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Summary

  • Most 15 and 30-year fixed-rate agency MBS coupons saw a modest to material price appreciation during the second quarter of 2014.
  • I am projecting AGNC will report a net unrealized gain (loss) on available-for-sale securities of $610 million for the second quarter of 2014.
  • I am projecting AGNC will report a net unrealized gain (loss) on interest rate swaps (upon reclassification to interest expense) of $41 million for the second quarter of 2014.
  • My projection for AGNC’s comprehensive income (loss) amount for the second quarter of 2014 is stated in the “Conclusions Drawn” section of the article.
  • A future article, which will be published prior to AGNC’s quarterly press release, will project the company’s BV as of 6/30/2014.

Author's Note: PART 3 of this article is a continuation from PART 2 which was discussed in a previous publication. PART 2 of this article was a continuation from PART 1 which was also discussed in a previous publication. Please see PART 1 of this article for a detailed projection of American Capital Agency Corp.'s (NASDAQ:AGNC) consolidated statement of comprehensive income for the second quarter of 2014 regarding the following accounts: 1) interest income; 2) interest expense; and 3) gain (loss) on sale of agency securities, net. Please see PART 2 of this article for a detailed projection of AGNC's consolidated statement of comprehensive income for the second quarter of 2014 regarding the following accounts: 4) gain (loss) on derivative instruments and other securities, net (including four "sub-accounts"); and 5) management fees. PART 2 also discussed AGNC's projected net income (loss) and earnings per share ('EPS') amounts. PART 1 and PART 2 helps lead to a better understanding of the topics and analysis that will be discussed in PART 3. The links to PART 1 and PART 2 are provided below:

American Capital Agency Corp.'s Upcoming Q2 2014 Consolidated Statement of Comprehensive Income Projection - Part 1

American Capital Agency's Upcoming Q2 2014 Consolidated Statement of Comprehensive Income Projection - Part 2

This three-part article is a very detailed look at AGNC's consolidated statement of comprehensive income. I perform this detailed analysis for readers who anticipate/want such an analysis performed each quarter (to fully understand AGNC's ongoing business operations). For readers who just want the summarized account projections, I would suggest to scroll down to the "Conclusions Drawn" section at the bottom of the each part of the article.

Focus of Article:

The focus of PART 3 of this article is to provide a detailed projection of AGNC's consolidated statement of comprehensive income for the second quarter of 2014 regarding the following accounts: 6) "unrealized gain (loss) on available-for-sale ('AFS') securities, net"; and 7) "unrealized gain (loss) on interest rate swaps, net (upon reclassification to interest expense)". PART 3 will also discuss AGNC's projected other comprehensive income (loss) (OCI/(OCL)) and comprehensive income (loss) amounts.

B) Other Comprehensive Income (Loss) (OCI/(OCL)):

- OCI/(OCL) Estimate of $651 Million; Range $251 Million - $1.05 Billion

- Confidence Within Range = Moderate to High

- See Red Reference "B" in Tables 8 and 12 Below Next to the June 30, 2014 Column

Let us take a look at AGNC's quarterly consolidated statements of comprehensive income for the trailing twelve-months going back to the second quarter of 2013 (ACTUAL) and my projection for the second quarter of 2014 (ESTIMATE) regarding the company's OCI/(OCL) and comprehensive income (loss) amounts. This information is provided in Table 8 below.

Table 8 - AGNC Quarterly OCI/(OCL) and Comprehensive Income (Loss) Projection

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(Source: Table created entirely by myself, partially using data obtained from AGNC's quarterly investor presentation slides)

Table 8 above is the main source of summarized data regarding AGNC's OCI/(OCL) and comprehensive income (loss) amounts. As such, all material accounts within Table 8 will be separately analyzed and discussed in corresponding order to the boxed blue references next to the June 30, 2014 column. PART 3 of this article will include an analysis on the following consolidated statement of comprehensive income accounts: 6) unrealized gain (loss) on AFS securities, net; and 7) unrealized gain (loss) on interest rate swaps, net (upon reclassification to interest expense).

6) Unrealized Gain (Loss) on AFS Securities, Net:

- Estimate of $610 Million; Range $210 Million - $1.01 Billion

- Confidence Within Range = Moderate to High

- See Boxed Blue Reference "6" in Table 8 Above and Table 12 Below Next to the June 30, 2014 Column

Projecting AGNC's unrealized gain (loss) on AFS securities, net account is an analysis that involves several assumptions and variables that need to be taken into consideration. Since this account is the summation of the quarterly unrealized valuation changes on AGNC's MBS portfolio (by far the largest asset class on the company's balance sheet), a wider projection range should be accompanied with this specific account. The same assumptions used within AGNC's gain (loss) on sale of agency securities, net account (see PART 1 of article) and gain (loss) on derivative instruments and other securities, net account (regarding the company's TBA MBS and forward settling MBS position; see PART 2 of article) will be applied when analyzing this account.

