BETHESDA, Md., July 27,
2016 /PRNewswire/ -- American Capital Agency Corp. ("AGNC" or
the "Company") (Nasdaq: AGNC) today reported comprehensive income
for the second quarter of 2016 of $0.73 per common share and net book value of
$22.22 per common
share. Economic return for the period, defined as dividends
per common share and the change in net book value ("NAV") per
common share, was 3.3% for the quarter, or 13.3% on an annualized
basis.
SECOND QUARTER 2016 FINANCIAL HIGHLIGHTS
- $0.73 comprehensive income per
common share, comprised of:
- $(0.43) net loss per common
share
- $1.16 other comprehensive income
("OCI") per common share
- Includes net unrealized gains on investments recognized through
OCI
- $0.56 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization cost 1
- Includes $0.13 per common share
of dollar roll income associated with the Company's $8.2 billion average net long position in forward
purchases and sales of agency mortgage-backed securities ("MBS") in
the "to-be-announced" ("TBA") market
- Excludes $(0.10) per common share
of estimated "catch-up" premium amortization cost due to change in
projected constant prepayment rate ("CPR") estimates
- Excludes $(0.03) per common share
of non-recurring transaction costs associated with
acquisition of American Capital Mortgage Management, LLC
("ACMM")
- $22.22 net book value per common
share as of June 30, 2016
- Increased $0.13 per common share,
or 0.6%, from $22.09 per common share
as of March 31, 2016
- $0.60 dividend declared per
common share during the quarter
- 3.3% economic return on common equity for the quarter, or 13.3%
annualized
- Comprised of $0.60 dividend per
common share and $0.13 increase in
net book value per common share
OTHER SECOND QUARTER HIGHLIGHTS
- $61.5 billion investment
portfolio as of June 30, 2016, comprised of:
- $54.4 billion agency MBS
- $7.1 billion TBA mortgage
position
- $0.1 billion AAA non-agency
MBS
- 7.2x "at risk" leverage as of June 30, 2016
- 6.3x leverage, excluding TBA mortgage position, as of
June 30, 2016
- 7.7x "at risk" leverage on pro-forma tangible net book value as
of June 30, 2016, adjusted for the
effect of the completed ACMM acquisition on July 1, 2016
- 7.2x average "at risk" leverage for the quarter, an increase
from 7.0x for the previous quarter
- 11.8% portfolio CPR for the quarter
- 10.8% average projected portfolio life CPR as of June 30,
2016
- 1.38% annualized net interest rate spread and TBA dollar roll
income for the quarter, excluding estimated "catch-up" premium
amortization cost
- Excludes -22 bps of "catch up" premium amortization cost due to
change in projected CPR estimates
- Increased from 1.31% for the prior quarter, excluding -37 bps
of "catch-up" premium amortization cost
_________
- Represents a non-GAAP measure. Please
refer to a reconciliation to the most applicable GAAP measure and
additional information regarding the use of non-GAAP financial
information later in this release.
|
MANAGEMENT REMARKS
"We are very pleased with the
performance of the portfolio in the second quarter," said
Gary Kain, the Company's Chief
Executive Officer, President and Chief Investment
Officer. "Despite volatile market conditions, particularly
late in the quarter following the surprise Brexit vote, AGNC
generated an annualized economic return for our stockholders of
13.3%. With interest rates at or near historically low
levels, we expect that asset selection will once again be a key
driver of total return and a critical component of our disciplined
approach to risk management.
"More importantly, AGNC's acquisition of American Capital
Mortgage Management, LLC was a significant milestone for the
Company. Upon the closing of the transaction on July 1, 2016, AGNC became the largest
internally-managed mortgage REIT. This transformative transaction
materially reduced AGNC's operating cost structure, and we believe
that AGNC will have the lowest run-rate operating cost structure as
a percentage of total equity in the residential mortgage REIT
industry as a result.
"Ultimately, we believe that our significantly improved cost
structure further solidifies AGNC's value proposition to
stockholders. AGNC has consistently provided industry-leading
performance, transparency and stockholder focus, liquidity and
scale, and disciplined risk management to our stockholders, and we
expect that our reduced operating cost structure will further
enhance these components of stockholder value."
NET BOOK VALUE
As of June 30, 2016, the Company's
net book value per common share was $22.22, an increase of $0.13 per common share, or 0.6%, from its
March 31, 2016 net book value per common share of $22.09, due to a modest widening of spreads
between the yield on agency MBS and benchmark interest rates
underlying the Company's interest rate hedges.
