Print Page     Close Window     

SEC Filings

10-K
AGNC INVESTMENT CORP. filed this Form 10-K on 02/26/2018
Entire Document
 


sources to understand the significant inputs and assumptions they used to determine their prices. For information regarding valuation of our derivative instruments, please refer to the discussion of derivative and other hedging instruments in Note 2
We review third-party fair value estimates and perform procedures to validate their reasonableness, including an analysis of the range of estimates for each position, comparison to recent trade activity for similar securities, and for consistency with market conditions observed as of the measurement date. While we do not adjust prices we obtain from third-party pricing sources, we will exclude third-party prices for securities from our estimation of fair value if we determine (based on our validation procedures and our market knowledge and expertise) that the price is significantly different from what observable market data would indicate and we cannot obtain an understanding from the third-party source as to the significant inputs used to determine the price.  
The validation procedures described above also influence our determination of the appropriate fair value measurement classification.  We utilize a three-level valuation hierarchy for disclosure of fair value measurement. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument's categorization within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement. There were no transfers between valuation hierarchy levels during fiscal years 2017 and 2016. The three levels of valuation hierarchy are defined as follows:
Level 1 Inputs —Quoted prices (unadjusted) for identical unrestricted assets and liabilities in active markets that are accessible at the measurement date.
Level 2 Inputs —Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs —Instruments with primarily unobservable market data that cannot be corroborated.
The following table provides a summary of our assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2017 and 2016 (in millions):
 
 
December 31, 2017
 
December 31, 2016
 
 
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Agency securities
 
$

 
$
55,506

 
$

 
$

 
$
45,393

 
$

Agency securities transferred to consolidated VIEs
 

 
662

 

 

 
818

 

Credit risk transfer securities
 

 
876

 

 

 
164

 

Non-Agency securities
 

 
36

 

 

 
124

 

U.S. Treasury securities
 

 

 

 
182

 

 

REIT equity securities
 
29

 

 

 

 

 

Interest rate swaps
 

 
81

 

 

 
321

 

Swaptions
 

 
75

 

 

 
22

 

TBA securities
 

 
30

 

 

 
4

 

U.S. Treasury futures
 
19

 

 

 
8

 

 

Total
 
$
48

 
$
57,266

 
$

 
$
190

 
$
46,846

 
$

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Debt of consolidated VIEs
 
$

 
$
357

 
$

 
$

 
$
460

 
$

Obligation to return U.S. Treasury securities borrowed under reverse repurchase agreements
 
10,467

 

 

 
7,636

 

 

Interest rate swaps
 

 
1

 

 

 
105

 

TBA securities
 

 
27

 

 

 
151

 

Total
 
$
10,467


$
385


$

 
$
7,636

 
$
716

 
$

We elected the option to account for debt of consolidated VIEs at fair value with changes in fair value reflected in earnings during the period in which they occur, because we believe this election more appropriately reflects our financial position as both the consolidated Agency securities and consolidated debt are presented in a consistent manner, at fair value, on our consolidated balance sheets. We estimate the fair value of the consolidated debt based on the difference between (i) the fair value of the RMBS transferred to consolidated VIEs and (ii) the fair value of our retained interests, each of which is based on valuations obtained

84


© AGNC Investment Corp All Rights Reserved