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AGNC Investment Corp. (AGNC)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered a strong turnaround: comprehensive income per share $0.78, GAAP diluted EPS $0.72, tangible book value per share (TBVPS) up 6% to $8.28; economic return was 10.6% driven by tighter mortgage spreads and lower rate volatility .
  • Non-GAAP Primary EPS (net spread & dollar roll income per share) was $0.35, below Wall Street consensus of $0.3865; “Revenue” (S&P Global) materially exceeded consensus ($836.0M vs $468.4M) as market conditions improved; estimates context below (Values retrieved from S&P Global) .
  • Balance sheet grew: investment portfolio reached $90.8B (Agency MBS $76.3B; net TBA $13.8B), liquidity increased to $7.2B, at‑risk leverage held at 7.6x; hedge coverage reduced (68% total; 77% excluding options) to position for anticipated rate cuts .
  • Catalysts: Fed pivot and declining rate vol, constructive demand (money manager inflows and potential bank buying), and ongoing GSE reform discussions; risks include an adverse inflation surprise delaying easing, and refi tech accelerating speeds in down‑rate scenarios .

What Went Well and What Went Wrong

  • What Went Well

    • TBVPS rose 6% QoQ to $8.28 on tighter mortgage spreads; economic return of 10.6% combined dividend ($0.36) and $0.47 book value gain .
    • Portfolio expansion and liquidity: investment portfolio grew to $90.8B; unencumbered cash & Agency MBS rose to $7.2B (66% of tangible equity) .
    • Market backdrop improved: “Agency MBS were one of the best performing fixed income asset classes… have now outperformed U.S. Treasuries for five consecutive months” (CEO); CFO noted TBVPS “unchanged to slightly up” for October and highlighted expected tailwind to net spread from easing .

  • What Went Wrong

    • Non‑GAAP earnings pressure: net spread & dollar roll income per share fell to $0.35 (vs $0.38 in Q2), driven by lower swap periodic income (legacy swaps maturing), capital deployment timing, and a lower swap hedge ratio (more unhedged short‑term debt) .
    • Net interest spread compressed to 1.78% (vs 2.01% in Q2; 2.21% in Q3’24) as average total cost of funds rose to 3.17% and swap income declined; implies sensitivity to funding costs until easing progresses .
    • CPR projections increased (life CPR to 8.6% from 7.8%), and prepayment risk could rise with lower long‑term rates and faster refi pull‑through enabled by technology (management added $7B receiver swaptions for down‑rate protection) .

Financial Results

EPS and Income Per Share

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Net income per common share - diluted ($)$0.39 $0.02 $(0.17) $0.72
Comprehensive income per common share - diluted ($)$0.63 $0.12 $(0.13) $0.78
Net spread & dollar roll income per common share - diluted ($)$0.43 $0.44 $0.38 $0.35
Dividends declared per common share ($)$0.36 $0.36 $0.36 $0.36

Revenue and Interest

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Interest income ($USD Millions)$756 $846 $830 $903
Net interest income ($USD Millions)$(64) $159 $162 $148
Other gain (loss), net ($USD Millions)$440 $(81) $(274) $688

Margins and Funding

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Average asset yield (%)4.54% 4.78% 4.89% 4.83%
Average total cost of funds (%)2.52% 2.75% 2.86% 3.17%
Average net interest spread (%)2.21% 2.12% 2.01% 1.78%

Q3 2025 vs Wall Street Consensus (S&P Global)

MetricQ3 2025 ActualQ3 2025 Consensus
Primary EPS ($)$0.35 $0.3865*
Revenue ($USD Millions)$836.0*$468.4*
Target Price ($)$10.16*$10.16*

Values retrieved from S&P Global.*

Segment/Portfolio Composition

MetricQ1 2025Q2 2025Q3 2025
Total investment portfolio ($B)$78.9 $82.3 $90.8
Agency MBS ($B)$70.5 $73.3 $76.3
Net TBA ($B, fair value)$7.47 $8.26 $13.84
CRT + Non‑Agency ($B)$0.9 $0.7 $0.7
30‑yr fixed‑rate share (% of portfolio)96% 96% 95%
Weighted average coupon (fixed‑rate + TBA)5.03% 5.13% 5.14%

Key KPIs

KPIQ3 2024Q1 2025Q2 2025Q3 2025
Tangible BVPS ($)$8.82 $8.25 $7.81 $8.28
Economic return (% unannualized)9.3% 2.4% (1.0)% 10.6%
Unencumbered cash + Agency MBS ($B)—$6.0 $6.4 $7.2
At‑risk leverage (end, x)7.2x 7.5x 7.6x 7.6x
Hedge coverage (% total funding liabilities)—91% 89% 68% (77% ex‑options)
Actual CPR (period avg, %)7.3% 7.0% 8.7% 8.3%
Projected CPR (life at period end, %)13.2% 8.3% 7.8% 8.6%
Weighted avg repo rate (as of period end, %)5.23% 4.47% 4.49% 4.38%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Monthly common dividend ($/share)Ongoing$0.12/month (Q3 declared) $0.12 declared for Nov 2025 Maintained
Hedge coverage (% of funding liabilities)Q2 → Q389% (total) 68% (total); 77% ex‑options Lowered (positioning for easing)
At‑risk leverage (x)Q2 → Q37.6x 7.6x Maintained
Liquidity ($B)Q2 → Q3$6.4B $7.2B Raised
Net TBA balance ($B, FV)Q2 → Q3$8.26B $13.84B Raised
Preferred issuanceQ3 2025—$345M Series H (8.75% per 8‑K; CEO cited 8.5% on call) Raised preferred capital

