BETHESDA, Md., July 24,
2023 /PRNewswire/ -- AGNC Investment Corp.
("AGNC" or the "Company") (Nasdaq: AGNC) today announced financial
results for the quarter ended June 30,
2023.
SECOND QUARTER 2023 FINANCIAL HIGHLIGHTS
- $0.32 comprehensive income per
common share, comprised of:
-
- $0.43 net income per common
share
- $(0.11) other comprehensive loss
("OCI") per common share on investments marked-to-market through
OCI
- $0.67 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization benefit 1
-
- Includes $0.01 per common share
of dollar roll income associated with the Company's $10.0 billion average net long position in Agency
mortgage-backed securities ("MBS") in the "to-be-announced" ("TBA")
market
- Excludes $0.02 per common share
of estimated "catch-up" premium amortization benefit due to change
in projected constant prepayment rate ("CPR") estimates
- $9.39 tangible net book value per
common share as of June 30, 2023
-
- Decreased $(0.02) per common
share, or -0.2%, from $9.41 per
common share as of March 31,
2023
- $0.36 dividends declared per
common share for the second quarter
- 3.6% economic return on tangible common equity for the
quarter
-
- Comprised of $0.36 dividends per
common share and $(0.02) decrease in
tangible net book value per common share
OTHER SECOND QUARTER HIGHLIGHTS
- $58.0 billion investment
portfolio as of June 30, 2023,
comprised of:
-
- $46.7 billion Agency MBS
- $10.2 billion net TBA mortgage
position
- $1.1 billion credit risk
transfer ("CRT") and non-Agency securities
- 7.2x tangible net book value "at risk" leverage as of
June 30, 2023
-
- 7.2x average tangible net book value "at risk" leverage for the
quarter
- Cash and unencumbered Agency MBS totaled $4.3 billion as of June
30, 2023
-
- Excludes unencumbered CRT and non-Agency securities
- Represents 58% of the Company's tangible equity as of
June 30, 2023
- 9.8% average projected portfolio life CPR as of June 30, 2023
-
- 6.6% actual portfolio CPR for the quarter
- 3.26% annualized net interest spread and TBA dollar roll income
for the quarter, excluding estimated "catch-up" premium
amortization benefit
-
- Excludes 7 bps of "catch-up" premium amortization benefit due
to change in projected CPR estimates
- Capital markets activity
-
- Issued 10.7 million common shares through At-the-Market ("ATM")
Offerings at an average offering price of $9.86 per share, net of offering costs, or
$106 million
___________
1. Represents a
non-GAAP measure. Please refer to a reconciliation to the most
comparable GAAP measure and additional information regarding the
use of non-GAAP financial information later in this
release.
|
MANAGEMENT REMARKS
"Market conditions in the second
quarter provided further support of our favorable investment
outlook for Agency MBS," said Peter
Federico, the Company's President and Chief Executive
Officer. "Over the last two years, the U.S. Treasury and Agency MBS
markets have undergone a dramatic repricing as the Federal Reserve
pivoted from an ultra-accommodative monetary policy in response to
the pandemic's impact on the U.S. economy to its restrictive stance
today to combat elevated inflation. We believe that this transition
is largely complete and that we are at the forefront of one of the
most constructive investment environments in our 15 year history,
driven by historically attractive asset valuations, strong funding
markets, and gradually improving hedging conditions as the Fed's
tightening campaign concludes.
"AGNC provides investors the opportunity to access this
fundamental fixed income asset class in a highly efficient way and
to a portfolio that is fully marked-to-market. At current valuation
levels, we believe our portfolio can generate robust risk-adjusted
returns for stockholders on a go forward basis either through
strong earnings if mortgage spreads remain at these levels or a
combination of earnings and net book value appreciation to the
extent that mortgage spreads tighten from these historically wide
levels. Agency MBS also provide investors a compelling alternative
to U.S Treasuries and investment grade corporate debt. While short
term deviations from this promising path are possible, we remain
confident in AGNC's long term prospects and are excited about the
next phase of this investment cycle."
"In the second quarter, AGNC generated a 3.6% economic
return on tangible common equity, comprised of $0.36 of dividends per common share and a modest
$(0.02) decline in tangible net book
value per common share," said Bernice
Bell, the Company's Executive Vice President and Chief
Financial Officer. "AGNC's net spread and dollar roll income,
excluding 'catch-up' premium amortization, remained strong at
$0.67 per common share. Finally, in
light of continuing rate volatility, AGNC maintained a conservative
leverage level, disciplined risk management positioning, and ample
liquidity throughout the quarter."
TANGIBLE NET BOOK VALUE PER COMMON SHARE
As of
June 30, 2023, the Company's tangible
net book value per common share was $9.39 per share, a decrease of -0.2% for the
quarter compared to $9.41 per share
as of March 31, 2023. The Company's
tangible net book value per common share excludes $526 million, or $0.87 and $0.89 per
share, of goodwill as of June 30,
2023 and March 31, 2023,
respectively.
INVESTMENT PORTFOLIO
As of June
30, 2023, the Company's investment portfolio totaled
$58.0 billion, comprised of:
- $56.9 billion of Agency MBS and
TBA securities, including:
-
- $56.5 billion of fixed-rate
securities, comprised of:
-
- $43.6 billion 30-year MBS,
- $9.8 billion 30-year TBA
securities,
- $1.4 billion 15-year MBS,
- $0.4 billion 15-year TBA
securities, and
- $1.3 billion 20-year MBS;
and
- $0.5 billion of collateralized
mortgage obligations ("CMOs"), adjustable-rate and other Agency
securities; and
- $1.1 billion of CRT and
non-Agency securities.
