 billion 15-year net TBA securities and
$4.2 billion 30-year net TBA
securities, at fair value.
As of December 31, 2012, 77% of the Company's fixed-rate
securities, or 67% inclusive of net TBA mortgage positions, 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 have favorable
prepayment attributes and, therefore, a lower risk of prepayment
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%. The remainder of the Company's portfolio
was primarily comprised of low coupon, new issuance fixed-rate
agency securities.
CONSTANT PREPAYMENT RATES
The actual CPR for the
Company's investment portfolio during the fourth quarter was 10%,
an increase from 9% for the third quarter. The most recent
CPR published in January 2013 for the
Company's portfolio held as of December 31, 2012 was
11%. The weighted average projected CPR for the remaining
life of all of the Company's agency securities held as of
December 31, 2012 was 11%, a decrease from 14% as of
September 30, 2012 primarily due to the combination of an
increase in long-term interest rates, higher concentration of lower
loan balance and HARP security holdings and a decline in the
weighted average coupon rate on the Company's portfolio during the
quarter. The Company's net TBA dollar roll position was
concentrated in low coupon securities and 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 105.6% of par value as of December 31, 2012; 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.
The amortization of premiums, net of any accretion of discounts,
on the investment portfolio for the fourth quarter was $(153) million, or $(0.45) per common share, compared to
$(219) million, or $(0.66) per common share, for the third
quarter. The change in the Company's weighted average
projected CPR estimate resulted in recognition of approximately
$37 million, or $0.11 per common share, of "catch-up" premium
amortization benefit during the quarter, compared to approximately
$(23) million, or $(0.07) per common share, of "catch-up" premium
amortization cost during the third quarter. The unamortized net
premium balance as of December 31, 2012 was $4.4 billion.
ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE
SPREAD
The Company's average asset yield on its agency
security portfolio for the fourth quarter increased 27 bps to
2.82%, from 2.55% for the third quarter. Excluding the impact
of "catch-up" premium amortization benefit/cost 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 2.63% for the current quarter,
compared to 2.66% for the prior quarter. The Company's
average asset yield reported as of December 31, 2012 was
2.61%, unchanged from September 30, 2012.
The Company's average cost of funds (derived from the cost of
repurchase agreements ("repos"), other debt and interest rate
swaps) increased 6 bps to 1.19% for the fourth quarter, from 1.13%
for the third quarter. The Company's average cost of funds as
of December 31, 2012, increased 11 bps to 1.22% from 1.11% as
of September 30, 2012. The increase in the Company's
average cost of funds was due to an increase of 5 bps in repo costs
from 0.46% as of September 30, 2012 to 0.51% as of
December 31, 2012, due to higher year-end repo rates and
higher average swap costs. The ratio of interest rate swaps
to repurchase agreements and other debt outstanding was 62% as of
December 31, 2012, largely unchanged from 61% as of
September 30, 2012.
The Company's average net interest rate spread for the fourth
quarter was 1.63%, an increase of 21 bps from the third quarter of
1.42%. Excluding the impact of "catch-up" premium
amortization benefit/cost during the current and prior quarter due
to changes in projected CPR estimates, the Company's average net
interest rate spread was 1.44% for the current quarter, or 1.65%
inclusive of estimated TBA dollar roll income, compared to 1.53%
for the third quarter. As of December 31, 2012, the
Company's average net interest rate spread was 1.39%, or 1.61%
inclusive of net TBA dollar roll positions compared to 1.50% as of
September 30, 2012.
LEVERAGE AND HEDGING ACTIVITIES
As of
December 31, 2012, the Company had total repurchase agreements
and other debt outstanding of $75.4
billion, resulting in a leverage ratio of 7.0x including the
net payable for agency securities not yet settled, or 8.2x
inclusive of off-balance sheet TBA financing. Average
leverage for the quarter was 6.7x. Inclusive of off-balance
sheet TBA financing, the Company's average leverage for the quarter
was 7.8x.