INVESTMENT PORTFOLIO
As of June 30, 2016, the
Company's investment portfolio totaled $61.5
billion, comprised of:
- $61.4 billion of agency MBS and
TBA securities, including:
- $59.7 billion of fixed-rate
securities, comprised of:
- $15.0 billion ≤ 15-year
securities,
- $1.3 billion 15-year net long TBA
securities,
- $1.0 billion 20-year fixed-rate
securities,
- $36.7 billion 30-year fixed-rate
securities, and
- $5.7 billion 30-year net long TBA
securities;
- $0.4 billion of adjustable-rate
securities; and
- $1.3 billion of collateralized
mortgage obligations ("CMOs"), including principal and
interest-only strips; and
- $0.1 billion of AAA non-agency
securities.
As of June 30, 2016, inclusive of TBA securities, ≤ 15-year
and 30 year fixed rate securities represented 26% and 69% of the
Company's investment portfolio, respectively, largely unchanged
from 27% and 68%, respectively, as of March 31, 2016.
As of June 30, 2016, the Company's fixed-rate securities,
inclusive of TBA securities, had a weighted average coupon of
3.50%, compared to 3.52% as of March 31, 2016, comprised of
the following weighted average coupons:
- 3.22% for ≤ 15-year fixed rate securities;
- 3.49% for 20-year fixed-rate securities; and
- 3.60% for 30-year fixed-rate securities.
As of June 30, 2016, 68% of the Company's fixed-rate
securities, excluding the net TBA position, were comprised of
securities backed by lower loan balance mortgages and loans
originated under the U.S. Government sponsored Home Affordable
Refinance Program ("HARP"), which typically have a lower risk of
prepayment in a low or declining interest rate environment than
generic agency securities, and reflects an increase from 62% as of
March 31, 2016. The Company
defines lower loan balance securities as pools backed by original
loan balances of up to $150,000 and
HARP securities as pools backed by 100% refinance loans with
original loan-to-values of ≥ 80%.
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 June 30,
2016, the Company's net TBA position had a total fair value and a
total cost basis of $7.1 billion and
$7.0 billion, respectively, and a net
carrying value of $97 million
reported in derivative assets/(liabilities) on the Company's
balance sheet, compared to a total fair value and a total cost
basis of $6.0 billion and a net
carrying value of $41 million as of
March 31, 2016.
CONSTANT PREPAYMENT RATES
The Company's investment
portfolio had a weighted average CPR of 11.8% for the second
quarter, compared to 8.8% for the prior quarter. The weighted
average projected CPR for the remaining life of the Company's
agency securities held as of June 30, 2016 was 10.8%, an
increase from 10.2% as of March 31, 2016 due to higher
prepayment expectations following a 29 basis point decline in the
10 year U.S. Treasury rate during the quarter, partially offset by
an increase in prepayment protected
securities.
The weighted average cost basis of the Company's investment
portfolio was 104.6% of par value as of June 30, 2016.
Net premium amortization cost on the Company's investment portfolio
for the second quarter was $(134)
million, or $(0.40) per common
share, including "catch-up" premium amortization cost of
$(32) million, or $(0.10) per common share, due to changes in the
Company's projected CPR estimates. This compares to net
premium amortization cost for the prior quarter of $(150) million, or $(0.45) per common share, including a "catch-up"
premium amortization cost of $(55)
million, or $(0.16) per common
share. The net unamortized premium balance as of June 30,
2016 was $2.4 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 2.46% for the second quarter, an
increase from 2.32% for the prior quarter. Excluding
"catch-up" premium amortization cost, the Company's average asset
yield was 2.70% for the second quarter, compared to 2.75% for the
prior quarter.
For the second quarter, the Company's average cost of funds was
1.46%, a decrease from 1.64% for the prior quarter, largely due to
a decline in interest rate swap costs, partially offset by a modest
increase in repo funding costs for the 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 Company's combined annualized net interest rate spread on
its balance sheet and dollar roll funded assets for the quarter was
1.16%, compared to 0.94% for the prior quarter. Excluding
"catch-up" premium amortization cost, the Company's combined
annualized net interest rate spread on its balance sheet and dollar
roll funded assets for the quarter was 1.38%, compared to 1.31% for
the prior quarter.
On a per share basis, the Company recognized $0.46 per common share of net spread and dollar
roll income (a non-GAAP financial measure) for the second quarter,
compared to $0.36 for the prior
quarter. Excluding "catch-up" premium amortization cost, the
Company's net spread and dollar roll income was $0.56 per common share for the second quarter, an
increase from $0.52 for the prior
quarter. Net spread and dollar roll income for the second quarter
included $0.13 per common share of
dollar roll income, compared to $0.15
for the prior quarter, and excluded $(0.03) per common share of non-recurring
transaction costs associated with the Company's acquisition of
ACMM, which closed on July 1,
2016. A reconciliation of the Company's net interest income
to net spread and dollar roll income and additional information
regarding the Company's use of non-GAAP measures are included later
in this release.
