BETHESDA, Md., Oct. 25, 2011 /PRNewswire/ -- American Capital
Agency Corp. (“AGNC” or the “Company”) (Nasdaq: AGNC) today
reported net income for the third quarter of 2011 of $250.4 million, or $1.39 per share, and net book value of
$26.90 per share.
THIRD QUARTER 2011 FINANCIAL HIGHLIGHTS
- $1.39 per share of net income
- $1.15 per share, excluding
$0.24 per share of other net
investment related income and excise tax
- $1.23 per share, excluding
$0.08 per share of non-recurring
estimated “catch up” premium amortization cost
- $1.86 per share of taxable
income
- $1.40 per share dividend
declared
- $0.85 per share of undistributed
taxable income as of September 30,
2011
- Increased $0.41 per share from
$0.44 per share as of June 30, 2011
- $26.90 net book value per share
as of September 30, 2011
- Increased $0.14 per share from
$26.76 per share as of June 30, 2011
- 20% annualized return on average stockholders’ equity (“ROE”)
for the quarter
OTHER THIRD QUARTER HIGHLIGHTS
- $42 billion investment portfolio
value as of September 30, 2011
- 7.7x leverage as of September 30,
2011(1)
- 7.9x average leverage for the quarter
- 8% actual constant prepayment rate (“CPR”) for the third
quarter of 2011(2)
- 9% CPR for the month of October
2011(3)
- 13% average projected life CPR as of September 30, 2011, approximately 50% higher than
the Company’s average third quarter actual CPR of 8%
- 2.14% annualized net interest rate spread for the quarter
- 1.94% net interest spread as of September 30, 2011(4)
- $147 million of net proceeds
raised pursuant to a Controlled Equity Offering SM
- All equity issuances were accretive to net book value
- Discontinued hedge accounting for all interest rate swaps as of
September 30, 2011
“The recent decline in interest rates, coupled with yesterday’s
announcement of changes to the Home Affordable Refinance Program
(“HARP”) by the Federal Housing Finance Authority (“FHFA”),
highlights once again the importance of active portfolio
management,” said Malon Wilkus, AGNC
Chairman and Chief Executive Officer. “Our investment team has been
proactive in taking steps to address both of these circumstances,
including significant sales of higher coupon mortgages during the
prior two quarters.”
“The third quarter defined the term volatility, with the
congressional debt ceiling debate, S&P’s downgrade of its U.S.
sovereign debt rating, the worsening European debt crisis, and the
Federal Reserve’s ‘operation twist,’” said Gary Kain, AGNC President and Chief Investment
Officer. “The result was a significant interest rate rally
and the escalation of prepayment fears, both as a result of record
low mortgage rates and changes to Freddie Mac and Fannie Mae’s
underwriting practices. Despite this difficult environment,
AGNC declared a cash dividend of $1.40 per share, almost doubled undistributed
taxable income from $0.44 per share
as of June 30, 2011 to $0.85 per share, as of September 30, 2011, and increased net book
value.”
“Perhaps more important than our results this quarter is that we
executed a number of material actions intended to reduce risk and
increase the durability of our returns,” continued Mr. Kain. “These
actions included increasing the use of longer term repurchase
agreements, proactively managing counterparty exposure, increasing
our ratio of interest rate swaps to our repurchase agreement
financings, and continuing to enhance our portfolio. To this
end, our portfolio has never had a higher percentage of assets
backed by loans with favorable prepayment characteristics, with 93%
of our 15-year securities and 86% of our 30-year securities backed
by either lower loan balance loans or HARP loans. We also
believe that we have very limited exposure to the HARP changes that
were announced by the FHFA yesterday because less than 5% of our
holdings are eligible for the revised HARP program”.
