BETHESDA, Md., Oct. 25, 2017 /PRNewswire/ -- AGNC Investment
Corp. ("AGNC" or the "Company") (Nasdaq: AGNC) today announced
financial results for the quarter ended September 30,
2017.
THIRD QUARTER 2017 FINANCIAL HIGHLIGHTS
- $0.99 comprehensive income per
common share, comprised of:
-
- $0.74 net income per common
share
- $0.25 other comprehensive income
("OCI") per common share on investments marked-to-market through
OCI
- $0.62 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization cost 1
-
- Includes $0.24 per common share
of dollar roll income associated with the Company's $18.6 billion average net long position in
forward purchases and sales of Agency mortgage-backed securities
("MBS") in the "to-be-announced" ("TBA") market
- Excludes $(0.03) per common share
of estimated "catch-up" premium amortization cost due to change in
projected constant prepayment rate ("CPR") estimates
- $19.78 tangible net book value
per common share as of September 30, 2017
-
- Increased $0.53 per common share,
or 2.8%, from $19.25 per common share
as of June 30, 2017
- Excludes $552 million, or
$1.41 per common share, of goodwill
and other intangible assets as of September 30, 2017
- $0.54 dividends declared per
common share during the quarter
- 5.6% economic return on tangible common equity for the
quarter
-
- Comprised of $0.54 dividends per
common share and $0.53 increase in
tangible net book value per common share
OTHER THIRD QUARTER HIGHLIGHTS
- $72.5 billion investment
portfolio as of September 30, 2017, comprised of:
-
- $52.3 billion Agency MBS
- $19.4 billion TBA mortgage
position
- $0.8 billion credit risk transfer
("CRT") and non-Agency securities
- 8.0x tangible net book value "at risk" leverage as of
September 30, 2017
-
- 7.9x average tangible net book value "at risk" leverage for the
quarter
- 12.1% portfolio CPR for the quarter
-
- 8.5% average projected portfolio life CPR as of
September 30, 2017
- 1.41% annualized net interest rate spread and TBA dollar roll
income for the quarter, excluding estimated "catch-up" premium
amortization cost
-
- Excludes -7 bps of "catch up" premium amortization cost due to
change in projected CPR estimates
- Decreased from 1.55% for the prior quarter, excluding -9 bps of
"catch-up" premium amortization cost
- Over $1 billion of accretive
equity raised during the quarter:
-
- $735 million of common equity
raised, net of offering costs, through follow-on and At-the-Market
equity offerings
- $315 million of preferred equity
raised, net of offering costs, through issuance of 7.000% Series C
Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock
offering
-
- $173 million of 8.000% Series A
Cumulative Redeemable Preferred Stock redeemed
___________
- 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 very pleased with AGNC's
strong financial performance during the third quarter," commented
Gary Kain, the Company's Chief
Executive Officer, President and Chief Investment Officer. "Our
$0.54 dividend per common share, when
combined with the $0.53 per share
improvement in our tangible net book value per common share,
produced a very attractive economic return on tangible common
equity of 5.6% during the quarter. Through the first three
quarters of the year, AGNC's economic return totaled 9.7% per
common share. Importantly, we have been able to produce these
results while maintaining a conservative risk profile, as evidenced
by our high hedge ratio and our relatively modest duration gap.
"During the third quarter, the Federal Reserve (the "Fed")
announced its intention to begin to reduce the pace of MBS
reinvestments beginning in October 2017. Agency MBS performed
well during the quarter and drove the 2.8% increase in our net book
value, despite the negative backdrop of the Fed's tapering
announcement, heightened geopolitical risk and significant
weather-related events. Although MBS spreads tightened
modestly, risk-adjusted returns on a levered Agency MBS position
continue to look attractive relative to other fixed income or
equity markets as credit spreads remain at or near historical lows
and prices of equity indices continue to set new highs."
"In addition to its strong financial performance, AGNC raised
over $1 billion in preferred and
common equity during the quarter, net of offering costs,"
added Peter Federico, the Company's Executive Vice President
and Chief Financial Officer. "Our common stock issuances
provide a substantial benefit for our stockholders through book
value accretion when they occur above our tangible net book
value. Additionally, because we are internally managed, there
are no additional management fees associated with any new equity we
raise, so these transactions benefit our prospective earnings
profile by leveraging our relatively fixed operating costs over a
larger capital base. As a result of this dynamic, AGNC's
operating efficiency improved during the third quarter as our
annualized operating costs dropped to 0.77% of our quarter-end
stockholders' equity, or to 0.64% net of the fees earned from
our management of MTGE Investment Corp."