LEVERAGE
As of June 30, 2016, $41.9 billion of agency repo, $3.0 billion of FHLB advances and $0.5 billion of other debt were used to fund
acquisitions of agency and AAA non-agency securities. The
remainder, or approximately $10
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, the Company's "at risk" leverage
ratio was 7.2x as of June 30, 2016, compared to 7.3x as of
March 31, 2016. The Company's average "at risk" leverage ratio
for the quarter was 7.2x, compared to 7.0x for the prior
quarter. The Company's "at risk" leverage ratio as of
June 30, 2016 based on pro-forma tangible net book value
adjusted for the effect of the completed ACMM acquisition on
July 1, 2016 was 7.7x.
As of June 30, 2016, the Company's agency repurchase
agreements had a weighted average interest rate of 0.78%, an
increase from 0.76% as of March 31, 2016, and a weighted
average remaining days to maturity of 202 days, an increase from
184 days as of March 31, 2016.
As of June 30, 2016, the Company's agency repurchase
agreements had remaining maturities of:
- $28.8 billion of three months or
less;
- $2.5 billion from three to six
months;
- $3.2 billion from six to nine
months;
- $1.3 billion from nine to twelve
months;
- $3.3 billion from one to three
years; and
- $2.9 billion from three to five
years.
As of June 30, 2016, the Company's FHLB advances had a
weighted average interest rate of 0.61% and a weighted average
remaining maturity of 215 days through to the termination of the
Company's captive subsidiary's FHLB membership in February 2017.
HEDGING ACTIVITIES
As of June 30, 2016, 79% 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, a decrease
from 83% as of March 31, 2016, led by a decline in the
Company's interest rate swap position to $35.1 billion in notional amount as of
June 30, 2016 from $38.2 billion
as of March 31, 2016.
As of June 30, 2016, the Company's interest rate swap
position included $2.7 billion of
forward starting swaps, with an average forward start date of 0.7
years and an average remaining maturity of 7.1 years, largely
unchanged from $2.7 billion as of
March 31, 2016, with an average forward start date of 0.9
years and an average remaining maturity of 7.3 years.
Excluding forward starting swaps, the Company's interest rate
swap portfolio had an average fixed pay rate of 1.51% and an
average receive rate of 0.64% as of June 30, 2016, compared to
1.73% and 0.62%, respectively, as of March 31,
2016. Including forward starting swaps, the Company's interest
rate swap portfolio had an average fixed pay rate of 1.64% and an
average maturity of 4.0 years as of June 30, 2016, compared to
1.83% and 4.5 years, respectively, as of March 31,
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
June 30, 2016, the Company had payer swaptions outstanding
totaling $1.1 billion, compared to
$1.8 billion as of March 31,
2016, and a net short U.S. Treasury position outstanding of
$5.5 billion, unchanged from
March 31, 2016.
OTHER GAIN (LOSS), NET
For the second quarter, the
Company recorded a net loss of $(312)
million in other gain (loss), net, or $(0.94) per common share, compared to a net loss
of $(935) million, or $(2.80) per common share, for the prior
quarter. Other gain (loss), net for the second quarter was
comprised of:
- $55 million of net realized gains
on sales of agency securities;
- $(287) million of net losses on
interest rate swaps (excluding $12
million of net unrealized gains recognized in OCI);
- $(69) million of interest rate
swap periodic interest costs;
- $(4) million of net losses on
interest rate swaptions;
- $(116) million of net losses on
U.S. Treasury positions;
- $44 million of TBA dollar roll
income;
- $64 million of net mark-to-market
gains on TBA mortgage positions; and
- $1 million of net gains on other
derivative instruments and securities.
OTHER COMPREHENSIVE INCOME
During the second quarter,
the Company recorded other comprehensive income of $382 million, or $1.16 per common share, primarily consisting of
unrealized gains on the Company's agency securities, compared to
$784 million, or $2.34 per common share, for the prior
quarter.
SECOND QUARTER 2016 DIVIDEND DECLARATIONS
During the
second quarter, the Company's Board of Directors declared monthly
dividends of $0.20 per share to
common stockholders of record as of April
29, May 31 and June 30, 2016, totaling $0.60 for the quarter, which were paid on
May 9, June
9 and July 8, 2016,
respectively. This equates to a second quarter annualized
dividend yield of 12.1% based on the Company's June 30, 2016
closing stock price of $19.82 per
common share. Since its May 2008
initial public offering through the second quarter of 2016, the
Company has declared a total of $6.4
billion in common stock dividends, or $33.90 per common share.
On June 17, 2016, the Company's Board of Directors declared
a second quarter dividend on its 8.000% Series A Cumulative
Redeemable Preferred Stock of $0.50
per share and on its 7.750% Series B Cumulative Redeemable
Preferred Stock ("Series B Preferred Stock") underlying its
outstanding depositary shares of $0.484375 per depositary share. Each
depositary share represents a 1/1,000th interest in a share of the
Series B Preferred Stock. The dividends were paid on
July 15, 2016 to preferred stockholders of record as of
July 1, 2016.
