BETHESDA, Md., Feb. 1,
2017 /PRNewswire/ -- AGNC Investment Corp. ("AGNC" or the
"Company") (Nasdaq: AGNC) today announced financial results for the
quarter ended December 31, 2016.
FOURTH QUARTER 2016 FINANCIAL HIGHLIGHTS
- $(1.19) comprehensive loss per
common share, comprised of:
- $3.06 net income per common
share
- $(4.25) other comprehensive loss
("OCI") per common share
- Includes net unrealized losses on investments recognized
through OCI
- $0.64 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization benefit 1
- Includes $0.21 per common share
of dollar roll income associated with the Company's $14.1 billion average net long position in
forward purchases and sales of agency mortgage-backed securities
("MBS") in the "to-be-announced" ("TBA") market
- Excludes $0.26 per common share
of estimated "catch-up" premium amortization benefit due to change
in projected constant prepayment rate ("CPR") estimates
- $21.17 net book value per common
share as of December 31, 2016
- Decreased $(1.74) per common
share, or -7.6%, from $22.91 per
common share as of September 30, 2016
- $19.50 tangible net book value
per common share as of December 31, 2016
- Decreased $(1.73) per share, or
-8.1%, from $21.23 per common share
as of September 30, 2016
- Excludes $554 million, or
$1.67 per common share, of goodwill
and other intangible assets as of December 31, 2016
- $0.54 dividend declared per
common share during the quarter
- -5.2% economic return on common equity for the quarter, or
-20.8% annualized
- Comprised of $0.54 dividend per
common share and $(1.74) decrease in
net book value per common share
OTHER FOURTH QUARTER HIGHLIGHTS
- $57.7 billion investment
portfolio as of December 31, 2016, comprised of:
- $46.2 billion agency MBS
- $11.2 billion TBA mortgage
position
- $0.3 billion credit risk transfer
("CRT") securities and other non-agency securities
- 7.7x tangible net book value "at risk" leverage as of
December 31, 2016
- 7.8x average tangible net book value "at risk" leverage for the
quarter
- 14.3% portfolio CPR for the quarter
- 8.0% average projected portfolio life CPR as of
December 31, 2016, a decrease from 10.6% projected CPR
as of September 30, 2016
- 1.45% annualized net interest rate spread and TBA dollar roll
income for the quarter, excluding estimated "catch-up" premium
amortization benefit
- Excludes 57 bps of "catch up" premium amortization benefit due
to change in projected CPR estimates
- Decreased from 1.47% for the prior quarter, excluding -5 bps of
"catch-up" premium amortization cost
2016 FULL YEAR HIGHLIGHTS
- $0.80 comprehensive income per
share, comprised of:
- $1.79 net income per common
share
- $(0.99) OCI per common share
- $2.36 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization cost of $(0.03) per
common share 1
- $2.30 dividends declared per
common share
- 3.9% economic return on common equity, comprised of:
- $2.30 dividends per common
share
- $(1.42) decrease in net book
value per common share
- 6.5 million shares, or $116
million, of common stock repurchased during the year
- Represents 1.9% of common stock outstanding as of January 1, 2016
- $17.89 per common share average
repurchase price, inclusive of transaction costs
- 18.2% total stock return
- Comprised of common stock share price appreciation and dividend
reinvestments
- 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
"The unanticipated outcome of the
U.S. Presidential election triggered a major repricing in nearly
every financial market," said Gary
Kain, the Company's Chief Executive Officer, President and
Chief Investment Officer. "U.S equity prices increased to new
highs, and U.S. Treasury prices fell significantly during the
quarter. At the nadir of the Treasury market sell-off, the
yield on the 10 year Treasury increased by over 100 basis points,
representing a rate change that has occurred only 5 times in the
last 50 quarters. In fact, the move in the fourth quarter
exceeded the increase experienced during the 'taper tantrum' in the
second quarter of 2013. Predictably, the dramatic increase in
rates and volatility led to a meaningful widening in agency MBS
spreads relative to swap and U.S. Treasury rates. However,
the performance of agency MBS in the fourth quarter was
significantly better than what we witnessed in 2013. The
combination of the rapid spike in interest rates and wider MBS
spreads led to AGNC's economic return of -5.2% for the fourth
quarter.
"Looking ahead, we anticipate that wider agency MBS spreads will
provide us with attractive investment opportunities. We also
believe that U.S. interest rates are likely to remain relatively
low by historical standards as the risks to the global growth
picture remain biased to the downside. Against this backdrop,
we believe that AGNC is very well positioned to generate attractive
returns for shareholders."
"For the year, AGNC generated an economic return of 3.9% despite
the significant interest rate and spread volatility experienced in
the fourth quarter and associated impact on our net book value,"
said Peter Federico, Executive Vice
President and Chief Financial Officer. "In
addition, dividends declared for the year to our common
stockholders totaling $2.30 per
common share increased our total distributions to common
stockholders since our initial public offering in May 2008 to $35.00
per share."
NET BOOK VALUE
As of December 31, 2016, the
Company's net book value per common share was $21.17, a decrease of $(1.74) per common share, or -7.6%, from its
September 30, 2016 net book value per common share of
$22.91. The decrease in the
Company's net book value per common share was due to the
underperformance of agency MBS relative to interest rate hedges and
the increase in interest rates experienced during the quarter.
As of December 31, 2016, the Company's tangible net book
value per common share was $19.50. Tangible net book value per common
share excludes goodwill and other intangible assets recognized by
the Company in connection with the acquisition of AGNC Mortgage
Management, LLC (formerly known as American Capital Mortgage
Management, LLC) and the internalization of the Company's
management on July 1, 2016.