INVESTMENT PORTFOLIO
As of September 30, 2011, the
Company’s investment portfolio totaled $42.0
billion of agency securities, at fair value, comprised of
$38.3 billion of fixed-rate
securities, $3.2 billion of
adjustable-rate securities (“ARMs”) and $0.5
billion of collateralized mortgage obligations (“CMOs”)
backed by fixed and adjustable-rate securities, including
interest-only strips. As of September
30, 2011, AGNC’s investment portfolio was comprised of 52%
less than or equal to 15-year fixed-rate securities, 2% 20-year
fixed-rate securities, 37% 30-year fixed-rate securities, 8% ARMs
and 1% 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 3.14% and its annualized
average cost of funds was 1.00%, which resulted in a net interest
rate spread of 2.14%, a decrease of 32 bps from the second quarter
of 2011. As of September 30, 2011,
the weighted average yield on the Company’s earning assets was
3.18% and its weighted average cost of funds was 1.24%.(5) This
resulted in a net interest rate spread of 1.94% as of September 30, 2011, a decrease of 42 bps from the
weighted average net interest rate spread as of June 30, 2011 of 2.36%.(6) The
quarter-over-quarter decrease in net interest rate spreads was
largely the result of the decline in long-term interest rates and a
corresponding increase in projected prepayments of the Company’s
investments as well as an increase in the ratio of interest rate
swaps to repurchase agreements.
The weighted average projected CPR for the remaining life of all
of the Company’s investments held as of September 30, 2011 was 13%, an increase from 10%
as of June 30, 2011. The
Company’s projected CPR increased due to a decline in long-term
interest rates, which was partially offset by changes in portfolio
composition to the Company’s highest percentage of assets backed by
loans with favorable prepayment characteristics. The actual
CPR for the Company’s portfolio during the third quarter of 2011
was 8%, a decrease from 9% during the second quarter of 2011. The
most recent CPR published in October
2011 for the Company’s portfolio held as September 30, 2011 was 9%.
The weighted average cost basis of the investment portfolio was
104.9% (or 104.3% excluding interest-only strips) as of
September 30, 2011. The amortization
of premiums (net of any accretion of discounts) on the investment
portfolio for the quarter was $112.6
million, or $0.62 per share.
The unamortized net premium as of September 30, 2011 was $1.9 billion. The increase in the Company’s
weighted average projected CPR resulted in recognition of an
estimated $15 million (or
$0.08 per share) of non-recurring
“catch-up” premium amortization cost during the quarter.
Premiums and discounts associated with purchases of agency
securities are amortized or accreted into interest income over the
estimated life of such securities, using the effective yield
method. Given that the cost basis of the Company’s mortgage assets
exceeds the underlying principal balance by 4.9% as of September 30, 2011, slower actual and projected
prepayments can have a meaningful positive impact, while faster
actual or projected prepayments can have a meaningful negative
impact, on the Company’s asset yields.
“We are very pleased with the prepayments on our securities and
that newer loan balance and new HARP securities are not affected by
the changes announced by the FHFA,” said Chris Kuehl, AGNC Senior Vice President,
Mortgage Investments. “Our mortgage portfolio exhibited an 8% CPR
during the third quarter and lower loan balance and HARP speeds
released in October remained very stable despite significant
increases in speeds on more generic securities. For instance,
Fannie Mae 15-year 4s increased from 18% CPR in early September to
30% CPR in the October release, while lower loan balance securities
increased from 9% to 13%. As such, speeds on our portfolio
increased only around one CPR in the latest speed release and
remained below 10% CPR.”
The Company’s average cost of funds increased 11 bps from 0.89%
for the second quarter of 2011 to 1.00% for the third quarter of
2011, largely due to an increase in the weighted average term of
the Company’s repurchase agreements and an increase in the ratio of
interest rate swaps to repurchase agreements.
LEVERAGE AND HEDGING ACTIVITIES
As of September 30, 2011, the
Company’s $42.0 billion investment
portfolio was financed with $38.8
billion of repurchase agreements, $0.1 billion of other debt and $4.9 billion of equity capital, resulting in a
leverage ratio of 7.9x. When adjusted for the net receivable
for agency securities not yet settled, the leverage ratio was 7.7x
as of September 30, 2011. The
average leverage for the quarter was 7.9x, which is calculated as
the daily weighted average repurchase agreement and other debt
balance outstanding, excluding repurchase agreements for treasury
securities, divided by the average month-ended shareholders’ equity
for the quarter.
