AGNC Investment Corp.'s Q3 2016 And 10/19/2016 Book Value Projection (Includes MTGE Investment Corp. And Annaly Book Value Projections)

| About: AGNC Investment (AGNC)

Summary

I am projecting AGNC will report a 3.5% increase in quarterly BV and generate a 6.0% economic return for the third quarter of 2016.

The projected increase in quarterly BV is mainly due to minor price fluctuations in most fixed-rate agency MBS coupons and a modest derivatives net valuation gain.

My projections for AGNC’s BV per common share as of 9/30/2016 and 10/19/2016 are stated in the “Conclusions Drawn” section of the article.

My projection for MTGE’s and NLY’s book value per common share as of 9/30/2016 is stated near the “Conclusions Drawn” section of the article (including my recommendation for each company).

The positive relationship between MBS prices and derivative instrument valuations should be seen as a positive catalyst/trend regarding mREIT book values and stock valuations.

Focus of Article:

The focus of this article is to provide a detailed projection of AGNC Investment Corp.'s (NASDAQ:AGNC) book value ("BV") per common share as of 9/30/2016. Prior to results being provided to the public on 10/24/2016 (via the company's quarterly press release), I would like to analyze AGNC's BV as of 9/30/2016 and provide readers a general direction on how I believe this recent quarter has panned out. A previous three-part article I wrote laid the ground works for this BV projection. In that article, I projected/analyzed AGNC's income statement (technically speaking, the company's "consolidated statement of comprehensive income") for the third quarter of 2016. The links to that three-part projection article are provided below:

AGNC Investment Corp.'s Q3 2016 Income Statement Projection - Part 1 (Including My Buy, Sell, or Hold Recommendation)

AGNC Investment Corp.'s Q3 2016 Income Statement and EPS Projection - Part 2

AGNC Investment Corp.'s Q3 2016 Income Statement and EPS Projection - Part 3

By understanding the trends that occurred within AGNC's operations during the third quarter of 2016, one can apply this information to sector peers as well. As such, the discussion/analysis below is not solely applicable to AGNC but to the fixed-rate agency mortgage real estate investment trust (mREIT) sector as a whole. This includes, but is not limited to, the following fixed-rate agency mREIT peers: 1) ARMOUR Residential REIT Inc. (NYSE:ARR); 2) CYS Investments, Inc. (NYSE:CYS); 3) Annaly Capital Management, Inc. (NYSE:NLY); and 4) Orchid Island Capital Inc. (NYSE:ORC).

This article will also include a brief BV discussion regarding AGNC's affiliate MTGE Investment Corp. (NASDAQ:MTGE) and the company's sector peer NLY. This includes a BV projection as of 9/30/2016 for both companies.

Overview of AGNC's Projected BV as of 9/30/2016:

Due to the fact that several figures needed to project/calculate AGNC's BV as of 9/30/2016 come directly from the company's consolidated statements of comprehensive income, Table 1 is provided below. Table 1 shows AGNC's consolidated statements of comprehensive income from a three-months ended time frame. Using Table 1 below as a reference, one must add certain account figures from the first, second, and third quarters of 2016 for purposes of projecting a suitable BV as of 9/30/2016.

Table 1 - AGNC Three-Months Ended Consolidated Statements of Comprehensive Income

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

Having provided Table 1 above, we can now begin to calculate AGNC's projected BV as of 9/30/2016. This projection will be calculated in Table 2 below.

There will not be an identical sheet AGNC provides that matches the data within Table 2. I have gathered specific information derived from multiple tables/charts for a more detailed analysis of AGNC's BV as of 9/30/2016. AGNC, through the company's quarterly investor presentation slides (see link above), only provides the public with a "Book Value Roll Forward" slide. This specific slide uses information based only on a quarterly time frame. In contrast, I perform a more detailed quarterly BV calculation/analysis based on the entire year.

