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SEC Filings

10-Q
AGNC INVESTMENT CORP. filed this Form 10-Q on 08/05/2016
Entire Document
 


Impact of Changes in the Principal Elements Impacting Interest Income
Periods Ended June 30, 2016 vs. June 30, 2015
 
 
 
Due to Change in Average
 
Total Increase /
(Decrease)
 
Portfolio
Size
 
Asset
Yield
Three months ended
$
(96
)
 
$
(32
)
 
$
(64
)
Six months ended
$
(184
)
 
$
(89
)
 
$
(95
)

The size of our average investment portfolio decreased in par value, compared to the prior year period, by 8% and 11% for the three and six months ended June 30, 2016, respectively. The decline was largely due to a relative shift from on-balance sheet MBS holdings to TBA holdings as well as due to a decrease in our investment base due share repurchase activity, which was partially offset by an increase in our average leverage (see "Leverage" below).
Our average asset yield decreased for the three and six months ended June 30, 2016, compared to the prior year period, largely due to fluctuations in "catch-up" premium amortization cost recognized due to changes in our projected CPR estimates. We recognized "catch-up" premium amortization cost of $32 million and $87 million for the three and six months ended June 30, 2016, respectively, compared to a benefit of $37 million and $18 million for the prior year period, respectively. Excluding "catch-up" premium amortization adjustments, our average asset yield was 2.70% and 2.73% for the three and six months ended June 30, 2016, respectively, largely unchanged from 2.71% and 2.69%, respectively, for the prior year period.

Leverage  
Our leverage was 6.3x and 5.8x our stockholders' equity as of June 30, 2016 and December 31, 2015, respectively, measured as the sum of our agency repurchase agreements ("agency repo"), FHLB advances and debt of consolidated VIEs (collectively referred to as "mortgage borrowings") and our net receivable / payable for unsettled agency securities divided by the sum of our total stockholders' equity less the fair value of our investments in REIT equity securities as of period end. Since the individual agency mortgage REITs in which we invest employ similar leverage as within our agency portfolio, we acquire these securities on an unlevered basis and, therefore, exclude from our leverage measurements the portion of our stockholders' equity allocated to investments in other mortgage REITs. In addition, our measurement of leverage excludes repurchase agreements used to fund short-term investments in U.S. Treasury securities ("U.S. Treasury repo") due to the temporary and highly liquid nature of these investments.
Inclusive of our net TBA position, our total "at risk" leverage was 7.2x and 6.8x our stockholders' equity as of June 30, 2016 and December 31, 2015, respectively. Since we recognize our TBA commitments as derivatives under GAAP, they are not included in our repurchase agreement and other debt leverage calculations as measured from our consolidated balance sheets; however, a long TBA position carries similar risks as if we had purchased the underlying MBS assets and funded such purchases with on-balance sheet funding liabilities. Similarly, a short TBA position has substantially the same effect as selling the underlying MBS assets and reducing our on-balance sheet funding commitments. (Refer to Liquidity and Capital Resources for further discussion of TBA dollar roll positions). Therefore, we refer to our leverage adjusted for TBA positions as our "at risk" leverage.
The table below presents our average and quarter-end mortgage borrowings, net TBA position and leverage ratios for each of the three month periods listed below (dollars in millions):
 
 
Mortgage Borrowings 1
 
Net TBA Position
Long / (Short) 2 
 
Average
Leverage during the Period 1,3
 
Average Total
"At Risk" Leverage during the Period 1,4
 
Leverage
as of
Period End 1,5
 
"At Risk" Leverage
as of
Period End 1,6
Quarter Ended
 
Average Daily
Amount
 
Maximum
Daily Amount
 
Ending
Amount
 
Average Daily
Amount
 
Ending
Amount
 
June 30, 2016
 
$
46,948

 
$
48,875

 
$
45,502

 
$
8,238

 
$
6,975

 
6.1:1
 
7.2:1
 
6.3:1
 
7.2:1
March 31, 2016
 
$
45,926

 
$
49,767

 
$
48,875

 
$
8,144

 
$
5,983

 
5.9:1
 
7.0:1
 
6.5:1
 
7.3:1
December 31, 2015
 
$
47,018

 
$
50,078

 
$
46,077

 
$
7,796

 
$
7,430

 
5.8:1
 
6.8:1
 
5.8:1
 
6.8:1
September 30, 2015
 
$
43,308

 
$
46,049

 
$
44,683

 
$
9,434

 
$
7,265

 
5.1:1
 
6.2:1
 
5.9:1
 
6.8:1
June 30, 2015
 
$
50,410

 
$
55,097

 
$
45,860

 
$
5,973

 
$
7,104

 
5.6:1
 
6.2:1
 
5.3:1
 
6.1:1
March 31, 2015
 
$
53,963

 
$
58,217

 
$
55,056

 
$
6,957

 
$
4,815

 
5.8:1
 
6.5:1
 
5.8:1
 
6.4:1
_______________________
1.
Mortgage borrowings includes agency repo, FHLB advances and debt of consolidated VIEs. Amounts exclude U.S. Treasury repo agreements.
2.
Daily average and ending net TBA position outstanding measured at cost.

39


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