BETHESDA, Md., Oct. 24,
2016 /PRNewswire/ -- AGNC Investment Corp. ("AGNC" or the
"Company") (Nasdaq: AGNC) today announced financial results for
quarter ended September 30, 2016.
THIRD QUARTER 2016 FINANCIAL HIGHLIGHTS
- $1.25 comprehensive income per
common share, comprised of:
- $1.52 net income per common
share
- $(0.27) other comprehensive loss
("OCI") per common share
- Includes net unrealized losses on investments recognized
through OCI
- $0.64 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization cost 1
- Includes $0.16 of dollar roll
income per common share associated with the Company's $10.7 billion average net long position in
forward purchases and sales of agency mortgage-backed securities
("MBS") in the "to-be-announced" ("TBA") market
- Excludes $(0.02) of estimated
"catch-up" premium amortization cost per common share due to change
in projected constant prepayment rate ("CPR") estimates
- $22.91 net book value per common
share as of September 30, 2016
- Increased $0.69 per common share,
or 3.1%, from $22.22 per common share
as of June 30, 2016
- $21.23 tangible net book value
per common share as of September 30, 2016
- Excludes $555 million, or
$1.68 per common share, of goodwill
and other intangible assets recognized in connection with AGNC's
acquisition of AGNC Mortgage Management, LLC ("AMM" and formerly
known as American Capital Mortgage Management, LLC) on July 1, 2016
- $0.56 dividend declared per
common share during the quarter
- 5.6% economic return on common equity for the quarter, or 22.4%
annualized
- Comprised of $0.56 dividend per
common share and $0.69 increase in
net book value per common share
OTHER THIRD QUARTER HIGHLIGHTS
- $62.9 billion investment
portfolio as of September 30, 2016, comprised of:
- $47.2 billion agency MBS
- $15.6 billion TBA mortgage
position
- $0.1 billion AAA non-agency MBS
and GSE credit risk transfer ("CRT") securities
- 7.7x tangible net book value "at risk" leverage as of
September 30, 2016
- Unchanged from pro-forma tangible net book value "at risk"
leverage as of June 30, 2016
- 7.6x average tangible net book value "at risk" leverage for the
quarter
- 14.3% portfolio CPR for the quarter
- 10.6% average projected portfolio life CPR as of
September 30, 2016, a decrease from 10.8% projected CPR
as of June 30, 2016 due to portfolio
repositioning
- 1.47% annualized net interest rate spread and TBA dollar roll
income for the quarter, excluding estimated "catch-up" premium
amortization cost
- Excludes -5 bps of "catch up" premium amortization cost due to
change in projected CPR estimates
- Increased from 1.38% for the prior quarter, excluding -22 bps
of "catch-up" premium amortization cost
___________
- Represents a non-GAAP measure. Please refer to a
reconciliation to the most applicable GAAP measure and additional
information regarding the use of non-GAAP financial information
later in this release.
MANAGEMENT REMARKS
"AGNC generated an outstanding 22.4% annualized economic return
on common equity in the third quarter, marking the fourth quarter
in a row of positive economic returns for our stockholders," said
Gary Kain, the Company's Chief
Executive Officer, President and Chief Investment Officer.
"Importantly, our financial performance in the third quarter
reflects, for the first time, the recent internalization of our
management, which significantly reduced our ongoing operating
expenses. The reduction in our cost structure is a material
and durable benefit for our stockholders and was the main driver of
the improvement in our net spread and dollar roll income during the
quarter. Moreover, AGNC is now positioned to be the
lowest-cost provider within the residential mortgage REIT industry,
which we believe is a substantial and lasting competitive
advantage. In addition, the significant improvement we have
seen in the funding environment should serve as a solid tailwind to
our business.
"We also acquired our first GSE credit risk transfer securities
in the third quarter, consistent with the broadening of our
investment guidelines that we announced in September. We view
the opportunity to invest in conforming mortgage credit, previously
the exclusive purview of the GSEs, as a natural complement to our
agency MBS holdings.
"All in all, we believe AGNC's track record of industry-leading
performance, low operating cost structure, prudent risk management,
stockholder-friendly practices, liquidity and scale due to its
size, and alignment of management and stockholder interests provide
a very compelling value proposition for our stockholders."
NET BOOK VALUE
As of September 30, 2016, the Company's net book value per
common share was $22.91, an increase
of $0.69 per common share, or 3.1%,
from its June 30, 2016 net book value per common share of
$22.22. The increase in the
Company's net book value per common share was primarily due
to interest rate hedges outperforming agency MBS during
the quarter.
As of September 30, 2016, the Company's tangible net book
value per common share was $21.23. Tangible net book value per common
share excludes goodwill and other intangible assets recognized by
the Company in connection with the acquisition of AMM and the
internalization of the Company's management on July 1, 2016.
INVESTMENT PORTFOLIO
As of September 30, 2016, the Company's investment
portfolio totaled $62.9 billion,
comprised of:
- $62.8 billion of agency MBS and
TBA securities, including:
- $61.2 billion of fixed-rate
securities, comprised of:
- $13.9 billion ≤ 15-year
securities,
- $2.3 billion 15-year net long TBA
securities,
- $0.9 billion 20-year fixed-rate securities,
- $30.8 billion 30-year fixed-rate
securities, and
- $13.3 billion 30-year net long
TBA securities (including $2.6
billion of forward purchases of agency MBS specified
pools);
- $0.4 billion of adjustable-rate
securities; and
- $1.2 billion of collateralized
mortgage obligations ("CMOs"), including principal and
interest-only strips; and
- $0.1 billion of AAA non-agency
securities and GSE credit risk transfer securities.