THIRD QUARTER 2016 DIVIDEND DECLARATIONS
On
July 14, 2016, the Company's Board of
Directors declared a monthly dividend of $0.20 per common share, which will be paid on
August 8, 2016 to common stockholders
of record as of July 29, 2016.
On July 27, 2016, the Company's
Board of Directors declared a monthly dividend of $0.18 per common share, which will be paid on
September 9, 2016 to common
stockholders of record as of August 31,
2016.
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.
|
AMERICAN CAPITAL
AGENCY CORP.
|
|
CONSOLIDATED BALANCE
SHEETS
|
|
(in millions, except
per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
|
2016
|
|
2016
|
|
2015
|
|
2015
|
|
2015
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
(unaudited)
|
|
(unaudited)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
Agency securities, at
fair value (including pledged securities of $48,344, $51,786,
$48,380, $47,319 and $48,128, respectively)
|
$
53,418
|
|
$
54,950
|
|
$
51,331
|
|
$
53,729
|
|
$
50,976
|
|
Agency securities
transferred to consolidated variable interest entities, at fair
value (pledged securities)
|
945
|
|
993
|
|
1,029
|
|
1,088
|
|
1,142
|
|
Non-agency
securities, at fair value (pledged securities)
|
107
|
|
112
|
|
113
|
|
-
|
|
-
|
|
U.S. Treasury
securities, at fair value (including pledged securities of $62, $0,
$25, $767 and $4,756, respectively)
|
62
|
|
-
|
|
25
|
|
787
|
|
5,124
|
|
REIT equity
securities, at fair value
|
19
|
|
38
|
|
33
|
|
34
|
|
60
|
|
Cash and cash
equivalents
|
1,131
|
|
1,109
|
|
1,110
|
|
1,505
|
|
1,510
|
|
Restricted
cash
|
1,399
|
|
1,686
|
|
1,281
|
|
1,413
|
|
778
|
|
Derivative assets, at
fair value
|
111
|
|
55
|
|
81
|
|
143
|
|
164
|
|
Receivable for
securities sold (pledged securities)
|
-
|
|
-
|
|
-
|
|
147
|
|
221
|
|
Receivable under
reverse repurchase agreements
|
2,982
|
|
3,163
|
|
1,713
|
|
1,463
|
|
2,741
|
|
Other
assets
|
301
|
|
290
|
|
305
|
|
300
|
|
169
|
Total
assets
|
$
60,475
|
|
$
62,396
|
|
$
57,021
|
|
$
60,609
|
|
$
62,885
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
$
41,947
|
|
$
45,276
|
|
$
41,754
|
|
$
41,014
|
|
$
50,158
|
|
Federal Home Loan
Bank advances
|
3,037
|
|
3,037
|
|
3,753
|
|
3,502
|
|
20
|
|
Debt of consolidated
variable interest entities, at fair value
|
528
|
|
562
|
|
595
|
|
626
|
|
674
|
|
Payable for
securities purchased
|
2,581
|
|
889
|
|
182
|
|
4,178
|
|
90
|
|
Derivative
liabilities, at fair value
|
1,519
|
|
1,652
|
|
935
|
|
1,536
|
|
844
|
|
Dividends
payable
|
73
|
|
73
|
|
74
|
|
76
|
|
77
|
|
Obligation to return
securities borrowed under reverse
|
|
|
|
|
|
|
|
|
|
|
repurchase
agreements, at fair value
|
3,017
|
|
3,175
|
|
1,696
|
|
1,309
|
|
2,230
|
|
Accounts payable and
other accrued liabilities
|
71
|
|
72
|
|
61
|
|
52
|
|
74
|
Total
liabilities
|
52,773
|
|
54,736
|
|
49,050
|
|
52,293
|
|
54,167
|
|
|
|
|
|
|
|
|
|
|
|
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, 337.5,
346.5 and 348.8 shares issued and outstanding,
respectively
|
3
|
|
3
|
|
3
|
|
3
|
|
3
|
|
Additional paid-in
capital
|
9,932
|
|
9,932
|
|
10,048
|
|
10,209
|
|
10,254
|
|
Retained
deficit
|
(3,669)
|
|
(3,329)
|
|
(2,350)
|
|
(2,727)
|
|
(1,879)
|
|
Accumulated other
comprehensive income (loss)
|
1,100
|
|
718
|
|
(66)
|
|
495
|
|
4
|
Total stockholders'
equity
|
7,702
|
|
7,660
|
|
7,971
|
|
8,316
|
|
8,718
|
Total liabilities and
stockholders' equity
|
$
60,475
|
|
$
62,396
|
|
$
57,021
|
|
$
60,609
|
|
$
62,885
|
|
|
|
|
|
|
|
|
|
|
|
Net book value per
common share
|
$
22.22
|
|
$
22.09
|
|
$
22.59
|
|
$
23.00
|
|
$
24.00
|
AMERICAN CAPITAL
AGENCY CORP.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
2016
|
|
2016
|
|
2015
|
|
2015
|
|
2015
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
318
|
|
$
295
|
|
$
374
|
|
$
295
|
|
$
414
|
Interest
expense 1
|
101
|
|
99
|
|
86
|
|
77
|
|
81
|
Net interest income
|
217
|
|
196
|
|
288
|
|
218
|
|
333
|
|
|
|
|
|
|
