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AGNC Investment Corp. (AGNC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 economic return on tangible common equity was -1.0%, driven by a $(0.44) decline in tangible book value per share to $7.81 and $0.36 in dividends; net spread and dollar roll income was $0.38 per share versus consensus ~$0.41 (miss) while GAAP EPS was $(0.17) per share .
  • Mortgage spreads widened moderately; management attributed underperformance of Agency MBS relative to benchmarks to tariff-related policy risk and elevated rate volatility, while reiterating a favorable outlook as spreads remain wide and stable and regulatory changes may boost bank demand .
  • Liquidity remained strong ($6.4B unencumbered cash and Agency MBS, 65% of tangible equity) and leverage was stable (7.6x “at risk” at quarter-end); AGNC issued 92.6M shares via ATM for $799M and has been deploying capital into higher-coupon specified pools .
  • Key surprise/miss: Primary EPS (net spread & dollar roll) of $0.38 was below Street; revenue (SPGI definition) was negative given fair-value marks (actual -$112M vs estimate ~$462M), reflecting outsized derivative and U.S. Treasury hedging losses despite periodic swap income . Values retrieved from S&P Global.*

What Went Well and What Went Wrong

  • What Went Well

    • Accretive capital raise and disciplined deployment: $799M raised at a premium; roughly half deployed by quarter-end and further ~$1B purchased post-quarter into higher coupon specified pools .
    • Strong liquidity and risk positioning: $6.4B unencumbered cash/Agency MBS (65% of tangible equity); leverage held at 7.6x; hedge coverage ~89% of funding liabilities .
    • Management constructive outlook: “Mortgage spreads to benchmark rates remain elevated by historical standards and range-bound, an extremely favorable return environment.” . “Collectively, we believe these dynamics provide a very positive backdrop for AGNC's investment activities.” .

  • What Went Wrong

    • TBV decline and economic loss: Tangible book value per share fell $(0.44) (-5.3% QoQ) to $7.81; economic return was -1.0%, driven by wider mortgage spreads .
    • Net spread & dollar roll income down: Fell to $0.38 per share (from $0.44 in Q1) primarily due to timing of capital deployment and higher swap costs; Street miss vs ~$0.41 . Values retrieved from S&P Global.*
    • Market headwinds: “Liberation Day” tariff shock increased policy risk and rate volatility; Agency MBS underperformed as spreads widened 7–14 bps vs Treasury/swap benchmarks .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Interest Income ($USD Millions)$856 $846 $830
Interest Expense ($USD Millions)$741 $687 $668
Net Interest Income ($USD Millions)$115 $159 $162
Total Other Gain (Loss), Net ($USD Millions)$39 $(81) $(274)
Net Income (Loss) ($USD Millions)$122 $50 $(140)
GAAP Net Income per Common Share (Basic, $)$0.10 $0.02 $(0.17)
Comprehensive Income (Loss) per Common Share (Basic, $)$(0.11) $0.12 $(0.13)
Net Spread & Dollar Roll Income per Common Share (Basic, $)$0.37 $0.44 $0.38
Tangible Book Value per Share ($)$8.41 $8.25 $7.81
Economic Return (Loss) on Tangible Common Equity (Unannualized, %)(0.6%) 2.4% (1.0%)

Margins and Funding

MetricQ4 2024Q1 2025Q2 2025
Avg Asset Yield, excl “catch-up” (%)4.72% 4.80% 4.83%
Avg Total Cost of Funds (%)2.89% 2.75% 2.86%
Avg Net Interest Spread (%)1.91% 2.12% 2.01%

Portfolio and Risk KPIs

MetricQ4 2024Q1 2025Q2 2025
Investment Portfolio Fair Value ($B)$66.3 $71.3 $73.98
Net TBA Portfolio, Fair Value ($B)$6.86 $7.47 $8.26
Weighted Avg Coupon (Investment Securities, %)5.03% 5.08% 5.14%
Actual Portfolio CPR (%)9.6% 7.0% 8.7%
Projected Life CPR (Period-End, %)7.7% 8.3% 7.8%
Repo Avg Funding Cost (%)4.86% 4.45% 4.44%
Hedge Coverage (% of funding liabilities)91% 91% 89%
“At Risk” Leverage (Period-End, x)7.2x 7.5x 7.6x
Unencumbered Cash & Agency MBS ($B, % of Tangible Equity)$6.1, 66% $6.0, 63% $6.4, 65%

Segment Breakdown

  • Not applicable; AGNC invests primarily in Agency MBS and related TBA positions .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Common Dividend ($/mo)Ongoing$0.12 monthly (maintained in Q1) $0.12 monthly (April–June declared; July/Aug separately reaffirmed) Maintained
Net Spread & Dollar Roll Income per Share (Outlook)Near termn/a“Mid to high $0.30s to low to mid $0.40s” run-rate commentary (not formal guidance) Qualitative outlook
Leverage (“at risk”)Ongoing~7.2–7.5x (Q4–Q1 actuals) 7.6x at Q2-end; comfortable with slightly higher if spreads stable Maintained to slightly higher
Hedge Mix2025Treasury hedges high (Q4), potential rotation to more swaps Hedge coverage 89%; biased to swaps at margin as spreads stabilize Mix evolving
CPR OutlookNear term8.3% projected at Q1-end 7.8% projected at Q2-end; actual CPR 8.7% in Q2 Lower projected CPR

