BETHESDA, Md., July 28,
2014 /PRNewswire/ -- American Capital Agency Corp. ("AGNC" or
the "Company") (Nasdaq: AGNC) today reported comprehensive income
for the second quarter of 2014 of $862
million, or $2.43 per common
share, and net book value of $26.26
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 $2.42 per
common share, or 9.9% for the quarter, or 39.6% on an annualized
basis.
SECOND QUARTER 2014 FINANCIAL HIGHLIGHTS
- $2.43 comprehensive income per
common share, comprised of:
- $0.08 net income per common
share
- $2.35 other comprehensive income
("OCI") per common share
- Includes net unrealized gains on investments marked-to-market
through OCI
- $0.87 net spread and dollar roll
income per common share
- Includes $0.39 per common share
of dollar roll income (also referred to as "drop income")
associated with the Company's $14.0
billion average net long position in agency mortgage- backed
securities ("MBS") in the "to-be-announced" ("TBA") market
- No "catch-up" premium amortization recognized for the quarter
as projected constant prepayment rate ("CPR") estimates were
largely unchanged from the prior quarter
- $0.28 estimated taxable income
per common share
- Excludes $0.88 per common share
of net capital gains (including $0.39
per common share of TBA dollar roll income) applied against prior
year net capital loss carryforward
- $0.65 dividend per common share
declared on June 17, 2014
- 11.1% annualized dividend yield based on June 30, 2014 closing stock price of $23.41 per common share
- $0.04 estimated undistributed
taxable income per common share as of June
30, 2014
- $26.26 net book value per common
share as of June 30, 2014
- Increased $1.77 per common share,
or 7.2%, from $24.49 per common share
as of March 31, 2014
- 9.9% economic return on common equity for the quarter, or 39.6%
annualized
- Comprised of $0.65 dividend per
common share and $1.77 increase in
net book value per common share
OTHER SECOND QUARTER HIGHLIGHTS
- $71.9 billion agency MBS
investment portfolio as of June 30,
2014
- Includes $18.4 billion net long
TBA mortgage position as of June 30,
2014
- $202 million investment in
mortgage REIT equity securities as of June
30, 2014
- Recognized $24 million, or
$0.07 per common share, of dividends
and gains from REIT equity securities during the quarter
- 6.9x "at risk" leverage as of June 30,
2014
- 5.0x leverage excluding net long TBA mortgage position as of
June 30, 2014
- 9% portfolio CPR for the quarter
- 8% average projected portfolio life CPR as of June 30, 2014
- 1.84% annualized net interest rate spread and TBA dollar roll
income for the quarter
- $169 million of net proceeds
raised from 7.750% Series B Redeemable Preferred Stock
offering
"In contrast to the overriding consensus that the Treasury and
agency MBS markets would face significant headwinds as the Fed's
tapering progressed, AGNC's performance in the second quarter was
very strong," commented Gary Kain,
President and Chief Investment Officer. "Economic return for
the quarter was approximately 10% (or almost 40% on an annualized
basis), making it one of our best quarters since the end of 2009.
Our results this quarter were bolstered by several important
strategic decisions, which we highlighted for investors on our
first quarter earnings call. Most important was our decision
to maintain our leverage as we believed the supply and demand
outlook for agency MBS was very positive despite the tapering of
Fed purchases. Additionally, our decision to operate
with a larger duration gap and to reduce the size of our swaption
portfolio also contributed to our performance."
John Erickson, Chief Financial
Officer and Executive Vice President, commented, "We are very
pleased with AGNC's performance this quarter. Through the
first two quarters of 2014, AGNC's economic return totaled 15% (or
approximately 30% on an annualized basis) and largely offset the
economic loss incurred in 2013. Since the beginning of the
Fed's QE3 program, we have been able to generate an economic return
of 15% (or approximately 7.5% on an annualized basis) for our
shareholders. This result is noteworthy given the more than 100 bps
increase in the 5 year Treasury rate and the episodes of extreme
volatility that we encountered during this period. I believe
this result speaks to the durability of our business model and to
the benefits of our active management approach in generating long
term value for our shareholders."
NET BOOK VALUE
As of June 30, 2014, the Company's
net book value per common share was $26.26, or $1.77
higher than the March 31, 2014 net book value per common share
of $24.49, driven largely by tighter
mortgage spreads.
INVESTMENT PORTFOLIO
As of June 30, 2014, the
Company's investment portfolio totaled $71.9
billion of agency MBS, including an $18.4 billion net long TBA mortgage position, at
fair value. The Company also held $202
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
June 30, 2014, the Company's net TBA mortgage portfolio had a
fair value of approximately $18.4
billion, cost basis of $18.2
billion and a net carrying value of $0.2 billion reported in derivative
assets/(liabilities) on the Company's balance sheet.
As of June 30, 2014, the Company's investment portfolio was
comprised of $69.3 billion of
fixed-rate securities, inclusive of the net long TBA position;
$1.0 billion of adjustable-rate
securities; and $1.7 billion of
collateralized mortgage obligations ("CMOs"), including principal
and interest-only strips.
As of June 30, 2014, the Company's fixed-rate mortgage
assets at fair value were comprised of:
- $28.2 billion ≤ 15-year
securities;
- $(1.0) billion 15-year net short
TBA securities;
- $1.3 billion 20-year fixed-rate
securities;
- $21.4 billion 30-year fixed-rate
securities; and
- $19.4 billion 30-year net long
TBA securities.