Table 2 - AGNC Nine-Months Ended BV Projection (BV as of 9/30/2016)

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

Using Table 2 above as a reference, let us take a look at the calculation for AGNC's projected BV as of 9/30/2016. Unless otherwise noted, all figures below are for the "nine months ended" time frame. Let us take a look at the following figures in corresponding order to the "Ref." column shown in Table 2 (next to the September 30, 2016, column):

A) Operations

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

C) Stockholder Transactions

D) Capital Share Transactions

A) Operations:

- Decrease in Net Common Equity From Operations Estimate of ($418) Million; Range ($668) - ($168) Million

- Confidence Within Range = Moderate to High

- See Red Reference "A" in Table 2 Above Next to the September 30, 2016, Column

This "net increase (decrease) in net common equity from operations" figure consists of the following amounts that come directly from AGNC's consolidated statement of comprehensive income (see Tables 1 and 2 above): 1) net interest income 2) total other income (loss) 3) total expenses and 4) excise tax.

Due to the fact I discussed these amounts in my previous three-part AGNC consolidated statement of comprehensive income projection article (see links near the top), further discussion of this figure is redundant/unwarranted.

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

- Increase in Net Common Equity From Other Comprehensive Income (OCI) Estimate of $1.13 Billion; Range $879 Million - $1.38 Billion

- Confidence Within Range = Moderate to High

- See Red Reference "B" in Table 2 Above Next to the September 30, 2016, Column

This "net increase (decrease) in net common equity from OCI/OCL" figure consists of the following accounts that come directly from AGNC's consolidated statement of comprehensive income (see Tables 1 and 2 above): 1) unrealized gain (loss) on available-for-sale ("AFS") securities, net; and 2) unrealized gain (loss) on derivative instruments, net (upon reclassification to interest expense).

Due to the fact I also discussed these accounts in my previous three-part AGNC consolidated statement of comprehensive income article (see links near the top), further discussion of this figure is redundant/unwarranted as well.

C) Stockholder Transactions:

- Decrease in Net Common Equity From Stockholder Transactions Estimate of ($604) Million; Range ($614) - ($594) Million

- Confidence Within Range = High

- See Red Reference "C" in Table 2 Above Next to the September 30, 2016, Column

This "net increase (decrease) in net common equity from stockholder transactions" figure is AGNC's dividend distributions for the first, second, and third quarters of 2016. This figure includes activity in relation to the following types of outstanding shares of stock: 1) common; and 2) preferred.

1) Common Stock:

a) First and Second Quarters of 2016:

The dividend declared on AGNC's common stock for the first and second quarters of 2016 totaled $1.20 per share ($0.60 each quarter). When calculated, AGNC had common stock dividend distributions totaling ($398) million for the first and second quarters of 2016 (or through the six-months ended 6/30/2016).

b) Third Quarter of 2016:

Prior to projecting AGNC's common stock dividend distributions for the third quarter of 2016, let us first discuss how the number of the company's outstanding shares of common stock could change during any given quarter. AGNC has three programs which could impact the number of outstanding shares of common stock the company has when monthly dividends are declared.

AGNC's "at-the-market ("ATM") offering program" allows the company to publicly offer and sell a certain aggregate number of shares of common stock in privately negotiated transactions pursuant to the sales agreement with Mitsubishi UFJ Securities. AGNC has not exercised the company's right to use this offering program for approximately four years. I am assuming no additional shares were issued under AGNC's ATM offering program during the third quarter of 2016.

AGNC also has a "dividend reinvestment and direct stock purchase program.". This plan allows AGNC's shareholders to acquire additional shares of common stock by reinvesting some or all of the cash dividends received. AGNC's shareholders may also make optional cash purchases of the company's common stock subject to certain limitations detailed in the plan's prospectus. The last time activity occurred within this program was the third quarter of 2011. Furthermore, whenever AGNC's stock price trades at a discount to BV, the probability of any activity within this program is very low (would be dilutive to BV). As was the case with AGNC's ATM offering program, I am making the assumption there was no activity in regards to this plan during the third quarter of 2016.