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Tariffs/macro policy riskElevated uncertainty around fiscal/monetary policy; spreads in stable range April tariff shock widened MBS spreads; volatility spiked; underperformance vs benchmarks Policy risk spiked in Q2, easing into Q3
GSE reform/implicit guaranteeCareful, do-no-harm approach preferred Administration statements affirm implicit guarantees; aim to avoid wider mortgage spreads Constructive clarity; supportive for spreads
Bank demand/regulationPotentially less onerous regulation to support demand Anticipated regulatory changes may increase bank participation Potential tailwind building
Hedging strategy (Treasury vs swaps)Treasury hedges ~53% duration dollars; plan to rotate to swaps as spreads stabilize Hedge coverage 89%; overweight swaps at margin expected; swap spreads dynamics monitored Gradual shift back to swaps
Liquidity/funding/repo marketStrong liquidity; Fed repo facility enhancements; QT likely to end; capacity ample Liquidity robust ($6.4B); leverage stable; no expected repo capacity constraints Stable/improving backdrop
Prepayment/CPR dynamicsSteep prepayment response in brief rate dips; manage via asset selection Projected CPR down to 7.8%; actual CPR 8.7%; continued focus on specified pools Manageable; selection-oriented
Capital issuance/deployment~$511M ATM in Q4; opportunistic timing $799M ATM in Q2; ~50% deployed by quarter-end; additional ~$1B post-quarter Continued accretive issuance when attractive

Management Commentary

  • Peter Federico (CEO/CIO): “Although most asset class valuations retraced the April losses… Agency MBS were an exception, as spreads to benchmark rates widened moderately during the second quarter. As a result of this underperformance, AGNC's economic return for the second quarter was -1.0%.” .
  • Federico on outlook: “Mortgage spreads to benchmark rates remain elevated by historical standards and range-bound, an extremely favorable return environment… bank participation… appears poised to increase… the administration has reiterated its intent to preserve Agency MBS' pristine credit profile.” .
  • Bernice Bell (CFO): “AGNC's net spread and dollar roll income was $0.38 per common share… we opportunistically added assets at attractive levels using accretive capital raised through our At-the-Market program… tangible 'at risk' leverage of 7.6x and… $6.4 billion of unencumbered cash and Agency MBS, 65% of our tangible equity.” .
  • CFO on drivers: “Net spread and dollar roll income declined $0.06… primarily due to the timing of deployment of the new capital… with moderately higher swap costs also contributing.” .

Q&A Highlights

  • Capital raise and leverage: Management remains opportunistic on further ATM issuance and comfortable operating with slightly higher leverage given stronger outlook; unencumbered liquidity improved to 65% despite volatility .
  • Core earnings/dividend trajectory: Run-rate returns in high-teens ROE; net spread & dollar roll income expected in mid-high $0.30s to low-mid $0.40s near term; dividend policy anchored to economics vs current-period accounting .
  • Hedging mix: Preference to gradually increase swap-based hedges as spreads stabilize; long-term mix ~50/50 Treasuries/swaps, currently somewhat overweight swaps due to expected swap spread widening with regulatory reform .
  • Prepayment risk: Acknowledge steeper S-curve response in brief rate dips; mitigate via specified pool selection and avoiding fastest collateral; projected CPR down with higher mortgage rates .
  • Repo market/funding: Fed operational changes and ample money market liquidity support stable funding; QT likely ends relatively soon; no capacity constraints anticipated .

Estimates Context

MetricQ4 2024 EstimateQ4 2024 ActualQ1 2025 EstimateQ1 2025 ActualQ2 2025 EstimateQ2 2025 Actual
Primary EPS Consensus Mean ($)0.424*0.37*0.405*0.44*0.411*0.38*
Revenue Consensus Mean ($USD)248.0M*154.0M*443.1M*78.0M*461.8M*(112.0M)*

Notes:

  • For AGNC, “Primary EPS” tracked by consensus aligns with reported non-GAAP net spread & dollar roll income per share (actuals: $0.37 Q4, $0.44 Q1, $0.38 Q2) . GAAP EPS in Q2 was $(0.17) .
  • Q2 was a miss on Primary EPS ($0.38 actual vs ~$0.41 est) and a large miss on revenue (actual negative on fair-value marks vs positive consensus). Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Wider mortgage spreads pressured tangible book value (down 5.3% QoQ to $7.81) and drove a modest economic loss; however, spreads remain at historically attractive levels and management expects stabilization to support mid-to-high $0.30s net spread & dollar roll per share near term .
  • Liquidity and risk management are strong: $6.4B unencumbered assets (65% of equity) and hedge coverage at 89% provide capacity to withstand volatility and deploy into attractive higher-coupon specified pools .
  • Near-term catalysts: clarity on GSE reform (affirmation of implicit guarantees), potential regulatory changes increasing bank MBS demand, and QT tapering—all supportive for spread tightening and ROE durability .
  • Earnings optics: GAAP results are volatile given hedging marks; focus on net spread & dollar roll income and net interest spread (2.01% in Q2) for dividend sustainability; Treasury hedge carry adds incremental income not included in reported net spread .
  • Capital allocation: Accretive ATM issuance and measured deployment can enhance book value and earnings power; expect continued bias to higher-coupon specified pools with favorable prepayment attributes .
  • Risk watchpoints: Policy shocks (tariffs), rate curve steepening, and prepayment spikes during brief rate dips; mitigate via hedge mix and asset selection .
  • Tactical trading: Miss vs Street on “Primary EPS” and TBV decline are near-term stock sentiment headwinds; improving July TBV (+~1% post dividend accrual) and supportive macro/regulatory narrative may act as subsequent positive catalysts as spreads stabilize .