INVESTMENT PORTFOLIO
As of December 31, 2016, the
Company's investment portfolio totaled $57.7
billion, comprised of:
- $57.4 billion of agency MBS and
TBA securities, including:
- $55.9 billion of fixed-rate
securities, comprised of:
- $12.9 billion ≤ 15-year
securities,
- $2.2 billion 15-year net long TBA
securities,
- $0.8 billion 20-year fixed-rate
securities,
- $31.1 billion 30-year fixed-rate
securities, and
- $9.0 billion 30-year net long TBA
securities;
- $0.4 billion of adjustable-rate
securities; and
- $1.1 billion of collateralized
mortgage obligations ("CMOs"), including principal and
interest-only strips; and
- $0.3 billion of CRT securities
and other non-agency securities.
As of December 31, 2016, inclusive of TBA securities, ≤
15-year and 30 year fixed rate securities represented 26% and 70%
of the Company's investment portfolio, respectively, which is
unchanged from September 30, 2016.
As of December 31, 2016, the Company's fixed-rate
securities, inclusive of TBA securities, had a weighted average
coupon of 3.49%, compared to 3.46% as of September 30, 2016,
comprised of the following weighted average coupons:
- 3.16% for ≤ 15-year fixed rate securities;
- 3.49% for 20-year fixed-rate securities; and
- 3.62% for 30-year fixed-rate securities.
The Company accounts for its TBA mortgage portfolio (also
referred to as "dollar roll funded assets") as derivative
instruments and recognizes dollar roll income in other gain (loss),
net on the Company's financial statements. As of
December 31, 2016, the Company's net TBA position had a total
fair value and a total cost basis of $11.2
billion and $11.3 billion,
respectively, and a net carrying value of $(147) million reported in derivative
assets/(liabilities) on the Company's balance sheet, compared to a
total fair value and a total cost basis of $15.6 billion and $15.5
billion, respectively, and a net carrying value of
$46 million as of September 30,
2016.
CONSTANT PREPAYMENT RATES
The Company's investment
portfolio had a weighted average CPR of 14.3% for the fourth
quarter, unchanged from the prior quarter. The weighted
average projected CPR for the remaining life of the Company's
agency securities held as of December 31, 2016 was 8.0%, a
decrease from 10.6% as of September 30, 2016 due to higher
interest rates.
The weighted average cost basis of the Company's investment
portfolio was 104.7% of par value as of December 31,
2016. Net premium amortization cost on the Company's
investment portfolio for the fourth quarter was $(6) million, or $(0.02) per common share, which includes a
"catch-up" premium amortization benefit of $85 million, or $0.26 per common share, due to changes in the
Company's projected CPR estimates for securities acquired prior to
the fourth quarter. This compares to net premium amortization
cost for the prior quarter of $(110)
million, or $(0.33) per common
share, including a "catch-up" premium amortization cost of
$(8) million, or $(0.02) per common share. The net
unamortized premium balance as of December 31, 2016 was
$2.1 billion.
The Company amortizes or accretes premiums and discounts
associated with purchases of agency securities into interest income
using the effective yield method over the estimated life of such
securities, incorporating both actual repayments to date and
projected repayments over the remaining life of the security.
Faster actual or projected repayments can have a meaningful
negative impact on the Company's asset yields, while slower actual
or projected repayments can have a meaningful positive impact.
ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE
SPREAD
The Company's average asset yield on its investment
portfolio, excluding the net TBA position, (also referred to as
"balance sheet funded assets") was 3.43% for the fourth quarter, an
increase from 2.60% for the prior quarter. Excluding the
"catch-up" premium amortization benefit, the Company's average
asset yield was 2.68% for the fourth quarter, compared to 2.66% for
the prior quarter.
For the fourth quarter, the Company's average cost of funds was
1.40%, an increase from 1.32% for the prior quarter. The
Company's average cost of funds includes the cost of agency
repurchase agreements ("agency repo"), Federal Home Loan Bank
("FHLB") advances, debt of consolidated variable interest entities
("other debt") and interest rate swaps (including interest rate
swaps used to hedge the Company's dollar roll funded assets)
measured against the Company's daily weighted average agency repo,
FHLB advances and other debt balance outstanding. The increase in
the Company's average cost of funds was largely due to the
combination of higher repo rates and a larger relative mix of TBA
dollar roll funded to agency repo funded assets held during the
fourth quarter, which was partially offset by an increase in the
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
2.02%, compared to 1.42% for the prior quarter. Excluding
"catch-up" premium amortization, the Company's combined annualized
net interest rate spread on its balance sheet and dollar roll
funded assets for the quarter was 1.45%, compared to 1.47% for the
prior quarter.
On a per share basis, the Company recognized $0.90 per common share of net spread and dollar
roll income (a non-GAAP financial measure) for the fourth quarter,
compared to $0.62 for the prior
quarter. Excluding "catch-up" premium amortization, the
Company's net spread and dollar roll income was $0.64 per common share for the fourth quarter,
unchanged from 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 December 31, 2016, $37.7 billion of agency repo, $3.0 billion of FHLB advances and $0.5 billion of other debt were used to fund the
Company's investment portfolio. The remainder, or
approximately $172 million, of the
Company's repurchase agreements was used to fund purchases of U.S.
Treasury securities ("U.S. Treasury repo") and is not included in
the Company's leverage measurements. Inclusive of its net TBA
position and net payable/(receivable) for unsettled securities, the
Company's tangible net book value "at risk" leverage ratio was 7.7x
as of December 31, 2016, unchanged from September 30,
2016.
As of December 31, 2016, the Company's agency repurchase
agreements had a weighted average interest rate of 0.98%, an
increase from 0.83% as of September 30, 2016, and a weighted
average remaining days to maturity of 187 days, compared to 199
days as of September 30, 2016.