As of June 30, 2014, inclusive of net TBA positions, ≤
15-year fixed rate securities represented 38% of the Company's
investment portfolio, a decrease from 48% as of March 31,
2014, and 30-year fixed rate securities represented 57% of the
Company's investment portfolio, an increase from 46% as of
March 31, 2014.
As of June 30, 2014, the Company's fixed-rate mortgage
assets, inclusive of the net TBA position, had a weighted average
coupon of 3.55%, comprised of a weighted average coupon of 3.19%
for ≤ 15-year fixed rate securities, 3.49% for 20-year fixed-rate
securities and 3.79% for 30-year fixed-rate securities.
CONSTANT PREPAYMENT RATES
The Company's investment
portfolio had a CPR of 9% for the second quarter, compared to 7%
for the prior quarter. The weighted average projected CPR for
the remaining life of the Company's agency securities held as of
June 30, 2014 was 8%, largely unchanged from March 31,
2014.
Net premium amortization on the Company's investment portfolio
for the second quarter was $(109)
million, or $(0.31) per common
share, compared to $(142) million, or
$(0.40) per common share, for the
first quarter. The Company did not recognize a "catch-up"
premium amortization adjustment for the second quarter, given that
its projected CPR estimates were largely unchanged from the
previous quarter, compared to approximately $(25) million, or $(0.07) per common share, of "catch-up" premium
amortization cost recognized during the first quarter. The
unamortized net premium balance as of June 30, 2014 was
$2.4 billion.
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 104.7% of par value as of June 30, 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.
ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE
SPREAD
The Company's average asset yield on its agency
security portfolio (or "repo funded assets") for the second quarter
was 2.71%, compared to 2.54%, or 2.70% excluding estimated
"catch-up" premium amortization cost, for the first quarter.
The Company's average cost of funds (derived from the cost of
repurchase agreements, other debt and interest rate swaps) for the
second quarter increased 10 bps to 1.45% from 1.35% for the first
quarter, reflective of a higher ratio of interest rate swaps to
repo and other debt outstanding during the second quarter as a
function of the Company's relative shift from repo funded assets to
TBA dollar roll funded assets. Excluding swap hedge costs
attributed to dollar roll funded assets, the Company's total costs
of funds for repo funded assets was 1.16% for the second quarter,
for an annualized net interest rate spread on its repo funded
assets of 1.55%.
The Company's dollar roll funded assets generated an annualized
net interest rate spread of 2.92%, net of allocated swap hedge
costs for the second quarter. The relative net asset interest
rate spread differential between the Company's repo and dollar roll
funded assets is due to the combined impact of favorable implied
financing rates in the dollar roll market and asset composition,
with a greater concentration of lower yielding 15 year agency MBS
in the Company's repo funded asset portfolio.
The Company's combined annualized net interest rate spread on
its repo and dollar roll funded assets for the quarter was 1.84%,
compared to 1.43%, or 1.59% excluding "catch-up" amortization cost,
for the prior quarter.
On a per share basis, the Company recognized $0.87 per common share of net spread and dollar
roll income for the second quarter, compared to $0.64 per common share, or $0.71 per common share excluding catch-up
amortization cost, for the prior quarter. Net spread and
dollar roll income for the second quarter included $0.39 per common share of dollar roll income, an
increase from $0.14 per common share
for the prior quarter. Net of allocated swap and operating
costs and dividends on preferred stock, dollar roll income was
$0.26 per common share for the second
quarter.
The Company allocates swap and operating costs and dividends on
preferred stock to its repo and dollar roll funded assets in
proportion to their relative price sensitivity to interest rate
risk (or on a "duration" weighted basis).
LEVERAGE
As of June 30, 2014, $47.5 billion of the Company's repurchase
agreements were used to fund acquisitions of agency securities
("agency repo"), while the remainder, or $1.2 billion, was used to fund purchases of U.S.
Treasury securities and is not included in the Company's leverage
measurements. Inclusive of its net TBA position, the
Company's "at risk" leverage ratio was 6.9x as of June 30,
2014, compared to 7.6x as of March
31, 2014. The decline in leverage was largely driven
by net gains on the Company's portfolio and a modest increase in
the Company's equity base as a function of its preferred stock
offering during the second quarter. The Company's average "at
risk" leverage ratio for the quarter was 7.1x, compared to 7.2x for
the prior quarter. The Company's leverage ratios exclude
equity allocated to investments in REIT equity
securities.
As of June 30, 2014, the Company's agency repo agreements
had a weighted average interest rate of 0.41%, a decrease from
0.43% as of March 31, 2014, while the weighted average
remaining days to maturity increased to 170 days as of
June 30, 2014 from 162 days as of March 31, 2014.
As of June 30, 2014, the Company's agency repo agreements
had remaining maturities consisting of:
- $11.1 billion of one month or
less;
- $14.5 billion from one to three
months;
- $10.3 billion from three to six
months;
- $4.7 billion from six to nine
months;
- $2.6 billion from nine to twelve
months;
- $2.3 billion from twelve to
twenty-four months;
- $0.6 billion from twenty-four to
thirty-six months;
- $0.5 billion from thirty-six to
forty-eight months; and
- $0.9 billion from forty-eight to
sixty months.
HEDGING ACTIVITIES
As of June 30, 2014, 88% of
the Company's outstanding balance of repurchase agreements, other
debt and net TBA position was hedged through interest rate swaps,
swaptions and U.S. Treasury positions, compared to 94% as of
March 31, 2014.