The third program that could impact the number of outstanding shares of common stock is AGNC's "stock repurchase program." This program, which was created in October 2012, currently allows AGNC to repurchase up to $2 billion of the company's outstanding shares of common stock through 12/31/2016. As of 6/30/2016, AGNC had$591 million remaining under the company's stock repurchase program. AGNC intends to buy back outstanding shares of common stock only when the repurchase price is materially accretive to BV. Since AGNC's stock price traded at less of a discount to BV during the third quarter of 2016 when compared to prior quarters, I believe management held back on repurchasing outstanding shares of common stock. Readers should also consider the fact AGNC paid $562 million in cash to internalize the company's once external manager, American Capital Mortgage Management ("ACMM") which was purchased from American Capital Ltd. (NASDAQ:ACAS) who is in the process of being acquired by Ares Capital Corp. (NASDAQ:ARCC). This event likely deterred management from using additional cash for share repurchases during the quarter.

The dividend declared on AGNC's common stock for the third quarter of 2016 totaled $0.56 per share. As such, this was a ($0.04) per share dividend decrease when compared to the prior quarter. When calculated, I am projecting AGNC had dividend distributions to common shareholders of ($185) million for the third quarter of 2016. When combined, I am projecting AGNC had dividend distributions to common shareholders of ($583) million for the nine months ended 9/30/2016. Now let us project the preferred stock dividend distributions.

2) Preferred Stock:

a) First and Second Quarters of 2016:

The dividend declared on AGNC's "Series A Preferred Stock" (AGNCP) for the first and second quarters of 2016 totaled $1.00 per share ($0.50 each quarter). When calculated, AGNC had dividend distributions to AGNCP shareholders totaling ($6.9) million for the first and second quarters of 2016 (or through the six-months ended 6/30/2016).

The dividend declared on AGNC's "Series B Preferred Stock" (AGNCB) for the first and second quarters of 2016 totaled $0.968750 per depository share ($0.484375 each quarter). When calculated, AGNC had dividend distributions to AGNCB shareholders of ($6.8) million for the first and second quarters of 2016 (or through the six-months ended 6/30/2016).

b) Third Quarter of 2016:

The dividend declared regarding AGNCP for the third quarter of 2016 was $0.50 per share. As such, this was an unchanged dividend when compared to the prior quarter. There were still 6.9 million outstanding shares of AGNCP as of 9/28/2016 (ex-dividend date). When calculated, I am projecting AGNC had dividend distributions to AGNCP shareholders of ($3.5) million for the third quarter of 2016.

The dividend declared regarding AGNCB for the third quarter of 2016 was $0.484375 per depository share. As such, this was an unchanged dividend when compared to the prior quarter as well. There were still 7.0 million outstanding shares of AGNCB as of 9/28/2016 (ex-dividend date). When calculated, I am projecting AGNC had dividend distributions to AGNCB shareholders of ($3.4) million for the third quarter of 2016.

Therefore, I am projecting AGNC had dividend distributions to AGNCP and AGNCB shareholders of ($6.8) million (rounded) for the third quarter of 2016. When combined, I am projecting AGNC had dividend distributions to preferred shareholders of ($20.5) million for the nine months ended 9/30/2016.

After combining the common and preferred stock dividend distributions for the first, second, and third quarters of 2016, I am projecting AGNC's total "distributions to stockholders from estimated REIT taxable income/undistributed taxable income ("UTI")" and decrease in net common equity from stockholder transactions was ($604) million for the nine months ended 9/30/2016 (see red reference "C" in Table 2 above).

