BETHESDA, Md., July 26,
2017 /PRNewswire/ -- AGNC Investment Corp. ("AGNC" or the
"Company") (Nasdaq: AGNC) today announced financial results for the
quarter ended June 30, 2017.
SECOND QUARTER 2017 FINANCIAL HIGHLIGHTS
- $0.40 comprehensive income per
common share, comprised of:
-
- $0.05 net income per common
share
- $0.35 other comprehensive income
("OCI") per common share
-
- Includes net unrealized gains on investments recognized through
OCI
- $0.67 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization cost 1
-
- Includes $0.27 per common share
of dollar roll income associated with the Company's $16.9 billion average net long position in
forward purchases and sales of Agency mortgage-backed securities
("MBS") in the "to-be-announced" ("TBA") market
- Excludes $(0.04) per common share
of estimated "catch-up" premium amortization cost due to change in
projected constant prepayment rate ("CPR") estimates
- $19.25 tangible net book value
per common share as of June 30, 2017
-
- Decreased $(0.06) per common
share, or -0.3%, from $19.31 per
common share as of March 31, 2017
- Excludes $553 million, or
$1.55 per common share, of goodwill
and other intangible assets as of June 30, 2017
- $0.54 dividends declared per
common share during the quarter
- 2.5% economic return on tangible common equity for the
quarter
-
- Comprised of $0.54 dividends per
common share and $(0.06) decrease in
tangible net book value per common share
OTHER SECOND QUARTER HIGHLIGHTS
- $63.8 billion investment
portfolio as of June 30, 2017, comprised of:
-
- $46.0 billion Agency MBS
- $17.3 billion TBA mortgage
position
- $0.6 billion credit risk transfer
("CRT") and non-Agency securities
- 8.1x tangible net book value "at risk" leverage as of
June 30, 2017
-
- 8.0x average tangible net book value "at risk" leverage for the
quarter
- 10.9% portfolio CPR for the quarter
-
- 8.6% average projected portfolio life CPR as of June 30,
2017, an increase from 8.2% projected CPR as of March 31,
2017
- 1.55% annualized net interest rate spread and TBA dollar roll
income for the quarter, excluding estimated "catch-up" premium
amortization cost
-
- Excludes -9 bps of "catch up" premium amortization cost due to
change in projected CPR estimates
- Increased from 1.51% for the prior quarter, excluding -6 bps of
"catch-up" premium amortization cost
- $503 million of net equity raised
from common stock offering during the quarter
___________
1. 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
"We are pleased to report another
quarter of solid financial performance for AGNC," commented
Gary Kain, the Company's Chief
Executive Officer, President and Chief Investment Officer.
"Our earnings profile continues to be supportive of our dividend
despite an elevated hedge ratio and a reduction in our aggregate
interest rate risk position. As we enter the third quarter,
returns on levered Agency MBS remain attractive as current
valuations reflect the anticipated near-term reduction in MBS
purchases by the Federal Reserve. The overhang of possible
Federal Reserve tapering has driven wider spreads on Agency MBS
over the last year. In stark contrast, the spreads on most
credit-centric fixed income investments have tightened to multiyear
lows. At the same time, the funding picture for Agency MBS,
including rate level and capacity, continues to be very
attractive. As such, Agency MBS provide levered investors
like AGNC with favorable return potential on an absolute basis and
relative to alternatives in the fixed-income and equity
markets."
"For the quarter, AGNC generated an economic return of 2.5% on
tangible common equity," added Peter
Federico, the Company's Executive Vice President and Chief
Financial Officer. "In addition to our strong financial
results, we continued to expand our use of our captive
broker-dealer, Bethesda Securities ('BES'), as the size of our repo
position funded through BES grew to almost $10 billion and we began clearing trades for our
TBA securities position. Finally, we increased our hedge
portfolio during the second quarter, thus providing us with greater
protection against net asset value fluctuations due to interest
rate changes. All in all, we believe these actions position
AGNC for success across a broad spectrum of market conditions."
NET BOOK VALUE
As of June 30, 2017, the Company's
tangible net book value per common share was $19.25 per common share, a decrease of
$(0.06) per common share, or -0.3%,
from $19.31 per common share as of
March 31, 2017. The Company's tangible net book value
per common share excludes $553
million, or $1.55 per common
share, of goodwill and other intangible assets as of June 30,
2017.
