BETHESDA, Md.,
Oct. 26, 2015 /PRNewswire/ --
American Capital Agency Corp. ("AGNC" or the "Company") (Nasdaq:
AGNC) today reported a comprehensive loss for the third quarter of
2015 of $(0.43) per common share and
net book value of $23.00 per common
share. Economic loss for the period, defined as dividends per
common share and the change in net book value ("NAV") per common
share, was -1.7% for the quarter, or -6.6% on an annualized
basis.
THIRD QUARTER 2015 FINANCIAL HIGHLIGHTS
- $(0.43) comprehensive loss per
common share, comprised of:
- $(1.84) net loss per common
share
- $1.41 other comprehensive income
("OCI") per common share
- Includes net unrealized gains on investments marked-to-market
through OCI
- $0.51 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization cost
- Includes $0.21 per common share
of dollar roll income associated with the Company's $9.4 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
- $23.00 net book value per common
share as of September 30, 2015
- Decreased $(1.00) per common
share, or -4.2%, from $24.00 per
common share as of June 30, 2015
- $0.60 dividend declared per
common share during the quarter
- 12.8% annualized dividend yield based on September 30,
2015 closing stock price of $18.70
per common share
- -1.7% economic loss on common equity for the quarter, or -6.6%
annualized
- Comprised of $0.60 dividend per
common share and $(1.00) decrease in
net book value per common share
- 2.35 million shares of common stock repurchased during the
quarter
- Represents 0.7% of common stock outstanding as of June 30,
2015
- $19.08 per share average
repurchase price, inclusive of transaction costs
OTHER THIRD QUARTER HIGHLIGHTS
- $62.2 billion agency MBS
investment portfolio as of September 30, 2015
- Includes $7.4 billion net long
TBA mortgage position as of September 30, 2015
- 6.8x "at risk" leverage as of September 30, 2015
- 5.9x leverage excluding net long TBA mortgage position as of
September 30, 2015
- 12.4% portfolio CPR for the quarter
- 9.0% average projected portfolio life CPR as of
September 30, 2015
- 1.14% annualized net interest rate spread for the quarter,
including TBA dollar roll income
- Includes -23 bps of "catch up" premium amortization cost due to
change in projected CPR estimates
MANAGEMENT REMARKS
Gary
Kain, President and Chief Investment Officer, commented,
"The financial markets continued to exhibit significant volatility
during the third quarter as strains in emerging market economies
drove global weakness in both the debt and equity markets.
Fixed income market participants continue to struggle with how to
balance the cross-currents of slowing growth abroad, moderate
growth in the U.S. and a Federal Reserve that appears biased to
want to raise interest rates in the near term. Against this
backdrop, the spread on most fixed income products widened
significantly versus swap rates. Agency MBS spreads were no
exception, widening relative to our interest rate swap hedges and
driving our decline in net book value for the quarter."
"It is important to note that wider MBS spreads, while adverse
to current period financial results, improve the returns on new
investments, which can provide a material benefit to our earnings
over the long term," continued Mr. Kain. "As AGNC is
currently operating with a lower leverage profile than it has
historically, AGNC has the ability to take advantage of a more
favorable investment environment through increased
leverage. Additional agency MBS spread widening, should
it occur, would further enhance the expected returns on new asset
purchases and likely provide a compelling opportunity for us to
continue to increase leverage."
John Erickson, Chief Financial
Officer and Executive Vice President, commented, "During the third
quarter, we bought back 2.35 million shares of our common stock,
totaling $45 million. Our goal
is to manage our portfolio in a manner that generates long term
value for our shareholders, and the accretion from share
repurchases can be an important tool in this endeavor under
appropriate circumstances. Looking ahead, we will continue to
evaluate common stock repurchase opportunities in the context of
market conditions and new investment opportunities."
NET BOOK VALUE
As of September 30, 2015, the
Company's net book value per common share was $23.00, or $(1.00)
lower than its June 30, 2015 net book value per common share
of $24.00. Declines in the
value of the Company's interest rate hedge portfolio more than
offset price increases on the Company's assets during the third
quarter due to wider spreads between agency MBS and benchmark
interest rates. In particular, the underperformance of
interest rate swaps relative to agency MBS drove much of the
Company's -4.2% quarterly decline in net book value, given that
interest rate swaps represent the Company's primary hedging
instrument.
INVESTMENT PORTFOLIO
As a real estate investment trust
("REIT"), AGNC 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. In keeping with AGNC's investment objective of
maintaining minimal credit exposure, the Company also announced
that its Board of Directors has approved limited investments of up
to 10% of the Company's total assets in AAA
non-agency mortgage-backed securities. The Company
believes the modification to its investment guidelines offers
incremental return potential with limited credit exposure, while
ensuring that the Company's investment portfolio remains highly
liquid.