The $74.5 billion borrowed under
repurchase agreements as of December 31, 2012 had original
maturities consisting of:
- $4.0 billion of one month or
less;
- $28.3 billion from one to three
months;
- $24.3 billion from three to six
months;
- $5.3 billion from six to nine
months;
- $7.8 billion from nine to twelve
months;
- $1.9 billion from twelve to
twenty-four months;
- $2.8 billion from twenty-four to
thirty-six months; and
- $0.1 billion of greater than
thirty-six months.
The Company increased the weighted average original maturity of
its repurchase agreements to 181 days as of December 31, 2012,
from 141 days as of September 30, 2012. As of
December 31, 2012, the Company's repurchase agreements had a
weighted average remaining days to maturity of 118 days, compared
to 89 days as of September 30, 2012.
The Company's interest rate swap positions as of
December 31, 2012 totaled $46.9
billion in notional amount and had an average fixed pay rate
of 1.46%, a weighted average receive rate of 0.29% and a weighted
average maturity of 4.4 years. During the quarter, the
Company increased its swap position, including forward starting
swaps ranging up to April 2013, by
$1.7 billion, while $3.7 billion of the Company's shorter duration
swaps were terminated during the quarter. The new swap
agreements entered into during the quarter have an average maturity
of approximately 8.7 years from December 31, 2012 and a
weighted average fixed pay rate of 1.53%. The Company enters
into swaps with longer maturities with the intention of protecting
its net book value and longer term earnings potential.
The Company utilizes interest rate swaptions to mitigate
exposure to larger changes in interest rates. During the
quarter, the Company added $6.1
billion of payer swaptions at a cost of $124 million, while $0.2
billion of payer swaptions from previous quarters expired
for a total loss of $3 million.
As of December 31, 2012, the Company had $14.5 billion in payer swaptions outstanding at a
market value of $171 million with an
average option term of 21 months and an average underlying interest
rate swap term of 7.8 years.
The Company also utilizes short positions in U.S. Treasury
Securities to mitigate exposure to increases in interest
rates. As of December 31, 2012, the Company had
$11.8 billion in short Treasury
positions. As of December 31, 2012, 97% of the Company's
outstanding balance of repurchase agreements and other debt was
hedged through interest rate swaps, swaptions and short Treasury
positions, an increase from 81% as of September 30,
2012. Inclusive of off-balance sheet TBA financing, the
Company's aggregate hedge ratio was 80% as of December 31,
2012, an increase from 76% as of September 30, 2012.
OTHER INCOME (LOSS), NET
During the quarter, the
Company recorded a gain of $442
million in other income (loss), net, or $1.30 per common share. Other income
(loss), net is comprised of:
- $353 million of net realized
gains on sales of agency securities;
- $(77) million of other interest
rate swap periodic interest costs (excludes $(50) million of interest rate swap costs
recorded in interest expense);
- $145 million of net unrealized
gains on interest rate swaps;
- $(32) million of interest rate
swap termination fees;
- $98 million of TBA dollar roll
income;
- $(8) million of net losses on TBA
mortgage positions and forward settling securities; and
- $(37) million of net losses on
other derivative instruments and securities.
Other derivative instruments and securities generally represent
instruments that are used in addition to interest rate swaps (such
as swaptions, treasury securities and treasury futures contracts)
to supplement the Company's interest rate risk management
strategies.
OTHER COMPREHENSIVE INCOME (LOSS)
During the quarter,
the Company recorded other comprehensive loss of $(684) million, or $(2.01) per common share, comprised of
$(734) million of net unrealized
losses on agency securities and $50
million of net unrealized gains on interest rate
swaps. The net unrealized gains on interest rate swaps
consists of amounts reclassified out of accumulated OCI into
interest expense for the amortization of deferred losses associated
with interest rate swaps that were de-designated as hedges in the
third quarter of 2011.
ESTIMATED TAXABLE INCOME
Estimated taxable income for
the fourth quarter was $1.93 per
common share, or $0.44 lower than
GAAP net income 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.
