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SEC Filings

10-K
AGNC INVESTMENT CORP. filed this Form 10-K on 02/27/2017
Entire Document
 


FISCAL YEAR 2016 COMPARED TO FISCAL YEAR 2015
Interest Income and Asset Yield
The following table summarizes our interest income for fiscal years 2016 and 2015 (dollars in millions):
 
Fiscal Year 2016
 
Fiscal Year 2015
 
Amount
 
Yield
 
Amount
 
Yield
Cash/coupon interest income
$
1,721

 
3.64
 %
 
$
1,874

 
3.62
 %
Net premium amortization
(400
)
 
(0.96
)%
 
(408
)
 
(0.91
)%
Interest income
$
1,321

 
2.68
 %
 
$
1,466

 
2.71
 %
Weighted average actual portfolio CPR for securities held during the period
12
%
 
 
 
10
%
 
 
Weighted average projected CPR for the remaining life of securities held as of period end
8
%
 
 
 
8
%
 
 
Average 30-year fixed rate mortgage rate as of period end 1
4.32
%
 
 
 
4.01
%
 
 
10-year U.S. Treasury rate as of period end
2.43
%
 
 
 
2.27
%
 
 
 _______________________
1.
Source: Freddie Mac Primary Fixed Mortgage Rate Mortgage Market Survey

The principal elements impacting our interest income are the size of our average investment portfolio and the yield on our investments. The following is a summary of the estimated impact of each of these elements on the decrease in interest income from fiscal year 2015 to 2016 (in millions):
Impact of Changes in the Principal Elements Impacting Interest Income
Fiscal Year 2016 vs. 2015
 
 
 
Due to Change in Average
 
Total Increase /
(Decrease)
 
Portfolio
Size
 
Asset
Yield
Interest Income
$
(145
)
 
$
(129
)
 
$
(16
)

The size of our average investment portfolio decreased in par value, compared to the prior year period, by 9% for fiscal year 2016. The decline was largely due to a relative shift from investments recognized as securities on our consolidated financial statements to investments in TBA contracts recognized as derivative assets/(liabilities) on our consolidated financial statements and a decline in our stockholders' equity due to share repurchases and price declines on our portfolio, net of hedges.
Our average asset yield was down slightly at 2.68% for fiscal year 2016, compared to 2.71% for the prior year. Excluding "catch-up" premium amortization cost due to changes in our projected CPR estimates, our average asset yield was 2.70% for fiscal year 2016, compared to 2.72% for the prior year period. The yield decline in our average asset was largely due to changes in our portfolio composition.
Leverage  
Our primary measures of leverage are our "at risk" leverage and our tangible net book value "at risk" leverage ratio. "At risk" leverage is measured as the sum of our mortgage borrowings (consisting of repurchase agreements used to fund our investment securities ("Agency repo"), FHLB advances and debt of consolidated VIEs), net TBA position (at cost) and our net receivable/payable for unsettled investment securities divided by the sum of our total stockholders' equity. Tangible net book value "at risk" leverage includes adjustments to exclude goodwill and other intangible assets, net of accumulated amortization, related to our acquisition of AMM from stockholders' equity.
We include our net TBA position in our measures of leverage because a long TBA position carries similar risks as if we had purchased the underlying Agency RMBS and funded the purchases with on-balance sheet funding liabilities. Similarly, a short TBA position has substantially the same effect as selling the underlying Agency RMBS and reducing our on-balance sheet funding commitments. (Refer to Liquidity and Capital Resources for further discussion of TBA dollar roll positions). Repurchase agreements used to fund short-term investments in U.S. Treasury securities ("U.S. Treasury repo") are excluded from our measures of leverage due to the temporary and highly liquid nature of these investments.

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