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SEC Filings

10-Q
AGNC INVESTMENT CORP. filed this Form 10-Q on 11/06/2014
Entire Document
 


 
 
Unrealized Loss Position For
 
 
Less than 12 Months
 
12 Months or More
 
Total
Agency Securities Classified as
Available-for-Sale
 
Estimated Fair
Value
 
Unrealized
Loss
 
Estimated
Fair Value
 
Unrealized
Loss
 
Estimated Fair
Value
 
Unrealized
Loss
September 30, 2014
 
$
6,709

 
$
(23
)
 
$
17,677

 
$
(451
)
 
$
24,386

 
$
(474
)
December 31, 2013
 
$
42,853

 
$
(1,248
)
 
$
1,586

 
$
(101
)
 
$
44,439

 
$
(1,349
)

As of the end of each respective reporting period, a decision had not been made to sell any of these agency securities and we do not believe it is more likely than not we will be required to sell the agency securities before recovery of their amortized cost basis. The unrealized losses on these agency securities are not due to credit losses given the GSE guarantees, but are rather due to changes in interest rates and prepayment expectations. Accordingly, we did not recognize any OTTI charges on our investment securities for the three and nine months ended September 30, 2014 and 2013. However, as we continue to actively manage our portfolio, we may recognize additional realized losses on our agency securities upon selecting specific securities to sell.
Gains and Losses
The following table is a summary of our net gain (loss) from the sale of agency securities classified as available-for-sale for the three and nine months ended September 30, 2014 and 2013 (in millions): 
 
 
Three Months Ended
 
Nine Months Ended
Agency Securities Classified as
Available-for-Sale
 
September 30, 2014
 
September 30, 2013
 
September 30, 2014
 
September 30, 2013
Agency MBS sold, at cost
 
$
(8,763
)
 
$
(25,147
)
 
$
(25,640
)
 
$
(60,541
)
Proceeds from agency MBS sold 1
 
8,777

 
24,414

 
25,657

 
59,799

Net gain (loss) on sale of agency MBS
 
$
14

 
$
(733
)
 
$
17

 
$
(742
)
 
 
 
 
 
 
 
 
 
Gross gain on sale of agency MBS
 
$
41

 
$
2

 
$
132

 
$
183

Gross loss on sale of agency MBS
 
(27
)
 
(735
)
 
(115
)
 
(925
)
Net gain (loss) on sale of agency MBS
 
$
14

 
$
(733
)
 
$
17

 
$
(742
)
  ________________________
1.
Proceeds include cash received during the period, plus receivable for agency MBS sold during the period as of period end.

For the three and nine months ended September 30, 2014, we recognized a net unrealized gain of $4 million and $31 million, respectively, and for the three and nine months ended September 30, 2013 we recognized an unrealized gain of $14 million and an unrealized loss of $8 million, respectively, for the change in value of investments in interest and principal-only strips in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income. 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 September 30, 2014 and December 31, 2013, 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 $1.3 billion and $1.5 billion as of September 30, 2014 and December 31, 2013, respectively, and debt, at fair value, of $796 million and $910 million, respectively, in our accompanying consolidated balance sheets. As of September 30, 2014 and December 31, 2013, the agency securities had an aggregate unpaid principal balance of $1.2 billion and $1.4 billion, respectively, and the debt had an aggregate unpaid principal balance of $780 million and $900 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 the three and nine months ended September 30, 2014, we recognized a net gain and a net loss of $6

13


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