Of the $38.8 billion borrowed
under repurchase agreements as of September
30, 2011, $18.9 billion had
original maturities of one month or less, $8.1 billion had original
maturities between one and two months, $4.8
billion had original maturities between two and three
months, $5.7 billion had original
maturities between three and six months, $0.3 billion had maturities between six and nine
months and the remaining $1.0 billion
had original maturities between nine and 12 months. As of
September 30, 2011, the Company had
repurchase agreements with 29 financial institutions. Less than 4%
of the Company’s equity was at risk with any one counterparty as of
September 30, 2011, with the top five
counterparties representing less than 15% of the Company’s equity
at risk.
The Company’s interest rate swap positions as of September 30, 2011 totaled $27.0 billion in notional amount at an average
fixed pay rate of 1.58%, a weighted average receive rate of 0.25%
and a weighted average maturity of 3.4 years. During the
quarter, the Company increased its swap position, including forward
starting swaps ranging up to three months, by $5.0 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 4.0 years
and a weighted average fixed pay rate of 1.08%. The Company enters
into swaps with longer maturities with the intention of protecting
its net book value and longer term earnings potential.
The Company also utilizes interest rate swaptions to mitigate
the Company’s exposure to larger changes in interest rates.
During the quarter, the Company added $250 million of payer swaptions at a cost of
$0.8 million, while $1.1 billion of payer swaptions from previous
quarters expired for a total loss of $8.3
million. As of September 30,
2011, the Company had $3.3
billion in payer swaptions outstanding at a market value of
$4.5 million with an average maturity
of 6.9 years.
As of September 30, 2011, 69% of
the Company’s repurchase agreement balance and other debt was
hedged through interest rate swap agreements, which is an increase
from 66% as of June 30, 2011. If net
unsettled purchases and sales of securities are incorporated, this
percentage increases to 71% as of September
30, 2011, an increase from 62% as of June 30, 2011. These percentages do not
reflect the swaps underlying the payer swaptions noted above.
DISCONTINUATION OF HEDGE ACCOUNTING
During the quarter, the Company discontinued its election to
account for interest rate swaps as cash flow hedges under
GAAP. As cash flow hedges, the swaps were recorded at fair value as
assets and liabilities on the balance sheet with any changes in
fair value recorded in accumulated other comprehensive income, a
separate component of equity. In order to qualify under GAAP as a
cash flow hedge, the monthly swap reset dates of an interest rate
swap must align with the term of an underlying repurchase
agreement. This alignment had the effect of limiting the Company’s
ability to alter or extend the maturity of its repurchase
agreements. To provide greater funding flexibility, the
Company determined that it was beneficial not to match the pricing
dates of its swaps and repurchase agreements. With the change in
practice, the Company stopped the designation of new swap contracts
during the quarter as cash flow hedges and de-designated all
remaining swap contracts on September 30,
2011. All changes in the fair value of swap contracts
will now be recorded in the income statement rather than in other
comprehensive income. The net book value of the company is the same
under either accounting treatment.
“Our decision to discontinue hedge accounting for interest rate
swaps gives us greater flexibility to manage our liabilities
because we can execute a significantly higher percentage of
repurchase agreements with maturities exceeding 30 days,” said
Peter Federico, AGNC Senior Vice
President and Chief Risk Officer. “Our third quarter Form 10-Q will
include a full discussion of how our discontinuation of hedge
accounting will impact our accounting for interest rate swaps going
forward, but the main impact is that all future swap related gains
or losses will be immediately reflected in current earnings through
other income. As a result, our GAAP earnings will be more volatile,
but our net book value will be the same. This increased volatility
in earnings is not reflective of any change to our true economic
risk profile. To gain better insight into our economic risk
profile, we encourage investors to look at our net book value,
which will not be impacted by this change because all derivative
instruments are carried at fair value irrespective of whether they
are treated as hedges for accounting purposes.”
OTHER INCOME (LOSS), NET
During the quarter, the Company recorded $41.3 million in other income, net, or
$0.23 per share. Excluding periodic
interest settlements of interest rate swaps, the Company recorded
$43.0 million, or $0.24 per share, of other income, net.
Other income, net, is comprised of $262.8 million of net realized gains on sales of
agency securities, $1.8 million of
net realized losses on periodic interest settlements of interest
rate swaps, $173.2 million of net
realized losses on other derivative instruments and securities,
$0.9 million of net unrealized losses
on interest rate swaps and $45.6
million of net unrealized losses on other derivative
instruments and securities.
