AGNC Investment : Q1 2025 Earnings Release (HTML)

Published: 2025-04-21 18:21:57 ET AGNC

April 21, 2025

AGNC Q1 2025 Earnings Release (PDF)

AGNC Q1 2025 Earnings Release Tables

BETHESDA, Md., April 21, 2025 /PRNewswire/ -- AGNC Investment Corp. ("AGNC" or the "Company") (Nasdaq: AGNC) today announced financial results for the quarter ended March 31, 2025.

FIRST QUARTER 2025 FINANCIAL HIGHLIGHTS

OTHER FIRST QUARTER HIGHLIGHTS

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MANAGEMENT REMARKS "In the first quarter, the prospect that potential governmental policy actions could adversely impact economic growth and accelerate inflationary pressures caused investor sentiment to turn decidedly more cautious," said Peter Federico, the Company's President, Chief Executive Officer and Chief Investment Officer. "These concerns, in turn, initially drove a flight to high quality assets - U.S. Treasuries, Agency mortgage-backed securities ('Agency MBS') and cash - from higher risk assets such as equities and corporate debt. Against this backdrop, AGNC generated a favorable economic return of 2.4% in the first quarter. Despite broader equity market declines, AGNC's total stock return with dividends reinvested for the quarter was 7.8%.

"Following the April tariff announcement, financial market volatility increased substantially, and Agency MBS spreads to benchmark rates widened. With our conservative leverage profile and ample liquidity at quarter end, AGNC was well-positioned for this instability. Although the widening of Agency MBS spreads drove a modest decline in our tangible book value, our anticipated portfolio returns have increased commensurately with today's wider spread environment. Moreover, at current valuation levels, we believe Agency MBS offer investors a compelling return opportunity on both a levered and unlevered basis."

"AGNC's 2.4% economic return on tangible common equity in the first quarter was comprised of $0.36 of dividends per common share and a modest $(0.16) decline in tangible net book value per common share resulting from the moderate increase in mortgage spreads to benchmark rates quarter-over-quarter," said Bernice Bell, the Company's Executive Vice President and Chief Financial Officer. "AGNC's $0.44 per common share of net spread and dollar roll income increased from $0.37 per common share in the prior quarter. Finally, AGNC concluded the first quarter with tangible 'at risk' leverage of 7.5x and a substantial liquidity position of $6.0 billion of unencumbered cash and Agency MBS, which constituted 63% of our tangible equity at quarter end."

TANGIBLE NET BOOK VALUE PER COMMON SHARE As of March 31, 2025, the Company's tangible net book value per common share was $8.25 per share, a decrease of -1.9% for the quarter compared to $8.41 per share as of December 31, 2024. The Company's tangible net book value per common share excludes $526 million, or $0.55 and $0.59 per share, of goodwill as of March 31, 2025 and December 31, 2024, respectively.

INVESTMENT PORTFOLIO As of March 31, 2025, the Company's investment portfolio totaled $78.9 billion, comprised of:

As of March 31, 2025, 30-year and 15-year fixed-rate Agency MBS and TBA securities represented 96% and less than 1%, respectively, of the Company's investment portfolio, unchanged from December 31, 2024. As of March 31, 2025, the Company's fixed-rate Agency MBS and TBA securities' weighted average coupon was 5.03%, compared to 5.02% as of December 31, 2024, comprised of the following weighted average coupons:

The Company accounts for TBA securities and other forward settling securities as derivative instruments and recognizes TBA dollar roll income in other gain (loss), net on the Company's financial statements. As of March 31, 2025, such positions had a fair value of $7.5 billion and a GAAP net carrying value of $44 million reported in derivative assets/(liabilities) on the Company's balance sheet, compared to $6.9 billion and $(26) million, respectively, as of December 31, 2024.

CONSTANT PREPAYMENT RATES The Company's weighted average projected CPR for the remaining life of its Agency securities held as of March 31, 2025 increased to 8.3% from 7.7% as of December 31, 2024. The Company's weighted average CPR for the first quarter was 7.0%, compared to 9.6% for the prior quarter.

