BETHESDA, Md., July 28 /PRNewswire-FirstCall/ -- American
Capital Agency Corp. ("AGNC" or the "Company") (Nasdaq: AGNC) today
reported net income for the second quarter of 2010 of $36.9 million, or $1.23 per share, and book value of $23.54 per share.
SECOND QUARTER 2010 FINANCIAL HIGHLIGHTS
- $1.23 per share of net income
- $1.06 per share, excluding
$0.26 per share of other investment
related income and $0.09 per share
of, now fully amortized, terminated swap expense
- $1.77 per share of taxable income
- Taxable income excludes $0.33 per
share of net unrealized losses associated with derivatives
outstanding as of June 30, 2010 that
are marked-to-market through current income for GAAP and
$0.21 per share of other net
temporary timing differences between GAAP and taxable income
- $1.40 per share dividend
declared
- $1.10 per share of undistributed
taxable income as of June 30, 2010
- Undistributed taxable income increased $6 million from $31
million as of March 31, 2010
to $37 million as of June 30, 2010
- $23.54 book value per share as of
June 30, 2010, an increase of
$0.63 per share (net of dividend)
from March 31, 2010
- 20.96% annualized return on average stockholders' equity
("ROE") for the quarter
OTHER HIGHLIGHTS
- $7.2 billion portfolio value as
of June 30, 2010
- 28%(1) constant prepayment rate ("CPR") for the second quarter
of 2010 despite Fannie Mae buyouts
- 16% Portfolio CPR in June 2010
(based on data released in July
2010)
- 8.2x(2) leverage as of June 30,
2010
- 2.18% annualized net interest rate spread for the quarter
- 2.38% net interest rate spread at quarter end
- $169 million of net proceeds
raised in follow-on equity offering
- Equity raise accretive to book value
"This was another strong quarter for AGNC, despite continued
volatility and shifting global economic sentiment. Our
dedication to actively managing our portfolio continues to serve
our shareholders well," said Gary
Kain, Chief Investment Officer of AGNC. "We have paid
a dividend of at least $1.40 per
share, while growing the dollar amount of our undistributed taxable
income, for five straight quarters. Furthermore, we have
accomplished this while growing book value every single quarter
since the beginning of 2009 despite a rapidly evolving interest
rate and prepayment landscape."
"As we look ahead," continued Mr. Kain, "we view the balance of
risk to be again weighted towards prepayments, driven more by
refinancing behavior rather than buyouts, and have spent a
significant amount of effort during the quarter adjusting our
portfolio to that end. We believe our proven track record of
navigating evolving prepayment challenges, coupled with our active
management philosophy, should aid us in selecting assets that will
perform well in this environment."
INVESTMENT PORTFOLIO
As of June 30, 2010, the Company's
investment portfolio totaled $7.2
billion of agency securities, at fair value, comprised of
$3.1 billion of fixed-rate agency
securities, $3.6 billion of
adjustable-rate agency securities ("ARMs") and $0.5 billion of collateralized mortgage
obligations ("CMOs") backed by fixed and adjustable-rate agency
securities. As of June 30,
2010, AGNC's investment portfolio was comprised of 28%
30-year fixed-rate securities, 15% 15-year fixed-rate securities,
50% adjustable-rate agency securities and 7% CMOs backed by fixed
and adjustable-rate agency securities.
ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE
SPREAD
During the quarter, the annualized weighted average yield on the
Company's average earning assets was 3.44% and its annualized
average cost of funds was 1.26%, including 0.19% of amortization
expense associated with previously terminated interest rate swaps,
which resulted in a net interest rate spread of 2.18%, an increase
of 2 bps from the first quarter of 2010 net interest rate spread of
2.16%. As of June 30, 2010, the
weighted average yield on the Company's earning assets was 3.40%
and its weighted average cost of funds was 1.02%. This
resulted in a net interest rate spread of 2.38% as of June 30, 2010, an increase of 2 bps from the
weighted average net interest rate spread as of March 31, 2010 of 2.36%. As of June 30, 2010, there was no remaining unamortized
expense associated with previously terminated interest rate swaps.
