BETHESDA, Md., Oct. 26 /PRNewswire-FirstCall/ -- American
Capital Agency Corp. ("AGNC" or the "Company") (Nasdaq: AGNC) today
reported net income for the third quarter of 2010 of $60.0 million, or $1.69 per share, and book value of $23.43 per share.
THIRD QUARTER 2010 FINANCIAL HIGHLIGHTS
- $1.69 per share of net income
- $1.11 per share, excluding
$0.59 per share of other investment
related income and $0.01 per share of
accrued excise tax
- $1.59 per share of taxable
income
- $1.40 per share dividend
declared
- $0.99 per share of undistributed
taxable income as of September 30,
2010
- Undistributed taxable income was $39
million as of September 30,
2010, a $2 million increase
from June 30, 2010
- $0.74 per share, pro
forma, when adjusted for the $328
million follow-on equity offering that settled on
October 1, 2010
- $23.43 book value per share as of
September 30, 2010
- $23.78 per share, pro
forma, when adjusted for the follow-on equity offering
- 27.9% annualized return on average stockholders' equity ("ROE")
for the quarter
OTHER HIGHLIGHTS
- $9.7 billion portfolio value as
of September 30, 2010
- 15%(1) constant prepayment rate ("CPR") for the third quarter
of 2010
- 17% Portfolio CPR in September
2010 (based on data released in October 2010)
- 9.8x(2) leverage as of September 30,
2010
- 7.2x(3) as of September 30, 2010,
pro forma, when adjusted for the follow-on equity
offering
- 8.5x average leverage for the quarter
- 2.21% annualized net interest rate spread for the quarter
- $470 million of net proceeds
raised from follow-on equity offerings
- $328 million raised from a
follow-on equity offering that settled on October 1, 2010
- $142 million raised via the
Direct Stock Purchase Plan ("DSPP")
- All equity raised was accretive to book value
"We continue to witness significant volatility in the markets,
with interest rates falling and mortgage rates at near record
lows," said Gary Kain, Chief
Investment Officer of AGNC. "As we mentioned last quarter, we
continue to view managing prepayment exposure as the key to
continuing to generate attractive risk-adjusted returns.
Growing awareness on the part of market participants that
prepayments can vary dramatically between different types of
securities led to significant changes in relative prices. In fact,
some securities with more favorable prepayment characteristics
increased significantly in price this quarter, while comparable
generic or TBA assets actually declined in price. As such, we
remain extremely focused on selecting assets that we believe will
produce the best risk adjusted returns, given evolving market
valuations and expected performance."
INVESTMENT PORTFOLIO
As of September 30, 2010, the
Company's investment portfolio totaled $9.7
billion of agency securities, at fair value, comprised of
$5.6 billion of fixed-rate agency
securities, $3.6 billion of
adjustable-rate agency securities ("ARMs") and $0.5 billion of collateralized mortgage
obligations ("CMOs") backed by fixed and adjustable-rate agency
securities(4). As of September 30,
2010, AGNC's investment portfolio was comprised of 36%
30-year(5) and 22% 15-year fixed-rate securities, 37%
adjustable-rate securities and 5% CMOs backed by fixed and
adjustable-rate agency securities.
ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE
SPREAD
During the quarter, the annualized weighted average yield on the
Company's average earning assets was 3.23% and its annualized
average cost of funds was 1.02%, which resulted in a net interest
rate spread of 2.21%, versus the second quarter of 2010 net
interest rate spread of 2.18% (or 2.37% when excluding 0.19%
of amortization expense associated with previously terminated
interest rate swaps). As of September
30, 2010, the weighted average yield on the Company's
earning assets was 3.25% and its weighted average cost of funds was
1.09%. This resulted in a net interest rate spread of 2.16%
as of September 30, 2010, a decrease
of 22 bps from the weighted average net interest rate spread as of
June 30, 2010 of 2.38%. The
cost of funds at the end of the quarter was higher than the average
cost of funds for the quarter because the Company increased its
interest rate swap positions in anticipation of a higher repurchase
agreement balance following the completed equity offering.
