AGNC Investment Corp. · NASDAQ:AGNC

AGNC Investment — Q2 2016 Earnings Presentation

29 slides from AGNC Investment's earnings presentation, Jul 28, 2016

  1. Slide 1: Q2 2016 Stockholder Presentation

    * Q2 2016 STOCKHOLDER PRESENTATION JULY 28, 2016 * Not affiliated with American Capital, Ltd © 2016 American Capital Agency Corp. All Rights Reserved.

  2. Slide 2: Safe Harbor Statement

    NASDAQ: AGNC SAFE HARBOR STATEMENT SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This presentation contains statements that, to the extent they are not recitations of historical fact, constitute "forward-looking statements" within the meaning of the Private Securit

  3. Slide 3: Capital Stock Highlights

    NASDAQ: AGNC CAPITAL STOCK HIGHLIGHTS TYPE / STOCK TICKER: COMMON STOCK / AGNC IPO PRICE: NET ASSET VALUE 2: EXCHANGE: $20.00 PER SHARE $22.22 PER SHARE TOTAL DIVIDENDS PAID SINCE IPO 1: TOTAL EQUITY CAPITAL 2: IPO DATE: MAY 2008 $33.90 PER SHARE $7.4 B TYPE / NAME: TYPE / NAME: 8.000% SERIES A CUMU

  4. Slide 4: Q2 2016 Highlights

    NASDAQ: AGNC Q2 2016 HIGHLIGHTS ♦ $0.73 Comprehensive Income per Share, Comprised of:  $(0.43) net loss per share  $1.16 other comprehensive income (“OCI”) per share ● Includes net unrealized gains on investments marked-to-market through OCI ♦ $0.56 Net Spread and Dollar Roll Income per Share, Exc

  5. Slide 5: Q2 2016 Other Highlights

    NASDAQ: AGNC Q2 2016 OTHER HIGHLIGHTS ♦ $61.5 B Investment Portfolio as of June 30, 2016  $54.4 B Agency MBS  $7.1 B TBA mortgage position  $0.1 B AAA non-Agency MBS ♦ 7.2x “At Risk” Leverage as of June 30, 2016 1,2  6.3x leverage, excluding net long TBA mortgage position, as of June 30, 2016 

  6. Slide 6: Market Update

    NASDAQ: AGNC MARKET UPDATE Q2 2016 Q2 2016 Security 6/30/15 9/30/15 12/31/15 3/31/16 6/30/16 ∆ Rate % / Price1 Security 6/30/15 9/30/15 12/31/15 3/31/16 6/30/16 ∆ Rate % / Price1 Treasury Rates Swap Rates 2 Yr UST 0.64% 0.64% 1.06% 0.73% 0.59% -0.14% / +0.28 2 Yr Swap 0.89% 0.76% 1.17% 0.85% 0.74% -

  7. Slide 7: Refinancing Exposure – Mortgage Universe

    NASDAQ: AGNC REFINANCING EXPOSURE – MORTGAGE UNIVERSE Conventional 15 & 30 Yr Mortgage Price Index vs. 10 Yr Swap Rate $108.75 3.75% $108.00 3.50% 3.25% $107.25 3.00% $106.50 2.75% $105.75 2.50% $105.00 2.25% $104.25 2.00% $103.50 1.75% $102.75 1.50% $102.00 1.25% Conventional 15 & 30 Yr Mortgage Pr

  8. Slide 8: Q2 2016 Portfolio Update

    NASDAQ: AGNC Q2 2016 PORTFOLIO UPDATE As of 6/30/16 As of 3/31/16 $61.5 B Portfolio $62.1 B Portfolio AGNC Actual CPR 1 MBS ($54.5 B, 89%) & Net TBA Position ($7.1 B, 11%) MBS ($56.1 B, 90%) & Net TBA Position ($6.0 B, 10%) 14% 14% 13% 12% 11% 12% 10% 9% 8% 8% 6% 4% 2% 0% 2/1/16 3/1/16 4/1/16 5/1/16

  9. Slide 9: Financing Summary

    NASDAQ: AGNC FINANCING SUMMARY OUR FINANCING POSITION IS VERY STRONG, WITH SIGNIFICANT ACCESS TO ATTRACTIVE FUNDING ACROSS A WIDE RANGE OF COUNTERPARTIES AND FINANCING TERMS ♦ Weighted average agency repo cost Mortgage Funding 1 As of June 30, 2016 totaled 0.78% as of June 30, 2016, an Amount Intere