TANGIBLE NET BOOK VALUE PER COMMON SHARE
As of
September 30, 2017, the Company's tangible net book value per
common share was $19.78 per share, an
increase of $0.53 per common share,
or 2.8%, from $19.25 per common share
as of June 30, 2017, benefiting from modestly tighter mortgage
spreads and accretive equity raises during the third quarter.
The Company's tangible net book value per common share excludes
$552 million, or $1.41 per common share, of goodwill and other
intangible assets as of September 30, 2017.
INVESTMENT PORTFOLIO
As of September 30, 2017,
the Company's investment portfolio totaled $72.5 billion, comprised of:
- $71.7 billion of Agency MBS and
TBA securities, including:
-
- $70.5 billion of fixed-rate
securities, comprised of:
-
- $40.4 billion 30-year fixed-rate
securities,
- $14.9 billion 30-year net long
TBA securities,
- $10.0 billion ≤ 15-year
securities,
- $4.5 billion 15-year net long TBA
securities, and
- $0.7 billion 20-year fixed-rate
securities;
- $0.9 billion of collateralized
mortgage obligations ("CMOs"), including principal and
interest-only strips; and
- $0.3 billion of adjustable-rate
securities; and
- $0.8 billion of CRT and
non-Agency securities.
As of September 30, 2017, inclusive of TBA securities, 30
year and ≤ 15-year Agency MBS fixed rate securities represented 76%
and 20% of the Company's investment portfolio, respectively,
largely unchanged from 75% and 21%, respectively, as of
June 30, 2017.
As of September 30, 2017, the Company's Agency MBS
fixed-rate securities, inclusive of TBA securities, had a weighted
average coupon of 3.54%, compared to 3.56% as of June 30,
2017, comprised of the following weighted average coupons:
- 3.64% for 30-year fixed-rate securities;
- 3.17% 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 September 30, 2017, the
Company's net TBA position had a total fair value of $19.4 billion and a GAAP net carrying value of
$(24) million reported in derivative
assets/(liabilities) on the Company's balance sheet, compared to a
total fair value of $17.3 billion and
a GAAP net carrying value of $(12)
million as of June 30, 2017.
CONSTANT PREPAYMENT RATES
The Company's investment
portfolio had a weighted average CPR of 12.1% for the third
quarter, compared to 10.9% for the prior quarter. The
weighted average projected CPR for the remaining life of the
Company's Agency securities held as of September 30, 2017 was
8.5%, slightly below the Company's prior forecast of 8.6% as
of June 30, 2017 largely due to the mix of assets acquired
during the third quarter.
The weighted average cost basis of the Company's investment
portfolio was 104.8% of par value as of September 30,
2017. Net premium amortization cost on the Company's
investment portfolio for the third quarter was $(97) million, or $(0.27) per common share, which includes
"catch-up" premium amortization cost of $(12) million, or $(0.03) 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 $(96)
million, or $(0.28) per common
share, including "catch-up" premium amortization cost of
$(13) million, or $(0.04) per common share for securities acquired
prior to the second quarter. The net unamortized premium
balance as of September 30, 2017 was $2.4 billion.
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 2.72% for the third quarter, an
increase from 2.66% for the prior quarter. Excluding
"catch-up" premium amortization, the Company's average asset yield
was 2.82% for the third quarter, an increase from 2.78% for the
prior quarter.
For the third quarter, the Company's average cost of funds,
excluding the net TBA position, was 1.59%, an increase from 1.51%
for the prior quarter. The Company's average cost of funds,
excluding the net TBA position, 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
net TBA position) measured against the Company's daily weighted
average Agency repo and other debt balance outstanding. The
increase in the Company's average cost of funds was primarily due
to higher repo rates, which were partly 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 was
1.34%, compared to 1.46% for the prior quarter. Excluding
"catch-up" premium amortization, the Company's combined annualized
net interest rate spread for the quarter was 1.41%, a decrease from
1.55% for the prior quarter.
On a per share basis, the Company recognized $0.59 per common share of net spread and dollar
roll income (a non-GAAP financial measure) for the third quarter,
compared to $0.63 for the prior
quarter. Excluding "catch-up" premium amortization, the
Company's net spread and dollar roll income was $0.62 per common share for the third quarter, a
decrease from $0.67 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 September 30, 2017, $45.5 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 8.0x
as of September 30, 2017, compared to 8.1x as of June 30,
2017.