As of September 30, 2015, the Company's investment
portfolio totaled $62.2 billion and
was entirely comprised of agency MBS and TBA securities:
- $60.2 billion of fixed-rate
securities, comprised of:
- $18.4 billion ≤ 15-year
securities,
- $(0.3) billion 15-year net short
TBA securities,
- $1.1 billion 20-year fixed-rate
securities,
- $33.3 billion 30-year fixed-rate
securities and
- $7.7 billion 30-year net long TBA
securities;
- $0.6 billion of adjustable-rate
securities; and
- $1.4 billion of collateralized
mortgage obligations ("CMOs"), including principal and
interest-only strips.
As of September 30, 2015, inclusive of the net TBA
position, ≤ 15-year fixed rate securities represented 29% of the
Company's investment portfolio, a decrease from 34% as of
June 30, 2015, and 30-year fixed rate securities represented
66% of the Company's investment portfolio, an increase from 61% as
of June 30, 2015.
As of September 30, 2015, the Company's fixed-rate mortgage
assets, inclusive of the net TBA position, had a weighted average
coupon of 3.52%, compared to 3.50% as of June 30, 2015,
comprised of the following weighted average coupons:
- 3.25% for ≤ 15-year fixed rate securities;
- 3.48% for 20-year fixed-rate securities; and
- 3.63% 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
September 30, 2015, the Company's net TBA position had a total
fair value of $7.4 billion, a total
cost basis of $7.3 billion and a net
carrying value of $120 million
reported in derivative assets/(liabilities) on the Company's
balance sheet, compared to a total fair value and total cost basis
of $7.1 billion and a net carrying
value of $(46) million as of
June 30, 2015, respectively.
CONSTANT PREPAYMENT RATES
The Company's investment
portfolio had a weighted average CPR of 12.4% for the third
quarter, compared to 11.6% for the prior quarter. The
weighted average projected CPR for the remaining life of the
Company's agency securities held as of September 30, 2015
increased to 9.0% from 8.3% as of June 30, 2015 due to lower
interest rates.
The weighted average cost basis of the Company's investment
portfolio was 104.5% of par value as of September 30,
2015. Net premium amortization cost on the Company's
investment portfolio for the third quarter was $(128) million, or $(0.37) per common share, including a "catch-up"
premium amortization cost of $(33)
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 $(69) million,
or $(0.20) per common share,
including a "catch-up" premium amortization benefit of $37 million, or $0.10 per common share. The net unamortized
premium balance as of September 30, 2015 was $2.3 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 "balance
sheet funded assets" (i.e., the Company's investment portfolio
excluding the net TBA position) was 2.42% for the third quarter, a
decrease from 2.95% for the prior quarter. Excluding
"catch-up" premium amortization (cost)/benefit, the Company's
average asset yield was 2.69% for the third quarter, unchanged from
the prior quarter.
For the third quarter, the Company's average cost of funds was
1.70%, an increase from 1.43% 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.
Excluding swap costs related to the Company's TBA dollar roll
funded assets, the Company's cost of funds for its balance sheet
funded assets was 1.49% for the third quarter, an increase from
1.28% for the prior quarter largely due to higher swap
costs.
The Company's combined annualized net interest rate spread on
its balance sheet and dollar roll funded assets for the quarter was
1.14%, compared to 1.74% for the prior quarter. Excluding
"catch-up" premium amortization (cost)/benefit, the Company's
combined annualized net interest rate spread on its balance sheet
and dollar roll funded assets for the quarter was 1.37%, compared
to 1.50% for the prior quarter.
On a per share basis, the Company recognized $0.41 per common share of net spread and dollar
roll income (a non-GAAP financial measure) for the third quarter,
compared to $0.70 for the prior
quarter. Excluding "catch-up" premium amortization
(cost)/benefit, the Company's net spread and dollar roll income was
$0.51 per common share for the third
quarter, a decrease from $0.60 per
common share for the prior quarter. Net spread and dollar
roll income for the third quarter included $0.21 per common share of dollar roll income, an
increase from $0.15 per common share
for the prior quarter due to a larger average dollar roll position,
partially offset by weaker dollar roll funding levels. A
reconciliation of the Company's net interest income to net spread
and dollar roll income and additional information regarding the
Company's use of non-GAAP measures are included later in this
release.
LEVERAGE
As of September 30, 2015, $40.6 billion of agency repo, $3.5 billion of FHLB advances and $0.6 billion of other debt were used to fund
acquisitions of agency securities. The remainder, or
approximately $0.5 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 net TBA
position, the Company's "at risk" leverage ratio was 6.8x as of
September 30, 2015, compared to 6.1x as of June 30,
2015. The Company's average "at risk" leverage ratio for the
quarter was 6.2x, unchanged from the prior quarter.
As of September 30, 2015, the Company's agency repo
agreements had a weighted average interest rate of 0.52%, an
increase from 0.45% as of June 30, 2015, and a weighted
average remaining days to maturity of 201 days, an increase from
177 days as of June 30, 2015.