FOURTH QUARTER 2012 DIVIDEND DECLARATIONS
On
December 14, 2012, the Board of Directors of the Company
declared a fourth quarter dividend on its common stock of
$1.25 per share, which was paid on
January 28, 2013 to common stockholders of record as of
December 27, 2012. Since its May
2008 initial public offering, the Company has paid a total
of $2.8 billion in common dividends,
or $23.86 per common share.
On December 17, 2012, the Board of Directors of the Company
declared a fourth 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 January 15, 2013 to preferred stockholders of record
as of January 1, 2013.
The Company had approximately $740
million of estimated undistributed taxable income as of
December 31, 2012, or $2.18 per
common share, after adjusting for the fourth quarter common and
preferred dividends declared, but without adjustment for future
quarterly dividends not yet declared on the Company's Series A
Preferred Stock.
The Company also announced the tax characteristics of its 2012
dividends. The Company's 2012 common stock dividend of $5.00 per common share consisted of $4.5092 per common share of ordinary income and
$0.4908 per common share of long-term
capital gains for federal income tax purposes. The Company's
2012 Series A Preferred Stock dividend of $1.056 per preferred share consisted of
$0.9523 per preferred share of
ordinary income and $0.1037 per
preferred share of long-term capital gains for federal income tax
purposes. The Company's 2012 Series A Preferred Stock dividend
excludes for federal income tax purposes the dividend of
$0.50 per preferred share declared
during the fourth quarter since the record date was subsequent to
December 31, 2012. Stockholders
should receive an IRS Form 1099-DIV containing this information
from their brokers, transfer agents or other institutions. For
additional detail please visit the Company's website at
www.AGNC.com.
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
2012
|
|
September
30,
2012
|
|
June
30,
2012
|
|
March
31,
2012
|
|
December
31,
2011
|
|
|
(unaudited)
|
|
|
|
(unaudited)
|
|
|
|
(unaudited)
|
|
|
|
(unaudited)
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
securities, at fair value
(including
pledged securities of $79,966,
$83,600,
$71,809, $71,156, and $50,405,
respectively)
|
$
|
83,710
|
|
|
$
|
88,020
|
|
|
$
|
76,378
|
|
|
$
|
80,517
|
|
|
$
|
54,625
|
|
Agency
securities transferred to consolidated variable interest entities,
at fair value
|
1,535
|
|
|
1,620
|
|
|
1,544
|
|
|
53
|
|
|
58
|
|
U.S.
Treasury securities, at fair value (including pledged securities of
$101)
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
101
|
|
Cash and
cash equivalents
|
2,430
|
|
|
2,569
|
|
|
2,099
|
|
|
1,762
|
|
|
1,367
|
|
Restricted
cash
|
399
|
|
|
369
|
|
|
302
|
|
|
315
|
|
|
336
|
|
Derivative