As of June 30, 2023, 30-year and
15-year fixed-rate Agency MBS and TBA securities represented 92%
and 3%, respectively, of the Company's investment portfolio,
unchanged from March 31, 2023.
As of June 30, 2023, the Company's
fixed-rate Agency MBS and TBA securities' weighted average coupon
was 4.42%, compared to 4.24% as of March 31,
2023, comprised of the following weighted average
coupons:
- 4.50% for 30-year fixed-rate securities;
- 3.59% for 15-year fixed rate securities; and
- 2.50% for 20-year fixed-rate securities.
The Company accounts for TBA securities and other forward
settling securities as derivative instruments and recognizes TBA
dollar roll income in other gain (loss), net on the Company's
financial statements. As of June 30,
2023, such positions had a fair value of $10.2 billion and a GAAP net carrying value of
$(92) million reported in derivative
assets/(liabilities) on the Company's balance sheet, compared to
$10.4 billion and $10 million, respectively, as of March 31, 2023.
CONSTANT PREPAYMENT RATES
The Company's weighted
average projected CPR for the remaining life of its Agency
securities held as of June 30, 2023
decreased to 9.8% from 10.0% as of March 31,
2023. The Company's weighted average CPR for the second
quarter was 6.6%, compared to 5.2% for the prior quarter.
The weighted average cost basis of the Company's investment
portfolio was 102.8% of par value as of June
30, 2023. The Company's investment portfolio generated net
premium amortization cost of $(45)
million, or $(0.08) per common
share, for the second quarter, which includes a "catch-up" premium
amortization benefit of $11 million,
or $0.02 per common share, due to a
decrease in the Company's CPR projections for certain securities
acquired prior to the second quarter. This compares to net premium
amortization cost for the prior quarter of $(120) million, or $(0.21) per common share, including a "catch-up"
premium amortization cost of $(69)
million, or $(0.12) per common
share.
ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE
SPREAD
The Company's average asset yield on its
investment portfolio, excluding the TBA position, was 3.72% for the
second quarter, compared to 2.93% for the prior quarter. Excluding
"catch-up" premium amortization, the Company's average asset yield
was 3.63% for the second quarter, compared to 3.51% for the prior
quarter. Including the TBA position and excluding "catch-up"
premium amortization, the Company's average asset yield for the
second quarter was 3.89%, compared to 3.90% for the prior
quarter.
For the second quarter, the weighted average interest rate on
the Company's repurchase agreements was 5.01%, compared to 4.51%
for the prior quarter. For the second quarter, the Company's TBA
position had an implied financing cost of 4.89%, compared to 4.53%
for the prior quarter. Inclusive of interest rate swaps, the
Company's combined weighted average cost of funds for the second
quarter was 0.63%, compared to 1.02% for the prior quarter.
The Company's annualized net interest spread, including the TBA
position and interest rate swaps and excluding "catch-up" premium
amortization, for the second quarter was 3.26%, compared to 2.88%
for the prior quarter.
NET SPREAD AND DOLLAR ROLL INCOME
The Company
recognized net spread and dollar roll income (a non-GAAP financial
measure) for the second quarter of $0.67 per common share, excluding $0.02 per common share of "catch-up" premium
amortization benefit, compared to $0.70 per common share for the prior quarter,
excluding $(0.12) per common share of
"catch-up" premium amortization cost.
A reconciliation of the Company's total comprehensive income
(loss) to net spread and dollar roll income, excluding "catch-up"
premium amortization, and additional information regarding the
Company's use of non-GAAP measures are included later in this
release.
LEVERAGE
As of June 30,
2023, $40.9 billion of
repurchase agreements, $10.3 billion
of net TBA dollar roll positions (at cost) and $0.1 billion of other debt were used to fund the
Company's investment portfolio. The remainder, or approximately
$1.2 billion, 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 TBA position and
net payable/(receivable) for unsettled investment securities, the
Company's tangible net book value "at risk" leverage ratio was 7.2x
as of June 30, 2023, unchanged from
March 31, 2023. The Company's average
"at risk" leverage for the second quarter was 7.2x tangible net
book value, compared to 7.7x for the prior quarter.
As of June 30, 2023, the Company's
repurchase agreements used to fund its investment portfolio
("Agency repo") had a weighted average interest rate of 5.23%,
compared to 4.81% as of March 31,
2023, and a weighted average remaining maturity of 15 days,
compared to 18 days as of March 31,
2023. As of June 30, 2023,
$19.7 billion, or 48%, of the
Company's Agency repo agreements were funded through the Company's
captive broker-dealer subsidiary, Bethesda Securities, LLC.
As of June 30, 2023, the Company's
Agency repo agreements had remaining maturities of:
- $40.7 billion of three months or
less and
- $0.2 billion from six to twelve
months.
HEDGING ACTIVITIES
As of June
30, 2023, interest rate swaps, swaptions, U.S. Treasury
positions and other interest rate hedges equaled 119% of the
Company's outstanding balance of Agency repo agreements, TBA
position and other debt, compared to 114% as of March 31, 2023.
As of June 30, 2023, the Company's
net interest rate swap position totaled $47.7 billion in notional amount, compared to
$48.9 billion as of March 31, 2023. As of June
30, 2023, the Company's interest rate swap portfolio had an
average fixed pay rate of 0.55%, an average receive rate of 5.08%
and an average maturity of 3.1 years, compared to 0.47%, 4.86% and
3.3 years, respectively, as of March 31,
2023. As of June 30, 2023, 81%
and 19% of the Company's interest rate swap portfolio were linked
to the Secured Overnight Financing Rate ("SOFR") and Overnight
Index Swap Rate ("OIS"), respectively.