As of December 31, 2016, the Company's agency repurchase
agreements had remaining maturities of:
- $27.5 billion of three months or
less;
- $2.0 billion from three to six
months;
- $1.3 billion from six to nine
months;
- $1.6 billion from nine to twelve
months;
- $2.5 billion from one to three
years; and
- $2.8 billion from three to five
years.
The Company's FHLB advances mature in February 2017, coinciding with the termination of
the Company's captive insurance subsidiary's FHLB membership.
As of December 31, 2016, the Company's FHLB advances had a
weighted average interest rate of 0.73%.
HEDGING ACTIVITIES
As of December 31, 2016, 91%
of the Company's outstanding balance of repurchase agreements, FHLB
advances, other debt and net TBA position was hedged with interest
rate swaps, swaptions and net U.S. Treasury positions, an increase
from 75% as of September 30, 2016.
As of December 31, 2016, the Company's interest rate swap
position totaled $37.2 billion in
notional amount, compared to $34.2
billion as of September 30, 2016. The Company's
interest rate swap portfolio had an average fixed pay rate of
1.48%, an average receive rate of 0.92% and an average maturity of
3.9 years as of December 31, 2016, compared to 1.52%, 0.78%
and 3.5 years, respectively, as of September 30,
2016.
The Company also utilizes payer swaptions and long and short
positions in U.S. Treasury securities and U.S. Treasury futures to
mitigate exposure to changes in interest rates. As of
December 31, 2016, the Company had payer swaptions outstanding
totaling $1.2 billion, compared to
$0.7 billion as of September 30,
2016, and a net short U.S. Treasury position outstanding of
$9.7 billion, compared to
$7.9 billion as of September 30,
2016.
OTHER GAIN (LOSS), NET
For the fourth quarter, the
Company recorded a net gain of $741
million in other gain (loss), net, or $2.24 per common share, compared to a net gain of
$307 million, or $0.93 per common share, for the prior
quarter. Other gain (loss), net for the fourth quarter was
comprised of:
- $(5) million of net realized
losses on sales of investment securities;
- $(11) million of net losses on
investment securities measured at fair value through net
income;
- $857 million of net gains on
interest rate swaps;
- $(46) million of interest rate
swap periodic interest costs;
- $8 million of net gains on
interest rate swaptions;
- $378 million of net gains on U.S.
Treasury positions;
- $68 million of TBA dollar roll
income;
- $(518) million of net
mark-to-market losses on TBA mortgage positions;
- $4 million of management fee
income; and
- $6 million of net gains on other
derivative instruments and securities.
OTHER COMPREHENSIVE LOSS
During the fourth quarter,
the Company recorded other comprehensive loss of $(1.4) billion, or $(4.25) per common share, consisting of
unrealized losses on the Company's agency securities, compared to
$(90) million, or $(0.27) per common share, of other comprehensive
loss for the prior quarter.
FOURTH QUARTER 2016 DIVIDEND DECLARATIONS
During the
fourth quarter, the Company's Board of Directors declared dividends
of $0.18 per share to common
stockholders of record as of October
31, November 30 and
December 30, 2016, respectively,
totaling $0.54 for the quarter, which
were paid on November 8 and
December 8, 2016 and January 9, 2017, respectively. Since its
May 2008 initial public offering
through the fourth quarter of 2016, the Company has declared a
total of $6.8 billion in common stock
dividends, or $35.00 per common
share.
On December 14, 2016, the Company's Board of Directors
declared a fourth 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
January 17, 2017 to preferred stockholders of record as of
January 1, 2017.
The Company also announced the tax characteristics of its 2016
common stock and Series A and B Preferred Stock dividends. The
Company's distributions of $2.12 per
common share for dividends declared during the eleven month period
ended November 30, 2016 consisted of
$1.689674 ordinary dividend and
$0.430326 non-dividend (also known as
"return of capital") distributions per common share for federal
income tax purposes. The dividend of $0.18 per common share declared on December 14, 2016, which was paid on January 9, 2017, will be reported as a 2017
distribution for federal income tax purposes. The Company's
distributions of $2.00 per Series A
preferred share and $1.93750 per
Series B depository share for dividends paid during the twelve
months ended December 31, 2016
consisted of ordinary dividends for federal income tax
purposes. Stockholders should receive an IRS Form 1099-DIV
containing this information from their brokers, transfer agents or
other institutions. For additional detail please visit the
Company's website at www.AGNC.com.