D) Capital Share Transactions:

- Decrease in Net Common Equity From Capital Share Transactions Estimate of ($116) Million; Range ($266) - ($66) Million

- Confidence Within Range = Moderate to High

- See Red Reference "D" in Table 2 Above Next to the September 30, 2016, Column

As stated earlier, I am making the assumption no additional shares of common stock were issued under AGNC's ATM offering, dividend reinvestment, or direct stock purchase programs during the third quarter of 2016. Also, since there were no additional common or preferred stock equity offerings during the third quarter of 2016, the following figures should have no activity: 1) issuance of common stock; 2) issuance of preferred stock; and 3) preferred stock $25,000 per share liquidation preference. Since AGNC officially internalized the company's management structure through its acquisition of ACMM (discussed earlier), management may be partially compensated through the issuance of common stock subject to certain vesting options. As such, AGNC may have some minor amount of equity issuance through the following accounts: 1) issuance of restricted stock; and/or 2) issuance of common stock under stock-based compensation program. However, due to the immaterial impact such restricted stock and/or stock-based compensation would represent, I have projected no amount within these two accounts during the third quarter of 2016. Any actual amount of restricted stock and/or stock-based compensation during the third quarter of 2016 (through the issuance of new shares) would only have a fractional per share impact to AGNC's BV as of 9/30/2016.

Regarding AGNC's "repurchases of common stock" figure, as stated earlier I am making the assumption management did not purchase any outstanding shares of common stock under the company's stock repurchase program during the third quarter of 2016. As stated earlier, I believe management used a notable amount of available cash ($562 million) to purchase ACMM from ACAS. In addition, AGNC traded at a smaller discount to CURRENT BV throughout most of the third quarter of 2016 when compared to recent quarters. Therefore, I am projecting AGNC had a decrease in "net common equity from capital share transactions" of ($116) million for the nine months ended 9/30/2016 (see red reference "D" in Table 2 above).

Brief Discussion of MTGE's Projected BV as of 9/30/2016:

When compared to AGNC, I am projecting MTGE had a fairly similar BV per share fluctuation (percentage wise) for the third quarter of 2016. Each company's agency MBS and derivatives portfolios as of 6/30/2016 had several differences which were discussed in my three-part AGNC income statement projection article (see links near the top). However, when combined, these differences should partially "offset" each other.

MTGE also had a sizable non-agency MBS portfolio as of 6/30/2016 when compared to AGNC (proportionately speaking). MTGE's and AGNC's non-agency MBS portfolio comprised 36% and less of 1% of each company's entire MBS portfolio, respectively. MTGE had a total non-agency MBS portfolio of $1.25 billion as of 3/31/2016. This balance increased to $1.26 billion as of 6/30/2016. When compared to MTGE's agency MBS portfolio of $3.46 billion, management decreased the proportional share of the company's non-agency MBS portfolio by (2%) during the second quarter of 2016. This decrease was mainly due to the fair market value ("FMV") fluctuations experienced within these investment securities during the quarter.

Due to the flat to slight depreciation in real estate prices, the continued relatively minor net change in mortgage delinquencies and foreclosures, and the minor narrowing of spreads/decrease in longer-term yields within most segments of the debt market (which typically impact valuations), I believe most non-agency MBS either equaled or slightly underperformed most fixed-rate agency MBS coupons during the third quarter of 2016.

However, one facet of MTGE's results that continues to be a disappointment is the company's acquired mortgage servicer, Residential Credit Solutions ("RCS"). RCS generated a net servicing loss of ($5.8) million during the second quarter of 2016. This was the eleventh consecutive quarterly loss for this mortgage servicing rights ("MSR") company. Since acquiring RCS, MTGE has reported a cumulative net servicing loss of ($50.8) million. When calculated, MTGE's MSR has accounted for a cumulative net decrease in BV of approximately ($1.78) per share since its acquisition (based on the weighted average outstanding shares of common stock for the second quarter of 2016). Management has acknowledged RCS has performed materially below expectations. In fact, due to this continued underperformance, MTGE recently sold a majority of RCS's assets and operations to Ditech Financial, LLC (Ditech). This included the transition of most of RCS's employees and subservicing agreements. Simply put, it would appear MTGE was never fully comfortable branching out into this specialized business/sector. In addition, the assumed synergies from acquiring RCS never fully materialized. Since I was skeptical when MTGE first announced the company's MSR acquisition, I like the recent strategy management executed in regards to the sale.