As of September 30, 2016, inclusive of TBA securities, ≤
15-year and 30 year fixed rate securities represented 26% and 70%
of the Company's investment portfolio, respectively, largely
unchanged from 26% and 69%, respectively, as of June 30,
2016.
As of September 30, 2016, the Company's fixed-rate
securities, inclusive of TBA securities, had a weighted average
coupon of 3.46%, compared to 3.50% as of June 30, 2016,
comprised of the following weighted average coupons:
- 3.17% for ≤ 15-year fixed rate securities;
- 3.49% for 20-year fixed-rate securities; and
- 3.57% for 30-year fixed-rate securities.
The Company accounts for its TBA mortgage portfolio (also
referred to as "dollar roll funded assets") as derivative
instruments and recognizes dollar roll income in other gain (loss),
net on the Company's financial statements. As of
September 30, 2016, the Company's net TBA position had a total
fair value and a total cost basis of $15.6
billion and $15.5 billion,
respectively, and a net carrying value of $46 million reported in derivative
assets/(liabilities) on the Company's balance sheet, compared to a
total fair value and a total cost basis of $7.1 billion and $7.0
billion, respectively, and a net carrying value of
$97 million as of June 30,
2016.
CONSTANT PREPAYMENT RATES
The Company's investment portfolio had a weighted average CPR of
14.3% for the third quarter, compared to 11.8% for the prior
quarter. The weighted average projected CPR for the remaining
life of the Company's agency securities held as of
September 30, 2016 was 10.6%, a decrease from 10.8% as of
June 30, 2016, largely due to changes in portfolio
composition.
The weighted average cost basis of the Company's investment
portfolio was 104.7% of par value as of September 30,
2016. Net premium amortization cost on the Company's
investment portfolio for the third quarter was $(110) million, or $(0.33) per common share, including "catch-up"
premium amortization cost of $(8)
million, or $(0.02) per common
share, due to changes in the Company's projected CPR estimates for
securities acquired prior to the third quarter. This compares
to net premium amortization cost for the prior quarter of
$(134) million, or $(0.40) per common share, including a "catch-up"
premium amortization cost of $(32)
million, or $(0.10) per common
share. The net unamortized premium balance as of
September 30, 2016 was $2.1
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 repayments over the remaining life of the security.
Faster actual or projected repayments can have a meaningful
negative impact on the Company's asset yields, while slower actual
or projected repayments can have a meaningful positive impact.
ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE
SPREAD
The Company's average asset yield on its investment portfolio,
excluding the net TBA position, (also referred to as "balance sheet
funded assets") was 2.60% for the third quarter, an increase from
2.46% for the prior quarter. Excluding "catch-up" premium
amortization cost, the Company's average asset yield was 2.66% for
the third quarter, compared to 2.70% for the prior quarter.
For the third quarter, the Company's average cost of funds was
1.32%, a decrease from 1.46% for the prior quarter, largely due to
a decline in interest rate swap costs, partially offset by modestly
higher repo funding costs. The Company's average cost of
funds includes the cost of agency repurchase agreements ("agency
repo"), Federal Home Loan Bank ("FHLB") advances, debt of
consolidated variable interest entities ("other debt") and interest
rate swaps (including interest rate swaps used to hedge the
Company's dollar roll funded assets) measured against the Company's
daily weighted average agency repo, FHLB advances and other debt
balance outstanding.
The Company's combined annualized net interest rate spread on
its balance sheet and dollar roll funded assets for the quarter was
1.42%, compared to 1.16% for the prior quarter. Excluding
"catch-up" premium amortization cost, the Company's combined
annualized net interest rate spread on its balance sheet and dollar
roll funded assets for the quarter was 1.47%, compared to 1.38% for
the prior quarter.
On a per share basis, the Company recognized $0.62 per common share of net spread and dollar
roll income (a non-GAAP financial measure) for the third quarter,
compared to $0.46 for the prior
quarter. Excluding "catch-up" premium amortization cost, the
Company's net spread and dollar roll income was $0.64 per common share for the third quarter, an
increase from $0.56 for the prior
quarter, benefiting from lower operating costs due to the Company's
management internalization and a lower average cost of funds.
A reconciliation of the Company's net interest income to net
spread and dollar roll income and additional information regarding
the Company's use of non-GAAP measures are included later in this
release.
LEVERAGE
As of September 30, 2016, $37.6
billion of agency repo, $3.0
billion of FHLB advances and $0.5
billion of other debt were used to fund the Company's
investment portfolio. The remainder, or approximately
$45 million, of the Company's
repurchase agreements, was used to fund purchases of U.S. Treasury
securities ("U.S. Treasury repo") and is not included in the
Company's leverage measurements. Inclusive of its net TBA
position and net payable/(receivable) for unsettled securities, the
Company's tangible net book value "at risk" leverage ratio was 7.7x
as of September 30, 2016, unchanged from its pro-forma
tangible net book value "at risk" leverage ratio as of June 30, 2016 adjusted for the effect of the
completed AMM acquisition on July 1,
2016.