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)
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
2016
|
|
2016
|
|
2016
|
|
2016
|
|
2015
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Agency securities, at
fair value (including pledged securities of $43,943, $44,089,
$48,344, $51,786 and $48,380, respectively)
|
$
45,393
|
|
$
46,328
|
|
$
53,418
|
|
$
54,950
|
|
$
51,331
|
Agency securities
transferred to consolidated variable interest entities, at fair
value
(pledged securities)
|
818
|
|
890
|
|
945
|
|
993
|
|
1,029
|
Non-agency securities,
at fair value (including pledged securities of $90, $102, $107,
$112 and $113, respectively)
|
124
|
|
102
|
|
107
|
|
112
|
|
113
|
Credit risk transfer
securities, at fair value
|
164
|
|
36
|
|
-
|
|
-
|
|
-
|
U.S. Treasury
securities, at fair value (including pledged securities of $173,
$45, $62, $0
and $25, respectively)
|
182
|
|
45
|
|
62
|
|
-
|
|
25
|
REIT equity securities,
at fair value
|
-
|
|
-
|
|
19
|
|
38
|
|
33
|
Cash and cash
equivalents
|
1,208
|
|
1,254
|
|
1,131
|
|
1,109
|
|
1,110
|
Restricted
cash
|
74
|
|
681
|
|
1,399
|
|
1,686
|
|
1,281
|
Derivative assets, at
fair value
|
355
|
|
61
|
|
111
|
|
55
|
|
81
|
Receivable for
securities sold (pledged securities)
|
21
|
|
228
|
|
-
|
|
-
|
|
-
|
Receivable under
reverse repurchase agreements
|
7,716
|
|
5,441
|
|
2,982
|
|
3,163
|
|
1,713
|
Goodwill and other
intangible assets, net
|
554
|
|
555
|
|
-
|
|
-
|
|
-
|
Other assets
|
271
|
|
268
|
|
301
|
|
290
|
|
305
|
Total
assets
|
$
56,880
|
|
$
55,889
|
|
$
60,475
|
|
$
62,396
|
|
$
57,021
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
$
37,858
|
|
$
37,668
|
|
$
41,947
|
|
$
45,276
|
|
$
41,754
|
Federal Home Loan Bank
advances
|
3,037
|
|
3,037
|
|
3,037
|
|
3,037
|
|
3,753
|
Debt of consolidated
variable interest entities, at fair value
|
460
|
|
494
|
|
528
|
|
562
|
|
595
|
Payable for securities
purchased
|
-
|
|
251
|
|
2,581
|
|
889
|
|
182
|
Derivative liabilities,
at fair value
|
256
|
|
947
|
|
1,519
|
|
1,652
|
|
935
|
Dividends
payable
|
66
|
|
66
|
|
73
|
|
73
|
|
74
|
Obligation to return
securities borrowed under reverse repurchase agreements, at
fair
value
|
7,636
|
|
5,424
|
|
3,017
|
|
3,175
|
|
1,696
|
Accounts payable and
other liabilities
|
211
|
|
71
|
|
71
|
|
72
|
|
61
|
Total
liabilities
|
49,524
|
|
47,958
|
|
52,773
|
|
54,736
|
|
49,050
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock -
aggregate liquidation preference of $348
|
336
|
|
336
|
|
336
|
|
336
|
|
336
|
Common stock - $0.01
par value; 600.0 shares authorized;
|
|
|
|
|
|
|
|
|
|
331.0, 331.0, 331.0,
331.0 and 337.5 shares issued and outstanding,
respectively
|
3
|
|
3
|
|
3
|
|
3
|
|
3
|
Additional paid-in
capital
|
9,932
|
|
9,932
|
|
9,932
|
|
9,932
|
|
10,048
|
Retained
deficit
|
(2,518)
|
|
(3,350)
|
|
(3,669)
|
|
(3,329)
|
|
(2,350)
|
Accumulated other
comprehensive income (loss)
|
(397)
|
|
1,010
|
|
1,100
|
|
718
|
|
(66)
|
Total stockholders'
equity
|
7,356
|
|
7,931
|
|
7,702
|
|
7,660
|
|
7,971
|
Total liabilities and
stockholder's equity
|
$
56,880
|
|
$
55,889
|
|
$
60,475
|
|
$
62,396
|
|
$
57,021
|
|
|
|
|
|
|
|
|
|
|
Net book value per
common share
|
$
21.17
|
|
$
22.91
|
|
$
22.22
|
|
$
22.09
|
|
$
22.59
|
Tangible net book
value per common share
|
$
19.50
|
|
$
21.23
|
|
N/A
|
|
N/A
|
|
N/A
|
AGNC INVESTMENT
CORP.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year Ended
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
2016
|
|
2016
|
|
2016
|
|
2016
|
|
2016
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
393
|
|
$
315
|
|
$
318
|
|
$
295
|
|
$
1,321
|
Interest
expense 1
|
98
|
|
96
|
|
101
|
|
99
|
|
394
|
Net
interest income
|
295
|
|
219
|
|
217
|
|
196
|
|
927
|
|
|
|
|
|
|
|
|
|
|
Other gain (loss),
net:
|
|
|
|
|
|
|
|
|
|
Realized gain (loss) on
sale of investment securities, net
|
(5)
|
|
61
|
|
55
|
|
(2)
|
|
109
|
Unrealized gain (loss)
on investment securities measured at fair value through net
income, net
|
(11)
|
|
(6)
|
|
-
|
|
11
|
|
(6)
|
Gain (loss) on
derivative instruments and other securities, net
1
|
753
|
|
248
|
|
(367)
|
|
(944)
|
|
(310)
|
Management fee
income
|
4
|
|
4
|
|
-
|
|
-
|
|
8
|
Total other gain
(loss), net
|
741
|
|
307
|
|
(312)
|
|
(935)
|
|
(199)
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Management fee
expense
|
-
|
|
-
|
|
25
|
|
27
|
|
52
|
Compensation and
benefits
|
10
|
|
9
|
|
-
|
|
-
|
|
19
|
Other operating
expenses
|
7
|
|
6
|
|
15
|
|
6
|
|
34
|
Total operating
expenses
|
17
|
|
15
|
|
40
|
|
33
|
|
105
|
Net income
(loss)
|
1,019
|
|
511
|
|
(135)
|
|
(772)
|
|
623
|
Dividend on preferred
stock
|
7
|
|
7
|
|
7
|
|
7
|
|
28
|
Net income (loss)
available (attributable) to common stockholders
|
$
1,012
|
|
$
504
|
|
$
(142)
|
|
$
(779)
|
|
$
595
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