assets, at fair value
|
301
|
|
|
292
|
|
|
64
|
|
|
184
|
|
|
82
|
|
Receivable
for securities sold (including pledged securities of $0, $1,466,
$2,674, $1,442, and $319, respectively)
|
-
|
|
|
2,326
|
|
|
2,877
|
|
|
1,706
|
|
|
443
|
|
Receivable
under reverse repurchase agreements
|
11,818
|
|
|
6,712
|
|
|
1,274
|
|
|
3,613
|
|
|
763
|
|
Other
assets
|
260
|
|
|
269
|
|
|
244
|
|
|
267
|
|
|
197
|
|
Total
assets
|
$
|
100,453
|
|
|
$
|
102,177
|
|
|
$
|
84,782
|
|
|
$
|
88,417
|
|
|
$
|
57,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
$
|
74,478
|
|
|
$
|
79,254
|
|
|
$
|
69,540
|
|
|
$
|
69,816
|
|
|
$
|
47,681
|
|
Debt of
consolidated variable interest entities, at fair value
|
937
|
|
|
1,008
|
|
|
954
|
|
|
50
|
|
|
54
|
|
Payable
for securities purchased
|
556
|
|
|
1,311
|
|
|
2,198
|
|
|
4,852
|
|
|
1,919
|
|
Derivative
liabilities, at fair value
|
1,264
|
|
|
1,562
|
|
|
1,250
|
|
|
827
|
|
|
853
|
|
Dividends
payable
|
427
|
|
|
430
|
|
|
384
|
|
|
286
|
|
|
314
|
|
Obligation
to return securities borrowed under reverse
|
11,763
|
|
|
7,265
|
|
|
1,269
|
|
|
3,816
|
|
|
899
|
|
repurchase agreements, at fair value
|
|
|
|
|
|
|
|
|
|
Accounts
payable and other accrued liabilities
|
133
|
|
|
74
|
|
|
51
|
|
|
52
|
|
|
40
|
|
Total
liabilities
|
|
89,558
|
|
|
|
90,904
|
|
|
|
75,646
|
|
|
|
79,699
|
|
|
|
51,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.000%
Series A Cumulative Redeemable
Preferred Stock; $0.01 par value; 6.9, 6.9, 6.9, 0.0
and 0.0 shares issued and outstanding, respectively; liquidation preference of
$25 per share ($173)
|
167
|
|
|
167
|
|
|
167
|
|
|
-
|
|
|
-
|
|
Common
stock, $0.01 par value; 600.0, 600.0, 600.0, 300.0, and 300.0
shares authorized; 338.9, 341.6, 304.8, 300.0, and 224.1 shares
issued and outstanding, respectively
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
2
|
|
Additional
paid-in capital
|
9,460
|
|
|
9,536
|
|
|
8,296
|
|
|
8,141
|
|
|
5,937
|
|
Retained
(deficit) earnings
|
(289)
|
|
|
(672)
|
|
|
(328)
|
|
|
317
|
|
|
(38)
|
|
Accumulated other comprehensive income
|
1,554
|
|
|
2,239
|
|
|
998
|
|
|
257
|
|
|
311
|
|
Total
stockholders' equity
|
10,895
|
|
|
11,273
|
|
|
9,136
|
|
|
8,718
|
|
|
6,212
|
|
Total
liabilities and stockholders' equity
|
$
|
100,453
|
|
|
$
|
102,177
|
|
|
$
|
84,782
|
|
|
$
|
88,417
|
|
|
$
|
57,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
book value per common share
|
$
|
31.64
|
|
|
$
|
32.49
|
|
|
$
|
29.41
|
|
|
$
|
29.06
|
|
|
$
|
27.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN
CAPITAL AGENCY CORP.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in
millions, except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Year
Ended
|
|
December
31,
2012
|
|
September
30,
2012
|
|
June
30,
2012
|
|
March
31,
2012
|
|
December
31,
2012