The Company's interest rate swap position as of June 30,
2014 totaled $47.9 billion in
notional amount. During the quarter, the Company terminated
$1.3 billion of interest rate swaps
and entered into new swap agreements totaling $2.8 billion. The new swap agreements had a
weighted average fixed pay rate of 3.25%, an average forward start
date of 1.4 years and an average maturity of approximately 12.5
years as of June 30, 2014. As of June 30, 2014, the Company's swap position
included $11.7 billion of forward
starting swaps, with an average forward start date of 1.7 years and
an average maturity of 8.6 years from June 30, 2014. As
of March 31, 2014, the Company's swap
position included $9.5 billion of
forward starting swaps, with an average forward start date of 1.9
years and an average maturity of 7.7 years from March 31,
2014. Excluding forward starting swaps, as of June 30,
2014, the Company's interest rate swap portfolio had an average
fixed pay rate of 1.61% and a weighted average receive rate of
0.20%, compared to 1.57% and 0.21%, respectively, as of
March 31, 2014. Including forward starting swaps, the
Company's interest rate swap portfolio had an average fixed pay
rate of 1.97% and an average maturity of 5.4 years from
June 30, 2014, compared to 1.87% and 4.9 years, respectively,
as of March 31, 2014. 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 changes in interest rates.
During the second quarter, the Company added $1.3 billion in notional amount of payer
swaptions, at a total cost of $11
million, while $1.6 billion of
payer swaptions from previous quarters expired or were terminated
resulting in net realized losses of $(27)
million. As of June 30, 2014, the Company had
payer swaptions totaling $7.7 billion
of notional value outstanding at a market value of $62 million and a cost basis of $179 million, with an average remaining option
term of 0.8 years and an average underlying interest rate swap term
of 5.6 years, compared to $8.0
billion notional value, $93
million market value, $194
million cost basis,1.0 year remaining option term and 5.7
years average underlying swap term as of March 31,
2014.
During the second quarter the Company added $0.8 billion in notional value of receiver
swaptions. As of June 30, 2014, the Company had receiver
swaptions totaling $1.8 billion of
notional value outstanding at a cost basis of $9 million, with an average remaining option term
of 0.7 years and an average underlying interest rate swap term of
10.0 years.
The Company also 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 June 30, 2014, the
Company had a net short position of $4.8
billion (market value) in U.S. Treasury securities and a
$913 million (market value) short
position in U.S. Treasury futures, a total net decrease of
$1.6 billion from March 31,
2014.
OTHER INCOME (LOSS), NET
For the second quarter, the
Company recorded a net loss of $(222)
million in other income (loss), net, or $(0.63) per common share, compared to a net loss
of $(397) million, or $(1.12) per common share for the prior
quarter. Other income (loss), net for the second quarter was
comprised of:
- $22 million of net realized gains
on sales of agency securities;
- $(500) million of net unrealized
losses on interest rate swaps and early termination fee income/cost
(excludes $40 million of unrealized
gains recognized in OCI);
- $(87) million of interest rate
swap periodic interest costs;
- $(41) million of net losses on
interest rate swaptions;
- $(182) million of net losses on
U.S. Treasury positions;
- $138 million of TBA dollar roll
income;
- $406 million of net
mark-to-market gains on TBA mortgage positions;
- $24 million of dividends and
gains from mortgage REIT equity securities; and
- $(2) million of net losses on
other derivative instruments and securities.
OTHER COMPREHENSIVE INCOME
During the second quarter,
the Company recorded other comprehensive income of $830 million, or $2.35 per common share, driven primarily by
unrealized gains on the Company's agency securities.
ESTIMATED TAXABLE INCOME
Estimated taxable income for
the second quarter was $0.28 per
common share, or $0.20 higher than
the Company's 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) 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 second quarter
excludes $0.88 per common share of
estimated net capital gains (including $0.39 per common share of TBA dollar roll income)
applied against the Company's prior year net capital loss
carryforward.
SECOND QUARTER 2014 DIVIDEND DECLARATIONS
On
June 17, 2014, the Board of Directors
of the Company declared a second quarter dividend on its common
stock of $0.65 per share, unchanged
from the prior quarter, which was paid on July 28, 2014 to common stockholders of record as
of June 30, 2014. This equates to an
11.1% annualized dividend yield based on the Company's June 30, 2014 closing stock price of $23.41 per common share. Given the size of the
Company's prior year net capital loss carry forward discussed below
and that a significant component of the Company's current earnings
is in the form of TBA dollar roll income, which is treated as a
capital gain for income tax purposes, the Company expects that a
portion of the dividends declared on its common stock for fiscal
year 2014 will constitute a return of capital for income tax
purposes when the final determination is made after the end of its
fiscal year. Shareholders will receive notification of such final
determination on their 2014 annual 1099-DIV statement.
Since its May 2008 initial public
offering, the Company has paid a total of $4.7 billion in common dividends, or $28.91 per common share.
On June 17, 2014, the Board of Directors of the Company
declared a second quarter dividend on its 8.000% Series A
Cumulative Redeemable Preferred Stock ("Series A Preferred Stock")
of $0.50 per share and on its 7.750%
Series B Cumulative Redeemable Preferred Stock ("Series B Preferred
Stock") underlying its outstanding depositary shares of
$0.36059 per depositary share.