The weighted average cost basis of the Company's investment portfolio was 101.4% of par value as of March 31, 2025. The Company's investment portfolio generated net premium amortization cost of $(39) million, or $(0.04) per common share, for the first quarter, which includes "catch-up" premium amortization cost of $(2) million, or less than $(0.01) per common share, due to an increase in the Company's CPR projections for certain securities acquired prior to the first quarter. This compares to net a premium amortization benefit for the prior quarter of $11 million, or $0.01 per common share, including a "catch-up" premium amortization benefit of $51 million, or $0.06 per common share.

ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE SPREAD The Company's average asset yield on its investment portfolio, excluding the TBA position, was 4.78% for the first quarter, compared to 5.02% for the prior quarter. Excluding "catch-up" premium amortization, the Company's average asset yield was 4.80% for the first quarter, compared to 4.72% for the prior quarter. Including the TBA position and excluding "catch-up" premium amortization, the Company's average asset yield for the first quarter was 4.87%, compared to 4.80% for the prior quarter.

For the first quarter, the weighted average interest rate on the Company's repurchase agreements was 4.45%, compared to 4.86% for the prior quarter. For the first quarter, the Company's TBA position had an implied financing cost of 4.34%, compared to 4.74% for the prior quarter. Inclusive of interest rate swaps, the Company's combined weighted average cost of funds for the first quarter was 2.75%, compared to 2.89% for the prior quarter.

The Company's annualized net interest spread, including the TBA position and interest rate swaps and excluding "catch-up" premium amortization, for the first quarter was 2.12%, compared to 1.91% for the prior quarter.

NET SPREAD AND DOLLAR ROLL INCOME The Company recognized net spread and dollar roll income (a non-GAAP financial measure) for the first quarter of $0.44 per common share, compared to $0.37 per common share for the prior quarter. Net spread and dollar roll income excludes less than $(0.01) and $0.06 per common share of estimated "catch-up" premium amortization (cost) / benefit for the first quarter and prior quarter, respectively.

The Company's cost of funds, net interest rate spread and net spread and dollar income excludes the impact of the Company's U.S. Treasury hedges and other supplemental interest rate hedges. For additional information regarding the Company's U.S. Treasury hedges, please refer to the schedule of Key Statistics included in this release.

A reconciliation of the Company's total comprehensive income (loss) to net spread and dollar roll income and additional information regarding the Company's use of non-GAAP measures are included later in this release.

LEVERAGE As of March 31, 2025, $63.3 billion of repurchase agreements, $7.4 billion of net TBA dollar roll positions (at cost) and $0.1 billion of other debt were used to fund the Company's investment portfolio. The remainder, or approximately $2.9 billion, of the Company's repurchase agreements was used to fund short-term purchases of U.S. Treasury securities ("U.S. Treasury Repo") and is not included in the Company's leverage measurements. Inclusive of its TBA position and net payable/(receivable) for unsettled investment securities, the Company's tangible net book value "at risk" leverage ratio was 7.5x as of March 31, 2025, compared to 7.2x as of December 31, 2024. The Company's average "at risk" leverage ratio for the first quarter was 7.3x tangible net book value, compared to 7.2x for the prior quarter.

As of March 31, 2025, the Company's repurchase agreements used to fund its investment portfolio ("Investment Securities Repo") had a weighted average interest rate of 4.47%, compared to 4.76% as of December 31, 2024, and a weighted average remaining maturity of 19 days, compared to 11 days as of December 31, 2024. As of March 31, 2025, $32.6 billion, or 52%, of the Company's Investment Securities Repo was funded through the Company's captive broker-dealer subsidiary, Bethesda Securities, LLC.

HEDGING ACTIVITIES As of March 31, 2025, interest rate swaps, U.S. Treasury positions, swaptions and other interest rate hedges equaled 91% of the Company's outstanding balance of Investment Securities Repo, TBA position and other debt, unchanged from December 31, 2024.