Let us discuss the history of this account which will lead to a better explanation of my projected gain (loss) for the second quarter of 2014. As was initially discussed in PART 1 of this article, the total cost basis of AGNC's MBS portfolio was $67.0 billion as of 12/31/2013. However, this balance was reduced to only $56.9 billion as of 3/31/2014. Management was aggressively reducing AGNC's on-balance sheet leverage ratio while maintaining the company's combined on and off-balance sheet "at risk" leverage ratio. As was discussed in PART 2 of this article, as of 12/31/2013 AGNC had a net long (short) TBA MBS and forward settling MBS position of $2.1 billion. However, as of 3/31/2014, AGNC had a net long (short) TBA MBS and forward settling MBS position of $13.9 billion. When calculated, AGNC increased (decreased) the company's net long TBA MBS and forward settling MBS position by $11.8 billion during the first quarter of 2014. AGNC's shift in strategy included the continued "rebalancing" of the company's proportion of 15 and 30-year fixed-rate agency MBS coupons.

Since most fixed-rate agency MBS prices modestly to materially increased during the first quarter of 2014, when combining both of AGNC's realized gain (loss) on sale of agency securities, net and unrealized gain (loss) on AFS securities, net accounts together, the company reported a net valuation gain (loss) of $502 million for the first quarter of 2014. After AGNC's net realized valuation gain (loss) of ($19) million was reversed-out, the company's total net unrealized gain (loss) on AFS securities was $521 million for the first quarter of 2014.

Having established what occurred to the company's MBS portfolio during the prior quarter, let us now take a look at AGNC's unrealized gain (loss) on AFS securities, net account for the second quarter of 2014. Prior to performing an account projection analysis, let us first analyze the fixed-rate agency MBS price movements during the second quarter of 2014. Using Table 9 below as a reference, let us first analysis the 15-year fixed-rate agency MBS price movements. This will then be followed by a similar analysis (via Table 10) of the 30-year fixed-rate agency MBS price movements. By analyzing the 15 and 30-year fixed-rate agency MBS price movements, it will help us better understand how I come up with my projected valuations discussed later in the article.

Table 9 - 15-Year Fixed-Rate Agency MBS Price Movements (During the Second Quarter of 2014)

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(Source: Table created entirely by myself, using privately-assessed MBS pricing data from my company's intranet resources [courtesy of Thomson Reuters])

Table 9 above shows the 15-year fixed-rate agency MBS price movements during the second quarter of 2014. It breaks out the 15-year fixed-rate agency MBS holdings by government-sponsored entity ('GSE'). This includes both Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) MBS. As of 3/31/2014, AGNC's Ginnie Mae holdings accounted for less than 0.5% of the company's MBS portfolio. As such, Ginnie Mae fixed-rate agency MBS price movements are deemed immaterial for discussion purposes and thus excluded from this table. Table 9 further breaks out the 15-year fixed-rate agency MBS price movements into the various coupons on AGNC's books ranging from 2.5% - 4.5%. AGNC holds an immaterial balance of 15-year fixed-rate agency MBS over the 4.5% coupon and thus these specific coupons are excluded from Table 9 above.

From the information provided in Table 9 above, a valuation gain (loss) can be calculated which is broken down by the various coupons. This valuation gain (loss) is performed in Table 11 later in the article. An exact valuation figure cannot be obtained because AGNC continually changes the company's portfolio holdings in a given quarter. As such, I must determine specific purchase and sale assumptions towards the end of my account projection analysis.

Using Table 9 as a reference, let us look at the 15-year fixed-rate agency MBS price movements for the current quarter regarding a few of the coupon rates where AGNC held a material MBS balance as of 3/31/2014. The cumulative quarterly net MBS price movements for each coupon rate are shown within Table 9 under the "Cumulative Quarterly Change" column. To illustrate, during the second quarter of 2014, the Fannie 15-year fixed-rate agency MBS with a 2.5% coupon had a cumulative quarterly price increase (decrease) of 1.58 to settle its price at 101.52 (100 being par). The Fannie 15-year fixed-rate agency MBS with a 3.0% coupon had a cumulative quarterly MBS price increase (decrease) of 1.07 to settle its price at 103.80 (100 being par). The Fannie 15-year fixed-rate agency MBS with a 3.5% coupon (AGNC's largest 15-year fixed-rate agency MBS position as of 3/31/2014) had a cumulative quarterly MBS price increase (decrease) of 1.13 to settle its price at 105.97 (100 being par).