The net gains and losses (realized and unrealized) on other
derivative instruments and securities generally represent
instruments that are used to supplement the Company’s interest rate
swaps (such as swaptions and short or long positions in
“to-be-announced” mortgage securities (“TBA’s”), Markit IOS total
return swaps and treasury securities). The Company uses these
supplemental hedges to reduce its exposure to interest rates.
TAXABLE INCOME
Taxable income for the third quarter of 2011 was $1.86 per share, or $0.47 higher than GAAP net income per share for
the quarter. The primary difference between tax and GAAP net income
is unrealized gains and losses associated with derivatives and
other securities marked-to-market in current income for GAAP
purposes but excluded from taxable income until realized or settled
and temporary differences related to the amortization of premiums
paid on investments. For the third quarter, $46.5 million of net unrealized losses, including
prior period reversals, and $34.3
million of amortized premium costs were recognized for GAAP
but excluded from taxable income for the quarter.
NET BOOK VALUE
As of September 30, 2011, the
Company’s net book value per share was $26.90, or $0.14
higher than the June 30, 2011 net
book value per share of $26.76.
THIRD QUARTER 2011 DIVIDEND DECLARATION
On September 13, 2011, the Board
of Directors of the Company declared a third quarter 2011 dividend
of $1.40 per share payable on
October 27, 2011, to stockholders of
record as of September 23, 2011.
Since its May 2008 initial public
offering, the Company has paid or declared a total of $936.7 million in dividends, or $17.46 per share. After adjusting for the
third quarter 2011 accrued dividend, the Company had approximately
$156 million of undistributed taxable
income as of September 30, 2011.
Undistributed taxable income per share as of September 30, 2011 was $0.85 per share, a $0.41 per share increase from June 30, 2011.
(1) Leverage calculated as the sum of total repurchase
agreements, net payable/receivable for unsettled purchases and
sales of securities and other debt divided by total stockholders’
equity as of September 30, 2011
(2) Weighted average monthly annualized CPR published during
July, August and September 2011 for
securities held during the third quarter
(3) Weighted average actual annualized CPR published in
October 2011 for securities held as
of September 30, 2011
(4) Incorporates interest rate swap agreements
(5) Cost of funds as of September 30,
2011 includes the impact of swaps in effect as of
September 30, 2011 of $25.1 billion, plus $1.6
billion of forward starting swaps becoming effective, net of
swap expirations, within the three month period following
September 30, 2011. Cost of funds
includes both interest rate swaps that have been designated and not
designated as hedges under GAAP.
(6) Cost of funds as of June 30,
2011 includes the impact of swaps in effect as of
June 30, 2011 of $14.1 billion, plus $6.9
billion of forward starting swaps becoming effective, net of
swap expirations, within the three month period following
June 30, 2011. Cost of funds includes
both interest rate swaps that have been designated and not
designated as hedges under GAAP.
Financial highlights for the quarter are as follows:
AMERICAN
CAPITAL AGENCY CORP.