If a particular company/sector is challenging, I believe it is better to "cut one's losses" and focus management's attention back to MTGE's core strengths or other areas where personnel can excel. MTGE has projected minor net servicing losses over the third and fourth quarters of 2016 as activities related to this MSR "wind down." I am more "upbeat" in regards to MTGE's new venture into healthcare real estate investment trust ("REIT") investments. I am in favor of this new venture notably more so than MTGE's MSR operations.

When taking all quarterly activities into consideration (including additional data not discussed within this specific article), I am projecting MTGE will report the following BV per common share as of 9/30/2016:

MTGE's Projected BV as of 9/30/2016 = $20.10 Per Common Share (Range $19.65 - $20.55 Per Common Share)

Brief Discussion of NLY's Projected BV as of 9/30/2016:

When compared to AGNC, I am projecting NLY had a lower BV per share increase (percentage wise) for the third quarter of 2016. As was highlighted in my three-part AGNC income statement projection article (see links near the top of this article), I discussed certain subtle differences in each company's agency MBS portfolio.

Furthermore, each company had a different strategy regarding derivative instruments going into the third quarter of 2016. AGNC and NLY had a material difference in each company's hedging coverage ratio as of 6/30/2016. AGNC had a hedging coverage ratio of 79% whereas NLY only had a hedging coverage ratio of 46%. As such, NLY was more vulnerable if mortgage interest rates/U.S. Treasury yields modestly - materially increased during the third quarter of 2016. While this specific scenario did not occur, most derivative instruments, (especially across the short-end and intermediate part of the yield curve) experienced valuation gains during the third quarter of 2016. As such, NLY's lower hedging coverage ratio at the start of the third quarter of 2016, including an interest rate payer swaps portfolio that had a longer weighted average tenor/maturity, was a disadvantage for the company regarding a lower total net valuation gain within its derivatives portfolio (proportionately speaking). Partially offsetting this factor was NLY had a minor net (short) position in Eurodollar future contracts which slightly outperformed interest rate payer swaps during the third quarter of 2016. However, to put things in better perspective, NLY's ratio of interest rate payer swaps to net (short) Eurodollar future contracts was approximately 4.2:1 as of 6/30/2016.

When taking all quarterly activities into consideration (including additional data not discussed within this specific article; for instance the recent HTS acquisition), I am projecting NLY will report the following BV per common share as of 9/30/2016:

NLY's Projected BV as of 9/30/2016 = $11.90 Per Common Share (Range $11.50 - $12.30 Per Common Share)

Conclusions Drawn:

To sum up all the information discussed above, I am projecting AGNC will report the following BV per common share as of 9/30/2016:

AGNC's Projected BV as of 9/30/2016 = $23.00 Per Common Share (Range $22.50 - $23.50 Per Common Share)

This projection is a $0.78 per common share increase from AGNC's BV as of 6/30/2016. This increase can be attributed to two factors. The first factor is in relation to the activity within AGNC's consolidated statement of comprehensive income. I am projecting AGNC reports net income of $489 million for the third quarter of 2016 while reporting an OCL of ($37) million. When both figures are combined, I am projecting AGNC reports comprehensive income of $452 million for the third quarter of 2016.

The second factor is in relation to the activity within AGNC's equity section of the balance sheet. AGNC had paid for/accrued dividend distributions totaling ($0.56) per common share during the third quarter of 2016. In addition, AGNC had paid for/accrued dividend distributions in regards to holders of the company's outstanding shares of preferred stock.