Premiums and discounts associated with purchases of agency
securities are amortized or accreted into interest income over the
life of such securities using the effective yield method. The
actual CPR for the Company's portfolio held in the third quarter of
2010 was 15%, a decrease from 28% during the second quarter of
2010. The most recent prepayment speed for the Company's
portfolio for the month of September (released in October) was 17%.
The Company's projected CPR for the remaining life of its
investments as of September 30, 2010
was 18%. This reflects a decrease from 20% as of June 30, 2010. The decrease in the
Company's projected CPR is largely due to the decline in forecasted
speeds for loans with high loan-to-value ratios and interest-only
hybrid ARM securities.
The weighted average cost basis of the investment portfolio was
105.1% (excluding interest-only strips the weighted average cost
basis was 104.8%) as of September 30,
2010. The amortization of premiums (net of any accretion of
discounts) on the investment portfolio for the quarter was
$30.8 million, or $0.87 per share. The unamortized net
premium as of September 30, 2010 was
$464.6 million.
LEVERAGE AND HEDGING ACTIVITIES
As of September 30, 2010, the
Company's $9.7 billion investment
portfolio was financed with $8.0
billion of repurchase agreements, $0.1 billion of other debt(6) and $0.9 billion of equity capital, resulting in a
leverage ratio of 8.8x. When adjusted for the net payable for
agency securities not yet settled, the leverage ratio was 9.8x as
of September 30, 2010.
The leverage at the end of the quarter was significantly higher
than the average leverage for the quarter of 8.5x. The Company
increased its asset positions through the use of additional
leverage toward the end of the quarter in anticipation of the
follow-on equity raise that the Company completed on October 1, 2010. When adjusting for the
approximately $328 million of net
equity proceeds raised, the Company's pro forma leverage
position as of September 30, 2010 was
7.2x(7). Following the completion of the equity raise,
leverage has returned to levels generally consistent with the third
quarter.
Of the $8.0 billion borrowed under
repurchase agreements as of September 30,
2010, $3.0 billion had
original maturities of 30 days or less, $3.5 billion had original
maturities greater than 30 days and less than or equal to 60 days,
$0.9 billion had original maturities
greater than 60 days and less than or equal to 90 days and the
remaining $0.6 billion had original
maturities of 91 days or more. As of September 30, 2010, the Company had repurchase
agreements with 21 financial institutions.
The Company's interest rate swap positions as of September 30, 2010 totaled $4.1 billion in notional amount at an average
fixed pay rate of 1.79%, a weighted average receive rate of 0.26%
and a weighted average maturity of 2.9 years. During the
quarter, AGNC increased its swap position by $1.1 billion in conjunction with an increase in
the portfolio size. The new swap agreements entered into
during the quarter have an average term of approximately 4.2 years
and a weighted average fixed pay rate of 1.22%.
The Company also utilizes swaptions to help mitigate the
Company's exposure to larger changes in interest rates.
During the quarter, as a result of the continued decline in
interest rates, the Company exercised or net settled $300 million of receiver swaptions. As of
September 30, 2010, the Company still
had $200 million in payer swaptions
outstanding and has purchased additional payer swaptions since the
end of the quarter.
As of September 30, 2010, 50% of
the Company's repurchase agreement balance and other debt were
hedged through interest rate swap agreements. This percentage
does not reflect the swaps underlying the swaptions noted above and
is expected to drop when purchases for future settlement dates
settle.
OTHER INCOME, NET
During the quarter, AGNC produced $20.8
million in other income, net, or $0.59 per share. Other income is comprised
of $24.6 million of net realized
gains on sales of agency securities, $0.8
million of net realized losses on derivative and trading
securities and $3.0 million of net
unrealized losses, including reversals of prior period unrealized
gains and losses realized during the current quarter, on derivative
and trading securities that are marked-to-market in current income.
Sales of agency securities during the quarter were largely
driven by actions taken by the Company in the ordinary course, in
response to changing relative values perceived by the Company.