Premiums and discounts associated with agency securities are
amortized or accreted into interest income over the life of such
securities using the effective yield method. The actual CPR for the
Company's portfolio held in the second quarter of 2010 was 28%, an
increase from 21% during the first quarter of 2010 due largely to
the Fannie Mae buyouts(3). The most recent prepayment speed
for the Company's portfolio for the month of June (released in
July) was 16%. The Company's projected CPR for the remaining
life of its investments as of June 30,
2010 was 20%. This reflects an increase from 18% as of
March 31, 2010. The increase in
the Company's projected CPR is largely due to the decline in
interest rates during the quarter, which resulted in an increased
expectation of refinance activity (prepayments). This
increase was partially offset by the Company's actions this quarter
to rebalance the portfolio towards securities with lower prepayment
risk.
The weighted average cost basis of the investment portfolio was
105.1% (excluding interest-only strips the weighted average cost
basis was 104.6%) as of June 30,
2010. The amortization of premiums (net of any
accretion of discounts) on the investment portfolio for the quarter
was $22.9 million, or $0.77 per share. The unamortized net
premium as of June 30, 2010 was
$345.1 million.
LEVERAGE AND HEDGING ACTIVITIES
As of June 30, 2010, the Company's
$7.2 billion investment portfolio was
financed with $6.6 billion of
repurchase agreements and $0.8
billion of equity capital, resulting in a leverage ratio of
8.4x. When adjusted for the net receivable for agency
securities not yet settled, the leverage ratio was 8.2x as of
June 30, 2010. Of the
$6.6 billion borrowed under
repurchase agreements as of June 30,
2010, $3.4 billion had
original maturities of 30 days or less, $1.5 billion had original
maturities greater than 30 days and less than or equal to 60 days,
$1.4 billion had original maturities
greater than 60 days and less than or equal to 90 days and the
remaining $0.3 billion had original
maturities of 91 days or more. As of June 30, 2010, the Company had repurchase
agreements with 22 counterparties.
The Company's swap positions as of June
30, 2010 totaled $3.0 billion
in notional amount at an average fixed pay rate of 1.99%, a
weighted average receive rate of 0.35% and a weighted average
maturity of 2.7 years. During the quarter, AGNC increased its
swap position by $650 million in
conjunction with an increase in the portfolio size. The new
swap agreements entered into during the quarter have an average
term of approximately 3.7 years and a weighted average fixed pay
rate of 1.94%. The Company also has options to enter into
$500 million of interest rate swaps,
commonly referred to as "swaptions," during the next year. These
purchases are intended to help mitigate the Company's exposure to
large movements in interest rates.
As of June 30, 2010, 45% of the
Company's repurchase agreements were hedged through interest rate
swap agreements. This percentage does not reflect the swaps
underlying the swaptions, mentioned above.
During the quarter, the Company recognized $2.6 million, or $0.09 per share, in amortization expense
associated with the prior period termination of interest rate swaps
(included in interest expense on the income statement). As of
June 30, 2010, there was no remaining
unamortized termination costs associated with the prior termination
of interest rate swaps.
OTHER INCOME, NET
During the quarter, AGNC produced $7.7
million in other income, net, or $0.26 per share. Other income is comprised
of $29.6 million of net realized
gains on sales of agency securities, $4.9
million of net realized losses on derivative and trading
securities and $17.0 million of net
unrealized losses, including reversals of prior period unrealized
gains and losses realized during the current quarter, on derivative
and trading securities that are marked-to-market in current income.
Sales of agency securities during the quarter were predominately
driven by actions taken by the Company to rebalance its portfolio
towards securities with lower prepayment risk and, in the ordinary
course, in response to changing relative values perceived by the
Company.
Derivative activity during the quarter was largely in response
to the changing economic and interest rate landscape. The Company
entered into certain to-be-announced ("TBA") transactions,
purchased and sold specified securities on a forward basis and held
positions in interest-only strips. Such transactions were
primarily used to hedge the portfolio against certain risks. For
accounting purposes, these instruments are not treated as hedges
and are marked-to-market through the income statement. By contrast,
qualified hedging instruments, along with the unrealized movements
in fair value related to the Company's agency securities are
marked-to-market through other comprehensive income ("OCI") on the
Company's balance sheet.
AGNC seeks to actively manage its portfolio and continuously
evaluates new investment opportunities throughout the agency
securities market in an effort to balance stockholder returns and
book value preservation.
TAXABLE INCOME
For the quarter ended June 30,
2010, taxable income exceeded GAAP net income by
$0.54 per share. This was
comprised of $0.33 per share of net
unrealized losses associated with derivatives outstanding as of
June 30, 2010 that are
marked-to-market through current income for GAAP but excluded from
taxable income until realized / settled, and $0.21 per share of other net temporary timing
differences between GAAP and taxable income.