When combined, these two factors account for a projected quarterly BV increase of $0.78 per common share. When calculated, I am projecting AGNC's BV per common share had an increase of 3.51% during the third quarter of 2016. I am also projecting AGNC generated an "economic return" (dividends paid/accrued for and net change in BV) of 6.03% for the third quarter of 2016.

I believe AGNC's results will be encouraging for most readers who anticipated an "average" quarter. Contrary to the general trend witnessed over the prior several quarters, there was a more positive relationship between MBS prices and derivative instrument valuations during the third quarter of 2016 ("option adjusted spreads"; OAS). As such, I believe most mREIT peers will report an increase in quarterly BV. This should be seen as a recent positive catalyst/trend regarding mREIT book values and valuations.

I believe four key factors to analyze within the fixed-rate agency mREIT sector this quarter are the following: 1) each company's proportion of 15-year MBS holdings versus 30-year MBS holdings; 2) each company's hedging coverage ratio; 3) each company's proportion of long-term derivative instruments versus short-term derivative instruments; and 4) each company's proportion of specified pools (for instance HARP and LLB securities). Dependent upon these factors, I believe results will vary across the fixed-rate agency mREIT sector for the third quarter of 2016.

I believe AGNC will outperform a few fixed-rate agency mREIT peers in regards to BV fluctuations for the third quarter of 2016, while underperforming a few others. This is mainly due to AGNC's higher hedging coverage ratio and the composition of the company's MBS portfolio heading into the third quarter of 2016. I believe NLY will underperform most fixed-rate agency mREIT peers regarding quarterly BV fluctuations while ARR will outperform most mREIT sector peers.

Looking ahead to the third quarter of 2016, mortgage interest rates/U.S. Treasury yields have modestly net increased (through 10/19/2016) when compared to what occurred during the third quarter of 2016. The fixed-pay rate on interest rate swaps, U.S. Treasury yields and the forward LIBOR curve have had minor - modest cumulative net increases through 10/19/2016 (when compared to 9/30/2016). It should also be noted spread/basis risk has slightly increased through the first three weeks of October when compared to the trends experienced during the third quarter of 2016.

Through a detailed analysis that will be omitted from this particular article, I am projecting AGNC's BV as of 10/19/2016 has fluctuated ($0.20) - $0.10 per common share when compared to the company's BV as of 9/30/2016. This projection excludes the October 2016 monthly dividend of $0.18 per common share (ex-dividend is 10/27/2016).

My BUY, SELL, or HOLD Recommendation:

From the analysis provided above, including additional factors not discussed within this article, I currently rate AGNC as a SELL when I believe the company's stock price is trading at less than a (7.5%) discount to my projected BV as of 9/30/2016, a HOLD when trading at or greater than a (7.5%) but less than a (15.0%) discount to my projected BV as of 9/30/2016, and a BUY when trading at or greater than a (15.0%) discount to my projected BV as of 9/30/2016. These ranges are unchanged when compared to the last time I provided a recommendation on AGNC (PART 3 of my income statement projection article; see link provided at the top).

Therefore, I currently rate AGNC as a BUY since the stock is trading at or greater than a (15.0%) discount to my projected BV as of 9/30/2016 (however, close to my HOLD range). My current price target for AGNC is approximately $21.25 per share. This is currently the price where my recommendation would change to a SELL. This price target is unchanged when compared to the last time I provided a recommendation on AGNC. The current price where my BUY recommendation would change to a HOLD is approximately $19.55 per share. This price is also unchanged when compared to the last time I provided a recommendation on AGNC.

From the analysis provided above, including additional factors not discussed within this article, I currently rate MTGE as a SELL when I believe the company's stock price is trading at less than a (7.5%) discount to my projected BV as of 9/30/2016, a HOLD when trading at or greater than a (7.5%) but less than a (17.5%) discount to my projected BV as of 9/30/2016, and a BUY when trading at or greater than a (17.5%) discount to my projected BV as of 9/30/2016. These ranges are a slight upgrade when compared to my last MTGE recommendation within an article (approximately three months ago; AGNC's prior quarter BV projection article) due to the recent positive catalysts/factors within the mREIT sector as a whole and several specific MTGE characteristics (some factors/catalysts discussed above).