INVESTMENT PORTFOLIO
As of June 30, 2017, the
Company's investment portfolio totaled $63.8
billion, comprised of:
- $63.2 billion of Agency MBS and
TBA securities, including:
-
- $61.9 billion of fixed-rate
securities, comprised of:
-
- $33.4 billion 30-year fixed-rate
securities,
- $14.6 billion 30-year net long
TBA securities,
- $10.5 billion ≤ 15-year
securities,
- $2.6 billion 15-year net long TBA
securities, and
- $0.8 billion 20-year fixed-rate
securities;
- $1.0 billion of collateralized
mortgage obligations ("CMOs"), including principal and
interest-only strips; and
- $0.3 billion of adjustable-rate
securities; and
- $0.6 billion of CRT and
non-Agency securities.
As of June 30, 2017, inclusive of TBA securities, 30 year
and ≤ 15-year Agency MBS fixed rate securities represented 75% and
21% of the Company's investment portfolio, respectively, compared
to 73% and 23%, respectively, as of March 31, 2017.
As of June 30, 2017, the Company's Agency MBS fixed-rate
securities, inclusive of TBA securities, had a weighted average
coupon of 3.56%, compared to 3.54% as of March 31, 2017,
comprised of the following weighted average coupons:
- 3.65% for 30-year fixed-rate securities;
- 3.21% for ≤ 15-year fixed rate securities; and
- 3.48% for 20-year fixed-rate securities.
The Company accounts for its TBA mortgage portfolio (or "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 June 30, 2017, the Company's
net TBA position had a total fair value and a total cost basis of
$17.3 billion and a GAAP net carrying
value of $(12) million reported in
derivative assets/(liabilities) on the Company's balance sheet,
compared to a total fair value and a total cost basis of
$14.4 billion, and a GAAP net
carrying value of $70 million as of
March 31, 2017.
CONSTANT PREPAYMENT RATES
The Company's investment
portfolio had a weighted average CPR of 10.9% for the second
quarter, compared to 10.7% for the prior quarter. The
weighted average projected CPR for the remaining life of the
Company's Agency securities held as of June 30, 2017 was 8.6%,
an increase from 8.2% as of March 31, 2017.
The weighted average cost basis of the Company's investment
portfolio was 104.8% of par value as of June 30, 2017.
Net premium amortization cost on the Company's investment portfolio
for the second quarter was $(96)
million, or $(0.28) per common
share, which includes "catch-up" premium amortization cost of
$(13) million, or $(0.04) per common share, due to changes in the
Company's projected CPR estimates for securities acquired prior to
the second quarter. This compares to net premium amortization
cost for the prior quarter of $(89)
million, or $(0.27) per common
share, including "catch-up" premium amortization cost of
$(9) million, or $(0.03) per common share. The net
unamortized premium balance as of June 30, 2017 was
$2.2 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 reduce asset yields,
while slower actual or projected repayments can increase asset
yields, on the Company's existing Agency securities.
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 2.66% for the second quarter, a
decrease from 2.68% for the prior quarter. Excluding
"catch-up" premium amortization, the Company's average asset yield
was 2.78% for the second quarter, an increase from 2.76% for the
prior quarter.
For the second quarter, the Company's average cost of funds,
excluding the net TBA position, was 1.51%, an increase from 1.48%
for the prior quarter. The Company's average cost of funds
includes the cost of Agency repurchase agreements ("Agency repo"),
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 and other
debt balance outstanding. The modest increase in the
Company's average cost of funds was primarily due to higher repo
rates, which were largely offset by an increase in the average
floating rate received on the Company's interest rate swaps.
The Company's combined annualized net interest rate spread on
its balance sheet and dollar roll funded assets for the quarter
further benefited from a larger dollar roll position and favorable
funding dynamics in the dollar roll market during the
quarter. The Company's combined annualized interest rate
spread on its balance sheet and dollar roll funded assets for the
quarter was 1.46%, compared to 1.44% for the prior quarter.
Excluding "catch-up" premium amortization, the Company's combined
annualized net interest rate spread for the quarter was 1.55%, an
increase from 1.51% for the prior quarter.
On a per share basis, the Company recognized $0.63 per common share of net spread and dollar
roll income (a non-GAAP financial measure) for the second quarter,
compared to $0.61 for the prior
quarter. Excluding "catch-up" premium amortization, the
Company's net spread and dollar roll income was $0.67 per common share for the second quarter, an
increase from $0.64 per common share
for the prior quarter.