1,019
|
|
$
511
|
|
$
(135)
|
|
$
(772)
|
|
$
623
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss)
on available-for-sale securities, net
|
(1,408)
|
|
(97)
|
|
370
|
|
765
|
|
(370)
|
Unrealized gain on
derivative instruments, net 1
|
1
|
|
7
|
|
12
|
|
19
|
|
39
|
Other comprehensive
income (loss)
|
(1,407)
|
|
(90)
|
|
382
|
|
784
|
|
(331)
|
Comprehensive
income (loss)
|
(388)
|
|
421
|
|
247
|
|
12
|
|
292
|
Dividend on preferred
stock
|
7
|
|
7
|
|
7
|
|
7
|
|
28
|
Comprehensive
income (loss) available (attributable) to common
stockholders
|
$
(395)
|
|
$
414
|
|
$
240
|
|
$
5
|
|
$
264
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic and
diluted
|
331.0
|
|
331.0
|
|
331.0
|
|
334.4
|
|
331.9
|
Net income (loss)
per common share - basic and diluted
|
$
3.06
|
|
$
1.52
|
|
$
(0.43)
|
|
$
(2.33)
|
|
$
1.79
|
Comprehensive
income (loss) per common share - basic and diluted
|
$
(1.19)
|
|
$
1.25
|
|
$
0.73
|
|
$
0.01
|
|
$
0.80
|
Dividends declared
per common share
|
$
0.54
|
|
$
0.56
|
|
$
0.60
|
|
$
0.60
|
|
$
2.30
|
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
|
|
Year Ended
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
2016
|
|
2016
|
|
2016
|
|
2016
|
|
2016
|
Interest
income
|
$
393
|
|
$
315
|
|
$
318
|
|
$
295
|
|
$
1,321
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
and other debt
|
97
|
|
89
|
|
89
|
|
80
|
|
355
|
Interest rate swap
periodic costs 1
|
1
|
|
7
|
|
12
|
|
19
|
|
39
|
Total interest
expense
|
98
|
|
96
|
|
101
|
|
99
|
|
394
|
Net interest
income
|
295
|
|
219
|
|
217
|
|
196
|
|
927
|
Other interest rate
swap periodic costs 3
|
(46)
|
|
(51)
|
|
(69)
|
|
(89)
|
|
(255)
|
Dividend on REIT
equity securities
|
-
|
|
-
|
|
1
|
|
1
|
|
2
|
Management fee
income
|
4
|
|
4
|
|
-
|
|
-
|
|
8
|
TBA dollar roll income
16
|
68
|
|
54
|
|
44
|
|
50
|
|
216
|
Adjusted net interest
and dollar roll income
|
321
|
|
226
|
|
193
|
|
158
|
|
898
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Total operating
expenses
|
17
|
|
15
|
|
40
|
|
33
|
|
105
|
Non-recurring
transaction costs
|
-
|
|
-
|
|
(9)
|
|
-
|
|
(9)
|
Adjusted operating
expenses
|
17
|
|
15
|
|
31
|
|
33
|
|
96
|
Net spread and dollar
roll income
|
304
|
|
211
|
|
162
|
|
125
|
|
802
|
Dividend on preferred
stock
|
7
|
|
7
|
|
7
|
|
7
|
|
28
|
Net spread and dollar
roll income available to common stockholders
|
297
|
|
204
|
|
155
|
|
118
|
|
774
|
Estimated "catch-up"
premium amortization cost (benefit) due to change in CPR
forecast
|
(85)
|
|
8
|
|
32
|
|
55
|
|
10
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization, available
to
common stockholders
|
$
212
|
|
$
212
|
|
$
187
|
|
$
173
|
|
$
784
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic and diluted
|
331.0
|
|
331.0
|
|
331.0
|
|
334.4
|
|
331.9
|
Net spread and dollar
roll income per common share - basic and diluted
|
$
0.90
|
|
$
0.62
|
|
$
0.46
|
|
$
0.36
|
|
$
2.33
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization, per
common share - basic and diluted
|
$
0.64
|
|
$
0.64
|
|
$
0.56
|
|
$
0.52
|
|
$
2.36
|
AGNC INVESTMENT
CORP.
|
RECONCILIATION OF
GAAP NET INCOME TO ESTIMATED TAXABLE INCOME 2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year Ended
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
2016
|
|
2016
|
|
2016
|
|
2016
|
|
2016
|
Net income
(loss)
|
$
1,019
|
|
$
511
|
|
$
(135)
|
|
$
(772)
|
|
$
623
|
Book to tax
differences:
|
|
|
|
|
|
|
|
|
|
Premium amortization,
net
|
(106)
|
|
(15)
|
|
20
|
|
55
|
|
(46)
|
Realized gain/loss,
net
|
301
|
|
249
|
|
391
|
|
93
|
|
1,034
|
Net capital loss/(utilization of net capital loss
carryforward) 5
|
93
|
|
(127)
|
|
(99)
|
|
(99)
|
|
(232)
|
Unrealized gain/(loss),
net
|
(1,252)
|
|
(540)
|
|
(106)
|
|
804
|
|
(1,094)
|
Other
|
2
|
|
(8)
|
|
9
|
|
-
|
|
3
|
Total book to tax
differences
|
(962)
|
|
(441)
|
|
215
|
|
853
|
|
(335)
|
Estimated REIT
taxable income
|
57
|
|
70
|
|
80
|
|
81
|
|
288
|
Dividend on preferred
stock
|
7
|
|
7
|
|
7
|
|
7
|
|
28
|
Estimated REIT
taxable income, net of preferred stock dividend
|
$
50
|
|
$
63
|
|
$
73
|
|
$
74
|
|
$
260
|
Weighted average
number of common shares outstanding - basic and diluted
|
331.0
|
|
331.0
|
|
331.0
|
|
334.4
|
|
331.9
|
Estimated REIT
taxable income per common share - basic and diluted
|
$
0.15
|
|
$
0.19
|
|
$
0.22
|
|
$
0.22
|
|
$
0.78
|
|
|
|
|
|
|
|
|
|
|
Beginning cumulative
non-deductible capital loss
|
$
359
|
|
$
486
|
|
$
585
|
|
$
684
|
|
$
684
|
Net capital
loss/(utilization of net capital loss
carryforward)
|
93
|
|
(127)
|
|
(99)
|
|
(99)
|
|
(232)
|
Ending cumulative
non-deductible capital loss
|
$
452
|
|
$
359
|
|
$
486
|
|
$
585
|
|
$
452
|
Ending cumulative
non-deductible capital loss per common share
|
$
1.37
|
|
$
1.08
|
|
$
1.47
|
|
$
1.77
|
|
$
1.37
|
AGNC INVESTMENT
CORP.