As of September 30, 2015, the Company's agency repo
agreements had remaining maturities consisting of:
- $27.5 billion of three months or
less;
- $5.2 billion from three to six
months;
- $2.0 billion from six to nine
months;
- $0.5 billion from nine to twelve
months;
- $2.3 billion from one to three
years; and
- $3.1 billion from three to five
years.
As of September 30, 2015, the Company's FHLB advances had a
weighted average interest rate of 0.27% and a weighted average
remaining maturity of 3.5 years.
HEDGING ACTIVITIES
As of September 30, 2015, 96%
of the Company's outstanding balance of repurchase agreements, FHLB
advances, other debt and net TBA position was hedged through
interest rate swaps, swaptions and net U.S. Treasury positions, an
increase from 84% as of June 30, 2015.
The Company's interest rate swap position as of
September 30, 2015 totaled $45.2
billion in notional amount, compared to $44.9 billion as of June 30, 2015.
As of September 30, 2015, the Company's interest rate swap
position included a total of $7.8
billion of forward starting swaps, with an average forward
start date of 0.6 years and an average remaining maturity of 6.3
years, compared to $8.8 billion as of
June 30, 2015, with an average forward start date of 0.8 years
and an average remaining maturity of 6.6 years.
Excluding forward starting swaps, the Company's interest rate
swap portfolio had an average fixed pay rate of 1.72% and an
average receive rate of 0.30% as of September 30, 2015,
compared to 1.69% and 0.27%, respectively, as of June 30,
2015. Including forward starting swaps, the Company's
interest rate swap portfolio had an average fixed pay rate of 1.95%
and an average maturity of 4.7 years as of September 30, 2015,
compared to 1.94% and 4.9 years, respectively, as of June 30,
2015.
During the third quarter, $1.8
billion of payer swaptions from previous quarters
expired. As of September 30, 2015, the Company had payer
swaptions totaling $3.7 billion of
notional value outstanding with a market value of $21 million, cost basis of $95 million, an average remaining option term of
0.4 years and an average underlying interest rate swap term of 8.2
years. This compares to $5.5
billion of notional value outstanding as of June 30,
2015 with a market value of $45
million, a cost basis of $136
million, an average remaining option term of 0.5 years and
an average underlying swap term of 7.1 years.
The Company also utilizes long and short positions in U.S.
Treasury securities and U.S. Treasury futures to mitigate exposure
to changes in interest rates. As of September 30, 2015,
the Company had a net short position of $0.5
billion (market value) in U.S. Treasury securities and a net
short position of $0.9 billion in
U.S. Treasury futures, compared to a net long position of
$2.9 billion and a net short position
of $0.9 billion, respectively, as of
June 30, 2015.
OTHER GAIN (LOSS), NET
For the third quarter, the
Company recorded a net loss of $(817)
million in other gain (loss), net, or $(2.35) per common share, compared to a net gain
of $215 million, or $0.61 per common share for the prior
quarter. Other gain (loss), net for the third quarter was
comprised of:
- $(39) million of net realized
losses on sales of agency securities;
- $(859) million of net losses on
interest rate swaps (excludes $24
million of net unrealized gains recognized in OCI);
- $(107) million of interest rate
swap periodic interest costs;
- $(25) million of net losses on
interest rate swaptions;
- $(19) million of net losses on
U.S. Treasury positions;
- $73 million of TBA dollar roll
income;
- $140 million of net
mark-to-market gains on TBA mortgage positions; and
- $19 million of net gains on other
derivative instruments and securities.
OTHER COMPREHENSIVE INCOME
During the third quarter,
the Company recorded other comprehensive gains of $491 million, or $1.41 per common share, primarily consisting of
unrealized gains on the Company's agency securities.
THIRD QUARTER 2015 DIVIDEND DECLARATIONS
During the
third quarter, the Company's Board of Directors declared monthly
dividends of $0.20 per share to
common stockholders of record as of July
31, August 31 and September 30, 2015, which were paid on
August 7, September 8 and October 9,
2015, respectively. This equates to a third quarter
annualized dividend yield of 12.8% based on the Company's
September 30, 2015 closing stock price of $18.70 per common share.
Since its May 2008 initial public
offering through the third quarter of 2015, the Company has
declared a total of $5.8 billion in
common stock dividends, or $32.10 per
common share.
On September 17, 2015, the Company's Board of Directors
declared a third quarter dividend on its 8.000% Series A Cumulative
Redeemable Preferred Stock ("Series A 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 1/1000th interest in a share of
the Series B Preferred Stock. The dividends were paid on
October 15, 2015 to preferred stockholders of record as of
October 1, 2015.
