AGNC Investment (NASDAQ:AGNC)
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BETHESDA, Md., July 29 /PRNewswire-FirstCall/ -- American Capital Agency Corp. ("AGNC" or the "Company") (NASDAQ:AGNC) today reported net income for the second quarter of 2009 of $30.4 million, or $2.02 per share.
SECOND QUARTER 2009 HIGHLIGHTS
-- Declared a dividend of $1.50 per common share
-- $1.98 per share of taxable income
-- $0.79 per share of undistributed taxable income as of June 30,
2009
-- Net income of $30.4 million, or $2.02 per common share
-- $1.48 per share excluding $0.18 of amortization expense related to
terminated swaps and $0.72 per share of other income
-- 39.8% annualized return on average stockholders' equity for the
quarter
-- 3.55% average net interest rate spread for the quarter
-- $2.6 billion agency securities portfolio at fair value as of June 30,
2009
-- 7.7x(1) leverage as of June 30, 2009
-- $20.76 book value per common share as of June 30, 2009, an increase of
8%, or $1.50 per share, from March 31, 2009
-- Effective July 1, 2009, completed organizational changes,
transitioning certain dedicated employees to AGNC's management company
"Our results for the quarter benefited from several factors, including slower than expected prepayment speeds, a larger investment portfolio, lower funding costs and improved valuations on higher coupon agency securities," commented Gary Kain, Chief Investment Officer of AGNC. "While AGNC was well positioned entering the quarter for the significant volatility we witnessed in the market, we continue to actively manage our portfolio to maintain the optimal balance between stockholder returns and the protection of book value. To that end, through the second quarter of 2009, we are pleased to have provided our stockholders with $2.35 per common share in dividends as well as $3.56 per share increase in book value since December 31, 2008, resulting in an economic return(2) of approximately 34% for the six months ended June 30, 2009 and an annualized economic return of approximately 69%."
SECOND QUARTER 2009 DIVIDEND DECLARATION
On June 22, 2009, the Board of Directors of the Company declared a second quarter 2009 dividend of $1.50 per common share to record holders as of July 2, 2009, which was paid on July 27, 2009. Since its May 2008 initial public offering, AGNC has paid a total of $72.9 million in dividends, or $4.86 per common share. After paying the dividend for second quarter 2009, AGNC had approximately $0.79 per share of undistributed taxable income.
INVESTMENT PORTFOLIO
As of June 30, 2009, the Company's investment portfolio totaled $2.6 billion of agency securities at fair value, comprised of $1.2 billion of fixed rate agency securities, $1.3 billion of adjustable rate agency securities and $0.1 billion of collateralized mortgage obligations ("CMOs") backed by adjustable rate agency securities. As of June 30, 2009, AGNC's investment portfolio was comprised of 40% 30-year fixed rate securities, 3% 40-year fixed rate securities, 2% 15-year fixed rate securities, 50% adjustable rate securities and 5% CMOs backed by adjustable rate agency securities.
CAPITAL GAINS
During the quarter, AGNC generated $9.5 million in net realized gains, or $0.64 per common share, from the sale of agency securities as a result of actively managing its investment portfolio. AGNC will continue to manage its balance sheet by assessing the entire agency securities landscape to balance stockholder returns and book value preservation.
ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE SPREAD
During the quarter, the annualized weighted average yield on average earning assets was 5.35% and the annualized average cost of funds was 1.80%, including 0.50% of amortization expense associated with the termination of interest rate swaps, which resulted in a net interest rate spread of 3.55%. Excluding the amortization expense, the net interest rate spread was 4.05%. As of June 30, 2009, the weighted average yield on earning assets was 4.78% and the weighted average cost of funds was 1.82%, including 0.63% of amortization expense associated with the termination of interest rate swaps, which resulted in a net interest rate spread of 2.96% as of June 30, 2009. Excluding the amortization expense, the net interest rate spread was 3.59% as of June 30, 2009.
The actual constant prepayment rate ("CPR") for the Company's portfolio held in the second quarter was 17%, which was down from 20% in the first quarter of 2009. The Company's projected CPR for the remaining life of its investments as of June 30, 2009 was 21%. This reflects a drop from 31% as of March 31, 2009, which resulted in a positive "catch-up" adjustment to interest income of $2.2 million, or $0.15 per share, in the second quarter.
The weighted average cost basis of the investment portfolio was 103.1% as of June 30, 2009. The amortization of premiums (net of any accretion of discounts) on the investment portfolio for the quarter was $3.1 million, or $0.20 per common share. The unamortized net premium as of June 30, 2009 was $79.2 million.