TAXABLE INCOME
For the quarter ended September 30,
2010, GAAP income exceeded taxable net income by
$0.10 per share. This was
comprised of $0.20 per share of net
temporary differences between GAAP and taxable income related to
premium amortization and net realized gains, partially offset by
$0.09 per share of net unrealized
losses, net of prior period reversals, associated with derivatives
marked-to-market in current income for GAAP purposes, but excluded
from taxable income until realized or settled, and $0.01 per share of non-deductible excise tax.
NET ASSET VALUE
As of September 30, 2010, the
Company's net asset value per share was $23.43, or $0.11
lower than the June 30, 2010 net
asset value per share of $23.54.
When adjusted for the follow-on equity offering that was
settled on October 1, 2010 the
Company's pro forma net asset value per share was
$23.78.
THIRD QUARTER 2010 DIVIDEND DECLARATION
On September 14, 2010, the Board
of Directors of the Company declared a third quarter 2010 dividend
of $1.40 per share payable to
stockholders of record as of September 28,
2010, which will be paid on October
27, 2010. Since its May
2008 initial public offering, AGNC has paid or declared a
total of $273.2 million in dividends,
or $11.86 per share. After
adjusting for the third quarter 2010 accrued dividend, AGNC had
approximately $39 million of
undistributed taxable income as of September
30, 2010, a $2 million
increase from June 30, 2010. Undistributed taxable income per
share as of September 30, 2010 was
$0.99 or $0.74 per share, pro forma, when adjusted
for the $328 million follow-on equity
offering that settled on October 1,
2010.
(1) Weighted average monthly annualized CPR for securities held
during the quarter
(2) Leverage calculated as total repurchase agreements, net
payable for unsettled purchases and sales of securities and other
debt divided by total stockholders' equity as of September 30, 2010
(3) Pro forma leverage calculated as total repurchase
agreements, net payable for unsettled purchases and sales of
securities and other debt divided by total stockholders' equity
plus $328 million of net proceeds
from follow-on equity raise
(4) CMO balance includes $19
million of fixed and adjustable rate interest-only
strips
(5) 30-year fixed rate securities includes $43 million and $76
million of 20-year and 40-year fixed rate securities,
respectively
(6) Other debt consists of other variable rate debt outstanding
at Libor + 25 bps in connection with the consolidation of a
structured transaction recorded as a financing transaction under
GAAP
(7) Pro forma leverage calculated as total repurchase
agreements, net payable for unsettled purchases and sales of
securities and other debt divided by total stockholders' equity
plus $328 million of net proceeds
from follow-on equity raise
Financial highlights for the quarter are as follows:
AMERICAN CAPITAL AGENCY CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands)
Sept. 30, June 30, March 31, December 31,
2010 2010 2010 2009
(unaudited) (unaudited) (unaudited)
Assets:
Agency securities,
at fair value
(including pledged
assets of $8,576,444,
$6,870,710, $4,855,633
and $4,136,596
(respectively) $9,736,463 $7,166,390 $5,240,254 $4,300,115
Cash and cash
equivalents 115,266 150,081 105,264 202,803
Restricted cash 62,462 37,877 26,630 19,628
Interest receivable 42,034 35,932 26,168 22,872
Derivative assets,
at fair value 11,344 7,391 8,736 11,960
Receivable for agency
securities sold 350,056 311,794 273,832 47,076
Principal payments
receivable 40,129 44,883 88,474 20,473
Other assets 1,052 1,139 631 757
----------- ---------- ---------- ----------
Total assets $10,358,806 $7,755,487 $5,769,989 $4,625,684
=========== ========== ========== ==========
Liabilities:
Repurchase agreements $7,969,399 $6,634,342 $4,651,115 $3,841,834
Other debt 80,822 - - -
Payable for agency
securities purchased 1,223,064 201,799 436,100 180,345
Derivative liabilities,
at fair value 113,900 76,220 28,689 17,798
Dividend payable 54,554 47,124 37,465 34,050
Accounts payable and
other accrued
liabilities 4,022 3,572 3,501 4,835
----------- ---------- ---------- ----------
Total liabilities 9,445,761 6,963,057 5,156,870 4,078,862