STOCK REPURCHASE PROGRAM
During the third quarter, the
Company repurchased approximately 2.4 million shares of its common
stock, or 0.7% of the Company's outstanding shares as of
June 30, 2015. The shares were repurchased at an average price
of $19.08 per share, including
expenses, totaling $45 million. Since
commencing a stock repurchase program in the fourth quarter of
2012, the Company has repurchased 52.7 million shares of its common
stock for total consideration of approximately $1.1 billion, including expenses. As of
September 30, 2015, the Company had $0.9 billion available under its current Board of
Directors' authorization for repurchases of its common stock.
The Company also announced that its Board of Directors has extended
its current share repurchase authorization through December 31, 2016.
FINANCIAL STATEMENTS, OPERATING PERFORMANCE AND PORTFOLIO
STATISTICS
The following measures of operating performance
include net spread and dollar roll income 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)
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
2015
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
(unaudited)
|
Assets:
|
|
|
|
|
|
|
|
|
|
Agency
securities, at fair value (including pledged securities of
$47,319, $48,128, $56,836, $51,629 and $46,162,
respectively)
|
$
53,729
|
|
$
50,976
|
|
$
60,131
|
|
$
55,482
|
|
$
50,420
|
Agency
securities transferred to consolidated variable interest
entities,
at fair value (pledged securities)
|
1,088
|
|
1,142
|
|
1,221
|
|
1,266
|
|
1,310
|
U.S.
Treasury securities, at fair value (including pledged securities
of
$767, $4,756, $4,328, $2,375 and $1,214,
respectively)
|
787
|
|
5,124
|
|
4,328
|
|
2,427
|
|
1,214
|
REIT
equity securities, at fair value
|
34
|
|
60
|
|
68
|
|
68
|
|
66
|
Cash and
cash equivalents
|
1,505
|
|
1,510
|
|
1,708
|
|
1,720
|
|
1,708
|
Restricted cash
|
1,413
|
|
778
|
|
1,108
|
|
713
|
|
794
|
Derivative assets, at fair value
|
143
|
|
164
|
|
229
|
|
408
|
|
462
|
Receivable for securities sold (including pledged securities of
$147,
$221, $721, $79 and $694, respectively)
|
147
|
|
221
|
|
908
|
|
239
|
|
905
|
Receivable under reverse repurchase agreements
|
1,463
|
|
2,741
|
|
3,175
|
|
5,218
|
|
5,258
|
Other
assets
|
300
|
|
169
|
|
229
|
|
225
|
|
211
|
Total
assets
|
$
60,609
|
|
$
62,885
|
|
$
73,105
|
|
$
67,766
|
|
$
62,348
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
|
$
41,014
|
|
$
50,158
|
|
$
58,112
|
|
$
50,296
|
|
$
45,327
|
Federal
Home Loan Bank advances
|
3,502
|
|
20
|
|
—
|
|
—
|
|
—
|
Debt of
consolidated variable interest entities, at fair value
|
626
|
|
674
|
|
725
|
|
761
|
|
796
|
Payable
for securities purchased
|
4,178
|
|
90
|
|
50
|
|
843
|
|
1,150
|
Derivative liabilities, at fair value
|
1,536
|
|
844
|
|
1,352
|
|
890
|
|
510
|
Dividends payable
|
76
|
|
77
|
|
85
|
|
85
|
|
236
|
Obligation to return securities borrowed under
reverse
|
|
|
|
|
|
|
|
|
|
repurchase agreements, at fair value
|
1,309
|
|
2,230
|
|
3,363
|
|
5,363
|
|
4,742
|
Accounts
payable and other accrued liabilities
|
52
|
|
74
|
|
62
|
|
100
|
|
230
|
Total
liabilities
|
52,293
|
|
54,167
|
|
63,749
|
|
58,338
|
|
52,991
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock - aggregate liquidation preference of
$348
|
336
|
|
336
|
|
336
|
|
336
|
|
336
|
Common
stock - $0.01 par value; 600.0 shares authorized;
|
|
|
|
|
|
|
|
|
|
346.5,
348.8, 352.8, 352.8 and 352.8 shares issued and
outstanding
|
3
|
|
3
|
|
4
|
|
4
|
|
4
|
Additional paid-in capital
|
10,209
|
|
10,254
|
|
10,332
|
|
10,332
|
|
10,332
|
Retained
deficit
|
(2,727)
|
|
(1,879)
|
|
(2,166)
|
|
(1,674)
|
|
(1,112)
|
Accumulated other comprehensive income (loss)
|
495
|
|
4
|
|
850
|
|
430
|
|
(203)
|
Total stockholders'
equity
|
8,316
|
|
8,718
|
|
9,356
|
|
9,428
|
|
9,357
|
Total liabilities and
stockholders' equity
|
$
60,609
|
|
$
62,885
|
|
$
73,105
|
|
$
67,766
|
|
$
62,348
|
|
|
|
|
|
|
|
|
|
|
Net book value per
common share
|
$
23.00
|
|
$
24.00
|
|
$
25.53
|
|
$
25.74
|
|
$
25.54
|
|
|
|
|
|
|
|
|