As of September 30, 2017, the Company's Agency repurchase
agreements had a weighted average interest rate of 1.36%, an
increase from 1.27% as of June 30, 2017, and a weighted
average remaining days to maturity of 129 days, compared to 154
days as of June 30, 2017. As of September 30, 2017,
$13.8 billion, or 30%, of the
Company's Agency repurchase agreements were funded through the
Company's captive broker-dealer subsidiary, Bethesda Securities,
LLC, compared to $9.9 billion, or
25%, as of June 30, 2017.
As of September 30, 2017, the Company's Agency repurchase
agreements had remaining maturities of:
- $34.4 billion of three months or
less;
- $4.6 billion from three to six
months;
- $0.8 billion from six to nine
months;
- $1.1 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 September 30, 2017, 92%
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 98% as of June 30, 2017.
As of September 30, 2017, the Company's interest rate swap
position totaled $42.2 billion in
notional amount, compared to $40.0
billion as of June 30, 2017. The Company's
interest rate swap position as of September 30, 2017 included
$3.4 billion of forward starting
swaps, with an average forward start date of 0.4 years, compared to
$3.7 billion and 0.2 years,
respectively, as of June 30, 2017. Including
forward starting swaps, the Company's interest rate swap portfolio
had an average fixed pay rate of 1.66%, an average receive rate of
1.31% and an average maturity of 4.5 years as of September 30,
2017, compared to 1.60%, 1.19% and 4.4 years, respectively, as of
June 30, 2017. Excluding forward starting swaps, the
Company's interest rate swap portfolio had an average fixed pay
rate of 1.61% as of September 30, 2017, compared to 1.52% as
of June 30, 2017.
The Company also utilizes payer swaptions and U.S. Treasury
securities and futures to further mitigate exposure to changes in
interest rates. As of September 30, 2017, the Company
had payer swaptions outstanding totaling $5.0 billion, unchanged from June 30, 2017,
and a short U.S. Treasury position outstanding of $12.7 billion, compared to $10.8 billion as of June 30, 2017.
OTHER GAIN (LOSS), NET
For the third quarter, the
Company recorded a net gain of $125
million in other gain (loss), net, or $0.34 per common share, compared to a net loss of
$(141) million, or $(0.41) per common share, for the prior
quarter. Other gain (loss), net for the third quarter was
comprised of:
- $22 million of net realized gains
on sales of investment securities;
- $(31) million of net unrealized
losses on investment securities measured at fair value through net
income;
- $(26) million of interest rate
swap periodic costs;
- $41 million of net gains on
interest rate swaps;
- $(22) million of net losses on
interest rate swaptions;
- $(20) million of net losses on
U.S. Treasury positions;
- $87 million of TBA dollar roll
income;
- $71 million of net mark-to-market
gains on TBA mortgage positions; and
- $3 million of management fee
income.
OTHER COMPREHENSIVE INCOME
During the third quarter,
the Company recorded other comprehensive income of $90.0 million, or $0.25 per common share, consisting of net
unrealized gains on the Company's Agency securities recognized
through OCI, compared to $121.0
million, or $0.35 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 AND PREFERRED EQUITY TRANSACTIONS
The Company
completed several capital markets transactions during the third
quarter.
On August 22, 2017, the Company
completed a public offering of 13 million depositary shares of
7.000% Series C Fixed-to-Floating Rate Cumulative Redeemable
Preferred Stock ("Series C Preferred Stock") for net proceeds of
$315 million (aggregate liquidation
preference of $325 million). Each
depositary share represents a 1/1,000th interest in a share of
Series C Preferred Stock.
On September 15, 2017, the Company
redeemed its 8.000% Series A Cumulative Redeemable Preferred Stock
for its aggregate liquidation preference of $173 million plus accrued and unpaid
dividends.
On September 15, 2017, the Company
completed a public offering of 28.2 million shares of its common
stock for net proceeds of $577
million, or $20.47 per common
share.
The Company issued 7.6 million shares of its common stock for
net proceeds of $159 million through
its "At-the-Market Offering Program" during the quarter. As
of September 30, 2017, the Company
had $589 million of common stock
remaining available for issuance under the Program.
THIRD QUARTER 2017 DIVIDEND DECLARATIONS
During the
third quarter, the Company's Board of Directors declared dividends
of $0.18 per share to common
stockholders of record as of July 31,
August 31 and September 29, 2017, respectively, totaling
$0.54 per share for the quarter,
which were paid on August 7,
September 8 and October 10, 2017, respectively. Since its
May 2008 initial public offering
through the third quarter of 2017, the Company has declared a total
of $7.3 billion in common stock
dividends, or $36.62 per common
share.