|
|
|
|
Other gain (loss),
net:
|
|
|
|
|
|
|
|
|
|
Gain
(loss) on sale of agency securities, net
|
55
|
|
(2)
|
|
2
|
|
(39)
|
|
(22)
|
Gain
(loss) on derivative instruments and other securities, net
1
|
(367)
|
|
(933)
|
|
331
|
|
(778)
|
|
237
|
Total other gain (loss), net
|
(312)
|
|
(935)
|
|
333
|
|
(817)
|
|
215
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Management fee
|
25
|
|
27
|
|
28
|
|
29
|
|
29
|
General
and administrative expenses
|
15
|
|
6
|
|
5
|
|
5
|
|
7
|
Total expenses
|
40
|
|
33
|
|
33
|
|
34
|
|
36
|
Net income
(loss)
|
(135)
|
|
(772)
|
|
588
|
|
(633)
|
|
512
|
Dividend on preferred
stock
|
7
|
|
7
|
|
7
|
|
7
|
|
7
|
Net income (loss)
available (attributable) to common stockholders
|
$
(142)
|
|
$
(779)
|
|
$
581
|
|
$
(640)
|
|
$
505
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
(135)
|
|
$
(772)
|
|
$
588
|
|
$
(633)
|
|
$
512
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on available-for-sale securities,
net
|
370
|
|
765
|
|
(583)
|
|
467
|
|
(872)
|
Unrealized gain on derivative instruments, net
1
|
12
|
|
19
|
|
22
|
|
24
|
|
26
|
Other comprehensive
income (loss)
|
382
|
|
784
|
|
(561)
|
|
491
|
|
(846)
|
Comprehensive
income (loss)
|
247
|
|
12
|
|
27
|
|
(142)
|
|
(334)
|
Dividend on preferred
stock
|
7
|
|
7
|
|
7
|
|
7
|
|
7
|
Comprehensive
income (loss) available (attributable) to common
stockholders
|
$
240
|
|
$
5
|
|
$
20
|
|
$
(149)
|
|
$
(341)
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding -
|
|
|
|
|
|
|
|
|
|
basic and
diluted
|
331.0
|
|
334.4
|
|
341.6
|
|
347.8
|
|
352.1
|
Net income (loss)
per common share - basic and diluted
|
$
(0.43)
|
|
$
(2.33)
|
|
$
1.70
|
|
$
(1.84)
|
|
$
1.43
|
Comprehensive
income (loss) per common share - basic and diluted
|
$
0.73
|
|
$
0.01
|
|
$
0.06
|
|
$
(0.43)
|
|
$
(0.97)
|
Dividends declared
per common share
|
$
0.60
|
|
$
0.60
|
|
$
0.60
|
|
$
0.60
|
|
$
0.62
|
AMERICAN CAPITAL
AGENCY CORP.
|
RECONCILIATION OF
GAAP NET INTEREST INCOME TO NET SPREAD AND DOLLAR ROLL INCOME
2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
2016
|
|
2016
|
|
2015
|
|
2015
|
|
2015
|
Interest
income
|
$
318
|
|
$
295
|
|
$
374
|
|
$
295
|
|
$
414
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements and other debt
|
89
|
|
80
|
|
64
|
|
53
|
|
55
|
Interest rate
swap periodic costs 1
|
12
|
|
19
|
|
22
|
|
24
|
|
26
|
Total interest
expense
|
101
|
|
99
|
|
86
|
|
77
|
|
81
|
Net interest
income
|
217
|
|
196
|
|
288
|
|
218
|
|
333
|
Other interest rate
swap periodic costs 3
|
(69)
|
|
(89)
|
|
(102)
|
|
(107)
|
|
(99)
|
Dividend on REIT
equity securities
|
1
|
|
1
|
|
1
|
|
1
|
|
2
|
TBA dollar roll
income 16
|
44
|
|
50
|
|
53
|
|
73
|
|
54
|
Adjusted net interest
and dollar roll income
|
193
|
|
158
|
|
240
|
|
185
|
|
290
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
40
|
|
33
|
|
33
|
|
34
|
|
36
|
Non-recurring
transaction costs
|
9
|
|
-
|
|
-
|
|
-
|
|
-
|
Adjusted operating
expenses
|
31
|
|
33
|
|
33
|
|
34
|
|
36
|
Net spread and dollar
roll income
|
162
|
|
125
|
|
207
|
|
151
|
|
254
|
Dividend on preferred
stock
|
7
|
|
7
|
|
7
|
|
7
|
|
7
|
Net spread and dollar
roll income available to common stockholders
|
155
|
|
118
|
|
200
|
|
144
|
|
247
|
Estimated "catch-up"
premium amortization cost (benefit) due to change in CPR
forecast
|
32
|
|
55
|
|
(14)
|
|
33
|
|
(37)
|
Net spread and dollar
roll income, excluding "catch-up"
premium amortization, available to common stockholders
|
$
187
|
|
$
173
|
|
$
186
|
|
$
177
|
|
$
210
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic and diluted
|
331.0
|
|
334.4
|
|
341.6
|
|
347.8
|
|
352.1
|
Net spread and dollar
roll income per common share - basic and diluted
|
$
0.46
|
|
$
0.36
|
|
$
0.58
|
|
$
0.41
|
|
$
0.70
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization, per
common share - basic and diluted
|
$
0.56
|
|
$
0.52
|
|
$
0.54
|
|
$
0.51
|
|
$
0.60
|
AMERICAN CAPITAL
AGENCY CORP.