|
|
AMERICAN CAPITAL
AGENCY CORP.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
2015
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
295
|
|
$
414
|
|
$
383
|
|
$
331
|
|
$
357
|
Interest
expense 1
|
77
|
|
81
|
|
86
|
|
81
|
|
88
|
Net interest income
|
218
|
|
333
|
|
297
|
|
250
|
|
269
|
|
|
|
|
|
|
|
|
|
|
Other gain (loss),
net:
|
|
|
|
|
|
|
|
|
|
Gain
(loss) on sale of agency securities, net
|
(39)
|
|
(22)
|
|
36
|
|
34
|
|
14
|
Gain
(loss) on derivative instruments and other securities, net
1
|
(778)
|
|
237
|
|
(549)
|
|
(572)
|
|
(51)
|
Total
other gain (loss), net
|
(817)
|
|
215
|
|
(513)
|
|
(538)
|
|
(37)
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Management fee
|
29
|
|
29
|
|
30
|
|
30
|
|
30
|
General
and administrative expenses
|
5
|
|
7
|
|
6
|
|
5
|
|
5
|
Total expenses
|
34
|
|
36
|
|
36
|
|
35
|
|
35
|
Net income
(loss)
|
(633)
|
|
512
|
|
(252)
|
|
(323)
|
|
197
|
Dividend on preferred stock
|
7
|
|
7
|
|
7
|
|
7
|
|
7
|
Net income (loss)
available (attributable) to common stockholders
|
$
(640)
|
|
$
505
|
|
$
(259)
|
|
$
(330)
|
|
$
190
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
(633)
|
|
$
512
|
|
$
(252)
|
|
$
(323)
|
|
$
197
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on available-for-sale securities,
net
|
467
|
|
(872)
|
|
391
|
|
599
|
|
(253)
|
Unrealized gain on derivative instruments, net
1
|
24
|
|
26
|
|
29
|
|
35
|
|
38
|
Other
comprehensive income (loss)
|
491
|
|
(846)
|
|
420
|
|
634
|
|
(215)
|
Comprehensive
income (loss)
|
(142)
|
|
(334)
|
|
168
|
|
311
|
|
(18)
|
Dividend on preferred stock
|
7
|
|
7
|
|
7
|
|
7
|
|
7
|
Comprehensive
income (loss) available (attributable) income to common
stockholders
|
$
(149)
|
|
$
(341)
|
|
$
161
|
|
$
304
|
|
$
(25)
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding -
|
|
|
|
|
|
|
|
|
|
basic and
diluted
|
347.8
|
|
352.1
|
|
352.8
|
|
352.8
|
|
352.8
|
Net income (loss)
per common share - basic and diluted
|
$
(1.84)
|
|
$
1.43
|
|
$
(0.73)
|
|
$
(0.94)
|
|
$
0.54
|
Comprehensive
income (loss) per common share - basic and diluted
|
$
(0.43)
|
|
$
(0.97)
|
|
$
0.46
|
|
$
0.86
|
|
$
(0.07)
|
Dividends declared
per common share
|
$
0.60
|
|
$
0.62
|
|
$
0.66
|
|
$
0.66
|
|
$
0.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
2015
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
Interest
income
|
$
295
|
|
$
414
|
|
$
383
|
|
$
331
|
|
$
357
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
Repurchase agreements and other debt
|
53
|
|
55
|
|
57
|
|
46
|
|
50
|
Interest
rate swap periodic costs 1
|
24
|
|
26
|
|
29
|
|
35
|
|
38
|
Total interest
expense
|
77
|
|
81
|
|
86
|
|
81
|
|
88
|
Net interest
income
|
218
|
|
333
|
|
297
|
|
250
|
|
269
|
Other
interest rate swap periodic costs 3
|
(107)
|
|
(99)
|
|
(84)
|
|
(78)
|
|
(82)
|
Dividend
on REIT equity securities
|
1
|
|
2
|
|
2
|
|
2
|
|
2
|
TBA
dollar roll income 16
|
73
|
|
54
|
|
57
|
|
167
|
|
152
|
Adjusted net interest
and dollar roll income
|
185
|
|
290
|
|
272
|
|
341
|
|
341
|
Operating expenses
|
34
|
|
36
|
|
36
|
|
35
|
|
35
|
Net spread and dollar
roll income
|
151
|
|
254
|
|
236
|
|
306
|
|
306
|
Dividend
on preferred stock
|
7
|
|
7
|
|
7
|
|
7
|
|
7
|
Net spread and dollar
roll income available to common stockholders
|
144
|
|
247
|
|
229
|
|
299
|
|
299
|
Estimated "catch-up" premium amortization cost (benefit)
due to change in CPR forecast
|
33
|
|
(37)
|
|
19
|
|
25
|
|
3
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization, available
to common stockholders
|
$
177
|
|
$
210
|
|
$
248
|
|
$
324
|
|
$
302
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic and diluted
|
347.8
|
|
352.1
|
|
352.8
|
|
352.8
|
|
352.8
|
Net spread and dollar
roll income per common share - basic and diluted
|
$
0.41
|
|
$
0.70
|
|
$
0.65
|
|
$
0.85
|
|
$
0.85
|
Net spread and dollar
roll income, excluding "catch-up" premium amortization, per
common share - basic and diluted
|
$
0.51
|
|
$
0.60
|
|
$
0.70
|
|
$
0.92
|
|
$
0.86
|
|
|
|
|
|
|
|
|
|
|
AMERICAN CAPITAL
AGENCY CORP.