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 June 30, 2017, $39.1 billion of Agency repo and $0.4 billion of other debt were used to fund the
Company's investment portfolio. 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 8.1x
as of June 30, 2017, compared to 8.0x as of March 31,
2017.
As of June 30, 2017, the Company's Agency repurchase
agreements had a weighted average interest rate of 1.27%, an
increase from 1.05% as of March 31, 2017, and weighted average
remaining days to maturity of 154 days, compared to 176 days as of
March 31, 2017. As of June 30, 2017, $9.9 billion, or 25%, of the Company's Agency
repurchase agreements were funded through BES, compared to
$7.6 billion, or 19%, as of
March 31, 2017.
As of June 30, 2017, the Company's Agency repurchase
agreements had remaining maturities of:
- $27.2 billion of three months or
less;
- $5.0 billion from three to six
months;
- $1.6 billion from six to nine
months;
- $0.5 billion from nine to twelve
months;
- $3.7 billion from one to three
years; and
- $0.9 billion from three to five
years.
HEDGING ACTIVITIES
As of June 30, 2017, 98% of
the Company's outstanding balance of Agency repurchase agreements,
other debt and net TBA position was hedged with interest rate
swaps, swaptions and U.S. Treasury positions, compared to 90% as of
March 31, 2017.
As of June 30, 2017, the Company's interest rate swap
position totaled $40.0 billion in
notional amount, compared to $35.8
billion as of March 31, 2017. The Company's
interest rate swap position as of June 30, 2017 included
$3.7 billion of forward starting
swaps, with an average forward start date of 0.2 years, compared to
$0.3 billion and 2.0 years,
respectively, as of March 31, 2017. Including
forward starting swaps, the Company's interest rate swap portfolio
had an average fixed pay rate of 1.60%, an average receive rate of
1.19% and an average maturity of 4.4 years as of June 30,
2017, compared to 1.52%, 1.06% and 3.9 years, respectively, as of
March 31, 2017. Excluding forward starting swaps, the
Company's interest rate swap portfolio had an average fixed pay
rate of 1.52% as of June 30, 2017, compared to 1.50% as of
March 31, 2017.
The Company also utilizes payer swaptions and U.S. Treasury
securities and futures to mitigate exposure to changes in interest
rates. As of June 30, 2017, the Company had payer
swaptions outstanding totaling $5.0
billion, compared to $2.2
billion as of March 31, 2017, and a short U.S. Treasury
position outstanding of $10.8
billion, compared to $11.0
billion as of March 31, 2017.
OTHER GAIN (LOSS), NET
For the second quarter, the
Company recorded a net loss of $(141)
million in other gain (loss), net, or $(0.41) per common share, compared to a net loss
of $(105) million, or $(0.32) per common share, for the prior
quarter. Other gain (loss), net for the second quarter was
comprised of:
- $15 million of net realized gains
on sales of investment securities;
- $9 million of net unrealized
gains on investment securities measured at fair value through net
income;
- $(35) million of interest rate
swap periodic costs;
- $(159) million of net losses on
interest rate swaps;
- $(13) million of net losses on
interest rate swaptions;
- $(125) million of net losses on
U.S. Treasury positions;
- $93 million of TBA dollar roll
income;
- $70 million of net mark-to-market
gains on TBA mortgage positions; and
- $4 million of management fee
income.
OTHER COMPREHENSIVE INCOME
During the second quarter,
the Company recorded other comprehensive income of $121.0 million, or $0.35 per common share, consisting of net
unrealized gains on the Company's Agency securities recognized
through OCI, compared to $46.0
million, or $0.14 per common
share, of other comprehensive income for the prior quarter.
Starting in fiscal year 2017, the Company elected to recognize
unrealized gains and losses on Agency securities acquired after
fiscal year 2016 through net income. Unrealized gains and
losses on Agency securities acquired prior to fiscal year 2017 will
continue to be recognized through OCI until the Company receives
full repayment of principal or disposes of the security.
COMMON STOCK OFFERING
On May 5,
2017, the Company completed a follow-on public offering of
24.5 million shares of common stock for proceeds of $503 million, or $20.53 per common share, net of offering
costs.
SECOND QUARTER 2017 DIVIDEND DECLARATIONS
During the
second quarter, the Company's Board of Directors declared dividends
of $0.18 per share to common
stockholders of record as of April
28, May 31 and June 30, 2017, respectively, totaling
$0.54 for the quarter, which were
paid on May 8, June 8 and July 7,
2017, respectively. Since its May 2008 initial public offering through the
second quarter of 2017, the Company has declared a total of
$7.1 billion in common stock
dividends, or $36.08 per common
share.