On September 14, 2017, the Company's Board of Directors
declared a third quarter dividend on its 7.750% Series B Cumulative
Redeemable Preferred Stock of $0.484375 per depositary share and on its Series
C Preferred Stock of $0.25764 per
depositary share. The dividends were paid on October 16, 2017
to preferred stockholders of record as of October 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)
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
(unaudited)
|
Assets:
|
|
|
|
|
|
|
|
|
|
Agency securities, at
fair value (including pledged securities of $47,997, $41,263,
$41,587, $43,943 and $44,089, respectively)
|
$
51,638
|
|
$
45,226
|
|
$
43,856
|
|
$
45,393
|
|
$
46,328
|
Agency securities
transferred to consolidated variable interest entities, at fair
value (pledged securities)
|
700
|
|
737
|
|
777
|
|
818
|
|
890
|
Credit risk transfer
securities, at fair value
|
717
|
|
572
|
|
383
|
|
164
|
|
36
|
Non-Agency securities,
at fair value (including pledged securities of $0, $0, $0, $90 and
$102, respectively)
|
36
|
|
31
|
|
31
|
|
124
|
|
102
|
U.S. Treasury
securities, at fair value (including pledged securities of $0, $0,
$0, $173 and $45, respectively)
|
-
|
|
-
|
|
-
|
|
182
|
|
45
|
REIT equity securities,
at fair value
|
4
|
|
4
|
|
-
|
|
-
|
|
-
|
Cash and cash
equivalents
|
1,098
|
|
1,122
|
|
1,073
|
|
1,208
|
|
1,254
|
Restricted
cash
|
294
|
|
261
|
|
219
|
|
74
|
|
681
|
Derivative assets, at
fair value
|
183
|
|
214
|
|
205
|
|
355
|
|
61
|
Receivable for
securities sold (including pledged securities of $149, $348, $537,
$21 and $228, respectively)
|
521
|
|
353
|
|
688
|
|
21
|
|
228
|
Receivable under
reverse repurchase agreements
|
9,226
|
|
7,489
|
|
8,908
|
|
7,716
|
|
5,441
|
Goodwill and other
intangible assets, net
|
552
|
|
553
|
|
554
|
|
554
|
|
555
|
Other assets
|
521
|
|
149
|
|
144
|
|
271
|
|
268
|
Total
assets
|
$
65,490
|
|
$
56,711
|
|
$
56,838
|
|
$
56,880
|
|
$
55,889
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
$
45,505
|
|
$
39,058
|
|
$
39,375
|
|
$
37,858
|
|
$
37,668
|
Debt of consolidated
variable interest entities, at fair value
|
380
|
|
405
|
|
434
|
|
460
|
|
494
|
Federal Home Loan Bank
advances
|
-
|
|
-
|
|
-
|
|
3,037
|
|
3,037
|
Payable for securities
purchased
|
1,373
|
|
2,005
|
|
693
|
|
-
|
|
251
|
Derivative liabilities,
at fair value
|
62
|
|
73
|
|
69
|
|
256
|
|
947
|
Dividends
payable
|
77
|
|
71
|
|
66
|
|
66
|
|
66
|
Obligation to return
securities borrowed under reverse repurchase agreements, at
fair value
|
9,119
|
|
7,221
|
|
8,792
|
|
7,636
|
|
5,424
|
Accounts payable and
other liabilities
|
183
|
|
133
|
|
117
|
|
211
|
|
71
|
Total
liabilities
|
56,699
|
|
48,966
|
|
49,546
|
|
49,524
|
|
47,958
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock -
aggregate liquidation preference of $500, $348, $348, $348 and
$348, respectively
|
484
|
|
336
|
|
336
|
|
336
|
|
336
|
Common stock - $0.01
par value; 600.0 shares authorized;
|
|
|
|
|
|
|
|
|
|
391.3, 355.6, 331.0,
331.0 and 331.0 shares issued and outstanding,
respectively
|
4
|
|
4
|
|
3
|
|
3
|
|
3
|
Additional paid-in
capital
|
11,172
|
|
10,435
