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SEC Filings

10-K
AGNC INVESTMENT CORP. filed this Form 10-K on 02/23/2016
Entire Document
 


Gains and Losses
The following table is a summary of our net gain (loss) from the sale of securities classified as available-for-sale for fiscal years 2015, 2014 and 2013 (in millions): 
 
 
Fiscal Year
Securities Classified as Available-for-Sale
 
2015
 
2014
 
2013
MBS sold, at cost
 
$
(27,578
)
 
$
(30,123
)
 
$
(81,516
)
Proceeds from agency MBS sold 1
 
27,555

 
30,174

 
80,108

Net gain (loss) on sale of MBS
 
$
(23
)
 
$
51

 
$
(1,408
)
 
 
 
 
 
 
 
Gross gain on sale of MBS
 
$
98

 
$
172

 
$
217

Gross loss on sale of MBS
 
(121
)
 
(121
)
 
(1,625
)
Net gain (loss) on sale of MBS
 
$
(23
)
 
$
51

 
$
(1,408
)
  ________________________
1.
Proceeds include cash received during the period, plus receivable for MBS sold during the period as of period end.
For fiscal years 2015 and 2014, we recognized a net unrealized gain of $5 million and $32 million, respectively, for the change in value of investments in interest and principal-only securities in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income. For fiscal year 2013, we did not recognize a net unrealized gain or loss on our interest and principal-only securities. Over the same periods, we did not recognize any realized gains or losses on our interest or principal-only securities.
Securitizations and Variable Interest Entities
As of December 31, 2015 and 2014, we held investments in CMO trusts, which are VIEs. We have consolidated certain of these CMO trusts in our consolidated financial statements where we have determined we are the primary beneficiary of the trusts. All of our CMO securities are backed by fixed or adjustable-rate agency MBS. Fannie Mae or Freddie Mac guarantees the payment of interest and principal and acts as the trustee and administrator of their respective securitization trusts. Accordingly, we are not required to provide the beneficial interest holders of the CMO securities any financial or other support. Our maximum exposure to loss related to our involvement with CMO trusts is the fair value of the CMO securities and interest and principal-only securities held by us, less principal amounts guaranteed by Fannie Mae and Freddie Mac.
In connection with our consolidated CMO trusts, we recognized agency securities with a total fair value of $1.0 billion and $1.3 billion as of December 31, 2015 and 2014, respectively, and debt, at fair value, of $595 million and $761 million, respectively, in our accompanying consolidated balance sheets. As of December 31, 2015 and 2014, the agency securities had an aggregate unpaid principal balance of $1.0 billion and $1.2 billion, respectively, and the debt had an aggregate unpaid principal balance of $587 million and $742 million, respectively. We re-measure our consolidated debt at fair value through earnings in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income. For fiscal years 2015 and 2014, we recorded a gain of $16 million and a loss of $10 million, respectively, associated with our consolidated debt. Our involvement with the consolidated trusts is limited to the agency securities transferred by us upon the formation of the trusts and the CMO securities subsequently held by us. There are no arrangements that could require us to provide financial support to the trusts.
As of December 31, 2015 and 2014, the fair value of our CMO securities and interest and principal-only securities was $1.3 billion and $1.6 billion, respectively, excluding the consolidated CMO trusts discussed above, or $1.8 billion and $2.1 billion, respectively, including the net asset value of our consolidated CMO trusts. Our maximum exposure to loss related to our CMO securities and interest and principal-only securities, including our consolidated CMO trusts, was $238 million and $274 million as of December 31, 2015 and 2014, respectively.

Note 4. Repurchase Agreements and Other Secured Borrowings
We pledge certain of our securities as collateral under our repurchase agreements with financial institutions and under our secured borrowing facility with the FHLB of Des Moines. Interest rates on our borrowings are generally based on LIBOR plus or minus a margin and amounts available to be borrowed are dependent upon the fair value of the securities pledged as collateral, which fluctuates with changes in interest rates, type of security and liquidity conditions within the banking, mortgage finance and real estate industries. If the fair value of our pledged securities declines, lenders will typically require us to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as "margin calls." Similarly, if the fair value of our pledged securities increases, lenders may release collateral back to us. As of December 31, 2015 and 2014, we had met all margin call requirements. For additional information regarding our pledged assets, please refer to Note 6.

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