As of June 30, 2023, the Company
had payer swaptions totaling $1.6
billion, a two-year swap equivalent long SOFR futures
position of $1.3 billion and a net
short U.S. Treasury position of $13.2
billion outstanding, compared to $1.6
billion, $0.3 billion and
$9.2 billion, respectively, as of
March 31, 2023.
OTHER GAIN (LOSS), NET
For the second quarter, the
Company recorded a net gain of $378
million in other gain (loss), net, or $0.63 per common share, compared to a net loss of
$(31) million, or $(0.05) per common share, for the prior quarter.
Other gain (loss), net for the second quarter was comprised of:
- $(255) million of net realized
losses on sales of investment securities;
- $(363) million of net unrealized
losses on investment securities measured at fair value through net
income;
- $567 million of interest rate
swap periodic income;
- $290 million of net gains on
interest rate swaps;
- $26 million of net gains on
interest rate swaptions;
- $(16) million of net losses on
SOFR futures;
- $316 million of net gains on U.S.
Treasury positions;
- $6 million of TBA dollar roll
income;
- $(142) million of net
mark-to-market losses on TBA securities;
- $(35) million of other interest
income (expense), net; and
- $(16) million of other
miscellaneous losses.
OTHER COMPREHENSIVE LOSS
During the second quarter,
the Company recorded other comprehensive loss of $(65) million, or $(0.11) per common share, consisting of net
unrealized losses on the Company's Agency securities recognized
through OCI, compared to $142
million, or $0.25 per common
share, of other comprehensive income for the prior quarter.
COMMON STOCK DIVIDENDS
During the second quarter, the
Company declared dividends of $0.12
per share to common stockholders of record as of April 28, May 31,
and June 30, 2023, totaling
$0.36 per share for the quarter.
Since its May 2008 initial public
offering through the second quarter of 2023, the Company has
declared a total of $12.4 billion in
common stock dividends, or $46.48 per
common share.
FINANCIAL STATEMENTS, OPERATING PERFORMANCE AND PORTFOLIO
STATISTICS
The following measures of operating performance
include net spread and dollar roll income; net spread and dollar
roll income, excluding "catch-up" premium amortization; economic
interest income; economic interest expense; and the related per
common share measures and financial metrics derived from such
information, which are non-GAAP financial measures. Please refer to
"Use of Non-GAAP Financial Information" later in this release for
further discussion of non-GAAP measures.
AGNC INVESTMENT
CORP.
|
CONSOLIDATED BALANCE
SHEETS
|
(in millions, except
per share data)
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2023
|
|
March 31,
2023
|
|
December 31,
2022
|
|
September 30,
2022
|
|
June 30,
2022
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
(unaudited)
|
|
(unaudited)
|
Assets:
|
|
|
|
|
|
|
|
|
|
Agency securities, at
fair value (including pledged securities of $41,185, $41,852,
$35,800, $37,886 and $40,107, respectively)
|
$
46,572
|
|
$
44,925
|
|
$
39,346
|
|
$
41,740
|
|
$
43,459
|
Agency securities
transferred to consolidated variable interest entities, at fair
value (pledged securities)
|
131
|
|
140
|
|
144
|
|
149
|
|
167
|
Credit risk transfer
securities, at fair value (including pledged securities of $664,
$747, $703, $815 and $629, respectively)
|
711
|
|
769
|
|
757
|
|
860
|
|
894
|
Non-Agency securities,
at fair value, and other mortgage credit investments (including
pledged securities of $283, $457, $605, $775 and $643,
respectively)
|
353
|
|
530
|
|
682
|
|
869
|
|
881
|
U.S. Treasury
securities, at fair value (including pledged securities of $1,523,
$6,481, $353, $1,213 and $1,882, respectively)
|
1,523
|
|
6,642
|
|
353
|
|
1,213
|
|
1,882
|
Cash and cash
equivalents
|
716
|
|
975
|
|
1,018
|
|
976
|
|
906
|
Restricted
cash
|
907
|
|
1,864
|
|
1,316
|
|
2,186
|
|
1,333
|
Derivative assets, at
fair value
|
234
|
|
229
|
|
617
|
|
851
|
|
536
|
Receivable for
investment securities sold (including pledged securities of $445,
$339, $119, $1,163 and $1,907, respectively)
|
148
|
|
346
|
|
120
|
|
1,169
|
|
2,006
|
Receivable under
reverse repurchase agreements
|
7,990
|
|
8,929
|
|
6,622
|
|
7,577
|
|
8,438
|
Goodwill
|
526
|
|
526
|
|
526
|
|
526
|
|
526
|
Other
assets
|
707
|
|
236
|
|
247
|
|
408
|