|
|
9,932
|
|
9,932
|
|
9,932
|
Retained
deficit
|
(2,729)
|
|
(2,800)
|
|
(2,628)
|
|
(2,518)
|
|
(3,350)
|
Accumulated other
comprehensive income (loss)
|
(140)
|
|
(230)
|
|
(351)
|
|
(397)
|
|
1,010
|
Total stockholders'
equity
|
8,791
|
|
7,745
|
|
7,292
|
|
7,356
|
|
7,931
|
Total liabilities and
stockholders' equity
|
$
65,490
|
|
$
56,711
|
|
$
56,838
|
|
$
56,880
|
|
$
55,889
|
|
|
|
|
|
|
|
|
|
|
Net book value per
common share
|
$
21.19
|
|
$
20.80
|
|
$
20.98
|
|
$
21.17
|
|
$
22.91
|
Tangible net book
value per common share
|
$
19.78
|
|
$
19.25
|
|
$
19.31
|
|
$
19.50
|
|
$
21.23
|
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,
|
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
318
|
|
$
293
|
|
$
296
|
|
$
393
|
|
$
315
|
Interest
expense
|
140
|
|
112
|
|
98
|
|
98
|
|
96
|
Net
interest income
|
178
|
|
181
|
|
198
|
|
295
|
|
219
|
|
|
|
|
|
|
|
|
|
|
Other gain (loss),
net:
|
|
|
|
|
|
|
|
|
|
Realized gain (loss) on
sale of investment securities, net
|
22
|
|
15
|
|
(84)
|
|
(5)
|
|
61
|
Unrealized gain (loss)
on investment securities measured at fair value through net income,
net
|
(31)
|
|
9
|
|
16
|
|
(11)
|
|
(6)
|
Gain (loss) on
derivative instruments and other securities, net
|
131
|
|
(169)
|
|
(40)
|
|
753
|
|
248
|
Management fee
income
|
3
|
|
4
|
|
3
|
|
4
|
|
4
|
Total other gain
(loss), net
|
125
|
|
(141)
|
|
(105)
|
|
741
|
|
307
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
10
|
|
10
|
|
10
|
|
10
|
|
9
|
Other operating
expenses
|
7
|
|
6
|
|
7
|
|
7
|
|
6
|
Total operating
expenses
|
17
|
|
16
|
|
17
|
|
17
|
|
15
|
Net
income
|
286
|
|
24
|
|
76
|
|
1,019
|
|
511
|
Dividend on preferred
stock
|
9
|
|
7
|
|
7
|
|
7
|
|
7
|
Issuance costs of
redeemed preferred stock
|
6
|
|
-
|
|
-
|
|
-
|
|
-
|
Net income
available to common stockholders
|
$
271
|
|
$
17
|
|
$
69
|
|
$
1,012
|
|
$
504
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
286
|
|
$
24
|
|
$
76
|
|
$
1,019
|
|
$
511
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss)
on available-for-sale securities, net
|
90
|
|
121
|
|
46
|
|
(1,408)
|
|
(97)
|
Unrealized gain on
derivative instruments, net
|
-
|
|
-
|
|
-
|
|
1
|
|
7
|
Other
comprehensive income (loss)
|
90
|
|
121
|
|
46
|
|
(1,407)
|
|
(90)
|
Comprehensive
income (loss)
|
376
|
|
145
|
|
122
|
|
(388)
|
|
421
|
Dividend on preferred
stock
|
9
|
|
7
|
|
7
|
|
7
|
|
7
|
Issuance costs of
redeemed preferred stock
|
6
|
|
-
|
|
-
|
|
-
|
|
-
|
Comprehensive
income (loss) available (attributable) to common
stockholders
|
$
361
|
|
$
138
|
|
$
115
|
|
$
(395)
|
|
$
414
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
364.7
|
|
346.4
|
|
331.0
|
|
331.0
|
|
331.0
|
Weighted average
number of common shares outstanding - diluted
|
364.9
|
|
346.5
|
|
331.1
|
|
331.0
|
|
331.0
|
Net income per
common share - basic and diluted
|
$
0.74
|
|
$
0.05
|
|
$
0.21
|
|
$
3.06
|
|
$
1.52
|
Comprehensive
income (loss) per common share - basic and diluted
|
$
0.99
|
|
$
0.40
|
|
$
0.35
|
|
$
(1.19)
|
|
$
1.25
|
Dividends declared
per common share
|
$
0.54
|
|
$
0.54
|
|
$
0.54
|
|
$
0.54
|
|
$
0.56
|
AGNC INVESTMENT
CORP.