|
RECONCILIATION OF
GAAP NET INCOME TO ESTIMATED TAXABLE INCOME 2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
2016
|
|
2016
|
|
2015
|
|
2015
|
|
2015
|
Net income
(loss)
|
$
(135)
|
|
$
(772)
|
|
$
588
|
|
$
(633)
|
|
$
512
|
Book to tax
differences:
|
|
|
|
|
|
|
|
|
|
Premium
amortization, net
|
20
|
|
55
|
|
(18)
|
|
15
|
|
(55)
|
Realized
gain/loss, net
|
391
|
|
93
|
|
154
|
|
12
|
|
(39)
|
Net capital
loss/(utilization of net capital loss carryforward)
5
|
(99)
|
|
(99)
|
|
(83)
|
|
-
|
|
121
|
Unrealized
gain/loss, net
|
(106)
|
|
804
|
|
(543)
|
|
672
|
|
(417)
|
Other
|
9
|
|
-
|
|
-
|
|
-
|
|
-
|
Total
book to tax differences
|
215
|
|
853
|
|
(490)
|
|
699
|
|
(390)
|
Estimated REIT
taxable income
|
80
|
|
81
|
|
98
|
|
66
|
|
122
|
Dividend on preferred
stock
|
7
|
|
7
|
|
7
|
|
7
|
|
7
|
Estimated REIT
taxable income, net of preferred
stock dividend
|
$
73
|
|
$
74
|
|
$
91
|
|
$
59
|
|
$
115
|
Weighted average
number of common shares outstanding - basic and diluted
|
331.0
|
|
334.4
|
|
341.6
|
|
347.8
|
|
352.1
|
Estimated REIT
taxable income per common share - basic and diluted
|
$
0.22
|
|
$
0.22
|
|
$
0.27
|
|
$
0.17
|
|
$
0.33
|
|
|
|
|
|
|
|
|
|
|
Beginning cumulative
non-deductible capital loss
|
$
585
|
|
$
684
|
|
$
767
|
|
$
767
|
|
$
646
|
Net capital
loss/(utilization of net capital loss carryforward)
|
(99)
|
|
(99)
|
|
(83)
|
|
-
|
|
121
|
Ending cumulative
non-deductible capital loss
|
$
486
|
|
$
585
|
|
$
684
|
|
$
767
|
|
$
767
|
Ending cumulative
non-deductible capital loss per common share
|
$
1.47
|
|
$
1.77
|
|
$
2.03
|
|
$
2.21
|
|
$
2.20
|
AMERICAN CAPITAL
AGENCY CORP.