|
212
|
Total
assets
|
$
60,518
|
|
$
66,111
|
|
$
51,748
|
|
$
58,524
|
|
$
61,240
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
$
42,029
|
|
$
48,384
|
|
$
36,262
|
|
$
40,306
|
|
$
43,153
|
Debt of consolidated
variable interest entities, at fair value
|
87
|
|
92
|
|
95
|
|
98
|
|
107
|
Payable for investment
securities purchased
|
1,901
|
|
—
|
|
302
|
|
1,279
|
|
547
|
Derivative
liabilities, at fair value
|
117
|
|
326
|
|
99
|
|
1,221
|
|
237
|
Dividends
payable
|
103
|
|
101
|
|
100
|
|
92
|
|
88
|
Obligation to return
securities borrowed under reverse repurchase agreements, at fair
value
|
7,970
|
|
8,869
|
|
6,534
|
|
7,469
|
|
8,265
|
Accounts payable and
other liabilities
|
433
|
|
547
|
|
486
|
|
837
|
|
803
|
Total
liabilities
|
52,640
|
|
58,319
|
|
43,878
|
|
51,302
|
|
53,200
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
Preferred Stock -
aggregate liquidation preference of $1,688, $1,688, $1,688, $1,688
and $1,538, respectively
|
1,634
|
|
1,634
|
|
1,634
|
|
1,634
|
|
1,489
|
Common stock - $0.01
par value; 603.3, 592.5, 574.6, 551.3 and 522.7 shares issued and
outstanding, respectively
|
6
|
|
6
|
|
6
|
|
6
|
|
5
|
Additional paid-in
capital
|
14,466
|
|
14,356
|
|
14,186
|
|
13,999
|
|
13,707
|
Retained
deficit
|
(7,633)
|
|
(7,674)
|
|
(7,284)
|
|
(7,610)
|
|
(6,726)
|
Accumulated other
comprehensive loss
|
(595)
|
|
(530)
|
|
(672)
|
|
(807)
|
|
(435)
|
Total stockholders'
equity
|
7,878
|
|
7,792
|
|
7,870
|
|
7,222
|
|
8,040
|
Total liabilities and
stockholders' equity
|
$
60,518
|
|
$
66,111
|
|
$
51,748
|
|
$
58,524
|
|
$
61,240
|
|
|
|
|
|
|
|
|
|
|
Tangible net book value per common share
1
|
$
9.39
|
|
$
9.41
|
|
$
9.84
|
|
$
9.08
|
|
$
11.43
|
|
|
|
|
|
|
|
|
|
|
AGNC INVESTMENT
CORP.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
December 31,
2022
|
|
September 30,
2022
|
|
June 30,
2022
|
Interest income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
457
|
|
$
351
|
|
$
347
|
|
$
373
|
|
$
395
|
Interest
expense
|
526
|
|
449
|
|
322
|
|
196
|
|
80
|
Net interest
income
|
(69)
|
|
(98)
|
|
25
|
|
177
|
|
315
|
Other gain (loss), net:
|
|
|
|
|
|
|
|
|
|
Realized loss on sale
of investment securities, net
|
(255)
|
|
(81)
|
|
(1,068)
|
|
(560)
|
|
(946)
|
Unrealized (loss) gain
on investment securities measured at fair value through net income,
net
|
(363)
|
|
594
|
|
1,462
|
|
(1,738)
|
|
(987)
|
Gain (loss) on
derivative instruments and other investments, net
|
996
|
|
(544)
|
|
156
|
|
1,474
|
|
1,204
|
Total other gain
(loss), net
|
378
|
|
(31)
|
|
550
|
|
(824)
|
|
(729)
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
14
|
|
14
|
|
5
|
|
11
|
|
12
|
Other operating
expense
|
9
|
|
8
|
|
9
|
|
8
|
|
8
|
Total operating
expense
|
23
|
|
22
|
|
14
|
|
19
|
|
20
|
Net income (loss)
|
286
|
|
(151)
|
|
561
|
|
(666)
|
|
(434)
|
Dividend on preferred
stock
|
31
|
|
30
|
|
29
|
|
26
|
|
25
|
Net income (loss) available (attributable) to common
stockholders
|
$
255
|
|
$
(181)
|
|
$
532
|
|
$
(692)
|
|
$
(459)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
286
|
|
$
(151)
|
|
$
561
|
|
$
(666)
|
|
$
(434)
|
Unrealized gain (loss)
on investment securities measured at fair value through other
comprehensive income (loss), net
|
(65)
|
|
142
|
|
135
|
|
(372)
|
|
(245)
|
Comprehensive income (loss)
|
221
|
|
(9)
|
|
696
|
|
(1,038)
|
|
(679)
|
Dividend on preferred
stock
|
31
|
|
30
|
|
29
|
|
26
|
|
25
|
Comprehensive income (loss) available (attributable)
to common stockholders
|
$
190
|
|
$
(39)
|
|
$
667
|
|
$
(1,064)
|
|
$
(704)
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
- basic
|
598.8
|
|
579.3
|
|
568.4
|
|
528.7
|
|
526.2
|
Weighted average number of common shares outstanding
- diluted
|
599.7
|
|
579.3
|
|
569.5
|
|
528.7
|
|
526.2
|
Net income (loss) per common share -
basic
|
$
0.43
|
|
$
(0.31)
|
|
$
0.94
|
|
$
(1.31)
|
|
$
(0.87)
|
Net income (loss) per common share -
diluted
|
$
0.43
|
|
$
(0.31)
|
|
$
0.93
|
|
$
(1.31)
|
|
$
(0.87)
|
Comprehensive income (loss) per common share -
basic
|
$
0.32
|
|
$
(0.07)
|
|
$
1.17
|
|
$
(2.01)
|
|
$
(1.34)
|
Comprehensive income (loss) per common share -
diluted
|
$
0.32
|
|
$
(0.07)
|
|
$
1.17
|
|
$
(2.01)
|
|
$
(1.34)
|
Dividends declared per common
share
|
$
0.36
|
|
$
0.36
|
|
$
0.36
|
|
$
0.36
|
|
$
0.36
|
|
|
|
|
|
|
|
|
|
|
AGNC INVESTMENT
CORP.