|
KEY
STATISTICS*
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Key Balance Sheet
Statistics:
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
2016
|
|
2016
|
|
2016
|
|
2016
|
|
2015
|
Fixed-rate agency
securities, at fair value - as of period end
18
|
$
44,736
|
|
$
45,611
|
|
$
52,648
|
|
$
54,155
|
|
$
50,522
|
Adjustable-rate
agency securities, at fair value - as of period end
|
$
379
|
|
$
415
|
|
$
443
|
|
$
471
|
|
$
495
|
CMO agency
securities, at fair value - as of period end
|
$
801
|
|
$
865
|
|
$
920
|
|
$
966
|
|
$
990
|
Interest-only strips
agency securities, at fair value - as of period end
|
$
151
|
|
$
166
|
|
$
180
|
|
$
176
|
|
$
178
|
Principal-only strips
agency securities, at fair value - as of period end
|
$
144
|
|
$
161
|
|
$
172
|
|
$
175
|
|
$
175
|
Non-agency
securities, at fair value - as of period end
|
$
124
|
|
$
102
|
|
$
107
|
|
$
112
|
|
$
113
|
Credit risk transfer
securities, at fair value - as of period end
|
$
164
|
|
$
36
|
|
$
-
|
|
$
-
|
|
$
-
|
Total securities, at
fair value - as of period end 18
|
$
46,499
|
|
$
47,356
|
|
$
54,470
|
|
$
56,055
|
|
$
52,473
|
Total securities, at
cost - as of period end 18
|
$
46,866
|
|
$
46,304
|
|
$
53,317
|
|
$
55,271
|
|
$
52,464
|
Total securities, at
par - as of period end 6, 18
|
$
44,749
|
|
$
44,212
|
|
$
50,950
|
|
$
52,864
|
|
$
50,163
|
Average securities,
at cost 18
|
$
45,885
|
|
$
48,548
|
|
$
51,810
|
|
$
50,897
|
|
$
52,131
|
Average securities,
at par 6, 18
|
$
43,802
|
|
$
46,372
|
|
$
49,544
|
|
$
48,687
|
|
$
49,890
|
Net TBA portfolio -
as of period end, at fair value
|
$
11,165
|
|
$
15,586
|
|
$
7,072
|
|
$
6,024
|
|
$
7,444
|
Net TBA portfolio -
as of period end, at cost
|
$
11,312
|
|
$
15,540
|
|
$
6,975
|
|
$
5,983
|
|
$
7,430
|
Net TBA portfolio -
as of period end, carrying value
|
$
(147)
|
|
$
46
|
|
$
97
|
|
$
41
|
|
$
14
|
Average net TBA
portfolio, at cost
|
$
14,141
|
|
$
10,748
|
|
$
8,238
|
|
$
8,144
|
|
$
7,796
|
Average repurchase
agreements and other debt 4
|
$
41,031
|
|
$
44,401
|
|
$
46,948
|
|
$
45,926
|
|
$
47,018
|
Average stockholders'
equity 7
|
$
7,604
|
|
$
7,803
|
|
$
7,722
|
|
$
7,776
|
|
$
8,143
|
Net book value per
common share 8
|
$
21.17
|
|
$
22.91
|
|
$
22.22
|
|
$
22.09
|
|
$
22.59
|
Tangible net book
value per common share 9
|
$
19.50
|
|
$
21.23
|
|
N/A
|
|
N/A
|
|
N/A
|
"At risk" leverage -
average during the period 10
|
7.3:1
|
|
7.1:1
|
|
7.2:1
|
|
7.0:1
|
|
6.8:1
|
"At risk" leverage -
as of period end 11
|
7.1:1
|
|
7.2:1
|
|
7.2:1
|
|
7.3:1
|
|
6.8:1
|
Tangible net book
value "at risk" leverage - average during the period
12
|
7.8:1
|
|
7.6:1
|
|
N/A
|
|
N/A
|
|
N/A
|
Tangible net book
value "at risk" leverage - as of period end
12
|
7.7:1
|
|
7.7:1
|
|
N/A
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Statistics:
|
|
|
|
|
|
|
|
|
|
Average coupon
13, 18
|
3.63%
|
|
3.65%
|
|
3.63%
|
|
3.63%
|
|
3.62%
|
Average asset yield
14, 18
|
3.43%
|
|
2.60%
|
|
2.46%
|
|
2.32%
|
|
2.87%
|
Average cost of funds
15, 18
|
(1.40)%
|
|
(1.32)%
|
|
(1.46)%
|
|
(1.64)%
|
|
(1.60)%
|
Average net interest
rate spread 18
|
2.03%
|
|
1.28%
|
|
1.00%
|
|
0.68%
|
|
1.27%
|
Average net interest
rate spread, including TBA dollar roll income/loss
16
|
2.02%
|
|
1.42%
|
|
1.16%
|
|
0.94%
|
|
1.47%
|
Average coupon - as
of period end 18
|
3.61%
|
|
3.64%
|
|
3.63%
|
|
3.63%
|
|
3.63%
|
Average asset yield -
as of period end 18
|
2.77%
|
|
2.68%
|
|
2.68%
|
|
2.72%
|
|
2.78%
|
Average cost of funds
- as of period end 15, 18
|
(1.44)%
|
|
(1.30)%
|
|
(1.35)%
|
|
(1.49)%
|
|
(1.65)%
|
Average net interest
rate spread - as of period end 18
|
1.33%
|
|
1.38%
|
|
1.33%
|
|
1.23%
|
|
1.13%
|
Average actual CPR
for securities held during the period 18
|
14%
|
|
14%
|
|
12%
|
|
9%
|
|
10%
|
Average forecasted
CPR - as of period end 18
|
8%
|
|
11%
|
|
11%
|
|
10%
|
|
8%
|
Total premium
amortization, net
|
$
(6)
|
|
$
(110)
|
|
$
(134)
|
|
$
(150)
|
|
$
(78)
|
Expenses % of average
total assets - annualized
|
0.12%
|
|
0.10%
|
|
0.27%
|
|
0.23%
|
|
0.23%
|
Expenses % of average
stockholders' equity - annualized
|
0.89%
|
|
0.76%
|
|
2.08%
|
|
1.70%
|
|
1.61%
|
Net comprehensive
income (loss) return on average common equity -
annualized
|
(21.6)%
|
|
22.0%
|
|
13.0%
|
|
0.3%
|
|
1.0%
|
Dividends declared
per common share
|
$
0.54
|
|
$
0.56
|
|
$
0.60
|
|
$
0.60
|
|
$
0.60
|
Economic return
(loss) on common equity - annualized 17
|
(20.8)%
|
|
22.4%
|
|
13.3%
|
|
1.8%
|
|
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.