On June 14, 2017, the Company's Board of Directors declared
a second 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
July 17, 2017 to preferred stockholders of record as of
July 1, 2017.
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)
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
|
2016
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
(unaudited)
|
|
(unaudited)
|
Assets:
|
|
|
|
|
|
|
|
|
|
Agency
securities, at fair value (including pledged securities of
$41,263,
$41,587, $43,943, $44,089 and $48,344, respectively)
|
$
45,226
|
|
$
43,856
|
|
$
45,393
|
|
$
46,328
|
|
$
53,418
|
Agency
securities transferred to consolidated variable interest entities,
at fair value (pledged securities)
|
737
|
|
777
|
|
818
|
|
890
|
|
945
|
Credit
risk transfer securities, at fair value
|
572
|
|
383
|
|
164
|
|
36
|
|
-
|
Non-Agency securities, at fair value (including
pledged securities of $0,
$0, $90, $102 and $107, respectively)
|
31
|
|
31
|
|
124
|
|
102
|
|
107
|
U.S.
Treasury securities, at fair value (including pledged securities
of
$0, $0, $173, $45 and $62, respectively)
|
-
|
|
-
|
|
182
|
|
45
|
|
62
|
REIT
equity securities, at fair value
|
4
|
|
-
|
|
-
|
|
-
|
|
19
|
Cash and
cash equivalents
|
1,122
|
|
1,073
|
|
1,208
|
|
1,254
|
|
1,131
|
Restricted cash
|
261
|
|
219
|
|
74
|
|
681
|
|
1,399
|
Derivative assets, at fair value
|
214
|
|
205
|
|
355
|
|
61
|
|
111
|
Receivable for securities sold (including pledged
securities of $348,
$537, $21, $228 and $0, respectively)
|
353
|
|
688
|
|
21
|
|
228
|
|
-
|
Receivable under reverse repurchase
agreements
|
7,489
|
|
8,908
|
|
7,716
|
|
5,441
|
|
2,982
|
Goodwill
and other intangible assets, net
|
553
|
|
554
|
|
554
|
|
555
|
|
-
|
Other
assets
|
149
|
|
144
|
|
271
|
|
268
|
|
301
|
Total
assets
|
$
56,711
|
|
$
56,838
|
|
$
56,880
|
|
$
55,889
|
|
$
60,475
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
|
$
39,058
|
|
$
39,375
|
|
$
37,858
|
|
$
37,668
|
|
$
41,947
|
Federal
Home Loan Bank advances
|
-
|
|
-
|
|
3,037
|
|
3,037
|
|
3,037
|
Debt of
consolidated variable interest entities, at fair value
|
405
|
|
434
|
|
460
|
|
494
|
|
528
|
Payable
for securities purchased
|
2,005
|
|
693
|
|
-
|
|
251
|
|
2,581
|
Derivative liabilities, at fair value
|
73
|
|
69
|
|
256
|
|
947
|
|
1,519
|
Dividends payable
|
71
|
|
66
|
|
66
|
|
66
|
|
73
|
Obligation to return securities borrowed under
reverse repurchase
agreements, at fair value
|
7,221
|
|
8,792
|
|
7,636
|
|
5,424
|
|
3,017
|
Accounts
payable and other liabilities
|
133
|
|
117
|
|
211
|
|
71
|
|
71
|
Total
liabilities
|
48,966
|
|
49,546
|
|
49,524
|
|
47,958
|
|
52,773
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock - aggregate liquidation preference of
$348
|
336
|
|
336
|
|
336
|
|
336
|
|
336
|
Common
stock - $0.01 par value; 600.0 shares authorized;
|
|
|
|
|
|
|
|
|
|
355.6,
331.0, 331.0, 331.0 and 331.0 shares issued and outstanding,
respectively
|
4
|
|
3
|
|
3
|
|
3
|
|
3
|
Additional paid-in capital
|
10,435
|
|
9,932
|
|
9,932
|
|
9,932
|
|
9,932
|
Retained
deficit
|
(2,800)
|
|
(2,628)
|
|
(2,518)
|
|
(3,350)
|
|
(3,669)
|
Accumulated other comprehensive income
(loss)
|
(230)
|
|
(351)
|
|
(397)
|
|
1,010
|
|
1,100
|
Total stockholders'
equity
|
7,745
|
|
7,292
|
|
7,356
|
|
7,931
|
|
7,702
|
Total liabilities and
stockholders' equity
|
$
56,711
|
|
$
56,838
|
|
$
56,880
|
|
$
55,889
|
|
$
60,475
|
|
|
|
|
|
|
|
|
|
|
Net book value per
common share
|
$
20.80