NET ASSET VALUE
As of June 30, 2010, the Company's
net asset value per share was $23.54,
or $0.63 higher than the March 31, 2010 net asset value per share of
$22.91.
SECOND QUARTER 2010 DIVIDEND DECLARATION
On June 15, 2010, the Board of
Directors of the Company declared a second quarter 2010 dividend of
$1.40 per share payable to
stockholders of record as of June 30,
2010, which will be paid on July 28,
2010. Since its May 2008
initial public offering, AGNC has paid or declared a total of
$218.6 million in dividends, or
$10.46 per share. After
adjusting for the second quarter 2010 accrued dividend, AGNC had
approximately $1.10 per share
outstanding of undistributed taxable income as of June 30, 2010.
MAY 2010 EQUITY
OFFERING
AGNC completed a follow-on equity offering during the quarter
raising total net proceeds of approximately $169 million (including the overallotment), after
underwriting discounts and offering expenses, through the issuance
of 6.9 million shares of common stock at a price of $25.75 per share. The offering was
accretive to the Company's June 30,
2010 book value by $0.11 per
share.
(1) Weighted average annualized 1 month CPR for securities held
during the second quarter of 2010. CPRs for CMOs, including CMOs
with structural prepayment protection, are based on the CPR of the
underlying collateral. CMOs with structural prepayment protection
do not receive repayments until the preceding front-end tranches
are fully repaid.
(2) Leverage calculated as total repurchase agreements
outstanding plus payable for agency securities purchased but not
yet settled less receivable for agency securities sold but not yet
settled divided by total stockholders’ equity as of June 30, 2010.
(3) The first and second quarter CPRs represent the weighted
average annualized 1 month CPR for securities held during the
quarter, respectively. CPRs for CMOs, including CMOs with
structural prepayment protection, are based on the CPR of the
underlying collateral. CMOs with structural prepayment protection
do not receive actual repayments until the preceding front-end
tranches are fully repaid.
Financial highlights for the quarter are as follows:
AMERICAN CAPITAL AGENCY CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, March 31, December 31,
2010 2010 2009
------------ ------------ -------------
(unaudited) (unaudited)
Assets:
Agency securities, at fair value
(including pledged assets of
$7,135,180, $4,855,633 and
$4,136,596, respectively) $7,166,390 $5,240,254 $4,300,115
Cash and cash equivalents 150,081 105,264 202,803
Restricted cash 37,877 26,630 19,628
Interest receivable 35,932 26,168 22,872
Derivative assets, at
fair value 7,391 8,736 11,960
Receivable for agency
securities sold 311,794 273,832 47,076
Principal payments receivable 44,883 88,474 20,473
Other assets 1,139 631 757
--------- --------- ---------
Total assets $7,755,487 $5,769,989 $4,625,684
========== ========== ==========
Liabilities:
Repurchase arrangements $6,634,342 $4,651,115 $3,841,834
Payable for agency
securities purchased 201,799 436,100 180,345
Derivative liabilities,
at fair value 76,220 28,689 17,798
Dividend payable 47,124 37,465 34,050
Accounts payable and
other accrued
liabilities 3,572 3,501 4,835
--------- --------- ---------
Total liabilities 6,963,057 5,156,870 4,078,862
--------- --------- ---------
Stockholders' equity:
Preferred stock, $0.01
par value; 10,000 shares
authorized, 0 shares issued
and outstanding,
respectively - - -
Common stock, $0.01 par
value; 150,000 shares
authorized, 33,660,
26,760 and 24,322 shares
issued and outstanding,
respectively 337 268 243
Additional paid-in
capital 738,525 569,595 507,465
Retained earnings 25,359 35,625 19,940
Accumulated other comprehensive
income 28,209 7,631 19,174
--------- --------- ---------
Total stockholders' equity 792,430 613,119 546,822
--------- --------- ---------
Total Liabilities and
stockholders' equity $7,755,487 $5,769,989 $4,625,684
========== ========== ==========
AMERICAN CAPITAL AGENCY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
Three Months Six Months
Ended June 30, Ended June 30,
--------------- ---------------
2010 2009 2010 2009
---- ---- ---- ----
Interest income:
Interest income $50,589 $31,690 $89,386 $54,041
Interest expense 17,348 9,585 32,858 17,714
------ ----- ------ ------
Net interest income 33,241 22,105 56,528 36,327
------ ------ ------ ------
Other income, net:
Gain from sale of agency
securities, net 29,585 9,530 56,993 14,348
Realized (loss) gain from
derivative instruments and
trading securities, net (4,852) 1,562 (3,478) 618
Unrealized (loss) gain from
derivative instruments and
trading securities, net (17,015) (336) (12,469) 250
------- ---- ------- ---
Total other income, net 7,718 10,756 41,046 15,216
Expenses:
Management fees 2,314 939 4,098 1,842
General and administrative
expenses 1,787 1,556 3,468 3,024
----- ----- ----- -----
Total expenses 4,101 2,495 7,566 4,866
----- ----- ----- -----
Net income $36,858 $30,366 $90,008 $46,677
====== ====== ====== ======
Net income per common share
- basic and diluted $1.23 $2.02 $3.28 $3.11
Weighted average number of
common shares outstanding
- basic and diluted 29,872 15,005 27,451 15,005
Dividends declared per
common share $1.40 $1.50 $2.80 $2.35
AMERICAN CAPITAL AGENCY CORP.