  10. Slide 10: Hedging Summary

    NASDAQ: AGNC HEDGING SUMMARY OUR PRIMARY OBJECTIVE IS NOT TO ELIMINATE INTEREST RATE RISK OR TO LOCK IN A PARTICULAR NET INTEREST MARGIN, BUT TO MAINTAIN OUR NET BOOK VALUE WITHIN REASONABLE BANDS OVER A RANGE OF INTEREST RATE SCENARIOS ♦ Our interest rate hedge portfolio totaled Hedge Portfolio Sum

  11. Slide 11: Duration Risk

    NASDAQ: AGNC DURATION RISK WE ACTIVELY MANAGE OUR EXPOSURE TO EXTENSION AND CONTRACTION RISK 1 Duration Gap Sensitivity 2,3 As of June 30, 2016 Rates Duration Rates - 100 bps 6/30/2016 + 100 bps Mortgage Assets: 4 30-Year MBS 1.5 3.1 5.2 15-Year MBS 1.5 2.5 3.4 Total Mortgage Assets 1.5 2.9 4.6 Liab

  12. Slide 12: Internalization Transaction Update

    NASDAQ: AGNC INTERNALIZATION TRANSACTION UPDATE ♦ AGNC’s acquisition of ACMM, first announced on May 23, 2016, closed on July 1, 2016  AGNC is now internally-managed, further aligning its management structure with shareholder interests  American Capital MTGE Management, LLC, a subsidiary of ACMM,

  13. Slide 13: Pro Forma Operating Cost Structure Comparison

    NASDAQ: AGNC PRO FORMA OPERATING COST STRUCTURE COMPARISON AGNC IS EXPECTED TO HAVE THE LOWEST RUN-RATE OPERATING COST STRUCTURE AS A PERCENTAGE OF SHAREHOLDERS’ EQUITY OF ANY RESIDENTIAL MORTGAGE REIT 1,2 Operating Cost Structure Comparison Across Residential Mortgage REIT Universe 1 (Operating exp

  14. Slide 14: The AGNC Value Proposition

    NASDAQ: AGNC THE AGNC VALUE PROPOSITION THE INTERNALIZATION OF AGNC’S MANAGEMENT STRUCTURE FURTHER ENHANCES AGNC’S VALUE PROPOSITION TO SHAREHOLDERS Total Stock Return Comparison 1 The AGNC Value Proposition Dec 31, 2008 – June 30, 2016 Industry- Since 2009, AGNC has significantly 250% Leading outpe

  15. Slide 15: Financial Results

    FINANCIAL RESULTS

  16. Slide 16: Balance Sheets

    NASDAQ: AGNC BALANCE SHEETS ($ in millions, except per share data, unaudited except 12/31/15) 6/30/16 3/31/16 12/31/15 9/30/15 6/30/15 Agency Securities, at Fair Value $53,418 $54,950 $51,331 $53,729 $50,976 Agency Securities Transferred to Consolidated Variable Interest Entities, at Fair Value 945

  17. Slide 17: Income Statements

    NASDAQ: AGNC INCOME STATEMENTS ($ in millions, except per share data) (Unaudited) Q2 2016 Q1 2016 Q4 2015 Q3 2015 Q2 2015 Interest Income $318 $295 $374 $295 $414 Interest Expense (101) (99) (86) (77) (81) Net Interest Income 217 196 288 218 333 Gain (Loss) on Sale of Agency Securities, Net 55 (2) 2

  18. Slide 18: Reconciliation of GAAP Net Interest Income to Net Spread and Dollar Roll Income

    NASDAQ: AGNC RECONCILIATION OF GAAP NET INTEREST INCOME TO 1 NET SPREAD AND DOLLAR ROLL INCOME ($ in millions, except per share data) (Unaudited) Q2 2016 Q1 2016 Q4 2015 Q3 2015 Q2 2015 Interest Income $318 $295 $374 $295 $414 Interest Expense: Repurchase Agreements and Other Debt (89) (80) (64) (53

  19. Slide 19: Reconciliation of GAAP Net Income to Estimated Taxable Income

    NASDAQ: AGNC RECONCILIATION OF GAAP NET INCOME TO 1 ESTIMATED TAXABLE INCOME ($ in millions, except per share data) (Unaudited) Q2 2016 Q1 2016 Q4 2015 Q3 2015 Q2 2015 Net Income (Loss) $(135) $(772) $588 $(633) $512 Book to Tax Differences: Premium Amortization, Net 20 55 (18) 15 (55) Realized Gain