|
RECONCILIATION OF
GAAP NET INTEREST INCOME TO NET SPREAD AND DOLLAR ROLL INCOME
1
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
Interest
income
|
$
318
|
|
$
293
|
|
$
296
|
|
$
393
|
|
$
315
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements and other debt
|
140
|
|
112
|
|
98
|
|
97
|
|
89
|
Interest rate
swap periodic costs
|
-
|
|
-
|
|
-
|
|
1
|
|
7
|
Total interest expense
|
140
|
|
112
|
|
98
|
|
98
|
|
96
|
Net interest
income
|
178
|
|
181
|
|
198
|
|
295
|
|
219
|
Interest rate
swap periodic costs 2
|
(26)
|
|
(35)
|
|
(45)
|
|
(46)
|
|
(51)
|
TBA dollar
roll income 3
|
87
|
|
93
|
|
71
|
|
68
|
|
54
|
Management fee
income
|
3
|
|
4
|
|
3
|
|
4
|
|
4
|
Adjusted net interest
and dollar roll income
|
242
|
|
243
|
|
227
|
|
321
|
|
226
|
Operating
expenses
|
17
|
|
16
|
|
17
|
|
17
|
|
15
|
Net spread and dollar
roll income
|
225
|
|
227
|
|
210
|
|
304
|
|
211
|
Dividend on
preferred stock
|
9
|
|
7
|
|
7
|
|
7
|
|
7
|
Net spread and dollar
roll income available to common stockholders
|
216
|
|
220
|
|
203
|
|
297
|
|
204
|
Estimated "catch-up"
premium amortization cost (benefit) due to change in CPR
forecast
|
12
|
|
13
|
|
9
|
|
(85)
|
|
8
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization, available
to common stockholders
|
$
228
|
|
$
233
|
|
$
212
|
|
$
212
|
|
$
212
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
364.7
|
|
346.4
|
|
331.0
|
|
331.0
|
|
331.0
|
Weighted average
number of common shares outstanding - diluted
|
364.9
|
|
346.5
|
|
331.1
|
|
331.0
|
|
331.0
|
Net spread and dollar
roll income per common share - basic
|
$
0.59
|
|
$
0.64
|
|
$
0.61
|
|
$
0.90
|
|
$
0.62
|
Net spread and dollar
roll income per common share - diluted
|
$
0.59
|
|
$
0.63
|
|
$
0.61
|
|
$
0.90
|
|
$
0.62
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization, per common
share - basic
|
$
0.63
|
|
$
0.67
|
|
$
0.64
|
|
$
0.64
|
|
$
0.64
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization, per common
share - diluted
|
$
0.62
|
|
$
0.67
|
|
$
0.64
|
|
$
0.64
|
|
$
0.64
|
AGNC INVESTMENT
CORP.
|
RECONCILIATION OF
GAAP NET INCOME TO ESTIMATED TAXABLE INCOME 1
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
Net income
|
$
286
|
|
$
24
|
|
$
76
|
|
$
1,019
|
|
$
511
|
Book to tax
differences:
|
|
|
|
|
|
|
|
|
|
Premium
amortization, net
|
(3)
|
|
4
|
|
(3)
|
|
(106)
|
|
(15)
|
Realized
gain/loss, net
|
(112)
|
|
99
|
|
(379)
|
|
301
|
|
249
|
Net capital
loss/(utilization of net capital loss carryforward)
5
|
(159)
|
|
(232)
|
|
276
|
|
93
|
|
(127)
|
Unrealized
gain/(loss), net
|
41
|
|
160
|
|
77
|
|
(1,252)
|
|
(540)
|
Other
|
(2)
|
|
(2)
|
|
(10)
|
|
2
|
|
(8)
|
Total
book to tax differences
|
(235)
|
|
29
|
|
(39)
|
|
(962)
|
|
(441)
|
Estimated REIT
taxable income
|
51
|
|
53
|
|
37
|
|
57
|
|
70
|
Dividend on
preferred stock
|
9
|
|
7
|
|
7
|
|
7
|
|
7
|
Estimated REIT
taxable income, net of preferred stock dividend
|
$
42
|
|
$
46
|
|
$
30
|
|
$
50
|
|
$
63
|
Weighted average
number of common shares outstanding - basic
|
364.7
|
|
346.4
|
|
331.0
|
|
331.0
|
|
331.0
|
Weighted average
number of common shares outstanding - diluted
|
364.9
|
|
346.5
|
|
331.1
|
|
331.0
|
|
331.0
|
Estimated REIT
taxable income per common share - basic and diluted
|
$
0.12
|
|
$
0.13
|
|
$
0.09
|
|
$
0.15
|
|
$
0.19
|
|
|
|
|
|
|
|
|
|
|
Beginning cumulative
non-deductible net capital loss
|
$
496
|
|
$
728
|
|
$
452
|
|
$
359
|
|
$
486
|
Net capital
loss/(utilization of net capital loss carryforward)
|
(159)
|
|
(232)
|
|
276
|
|
93
|
|
(127)
|
Ending cumulative
non-deductible net capital loss
|
$
337
|
|
$
496
|
|
$
728
|
|
$
452
|
|
$
359
|
Ending cumulative
non-deductible net capital loss per common share
|
$
0.86