** Numbers may not total due to rounding.
N/A - Not applicable
- The Company voluntarily discontinued hedge accounting under
GAAP for interest rate swaps as of September
30, 2011. The accumulated other comprehensive loss on
the Company's de-designated interest rate swaps as of September 30, 2011 is being amortized on a
straight-line basis over the remaining swap terms into interest
expense. All other periodic interest costs, termination fees
and mark-to-market adjustments associated with interest rate swaps
are reported in other income (loss), net pursuant to GAAP.
- Table includes non-GAAP financial measures. Refer to "Use
of Non-GAAP Financial Information" for additional discussion of
non-GAAP financial measures.
- Other interest rate swap periodic costs represent periodic
interest costs on the Company's interest rate swap portfolio in
excess of amounts reclassified from accumulated OCI into interest
expense (see footnote 1 for additional information). Other interest
rate swap periodic costs do not include termination fees or
mark-to-market adjustments associated with interest rate
swaps.
- Average repurchase agreements and other debt includes agency
repo, FHLB advances and debt of consolidated VIE's. Amount
excludes U.S. Treasury repurchase agreements.
- Capital losses in excess of capital gains are not deductible
from the Company's ordinary taxable income, but may be carried
forward for up to five years from the year of loss and applied
against future net capital gains.
- Par value excludes the underlying unamortized principal balance
("UPB") of the Company's interest-only securities. Excludes
TBAs.
- Average stockholders' equity calculated as the average
month-ended stockholders' equity during the quarter.
- Net book value per common share calculated as total
stockholders' equity, less the preferred stock liquidation
preference, divided by the number of common shares
outstanding.
- Tangible net book value per common share excludes goodwill and
other intangible assets, net.
- Average "at risk" leverage during the period was calculated by
dividing the sum of the daily weighted average agency repurchase
agreements, FHLB advances, debt of consolidated VIEs outstanding
and average net TBA position (at cost) for the period by the sum of
average stockholders' equity less the average investment in REIT
equity securities for the period. Leverage excludes U.S.
Treasury repurchase agreements.
- "At risk" leverage as of period end was calculated by dividing
the sum of the amount outstanding under agency repurchase
agreements, FHLB advances, debt of consolidated VIE, net TBA
position (at cost) and net receivable / payable for unsettled
agency securities by the sum of total stockholders' equity less the
fair value of investments in REIT equity securities at period end.
Leverage excludes U.S. Treasury repurchase agreements.
- Tangible net book value "at risk" leverage includes the
components of "at risk" leverage, with stockholders' equity
adjusted to exclude goodwill and other intangible assets, net.
- Average coupon for the period was calculated by dividing the
total coupon (or cash) interest income by average securities held
at par.
- Average asset yield for the period was calculated by dividing
the total interest income (coupon interest less amortization of net
premiums and discounts) by the average amortized cost of securities
held.
- Cost of funds includes agency repurchase agreements, other debt
and current pay interest rate swaps, but excludes swap termination
fees, forward starting swaps and costs associated with other
supplemental hedges such as swaptions and short U.S. Treasury or
TBA positions. Average cost of funds for the period was
calculated by dividing the total cost of funds by the average
agency repurchase agreements and other debt outstanding for the
period. Cost of funds excludes U.S. Treasury repurchase
agreements.
- TBA dollar roll income/(loss) is net of TBAs used for hedging
purposes. Dollar roll income/(loss) excludes the impact of other
supplemental hedges, and is recognized in gain (loss) on derivative
instruments and other securities, net.
- Economic return (loss) on common equity represents the sum of
the change in net asset value per common share and dividends
declared on common stock during the period over the beginning net
asset value per common share.
- Excludes net TBA mortgage position.
STOCKHOLDER CALL
AGNC invites stockholders,
prospective stockholders and analysts to attend the AGNC
stockholder call on February 2, 2017 at 8:30 am ET. Interested persons who do not
plan on asking a question and have access to the internet are
encouraged to utilize the free live webcast at www.AGNC.com.
Those who plan on participating in the Q&A or do not have the
internet available may access the call by dialing (877) 300-5922
(U.S. domestic) or (412) 902-6621 (international). Please advise
the operator you are dialing in for the AGNC Investment Corp.
stockholder call.
A slide presentation will accompany the call and will be
available at www.AGNC.com. Select the Q4 2016 Earnings
Presentation link to download and print the presentation in advance
of the stockholder call.