Each depositary share represents a 1/1000th interest in a share of
the Series B Preferred Stock. The dividends were paid on
July 15, 2014 to preferred stockholders of record as of
July 1, 2014.
As of June 30, 2014, the Company had approximately
$16 million of estimated
undistributed taxable income ("UTI"), or $0.04 per common share, net of dividends
declared. UTI excludes the Company's remaining prior year
non-deductible capital losses of $(1.4)
billion, or $(3.89) per common
share, as of June 30, 2014, which may be carried forward and
applied against future net capital gains through 2018.
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
|
2014
|
|
2014
|
|
2013
|
|
2013
|
|
2013
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency securities, at
fair value (including pledged securities of $50,057,
$51,850, $62,205, $80,721 and $71,261, respectively)
|
$
|
52,174
|
|
|
$
|
54,960
|
|
|
$
|
64,482
|
|
|
$
|
83,805
|
|
|
$
|
75,926
|
|
Agency securities
transferred to consolidated variable interest entities, at
fair value (pledged securities)
|
1,377
|
|
|
1,417
|
|
|
1,459
|
|
|
1,204
|
|
|
1,281
|
|
U.S. Treasury
securities, at fair value (including pledged securities of
$1,247, $196, $3,778, $4,710 and $2,569, respectively)
|
1,247
|
|
|
196
|
|
|
3,822
|
|
|
4,823
|
|
|
3,671
|
|
REIT equity
securities, at fair value
|
202
|
|
|
352
|
|
|
237
|
|
|
—
|
|
|
—
|
|
Cash and cash
equivalents
|
1,747
|
|
|
1,726
|
|
|
2,143
|
|
|
2,129
|
|
|
2,923
|
|
Restricted
cash
|
783
|
|
|
269
|
|
|
101
|
|
|
77
|
|
|
1,216
|
|
Derivative
assets, at fair value
|
593
|
|
|
686
|
|
|
1,194
|
|
|
1,246
|
|
|
1,876
|
|
Receivable for
securities sold (including pledged securities of $281,$772, $622,
$1,417 and $1,338, respectively)
|
1,872
|
|
|
799
|
|
|
652
|
|
|
1,807
|
|
|
2,070
|
|
Receivable
under reverse repurchase agreements
|
6,621
|
|
|
6,685
|
|
|
1,881
|
|
|
1,808
|
|
|
9,430
|
|
Other
assets
|
238
|
|
|
228
|
|
|
284
|
|
|
372
|
|
|
270
|
|
Total
assets
|
$
|
66,854
|
|
|
$
|
67,318
|
|
|
$
|
76,255
|
|
|
$
|
97,271
|
|
|
$
|
98,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
$
|
48,714
|
|
|
$
|
49,729
|
|
|
$
|
63,533
|
|
|
$
|
82,473
|
|
|
$
|
72,451
|
|
Debt of consolidated
variable interest entities, at fair value
|
844
|
|
|
874
|
|
|
910
|
|
|
736
|
|
|
783
|
|
Payable for
securities purchased
|
558
|
|
|
324
|
|
|
118
|
|
|
979
|
|
|
3,167
|
|
Derivative
liabilities, at fair value
|
583
|
|
|
417
|
|
|
422
|
|
|
1,015
|
|
|
1,544
|
|
Dividends
payable
|
235
|
|
|
232
|
|
|
235
|
|
|
311
|
|
|
420
|
|
Obligation to return
securities borrowed under reverse
|
6,094
|
|
|
6,658
|
|
|
1,848
|
|
|
1,801
|
|
|
9,931
|
|
repurchase
agreements, at fair value
|
Accounts
payable and other accrued liabilities
|
215
|
|
|
270
|
|
|
492
|
|
|
71
|
|
|
87
|
|
Total
liabilities
|
57,243
|
|
|
58,504
|
|
|
67,558
|
|
|
87,386
|
|
|
88,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Preferred
Stock - aggregate liquidation preference of $348,
$173, $173, $173 and $173, respectively
|
336
|
|
|
167
|
|
|
167
|
|
|
167
|
|
|
167
|
|
Common stock - $0.01
par value; 600.0 shares authorized;
|
4
|
|
|
4
|
|
|
4
|
|
|
4
|
|
|
4
|
|
352.8, 352.8, 356.2,
384.3 and 396.2 shares issued and outstanding,
respectively
|
Additional paid-in
capital
|
10,332
|
|
|
10,332
|
|
|
10,406
|
|
|
10,992
|
|
|
11,255
|
|
Retained (deficit)
earnings
|
(1,073)
|
|
|
(870)
|
|
|
(497)
|
|
|
(160)
|
|
|
852
|
|