|
RECONCILIATION OF
GAAP NET INCOME TO ESTIMATED TAXABLE INCOME 2
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
2015
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
Net income
(loss)
|
$
(633)
|
|
$
512
|
|
$
(252)
|
|
$
(323)
|
|
$
197
|
Book to tax
differences:
|
|
|
|
|
|
|
|
|
|
Premium
amortization, net
|
15
|
|
(55)
|
|
26
|
|
15
|
|
(7)
|
Realized
loss/gain, net
|
12
|
|
(39)
|
|
(113)
|
|
320
|
|
136
|
Net
capital loss/(utilization of net capital loss carryforward)
5
|
—
|
|
121
|
|
(115)
|
|
(366)
|
|
(246)
|
Unrealized loss/gain, net
|
672
|
|
(417)
|
|
627
|
|
449
|
|
12
|
Other
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
Total book to tax
differences
|
699
|
|
(390)
|
|
425
|
|
418
|
|
(105)
|
Estimated REIT
taxable income
|
66
|
|
122
|
|
173
|
|
95
|
|
92
|
Dividend
on preferred stock
|
7
|
|
7
|
|
7
|
|
7
|
|
7
|
Estimated REIT
taxable income, net of preferred stock dividend
|
$
59
|
|
$
115
|
|
$
166
|
|
$
88
|
|
$
85
|
Weighted average
number of common shares outstanding - basic and diluted
|
347.8
|
|
352.1
|
|
352.8
|
|
352.8
|
|
352.8
|
Estimated REIT
taxable income per common share - basic and diluted
|
$
0.17
|
|
$
0.33
|
|
$
0.47
|
|
$
0.25
|
|
$
0.24
|
|
|
|
|
|
|
|
|
|
|
Beginning cumulative
non-deductible capital loss
|
$
767
|
|
$
646
|
|
$
761
|
|
$
1,127
|
|
$
1,373
|
Net capital
loss/(utilization of net capital loss carryforward)
|
—
|
|
121
|
|
(115)
|
|
(366)
|
|
(246)
|
Ending cumulative
non-deductible capital loss
|
$
767
|
|
$
767
|
|
$
646
|
|
$
761
|
|
$
1,127
|
Ending cumulative
non-deductible capital loss per common share
|
$
2.21
|
|
$
2.20
|
|
$
1.83
|
|
$
2.16
|
|
$
3.19
|
|
|
|
|
|
|
|
|
|
|
AMERICAN CAPITAL
AGENCY CORP.
|
KEY
STATISTICS*
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Key Balance Sheet
Statistics:
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
2015
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
Fixed-rate agency
securities, at fair value - as of period end
19
|
$
52,862
|
|
$
50,070
|
|
$
59,140
|
|
$
54,473
|
|
$
49,170
|
Adjustable-rate
agency securities, at fair value - as of period end
|
$
551
|
|
$
599
|
|
$
642
|
|
$
678
|
|
$
922
|
CMO agency
securities, at fair value - as of period end
|
$
1,041
|
|
$
1,078
|
|
$
1,173
|
|
$
1,195
|
|
$
1,224
|
Interest-only strips
agency securities, at fair value - as of period end
|
$
179
|
|
$
189
|
|
$
198
|
|
$
203
|
|
$
217
|
Principal-only strips
agency securities, at fair value - as of period end
|
$
184
|
|
$
182
|
|
$
199
|
|
$
199
|
|
$
197
|
Total agency
securities, at fair value - as of period end
19
|
$
54,817
|
|
$
52,118
|
|
$
61,352
|
|
$
56,748
|
|
$
51,730
|
Total agency
securities, at cost - as of period end 19
|
$
54,216
|
|
$
51,994
|
|
$
60,349
|
|
$
56,148
|
|
$
51,730
|
Total agency
securities, at par - as of period end 6, 19
|
$
51,902
|
|
$
49,688
|
|
$
57,710
|
|
$
53,666
|
|
$
49,475
|
Average agency
securities, at cost 19
|
$
48,711
|
|
$
56,106
|
|
$
59,479
|
|
$
51,592
|
|
$
52,767
|
Average agency