LEVERAGE AND HEDGING ACTIVITIES
As of June 30, 2009, the Company's $2.6 billion investment portfolio was financed with $2.3 billion of repurchase agreements and $0.3 billion of equity capital, resulting in a leverage ratio of 7.5x. When adjusted for the net liability for agency securities not yet settled, the leverage ratio was 7.7x as of June 30, 2009. Of the $2.3 billion borrowed under repurchase agreements as of June 30, 2009, $1.1 billion had original maturities of 30 days or less, $1.0 billion had original maturities greater than 30 days and less than 60 days and the remaining $0.2 billion had original maturities of 61 days or more. As of June 30, 2009, the Company had repurchase agreements with 18 counterparties, with no more than 9% of stockholders' equity at risk with a single counterparty.
The Company's swap positions as of June 30, 2009 totaled $950 million in notional amount at an average fixed pay rate of 2.09%, an average receive rate of 0.32% and a weighted average maturity of 3.0 years. During the quarter, AGNC entered into eight interest rate swaps with a combined notional amount of $600 million, an average term of approximately 30 months and a weighted average fixed pay rate of 1.69%.
Additionally, during the quarter the Company terminated five interest rate swaps with a combined notional amount of $350 million and a weighted average remaining term of 11 months, realizing a loss of $10.0 million, which will be amortized into interest expense for GAAP and taxable income over the remaining original life of the terminated swaps. In the quarter, the Company recognized $2.7 million, or $0.18 per common share, in amortization expense associated with the termination of interest rate swaps (included in interest expense on the income statement). Since December 31, 2008, the Company has terminated interest rate swaps with a total combined notional amount of $550 million, realizing a loss of $16.5 million, of which $3.0 million has already been amortized into GAAP and taxable income. The remaining $13.5 million of this realized loss will be amortized into GAAP and taxable income over the next four quarters.
As of June 30, 2009, the Company's book value per common share was $20.76, or $1.50 higher than the March 31, 2009 book value per common share of $19.26 and $3.56 higher than the December 31, 2008 book value per common share of $17.20. The Company's book value fully reflects all costs associated with the termination of interest rate swaps.
Financial highlights for the quarter are as follows:
AMERICAN CAPITAL AGENCY CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, March 31, December 31,
2009 2009 2008
-------- --------- ------------
(unaudited) (unaudited)
Assets:
Agency securities, at fair
value (including pledged
assets of $2,535,249,
$2,060,748, and $1,522,001,
respectively) $2,631,893 $2,257,474 $1,573,383
Cash and cash equivalents 69,226 53,774 56,012
Restricted cash 5,203 25,168 18,692
Interest receivable 14,005 10,474 7,851
Derivative assets, at
fair value 3,257 - -
Receivable for agency
securities sold 73,505 38,148 -
Principal payments receivable 6,291 - -
Other assets 392 257 387
--- --- ---
Total assets $2,803,772 $2,385,295 $1,656,325
========== ========== ==========
Liabilities:
Repurchase arrangements $2,346,875 $1,849,473 $1,346,265
Payable for agency
securities purchased 110,872 207,220 -
Accrued interest payable 1,213 1,428 3,664
Derivative liabilities, at
fair value 9,839 24,441 29,277
Dividend payable 22,507 12,754 18,006
Due to Manager 607 665 714
Accounts payable and other
liabilities 416 353 248
--- --- ---
Total liabilities 2,492,329 2,096,334 1,398,174
--------- --------- ---------
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,
15,005 shares issued and
outstanding, respectively 150 150 150
Additional paid-in capital 285,932 285,924 285,917
Retained earnings
(accumulated deficit) 9,106 1,247 (2,310)
Accumulated other comprehensive
income (loss) 16,255 1,640 (25,606)
------ ----- -------
Total stockholders' equity 311,443 288,961 258,151
------- ------- -------
Total liabilities and
stockholders' equity $2,803,772 $2,385,295 $1,656,325
========== ========== ==========
AMERICAN CAPITAL AGENCY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
Three months ended
------------------
June 30, March 31, December 31,
2009 2009 2008
-------- --------- ------------
Interest income:
Interest income $31,690 $22,351 $17,132
Interest expense 9,585 8,129 10,331
----- ----- ------
Net interest income 22,105 14,222 6,801
------ ------ -----
Other income:
Gain from sale of agency
securities, net 9,530 4,818 5
Gain (loss) from derivative
instruments, net 1,226 (358) 6,286
----- ---- -----
Total other income 10,756 4,460 6,291
Expenses:
Management fees 939 903 927
General and administrative
expenses 1,556 1,468 1,213
----- ----- -----
Total expenses 2,495 2,371 2,140
----- ----- -----
Net income $30,366 $16,311 $10,952
======= ======= =======
Net income per common share -
basic and diluted $2.02 $1.09 $0.73
Weighted average number of
common shares outstanding -
basic and diluted 15,005 15,005 15,005
Dividends declared per
common share $1.50 $0.85 $1.20
AMERICAN CAPITAL AGENCY CORP.