|
KEY
STATISTICS*
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Key Balance Sheet
Statistics:
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
2016
|
|
2016
|
|
2015
|
|
2015
|
|
2015
|
Fixed-rate agency
securities, at fair value - as of period end
19
|
$
52,648
|
|
$
54,155
|
|
$
50,522
|
|
$
52,862
|
|
$
50,070
|
Adjustable-rate
agency securities, at fair value - as of period end
|
$
443
|
|
$
471
|
|
$
495
|
|
$
551
|
|
$
599
|
AAA non-agency
securities, at fair value - as of period end
|
$
107
|
|
$
112
|
|
$
113
|
|
$
-
|
|
$
-
|
CMO agency
securities, at fair value - as of period end
|
$
920
|
|
$
966
|
|
$
990
|
|
$
1,041
|
|
$
1,078
|
Interest-only strips
agency securities, at fair value - as of period end
|
$
180
|
|
$
176
|
|
$
178
|
|
$
179
|
|
$
189
|
Principal-only strips
agency securities, at fair value - as of period end
|
$
172
|
|
$
175
|
|
$
175
|
|
$
184
|
|
$
182
|
Total securities, at
fair value - as of period end 19
|
$
54,470
|
|
$
56,055
|
|
$
52,473
|
|
$
54,817
|
|
$
52,118
|
Total securities, at
cost - as of period end 19
|
$
53,317
|
|
$
55,271
|
|
$
52,464
|
|
$
54,216
|
|
$
51,994
|
Total securities, at
par - as of period end 6, 19
|
$
50,950
|
|
$
52,864
|
|
$
50,163
|
|
$
51,902
|
|
$
49,688
|
Average securities,
at cost 19
|
$
51,810
|
|
$
50,897
|
|
$
52,131
|
|
$
48,711
|
|
$
56,106
|
Average securities,
at par 6, 19
|
$
49,544
|
|
$
48,687
|
|
$
49,890
|
|
$
46,610
|
|
$
53,660
|
Net TBA portfolio -
as of period end, at fair value
|
$
7,072
|
|
$
6,024
|
|
$
7,444
|
|
$
7,385
|
|
$
7,058
|
Net TBA portfolio -
as of period end, at cost
|
$
6,975
|
|
$
5,983
|
|
$
7,430
|
|
$
7,265
|
|
$
7,104
|
Net TBA portfolio -
as of period end, carrying value
|
$
97
|
|
$
41
|
|
$
14
|
|
$
120
|
|
$
(46)
|
Average net TBA
portfolio, at cost
|
$
8,238
|
|
$
8,144
|
|
$
7,796
|
|
$
9,434
|
|
$
5,973
|
Average repurchase
agreements and other debt 4
|
$
46,948
|
|
$
45,926
|
|
$
47,018
|
|
$
43,308
|
|
$
50,410
|
Average stockholders'
equity 7
|
$
7,722
|
|
$
7,776
|
|
$
8,143
|
|
$
8,603
|
|
$
9,108
|
Net book value per
common share as of period end 8
|
$
22.22
|
|
$
22.09
|
|
$
22.59
|
|
$
23.00
|
|
$
24.00
|
Leverage - average
during the period 9, 19
|
6.1:1
|
|
5.9:1
|
|
5.8:1
|
|
5.1:1
|
|
5.6:1
|
Leverage - average
during the period, including net TBA position
10
|
7.2:1
|
|
7.0:1
|
|
6.8:1
|
|
6.2:1
|
|
6.2:1
|
Leverage - as of
period end 11, 19
|
6.3:1
|
|
6.5:1
|
|
5.8:1
|
|
5.9:1
|
|
5.3:1
|
Leverage - as of
period end, including net TBA position 12
|
7.2:1
|
|
7.3:1
|
|
6.8:1
|
|
6.8:1
|
|
6.1:1
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Statistics:
|
|
|
|
|
|
|
|
|
|
Average coupon
13, 19
|
3.63%
|
|
3.63%
|
|
3.62%
|
|
3.62%
|
|
3.60%
|
Average asset yield
14, 19
|
2.46%
|
|
2.32%
|
|
2.87%
|
|
2.42%
|
|
2.95%
|
Average cost of funds
15, 19
|
(1.46%)
|
|
(1.64%)
|
|
(1.60%)
|
|
(1.70%)
|
|
(1.43%)
|
Average net interest
rate spread 19
|
1.00%
|
|
0.68%
|
|
1.27%
|
|
0.72%
|
|
1.52%
|
Average net interest
rate spread, including TBA dollar roll income/loss
16
|
1.16%
|
|
0.94%
|
|
1.47%
|
|
1.14%
|
|
1.74%
|
Average coupon - as
of period end 19
|
3.63%
|
|
3.63%
|
|
3.63%
|
|
3.61%
|
|
3.62%
|
Average asset
yield - as of period end 19
|
2.68%
|
|
2.72%
|
|
2.78%
|
|
2.76%
|
|
2.75%
|
Average cost of funds
- as of period end 17, 19
|
(1.35%)
|
|
(1.49%)
|
|
(1.65%)
|
|
(1.64%)
|
|
(1.56%)
|
Average net interest
rate spread - as of period end 19
|
1.33%
|
|
1.23%
|
|
1.13%
|
|
1.12%
|
|
1.19%
|
Average actual CPR
for securities held during the period 19
|
12%
|
|
9%
|
|
10%
|
|
12%
|
|
12%
|
Average forecasted
CPR - as of period end 19
|
11%
|
|
10%
|
|
8%
|
|
9%
|
|
8%
|
Total premium
amortization, net
|
$
(134)
|
|
$
(150)
|
|
$
(78)
|
|
$
(128)
|
|
$
(69)
|
Expenses % of average
total assets - annualized
|
0.27%
|
|
0.23%
|
|
0.23%
|
|
0.25%
|
|
0.21%
|
Expenses % of average
stockholders' equity - annualized
|
2.08%
|
|
1.70%
|
|
1.61%
|
|
1.57%
|
|
1.59%
|
Net comprehensive
income (loss) return on average common equity -
annualized
|
13.0%
|
|
0.3%
|
|
1.0%
|
|
(7.1%)
|
|
(15.6%)
|
Dividends declared
per common share
|
$
0.60
|
|
$
0.60
|
|
$
0.60
|
|
$
0.60
|
|
$
0.62
|
Economic return
(loss) on common equity - annualized 18
|
13.3%
|
|
1.8%
|
|
3.3%
|
|
(6.6%)
|
|
(14.3%)
|
*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.