Therefore, I currently rate MTGE as a HOLD since the stock is trading at or greater than a (7.5%) but less than a (17.5%) discount to my projected BV as of 9/30/2016. My current price target for MTGE is approximately $18.60 per share. This is currently the price where my HOLD recommendation would change to a SELL. This price target is a $1.35 per share increase when compared to my last MTGE recommendation within an article. The current price where I would increase my MTGE position is approximately $16.60 per share. This price is also a $1.35 per share increase when compared to the last time I provided a recommendation on MTGE.

From the analysis provided above, including additional factors not discussed within this article, I currently rate NLY as a SELL when I believe the company's stock price is trading at less than a modest (5%) discount to my projected BV as of 9/30/2016, a HOLD when trading at or greater than a (5%) but less than a (15%) discount to my projected BV as of 9/30/2016, and a BUY when trading at or greater than a (15%) discount to my projected BV as of 9/30/2016. These ranges are unchanged when compared to my last NLY article (approximately three weeks ago). When compared to AGNC, NLY's sell range is a slightly less discount to BV due to the fact the company has recently diversified its investment portfolio by allocating more capital into commercial debt/real estate, preferred equity, corporate debt, middle market ("MM") lending, and most recently variable-rate agency MBS through its HTS acquisition. This added diversity should provide an added "buffer" when it comes to interest rate sensitivity.

Therefore, I currently rate NLY as a BUY since the stock is trading at or greater than a (15%) discount to my projected BV as of 9/30/2016 (however, close to my HOLD range). My current price target for NLY is approximately $11.30 per share. This is currently the price where my recommendation would change to a SELL. This price target is unchanged when compared to my last NLY article. The current price where my BUY recommendation would change to a HOLD is approximately $10.15 per share. This price is also unchanged when compared to my last NLY article.

Along with the data presented within this article, these recommendations consider the following mREIT catalysts/factors: 1) projected future MBS price movements; 2) projected future derivative valuations and 3) projected near-term dividend per share rates. This recommendation also considers the higher probability of one Fed Funds Rate increase by the FOMC during late 2016/early 2017 (this is a more "hawkish" view when compared to early summer when no rate hikes were projected by most market participants) due to recent macroeconomic trends/events.

Final Note: Each investor's BUY, SELL, or HOLD decision is based on one's risk tolerance, time horizon, and dividend income goals. My personal recommendation will not fit each reader's current investing strategy. The factual information provided within this article is intended to help assist readers when it comes to investing strategies/decisions.

Within the past 180 days, I have not directly increased or decreased my MTGE position (only through reinvested dividends). On 9/12/2016 and 10/7/2016, I directly increased my position in AGNC at a weighted average purchase price of $18.985 and $18.745 per share, respectively. Each purchase had the same approximate monetary value. On 11/27/2015, I initiated a position in AGNCB. On 12/7/2015, 12/9/2015, 12/14/2015, 1/14/2016, and 1/20/2016 I selectively increased my position in AGNCB. When combined, my AGNCB position has a weighted average purchase price of $23.215 per share. This weighted average per share price excludes all dividends received/reinvested. I currently hold 0.71% of the outstanding shares of AGNCB. Each AGNC/AGNCB trade was disclosed to readers in "real time" (that day) via the StockTalks feature of Seeking Alpha. Through this resource, readers can look up all my prior disclosures (buys/sells) regarding companies I cover here at Seeking Alpha.

Disclosure: I am/we are long AGNC, MTGE.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I currently have no position in ACAS, ARCC, ARR, CYS, NLY, or ORC.