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
2011
|
|
June
30,
2011
|
|
March
31,
2011
|
|
December
31,
2010
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Agency securities, at
fair value (including
pledged securities
of $38,860,353,
$35,117,998,
$23,263,144, and
$12,270,909,
respectively)
|
|
$
41,970,419
|
|
$
39,925,707
|
|
$
28,192,575
|
|
$
13,510,280
|
|
U.S. Treasury securities,
at fair value
|
|
300,873
|
|
-
|
|
-
|
|
-
|
|
Cash and cash
equivalents
|
|
984,393
|
|
625,850
|
|
300,574
|
|
173,258
|
|
Restricted
cash
|
|
375,207
|
|
188,772
|
|
75,221
|
|
76,094
|
|
Derivative assets, at
fair value
|
|
54,532
|
|
86,064
|
|
142,047
|
|
76,593
|
|
Receivable for agency
securities sold
|
|
2,698,121
|
|
1,251,624
|
|
298,320
|
|
258,984
|
|
Principal payments
receivable
|
|
33,831
|
|
29,254
|
|
42,667
|
|
75,524
|
|
Receivable under reverse repurchase agreements
|
|
473,800
|
|
1,388,188
|
|
-
|
|
247,438
|
|
Other assets
|
|
148,253
|
|
141,111
|
|
103,559
|
|
57,658
|
|
Total assets
|
|
$
47,039,429
|
|
$
43,636,570
|
|
$
29,154,963
|
|
$
14,475,829
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
|
$
38,841,619
|
|
$
33,505,142
|
|
$
21,994,039
|
|
$
11,680,092
|
|
Other debt
|
|
56,864
|
|
61,757
|
|
67,845
|
|
72,927
|
|
Payable for agency
securities purchased
|
|
1,660,276
|
|
3,336,485
|
|
3,504,600
|
|
727,374
|
|
Derivative liabilities,
at fair value
|
|
792,714
|
|
290,286
|
|
92,658
|
|
78,590
|
|
Dividend
payable
|
|
257,068
|
|
180,360
|
|
135,280
|
|
90,798
|
|
Obligation to return
securities borrowed under
reverse repurchase
agreements, at fair value
|
|
473,247
|
|
1,459,298
|
|
-
|
|
245,532
|
|
Accounts payable and
other accrued liabilities
|
|
17,385
|
|
26,596
|
|
16,040
|
|
8,452
|
|
Total
liabilities
|
|
42,099,173
|
|
38,859,924
|
|
25,810,462
|
|
12,903,765
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par
value; 10,000 shares authorized, 0 shares issued and outstanding,
respectively
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Common stock, $0.01 par
value; 300,000 shares authorized, 183,619, 178,509, 128,829, and
64,856 shares issued and outstanding, respectively
|
|
1,836
|
|
1,785
|
|
1,288
|
|
649
|
|
Additional paid-in
capital
|
|
4,829,065
|
|
4,682,070
|
|
3,314,119
|
|
1,561,908
|
|
Retained
earnings
|
|
67,174
|
|
73,841
|
|
76,379
|
|
78,116
|
|
Accumulated other
comprehensive income (loss)
|
|
42,181
|
|
18,950
|
|
(47,285)
|
|
(68,609)
|
|
Total stockholders'
equity
|
|
4,940,256
|
|
4,776,646
|
|
3,344,501
|
|
1,572,064
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
|
$
47,039,429
|
|
$
43,636,570
|
|
$
29,154,963
|
|
$
14,475,829
|
|
|
|
|
|
|
|
|
|
|
AMERICAN
CAPITAL AGENCY CORP.
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
(unaudited)
|
|
(in
thousands, except per share data)
|
|
|
|
|
|
Three Months
Ended September 30,
|
|
Nine Months
Ended September 30,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
326,754
|
|
$
62,600
|
|
$
755,975
|
|
$
151,986
|
|
Interest
expense
|
|
95,036
|
|
18,531
|
|
194,500
|
|
51,389
|
|
Net interest income
|
|
231,718
|
|
44,069
|
|
561,475
|
|
100,597
|
|
|
|
|
|
|
|
|
|
|
|
Other income (loss),
net:
|
|
|
|
|
|
|
|
|
|
Gain on sale of agency
securities, net
|
|
262,768
|
|
24,565
|
|
360,880
|
|
81,558
|
|
Realized loss on periodic
interest settlements of interest rate swaps, net
|
|
(1,773)
|
|
-
|
|
(1,773)
|
|
-
|
|
Other realized loss on
derivative instruments and other securities, net
|
|
(173,190)
|
|
(736)
|
|
(222,594)
|
|
(4,214)
|
|
Unrealized loss on
other derivative
instruments and
other securities, net
|
|
(46,543)
|
|
(2,997)
|
|
(85,623)
|
|
(15,466)
|
|
Total other income, net
|
|
41,262
|
|
20,832
|
|
50,890
|
|
61,878
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Management
fees
|
|
15,634
|
|
2,697
|
|
36,511
|
|
6,795
|
|
General and
administrative expenses
|
|
5,845
|
|
1,926
|
|
12,988
|
|
5,394
|
|
Total expenses
|
|
21,479
|
|
4,623
|
|
49,499
|
|
12,189
|
|
|
|
|
|
|
|
|
|
|
|
Income before tax
|
|
251,501
|
|
60,278
|
|
562,866
|
|
150,286
|
|
|
|
|
|
|
|
|
|
|
|
Excise
tax
|
|
1,100
|
|
250
|
|
1,100
|
|
250
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
250,401
|
|
$
60,028
|
|
$
561,766
|
|
$
150,036
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share -
basic and diluted
|
|
$
1.39
|
|
$
1.69
|
|
$
4.19
|
|
$
4.97
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding -
basic and
diluted
|
|
180,725
|
|
35,495
|
|
134,163
|
|
30,161
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common
share
|
|
$
1.40
|
|
$
1.40
|
|
$
4.20
|
|
$
4.20
|
|
|
|
|
|
|
|
|
|
|
AMERICAN
CAPITAL AGENCY CORP.