Accumulated other
comprehensive income (loss)
|
12
|
|
|
(819)
|
|
|
(1,383)
|
|
|
(1,118)
|
|
|
(1,998)
|
|
Total stockholders'
equity
|
9,611
|
|
|
8,814
|
|
|
8,697
|
|
|
9,885
|
|
|
10,280
|
|
Total liabilities and
stockholders' equity
|
$
|
66,854
|
|
|
$
|
67,318
|
|
|
$
|
76,255
|
|
|
$
|
97,271
|
|
|
$
|
98,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value per
common share
|
$
|
26.26
|
|
|
$
|
24.49
|
|
|
$
|
23.93
|
|
|
$
|
25.27
|
|
|
$
|
25.51
|
|
AMERICAN CAPITAL
AGENCY CORP.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
|
2014
|
|
2014
|
|
2013
|
|
2013
|
|
2013
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
|
385
|
|
|
$
|
399
|
|
|
$
|
542
|
|
|
$
|
558
|
|
|
$
|
545
|
|
Interest
expense 1
|
95
|
|
|
108
|
|
|
120
|
|
|
145
|
|
|
131
|
|
Net interest income
|
290
|
|
|
291
|
|
|
422
|
|
|
413
|
|
|
414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (loss)
income, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
(loss) on sale of agency securities, net
|
22
|
|
|
(19)
|
|
|
(667)
|
|
|
(733)
|
|
|
17
|
|
(Loss)
gain on derivative instruments and other securities, net
1
|
(244)
|
|
|
(378)
|
|
|
184
|
|
|
(339)
|
|
|
1,444
|
|
Total other (loss) income, net
|
(222)
|
|
|
(397)
|
|
|
(483)
|
|
|
(1,072)
|
|
|
1,461
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees
|
30
|
|
|
29
|
|
|
31
|
|
|
35
|
|
|
37
|
|
General
and administrative expenses
|
6
|
|
|
6
|
|
|
6
|
|
|
7
|
|
|
9
|
|
Total expenses
|
36
|
|
|
35
|
|
|
37
|
|
|
42
|
|
|
46
|
|
Income (loss)
before income tax provision
|
32
|
|
|
(141)
|
|
|
(98)
|
|
|
(701)
|
|
|
1,829
|
|
Income tax provision
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
Net income
(loss)
|
32
|
|
|
(141)
|
|
|
(101)
|
|
|
(701)
|
|
|
1,829
|
|
Dividend on preferred
stock
|
5
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
Net income (loss)
available (attributable) to common shareholders
|
$
|
27
|
|
|
$
|
(144)
|
|
|
$
|
(104)
|
|
|
$
|
(704)
|
|
|
$
|
1,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
32
|
|
|
$
|
(141)
|
|
|
$
|
(101)
|
|
|
$
|
(701)
|
|
|
$
|
1,829
|
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on available-for-sale securities,
net
|
790
|
|
|
521
|
|
|
(311)
|
|
|
833
|
|
|
(2,813)
|
|
Unrealized gain on derivative instruments, net
1
|
40
|
|
|
43
|
|
|
46
|
|
|
47
|
|
|
48
|
|
Other comprehensive
income (loss)
|
830
|
|
|
564
|
|
|
(265)
|
|
|
880
|
|
|
(2,765)
|
|
Comprehensive
income (loss)
|
862
|
|
|
423
|
|
|
(366)
|
|
|
179
|
|
|
(936)
|
|
Dividend on preferred
stock
|
5
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
Comprehensive
income (loss) available (attributable) to common
shareholders
|
$
|
857
|
|
|
$
|
420
|
|
|
$
|
(369)
|
|
|
$
|
176
|
|
|
$
|
(939)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding -
|
352.8
|
|
|
354.8
|
|
|
373.0
|
|
|
390.6
|
|
|
396.4
|
|
basic and
diluted
|
Net income (loss)
per common share - basic and diluted
|
$
|
0.08
|
|
|
$
|
(0.41)
|
|
|
$
|
(0.28)
|
|
|
$
|
(1.80)
|
|
|
$
|
4.61
|
|
Comprehensive
income (loss) per common share - basic and diluted
|
$
|
2.43
|
|
|
$
|
1.18
|
|
|
$
|
(0.99)
|
|
|
$
|
0.45
|
|
|
$
|
(2.37)
|
|
Estimated REIT
taxable income per common share -
|
$
|
0.28
|
|
|
$
|
0.47
|
|
|
$
|
0.65
|
|
|
$
|
0.29
|
|
|
$
|
1.04
|
|
basic and diluted
2
|
Dividends declared
per common share
|
$
|
0.65
|
|
|
$
|
0.65
|
|
|
$
|
0.65
|
|
|
$
|
0.80
|
|
|
$
|
1.05
|
|
AMERICAN CAPITAL
AGENCY CORP.