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
$
|
570
|
|
|
$
|
$520
|
|
|
$
|
$504
|
|
|
$
|
$514
|
|
|
$
|
$2,109
|
|
Interest expense (1)
|
147
|
|
|
139
|
|
|
120
|
|
|
106
|
|
|
512
|
|
Net interest income
|
423
|
|
|
381
|
|
|
384
|
|
|
408
|
|
|
1,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (loss), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of agency securities,
net
|
353
|
|
|
210
|
|
|
417
|
|
|
216
|
|
|
1,196
|
|
Gain (loss) on derivative instruments
and other securities, net (1)
|
89
|
|
|
(460)
|
|
|
(1,029)
|
|
|
47
|
|
|
(1,353)
|
|
Total other income (loss), net
|
442
|
|
|
(250)
|
|
|
(612)
|
|
|
263
|
|
|
(157)
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees
|
31
|
|
|
32
|
|
|
28
|
|
|
22
|
|
|
113
|
|
General and administrative
expenses
|
9
|
|
|
8
|
|
|
8
|
|
|
6
|
|
|
31
|
|
Total expenses
|
40
|
|
|
40
|
|
|
36
|
|
|
28
|
|
|
144
|
|
Income
(loss) before income tax provision (benefit)
|
825
|
|
|
91
|
|
|
(264)
|
|
|
643
|
|
|
1,296
|
|
Income tax provision
(benefit)
|
15
|
|
|
5
|
|
|
(3)
|
|
|
2
|
|
|
19
|
|
Net
income (loss)
|
810
|
|
|
86
|
|
|
(261)
|
|
|
641
|
|
|
1,277
|
|
Dividend
on preferred stock
|
3
|
|
|
3
|
|
|
3
|
|
|
-
|
|
|
10
|
|
Net
income (loss) available (attributable) to common
shareholders
|
$
|
807
|
|
|
$
|
83
|
|
|
$
|
(264)
|
|
|
$
|
641
|
|
|
$
|
1,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
$
|
810
|
|
|
$
|
86
|
|
|
$
|
(261)
|
|
|
$
|
641
|
|
|
$
|
1,277
|
|
Other
comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (loss) gain on
available-for-sale securities, net
|
(734)
|
|
|
1,190
|
|
|
689
|
|
|
(106)
|
|
|
1,039
|
|
Unrealized gain on derivative
instruments, net (1)
|
50
|
|
|
51
|
|
|
52
|
|
|
52
|
|
|
205
|
|
Other
comprehensive (loss) income
|
(684)
|
|
|
1,241
|
|
|
741
|
|
|
(54)
|
|
|
1,244
|
|
Comprehensive income
|
126
|
|
|
1,327
|
|
|
480
|
|
|
587
|
|
|
2,521
|
|
Dividend
on preferred stock
|
3
|
|
|
3
|
|
|
3
|
|
|
-
|
|
|
10
|
|
Comprehensive income available to common
shareholders
|
$
|
123
|
|
|
$
|
1,324
|
|
|
$
|
477
|
|
|
$
|
587
|
|
|
$
|
2,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic and
diluted
|
|
340.3
|
|
|
|
332.8
|
|
|
|
301.0
|
|
|
|
240.6
|
|
|
|
303.9
|
|
Net
income (loss) per common share - basic and diluted
|
$
|
2.37
|
|
|
$
|
0.25
|
|
|
$
|
(0.88)
|
|
|
$
|
2.66
|
|
|
$
|
4.17
|
|
Comprehensive income per common share - basic and
diluted
|
$
|
0.36
|
|
|
$
|
3.98
|
|
|
$
|
1.58
|
|
|
$
|
2.44
|
|
|
$
|
8.26
|
|
Estimated REIT taxable income per common share
-
|
$
|
1.93
|
|
|
$
|
1.36
|
|
|
$
|
1.62
|
|
|
$
|
2.03
|
|
|
$
|
6.87
|
|
basic
and diluted (2)
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share
|
$
|
1.25
|
|
|
$
|
1.25
|
|
|
$
|
1.25
|
|
|
$
|
1.25
|
|
|
$
|
5.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN
CAPITAL AGENCY CORP.