As of March 31, 2025, the Company's pay fixed interest rate swap position totaled $47.8 billion in notional amount, had an average fixed pay rate of 1.91%, an average floating receive rate of 4.40% and an average maturity of 5.0 years, compared to $39.6 billion, 1.46%, 4.46% and 4.4 years, respectively, as of December 31, 2024.

As of March 31, 2025, the Company had a net short U.S. Treasury position of $15.7 billion, net payer swaptions totaling $1.9 billion and a two-year swap equivalent long SOFR futures position of $1.2 billion outstanding, compared to $20.0 billion, $1.9 billion and $1.2 billion, respectively, as of December 31, 2024.

OTHER GAIN (LOSS), NET For the first quarter, the Company recorded a net loss of $(81) million in other gain (loss), net, or $(0.09) per common share, compared to a net gain of $39 million, or $0.04 per common share, for the prior quarter. Other gain (loss), net for the first quarter was comprised of:

OTHER COMPREHENSIVE INCOME During the first quarter, the Company recorded other comprehensive income of $93 million, or $0.10 per common share, consisting of net unrealized gains on the Company's Agency securities recognized through OCI, compared to $(179) million, or $(0.20) per common share, of other comprehensive loss for the prior quarter.

COMMON STOCK DIVIDENDS During the first quarter, the Company declared dividends of $0.12 per share to common stockholders of record as of January 31, February 28, and March 31, 2025, totaling $0.36 per share for the quarter. Since its May 2008 initial public offering through the first quarter of 2025, the Company has declared a total of $14.3 billion in common stock dividends, or $49.00 per common share.

FINANCIAL STATEMENTS, OPERATING PERFORMANCE AND PORTFOLIO STATISTICS The following measures of operating performance include net spread and dollar roll income; economic interest income; economic interest expense; and the related per common share measures and financial metrics derived from such information, which are non-GAAP financial measures. Please refer to "Use of Non-GAAP Financial Information" later in this release for further discussion of non-GAAP measures.

*Except as noted below, average numbers for each period are weighted based on days on the Company's books and records. All percentages are annualized, unless otherwise noted. Numbers in financial tables may not total due to rounding.

STOCKHOLDER CALL AGNC invites stockholders, prospective stockholders and analysts to attend the AGNC stockholder call on April 22, 2025 at 8:30 am ET. Interested persons who do not plan on asking a question and have internet access are encouraged to utilize the webcast atwww.AGNC.com . Those who plan on participating in the Q&A or do not have internet available may access the call by dialing (877) 300-5922 (U.S. domestic) or (412) 902-6621 (international). Please advise the operator you are dialing in for the AGNC Investment Corp. stockholder call.

A slide presentation will accompany the call and will be available in the Investors section of the Company's website atwww.AGNC.com . Select the Q1 2025 Stockholder Presentation link to download the presentation in advance of the stockholder call.

An archived audio of the stockholder call combined with the slide presentation will be available on the AGNC website after the call on April 22, 2025. In addition, there will be a phone recording available one hour after the call on April 22, 2025 through April 29, 2025. Those who are interested in hearing the recording of the presentation, can access it by dialing (877) 344-7529 (U.S. domestic) or (412) 317-0088 (international), passcode 8131750.

For further information, please contact Investor Relations at (301) 968-9300 [email protected] .

ABOUT AGNC INVESTMENT CORP. Founded in 2008, AGNC Investment Corp. (Nasdaq: AGNC) is a leading investor in Agency residential mortgage-backed securities (Agency MBS), which benefit from a guarantee against credit losses by Fannie Mae, Freddie Mac, or Ginnie Mae. We invest on a leveraged basis, financing our Agency MBS assets primarily through repurchase agreements, and utilize dynamic risk management strategies intended to protect the value of our portfolio from interest rate and other market risks.

AGNC has a track record of providing favorable long-term returns for our stockholders through substantial monthly dividend income, with over $14 billion of common stock dividends paid since inception. Our business is a significant source of private capital for the U.S. residential housing market, and our team has extensive experience managing mortgage assets across market cycles.