|
RECONCILIATION OF
GAAP NET INTEREST INCOME TO NET SPREAD AND DOLLAR ROLL
INCOME2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
2014
|
|
2014
|
|
2013
|
|
2013
|
|
2013
|
Interest
income
|
$
|
385
|
|
|
$
|
399
|
|
|
$
|
542
|
|
|
$
|
558
|
|
|
$
|
545
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
and other debt
|
55
|
|
|
65
|
|
|
74
|
|
|
98
|
|
|
83
|
|
Interest rate swap
periodic costs1
|
40
|
|
|
43
|
|
|
46
|
|
|
47
|
|
|
48
|
|
Total interest
expense
|
95
|
|
|
108
|
|
|
120
|
|
|
145
|
|
|
131
|
|
Net interest
income
|
290
|
|
|
291
|
|
|
422
|
|
|
413
|
|
|
414
|
|
Other interest rate
swap periodic costs 3
|
(87)
|
|
|
(83)
|
|
|
(104)
|
|
|
(131)
|
|
|
(105)
|
|
Dividend on REIT
equity securities4
|
6
|
|
|
10
|
|
|
5
|
|
|
—
|
|
|
—
|
|
TBA dollar roll
income (loss) 17
|
138
|
|
|
48
|
|
|
(5)
|
|
|
(12)
|
|
|
195
|
|
Adjusted net interest
and dollar roll income
|
347
|
|
|
266
|
|
|
318
|
|
|
270
|
|
|
504
|
|
Operating
expenses
|
36
|
|
|
35
|
|
|
37
|
|
|
42
|
|
|
46
|
|
Net spread and dollar
roll income
|
311
|
|
|
231
|
|
|
281
|
|
|
228
|
|
|
458
|
|
Dividend on preferred
stock
|
5
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
Net spread and dollar
roll income available to common shareholders
|
306
|
|
|
228
|
|
|
278
|
|
|
225
|
|
|
455
|
|
Estimated "catch-up"
premium amortization cost (benefit) due to change in
CPR forecast
|
—
|
|
|
25
|
|
|
(28)
|
|
|
12
|
|
|
(55)
|
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, available to common shareholders
|
$
|
306
|
|
|
$
|
253
|
|
|
$
|
250
|
|
|
$
|
237
|
|
|
$
|
400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic and diluted
|
352.8
|
|
|
354.8
|
|
|
373.0
|
|
|
390.6
|
|
|
396.4
|
|
Net spread and dollar
roll income per common share - basic and diluted
|
$
|
0.87
|
|
|
$
|
0.64
|
|
|
$
|
0.75
|
|
|
$
|
0.58
|
|
|
$
|
1.15
|
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, per common share - basic and diluted
|
$
|
0.87
|
|
|
$
|
0.71
|
|
|
$
|
0.67
|
|
|
$
|
0.61
|
|
|
$
|
1.01
|
|
AMERICAN CAPITAL
AGENCY CORP.
|
RECONCILIATION OF
GAAP NET INCOME TO ESTIMATED TAXABLE INCOME2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
2014
|
|
2014
|
|
2013
|
|
2013
|
|
2013
|
Net income
(loss)
|
$
|
32
|
|
|
$
|
(141)
|
|
|
$
|
(101)
|
|
|
$
|
(701)
|
|
|
$
|
1,829
|
|
Book to tax
differences:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium amortization,
net
|
(5)
|
|
|
31
|
|
|
(21)
|
|
|
(6)
|
|
|
(75)
|
|
Realized losses
(gains), net
|
5
|
|
|
36
|
|
|
(92)
|
|
|
(255)
|
|
|
(15)
|
|
Capital loss
(carryforward)/excess over capital gains 5
|
(310)
|
|
|
(102)
|
|
|
936
|
|
|
849
|
|
|
—
|
|
Unrealized losses
(gains), net
|
384
|
|
|
346
|
|
|
(480)
|
|
|
229
|
|
|
(1,324)
|
|
Other
|
(1)
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
(1)
|
|
Total book to tax
differences
|
73
|
|
|
311
|
|
|
345
|
|
|
817
|
|
|
(1,415)
|
|
Estimated REIT
taxable income
|
105
|
|
|
170
|
|
|
244
|
|
|
116
|
|
|
414
|
|
Dividend on preferred
stock
|
5
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
Estimated REIT
taxable income available to common shareholders
|
$
|
100
|
|
|
$
|
167
|
|
|
$
|
241
|
|
|
$
|
113
|
|
|
$
|
411
|
|
Weighted average
number of common shares outstanding - basic and
diluted
|
352.8
|
|
|
354.8
|
|
|
373.0
|
|
|
390.6
|
|
|
396.4
|
|
Estimated REIT
taxable income per common share - basic and diluted
|
$
|
0.28
|
|
|
$
|
0.47
|
|
|
$
|
0.65
|
|
|
$
|
0.29
|
|
|
$
|
1.04
|
|
Estimated cumulative
undistributed REIT taxable income per common share
6
|
$
|
0.04
|
|
|
$
|
0.42
|
|
|
$
|
0.59
|
|
|
$
|
0.57
|
|
|
$
|
1.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning cumulative
non-deductible capital losses
|
$
|
1,683
|
|
|
$
|
1,785
|
|
|
$
|
849
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Capital loss
(carryforward)/excess over capital gains
|
(310)
|
|
|
(102)
|
|
|
936
|
|
|
849
|
|
|
—
|
|
Ending cumulative
non-deductible capital losses
|
$
|
1,373
|
|
|
$
|
1,683
|
|
|
$
|
1,785
|
|
|
$
|
849
|
|
|
$
|
—
|
|
Ending cumulative
non-deductible capital losses per common share
|
$
|
3.89
|
|
|
$
|
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:
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
2014
|
|
2014
|
|
2013
|
|
2013
|
|
2013
|
Fixed-rate agency
securities, at fair value - as of period end
|
$
|
50,871
|
|
|
$
|
53,461
|
|
|
$
|
62,961
|
|
|
$
|
82,310
|
|
|
$
|
75,910
|
|
Adjustable-rate
