Print Page     Close Window     

SEC Filings

10-Q
AGNC INVESTMENT CORP. filed this Form 10-Q on 05/08/2017
Entire Document
 


14.
"At risk" leverage as of period end is calculated by dividing the sum of our mortgage borrowings outstanding, our receivable/payable for unsettled investment securities and our net TBA dollar roll position outstanding as of period end (at cost) by the sum of our total stockholders' equity less the fair value of investments in REIT equity securities at period end. Leverage excludes U.S. Treasury repurchase agreements.
15.
Tangible net book value "at risk" leverage includes the components of "at risk" leverage, with stockholders' equity adjusted to exclude goodwill and other intangible assets, net.
Interest Income and Asset Yield
The following table summarizes our interest income for the three months ended March 31, 2017 and 2016 (dollars in millions):
 
Three Months Ended March 31,
 
2017
 
2016
 
Amount
 
Yield
 
Amount
 
Yield
Cash/coupon interest income
$
385

 
3.65
 %
 
$
445

 
3.63
 %
Net premium amortization
(89
)
 
(0.97
)%
 
(150
)
 
(1.31
)%
Interest income
$
296

 
2.68
 %
 
$
295

 
2.32
 %
Weighted average actual portfolio CPR for securities held during the period
11
%
 
 
 
9
%
 
 
Weighted average projected CPR for the remaining life of securities held as of period end
8
%
 
 
 
10
%
 
 
Average 30-year fixed rate mortgage rate as of period end 1
4.14
%
 
 
 
3.71
%
 
 
10-year U.S. Treasury rate as of period end
2.39
%
 
 
 
1.78
%
 
 
 _______________________
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 increase in interest income for the three months ended March 31, 2017 compared to the prior year period (in millions):
Impact of Changes in the Principal Elements Impacting Interest Income
Three Months Ended March 31, 2017 vs. March 31, 2016
 
 
 
Due to Change in Average
 
Total Increase /
(Decrease)
 
Portfolio
Size
 
Asset
Yield
Interest Income
$
1

 
$
(39
)
 
$
40


The size of our average investment portfolio decreased in par value, compared to the prior year period, by 13% for the three months ended March 31, 2017. 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 largely due to share repurchase activity during the prior year period.
Our average asset yield increased to 2.68% for the three months ended March 31, 2017, compared to 2.32% for the prior year period, mostly due to differences in "catch-up" premium amortization recognized due to changes in projected CPR estimates. Excluding "catch-up" premium amortization cost of $9 million and $55 million, our average asset yield was 2.76% and 2.75% for the three months ended March 31, 2017 and 2016, respectively.
Leverage  
Our primary measure of leverage is our tangible net book value "at risk" leverage ratio. Tangible net book value "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 adjusted to exclude goodwill and other intangible assets related to our acquisition of AMM on July 1, 2016.
We include our net TBA position in our measure 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 measure of leverage due to the temporary and highly liquid nature of these investments.

36


© AGNC Investment Corp All Rights Reserved