Still using Table 9 above as a reference, when evaluating all coupons, AGNC's Fannie 15-year fixed-rate agency MBS had a variety of cumulative quarterly MBS price changes during the second quarter of 2014. A material 15-year fixed-rate agency MBS price increase occurred on the 2.5%, 3.0%, and 3.5% coupons. A modest 15-year fixed-rate agency MBS price increase occurred on the 4.0% coupon. A minor 15-year fixed-rate agency MBS price increase occurred on the 4.5% coupon.

When compared to the Fannie 15-year fixed-rate agency MBS, the Freddie 15-year fixed-rate agency MBS had slight differences in weekly (hence cumulative quarterly) price valuations across the same coupons. As will be shown in Table 11 later in the article, the minor price fluctuations between the two types of 15-year fixed-rate agency MBS only had a minor impact on differing valuations. Now that we have an understanding of the 15-year fixed-rate agency MBS price movements during the second quarter of 2014, let us take a look at the 30-year fixed-rate agency MBS price movements.

Table 10 - 30-Year Fixed-Rate Agency MBS Price Movements (During the Second Quarter of 2014)

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(Source: Table created entirely by myself, using privately-assessed MBS pricing data from my company's intranet resources [courtesy of Thomson Reuters; link provided below Table 9])

Table 10 above shows the 30-year fixed-rate agency MBS price movements during the second quarter of 2014. It breaks out the 30-year fixed agency MBS holdings by GSE. As was the case with the 15-year fixed-rate agency MBS, this includes both FNMA.OB and FMCC.OB holdings. As stated earlier, AGNC's Ginnie Mae fixed-rate agency MBS holdings are deemed immaterial for discussion purposes. As such, Ginnie Mae fixed-rate agency MBS price movements are excluded from this table. Table 10 further breaks out the 30-year fixed-rate agency MBS price movements into the various coupons on AGNC's books ranging from 3.0% - 5.0%. AGNC holds an immaterial balance of 30-year fixed-rate agency MBS over the 5.0% coupon and thus these specific coupons are excluded from Table 10 above.

From the information provided in Table 10 above, a valuation gain (loss) can be calculated which is broken down by the various coupons. This valuation gain (loss) is performed in Table 11 later in the article. An exact valuation figure cannot be obtained because AGNC continually changes the company's portfolio holdings in a given quarter. As such, I must determine specific purchase and sale assumptions towards the end of my account projection analysis.

Using Table 10 as a reference, let us look at the 30-year fixed-rate agency MBS price movements for the current quarter regarding a few of the coupon rates where AGNC held a material MBS balance as of 3/31/2014. The cumulative quarterly net MBS price movements for each coupon rate are shown within Table 10 above under the "Cumulative Quarterly Change" column. To illustrate, during the second quarter of 2014, the Fannie 30-year fixed-rate agency MBS with a 3.0% coupon had a cumulative quarterly price increase (decrease) of 2.07 to settle its price at 98.66 (100 being par). The Fannie 30-year fixed-rate agency MBS with a 3.5% coupon had a cumulative quarterly MBS price increase (decrease) of 2.18 to settle its price at 102.81 (100 being par). The Fannie 30-year fixed-rate agency MBS with a 4.0% coupon (AGNC's largest 30-year fixed-rate agency MBS position held as of 3/31/2014) had a cumulative quarterly MBS price increase (decrease) of 2.03 to settle its price at 106.00 (100 being par). The Fannie 30-year fixed-rate agency MBS with a 4.5% coupon had a cumulative quarterly MBS price increase (decrease) of 1.50 to settle its price at 108.22 (100 being par).

Still using Table 10 as a reference, when evaluating all coupons, AGNC's Fannie 30-year fixed-rate agency MBS had a material cumulative quarterly MBS price increase during the second quarter of 2014 (regardless of coupon).