securities, at par 6, 19
|
$
46,610
|
|
$
53,660
|
|
$
56,874
|
|
$
49,347
|
|
$
50,498
|
Net TBA portfolio -
as of period end, at fair value
|
$
7,385
|
|
$
7,058
|
|
$
4,894
|
|
$
14,768
|
|
$
17,748
|
Net TBA portfolio -
as of period end, at cost
|
$
7,265
|
|
$
7,104
|
|
$
4,815
|
|
$
14,576
|
|
$
17,769
|
Net TBA portfolio -
as of period end, carrying value
|
$
120
|
|
$
(46)
|
|
$
79
|
|
$
192
|
|
$
(21)
|
Average net TBA
portfolio, at cost
|
$
9,434
|
|
$
5,973
|
|
$
6,957
|
|
$
18,492
|
|
$
15,680
|
Average repurchase
agreements and other debt 4
|
$
43,308
|
|
$
50,410
|
|
$
53,963
|
|
$
45,554
|
|
$
46,694
|
Average stockholders'
equity 7
|
$
8,603
|
|
$
9,108
|
|
$
9,401
|
|
$
9,408
|
|
$
9,455
|
Net book value per
common share as of period end 8
|
$
23.00
|
|
$
24.00
|
|
$
25.53
|
|
$
25.74
|
|
$
25.54
|
Leverage - average
during the period 9, 19
|
5.1:1
|
|
5.6:1
|
|
5.8:1
|
|
4.9:1
|
|
5.0:1
|
Leverage - average
during the period, including net TBA position
10
|
6.2:1
|
|
6.2:1
|
|
6.5:1
|
|
6.9:1
|
|
6.7:1
|
Leverage - as of
period end 11, 19
|
5.9:1
|
|
5.3:1
|
|
5.8:1
|
|
5.3:1
|
|
4.8:1
|
Leverage - as of
period end, including net TBA position 12
|
6.8:1
|
|
6.1:1
|
|
6.4:1
|
|
6.9:1
|
|
6.7:1
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Statistics:
|
|
|
|
|
|
|
|
|
|
Average coupon
13, 19
|
3.62%
|
|
3.60%
|
|
3.63%
|
|
3.66%
|
|
3.63%
|
Average asset yield
14, 19
|
2.42%
|
|
2.95%
|
|
2.57%
|
|
2.57%
|
|
2.71%
|
Average cost of funds
15, 19
|
(1.70%)
|
|
(1.43%)
|
|
(1.28%)
|
|
(1.39%)
|
|
(1.44%)
|
Average net interest
rate spread 19
|
0.72%
|
|
1.52%
|
|
1.29%
|
|
1.18%
|
|
1.27%
|
Average net interest
rate spread, including TBA dollar roll income/loss
16
|
1.14%
|
|
1.74%
|
|
1.53%
|
|
1.85%
|
|
1.90%
|
Average coupon - as
of period end 19
|
3.61%
|
|
3.62%
|
|
3.58%
|
|
3.65%
|
|
3.65%
|
Average asset
yield - as of period end 19
|
2.76%
|
|
2.75%
|
|
2.64%
|
|
2.74%
|
|
2.78%
|
Average cost of funds
- as of period end 17, 19
|
(1.64%)
|
|
(1.56%)
|
|
(1.34%)
|
|
(1.40%)
|
|
(1.42%)
|
Average net interest
rate spread - as of period end 19
|
1.12%
|
|
1.19%
|
|
1.30%
|
|
1.34%
|
|
1.36%
|
Average actual CPR
for securities held during the period 19
|
12%
|
|
12%
|
|
8%
|
|
9%
|
|
10%
|
Average forecasted
CPR - as of period end 19
|
9%
|
|
8%
|
|
10%
|
|
9%
|
|
8%
|
Total premium
amortization, net
|
$
(128)
|
|
$
(69)
|
|
$
(133)
|
|
$
(121)
|
|
$
(101)
|
Expenses % of average
total assets - annualized
|
0.25%
|
|
0.21%
|
|
0.20%
|
|
0.22%
|
|
0.22%
|
Expenses % of average
stockholders' equity - annualized
|
1.57%
|
|
1.59%
|
|
1.55%
|
|
1.48%
|
|
1.47%
|
Net comprehensive
income (loss) return on average common equity -
annualized
|
(7.1%)
|
|
(15.6%)
|
|
7.2%
|
|
13.3%
|
|
(1.1%)
|
Dividends declared
per common share
|
$
0.60
|
|
$
0.62
|
|
$
0.66
|
|
$
0.66
|
|
$
0.65
|
Economic return
(loss) on common equity - annualized 18
|
(6.6%)
|
|
(14.3%)
|
|
7.1%
|
|
13.4%
|
|
(1.1%)
|
|
|
|
|
|
|
|
|
|
|
*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.