As of September 30, 2016, the Company's agency repurchase
agreements had a weighted average interest rate of 0.83%, an
increase from 0.78% as of June 30, 2016, and a weighted
average remaining days to maturity of 199 days, a decrease from 202
days as of June 30, 2016.
As of September 30, 2016, the Company's agency repurchase
agreements had remaining maturities of:
- $26.5 billion of three months or
less;
- $3.6 billion from three to six
months;
- $0.8 billion from six to nine
months;
- $0.6 billion from nine to twelve
months;
- $3.1 billion from one to three
years; and
- $3.0 billion from three to five
years.
As of September 30, 2016, the Company's FHLB advances had a
weighted average interest rate of 0.63% and a weighted average
remaining maturity of 123 days through to the termination of the
Company's captive subsidiary's FHLB membership in February 2017.
HEDGING ACTIVITIES
As of September 30, 2016, 75% of the Company's outstanding
balance of repurchase agreements, FHLB advances, other debt and net
TBA position was hedged with interest rate swaps, swaptions and net
U.S. Treasury positions, a decrease from 79% as of June 30,
2016.
As of September 30, 2016, the Company's interest rate swap
position totaled $34.2 billion in
notional amount, compared to $35.1
billion as of June 30, 2016. The Company's
interest rate swap position as of September 30, 2016 included
$2.2 billion of forward starting
swaps, with an average forward start date of 0.5 years and an
average remaining maturity of 6.8 years, compared to $2.7 billion, 0.7 years and 7.1 years,
respectively, as of June 30, 2016.
Excluding forward starting swaps, the Company's interest rate
swap portfolio had an average fixed pay rate of 1.40% and an
average receive rate of 0.78% as of September 30, 2016,
compared to 1.51% and 0.64%, respectively, as of June 30,
2016. Including forward starting swaps, the Company's
interest rate swap portfolio had an average fixed pay rate of 1.52%
and an average maturity of 3.5 years as of September 30, 2016,
compared to 1.64% and 4.0 years, respectively, as of June 30,
2016.
The Company also utilizes payer swaptions and long and short
positions in U.S. Treasury securities and U.S. Treasury futures to
mitigate exposure to changes in interest rates. As of
September 30, 2016, the Company had payer swaptions
outstanding totaling $0.7 billion,
compared to $1.1 billion as of
June 30, 2016, and a net short U.S. Treasury position
outstanding of $7.9 billion, compared
to $5.5 billion as of June 30,
2016.
OTHER GAIN (LOSS), NET
For the third quarter, the Company recorded a net gain of
$307 million in other gain (loss),
net, or $0.93 per common share,
compared to a net loss of $(312)
million, or $(0.94) per common
share, for the prior quarter. Other gain (loss), net for the
third quarter was comprised of:
- $61 million of net realized gains
on sales of agency securities;
- $204 million of net gains on
interest rate swaps (excluding $7
million of net unrealized gains recognized in OCI);
- $(51) million of interest rate
swap periodic interest costs;
- $(1) million of net losses on
interest rate swaptions;
- $30 million of net gains on U.S.
Treasury positions;
- $54 million of TBA dollar roll
income;
- $13 million of net mark-to-market
gains on TBA mortgage positions;
- $4 million of management fee
income; and
- $(7) million of net losses on
other derivative instruments and securities.
OTHER COMPREHENSIVE LOSS
During the third quarter, the Company recorded other
comprehensive loss of $(90) million,
or $(0.27) per common share,
primarily consisting of unrealized losses on the Company's agency
securities, compared to $382 million,
or $1.16 per common share, of other
comprehensive income for the prior quarter.
THIRD QUARTER 2016 DIVIDEND DECLARATIONS
During the third quarter, the Company's Board of Directors
declared dividends of $0.20,
$0.18 and $0.18 per share to common stockholders of record
as of July 29, August 31 and September
30, 2016, respectively, totaling $0.56 for the quarter, which were paid on
August 8, September 9 and October 7,
2016, respectively. Since its May 2008 initial public offering through the
third quarter of 2016, the Company has declared a total of
$6.6 billion in common stock
dividends, or $34.46 per common
share.
On September 16, 2016, the Company's Board of Directors
declared a third quarter dividend on its 8.000% Series A Cumulative
Redeemable 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 $0.484375 per depositary share. Each
depositary share represents a 1/1,000th interest in a share of the
Series B Preferred Stock. The dividends were paid on
October 17, 2016 to preferred stockholders of record as of
October 1, 2016.
STOCK REPURCHASE PROGRAM
The Company also announced that its Board of Directors has
terminated the Company's existing stock repurchase plan that was
due to expire December 31, 2016, and
replaced it with a new stock repurchase plan. Under the new
stock repurchase plan, the Company is authorized to repurchase up
to $1 billion of its outstanding
shares of common stock through December
31, 2017. The Company may repurchase shares in the
open market or privately negotiated transactions or pursuant to a
trading plan that may be adopted in accordance with Rule 10b5-1 of
the Securities and Exchange Act of 1934, as amended. The Company
intends to only repurchase shares under the new stock repurchase
plan when the repurchase price is less than its estimate of its
current tangible net book value per common share.