When compared to the Fannie 30-year fixed-rate agency MBS, the Freddie 30-year fixed-rate agency MBS had slight differences in weekly (hence cumulative quarterly) price valuations across the same coupons. As will be shown in Table 11 below, the minor price fluctuations between the two types of 30-year fixed-rate agency MBS only had a minor impact on differing valuations. Now that we have an understanding of the 15 and 30-year fixed-rate agency MBS price movements during the second quarter of 2014, let us take a look at how these price movements affected AGNC's MBS portfolio regarding the company's weekly and cumulative quarterly valuations (quantified in dollar amounts).

Table 11 - AGNC Summarized Weekly and Cumulative Quarterly Fixed-Rate MBS Portfolio Valuation Gain (Loss) (During the Second Quarter of 2014)

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(Source: Table created entirely by myself, including all calculated figures and projected valuations)

Table 11 above first shows AGNC's weekly and cumulative quarterly projected valuation gain (loss) on the company's 15 and 30-year fixed-rate agency MBS holdings across all coupons (including immaterial coupons omitted from Table 9 and Table 10 above). For this specific analysis, Table 11 quantifies the projected cumulative quarterly net valuation gain (loss) for the second quarter of 2014 in dollar amounts.

Using Table 11 above as a reference, I am projecting an "initial" net valuation gain (loss) of $734 million on AGNC's 15 and 30-year fixed-rate agency MBS holdings for the second quarter of 2014 (see blue reference "A" in Table 11 above). However, as stated earlier, several other adjustments need to be performed prior to a final projection is made for AGNC's unrealized gain (loss) on AFS securities, net account.

Since AGNC currently has a material amount of the company's fixed-rate agency MBS within "specified pools" (prepayment protected MBS; mainly through the Home Affordable Refinance Program (HARP) and low-loan balance (LLB) securities), a quarterly valuation adjustment needs to be projected. Since I am projecting only an additional minor net valuation gain on AGNC's fixed-rate agency MBS within specified pools (HARP and LLB securities) for the second quarter of 2014, I would refer readers to a prior quarter's article for a full discussion of this topic. The link to a prior quarter's article is provided below:

American Capital Agency Corp.'s Upcoming Q4 2013 Income Statement Projection (Part 3)

Still using Table 11 above as a reference, through a detailed calculation that will be omitted from this particular article, I am projecting an additional net valuation gain (loss) of $50 million for the second quarter of 2014 in regards to the following agency MBS holdings: 1) specified pools (HARP and LLB securities); 2) 20-year fixed-rate; 3) collateralized mortgage obligations ('CMO'); and 4) adjustable-rate mortgages ('ARM') (see blue reference "B" in Table 11 above).

Also, when considering the effects of the newly converted net long (short) TBA MBS and forward settling MBS position of $13.9 billion and AGNC's realignment of the company's MBS portfolio throughout the quarter, I am projecting an additional net valuation gain (loss) of ($25) million for the second quarter of 2014 (see blue reference "C" in Table 11 above). I am projecting an "intra-quarter" net valuation loss on newly created positions because MBS prices initially materially increased through the first two months of the quarter but then remained relatively flat or slightly decreased in some lower coupons during June 2014. As such, some MBS purchases during the second-half of the quarter most likely had a minor net valuation loss. It is only prudent to take this consideration into effect.

Therefore, when all three net valuation gain (loss) figures are combined, I am projecting a total net valuation gain (loss) of $760 million on AGNC's MBS portfolio for the second quarter of 2014. This figure is PRIOR to all sold MBS being reversed out in the current quarter. As such, the final calculation within AGNC's unrealized gain (loss) on AFS securities, net account is the quarterly reversal of the company's MBS sales shown in Table 12 below. Remember, all MBS sales have already been accounted for within AGNC's gain (loss) on sale of agency securities, net account (see PART 1 of the article). Thus, AGNC's realized valuation gain (loss) must be "reversed-out" of the company's unrealized gain (loss) on AFS securities, net account.

Table 12- AGNC Quarterly Unrealized Gain (Loss) on AFS Securities, Net and Unrealized Gain (Loss) on Interest Rate Swaps, Net (Upon Reclassification to Interest Expense) Projection

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(Source: Table created entirely by myself, partially using AGNC data obtained from the SEC's EDGAR Database)

Table 12 above shows AGNC's projected total net valuation gain (loss) of $760 million on the company's MBS portfolio (see red reference "AB" in Table 12 above). This amount is highlighted in teal. The second amount shown is AGNC's projected "reversal of prior period unrealized ('gain') loss, net, (upon realization)" figure (see red reference "AC" in Table 12 above). This amount is highlighted in pink and also has a boxed blue reference "3" next to the June 30, 2014 column. As stated earlier, this is the exact amount accounted for within AGNC's gain (loss) on sale of agency securities, net account (see PART 1 of the article).