** Numbers may not total due to rounding.
1.
|
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.
|
2.
|
Table includes
non-GAAP financial measures. Refer to "Use of Non-GAAP
Financial Information" for additional discussion of non-GAAP
financial measures.
|
3.
|
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.
|
4.
|
Average repurchase
agreements and other debt includes agency repo, FHLB advances and
debt of consolidated VIE's. Amount excludes U.S. Treasury
repurchase agreements.
|
5.
|
Capital losses in
excess of capital gains are not deductible from the Company's
ordinary taxable income, but may be carried forward for up to five
years and applied against future net capital
gains.
|
6.
|
Agency securities at
par value exclude the underlying unamortized principal balance
("UPB") of the Company's interest-only securities. Excludes
TBAs.
|
7.
|
Average stockholders'
equity calculated as the average month-ended stockholders' equity
during the quarter.
|
8.
|
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 as of period end.
|
9.
|
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.
|
10.
|
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.
|
11.
|
Leverage at 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.
|
12.
|
Leverage at 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.
|
13.
|
Average coupon for
the period was calculated by dividing the total coupon (or cash)
interest income on agency securities by average agency securities
held at par.
|
14.
|
Average asset yield
for the period was calculated by dividing the total interest income
on agency securities (coupon interest less amortization of net
premiums and discounts) by the average amortized cost of agency
securities held.
|
15.
|
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.
|
16.
|
Estimated 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.
|
17.
|
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 and forward starting swaps becoming effective, net
of swaps expiring, within three months of each period end, but
excludes costs associated with other supplemental hedges such as
swaptions and short U.S. Treasury or TBA
positions.
|
18.
|
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.
|
19.
|
Excludes net TBA
mortgage position.
|
STOCKHOLDER CALL
AGNC invites stockholders,
prospective stockholders and analysts to attend the AGNC
stockholder call on October 27, 2015 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 Q3 2015 Earnings
Presentation link to download and print the presentation in advance
of the stockholder call.
An archived audio of the stockholder call combined with the
slide presentation will be available on the AGNC website after the
call on October 27, 2015. In addition, there will be a
phone recording available one hour after the live call on
October 27, 2015 through November 10,
2015. 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
10073277.
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 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 externally
managed and advised by American Capital AGNC Management, LLC, an
affiliate of American Capital, Ltd. For further information,
please refer to www.AGNC.com.
ABOUT AMERICAN CAPITAL, LTD.
American Capital, Ltd.
(Nasdaq: ACAS) is a publicly traded private equity firm and global
asset manager. American Capital, both directly and through
its asset management business, originates, underwrites and manages
investments in middle market private equity, leveraged finance,
real estate, energy & infrastructure and structured
products. American Capital manages $23
billion of assets, including assets on its balance sheet and
fee earning assets under management by affiliated managers, with
$81 billion of total assets under
management (including levered assets). Through a wholly owned
affiliate, American Capital manages publicly traded American
Capital Agency Corp. (Nasdaq: AGNC), American Capital Mortgage
Investment Corp. (Nasdaq: MTGE) and American Capital Senior
Floating, Ltd. (Nasdaq: ACSF) with approximately $11 billion of total net book value. From
its eight offices in the U.S., Europe and Asia, American Capital and its wholly owned
affiliate, European Capital, will consider investment opportunities
from $10 million to $600
million. For further information, please refer to
www.AmericanCapital.com.
FORWARD LOOKING STATEMENTS
This press release contains
forward-looking statements. Forward-looking statements are
based on estimates, projections, beliefs and assumptions of
management of the Company at the time of such statements and are
not guarantees of future performance. Forward-looking
statements involve risks and uncertainties in predicting future
results and conditions. Actual results could differ
materially from those projected in these forward-looking statements
due to a variety of 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 "adjusted net interest
expense" (defined as interest expense plus the periodic interest
rate costs of the Company's interest rate swaps reported in gain
(loss) on derivatives and other securities, net in its consolidated
statements of comprehensive income), "net spread and dollar roll
income" (defined as interest income, TBA dollar roll income and
dividends from REIT equity securities, net of adjusted net interest
expense and operating expenses) and "estimated taxable income" and
certain financial metrics derived from non-GAAP information, such
as "cost of funds" and "net interest rate spread."
By providing users of the Company's financial information with
such measures in addition to the related GAAP measures, the Company
believes it gives users 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: (i) in the case of adjusted net interest expense, the
economic costs of financing the Company's investment portfolio
inclusive of interest rate swaps used to economically hedge against
fluctuations in its borrowing costs, (ii) in the case of net spread
and dollar roll income, the Company's current financial performance
without the effects of certain transactions that are not
necessarily indicative of its current investment portfolio and
operations, and (iii) in the case of estimated taxable income,
information that 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 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) 968-9400
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/american-capital-agency-corp-reports-043-comprehensive-loss-per-common-share-and-2300-net-book-value-per-common-share-300166198.html
SOURCE American Capital Agency Corp.