FINANCIAL STATEMENTS, OPERATING PERFORMANCE AND PORTFOLIO
STATISTICS
The following measures of operating performance include net
spread and dollar roll income, net spread and dollar roll income,
excluding "catch-up" premium amortization, 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.
AGNC INVESTMENT
CORP.
|
CONSOLIDATED BALANCE
SHEETS
|
(in millions, except
per share data)
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
2016
|
|
2016
|
|
2016
|
|
2015
|
|
2015
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
(unaudited)
|
Assets:
|
|
|
|
|
|
|
|
|
|
Agency
securities, at fair value (including pledged securities
of
$44,085, $48,344, $51,786, $48,380 and $47,319,
respectively)
|
$
46,328
|
|
$
53,418
|
|
$
54,950
|
|
$
51,331
|
|
$
53,729
|
Agency
securities transferred to consolidated variable interest
entities, at fair value (pledged
securities)
|
890
|
|
945
|
|
993
|
|
1,029
|
|
1,088
|
Non-agency securities, at fair value (pledged
securities)
|
102
|
|
107
|
|
112
|
|
113
|
|
-
|
Credit
risk transfer securities, at fair value
|
36
|
|
-
|
|
-
|
|
-
|
|
-
|
U.S.
Treasury securities, at fair value (including pledged
securities
of $45, $62, $0, $25 and $767,
respectively)
|
45
|
|
62
|
|
-
|
|
25
|
|
787
|
REIT
equity securities, at fair value
|
-
|
|
19
|
|
38
|
|
33
|
|
34
|
Cash and
cash equivalents
|
1,254
|
|
1,131
|
|
1,109
|
|
1,110
|
|
1,505
|
Restricted cash
|
681
|
|
1,399
|
|
1,686
|
|
1,281
|
|
1,413
|
Derivative assets, at fair value
|
61
|
|
111
|
|
55
|
|
81
|
|
143
|
Receivable for securities sold (pledged securities)
|
228
|
|
-
|
|
-
|
|
-
|
|
147
|
Receivable under reverse repurchase agreements
|
5,441
|
|
2,982
|
|
3,163
|
|
1,713
|
|
1,463
|
Goodwill
and other intangible assets, net
|
555
|
|
-
|
|
-
|
|
-
|
|
-
|
Other
assets
|
268
|
|
301
|
|
290
|
|
305
|
|
300
|
Total
assets
|
$
55,889
|
|
$
60,475
|
|
$
62,396
|
|
$
57,021
|
|
$
60,609
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
|
$
37,668
|
|
$
41,947
|
|
$
45,276
|
|
$
41,754
|
|
$
41,014
|
Federal
Home Loan Bank advances
|
3,037
|
|
3,037
|
|
3,037
|
|
3,753
|
|
3,502
|
Debt of
consolidated variable interest entities, at fair value
|
494
|
|
528
|
|
562
|
|
595
|
|
626
|
Payable
for securities purchased
|
251
|
|
2,581
|
|
889
|
|
182
|
|
4,178
|
Derivative liabilities, at fair value
|
947
|
|
1,519
|
|
1,652
|
|
935
|
|
1,536
|
Dividends payable
|
66
|
|
73
|
|
73
|
|
74
|
|
76
|
Obligation to return securities borrowed under reverse
repurchase agreements, at fair value
|
5,424
|
|
3,017
|
|
3,175
|
|
1,696
|
|
1,309
|
Accounts
payable and other accrued liabilities
|
71
|
|
71
|
|
72
|
|
61
|
|
52
|
Total
liabilities
|
47,958
|
|
52,773
|
|
54,736
|
|
49,050
|
|
52,293
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock - aggregate liquidation preference of
$348
|
336
|
|
336
|
|
336
|
|
336
|
|
336
|
Common
stock - $0.01 par value; 600.0 shares authorized;
|
|
|
|
|
|
|
|
|
|
331.0,
331.0, 331.0, 337.5 and 346.5 shares issued and outstanding,
respectively
|
3
|
|
3
|
|
3
|
|
3
|
|
3
|
Additional paid-in capital
|
9,932
|
|
9,932
|
|
9,932
|
|
10,048
|
|
10,209
|
Retained
deficit
|
(3,350)
|
|
(3,669)
|
|
(3,329)
|
|
(2,350)
|
|
(2,727)
|
Accumulated other comprehensive income (loss)
|
1,010
|
|
1,100
|
|
718
|
|
(66)
|
|
495
|
Total stockholders'
equity
|
7,931
|
|
7,702
|
|
7,660
|
|
7,971
|
|
8,316
|
Total liabilities and
stockholders' equity
|
$
55,889
|
|
$
60,475
|
|
$
62,396
|
|
$
57,021
|
|
$
60,609
|
|
|
|
|
|
|
|
|
|
|
Net book value per
common share
|
$
22.91
|
|
$
22.22
|
|
$
22.09
|
|
$
22.59
|
|
$
23.00
|
Tangible net book
value per common share
|
$
21.23
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
AGNC INVESTMENT CORP.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
2016
|
|
2016
|
|
2016
|
|
2015
|
|
2015
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
315
|
|
$
318
|
|
$
295
|
|
$
374
|
|
$
295
|
Interest
expense 1
|
96
|
|
101
|
|
99
|
|
86
|
|
77
|
Net interest income
|
219
|
|
217
|
|
196
|
|
288
|
|
218
|
|
|
|
|
|
|
|
|
|
|