Therefore, after AGNC's projected realized valuation gain (loss) of $150 million is reversed-out, the company's total unrealized gain (loss) on AFS securities, net account is projected to be $610 million for the second quarter of 2014 (see red reference "(AB + AC) = AD" in Table 12 above). This amount is highlighted in grey.

Brief Discussion of MTGE's Unrealized Gain (Loss) on Agency Securities, Net Account:

I also see general similarities between AGNC and its sister company American Capital Mortgage Investment Corp. (NASDAQ:MTGE) regarding agency MBS portfolio strategies. As such, I see somewhat similar projections between AGNC's unrealized gain (loss) on AFS securities, net account and MTGE's "unrealized gain (loss) on agency securities, net" account for the second quarter of 2014 (proportionally speaking). However, MTGE also had a non-agency MBS portfolio. MTGE's non-agency MBS portfolio has different valuation methods performed which are mainly based on specific indexes and simulated models. Due to this fact, MTGE also has an "unrealized gain (loss) on non-agency securities, net" account that needs to be incorporated into the company's consolidated statement of comprehensive income. A discussion of MTGE's non-agency MBS portfolio is beyond the scope of this article.

Brief Discussion of NLY's Unrealized Gain (Loss) on AFS Securities, Net Account:

When it comes to AGNC's closest sector peer Annaly Capital Management Inc. (NYSE:NLY), I see one modest difference that would affect the account described above. As of 3/31/2014, 80% of NLY's fixed-rate agency MBS portfolio was in 30-year holdings whereas AGNC only had 48% of the company's MBS portfolio in 30-year holdings. Since 30-year fixed-rate agency MBS prices outpaced 15-year fixed-rate agency MBS prices during the second quarter of 2014, NLY should have a slightly higher valuation gain within the unrealized gain (loss) on AFS securities, net account when compared to AGNC (proportionally speaking; assuming each company had a comparable level of MBS sales). As stated in PART 1 and PART 2 of this article, there are several other accounts where AGNC had the advantage over NLY (lower interest expense; higher TBA MBS net valuation gain). Therefore, one could argue when all accounts are taken into consideration, both companies should have a fairly similar comprehensive income (loss) amount (proportionally speaking).

7) Unrealized Gain (Loss) on Interest Rate Swaps, Net (Upon Reclassification to Interest Expense):

- Estimate of $41 Million; Range $36 - $46 Million

- Confidence Within Range = High

- See Boxed Blue Reference "7" in Tables 8 and 12 Above Next to June 30, 2014 Column

Now let us take a look at AGNC's unrealized gain (loss) on interest rate swaps, net account. I show my projection for this figure in Table 12 above. AGNC's unrealized gain (loss) on interest rate swaps, net account consists of two "sub-accounts". The first sub-account is AGNC's "unrealized gain (loss) on interest rate swaps designated as cash flow hedges" (see red reference "AE" in Table 12 above). Since AGNC has discontinued accounting for the company's interest rate swaps as cash flow hedges, this balance will remain $0 for the second quarter of 2014. The second sub-account is AGNC's "reversal of prior period unrealized ('gain') loss on interest rate swaps, net (upon reclassification to interest expense)" (see red reference "AF" in Table 12 above). AGNC has elected to discontinue accounting for the company's interest rate swaps as cash flow hedges under Generally Accepted Accounting Principles ('GAAP') as of September 30, 2011. Each quarter, a portion of the remaining accumulated net deferred loss prior to the change in accounting treatment is reclassified out of the OCI/(OCL) amount and into the interest expense account as it relates to AGNC's "de-designated" interest rate swaps.

As of 3/31/2014, AGNC had a remaining net deferred gain (loss) of ($253) million in the company's accumulated OCI/(OCL) amount relating to these de-designated interest rate swaps. The net deferred gain (loss) that is expected to be reclassified from the OCI/(OCL) amount and into the interest expense account over the next twelve months is ($143) million. Therefore, a reclassification of $41 million has been projected for the second quarter of 2014.

After combining the company's unrealized gain (loss) on AFS securities, net and unrealized gain (loss) on interest rate swaps, net (upon reclassification to interest expense) accounts together, I am projecting AGNC will report OCI/(OCL) of $651 million for the second quarter of 2014 (see red reference "B" in Tables 8 and 12 above).