|
|
$
20.98
|
|
$
21.17
|
|
$
22.91
|
|
$
22.22
|
Tangible net book
value per common share
|
$
19.25
|
|
$
19.31
|
|
$
19.50
|
|
$
21.23
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
AGNC INVESTMENT
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,
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
|
2016
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
293
|
|
$
296
|
|
$
393
|
|
$
315
|
|
$
318
|
Interest
expense 1
|
112
|
|
98
|
|
98
|
|
96
|
|
101
|
Net
interest income
|
181
|
|
198
|
|
295
|
|
219
|
|
217
|
|
|
|
|
|
|
|
|
|
|
Other gain (loss),
net:
|
|
|
|
|
|
|
|
|
|
Realized
gain (loss) on sale of investment securities, net
|
15
|
|
(84)
|
|
(5)
|
|
61
|
|
55
|
Unrealized gain (loss) on investment securities
measured at fair value
through net income, net
|
9
|
|
16
|
|
(11)
|
|
(6)
|
|
-
|
Gain
(loss) on derivative instruments and other securities, net
1
|
(169)
|
|
(40)
|
|
753
|
|
248
|
|
(367)
|
Management fee income
|
4
|
|
3
|
|
4
|
|
4
|
|
-
|
Total
other gain (loss), net
|
(141)
|
|
(105)
|
|
741
|
|
307
|
|
(312)
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Management fee expense
|
-
|
|
-
|
|
-
|
|
-
|
|
25
|
Compensation and benefits
|
10
|
|
10
|
|
10
|
|
9
|
|
-
|
Other
operating expenses
|
6
|
|
7
|
|
7
|
|
6
|
|
15
|
Total
operating expenses
|
16
|
|
17
|
|
17
|
|
15
|
|
40
|
Net income
(loss)
|
24
|
|
76
|
|
1,019
|
|
511
|
|
(135)
|
Dividend
on preferred stock
|
7
|
|
7
|
|
7
|
|
7
|
|
7
|
Net income (loss)
available (attributable) to common stockholders
|
$
17
|
|
$
69
|
|
$
1,012
|
|
$
504
|
|
$
(142)
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
24
|
|
$
76
|
|
$
1,019
|
|
$
511
|
|
$
(135)
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on available-for-sale
securities, net
|
121
|
|
46
|
|
(1,408)
|
|
(97)
|
|
370
|
Unrealized gain on derivative instruments, net
1
|
-
|
|
-
|
|
1
|
|
7
|
|
12
|
Other
comprehensive income (loss)
|
121
|
|
46
|
|
(1,407)
|
|
(90)
|
|
382
|
Comprehensive
income (loss)
|
145
|
|
122
|
|
(388)
|
|
421
|
|
247
|
Dividend
on preferred stock
|
7
|
|
7
|
|
7
|
|
7
|
|
7
|
Comprehensive
income (loss) available (attributable) to common
stockholders
|
$
138
|
|
$
115
|
|
$
(395)
|
|
$
414
|
|
$
240
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
346.4
|
|
331.0
|
|
331.0
|
|
331.0
|
|
331.0
|
Weighted average
number of common shares outstanding - diluted
|
346.5
|
|
331.1
|
|
331.0
|
|
331.0
|
|
331.0
|
Net income (loss)
per common share - basic and diluted
|
$
0.05
|
|
$
0.21
|
|
$
3.06
|
|
$
1.52
|
|
$
(0.43)
|
Comprehensive
income (loss) per common share - basic and diluted
|
$
0.40
|
|
$
0.35
|
|
$
(1.19)
|
|
$
1.25
|
|
$
0.73
|
Dividends declared
per common share
|
$
0.54
|
|
$
0.54
|
|
$
0.54
|
|
$
0.56
|
|
$
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
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
|
2016
|
Interest
income
|
$
293
|
|
$
296
|
|
$
393
|
|
$
315
|
|
$
318
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements and other debt
|
112
|
|
98
|
|
97
|
|
89
|
|
89
|
Interest
rate swap periodic costs 1
|
-
|
|
-
|
|
1
|
|
7
|
|
12
|
Total
interest expense
|
112
|
|
98
|
|
98
|
|
96
|
|
101
|
Net interest
income
|
181
|
|
198
|
|
295
|
|
219
|
|
217
|
Interest
rate swap periodic costs 3
|
(35)
|
|
(45)
|
|
(46)
|
|
(51)
|
|
(69)
|
TBA
dollar roll income 16
|
93
|
|
71
|
|
68
|
|
54
|
|
44
|
Dividend
on REIT equity securities
|
-
|
|
-
|
|
-
|
|
-
|
|
1
|
Management fee income
|
4
|
|
3
|