Management did not issue formal numeric guidance; CFO expects “moderate tailwind” to net spread & dollar roll income from lower funding costs, full capital deployment, and a greater share of swap‑based hedges .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Monetary policy & tariffs/macroQ1 cautioned on potential policy actions; Q2 cited April tariff shock widening MBS spreads and higher vol Fed pivot to easing; tax bill passage and positive tariff developments reduced vol; constructive MBS backdrop Improving
Demand for Agency MBSQ1/Q2 noted potential bank participation post reforms Money manager inflows ~$180B in Q3; pace on track for ~$450B for year; bank demand likely improves post Basel endgame Rising
GSE reformElevated focus on stability in Q2 Treasury leading careful roundtables; principles include stability and tighter spreads; potentially stronger market structure Constructive
VolatilityQ2 vol spiked after April tariffs Volatility “declined sharply”; outlook benign if tariff clarity continues Down
Hedging & hedge ratioQ1 91% total; Q2 89% Total coverage 68% (77% ex‑options); added $7B receiver swaptions for down‑rate protection Lower coverage to benefit from easing
Prepayment/refi techLimited prior commentaryFaster refi pull‑through with brief rate dips; tech and lowering refi incentive thresholds could raise speeds; asset selection and options used to mitigate Increasing risk awareness

Management Commentary

  • CEO: “Agency mortgage-backed securities were one of the best performing fixed income asset classes… and have now outperformed U.S. Treasuries for five consecutive months… In this beneficial investment environment, AGNC generated a very strong economic return on tangible common equity of 10.6%” .
  • CFO: “AGNC’s net spread and dollar roll income per common share was $0.35… we concluded the quarter with… 7.6x leverage and… $7.2 billion of unencumbered cash and Agency MBS” .
  • CFO (forward look): “Lower funding costs from the September rate cut and widely anticipated future rate cuts… and a shift… toward… swap based hedges… will collectively provide a moderate tailwind to net spread and dollar roll income” .
  • CEO on policy: Administration’s focus on narrowing mortgage spreads and balanced supply/demand underpin a favorable backdrop; Treasury leadership on GSE reform emphasizes stability .

Q&A Highlights

  • Dividend sustainability and ROE: Current coupon expected ROE 16–18% aligns with ~17% breakeven, supporting dividend sustainability; $0.35 non‑GAAP EPS likely near trough with reasons to improve (swap roll‑offs, hedge mix, easing) .
  • Hedge ratio strategy: 77% swap/treasury hedge ratio leaves 23% short‑term debt to benefit from rate cuts; quantified ~$0.05 per share tailwind over 6 months if short rates term to neutral (~3.25%) .
  • Demand outlook: Bond fund inflows robust; bank demand likely rises post reforms; constructive for lower/middle coupons .
  • Volatility trajectory: With easing and potential tariff clarity, rate vol likely benign; spreads could break the lower end of their 4‑year range .
  • Prepay risk management: More down‑rate protection via receiver swaptions and rotation into specified pools with favorable prepayment characteristics; focus on production coupons (4.5–5.5%) .

Estimates Context

  • Q3 2025 Primary EPS missed: $0.35 actual vs $0.3865 consensus (≈ $0.04 shortfall), reflecting lower swap periodic income, capital timing, and reduced hedge ratio; management expects improvement as easing progresses (Values retrieved from S&P Global*).
  • Q3 2025 Revenue beat: $836.0M actual vs $468.4M consensus; note filings report interest income of $903M for Q3 (different reporting basis vs S&P “Revenue”) (Values retrieved from S&P Global*).
  • Target price consensus mean: $10.16*; no consensus recommendation text available (Values retrieved from S&P Global*).

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • TBVPS momentum and strong economic return confirm sensitivity to tighter spreads; continuation of spread tightening and benign vol are positive near‑term drivers .
  • Non‑GAAP EPS appears near trough; easing cycle and hedge mix (more swaps) should lift net spread & dollar roll income; positioning with 23% short‑term debt enhances upside to cuts .
  • Demand tailwinds (money managers, potential bank rotation post Basel endgame) plus Treasury’s reform approach support MBS spread compression; focus on production coupons and specified pools mitigates prepay risk .
  • Watch CPR trends and tech‑enabled refi pull‑through in rate dips; added receiver swaptions provide down‑rate protection but hedge ratio reduction increases funding cost sensitivity until rates fall .
  • Funding cost dynamics are key: average total cost of funds rose to 3.17%; progression of Fed easing and/or terming out short‑term repo via swaps to neutral rates should widen net interest spread over coming quarters .
  • Capital actions (preferred and ATM equity) expanded investable base; note Series H coupon disclosure discrepancy (8‑K: 8.75% vs call: 8.5%); preferred carry accretive to common if levered ROEs ~16% persist .
  • Trading lens: Near term, continued spread tightening, low vol and easing expectations are supportive; risks include an inflation surprise delaying cuts and faster‑than‑expected CPR due to refi tech. Focus on monthly book value updates, hedge coverage mix, and CPR prints for signals .