|
RECONCILIATION OF
GAAP COMPREHENSIVE INCOME (LOSS) TO NET SPREAD AND DOLLAR ROLL
INCOME (NON-GAAP MEASURE) 2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
December 31,
2022
|
|
September 30,
2022
|
|
June 30,
2022
|
Comprehensive income (loss) available (attributable)
to common stockholders
|
$
190
|
|
$
(39)
|
|
$
667
|
|
$
(1,064)
|
|
$
(704)
|
Adjustments to exclude realized and unrealized
(gains) losses reported through net income:
|
|
|
|
|
|
|
|
|
|
Realized loss on sale
of investment securities, net
|
255
|
|
81
|
|
1,068
|
|
560
|
|
946
|
Unrealized (gain) loss
on investment securities measured at fair value through net income,
net
|
363
|
|
(594)
|
|
(1,462)
|
|
1,738
|
|
987
|
(Gain) loss on
derivative instruments and other securities, net
|
(996)
|
|
544
|
|
(156)
|
|
(1,474)
|
|
(1,204)
|
Adjustment to exclude unrealized (gain) loss reported
through other comprehensive income:
|
|
|
|
|
|
|
|
|
|
Unrealized (gain) loss
on available-for-sale securities measure at fair value through
other comprehensive income, net
|
65
|
|
(142)
|
|
(135)
|
|
372
|
|
245
|
Other adjustments:
|
|
|
|
|
|
|
|
|
|
TBA dollar roll income
3,4
|
6
|
|
18
|
|
65
|
|
119
|
|
182
|
Interest rate swap
periodic income (cost) 3,8
|
567
|
|
504
|
|
401
|
|
236
|
|
56
|
Other interest income
(expense), net 3,22
|
(35)
|
|
(33)
|
|
(33)
|
|
(25)
|
|
(7)
|
Net spread and dollar roll income available to common
stockholders
|
415
|
|
339
|
|
415
|
|
462
|
|
501
|
Estimated "catch up"
premium amortization cost (benefit) due to change in CPR forecast
11
|
(11)
|
|
69
|
|
5
|
|
(18)
|
|
(66)
|
Net spread and dollar roll income, excluding
"catch-up" premium amortization, available to common
stockholders
|
$
404
|
|
$
408
|
|
$
420
|
|
$
444
|
|
$
435
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of common shares outstanding - basic
|
598.8
|
|
579.3
|
|
568.4
|
|
528.7
|
|
526.2
|
Weighted average number
of common shares outstanding - diluted
|
599.7
|
|
580.5
|
|
569.5
|
|
529.8
|
|
527.1
|
Net spread and dollar
roll income per common share - basic
|
$
0.69
|
|
$
0.59
|
|
$
0.73
|
|
$
0.87
|
|
$
0.95
|
Net spread and dollar
roll income per common share - diluted
|
$
0.69
|
|
$
0.58
|
|
$
0.73
|
|
$
0.87
|
|
$
0.95
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization, per common
share - basic
|
$
0.67
|
|
$
0.70
|
|
$
0.74
|
|
$
0.84
|
|
$
0.83
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization, per common
share - diluted
|
$
0.67
|
|
$
0.70
|
|
$
0.74
|
|
$
0.84
|
|
$
0.83
|
|
|
|
|
|
|
|
|
|
|
AGNC INVESTMENT
CORP.
|
NET INTEREST SPREAD
COMPONENTS BY FUNDING SOURCE 2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
December 31,
2022
|
|
September 30,
2022
|
|
June 30,
2022
|
Adjusted net interest and dollar roll income,
excluding "catch-up" premium amortization:
|
|
|
|
|
|
|
|
|
|
Economic interest
income:
|
|
|
|
|
|
|
|
|
|
Investment securities
- GAAP interest income 12
|
$
457
|
|
$
351
|
|
$
347
|
|
$
373
|
|
$
395
|
Estimated "catch-up"
premium amortization cost (benefit) due to change in CPR forecast
11
|
(11)
|
|
69
|
|
5
|
|
(18)
|
|
(66)
|
TBA dollar roll income
- implied interest income 3,6
|
129
|
|
220
|
|
230
|
|
213
|
|
180
|
Economic interest
income, excluding "catch-up" premium amortization
|
575
|
|
640
|
|
582
|
|
568
|
|
509
|
Economic interest
expense:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
and other debt - GAAP interest expense
|
(526)
|
|
(449)
|
|
(322)
|
|
(196)
|
|
(80)
|
TBA dollar roll income
- implied interest (expense) benefit 3,5
|
(123)
|
|
(202)
|
|
(165)
|
|
(94)
|
|
2
|
Interest rate swap
periodic income, net 3,8
|
567
|
|
504
|
|
401
|
|
236
|
|
56
|
Economic interest
expense
|
(82)
|
|
(147)
|
|
(86)
|
|
(54)
|
|
(22)
|
Adjusted net interest
and dollar roll income, excluding "catch-up" premium
amortization
|
$
493
|
|
$
493
|
|
$
496
|
|
$
514
|
|
$
487
|
|
|
|
|
|
|
|
|
|
|
Net interest spread, excluding "catch-up"
amortization:
|
|
|
|
|
|
|
|
|
|
Average asset
yield:
|
|
|
|
|
|
|
|
|
|
Investment securities