C) Comprehensive Income (Loss):

- Comprehensive Income (Loss) Estimate of $629 Million; Range $179 Million - $1.08 Billion

- Comprehensive Income (Loss) Available to Common Shareholders of $1.76 Per Share; Range $0.49 - $3.04 Per Share

- Confidence Within Range = Moderate to High

- See Red Reference "C" in Table 8 Above Next to the June 30, 2014 Column

Finally, let us look at AGNC's comprehensive income (loss) for the second quarter of 2014. This is the summation of the following AGNC consolidated statement of comprehensive income amounts: A) net income (loss) of ($22) million (see PART 1 and PART 2 of the article); and B) OCI/(OCL) of $651 million (see analysis above). Therefore, when these two amounts are combined, I am projecting AGNC will report comprehensive income (loss) of $629 million for the second quarter of 2014.

Conclusions Drawn (PART 3):

To sum up all the information above, I am projecting AGNC will report the following consolidated statement of comprehensive income figures for the second quarter of 2014 (refer to Tables 8 and 12 above):

6) Quarterly Unrealized Gain (Loss) on AFS Securities, Net of $610 Million

7) Quarterly Unrealized Gain (Loss) on Interest Rate Swaps, Net (Upon Reclassification to Interest Expense) of $41 Million

Mortgage interest rates/U.S. Treasury yields net decreased during the second quarter of 2014. As such, cumulative quarterly MBS prices increased throughout most of the 15 and 30-year fixed-rate agency coupons for the second quarter of 2014. Through the detailed analysis performed above, AGNC's unrealized gain (loss) on AFS securities, net account is projected to be $610 million for the second quarter of 2014. This projected valuation gain is a slight increase when compared to the prior quarter's total net valuation gain (loss) of $521 million.

I am also projecting AGNC had a slight decrease to the company's unrealized gain (loss) on interest rate swaps, net (upon reclassification to interest expense) account when compared to the prior quarter. I am projecting AGNC's unrealized gain (loss) on interest rate swaps, net (upon reclassification to interest expense) account to increase (decrease) by ($2) million for the second quarter of 2014 when compared to the first quarter of 2014 ($41 million versus $43 million). This slight decrease is due to the lower remaining net deferred loss on AGNC's de-designated interest rate swaps as of 3/31/2014 when compared to 12/31/2013.

Conclusions Drawn From PART 1, PART 2, and PART 3:

To sum up the analysis from all three parts of the article, I am projecting AGNC will report the following consolidated statement of comprehensive income amounts for the second quarter of 2014:

A) Quarterly Net Income (Loss) of ($22) Million; Earnings Available to Common Shareholders of ($0.08) Per Share

B) Quarterly OCI/(OCL) of $651 Million

C) Quarterly Comprehensive Income (Loss) (A and B Combined) of $629 Million; Comprehensive Income (Loss) Available to Common Shareholders of $1.76 Per Share

AGNC's projected net income (loss) of ($22) million for the second quarter of 2014 is modestly better than the reported net income (loss) of ($141) million for the first quarter of 2014. This is mainly due to AGNC's projected net valuation gain (loss) of $150 million on the company's gain (loss) on sale of agency securities, net account for the second quarter of 2014. For the same account in the prior quarter, AGNC recognized a net valuation gain (loss) of ($19) million.

I am also projecting AGNC will report OCI/(OCL) of $651 million for the second quarter of 2014. This projected amount is slightly higher when compared to an OCI/(OCL) of $564 million for the first quarter of 2014. The main culprit for the projected minor increase in AGNC's OCI/(OCL) amount is the slightly higher cumulative quarterly MBS price increases seen in most 15 and 30-year fixed-rate agency MBS coupons when compared to the prior quarter.

As a result of the company's projected net income (loss) of ($22) million and OCI/(OCL) of $651 million, I am projecting AGNC will report a comprehensive income (loss) of $629 million for the second quarter of 2014. When compared to a comprehensive income (loss) of $423 million for the first quarter of 2014, this is a positive (negative) change of $206 million. I believe this should be seen as a positive sign.

Final Note on Upcoming BV Article: The projected amounts from this three-part article will have a direct impact on AGNC's projected BV as of 6/30/2014. My upcoming AGNC BV projection article will be available to readers prior to the company's earnings press release for the second quarter of 2014 on 7/27/2014.

Editor's Note: This article discusses one or more securities that do not trade on a major exchange. Please be aware of the risks associated with these stocks.

Source: American Capital Agency Corp.'s Upcoming Q2 2014 Consolidated Statement Of Comprehensive Income Projection - Part 3

Additional disclosure: I have no position in FMCC, FNMA, or NLY.