|
4
|
|
4
|
|
-
|
Adjusted net interest
and dollar roll income
|
243
|
|
227
|
|
321
|
|
226
|
|
193
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
16
|
|
17
|
|
17
|
|
15
|
|
40
|
Non-recurring transaction costs
|
-
|
|
-
|
|
-
|
|
-
|
|
(9)
|
Adjusted operating
expenses
|
16
|
|
17
|
|
17
|
|
15
|
|
31
|
Net spread and dollar
roll income
|
227
|
|
210
|
|
304
|
|
211
|
|
162
|
Dividend
on preferred stock
|
7
|
|
7
|
|
7
|
|
7
|
|
7
|
Net spread and dollar
roll income available to common stockholders
|
220
|
|
203
|
|
297
|
|
204
|
|
155
|
Estimated "catch-up" premium amortization cost
(benefit) due to change in
CPR forecast
|
13
|
|
9
|
|
(85)
|
|
8
|
|
32
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization,
available to common stockholders
|
$
233
|
|
$
212
|
|
$
212
|
|
$
212
|
|
$
187
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
346.4
|
|
331.0
|
|
331.0
|
|
331.0
|
|
331.0
|
Weighted average
number of common shares outstanding - diluted
|
346.5
|
|
331.1
|
|
331.0
|
|
331.0
|
|
331.0
|
Net spread and dollar
roll income per common share - basic and diluted
|
$
0.63
|
|
$
0.61
|
|
$
0.90
|
|
$
0.62
|
|
$
0.46
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization,
per common share - basic and diluted
|
$
0.67
|
|
$
0.64
|
|
$
0.64
|
|
$
0.64
|
|
$
0.56
|
AGNC INVESTMENT
CORP.
|
RECONCILIATION OF
GAAP NET INCOME TO ESTIMATED TAXABLE INCOME 2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
|
2016
|
Net income
(loss)
|
$
24
|
|
$
76
|
|
$
1,019
|
|
$
511
|
|
$
(135)
|
Book to tax
differences:
|
|
|
|
|
|
|
|
|
|
Premium
amortization, net
|
4
|
|
(3)
|
|
(106)
|
|
(15)
|
|
20
|
Realized
gain/loss, net
|
99
|
|
(379)
|
|
301
|
|
249
|
|
391
|
Net
capital loss/(utilization of net capital loss carryforward)
5
|
(232)
|
|
276
|
|
93
|
|
(127)
|
|
(99)
|
Unrealized gain/(loss), net
|
160
|
|
77
|
|
(1,252)
|
|
(540)
|
|
(106)
|
Other
|
(2)
|
|
(10)
|
|
2
|
|
(8)
|
|
9
|
Total
book to tax differences
|
29
|
|
(39)
|
|
(962)
|
|
(441)
|
|
215
|
Estimated REIT
taxable income
|
53
|
|
37
|
|
57
|
|
70
|
|
80
|
Dividend
on preferred stock
|
7
|
|
7
|
|
7
|
|
7
|
|
7
|
Estimated REIT
taxable income, net of preferred stock dividend
|
$
46
|
|
$
30
|
|
$
50
|
|
$
63
|
|
$
73
|
Weighted average
number of common shares outstanding - basic
|
346.4
|
|
331.0
|
|
331.0
|
|
331.0
|
|
331.0
|
Weighted average
number of common shares outstanding - diluted
|
346.5
|
|
331.1
|
|
331.0
|
|
331.0
|
|
331.0
|
Estimated REIT
taxable income per common share - basic and diluted
|
$
0.13
|
|
$
0.09
|
|
$
0.15
|
|
$
0.19
|
|
$
0.22
|
|
|
|
|
|
|
|
|
|
|
Beginning cumulative
non-deductible net capital loss
|
$
728
|
|
$
452
|
|
$
359
|
|
$
486
|
|
$
585
|
Net capital
loss/(utilization of net capital loss carryforward)
|
(232)
|
|
276
|
|
93
|
|
(127)
|
|
(99)
|
Ending cumulative
non-deductible net capital loss
|
$
496
|
|
$
728
|
|
$
452
|
|
$
359
|
|
$
486
|
Ending cumulative
non-deductible net capital loss per common share
|
$
1.39
|
|
$
2.20
|
|
$
1.37
|
|
$
1.08
|
|
$
1.47
|
|
|
|
|
|
|
|
|
|
|
AGNC INVESTMENT
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,
|
2017
|
|
2017
|
|
2016
|
|
2016
|
|
2016
|
Fixed-rate Agency
MBS, at fair value - as of period end 18
|
$
44,643
|
|
$
43,232
|
|
$
44,736
|
|
$
45,611
|
|
$
52,648
|
Other Agency MBS, at
fair value - as of period end 6
|
$
1,320
|
|
$
1,401
|
|
$
1,475
|
|
$
1,607
|
|
$
1,715
|
Credit risk transfer
securities, at fair value - as of period end
|
$
572