- 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.
- Agency securities, at par value exclude 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 as of period end calculated as
total stockholders' equity, less the preferred stock liquidation
preference, divided by the number of common shares
outstanding.
- Average leverage during the period was calculated by dividing
the daily weighted average agency repurchase agreements, FHLB
advances and debt of consolidated VIEs outstanding 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.
- Average leverage during the period, including net TBA position,
includes the components of "leverage - average during the period,"
plus the Company's daily weighted average net TBA dollar roll
position (at cost) during the period.
- 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 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.
- Leverage as of period end, including net TBA position, includes
the components of "leverage - as of period end," plus the Company's
net TBA dollar roll position (at cost) as of period end.
- 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.
- Cost of funds as of period end includes agency repurchase
agreements and other debt outstanding, plus the impact of interest
rate swaps in effect as of each period end. Amount excludes forward
starting swaps and costs associated with other supplemental hedges
such as swaptions and short U.S. Treasury or TBA positions.
- 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 July 28,
2016 at 11:00 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 American Capital Agency stockholder call.
A slide presentation will accompany the call and will be
available at www.AGNC.com. Select the Q2 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 July 28, 2016. In addition,
there will be a phone recording available one hour after the live
call on July 28, 2016 through
August 13, 2016. If you are
interested in hearing the recording of the presentation, please
dial (877) 344-7529 (U.S. domestic) or (412) 317-0088
(international). The conference number is 10087919.
For further information, please contact Investor Relations at
(301) 968-9300 or IR@AGNC.com.
ABOUT AMERICAN CAPITAL AGENCY CORP.
American Capital Agency Corp. is a 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. The Company is no longer affiliated with American
Capital, Ltd. For further information, please refer to
www.AGNC.com.
FORWARD LOOKING STATEMENTS
This press release contains forward-looking
statements. Forward-looking statements are based on estimates,
projections, beliefs and assumptions of management of the Company
at the time of such statements and are not guarantees of future
performance. Forward-looking statements involve risks and
uncertainties in predicting future results and
conditions. Actual results could differ materially from those
projected in these forward-looking statements due to a variety of
important factors, including, without limitation, changes in
interest rates, changes in the yield curve, changes in prepayment
rates, the availability and terms of financing, changes in the
market value of the Company's assets, general economic conditions,
market conditions, conditions in the market for agency securities,
and legislative and regulatory changes that could adversely affect
the business of the Company. Certain factors that could cause
actual results to differ materially from those contained in the
forward-looking statements, are included in the Company's periodic
reports filed with the Securities and Exchange Commission
("SEC"). Copies are available on the SEC's website,
www.sec.gov. The Company disclaims any obligation to update or
revise any forward-looking statements based on the occurrence of
future events, the receipt or new information, or otherwise.
USE OF NON-GAAP FINANCIAL INFORMATION
In addition to
the results presented in accordance with GAAP, the Company's
results of operations discussed in this release include certain
non-GAAP financial information, including "net spread and dollar
roll income," "net spread and dollar roll income, excluding
'catch-up' premium amortization," "estimated taxable income" and
the related per common share measures and certain financial metrics
derived from such non-GAAP information, such as "cost of funds" and
"net interest rate spread."
"Net spread and dollar roll income" is measured as (i) net
interest income (GAAP measure) adjusted to include other interest
rate swap periodic costs, TBA dollar roll income and dividends on
REIT equity securities (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 and that it is meaningful information to consider
related to the Company's current financial performance without the
effects of certain transactions that are not necessarily indicative
of its current investment portfolio 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, which are recognized under GAAP in other gain (loss),
is meaningful as interest rate swaps are used to economically hedge
against fluctuations in the Company's borrowing costs and inclusion
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 general and administrative expense under GAAP is
meaningful as they represent non-recurring transaction costs
associated with the Company's acquisition of ACMM 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
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visit:http://www.prnewswire.com/news-releases/american-capital-agency-corp-reports-073-comprehensive-income-per-common-share-and-2222-net-book-value-per-common-share-300305067.html
SOURCE American Capital Agency Corp.