- average asset yield
|
3.72 %
|
|
2.93 %
|
|
3.14 %
|
|
3.09 %
|
|
3.09 %
|
Estimated "catch-up"
premium amortization cost (benefit) due to change in CPR
forecast
|
(0.09) %
|
|
0.58 %
|
|
0.03 %
|
|
(0.15) %
|
|
(0.51) %
|
Investment securities
average asset yield, excluding "catch-up" premium
amortization
|
3.63 %
|
|
3.51 %
|
|
3.17 %
|
|
2.94 %
|
|
2.58 %
|
TBA securities -
average implied asset yield 6
|
5.18 %
|
|
4.93 %
|
|
4.86 %
|
|
4.18 %
|
|
3.66 %
|
Average asset yield,
excluding "catch-up" premium amortization 7
|
3.89 %
|
|
3.90 %
|
|
3.68 %
|
|
3.31 %
|
|
2.88 %
|
Average total cost of
funds:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
and other debt - average funding cost
|
5.01 %
|
|
4.51 %
|
|
3.55 %
|
|
1.89 %
|
|
0.74 %
|
TBA securities -
average implied funding cost (benefit) 5
|
4.89 %
|
|
4.53 %
|
|
3.41 %
|
|
1.80 %
|
|
(0.04) %
|
Average cost of funds,
before interest rate swap periodic cost (income), net
7
|
4.98 %
|
|
4.52 %
|
|
3.50 %
|
|
1.86 %
|
|
0.49 %
|
Interest rate swap
periodic income, net 10
|
(4.35) %
|
|
(3.50) %
|
|
(2.89) %
|
|
(1.52) %
|
|
(0.35) %
|
Average total cost of
funds 9
|
0.63 %
|
|
1.02 %
|
|
0.61 %
|
|
0.34 %
|
|
0.14 %
|
Average net interest
spread, excluding "catch-up" premium amortization
|
3.26 %
|
|
2.88 %
|
|
3.07 %
|
|
2.97 %
|
|
2.74 %
|
|
|
|
|
|
|
|
|
|
|
AGNC INVESTMENT
CORP.
|
KEY
STATISTICS*
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Key Balance Sheet Statistics:
|
June 30,
2023
|
|
March 31,
2023
|
|
December 31,
2022
|
|
September 30,
2022
|
|
June 30,
2022
|
Investment securities:
12
|
|
|
|
|
|
|
|
|
|
Fixed-rate Agency MBS,
at fair value - as of period end
|
$
46,250
|
|
$
44,754
|
|
$
39,169
|
|
$
41,578
|
|
$
43,382
|
Other Agency MBS, at
fair value - as of period end
|
$
453
|
|
$
311
|
|
$
321
|
|
$
311
|
|
$
244
|
Credit risk transfer
securities, at fair value - as of period end
|
$
711
|
|
$
769
|
|
$
757
|
|
$
860
|
|
$
894
|
Non-Agency MBS, at
fair value - as of period end 21
|
$
325
|
|
$
505
|
|
$
657
|
|
$
843
|
|
$
881
|
Total investment
securities, at fair value - as of period end
|
$
47,739
|
|
$
46,339
|
|
$
40,904
|
|
$
43,592
|
|
$
45,401
|
Total investment
securities, at cost - as of period end
|
$
51,406
|
|
$
49,575
|
|
$
44,880
|
|
$
49,162
|
|
$
48,862
|
Total investment
securities, at par - as of period end
|
$
50,030
|
|
$
48,123
|
|
$
43,403
|
|
$
47,646
|
|
$
47,347
|
Average investment
securities, at cost
|
$
49,119
|
|
$
47,846
|
|
$
44,351
|
|
$
48,362
|
|
$
51,089
|
Average investment
securities, at par
|
$
47,711
|
|
$
46,374
|
|
$
42,978
|
|
$
46,863
|
|
$
49,453
|
TBA securities:
20
|
|
|
|
|
|
|
|
|
|
Net TBA portfolio - as
of period end, at fair value
|
$
10,228
|
|
$
10,395
|
|
$
18,574
|
|
$
17,902
|
|
$
15,893
|
Net TBA portfolio - as
of period end, at cost
|
$
10,320
|
|
$
10,385
|
|
$
18,407
|
|
$
19,116
|
|
$
16,001
|
Net TBA portfolio - as
of period end, carrying value
|
$
(92)
|
|
$
10
|
|
$
167
|
|
$
(1,214)
|
|
$
(108)
|
Average net TBA
portfolio, at cost
|
$
9,985
|
|
$
17,851
|
|
$
18,988
|
|
$
20,331
|
|
$
19,653
|
Average repurchase
agreements and other debt 13
|
$
41,546
|
|
$
39,824
|
|
$
35,486
|
|
$
40,530
|
|
$
42,997
|
Average stockholders'
equity 14
|
$
7,712
|
|
$
8,053
|
|
$
7,481
|
|
$
8,040
|
|
$
8,525
|
Tangible net book value
per common share 1
|
$
9.39
|
|
$
9.41
|
|
$
9.84
|
|
$
9.08
|
|
$
11.43
|
Tangible net book value
"at risk" leverage - average 15
|
7.2 :1
|
|
7.7 :1
|
|
7.8 :1
|
|
8.1 :1
|
|
7.8 :1
|
Tangible net book value
"at risk" leverage - as of period end 16
|
7.2 :1
|
|
7.2 :1
|
|
7.4 :1
|
|
8.7 :1
|
|
7.4 :1
|
|
|
|
|
|
|
|
|
|
|
Key Performance Statistics:
|
|
|
|
|
|
|
|
|
|
Investment securities:
12
|
|
|
|
|
|
|
|
|
|
Average
coupon
|
4.21 %
|
|
4.06 %
|
|
3.74 %
|
|
3.49 %
|
|
3.19 %
|
Average asset
yield
|
3.72 %
|
|
2.93 %
|
|
3.14 %
|
|
3.09 %
|
|
3.09 %
|
Average asset yield,
excluding "catch-up" premium amortization
|
3.63 %
|
|
3.51 %
|
|
3.17 %
|
|
2.94 %
|
|
2.58 %
|