|
|
$
383
|
|
$
164
|
|
$
36
|
|
$
-
|
Non-Agency MBS, at
fair value - as of period end
|
$
31
|
|
$
31
|
|
$
124
|
|
$
102
|
|
$
107
|
Total securities, at
fair value - as of period end 18
|
$
46,566
|
|
$
45,047
|
|
$
46,499
|
|
$
47,356
|
|
$
54,470
|
Total securities, at
cost - as of period end 18
|
$
46,744
|
|
$
45,354
|
|
$
46,866
|
|
$
46,304
|
|
$
53,317
|
Total securities, at
par - as of period end 7, 18
|
$
44,593
|
|
$
43,298
|
|
$
44,749
|
|
$
44,212
|
|
$
50,950
|
Average securities,
at cost 18
|
$
43,992
|
|
$
44,215
|
|
$
45,885
|
|
$
48,548
|
|
$
51,810
|
Average securities,
at par 7, 18
|
$
41,986
|
|
$
42,218
|
|
$
43,802
|
|
$
46,372
|
|
$
49,544
|
Net TBA portfolio -
as of period end, at fair value
|
$
17,271
|
|
$
14,447
|
|
$
11,165
|
|
$
15,586
|
|
$
7,072
|
Net TBA portfolio -
as of period end, at cost
|
$
17,283
|
|
$
14,377
|
|
$
11,312
|
|
$
15,540
|
|
$
6,975
|
Net TBA portfolio -
as of period end, carrying value
|
$
(12)
|
|
$
70
|
|
$
(147)
|
|
$
46
|
|
$
97
|
Average net TBA
portfolio, at cost
|
$
16,931
|
|
$
13,460
|
|
$
14,141
|
|
$
10,748
|
|
$
8,238
|
Average repurchase
agreements and other debt 4
|
$
38,945
|
|
$
39,203
|
|
$
41,031
|
|
$
44,401
|
|
$
46,948
|
Average stockholders'
equity 8
|
$
7,552
|
|
$
7,310
|
|
$
7,604
|
|
$
7,803
|
|
$
7,722
|
Net book value per
common share 9
|
$
20.80
|
|
$
20.98
|
|
$
21.17
|
|
$
22.91
|
|
$
22.22
|
Tangible net book
value per common share 10
|
$
19.25
|
|
$
19.31
|
|
$
19.50
|
|
$
21.23
|
|
N/A
|
Tangible net book
value "at risk" leverage - average during the period
11
|
8.0:1
|
|
7.8:1
|
|
7.8:1
|
|
7.6:1
|
|
N/A
|
Tangible net book
value "at risk" leverage - as of period end
12
|
8.1:1
|
|
8.0:1
|
|
7.7:1
|
|
7.7:1
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Statistics:
|
|
|
|
|
|
|
|
|
|
Average coupon
13, 18
|
3.70%
|
|
3.65%
|
|
3.63%
|
|
3.65%
|
|
3.63%
|
Average asset yield
14, 18
|
2.66%
|
|
2.68%
|
|
3.43%
|
|
2.60%
|
|
2.46%
|
Average cost of funds
15, 18
|
(1.51)%
|
|
(1.48)%
|
|
(1.40)%
|
|
(1.32)%
|
|
(1.46)%
|
Average net interest
rate spread 18
|
1.15%
|
|
1.20%
|
|
2.03%
|
|
1.28%
|
|
1.00%
|
Average net interest
rate spread, including TBA dollar roll income/loss
16
|
1.46%
|
|
1.44%
|
|
2.02%
|
|
1.42%
|
|
1.16%
|
Average coupon - as
of period end 18
|
3.70%
|
|
3.67%
|
|
3.61%
|
|
3.64%
|
|
3.63%
|
Average asset yield -
as of period end 18
|
2.84%
|
|
2.83%
|
|
2.77%
|
|
2.68%
|
|
2.68%
|
Average cost of funds
- as of period end 15, 18
|
(1.56)%
|
|
(1.45)%
|
|
(1.44)%
|
|
(1.30)%
|
|
(1.35)%
|
Average net interest
rate spread - as of period end 18
|
1.28%
|
|
1.38%
|
|
1.33%
|
|
1.38%
|
|
1.33%
|
Average actual CPR
for securities held during the period 18
|
11%
|
|
11%
|
|
14%
|
|
14%
|
|
12%
|
Average forecasted
CPR - as of period end 18
|
9%
|
|
8%
|
|
8%
|
|
11%
|
|
11%
|
Total premium
amortization, net
|
$
(96)
|
|
$
(89)
|
|
$
(6)
|
|
$
(110)
|
|
$
(134)
|
Expenses % of average
stockholders' equity - annualized
|
0.85%
|
|
0.93%
|
|
0.89%
|
|
0.76%
|
|
2.08%
|
Dividends declared
per common share
|
$
0.54
|
|
$
0.54
|
|
$
0.54
|
|
$
0.56
|
|
$
0.60
|
Economic return
(loss) on common equity - unannualized 17
|
2.5%
|
|
1.8%
|
|
(5.2)%
|
|
5.6%
|
|
3.3%
|
|
|
|
|
|
|
|
|
|
|
*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, unless otherwise noted.
** 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 was amortized on a
straight-line basis over the remaining swap terms through 2016 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.