  20. Slide 20: Net Book Value Roll Forward

    NASDAQ: AGNC NET BOOK VALUE ROLL FORWARD Q2 2016 Common Shares Net Book Value (In millions, except per share data) (Unaudited) Balance Outstanding per Common Share Beginning Net Common Equity 1 $7,312 331.0 $22.09 Net Income (135) Other Comprehensive Loss 382 Dividend on Common Stock (198) Dividend

  21. Slide 21: Supplemental Slides

    SUPPLEMENTAL SLIDES

  22. Slide 22: AGNC Historical Overview

    NASDAQ: AGNC AGNC HISTORICAL OVERVIEW Asset Composition ($ B) Leverage Fixed Rate TBA ARM CMO1 % Spec Pools 2 Leverage 3 "At Risk" Leverage 4 80% $80.0 8.0x 7.3x 75% 7.2x $70.0 6.8x 6.8x $62.2 $59.9 $62.1 $61.5 6.5x 6.3x $59.2 6.1x 70% 5.9x 5.8x $60.0 6.0x 5.3x 65% $50.0 60% 60% $40.0 58% 4.0x 55% 5

  23. Slide 23: AGNC Historical Overview

    NASDAQ: AGNC AGNC HISTORICAL OVERVIEW Earnings and Dividends per Common Share 1 Comprehensive EPS Dividend per Common Share 1 Comprehensive EPS Dividend per Common Share $10.00 $8.26 $1.00 $7.50 $0.73 $8.00 $0.80 $0.62 $0.60 $0.60 $0.60 $0.60 $5.60 $0.60 $6.00 $5.00 $4.41 $0.40 $3.75 $4.00 $0.20 $2.

  24. Slide 24: Fixed Rate Agency Securities – MBS and Net TBA Position

    NASDAQ: AGNC FIXED RATE AGENCY SECURITIES – MBS AND NET TBA POSITION $ IN MILLIONS – AS OF JUNE 30, 2016 Higher MBS MBS Quality Other MBS MBS Average Actual 1 Specified Specified Amortized Cost Average Age Month Duration MBS Coupon 1 Par Value 2 Market Value 2 Pools 3 Pools 4 Basis 5 WAC 5,6 (Months

  25. Slide 25: Repo Counterparty Credit Risk

    NASDAQ: AGNC REPO COUNTERPARTY CREDIT RISK OUR REPO FUNDING IS WELL DIVERSIFIED BY COUNTERPARTY AND GEOGRAPHY ♦ Maintained excess capacity with Counterparty Counterparty Counterparty Exposure as a most of our counterparties Region Rank % of NAV 1,2 ♦ Less than 4% of our equity at risk 1 3.5% 2 2.9%

  26. Slide 26: Hedge Instruments

    NASDAQ: AGNC HEDGE INSTRUMENTS OUR HEDGES ARE DESIGNED TO MITIGATE BOOK VALUE FLUCTUATIONS DUE TO INTEREST RATE CHANGES AND ARE NOT DESIGNED TO PROTECT AGAINST MARKET VALUE FLUCTUATIONS IN OUR ASSETS CAUSED BY CHANGES IN THE SPREAD BETWEEN OUR INVESTMENTS AND OTHER BENCHMARK RATES, SUCH AS SWAP AND

  27. Slide 27: Other Hedge and Derivative Instruments

    NASDAQ: AGNC OTHER HEDGE AND DERIVATIVE INSTRUMENTS WE CONTINUE TO USE A VARIETY OF HEDGING INSTRUMENTS TO MANAGE INTEREST RATE RISK ♦ U.S. Treasury Position U.S. Treasury Position As of June 30, 2016 ($ MM)  $3.0 B net short U.S. Treasury securities Face Amount Market Value  $2.5 B short U.S Trea

  28. Slide 28: NAV Sensitivity to Rates and MBS Spreads

    NASDAQ: AGNC NAV SENSITIVITY TO RATES AND MBS SPREADS CHANGES IN INTEREST RATES AND CHANGES IN MBS SPREADS RELATIVE TO TREASURY AND SWAP RATES CAN IMPACT THE MARKET VALUE OF OUR EQUITY ♦ Interest Rate Sensitivity Interest Rate Sensitivity 1 As of June 30, 2016  Interest rate sensitivity is the sens

  29. Slide 29: Use of Non-GAAP Financial Information

    NASDAQ: AGNC USE OF NON-GAAP FINANCIAL INFORMATION In addition to the results presented in accordance with GAAP, our results of operations discussed in this presentation include certain non-GAAP financial information, including “net spread and dollar roll income,” “net spread and dollar roll income,

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