Average coupon - as of
period end
|
4.33 %
|
|
4.15 %
|
|
3.94 %
|
|
3.63 %
|
|
3.35 %
|
Average asset yield -
as of period end
|
3.78 %
|
|
3.55 %
|
|
3.37 %
|
|
3.14 %
|
|
2.85 %
|
Average actual CPR for
securities held during the period
|
6.6 %
|
|
5.2 %
|
|
6.8 %
|
|
9.2 %
|
|
12.4 %
|
Average forecasted CPR
- as of period end
|
9.8 %
|
|
10.0 %
|
|
7.4 %
|
|
7.0 %
|
|
7.2 %
|
Total premium
amortization (cost) benefit, net
|
$
(45)
|
|
$
(120)
|
|
$
(55)
|
|
$
(36)
|
|
$
—
|
TBA
securities:
|
|
|
|
|
|
|
|
|
|
Average coupon - as of
period end 17
|
5.25 %
|
|
5.06 %
|
|
4.84 %
|
|
4.30 %
|
|
4.35 %
|
Average implied asset
yield 6
|
5.18 %
|
|
4.93 %
|
|
4.86 %
|
|
4.18 %
|
|
3.66 %
|
Combined investment and
TBA securities - average asset yield, excluding "catch-up" premium
amortization 7
|
3.89 %
|
|
3.90 %
|
|
3.68 %
|
|
3.31 %
|
|
2.88 %
|
Cost of
funds:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
- average funding cost
|
5.01 %
|
|
4.51 %
|
|
3.55 %
|
|
1.89 %
|
|
0.74 %
|
TBA securities -
average implied funding cost (benefit) 5
|
4.89 %
|
|
4.53 %
|
|
3.41 %
|
|
1.80 %
|
|
(0.04) %
|
Interest rate swaps -
average periodic (income) expense, net 10
|
(4.35) %
|
|
(3.50) %
|
|
(2.89) %
|
|
(1.52) %
|
|
(0.35) %
|
Average total cost
(benefit) of funds, inclusive of TBAs and interest rate swap
periodic (income) expense, net 7,9
|
0.63 %
|
|
1.02 %
|
|
0.61 %
|
|
0.34 %
|
|
0.14 %
|
Repurchase agreements
- average funding cost as of period end
|
5.23 %
|
|
4.81 %
|
|
4.31 %
|
|
2.85 %
|
|
1.25 %
|
Interest rate swaps -
average net pay/(receive) rate as of period end
18
|
(4.53) %
|
|
(4.39) %
|
|
(3.94) %
|
|
(2.79) %
|
|
(1.23) %
|
Net interest
spread:
|
|
|
|
|
|
|
|
|
|
Combined investment
and TBA securities average net interest spread
|
3.34 %
|
|
2.46 %
|
|
3.03 %
|
|
3.07 %
|
|
3.11 %
|
Combined investment
and TBA securities average net interest spread, excluding
"catch-up" premium amortization
|
3.26 %
|
|
2.88 %
|
|
3.07 %
|
|
2.97 %
|
|
2.74 %
|
Expenses % of average
stockholders' equity - annualized
|
1.19 %
|
|
1.09 %
|
|
0.75 %
|
|
0.95 %
|
|
0.94 %
|
Economic return (loss)
on tangible common equity - unannualized 19
|
3.6 %
|
|
(0.7) %
|
|
12.3 %
|
|
(17.4) %
|
|
(10.1) %
|
|
|
|
|
|
|
|
|
|
|
*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.
- Tangible net book value per common share excludes preferred
stock liquidation preference and goodwill.
- Table includes non-GAAP financial measures and/or amounts
derived from non-GAAP measures. Refer to "Use of Non-GAAP Financial
Information" for additional discussion of non-GAAP financial
measures.
- Amount reported in gain (loss) on derivatives instruments and
other securities, net in the accompanying consolidated statements
of operations.
- Dollar roll income represents the price differential, or "price
drop," between the TBA price for current month settlement versus
the TBA price for forward month settlement. Amount includes dollar
roll income (loss) on long and short TBA securities. Amount
excludes TBA mark-to-market adjustments.
- The implied funding cost/benefit of TBA dollar roll
transactions is determined using the "price drop" (Note 4) and
market-based assumptions regarding the "cheapest-to-deliver"
collateral that can be delivered to satisfy the TBA contract, such
as the anticipated collateral's weighted average coupon, weighted
average maturity and projected 1-month CPR. The average implied
funding cost/benefit for all TBA transactions is weighted based on
the Company's daily average TBA balance outstanding for the
period.
- The average implied asset yield for TBA dollar roll
transactions is extrapolated by adding the average TBA implied
funding cost (Note 5) to the net dollar roll yield. The net dollar
roll yield is calculated by dividing dollar roll income (Note 4) by
the average net TBA balance (cost basis) outstanding for the
period.
- Amount calculated on a weighted average basis based on average
balances outstanding during the period and their respective asset
yield/funding cost.