- Represents periodic interest costs on the Company's interest
rate swap portfolio net of amounts reclassified from accumulated
OCI into interest expense (see footnote 1). Amount does 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.
- Other Agency MBS includes adjustable rate securities and
collateralized mortgage obligations (including interest and
principle-only securities).
- 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 tangible net book value "at risk" leverage during the
period was calculated by dividing the sum of the daily weighted
average Agency repurchase agreements, other debt and net TBA
position (at cost) outstanding for the period by the sum of average
stockholders' equity adjusted to exclude investments in REIT equity
securities and goodwill and other intangible assets, net.
Leverage excludes U.S. Treasury repurchase agreements.
- Tangible net book value "at risk" leverage as of period end was
calculated by dividing the sum of the amount outstanding under
Agency repurchase agreements, other debt, net TBA position (at
cost) and net receivable / payable for unsettled investment
securities outstanding by the sum of total stockholders' equity
adjusted to exclude investments in REIT equity securities and
goodwill and other intangible assets at period end. Leverage
excludes U.S. Treasury repurchase agreements.
- Average coupon for the period was calculated by dividing the
total coupon (or cash) interest income by average investment
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 investment
securities held.
- Cost of funds includes Agency repurchase agreements, other debt
and interest rate swaps. Amount excludes swap termination fees,
forward starting swaps and costs associated with other supplemental
hedges (such as swaptions, U.S. Treasury positions and U.S.
Treasury repurchase agreements). 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.
- 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 book value per common share and dividends
declared on common stock during the period over the beginning net
book value per common share. Starting Q1 2017, economic
return (loss) on common equity represents the change in tangible
net book value per common share and dividends declared on common
stock during the period over the beginning tangible net book 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 July 27, 2017 at 8:30 am ET. Interested persons who do not
plan on asking a question and have internet access 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 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 Q2 2017 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 July 27, 2017. In addition, there will be a
phone recording available one hour after the live call on
July 27, 2017 through August 10,
2017. 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
10110075.
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 residential mortgage-backed securities for
which the principal and interest payments are guaranteed by a U.S.
Government-sponsored enterprise or a U.S. Government
agency. 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 its 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 AGNC Mortgage Management, LLC 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
View original
content:http://www.prnewswire.com/news-releases/agnc-investment-corp-announces-second-quarter-2017-financial-results-300494780.html
SOURCE AGNC Investment Corp.