KEY PORTFOLIO CHARACTERISTICS*
(unaudited)
(in thousands, except per share data)
Three Months Ended
------------------
June 30, March 31, December 31,
2010 2010 2009
--------- ---------- -------------
Average agency
securities, at cost $5,886,806 $4,099,855 $3,912,087
Average total assets,
at fair value $6,498,247 $4,591,850 $4,434,206
Average repurchase
agreements $5,548,225 $3,787,583 $3,637,220
Average stockholders'
equity $705,466 $580,056 $533,453
Fixed-rate agency
securities, at fair
value - as of period
end $3,063,016 $1,834,924 $1,887,404
Adjustable-rate agency
securities, at fair
value - as of period
end $3,589,711 $2,710,557 $1,705,487
CMO agency securities,
at fair value -as of
period end $483,667 $657,119 $707,224
Interest-only strips
agency securities, at
fair value - as of
period end $29,996 $37,654 $-
Average asset yield (1) 3.44% 3.78% 4.20%
Average cost of funds
(2) 1.07% 1.23% 1.17%
Average cost of funds -
terminated swap
amortization expense
(3) 0.19% 0.39% 0.40%
Average net interest
rate spread (4) 2.18% 2.16% 2.63%
Net return on average
equity (5) 20.96% 37.16% 30.27%
Leverage (average
during the period) (6) 7.9:1 6.5:1 6.8:1
Leverage (as of period
end) (7) 8.2:1 7.9:1 7.3:1
Expenses % of average
assets (8) 0.25% 0.31% 0.33%
Expenses % of average
stockholders' equity
(9) 2.33% 2.42% 2.71%
Book value per common
share as of period end
(10) $23.54 $22.91 $22.48
Three Months Ended
------------------
September 30, June 30,
2009 2009
-------------- ---------
Average agency securities, at cost $2,992,151 $2,367,303
Average total assets, at fair value $3,263,632 $2,676,006
Average repurchase agreements $2,693,851 $2,139,402
Average stockholders' equity $376,229 $305,866
Fixed-rate agency securities, at
fair value - as of period end $1,272,407 $1,203,261
Adjustable-rate agency securities,
at fair value - as of period end $1,904,184 $1,307,430
CMO agency securities, at fair
value -as of period end $261,536 $121,202
Interest-only strips agency
securities, at fair value - as of
period end $- $-
Average asset yield (1) 4.38% 5.35%
Average cost of funds (2) 1.16% 1.30%
Average cost of funds - terminated
swap amortization expense (3) 0.54% 0.50%
Average net interest rate spread (4) 2.68% 3.55%
Net return on average equity (5) 32.94% 39.82%
Leverage (average during the
period) (6) 7.2:1 7.0:1
Leverage (as of period end) (7) 7.3:1 7.7:1
Expenses % of average assets (8) 0.32% 0.37%
Expenses % of average stockholders'
equity (9) 2.78% 3.27%
Book value per common share as of
period end (10) $22.23 $20.76
* Average numbers for each period are weighted based on
days on the Company's books and records. All percentages are
annualized.
(1) Weighted average asset yield for the period was
calculated by dividing the Company's average interest income on
agency securities, less average amortization of premiums and
discounts, by the Company's average agency securities.
(2) Weighted average cost of funds for the period was calculated
by dividing the Company's total interest expense, less amortization
expense related to the termination of interest rate swaps, by the
Company's weighted average repurchase agreements.