----------- ---------- ---------- ----------
Stockholders' equity:
Preferred stock, $0.01
par value; 10,000 shares
authorized, 0 shares
issued and outstanding,
respectively - - - -
Common stock, $0.01 par
value; 150,000 shares
authorized, 38,967,
33,660, and 26,760 and
24,322 shares issued and
outstanding, respectively 390 337 268 243
Additional paid-
in capital 880,571 738,525 569,595 507,465
Retained earnings 30,835 25,359 35,625 19,940
Accumulated other
comprehensive income 1,249 28,209 7,631 19,174
----------- ---------- ---------- ----------
Total stockholders'
equity 913,045 792,430 613,119 546,822
----------- ---------- ---------- ----------
Total liabilities
and stockholders'
equity $10,358,806 $7,755,487 $5,769,989 $4,625,684
=========== ========== ========== ==========
AMERICAN CAPITAL AGENCY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------- --------------------
2010 2009 2010 2009
------- ------- -------- -------
Interest income:
Interest income $62,600 $32,793 $151,986 $86,834
Interest expense 18,531 11,551 51,389 29,265
------- ------- -------- -------
Net interest
income 44,069 21,242 100,597 57,569
------- ------- -------- -------
Other income, net:
Gain from sale of
agency securities, net 24,565 16,070 81,558 30,418
Loss derivative
instruments and
trading securities,
net (3,733) (3,435) (19,680) (2,567)
------- ------- -------- -------
Total other
income, net 20,832 12,635 61,878 27,851
------- ------- -------- -------
Expenses:
Management fees 2,697 1,166 6,795 3,008
General and
administrative
expenses 1,926 1,474 5,394 4,498
------- ------- -------- -------
Total expenses 4,623 2,640 12,189 7,506
------- ------- -------- -------
Income before tax 60,278 31,237 150,286 77,914
Excise tax 250 - 250 -
------- ------- -------- -------
Net income $60,028 $31,237 $150,036 $77,914
======= ======= ======== =======
Net income per common
share -basic and diluted $1.69 $1.82 $4.97 $4.95
======= ======= ======== =======
Weighted average number
of common shares
outstanding - basic and
diluted 35,495 17,191 30,161 15,741
======= ======= ======== =======
Dividends declared per
common share $1.40 $1.40 $4.20 $3.75
======= ======= ======== =======
AMERICAN CAPITAL AGENCY CORP.
KEY PORTFOLIO CHARACTERISTICS*
(unaudited)
(in thousands, except per share data)
Three Months Ended
------------------------------------------------------
Sept. June March December Sept.
30, 30, 31, 31, 30,
2010 2010 2010 2009 2009
--------- ---------- ---------- ---------- ----------
Average agency
securities, at
cost $7,751,068 $5,886,806 $4,099,855 $3,912,087 $2,992,151
Average total
assets, at fair
value $8,454,760 $6,498,247 $4,591,850 $4,434,206 $3,263,632
Average repurchase
agreements $7,241,783 $5,548,225 $3,787,583 $3,637,220 $2,693,851
Average
stockholders'
equity $853,250 $705,466 $580,056 $533,453 $376,229
Fixed-rate agency
securities, at
fair value - as
of period end $5,647,393 $3,063,016 $1,834,924 $1,887,404 $1,272,407
Adjustable-rate
agency securities,
at fair value -
as of period end $3,630,469 $3,589,711 $2,710,557 $1,705,487 $1,904,184
CMO
agency securities,
at fair value -as
of period end $439,347 $483,667 $657,119 $707,224 $261,536
Interest-only
strips agency
securities, at
fair value - as
of period end $19,254 $29,996 $37,654 $- $-
Average coupon (1) 5.03% 5.20% 5.17% 5.43% 5.82%
Average asset
yield (2) 3.23% 3.44% 3.78% 4.20% 4.38%
Average cost of
funds (3) 1.02% 1.07% 1.23% 1.17% 1.16%
Average cost of
funds -
terminated swap
amortization
expense (4) - 0.19% 0.39% 0.40% 0.54%
Average net
interest rate
spread (5) 2.21% 2.18% 2.16% 2.63% 2.68%
Net return on
average equity (6) 27.91% 20.96% 37.16% 30.27% 32.94%
Leverage (average
during the
period) (7) 8.5:1 7.9:1 6.5:1 6.8:1 7.2:1
Leverage (as of
period end) (8) 9.8:1 8.2:1 7.9:1 7.3:1 7.3:1
Expenses % of
average assets (9) 0.22% 0.25% 0.31% 0.33% 0.32%
Expenses % of
average
stockholders'
equity (10) 2.15% 2.33% 2.42% 2.71% 2.78%
Book value per
common share as
of period end (11) $23.43 $23.54 $22.91 $22.48 $22.23
* Average numbers for each period are weighted based on days on the
Company's books and records. All percentages are annualized.