|
RECONCILIATION OF GAAP NET INTEREST INCOME TO
ADJUSTED NET INTEREST INCOME AND NET SPREAD INCOME
(2)
|
(in
millions, except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Year
Ended
|
|
December
31,
2012
|
|
September
30,
2012
|
|
June
30,
2012
|
|
March
31,
2012
|
|
December
31,
2012
|
Interest
income
|
$
|
570
|
|
|
$
|
520
|
|
|
$
|
504
|
|
|
$
|
514
|
|
|
$
|
2,109
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase agreements and other debt
|
97
|
|
|
88
|
|
|
68
|
|
|
54
|
|
|
307
|
|
Interest rate swap periodic costs (1)
|
50
|
|
|
51
|
|
|
52
|
|
|
52
|
|
|
205
|
|
Total interest
expense
|
147
|
|
|
139
|
|
|
120
|
|
|
106
|
|
|
512
|
|
Net
interest income
|
423
|
|
|
381
|
|
|
384
|
|
|
408
|
|
|
1,597
|
|
Other interest rate swap periodic costs (3)
|
77
|
|
|
74
|
|
|
62
|
|
|
39
|
|
|
252
|
|
Adjusted
net interest income
|
346
|
|
|
307
|
|
|
322
|
|
|
369
|
|
|
1,345
|
|
Operating expenses
|
40
|
|
|
40
|
|
|
36
|
|
|
28
|
|
|
144
|
|
Net spread
income
|
306
|
|
|
267
|
|
|
286
|
|
|
341
|
|
|
1,201
|
|
Dividend on preferred stock
|
3
|
|
|
3
|
|
|
3
|
|
|
-
|
|
|
10
|
|
Net spread
income available to common
shareholders
|
$
|
303
|
|
|
$
|
264
|
|
|
$
|
283
|
|
|
$
|
341
|
|
|
$
|
1,191
|
|
Weighted
average number of common shares
outstanding - basic and diluted
|
340.3
|
|
|
332.8
|
|
|
301.0
|
|
|
240.6
|
|
|
303.9
|
|
Net spread
income per common share - basic and diluted
|
$
|
0.89
|
|
|
$
|
0.79
|
|
|
$
|
0.94
|
|
|
$
|
1.42
|
|
|
$
|
3.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN
CAPITAL AGENCY CORP.
|
RECONCILIATION OF GAAP NET INCOME TO ESTIMATED
TAXABLE INCOME (2)
|
(in
millions, except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Year
Ended
|
|
December
31,
2012
|
|
September
30,
2012
|
|
June
30,
2012
|
|
March
31,
2012
|
|
December
31,
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
810
|
|
|
$
|
86
|
|
|
$
|
(261)
|
|
|
$
|
641
|
|
|
$
|
1,277
|
|
Book to
tax differences:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium amortization, net
|
(19)
|
|
|
55
|
|
|
43
|
|
|
(28)
|
|
|
51
|
|
Realized (gain) loss, net
|
(16)
|
|
|
167
|
|
|
54
|
|
|
(46)
|
|
|
159
|
|
Unrealized (gain) loss, net
|
(121)
|
|
|
128
|
|
|
647
|
|
|
(80)
|
|
|
574
|
|
Other
|
6
|
|
|
20
|
|
|
9
|
|
|
2
|
|
|
38
|
|
Total book to tax
differences
|
(150)
|
|
|
370
|
|
|
753
|
|
|
(152)
|
|
|
822
|
|
Estimated
REIT taxable income
|
660
|
|
|
456
|
|
|
492
|
|
|
489
|
|
|
2,099
|
|
Dividend on preferred stock
|
3
|
|
|
3
|
|
|
3
|
|
|
-
|
|
|
10
|
|
Estimated
REIT taxable income available
to common shareholders
|
$
|
657
|
|
|
$
|
453
|
|
|
$
|
489
|
|
|
$
|
489
|
|
|
$
|
2,089
|
|
Weighted
average number of common shares outstanding - basic and
diluted
|
340.3
|
|
|
332.8
|
|
|
301.0
|
|
|
240.6
|
|
|
303.9
|
|
Estimated
REIT taxable income per common share - basic and diluted
|
$
|
1.93
|
|
|
$
|
1.36
|
|
|
$
|
1.62
|
|
|
$
|
2.03
|
|
|
$
|
6.87
|
|
Estimated
cumulative undistributed REIT taxable income per common share
(4)
|
$
|
2.18
|
|
|
$
|
1.52
|
|
|
$
|
1.61
|
|
|
$
|
1.28
|
|
|
$
|
2.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERICAN
CAPITAL AGENCY CORP.