|
|
$
1.39
|
|
$
2.20
|
|
$
1.37
|
|
$
1.08
|
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,
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
Fixed-rate Agency
MBS, at fair value - as of period end 17
|
$
51,104
|
|
$
44,643
|
|
$
43,232
|
|
$
44,736
|
|
$
45,611
|
Other Agency MBS, at
fair value - as of period end 6
|
$
1,234
|
|
$
1,320
|
|
$
1,401
|
|
$
1,475
|
|
$
1,607
|
Credit risk transfer
securities, at fair value - as of period end
|
$
717
|
|
$
572
|
|
$
383
|
|
$
164
|
|
$
36
|
Non-Agency MBS, at
fair value - as of period end
|
$
36
|
|
$
31
|
|
$
31
|
|
$
124
|
|
$
102
|
Total securities, at
fair value - as of period end 17
|
$
53,091
|
|
$
46,566
|
|
$
45,047
|
|
$
46,499
|
|
$
47,356
|
Total securities, at
cost - as of period end 17
|
$
53,206
|
|
$
46,744
|
|
$
45,354
|
|
$
46,866
|
|
$
46,304
|
Total securities, at
par - as of period end 7, 17
|
$
50,795
|
|
$
44,593
|
|
$
43,298
|
|
$
44,749
|
|
$
44,212
|
Average securities,
at cost 17
|
$
46,808
|
|
$
43,992
|
|
$
44,215
|
|
$
45,885
|
|
$
48,548
|
Average securities,
at par 7, 17
|
$
44,672
|
|
$
41,986
|
|
$
42,218
|
|
$
43,802
|
|
$
46,372
|
Net TBA portfolio -
as of period end, at fair value
|
$
19,409
|
|
$
17,271
|
|
$
14,447
|
|
$
11,165
|
|
$
15,586
|
Net TBA portfolio -
as of period end, at cost
|
$
19,433
|
|
$
17,283
|
|
$
14,377
|
|
$
11,312
|
|
$
15,540
|
Net TBA portfolio -
as of period end, carrying value
|
$
(24)
|
|
$
(12)
|
|
$
70
|
|
$
(147)
|
|
$
46
|
Average net TBA
portfolio, at cost
|
$
18,616
|
|
$
16,931
|
|
$
13,460
|
|
$
14,141
|
|
$
10,748
|
Average repurchase
agreements and other debt 4
|
$
41,406
|
|
$
38,945
|
|
$
39,203
|
|
$
41,031
|
|
$
44,401
|
Average stockholders'
equity 8
|
$
8,134
|
|
$
7,552
|
|
$
7,310
|
|
$
7,604
|
|
$
7,803
|
Net book value per
common share 9
|
$
21.19
|
|
$
20.80
|
|
$
20.98
|
|
$
21.17
|
|
$
22.91
|
Tangible net book
value per common share 10
|
$
19.78
|
|
$
19.25
|
|
$
19.31
|
|
$
19.50
|
|
$
21.23
|
Tangible net book
value "at risk" leverage - average during the period
11
|
7.9:1
|
|
8.0:1
|
|
7.8:1
|
|
7.8:1
|
|
7.6:1
|
Tangible net book
value "at risk" leverage - as of period end
12
|
8.0:1
|
|
8.1:1
|
|
8.0:1
|
|
7.7:1
|
|
7.7:1
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Statistics:
|
|
|
|
|
|
|
|
|
|
Average coupon
13, 17
|
3.72%
|
|
3.70%
|
|
3.65%
|
|
3.63%
|
|
3.65%
|
Average asset yield
14, 17
|
2.72%
|
|
2.66%
|
|
2.68%
|
|
3.43%
|
|
2.60%
|
Average cost of funds
15, 17
|
(1.59)%
|
|
(1.51)%
|
|
(1.48)%
|
|
(1.40)%
|
|
(1.32)%
|
Average net interest
rate spread 17
|
1.13%
|
|
1.15%
|
|
1.20%
|
|
2.03%
|
|
1.28%
|
Average net interest
rate spread, including TBA dollar roll income/loss
3
|
1.34%
|
|
1.46%
|
|
1.44%
|
|
2.02%
|
|
1.42%
|
Average coupon - as
of period end 17
|
3.67%
|
|
3.70%
|
|
3.67%
|
|
3.61%
|
|
3.64%
|
Average asset yield -
as of period end 17
|
2.85%
|
|
2.84%
|
|
2.83%
|
|
2.77%
|
|
2.68%
|
Average cost of funds
- as of period end 15, 17
|
(1.61)%
|
|
(1.56)%
|
|
(1.45)%
|
|
(1.44)%
|
|
(1.30)%
|
Average net interest
rate spread - as of period end 17
|
1.24%
|
|
1.28%
|
|
1.38%
|
|
1.33%
|
|
1.38%
|
Average actual CPR
for securities held during the period 17
|
12%
|
|
11%
|
|
11%
|
|
14%
|
|
14%
|
Average forecasted
CPR - as of period end 17
|
9%
|
|
9%
|
|
8%
|
|
8%
|
|
11%
|
Total premium
amortization, net
|
$
(97)
|
|
$
(96)
|
|
$
(89)
|
|
$
(6)
|
|
$
(110)
|
Expenses % of average
stockholders' equity - annualized
|
0.84%
|
|
0.85%
|
|
0.93%
|
|
0.89%
|
|
0.76%
|
Dividends declared
per common share
|
$
0.54
|
|
$
0.54
|
|
$
0.54
|
|
$
0.54
|
|
$
0.56
|
Economic return
(loss) on common equity - unannualized 16
|
5.6%
|
|
2.5%
|
|
1.8%
|
|
(5.2)%
|
|
5.6%
|