Other gain (loss),
net:
|
|
|
|
|
|
|
|
|
|
Gain (loss) on sale of
agency securities, net
|
61
|
|
55
|
|
(2)
|
|
2
|
|
(39)
|
Gain (loss) on
derivative instruments and other securities, net
1
|
242
|
|
(367)
|
|
(933)
|
|
331
|
|
(778)
|
Management fee
income
|
4
|
|
-
|
|
-
|
|
-
|
|
-
|
Total other gain (loss), net
|
307
|
|
(312)
|
|
(935)
|
|
333
|
|
(817)
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Management fee
expense
|
-
|
|
25
|
|
27
|
|
28
|
|
29
|
Compensation and
benefits
|
9
|
|
-
|
|
-
|
|
-
|
|
-
|
Other operating
expenses
|
6
|
|
15
|
|
6
|
|
5
|
|
5
|
Total operating expenses
|
15
|
|
40
|
|
33
|
|
33
|
|
34
|
Net income
(loss)
|
511
|
|
(135)
|
|
(772)
|
|
588
|
|
(633)
|
Dividend on preferred
stock
|
7
|
|
7
|
|
7
|
|
7
|
|
7
|
Net income (loss)
available (attributable) to common stockholders
|
$
504
|
|
$
(142)
|
|
$
(779)
|
|
$
581
|
|
$
(640)
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
511
|
|
$
(135)
|
|
$
(772)
|
|
$
588
|
|
$
(633)
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss)
on available-for-sale securities, net
|
(97)
|
|
370
|
|
765
|
|
(583)
|
|
467
|
Unrealized gain on
derivative instruments, net 1
|
7
|
|
12
|
|
19
|
|
22
|
|
24
|
Other comprehensive income (loss)
|
(90)
|
|
382
|
|
784
|
|
(561)
|
|
491
|
Comprehensive
income (loss)
|
421
|
|
247
|
|
12
|
|
27
|
|
(142)
|
Dividend on preferred
stock
|
7
|
|
7
|
|
7
|
|
7
|
|
7
|
Comprehensive
income (loss) available (attributable) to common
stockholders
|
$
414
|
|
$
240
|
|
$
5
|
|
$
20
|
|
$
(149)
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding -
basic and diluted
|
331.0
|
|
331.0
|
|
334.4
|
|
341.6
|
|
347.8
|
Net income (loss)
per common share - basic and diluted
|
$
1.52
|
|
$
(0.43)
|
|
$
(2.33)
|
|
$
1.70
|
|
$
(1.84)
|
Comprehensive
income (loss) per common share - basic and diluted
|
$
1.25
|
|
$
0.73
|
|
$
0.01
|
|
$
0.06
|
|
$
(0.43)
|
Dividends declared
per common share
|
$
0.56
|
|
$
0.60
|
|
$
0.60
|
|
$
0.60
|
|
$
0.60
|
AGNC INVESTMENT CORP.
|
RECONCILIATION OF
GAAP NET INTEREST INCOME TO NET SPREAD AND DOLLAR ROLL INCOME
2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
2016
|
|
2016
|
|
2016
|
|
2015
|
|
2015
|
Interest
income
|
$
315
|
|
$
318
|
|
$
295
|
|
$
374
|
|
$
295
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements and other debt
|
89
|
|
89
|
|
80
|
|
64
|
|
53
|
Interest
rate swap periodic costs 1
|
7
|
|
12
|
|
19
|
|
22
|
|
24
|
Total interest
expense
|
96
|
|
101
|
|
99
|
|
86
|
|
77
|
Net interest
income
|
219
|
|
217
|
|
196
|
|
288
|
|
218
|
Other
interest rate swap periodic costs 3
|
(51)
|
|
(69)
|
|
(89)
|
|
(102)
|
|
(107)
|
Dividend
on REIT equity securities
|
-
|
|
1
|
|
1
|
|
1
|
|
1
|
Management fee income
|
4
|
|
-
|
|
-
|
|
-
|
|
-
|
TBA
dollar roll income 16
|
54
|
|
44
|
|
50
|
|
53
|
|
73
|
Adjusted net interest
and dollar roll income
|
226
|
|
193
|
|
158
|
|
240
|
|
185
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
15
|
|
40
|
|
33
|
|
33
|
|
34
|
Non-recurring transaction costs
|
-
|
|
(9)
|
|
-
|
|
-
|
|
-
|
Adjusted operating
expenses
|
15
|
|
31
|
|
33
|
|
33
|
|
34
|
Net spread and dollar
roll income
|
211
|
|
162
|
|
125
|
|
207
|
|
151
|
Dividend
on preferred stock
|
7
|
|
7
|
|
7
|
|
7
|
|
7
|
Net spread and dollar
roll income available to common stockholders
|
204
|
|
155
|
|
118
|
|
200
|
|
144
|
Estimated "catch-up" premium amortization cost (benefit) due to
change in
CPR forecast
|
8
|
|
32
|
|
55
|
|
(14)
|
|
33
|
Net spread and dollar
roll income, excluding "catch-up" premium
amortization, available to common stockholders
|
$
212
|
|
$
187
|
|
$
173
|
|
$
186
|
|
$
177
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic and diluted
|
331.0
|
|
331.0
|
|
334.4
|
|
341.6
|
|
347.8
|
Net spread and dollar
roll income per common share - basic and diluted
|
$
0.62
|
|
$
0.46
|
|
$
0.36
|
|
$
0.58
|
|
$
0.41
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization, per common
share - basic and diluted
|
$
0.64
|
|
$
0.56
|
|
$
0.52
|
|
$
0.54
|
|
$
0.51
|
AGNC INVESTMENT CORP.