|
KEY
STATISTICS*
|
(in
millions, except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
Key
Balance Sheet Statistics:
|
December
31,
2012
|
|
September
30,
2012
|
|
June
30,
2012
|
|
March
31,
2012
|
|
December
31,
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate
agency securities, at fair
value - as of period end
|
$
|
83,635
|
|
|
$
|
87,882
|
|
|
$
|
75,732
|
|
|
$
|
77,675
|
|
|
$
|
51,484
|
|
Adjustable-rate agency securities, at fair value - as
of period end
|
$
|
891
|
|
|
$
|
992
|
|
|
$
|
1,072
|
|
|
$
|
2,500
|
|
|
$
|
2,774
|
|
CMO agency
securities, at fair value - as of period end
|
$
|
173
|
|
|
$
|
191
|
|
|
$
|
568
|
|
|
$
|
228
|
|
|
$
|
247
|
|
Interest-only strips agency securities, at fair value
- as of period end
|
$
|
292
|
|
|
$
|
307
|
|
|
$
|
276
|
|
|
$
|
133
|
|
|
$
|
141
|
|
Principal-only strips agency securities, at fair
value - as of period end
|
$
|
254
|
|
|
$
|
268
|
|
|
$
|
274
|
|
|
$
|
34
|
|
|
$
|
37
|
|
Total
agency securities, at fair value - as of period end
|
$
|
85,245
|
|
|
$
|
89,640
|
|
|
$
|
77,922
|
|
|
$
|
80,570
|
|
|
$
|
54,683
|
|
Total
agency securities, at cost - as of period end
|
$
|
83,193
|
|
|
$
|
86,850
|
|
|
$
|
76,352
|
|
|
$
|
79,687
|
|
|
$
|
53,694
|
|
Total
agency securities, at par - as of period end (5)
|
$
|
78,789
|
|
|
$
|
82,435
|
|
|
$
|
72,683
|
|
|
$
|
76,023
|
|
|
$
|
51,266
|
|
Average
agency securities, at cost
|
$
|
80,932
|
|
|
$
|
81,500
|
|
|
$
|
74,007
|
|
|
$
|
61,962
|
|
|
$
|
46,060
|
|
Average
agency securities, at par (5)
|
$
|
76,710
|
|
|
$
|
77,519
|
|
|
$
|
70,549
|
|
|
$
|
59,082
|
|
|
$
|
43,968
|
|
Average
repurchase agreements and other debt
|
$
|
74,649
|
|
|
$
|
75,106
|
|
|
$
|
67,997
|
|
|
$
|
57,480
|
|
|
$
|
42,184
|
|
Average
stockholders' equity (6)
|
$
|
11,177
|
|
|
$
|
10,602
|
|
|
$
|
9,071
|
|
|
$
|
6,984
|
|
|
$
|
5,564
|
|
Net book
value per common share as of period end (7)
|
$
|
31.64
|
|
|
$
|
32.49
|
|
|
$
|
29.41
|
|
|
$
|
29.06
|
|
|
$
|
27.71
|
|
Leverage -
average during the period (8)
|
|
6.7:1
|
|
|
|
7.1:1
|
|
|
|
7.5:1
|
|
|
|
8.2:1
|
|
|
|
7.6:1
|
|
Leverage -
as of period end (9)
|
|
7.0:1
|
|
|
|
7.0:1
|
|
|
|
7.6:1
|
|
|
|
8.4:1
|
|
|
|
7.9:1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key
Performance Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
coupon (10)
|
|
3.77
|
%
|
|
|
3.81
|
%
|
|
|
3.96
|
%
|
|
|
4.15
|
%
|
|
|
4.31
|
%
|
Average
asset yield (11)
|
|
2.82
|
%
|
|
|
2.55
|
%
|
|
|
2.73
|
%
|
|
|
3.32
|
%
|
|
|
3.06
|
%
|
Average
cost of funds (12)
|
|
(1.19)
|
%
|
|
|
(1.13)
|
%
|
|
|
(1.08)
|
%
|
|
|
(1.01)
|
%
|
|
|
(1.16)
|
%
|
Average
net interest rate spread (13)
|
|
1.63
|
%
|
|
|
1.42
|
%
|
|
|
1.65
|
%
|
|
|
2.31
|
%
|
|
|
1.90
|
%
|
Average
coupon - as of period end
|
|
3.69
|
%
|
|
|
3.77
|
%
|
|
|
3.86
|
%
|
|
|
3.99
|
%
|
|
|
4.23
|
%
|
Average
asset yield - as of period end
|
|
2.61
|
%
|
|
|
2.61
|
%
|
|
|
2.81
|
%
|
|
|
3.06
|
%
|
|
|
3.07
|
%
|
Average
cost of funds - as of period end (14)
|
|
(1.22)
|
%
|
|
|
(1.11)
|
%
|
|
|
(1.19)
|
%
|
|
|
(0.99)
|
%
|
|
|
(1.13)
|
%
|
Average
net interest rate spread - as of period end
|
|
1.39
|
%
|
|
|
1.50
|
%
|
|
|
1.62
|
%
|
|
|
2.07
|
%
|
|
|
1.94
|
%
|
Average
actual CPR for securities held during the period
|
|
10
|
%
|
|
|
9
|
%
|
|
|
10
|
%
|
|
|
10
|
%
|
|
|
9
|
%
|
Average
forecasted CPR - as of period end
|
|
11
|
%
|
|
|
14
|
%
|
|
|
12