(1) Weighted average coupon for the period was calculated by dividing the
Company's total coupon (or cash) interest income on our agency securities
by the Company's weighted average agency securities.
(2) Weighted average asset yield for the period was calculated by dividing
the Company's average interest income on agency securities, less average
amortization of premiums and discounts, by the Company's average agency
securities.
(3) Weighted average cost of funds for the period was calculated by
dividing the Company's total interest expense, less amortization expense
related to the termination of interest rate swaps, by the Company's
weighted average repurchase agreements.
(4) Weighted average cost of funds related to terminated interest rate
swap amortization expense was calculated by dividing the Company's
amortization expense by the Company's weighted average repurchase
agreements. The amortization expense associated with the termination of
interest rate swaps was $ - , $2.6 million, $3.7 million, $3.7 million and
$3.7 million for the respective periods presented.
(5) Net interest rate spread for the period was calculated by subtracting
the Company's weighted average cost of funds, net of interest rate swaps
and terminated swap amortization expense, from the Company's weighted
average asset yield.
(6) Net return on average stockholders' equity for the period was
calculated by dividing the Company's net income by the Company's average
stockholders' equity for the period.
(7) Leverage during the period was calculated by dividing the Company's
average repurchase agreements outstanding for the period by the Company's
average stockholders' equity for the period.
(8) Leverage at period end was calculated by dividing the amount
outstanding under the Company's repurchase agreements, net receivable /
payable for unsettled agency securities and other debt by the Company's
total stockholders' equity at period end.
(9) Expenses as a % of average total assets was calculated by dividing the
Company's total expenses by the Company's average total assets for the
period.
(10) Expenses as a % of average stockholders' equity was calculated by
dividing the Company's total expenses by the Company's average
stockholders' equity.
(11) Book value per share was calculated by dividing the Company's total
stockholders' equity by the Company's number of shares outstanding.
DIVIDEND REINVESTMENT AND DIRECT STOCK PURCHASE PLAN
During the quarter, AGNC issued 5.3 million shares through its
DSPP and DRIP raising net proceeds of approximately $142 million.
AGNC's Dividend Reinvestment and Direct Stock Purchase Plan
provide prospective investors and existing stockholders with a
convenient and economical method to purchase shares of the
Company's common stock. By participating in the Plan,
investors may purchase additional shares of common stock by
reinvesting some or all of the cash dividends received on shares of
the Company's common stock. Investors may also make optional
cash purchases of shares of the Company's common stock subject to
certain limitations detailed in the Plan prospectus. To
review the Plan Prospectus, please visit the Company's Investor
Relations website at www.AGNC.com.
STOCKHOLDER CALL
AGNC invites stockholders, prospective stockholders and analysts
to attend the AGNC stockholder call on October 27, 2010 at 11:00
am ET. The stockholder call can be accessed through a
live webcast, free of charge, at www.AGNC.com or by dialing (877)
569-8701 (U.S. domestic) or +1 (574) 941-7382 (international).
Please provide the operator with the conference ID number 16368819.
If you do not plan on asking a question on the call and have access
to the internet, please take advantage of the webcast.
A slide presentation will accompany the call and will be
available at www.AGNC.com. Select the Q3 2010 Earnings
Presentation link to download and print the presentation in advance
of the Stockholder Call.