|
RECONCILIATION OF
GAAP NET INCOME TO ESTIMATED TAXABLE INCOME 2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
2016
|
|
2016
|
|
2016
|
|
2015
|
|
2015
|
Net income
(loss)
|
$
511
|
|
$
(135)
|
|
$
(772)
|
|
$
588
|
|
$
(633)
|
Book to tax
differences:
|
|
|
|
|
|
|
|
|
|
Premium
amortization, net
|
(15)
|
|
20
|
|
55
|
|
(18)
|
|
15
|
Realized
gain/loss, net
|
249
|
|
391
|
|
93
|
|
154
|
|
12
|
Utilization of net capital loss carryforward
5
|
(127)
|
|
(99)
|
|
(99)
|
|
(83)
|
|
-
|
Unrealized gain/loss, net
|
(540)
|
|
(106)
|
|
804
|
|
(543)
|
|
672
|
Other
|
(8)
|
|
9
|
|
-
|
|
-
|
|
-
|
Total book to tax
differences
|
(441)
|
|
215
|
|
853
|
|
(490)
|
|
699
|
Estimated REIT
taxable income
|
70
|
|
80
|
|
81
|
|
98
|
|
66
|
Dividend
on preferred stock
|
7
|
|
7
|
|
7
|
|
7
|
|
7
|
Estimated REIT
taxable income, net of preferred stock dividend
|
$
63
|
|
$
73
|
|
$
74
|
|
$
91
|
|
$
59
|
Weighted average
number of common shares outstanding - basic and diluted
|
331.0
|
|
331.0
|
|
334.4
|
|
341.6
|
|
347.8
|
Estimated REIT
taxable income per common share - basic and diluted
|
$
0.19
|
|
$
0.22
|
|
$
0.22
|
|
$
0.27
|
|
$
0.17
|
|
|
|
|
|
|
|
|
|
|
Beginning cumulative
non-deductible capital loss
|
$
486
|
|
$
585
|
|
$
684
|
|
$
767
|
|
$
767
|
Utilization of net
capital loss carryforward
|
(127)
|
|
(99)
|
|
(99)
|
|
(83)
|
|
-
|
Ending cumulative
non-deductible capital loss
|
$
359
|
|
$
486
|
|
$
585
|
|
$
684
|
|
$
767
|
Ending cumulative
non-deductible capital loss per common share
|
$
1.08
|
|
$
1.47
|
|
$
1.77
|
|
$
2.03
|
|
$
2.21
|
AGNC INVESTMENT CORP.
|
KEY
STATISTICS*
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Key Balance Sheet
Statistics:
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
2016
|
|
2016
|
|
2016
|
|
2015
|
|
2015
|
Fixed-rate agency
securities, at fair value - as of period end
18
|
$
45,611
|
|
$
52,648
|
|
$
54,155
|
|
$
50,522
|
|
$
52,862
|
Adjustable-rate
agency securities, at fair value - as of period end
|
$
414
|
|
$
443
|
|
$
471
|
|
$
495
|
|
$
551
|
AAA non-agency
securities, at fair value - as of period end
|
$
102
|
|
$
107
|
|
$
112
|
|
$
113
|
|
$
-
|
GSE credit risk
transfer securities, at fair value - as of period end
|
$
36
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
-
|
CMO agency
securities, at fair value - as of period end
|
$
865
|
|
$
920
|
|
$
966
|
|
$
990
|
|
$
1,041
|
Interest-only strips
agency securities, at fair value - as of period end
|
$
166
|
|
$
180
|
|
$
176
|
|
$
178
|
|
$
179
|
Principal-only strips
agency securities, at fair value - as of period end
|
$
161
|
|
$
172
|
|
$
175
|
|
$
175
|
|
$
184
|
Total securities, at
fair value - as of period end 18
|
$
47,355
|
|
$
54,470
|
|
$
56,055
|
|
$
52,473
|
|
$
54,817
|
Total securities, at
cost - as of period end 18
|
$
46,306
|
|
$
53,317
|
|
$
55,271
|
|
$
52,464
|
|
$
54,216
|
Total securities, at
par - as of period end 6, 18
|
$
44,212
|
|
$
50,950
|
|
$
52,864
|
|
$
50,163
|
|
$
51,902
|
Average securities,
at cost 18
|
$
48,548
|
|
$
51,810
|
|
$
50,897
|
|
$
52,131
|
|
$
48,711
|
Average securities,
at par 6, 18
|
$
46,372
|
|
$
49,544
|
|
$
48,687
|
|
$
49,890
|
|
$
46,610
|
Net TBA portfolio -
as of period end, at fair value
|
$
15,586
|
|
$
7,072
|
|
$
6,024
|
|
$
7,444
|
|
$
7,385
|
Net TBA portfolio -
as of period end, at cost
|
$
15,540
|
|
$
6,975
|
|
$
5,983
|
|
$
7,430
|
|
$
7,265
|
Net TBA portfolio -
as of period end, carrying value
|
$
46
|
|
$
97
|
|
$
41
|
|
$
14
|
|
$
120
|
Average net TBA
portfolio, at cost
|
$
10,748
|
|
$
8,238
|
|
$
8,144
|
|
$
7,796
|
|
$
9,434
|
Average repurchase
agreements and other debt 4
|
$
44,401
|
|
$
46,948
|
|
$
45,926
|
|
$
47,018
|
|
$
43,308
|
Average stockholders'
equity 7
|
$
7,803
|
|
$
7,722
|
|
$
7,776
|
|
$
8,143
|
|
$
8,603
|
Net book value per
common share 8
|
$
22.91