We use our website (www.AGNC.com ) and AGNC's LinkedIn and X accounts to distribute information about the Company. Investors should monitor these channels in addition to our press releases, filings with the U.S. Securities and Exchange Commission ("SEC"), public conference calls and webcasts, as information posted through them may be deemed material. Our website, alerts and social media channels are not incorporated by reference into, and are not a part of, this document or any report filed with the SEC. To learn more aboutThe Premier Agency Residential Mortgage REIT, please visitwww.AGNC.com , follow us onLinkedIn andX, and sign up forInvestor Alerts .

FORWARD LOOKING STATEMENTS This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act. 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 or from our historic performance due to a variety of important factors, including, without limitation, changes in monetary policy and other factors that affect interest rates, MBS spreads to benchmark interest rates, the forward yield curve, or prepayment rates; the availability and terms of financing; changes in the market value of the Company's assets; general economic or geopolitical conditions; liquidity and other conditions in the market for Agency securities and other financial markets; 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 of new information, or otherwise.

USE OF NON-GAAP FINANCIAL INFORMATION In addition to the results presented in accordance with GAAP, the Company's results of operations discussed in this release include certain non-GAAP financial information, including "net spread and dollar roll income"; "economic interest income" and "economic interest expense"; and the related per common share measures and certain financial metrics derived from such non- GAAP information, such as "cost of funds" and "net interest spread."

Net spread and dollar roll income available to common stockholders is measured as comprehensive income (loss) available (attributable) to common stockholders (GAAP measure) adjusted to: (i) exclude gains/losses on investment securities recognized through net income or other comprehensive income and gains/losses on derivative instruments and other securities (GAAP measures), (ii) exclude retrospective "catch-up" adjustments to premium amortization cost due to changes in projected CPR estimates and (iii) include interest rate swap periodic income/ cost, TBA dollar roll income and other miscellaneous interest income/expense. As defined, net spread and dollar roll income available to common stockholders represents net interest income/ expense (GAAP measure) adjusted to exclude retrospective "catch-up" adjustments to premium amortization cost due to changes in projected CPR estimates and to include TBA dollar roll income, interest rate swap periodic income/cost and other miscellaneous interest income/expense, less total operating expense (GAAP measure) and dividends on preferred stock (GAAP measure).

By providing users of the Company's financial information with such measures in addition to the related GAAP measures, the Company believes users have greater transparency into the information used by the Company's management in its financial and operational decision-making. The Company also believes that it is important for users of its financial information to consider information related to the Company's current financial performance without the effects of certain transactions that are not necessarily indicative of its current investment portfolio performance and operations.

Specifically, the Company believes the inclusion of TBA dollar roll income in its non-GAAP measures is meaningful as TBAs are economically equivalent to holding and financing generic Agency MBS using short-term repurchase agreements but are recognized under GAAP in gain/ loss on derivative instruments in the Company's statement of operations. Similarly, the Company believes that the inclusion of periodic interest rate swap settlements in such measures, which are recognized under GAAP in gain/loss on derivative instruments, is meaningful as interest rate swaps are the primary instrument the Company uses to economically hedge against fluctuations in the Company's borrowing costs and inclusion of periodic interest rate swap settlements is more indicative of the Company's total cost of funds than interest expense alone. Finally, the Company believes the exclusion of "catch-up" adjustments to premium amortization cost is meaningful as it excludes the cumulative effect from prior reporting periods due to current changes in future prepayment expectations and, therefore, exclusion of such "catch-up" cost or benefit is more indicative of the current earnings potential of the Company's investment portfolio.

However, because such measures are incomplete measures of the Company's financial performance and involve differences from results computed in accordance with GAAP, they should be considered as supplementary to, and not as a substitute for, results computed in accordance with GAAP. In addition, because not all companies use identical calculations, the Company's presentation of such non-GAAP measures may not be comparable to other similarly- titled measures of other companies.

A reconciliation of GAAP comprehensive income (loss) to non-GAAP "net spread and dollar roll income" is included in this release.

CONTACT:Investors- (301) 968-9300Media- (301) 968-9303

Disclaimer

AGNC Investment Corp. published this content on April 21, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on April 21, 2025 at 22:19 UTC.