- Represents periodic interest rate swap settlements. Amount
excludes interest rate swap termination fees, mark-to-market
adjustments and price alignment interest income (expense) on margin
deposits.
- Cost of funds excludes other supplemental hedges used to hedge
a portion of the Company's interest rate risk (such
as swaptions, SOFR futures, and U.S. Treasury positions) and
U.S. Treasury repurchase agreements.
- Represents interest rate swap periodic cost measured as a
percent of total mortgage funding (Agency repurchase agreements,
other debt and net TBA securities (at cost)).
- "Catch-up" premium amortization cost/benefit is reported in
interest income on the accompanying consolidated statements of
operations.
- Investment securities include Agency MBS, CRT and
non-Agency securities. Amounts exclude TBA and forward settling
securities accounted for as derivative instruments in the
accompanying consolidated balance sheets and statements of
operations.
- Average repurchase agreements and other debt excludes U.S.
Treasury repurchase agreements.
- Average stockholders' equity calculated as the average
month-ended stockholders' equity during the quarter.
- 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 TBA and
forward settling securities (at cost) outstanding for the period by
the sum of average stockholders' equity adjusted to exclude
goodwill. Leverage excludes U.S. Treasury repurchase
agreements.
- Tangible net book value "at risk" leverage as of period end was
calculated by dividing the sum of the amount outstanding under
repurchase agreements, other debt, net TBA position and forward
settling securities (at cost), and net receivable / payable for
unsettled investment securities outstanding by the sum of total
stockholders' equity adjusted to exclude goodwill. Leverage
excludes U.S. Treasury repurchase agreements.
- Average TBA coupon is for the long TBA position only.
- Includes forward starting swaps not yet in effect as of
reported period-end.
- Economic return (loss) on tangible common equity represents the
sum of 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.
- Includes TBA dollar roll position and, if applicable, forward
settling securities accounted for as derivative instruments in the
accompanying consolidated balance sheets and statements of
operations. Amount is net of short TBA securities.
- Non-Agency MBS, at fair value, excludes $28 million, $25
million, $25 million and
$26 million of other mortgage credit
investments held as of June 30 and
March 31, 2023 and December 31 and September
30, 2022, respectively.
- Other interest income (expense), net includes interest income
on cash and cash equivalents, price alignment interest income
(expense) on margin deposits, and other miscellaneous interest
income (expense).
STOCKHOLDER CALL
AGNC invites stockholders,
prospective stockholders and analysts to attend the AGNC
stockholder call on July 25, 2023 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 webcast at www.AGNC.com. Those who
plan on participating in the Q&A or do not have internet
available may access the call by dialing (877) 300-5922 (U.S.
domestic) or (412) 902-6621 (international). Please advise the
operator you are dialing in for the AGNC Investment Corp.
stockholder call.
A slide presentation will accompany the call and will be
available at www.AGNC.com. Select the Q2 2023 Earnings
Presentation link to download the presentation in advance of the
stockholder call.
An archived audio of the stockholder call combined with the
slide presentation will be available on the AGNC website after
the call on July 25, 2023. In
addition, there will be a phone recording available one hour after
the call on July 25, 2023 through
August 1, 2023. 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 9842963.
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 within the meaning of the Private
Securities Litigation Reform Act. 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 or from our historic
performance due to a variety of important factors, including,
without limitation, changes in monetary policy and other factors
that affect interest rates, MBS spreads to benchmark interest
rates, the forward yield curve, or prepayment rates; the
availability and terms of financing; changes in the market value of
the Company's assets; general economic or geopolitical conditions;
liquidity and other conditions in the market for Agency securities
and other financial markets; 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 of 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"; "economic interest income" and
"economic interest expense"; 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 spread."
Net spread and dollar roll income available to common
stockholders is measured as comprehensive income (loss) available
(attributable) to common stockholders (GAAP measure) adjusted to:
(i) exclude gains/losses on investment securities recognized
through net income or other comprehensive income and gains/losses
on derivative instruments and other securities (GAAP measures) and
(ii) include interest rate swap periodic income/cost, TBA dollar
roll income and other miscellaneous interest income/expense. As
defined, net spread and dollar roll income available to common
stockholders represents net interest income (GAAP measure) adjusted
to include TBA dollar roll income, interest rate swap periodic
income/cost and other miscellaneous interest income/expense, less
total operating expense (GAAP measure) and dividends on preferred
stock (GAAP measure). Net spread and dollar roll income, excluding
'catch-up' premium amortization, available to common stockholders
further excludes retrospective "catch-up" adjustments to premium
amortization cost 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 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, the Company believes the inclusion of TBA dollar
roll income is meaningful as TBAs are economically equivalent
to holding and financing generic Agency MBS using short-term
repurchase agreements but are recognized under GAAP in gain/loss on
derivative instruments in the Company's statement of operations.
Similarly, the Company believes that the inclusion of periodic
interest rate swap settlements in such measure, which are
recognized under GAAP in gain/loss on derivative instruments, 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 settlements 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 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
"catch-up" cost or benefit is more indicative of the current
earnings potential of the Company's investment portfolio.
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.
A reconciliation of GAAP comprehensive income (loss) to non-GAAP
"net spread and dollar roll income, excluding 'catch-up' premium
amortization" is included in this release.
CONTACT:
Investors - (301) 968-9300
Media - (301) 968-9303
View original
content:https://www.prnewswire.com/news-releases/agnc-investment-corp-announces-second-quarter-2023-financial-results-301884311.html
SOURCE AGNC Investment Corp.