|
|
$
22.22
|
|
$
22.09
|
|
$
22.59
|
|
$
23.00
|
Tangible net book
value per common share 9
|
$
21.23
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
"At risk" leverage -
average during the period 10
|
7.1:1
|
|
7.2:1
|
|
7.0:1
|
|
6.8:1
|
|
6.2:1
|
"At risk" leverage -
as of period end 11
|
7.2:1
|
|
7.2:1
|
|
7.3:1
|
|
6.8:1
|
|
6.8:1
|
Tangible net book
value "at risk" leverage - average during the period
12
|
7.6:1
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
Tangible net book
value "at risk" leverage - as of period end
12
|
7.7:1
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Statistics:
|
|
|
|
|
|
|
|
|
|
Average coupon
13, 18
|
3.65%
|
|
3.63%
|
|
3.63%
|
|
3.62%
|
|
3.62%
|
Average asset yield
14, 18
|
2.60%
|
|
2.46%
|
|
2.32%
|
|
2.87%
|
|
2.42%
|
Average cost of funds
15, 18
|
(1.32%)
|
|
(1.46%)
|
|
(1.64%)
|
|
(1.60%)
|
|
(1.70%)
|
Average net interest
rate spread 18
|
1.28%
|
|
1.00%
|
|
0.68%
|
|
1.27%
|
|
0.72%
|
Average net interest
rate spread, including TBA dollar roll income/loss
16
|
1.42%
|
|
1.16%
|
|
0.94%
|
|
1.47%
|
|
1.14%
|
Average coupon - as
of period end 18
|
3.64%
|
|
3.63%
|
|
3.63%
|
|
3.63%
|
|
3.61%
|
Average asset yield -
as of period end 18
|
2.68%
|
|
2.68%
|
|
2.72%
|
|
2.78%
|
|
2.76%
|
Average cost of funds
- as of period end 15, 18
|
(1.30%)
|
|
(1.35%)
|
|
(1.49%)
|
|
(1.65%)
|
|
(1.64%)
|
Average net interest
rate spread - as of period end 18
|
1.38%
|
|
1.33%
|
|
1.23%
|
|
1.13%
|
|
1.12%
|
Average actual CPR
for securities held during the period 18
|
14%
|
|
12%
|
|
9%
|
|
10%
|
|
12%
|
Average forecasted
CPR - as of period end 18
|
11%
|
|
11%
|
|
10%
|
|
8%
|
|
9%
|
Total premium
amortization, net
|
$
(110)
|
|
$
(134)
|
|
$
(150)
|
|
$
(78)
|
|
$
(128)
|
Expenses % of average
total assets - annualized
|
0.10%
|
|
0.27%
|
|
0.23%
|
|
0.23%
|
|
0.25%
|
Expenses % of average
stockholders' equity - annualized
|
0.76%
|
|
2.08%
|
|
1.70%
|
|
1.61%
|
|
1.57%
|
Net comprehensive
income (loss) return on average common equity -
annualized
|
22.0%
|
|
13.0%
|
|
0.3%
|
|
1.0%
|
|
(7.1%)
|
Dividends declared
per common share
|
$
0.56
|
|
$
0.60
|
|
$
0.60
|
|
$
0.60
|
|
$
0.60
|
Economic return
(loss) on common equity - annualized 17
|
22.4%
|
|
13.3%
|
|
1.8%
|
|
3.3%
|
|
(6.6%)
|
*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.
** Numbers may not total due to rounding.
N/A - Not applicable
- The Company voluntarily discontinued hedge accounting under
GAAP for interest rate swaps as of September
30, 2011. The accumulated other comprehensive loss 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 (see footnote 1 for additional information). Other interest
rate swap periodic costs do not include termination fees or
mark-to-market adjustments associated with interest rate
swaps.
- Average repurchase agreements and other debt includes agency
repo, FHLB advances and debt of consolidated VIE's. Amount
excludes U.S. Treasury repurchase agreements.
- 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 from the year of loss and applied
against future net capital gains.
- 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.
- Tangible net book value per common share excludes goodwill and
other intangible assets, net.
- Average "at risk" leverage during the period was calculated by
dividing the sum of the daily weighted average agency repurchase
agreements, FHLB advances, debt of consolidated VIEs outstanding
and average net TBA position (at cost) 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.
- "At risk" leverage as of period end was calculated by dividing
the sum of the amount outstanding under agency repurchase
agreements, FHLB advances, debt of consolidated VIE, net TBA
position (at cost) and net receivable / payable for unsettled
agency securities 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.