|
%
|
|
|
9
|
%
|
|
|
14
|
%
|
Total
premium amortization, net
|
$
|
(153)
|
|
|
$
|
(219)
|
|
|
$
|
(196)
|
|
|
$
|
(100)
|
|
|
$
|
(121)
|
|
Expenses %
of average total assets
|
|
0.16
|
%
|
|
|
0.17
|
%
|
|
|
0.18
|
%
|
|
|
0.16
|
%
|
|
|
0.19
|
%
|
Expenses %
of average stockholders' equity
|
|
1.42
|
%
|
|
|
1.50
|
%
|
|
|
1.59
|
%
|
|
|
1.60
|
%
|
|
|
1.74
|
%
|
Net
comprehensive income return on average common equity - annualized
(15)
|
|
4.4
|
%
|
|
|
50.4
|
%
|
|
|
21.5
|
%
|
|
|
33.7
|
%
|
|
|
34.0
|
%
|
Dividends
declared per common share
|
$
|
$1.25
|
|
|
$
|
$1.25
|
|
|
$
|
$1.25
|
|
|
$
|
$1.25
|
|
|
$
|
$1.40
|
|
Economic
return on common equity - annualized (16)
|
|
4.9
|
%
|
|
|
58.6
|
%
|
|
|
22.1
|
%
|
|
|
37.7
|
%
|
|
|
32.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*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.
- 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.
- Estimated cumulative undistributed REIT taxable income as of
period end is net of common and preferred dividends declared during
the period, without adjustment for future quarterly dividends not
yet declared on the Company's Series A Preferred Stock.
Amount divided by total common shares outstanding as of each period
end.
- Agency securities 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 repurchase agreements and other debt outstanding,
less repurchase agreements for treasury securities, for the period
by the average stockholders' equity for the period.
- Leverage at period end was calculated by dividing the sum of
the amount outstanding under repurchase agreements, net receivable
/ payable for unsettled agency securities and other debt by total
stockholders' equity at 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 (including de-designated swaps and swaps never
designated as hedges under GAAP), 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.
- Net interest rate spread for the period was calculated by
subtracting the average cost of funds from the average asset
yield.
- 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 return on average common equity for
the period was calculated by dividing comprehensive income
available to common shareholders by average common equity.
- Economic return 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 February
8, 2013 at 9:00 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 Q4 2012
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 February
8, 2013. In addition, there will be a phone recording
available from 12:00 pm ET
February 8, 2013 until 9:00 am ET February 22,
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
10024358.
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 entity. 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 and structured products. American
Capital manages $18.6 billion of
assets, including assets on its balance sheet and fee earning
assets under management by affiliated managers, with $118 billion of total assets under management
(including levered assets). American Capital, through a
wholly-owned portfolio company, manages publicly traded American
Capital Agency Corp. (NASDAQ: AGNC) with approximately $10 billion market capitalization and American
Capital Mortgage Investment Corp. (NASDAQ: MTGE) with approximately
$850 million market capitalization.
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 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.