|
|
KEY
PORTFOLIO CHARACTERISTICS*
|
|
(unaudited)
|
|
(in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
September
30, 2011
|
|
June
30,
2011
|
|
March
31,
2011
|
|
December 31,
2010
|
|
September
30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average agency securities, at
cost
|
|
$
41,667,838
|
|
$
31,552,263
|
|
$
19,361,473
|
|
$
11,603,957
|
|
$
7,751,068
|
|
Average total assets, at fair
value
|
|
$
47,077,307
|
|
$
34,442,961
|
|
$
20,472,785
|
|
$
11,605,200
|
|
$
8,454,760
|
|
Average repurchase
agreements
|
|
$
38,484,147
|
|
$
28,668,011
|
|
$
17,755,790
|
|
$
10,813,568
|
|
$
7,241,783
|
|
Average stockholders'
equity
|
|
$
4,871,687
|
|
$
3,785,199
|
|
$
2,411,628
|
|
$
1,291,127
|
|
$
853,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate agency securities, at
fair value - as of period end
|
|
$
38,278,257
|
|
$
34,800,625
|
|
$
22,875,909
|
|
$
9,101,479
|
|
$
5,647,393
|
|
Adjustable-rate agency
securities, at fair value - as of period end
|
|
$
3,237,779
|
|
$
4,612,940
|
|
$
4,915,994
|
|
$
3,950,164
|
|
$
3,630,469
|
|
CMO agency securities, at fair
value - as of period end
|
|
$
246,157
|
|
$
265,099
|
|
$
290,321
|
|
$
401,898
|
|
$
439,347
|
|
Interest-only strips agency
securities, at fair value - as of period end
|
|
$
168,213
|
|
$
206,829
|
|
$
110,351
|
|
$
56,739
|
|
$
19,254
|
|
Principal-only strips agency
securities, at fair value - as of period end
|
|
$
40,013
|
|
$
40,215
|
|
$
-
|
|
$
-
|
|
$
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average coupon (1)
|
|
4.35%
|
|
4.44%
|
|
4.58%
|
|
4.86%
|
|
5.03%
|
|
Average asset yield
(2)
|
|
3.14%
|
|
3.35%
|
|
3.39%
|
|
3.48%
|
|
3.23%
|
|
Average cost of funds
(3)
|
|
1.00%
|
|
0.89%
|
|
0.81%
|
|
0.90%
|
|
1.02%
|
|
Average net interest rate spread
(4)
|
|
2.14%
|
|
2.46%
|
|
2.58%
|
|
2.58%
|
|
2.21%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average actual CPR for
securities held during the period
|
|
8%
|
|
9%
|
|
13%
|
|
18%
|
|
15%
|
|
Average forecasted CPR as of
period end
|
|
13%
|
|
10%
|
|
10%
|
|
12%
|
|
18%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leverage (average
during the period) (5)
|
|
7.9:1
|
|
7.6:1
|
|
7.4:1
|
|
8.4:1
|
|
8.5:1
|
|
Leverage (as of period
end) (6)
|
|
7.7:1
|
|
7.5:1
|
|
7.6:1
|
|
7.8:1
|
|
9.8:1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses % of average assets
(7)
|
|
0.18%
|
|
0.20%
|
|
0.22%
|
|
0.23%
|
|
0.22%
|
|
Expenses % of average
stockholders' equity (8)
|
|
1.75%
|
|
1.80%
|
|
1.86%
|
|
2.03%
|
|
2.15%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value per common share
as of period end (9)
|
|
$
26.90
|
|
$
26.76
|
|
$
25.96
|
|
$
24.24
|
|
$
23.43
|
|
Dividends declared per common
share
|
|
$
1.40
|
|
$
1.40
|
|
$
1.40
|
|
$
1.40
|
|
$
1.40
|
|
Annualized economic return
(10)
|
|
22.9%
|
|
34.0%
|
|
52.2%
|
|
37.4%
|
|
21.7%
|
|
Net return on average
stockholders' equity (11)
|
|
20.4%
|
|
18.8%
|
|
22.5%
|
|
42.4%
|
|
27.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
* 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
agency securities by the Company’s daily weighted average agency
securities held.