- Tangible net book value "at risk" leverage includes the
components of "at risk" leverage, with stockholders' equity
adjusted to exclude goodwill and other intangible assets, net.
- Average coupon for the period was calculated by dividing the
total coupon (or cash) interest income by average securities held
at par.
- Average asset yield for the period was calculated by dividing
the total interest income (coupon interest less amortization of net
premiums and discounts) by the average amortized cost of securities
held.
- Cost of funds includes agency repurchase agreements, other debt
and current pay interest rate swaps, but excludes swap termination
fees, forward starting swaps and costs associated with other
supplemental hedges such as swaptions and short U.S. Treasury or
TBA positions. Average cost of funds for the period was
calculated by dividing the total cost of funds by the average
agency repurchase agreements and other debt outstanding for the
period. Cost of funds excludes U.S. Treasury repurchase
agreements.
- 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.
- 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.
- Excludes net TBA mortgage position.
STOCKHOLDER CALL
AGNC invites stockholders, prospective stockholders and analysts
to attend the AGNC stockholder call on October 25, 2016 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 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 AGNC Investment Corp. stockholder call.
A slide presentation will accompany the call and will be
available at www.AGNC.com. Select the Q3 2016 Earnings
Presentation link to download and print the presentation in advance
of the stockholder call.
An archived audio of the stockholder call combined with the
slide presentation will be available on the AGNC website after the
call on October 25, 2016. In addition, there will be a
phone recording available one hour after the live call on
October 25, 2016 through November 8,
2016. Those who are interested in hearing the recording of
the presentation can access it by dialing (877) 344-7529 (U.S.
domestic) or (412) 317-0088 (international), passcode
10093704.
For further information, please contact Investor Relations at
(301) 968-9300 or IR@AGNC.com.
ABOUT AGNC INVESTMENT CORP.
AGNC Investment Corp. is an internally-managed real estate
investment trust ("REIT") that invests primarily in agency
pass-through securities for which the principal and interest
payments are guaranteed by a U.S. Government agency or a U.S.
Government-sponsored enterprise. For further information, please
refer to www.AGNC.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 "net
spread and dollar roll income," "adjusted net interest expense,"
"net spread and dollar roll income, excluding 'catch-up' premium
amortization," "estimated taxable income" and the related per
common share measures and certain financial metrics derived from
such non-GAAP information, such as "cost of funds" and "net
interest rate spread."
"Adjusted net interest expense" is measured as interest expense
(GAAP measure) adjusted to include other interest rate swap
periodic costs. "Net spread and dollar roll income" is
measured as (i) net interest income (GAAP measure) adjusted to
include other interest rate swap periodic costs, TBA dollar roll
income, dividends on REIT equity securities and management fee
income (referred to as "adjusted net interest and dollar roll
income") less (ii) total operating expenses (GAAP measure) adjusted
to exclude non-recurring transaction costs (referred to as
"adjusted operating expenses"). "Net spread and dollar roll
income, excluding 'catch-up' premium amortization," further
excludes retrospective "catch-up" adjustments to premium
amortization cost or benefit due to changes in projected CPR
estimates.
By providing users of the Company's financial information with
such measures in addition to the related GAAP measures, the Company
believes users will have greater transparency into the information
used by the Company's management in its financial and operational
decision-making. The Company also believes that it is
important for users of our financial information to consider
information related to the Company's current financial performance
without the effects of certain transactions that are not
necessarily indicative of its current investment portfolio
performance and operations.
Specifically, in the case of "adjusted net interest and dollar
roll income," the Company believes the inclusion of TBA dollar roll
income is meaningful as TBAs, which are accounted for under GAAP as
derivative instruments with gains and losses recognized in other
gain (loss) in the Company's statement of operations, are
economically equivalent to holding and financing generic agency MBS
using short-term repurchase agreements. Similarly, the
Company believes that the inclusion of periodic interest rate swap
settlements in such measure and in "adjusted net interest expense",
which are recognized under GAAP in other gain (loss), is meaningful
as interest rate swaps are the primary instrument the Company uses
to economically hedge against fluctuations in the Company's
borrowing costs and inclusion of all periodic interest rate swap
settlement costs is more indicative of the Company's total cost of
funds than interest expense alone. In the case of "net spread
and dollar roll income, excluding 'catch-up' premium amortization,"
the Company believes the exclusion of "catch-up" adjustments to
premium amortization cost or benefit is meaningful as it excludes
the cumulative effect from prior reporting periods due to current
changes in future prepayment expectations and, therefore, exclusion
of such cost or benefit is more indicative of the current earnings
potential of the Company's investment portfolio. The Company
also believes the exclusion of non-recurring transactions costs
reported in operating expense under GAAP is meaningful as they
represent non-recurring transaction costs associated with the
Company's acquisition of AMM and are not representative of ongoing
operating costs. In the case of estimated taxable income, the
Company believes it is meaningful information as it 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, excluding 'catch-up' premium
amortization" and a reconciliation of GAAP net income to non-GAAP
"estimated taxable income" is included in this release.
CONTACT:
Investors - (301) 968-9300
Media - (301) 968-9303
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visit:http://www.prnewswire.com/news-releases/agnc-investment-corp-announces-third-quarter-2016-financial-results-300349964.html
SOURCE AGNC Investment Corp.