agency securities, at fair value - as of period end
|
$
|
986
|
|
|
$
|
1,195
|
|
|
$
|
1,235
|
|
|
$
|
1,015
|
|
|
$
|
694
|
|
CMO agency
securities, at fair value - as of period end
|
$
|
1,268
|
|
|
$
|
1,289
|
|
|
$
|
1,308
|
|
|
$
|
1,244
|
|
|
$
|
141
|
|
Interest-only strips
agency securities, at fair value - as of period end
|
$
|
219
|
|
|
$
|
230
|
|
|
$
|
232
|
|
|
$
|
224
|
|
|
$
|
236
|
|
Principal-only strips
agency securities, at fair value - as of period end
|
$
|
205
|
|
|
$
|
202
|
|
|
$
|
205
|
|
|
$
|
216
|
|
|
$
|
226
|
|
Total agency
securities, at fair value - as of period end
|
$
|
53,549
|
|
|
$
|
56,377
|
|
|
$
|
65,941
|
|
|
$
|
85,009
|
|
|
$
|
77,207
|
|
Total agency
securities, at cost - as of period end
|
$
|
53,300
|
|
|
$
|
56,928
|
|
|
$
|
67,025
|
|
|
$
|
85,789
|
|
|
$
|
78,834
|
|
Total agency
securities, at par - as of period end 7
|
$
|
50,887
|
|
|
$
|
54,336
|
|
|
$
|
64,048
|
|
|
$
|
82,003
|
|
|
$
|
74,966
|
|
Average agency
securities, at cost
|
$
|
56,923
|
|
|
$
|
62,920
|
|
|
$
|
76,991
|
|
|
$
|
86,407
|
|
|
$
|
74,816
|
|
Average agency
securities, at par 7
|
$
|
54,365
|
|
|
$
|
60,103
|
|
|
$
|
73,527
|
|
|
$
|
82,751
|
|
|
$
|
70,851
|
|
Net TBA portfolio -
as of period end, at fair value
|
$
|
18,384
|
|
|
$
|
14,102
|
|
|
$
|
2,271
|
|
|
$
|
(7,256)
|
|
|
$
|
14,514
|
|
Net TBA portfolio -
as of period end, at cost
|
$
|
18,184
|
|
|
$
|
14,127
|
|
|
$
|
2,276
|
|
|
$
|
(7,060)
|
|
|
$
|
15,285
|
|
Net TBA portfolio -
as of period end, carrying value
|
$
|
200
|
|
|
$
|
(25)
|
|
|
$
|
(5)
|
|
|
$
|
(196)
|
|
|
$
|
(771)
|
|
Average net TBA
portfolio, at cost
|
$
|
13,963
|
|
|
$
|
4,534
|
|
|
$
|
(486)
|
|
|
$
|
131
|
|
|
$
|
28,904
|
|
Average repurchase
agreements and other debt
|
$
|
50,448
|
|
|
$
|
57,544
|
|
|
$
|
71,260
|
|
|
$
|
78,845
|
|
|
$
|
66,060
|
|
Average stockholders'
equity 8
|
$
|
9,315
|
|
|
$
|
8,975
|
|
|
$
|
9,432
|
|
|
$
|
10,064
|
|
|
$
|
11,256
|
|
Net book value per
common share as of period end 9
|
$
|
26.26
|
|
|
$
|
24.49
|
|
|
$
|
23.93
|
|
|
$
|
25.27
|
|
|
$
|
25.51
|
|
Leverage - average
during the period 10
|
5.6:1
|
|
6.7:1
|
|
7.6:1
|
|
7.8:1
|
|
5.9:1
|
Leverage - average
during the period, including net TBA position
11
|
7.1:1
|
|
7.2:1
|
|
7.5:1
|
|
7.8:1
|
|
8.4:1
|
Leverage - as of
period end 12
|
5.0:1
|
|
5.9:1
|
|
7.3:1
|
|
7.9:1
|
|
7.0:1
|
Leverage - as of
period end, including net TBA position 13
|
6.9:1
|
|
7.6:1
|
|
7.5:1
|
|
7.2:1
|
|
8.5:1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average coupon
14
|
3.63
|
%
|
|
3.60
|
%
|
|
3.59
|
%
|
|
3.50
|
%
|
|
3.63
|
%
|
Average asset yield
15
|
2.71
|
%
|
|
2.54
|
%
|
|
2.82
|
%
|
|
2.59
|
%
|
|
2.92
|
%
|
Average cost of funds
16
|
(1.45)
|
%
|
|
(1.35)
|
%
|
|
(1.25)
|
%
|
|
(1.39)
|
%
|
|
(1.43)
|
%
|
Average net interest
rate spread
|
1.26
|
%
|
|
1.19
|
%
|
|
1.57
|
%
|
|
1.20
|
%
|
|
1.49
|
%
|
Average net interest
rate spread, including TBA dollar roll income/
loss 17
|
1.84
|
%
|
|
1.43
|
%
|
|
1.56
|
%
|
|
1.14
|
%
|
|
1.86
|
%
|
Average coupon - as
of period end
|
3.63
|
%
|
|
3.65
|
%
|
|
3.58
|
%
|
|
3.54
|
%
|
|
3.56
|
%
|
Average asset
yield - as of period end
|
2.70
|
%
|
|
2.72
|
%
|
|
2.70
|
%
|
|
2.70
|
%
|
|
2.71
|
%
|
Average cost of funds
- as of period end 18
|
(1.53)
|
%
|
|
(1.45)
|
%
|
|
(1.31)
|
%
|
|
(1.33)
|
%
|
|
(1.47)
|
%
|
Average net interest
rate spread - as of period end
|
1.17
|
%
|
|
1.27
|
%
|
|
1.39
|
%
|
|
1.37
|
%
|
|
1.24
|
%
|
Average actual CPR
for securities held during the period
|
9
|
%
|
|
7
|
%
|
|
8
|
%
|
|
10
|
%
|
|
11
|
%
|
Average forecasted
CPR - as of period end
|
8
|
%
|
|
8
|
%
|
|
7
|
%
|
|
8
|
%
|
|
7
|
%
|
Total premium
amortization, net
|
$
|
(109)
|
|
|
$
|
(142)
|
|
|
$
|
(117)
|
|
|
$
|
(168)
|
|
|
$
|
(98)
|
|
Expenses % of average
total assets - annualized
|
0.21
|
%
|
|
0.19
|
%
|
|
0.17
|
%
|
|
0.15
|
%
|
|
0.19
|
%
|
Expenses % of average
stockholders' equity - annualized
|
1.55
|
%
|
|
1.58
|
%
|
|
1.56
|
%
|
|
1.66
|
%
|
|
1.64
|
%
|
Net comprehensive
income (loss) return on average common equity -
annualized 19
|
38.0
|
%
|
|
19.4
|
%
|
|
(15.8)
|
%
|
|
7.1
|
%
|
|
(34.0)
|
%
|
Dividends declared
per common share
|
$
|
0.65
|
|
|
$
|
0.65
|
|
|
$
|
0.65
|
|
|
$
|
0.80
|
|
|
$
|
1.05
|
|
Economic return
(loss) on common equity - annualized 20
|
39.6
|
%
|
|
20.5
|
%
|
|
(10.8)
|
%
|
|
8.7
|
%
|
|
(32.9)
|
%
|
*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).