An archived audio of the stockholder call combined with the
slide presentation will be available on the AGNC website after the
call on February 2, 2017. In addition, there will be a
phone recording available one hour after the live call on
February 2, 2017 through February 16,
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
10098994.
For further information, please contact Investor Relations at
(301) 968-9300 or IR@AGNC.com.
ABOUT AGNC INVESTMENT CORP.
AGNC Investment Corp. is
an internally-managed real estate investment trust ("REIT") that
invests primarily in agency pass-through securities for which the
principal and interest payments are guaranteed by a U.S. Government
agency or a U.S. Government-sponsored enterprise. For further
information, please refer to www.AGNC.com.
FORWARD LOOKING STATEMENTS
This press release contains
forward-looking statements. Forward-looking statements are
based on estimates, projections, beliefs and assumptions of
management of the Company at the time of such statements and are
not guarantees of future performance. Forward-looking
statements involve risks and uncertainties in predicting future
results and conditions. Actual results could differ
materially from those projected in these forward-looking statements
due to a variety of important factors, including, without
limitation, changes in interest rates, changes in the yield curve,
changes in prepayment rates, the availability and terms of
financing, changes in the market value of the Company's assets,
general economic conditions, market conditions, conditions in the
market for agency securities, and legislative and regulatory
changes that could adversely affect the business of the
Company. Certain factors that could cause actual results to
differ materially from those contained in the forward-looking
statements, are included in the Company's periodic reports filed
with the Securities and Exchange Commission ("SEC"). Copies
are available on the SEC's website, www.sec.gov. The Company
disclaims any obligation to update or revise any forward-looking
statements based on the occurrence of future events, the receipt or
new information, or otherwise.
USE OF NON-GAAP FINANCIAL INFORMATION
In addition to
the results presented in accordance with GAAP, the Company's
results of operations discussed in this release include certain
non-GAAP financial information, including "net spread and dollar
roll income," "adjusted net interest expense," "net spread and
dollar roll income, excluding 'catch-up' premium amortization,"
"estimated taxable income" and the related per common share
measures and certain financial metrics derived from such non-GAAP
information, such as "cost of funds" and "net interest rate
spread."
"Adjusted net interest expense" is measured as interest expense
(GAAP measure) adjusted to include other interest rate swap
periodic costs. "Net spread and dollar roll income" is
measured as (i) net interest income (GAAP measure) adjusted to
include other interest rate swap periodic costs, TBA dollar roll
income, dividends on REIT equity securities and management fee
income (referred to as "adjusted net interest and dollar roll
income") less (ii) total operating expenses (GAAP measure) adjusted
to exclude non-recurring transaction costs (referred to as
"adjusted operating expenses"). "Net spread and dollar roll
income, excluding 'catch-up' premium amortization," further
excludes retrospective "catch-up" adjustments to premium
amortization cost or benefit due to changes in projected CPR
estimates.
By providing users of the Company's financial information with
such measures in addition to the related GAAP measures, the Company
believes users will have greater transparency into the information
used by the Company's management in its financial and operational
decision-making. The Company also believes that it is
important for users of our financial information to consider
information related to the Company's current financial performance
without the effects of certain transactions that are not
necessarily indicative of its current investment portfolio
performance and operations.
Specifically, in the case of "adjusted net interest and dollar
roll income," the Company believes the inclusion of TBA dollar roll
income is meaningful as TBAs, which are accounted for under GAAP as
derivative instruments with gains and losses recognized in other
gain (loss) in the Company's statement of operations, are
economically equivalent to holding and financing generic agency MBS
using short-term repurchase agreements. Similarly, the
Company believes that the inclusion of periodic interest rate swap
settlements in such measure and in "adjusted net interest expense",
which are recognized under GAAP in other gain (loss), is meaningful
as interest rate swaps are the primary instrument the Company uses
to economically hedge against fluctuations in the Company's
borrowing costs and inclusion of all periodic interest rate swap
settlement costs is more indicative of the Company's total cost of
funds than interest expense alone. In the case of "net spread
and dollar roll income, excluding 'catch-up' premium amortization,"
the Company believes the exclusion of "catch-up" adjustments to
premium amortization cost or benefit is meaningful as it excludes
the cumulative effect from prior reporting periods due to current
changes in future prepayment expectations and, therefore, exclusion
of such cost or benefit is more indicative of the current earnings
potential of the Company's investment portfolio. The Company
also believes the exclusion of non-recurring transactions costs
reported in operating expense under GAAP is meaningful as they
represent non-recurring transaction costs associated with the
Company's acquisition of AMM and are not representative of ongoing
operating costs. In the case of estimated taxable income, the
Company believes it is meaningful information as it is directly
related to the amount of dividends the Company is required to
distribute in order to maintain its REIT qualification status.
However, because such measures are incomplete measures of the
Company's financial performance and involve differences from
results computed in accordance with GAAP, they should be considered
as supplementary to, and not as a substitute for, results computed
in accordance with GAAP. In addition, because not all
companies use identical calculations, the Company's presentation of
such non-GAAP measures may not be comparable to other
similarly-titled measures of other companies. Furthermore,
estimated taxable income can include certain information that is
subject to potential adjustments up to the time of filing the
Company's income tax returns, which occurs after the end of its
fiscal year.
A reconciliation of GAAP net interest income to non-GAAP "net
spread and dollar roll income, excluding 'catch-up' premium
amortization" and a reconciliation of GAAP net income to non-GAAP
"estimated taxable income" is included in this release.
CONTACT:
Investors - (301) 968-9300
Media - (301) 968-9303
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/agnc-investment-corp-announces-fourth-quarter-2016-financial-results-300400874.html
SOURCE AGNC Investment Corp.