(2) Weighted average asset yield for the period was calculated
by dividing the Company’s total interest income on agency
securities, less amortization of premiums and discounts, by the
Company’s daily weighted average agency securities held.
(3) Weighted average cost of funds for the period was calculated
by dividing the Company’s total interest expense by the Company’s
daily weighted average repurchase agreements and other debt
outstanding, less repurchase agreements for treasury securities,
for the period. Cost of funds includes both interest rate swaps
that have been designated and not designated as hedges under
GAAP.
(4) Net interest rate spread for the period was calculated by
subtracting the Company’s weighted average cost of funds from the
Company’s weighted average asset yield.
(5) Leverage during the period was calculated by dividing the
Company’s daily weighted average repurchase agreements and other
debt outstanding, less repurchase agreements for treasury
securities, for the period by the Company’s average month-ended
stockholders’ equity for the period.
(6) Leverage at period end was calculated by dividing the sum of
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.
(7) 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.
(8) Expenses as a % of average stockholders’ equity was
calculated by dividing the Company’s total expenses by the
Company’s average month-ended stockholders’ equity.
(9) Net book value per share was calculated by dividing the
Company’s total stockholders’ equity by the Company’s number of
shares outstanding.
(10) Annualized economic return represents the sum of the change
in net asset value over the period and dividends declared during
the period over the beginning net asset value on an annualized
basis.
(11) Annualized net return on average stockholders’ equity for
the period was calculated by dividing the Company’s net income by
the Company’s average month-ended stockholders’ equity on an
annualized basis.
CONTROLLED EQUITY OFFERING(SM) PROGRAM
The Company’s Controlled Equity Offering(SM) Program enables the
Company to publicly offer and sell, from time to time, up to an
aggregate 15 million shares of common stock in privately
negotiated and/or at-the-market transactions pursuant to a sales
agreement with an underwriter. During the third quarter, the
Company sold 5.1 million shares of common stock under the
sales agreement at an average offering price of $29.08 per share for proceeds, net of the
underwriter’s discount, of $147
million. As of September 30, 2011, 1.2 million
shares of common stock remain available for issuance under the
program.
DIVIDEND REINVESTMENT AND DIRECT STOCK PURCHASE PLAN
During the quarter, AGNC did not issue shares under the Dividend
Reinvestment and Direct Stock Purchase Plan (the “Plan”) through
either direct stock purchases or dividend reinvestment.
AGNC’s Plan provides 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 26, 2011 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 16828279.
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 2011 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 26. In
addition, there will be a phone recording available from
4:00 pm ET October 26 until 11:59 pm
ET November 9. If you are
interested in hearing the recording of the presentation, please
dial (855) 859-2056 (U.S. domestic) or (404) 537-3406
(international). The conference ID number is 16828279.
For further information, please contact Investor Relations at
(301) 968-9300 or IR@AGNC.com.
ABOUT AMERICAN CAPITAL AGENCY CORP.
American Capital Agency Corp. is a real estate investment trust
(“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 AGNC Management, LLC, an
affiliate of American Capital, Ltd. For further information,
please refer to www.AGNC.com.
ABOUT AMERICAN CAPITAL, LTD.
American Capital, Ltd., 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 $52
billion in assets under management and seven offices in the
U.S. and Europe. American
Capital and its affiliates will consider investment opportunities
from $10 million to $300 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.
CONTACT:
Investors - (301) 968-9300
Media - (301) 968-9400
SOURCE American Capital Agency Corp.