An archived audio of the stockholder call combined with the
slide presentation will be made available on the Company's website
after the call on October 27. In
addition, there will be a phone recording available from
2:00 pm ET October 27 until 11:59 pm
ET November 10. If you are
interested in hearing the recording of the presentation, please
dial (800) 642-1687 (U.S. domestic) or +1 (706) 645-9291
(international). The conference ID number is 16368819.
For further information, please contact Investor Relations at
(301) 968-9300 or IR@AGNC.com.
ABOUT AGNC
AGNC is a REIT that invests in agency pass-through securities
and collateralized mortgage obligations for which the principal and
interest payments are guaranteed by a U.S. Government agency or a
U.S. Government-sponsored entity. The Company is externally
managed and advised by American Capital Agency Management, LLC, an
affiliate of American Capital, Ltd. ("American Capital"). For
further information, please refer to www.AGNC.com.
ABOUT AMERICAN CAPITAL
American Capital is a publicly traded private equity firm and
global asset manager. American Capital, both directly and through
its asset management business, originates, underwrites and manages
investments in middle market private equity, leveraged finance,
real estate and structured products. Founded in 1986, American
Capital has $15 billion in capital
resources under management and eight offices in the U.S.,
Europe and Asia. American Capital and its affiliates will
consider investment opportunities from $5
million to $100 million. For further information, please
refer to www.AmericanCapital.com.
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements.
Forward-looking statements are based on estimates,
projections, beliefs and assumptions of management of the Company
at the time of such statements and are not guarantees of future
performance. Forward-looking statements involve risks and
uncertainties in predicting future results and conditions.
Actual results could differ materially from those projected
in these forward-looking statements due to a variety of factors,
including, without limitation, changes in interest rates, changes
in the yield curve, changes in prepayment rates, the availability
and terms of financing, changes in the market value of our assets,
general economic conditions, market conditions, conditions in the
market for agency securities, and legislative and regulatory
changes that could adversely affect the business of the Company.
Certain factors that could cause actual results to differ
materially from those contained in the forward-looking statements,
are included in the Company's periodic reports filed with the
Securities and Exchange Commission ("SEC"). Copies are
available on the SEC's website, www.sec.gov. The Company
disclaims any obligation to update or revise any forward-looking
statements based on the occurrence of future events, the receipt or
new information, or otherwise.
USE OF NON-GAAP FINANCIAL INFORMATION
In addition to the results presented in accordance with GAAP,
this release includes non-GAAP financial information, including our
taxable income and certain financial metrics derived based on
taxable income, which management uses in its internal analysis of
results, and believes may be informative to investors.
Taxable income is pre-tax income calculated in accordance
with the requirements of the Internal Revenue Code rather than
GAAP. Taxable income differs from GAAP income because of both
temporary and permanent differences in income and expense
recognition. Examples include temporary differences for
unrealized gains and losses on derivative instruments and trading
securities recognized in income for GAAP but excluded from taxable
income until realized or settled, differences in the CPR used to
amortize premiums or accrete discounts as well as treatment of
start-up organizational costs, hedge ineffectiveness, and
stock-based compensation and permanent differences for excise tax
expense. Furthermore, taxable income can include certain
estimated information and is subject to potential adjustments up to
the time of filing of the appropriate tax returns, which occurs
after the end of the calendar year of the Company. The
Company believes that these non-GAAP financial measures provide
information useful to investors because taxable income is directly
related to the amount of dividends the Company is required to
distribute in order to maintain its REIT tax qualification status.
The Company also believes that providing investors with our
taxable income and certain financial metrics derived based on such
taxable income, in addition to the related GAAP measures, gives
investors greater transparency to the information used by
management in its financial and operational decision-making.
However, because taxable income is an incomplete measure of
the Company's financial performance and involves differences from
net income computed in accordance with GAAP, taxable income should
be considered as supplementary to, and not as a substitute for, the
Company's net income computed in accordance with GAAP as a measure
of the Company's financial performance. In addition, because not
all companies use identical calculations, our presentation of our
estimated taxable income may not be comparable to other
similarly-titled measures of other companies.
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CONTACT:
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Investors - (301)
968-9300
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Media - (301)
968-9400
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SOURCE American Capital Agency Corp.
Copyright . 26 PR Newswire