KEY PORTFOLIO CHARACTERISTICS*
(unaudited)
(in thousands, except per share data)
Three months ended
------------------
June 30, March 31, December 31,
2009 2009 2008
-------- --------- ------------
Average agency securities $2,367,303 $1,738,321 $1,604,087
Average total assets $2,676,006 $1,968,190 $1,662,882
Average repurchase agreements $2,139,402 $1,537,798 $1,355,267
Average stockholders' equity $305,866 $274,278 $263,970
Fixed rate agency securities
- as of period end $1,203,261 $1,387,278 $1,573,383
Adjustable rate agency
securities - as of period end $1,307,430 $870,196 $-
CMO agency securities
- as of period end $121,202 $- $-
Average asset yield (1) 5.35% 5.13% 4.24%
Average cost of funds (2) 1.30% 2.03% 3.05%
Average cost of funds -
terminated swap amortization
expense (3) 0.50% 0.08% 0.00%
Average net interest rate
spread (4) 3.55% 3.02% 1.19%
Net return on average
equity (5) 39.82% 24.12% 16.46%
Leverage (average during the
period) (6) 7.0:1 5.6:1 5.1:1
Leverage (as of period
end) (7) 7.7:1 7.0:1 5.2:1
Annualized expenses % of
average assets (8) 0.37% 0.49% 0.51%
Annualized expenses % of
average equity (9) 3.27% 3.51% 3.22%
Book value per common
share as of period end (10) $20.76 $19.26 $17.20
* All percentages are annualized.
(1) Weighted average asset yield for the period was calculated by
dividing our average interest income on agency securities less
average amortization of premiums and discounts by our average agency
securities.
(2) Weighted average cost of funds for the period was calculated by
dividing our total interest expense by our weighted average
repurchase agreements. Total interest expense excludes amortization
expense related to the fair value of terminated swaps during the
periods presented.
(3) Represents amortization expense associated with the termination of
interest rate swaps of $2.7 million in the second quarter of 2009,
$0.3 million in the first quarter of 2009 and $0.0 million for the
fourth quarter of 2008.
(4) Average net interest rate spread for the period was calculated by
subtracting our weighted average cost of funds, net of interest rate
swaps and terminated swap amortization expense, from our weighted
average asset yield.
(5) Net return on average stockholders' equity for the period was
calculated by dividing our net income by our average stockholders'
equity.
(6) Leverage during the period was calculated by dividing our average
repurchase agreements outstanding by our average stockholders'
equity.
(7) Leverage at period end was calculated by dividing the amount
outstanding under our repurchase agreements and net liabilities for
unsettled agency securities by our total stockholders' equity at
period end.
(8) Annualized expenses as a % of average total assets was calculated by
dividing our total expenses by our average total assets.
(9) Annualized expenses as a % of average stockholders' equity was
calculated by dividing our total expenses by our average
stockholders' equity.
(10) Book value per common share was calculated by dividing our total
stockholders' equity by our number of common shares outstanding.
STOCKHOLDER CALL
AGNC invites stockholders, prospective stockholders and analysts to attend the AGNC stockholder call on July 30, 2009 at 11:00 am ET. The stockholder call can be accessed through a live webcast at http://www.agnc.com/ or by dialing (800) 230-1951 (U.S. domestic) or +1 (612) 234-9959 (international). Please advise the operator you are dialing in for the AGNC stockholder call.
A slide presentation will accompany the call and will be available at http://www.agnc.com/. Select the Q2 2009 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 our website after the call on July 30, 2009. In addition, there will be a phone recording available from 2:00 pm ET on July 30, 2009 until 11:59 pm ET on August 13, 2009. If you are interested in hearing the recording of the presentation, please dial (800) 475-6701 (U.S. domestic) or +1 (320) 365-3844 (international). The access code for both domestic and international callers is 107213.
For further information or questions, please do not hesitate to call our Investor Relations Department at (301) 968-9300 or send an email to .
ABOUT AGNC
AGNC is a REIT that invests exclusively 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 an affiliate of American Capital, Ltd. ("American Capital"). For further information, please refer to http://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 $11 billion(3) in capital resources under management and ten offices in the U.S., Europe and Asia. For further information, please refer to http://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, http://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.
(1) Leverage calculated as total repurchase agreements outstanding plus payable for agency securities purchased but not yet settled less receivable for agency securities sold but not yet settled over total stockholders' equity as of June 30, 2009.
(2) Economic return equals $5.91 per share ($2.35 per share of dividends in first and second quarter 2009 plus $3.56 per share increase in book value from $17.20 as of December 31, 2008 to $20.76 per share as of June 30, 2009) divided by $17.20 per share (book value as of December 31, 2008).
(3) As of March 31, 2009.
CONTACT:
Investors - (301) 968-9300
Media - (301) 968-9400
DATASOURCE: American Capital Agency Corp.
CONTACT: Investors, +1-301-968-9300, or Media, +1-301-968-9400, both of
American Capital Agency Corp.
Web Site: http://www.agnc.com/