*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,
unless otherwise noted.
|
Numbers in financial
tables may not total due to rounding.
|
|
1.
|
Table includes
non-GAAP financial measures. Refer to "Use of Non-GAAP
Financial Information" for additional discussion of non-GAAP
financial measures.
|
2.
|
Represents periodic
interest costs on the Company's interest rate swap portfolio
recognized in gain (loss) on derivative instruments and other
securities, net. Amount does not include termination fees or
mark-to-market adjustments associated with interest rate
swaps.
|
3.
|
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.
|
4.
|
Average repurchase
agreements and other debt includes Agency repo, FHLB advances and
debt of consolidated VIE's. Amount excludes U.S. Treasury
repurchase agreements.
|
5.
|
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.
|
6.
|
Other Agency MBS
includes adjustable rate securities and collateralized mortgage
obligations (including interest and principal-only
securities).
|
7.
|
Par value excludes
the underlying unamortized principal balance ("UPB") of the
Company's interest-only securities. Excludes TBAs.
|
8.
|
Average stockholders'
equity calculated as the average month-ended stockholders' equity
during the quarter.
|
9.
|
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.
|
10.
|
Tangible net book
value per common share excludes goodwill and other intangible
assets, net.
|
11.
|
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. Leverage excludes U.S. Treasury
repurchase agreements.
|
12.
|
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.
|
13.
|
Average coupon for
the period was calculated by dividing the total coupon (or cash)
interest income by average investment securities held at
par.
|
14.
|
Average asset yield
for the period was calculated by dividing the total interest income
(coupon interest less amortization of net premiums and discounts)
by average investment securities held at amortized cost.
|
15.
|
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.
|
16.
|
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.
|
17.
|
Excludes net TBA
position.
|
STOCKHOLDER CALL
AGNC invites stockholders,
prospective stockholders and analysts to attend the AGNC
stockholder call on October 26, 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 Q3 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 October 26, 2017. In addition, there will be a
phone recording available one hour after the live call on
October 26, 2017 through November 9,
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
10112675.
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," "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."
"Net spread and dollar roll income" is measured as (i) net
interest income (GAAP measure) adjusted to include interest rate
swap periodic costs, TBA dollar roll income and management fee
income (referred to as "adjusted net interest and dollar roll
income") less (ii) total operating expenses (GAAP measure).
"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. Related amounts available to
common stockholders exclude non-recurring issuance costs of
redeemed preferred stock.
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, 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
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 issuance costs of redeemed preferred stock reported as
a reduction to net income available to common stockholders under
GAAP is meaningful as they represent non-recurring costs associated
capital transactions and are not representative of ongoing
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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SOURCE AGNC Investment Corp.