- Dividend on REIT equity securities is 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 preferred stock liquidation
preference, 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 July 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 (877) 300-5922 (U.S.
domestic) or (412) 902-6621 (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 Q2 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 July 29, 2014. In addition, there will be a
phone recording available from 1:00 pm
ET July 29, 2014 until 9:00 am
ET August 12, 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 10049322.
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
$83 billion of total assets under
management (including levered assets). Through an affiliate,
American Capital manages publicly traded American Capital Agency
Corp. (Nasdaq: AGNC), American Capital Mortgage Investment Corp.
(Nasdaq: MTGE) and American Capital Senior Floating, Ltd. (Nasdaq:
ACSF) with approximately $11 billion
of aggregate net book value. From its eight offices in the
U.S. and Europe, American Capital
and its affiliate, European Capital, will consider investment
opportunities from $10 million to $750
million. For further information, please refer to
www.AmericanCapital.com.
FORWARD LOOKING STATEMENTS
This press release contains
forward-looking statements. Forward-looking statements are
based on estimates, projections, beliefs and assumptions of
management of the Company at the time of such statements and are
not guarantees of future performance. Forward-looking
statements involve risks and uncertainties in predicting future
results and conditions. Actual results could differ
materially from those projected in these forward-looking statements
due to a variety of important factors, including, without
limitation, changes in interest rates, changes in the yield curve,
changes in prepayment rates, the availability and terms of
financing, changes in the market value of the Company's assets,
general economic conditions, market conditions, conditions in the
market for agency securities, and legislative and regulatory
changes that could adversely affect the business of the
Company. Certain factors that could cause actual results to
differ materially from those contained in the forward-looking
statements, are included in the Company's periodic reports filed
with the Securities and Exchange Commission ("SEC"). Copies
are available on the SEC's website, www.sec.gov. The Company
disclaims any obligation to update or revise any forward-looking
statements based on the occurrence of future events, the receipt or
new information, or otherwise.
USE OF NON-GAAP FINANCIAL INFORMATION
In addition to
the results presented in accordance with GAAP, the Company's
results of operations discussed in this release include certain
non-GAAP financial information, including "adjusted net interest
expense" (defined as interest expense plus the periodic interest
rate costs of the Company's interest rate swaps reported in gain
(loss) on derivatives and other securities, net in its consolidated
statements of comprehensive income), "net spread and dollar roll
income" (defined as interest income, TBA dollar roll income and
dividends from REIT equity securities, net of adjusted net interest
expense and operating expenses) and "estimated taxable income" and
certain financial metrics derived from non-GAAP information, such
as "cost of funds" and "estimated undistributed taxable
income."
By providing users of the Company's financial information with
such measures in addition to the related GAAP measures, it believes
it gives users greater transparency into the information used by
the Company's management in its financial and operational
decision-making and that it is meaningful information to consider
related to: (i) the economic costs of financing the Company's
investment portfolio inclusive of interest rate swaps used to
economically hedge against fluctuations in its borrowing costs,
(ii) in the case of net spread and dollar roll income, the
Company's current financial performance without the effects of
certain transactions that are not necessarily indicative of its
current investment portfolio and operations, and (iii) in the case
of estimated taxable income and estimated undistributed taxable
income, information that is directly related to the amount of
dividends the Company is required to distribute in order to
maintain its REIT qualification status. However, because such
measures are incomplete measures of the Company's financial
performance and involve differences from results computed in
accordance with GAAP, they should be considered as supplementary
to, and not as a substitute for, results computed in accordance
with GAAP. In addition, because not all companies use
identical calculations, the Company's presentation of such non-GAAP
measures may not be comparable to other similarly-titled measures
of other companies. Furthermore, estimated taxable income can
include certain information that is subject to potential
adjustments up to the time of filing the Company's income tax
returns, which occurs after the end of its fiscal year.
A reconciliation of GAAP net interest income to non-GAAP net
spread and dollar roll income and a reconciliation of GAAP net
income to non-GAAP estimated taxable income is included in this
release.
SOURCE American Capital Agency Corp.