(3) Weighted average cost of funds related to terminated
interest rate swap amortization expense was calculated by dividing
the Company's amortization expense by the Company's weighted
average repurchase agreements. The amortization expense
associated with the termination of interest rate swaps was
$2.6 million, $3.7 million, $3.7
million, $3.7 million and
$2.7 million for the respective
periods presented.
(4) Net interest rate spread for the period was calculated
by subtracting the Company's weighted average cost of funds, net of
interest rate swaps and terminated swap amortization expense, from
the Company's weighted average asset yield.
(5) Net return on average stockholders' equity for the
period was calculated by dividing the Company's net income by the
Company's average stockholders' equity for the period.
(6) Leverage during the period was calculated by dividing
the Company's average repurchase agreements outstanding for the
period by the Company's average stockholders' equity for the
period.
(7) Leverage at period end was calculated by dividing the
amount outstanding under the Company's repurchase agreements and
net receivable / payable for unsettled agency securities by the
Company's total stockholders' equity at period end.
(8) Expenses as a % of average total assets was calculated
by dividing the Company's total expenses by the Company's average
total assets for the period.
(9) Expenses as a % of average stockholders' equity was
calculated by dividing the Company's total expenses by the
Company's average stockholders' equity.
(10) Book value per share was calculated by dividing the
Company's total stockholders' equity by the Company's number of
shares outstanding.
DIVIDEND REINVESTMENT AND DIRECT STOCK PURCHASE PLAN
AGNC did not issue any shares through its DSPP and DRIP in the
second quarter of 2010.
AGNC's Dividend Reinvestment Plan and Direct Stock Purchase Plan
provide prospective investors and existing stockholders with a
convenient and economical method to purchase shares of the
Company's common stock. By participating in the Plan,
investors may purchase additional shares of common stock by
reinvesting some or all of the cash dividends received on shares of
the Company's common stock. Investors may also make optional
cash purchases of shares of the Company's common stock subject to
certain limitations detailed in the Plan prospectus. To
review the Plan Prospectus, please visit the Company's Investor
Relations website at www.AGNC.com.
STOCKHOLDER CALL
AGNC invites stockholders, prospective stockholders and analysts
to attend the AGNC stockholder call on July
29, 2010 at 2:00 pm ET.
The stockholder call can be accessed through a live webcast,
free of charge, at www.AGNC.com or by dialing (877) 569-8701 (U.S.
domestic) or +1 (574) 941-7382 (international). Please provide the
operator with the conference ID number 86022968. If you do not plan
on asking a question on the call and have access to the internet,
please take advantage of the webcast.
A slide presentation will accompany the call and will be
available at www.AGNC.com. Select the Q2 2010 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 made available on the Company's website
after the call on July 29. In
addition, there will be a phone recording available from
6:00 pm ET July 29 until 11:59 pm
ET August 12. If you are
interested in hearing the recording of the presentation, please
dial (800) 642-1687 (U.S. domestic) or +1 (706) 645-9291
(international). The conference ID number is 86022968.
For further information, please contact Investor Relations at
(301) 968-9300 or IR@AGNC.com.
ABOUT AGNC
AGNC is a REIT that invests in agency pass-through securities
and collateralized mortgage obligations for which the principal and
interest payments are guaranteed by a U.S. Government agency or a
U.S. Government-sponsored entity. The Company is externally
managed and advised by American Capital Agency Management, LLC, an
affiliate of American Capital, Ltd. ("American Capital").
For further information, please refer to www.AGNC.com.
ABOUT AMERICAN CAPITAL
American Capital is a publicly traded private equity firm and
global asset manager. American Capital, both directly and through
its asset management business, originates, underwrites and manages
investments in middle market private equity, leveraged finance,
real estate and structured products. Founded in 1986, American
Capital has $14 billion in capital
resources under management and eight offices in the U.S.,
Europe and Asia. American Capital and its affiliates will
consider investment opportunities from $5
million to $100 million. For further information, please
refer to www.AmericanCapital.com.
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements.
Forward-looking statements are based on estimates,
projections, beliefs and assumptions of management of the Company
at the time of such statements and are not guarantees of future
performance. Forward-looking statements involve risks and
uncertainties in predicting future results and conditions.
Actual results could differ materially from those projected
in these forward-looking statements due to a variety of factors,
including, without limitation, changes in interest rates, changes
in the yield curve, changes in prepayment rates, the availability
and terms of financing, changes in the market value of our 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.
CONTACT:
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Investors - (301)
968-9300
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Media - (301)
968-9400
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SOURCE American Capital Agency Corp.