AGNC(AGNC) - 2025 Q2 - Quarterly Results

AGNC Investment Corp. Q2 2025 Financial Results Financial & Operational Highlights AGNC reported a comprehensive loss of $(0.13) per common share and a -1.0% economic return on tangible common equity, with tangible net book value declining 5.3%, while maintaining a substantial $82.3 billion investment portfolio and $6.4 billion in liquidity Q2 2025 Key Financial Metrics | Metric | Value | Change from Q1 2025 | | :--- | :--- | :--- | | Comprehensive Loss per Common Share | $(0.13) | N/A | | Net Loss per Common Share | $(0.17) | N/A | | Net Spread and Dollar Roll Income per Share (Non-GAAP) | $0.38 | Down from $0.44 | | Tangible Net Book Value per Common Share | $7.81 | $(0.44) or -5.3% | | Dividends Declared per Common Share | $0.36 | Unchanged | | Economic Return on Tangible Common Equity | -1.0% | Down from 2.4% | | Investment Portfolio | $82.3 billion | Up from $78.8B (derived) | | Tangible Net Book Value 'at risk' Leverage | 7.6x | Up from 7.5x | * The company maintained a strong liquidity position with $6.4 billion in unencumbered cash and Agency MBS, which represents 65% of its tangible equity[8] * During the quarter, AGNC issued 92.6 million shares of common equity through its At-the-Market (ATM) program, raising net proceeds of $799 million[8] Management Remarks Management attributed the -1.0% economic return to wider Agency MBS spreads and increased interest rate volatility, yet expressed a favorable long-term outlook for Agency MBS investments due to historically wide spreads and balanced market dynamics * CEO Peter Federico noted that financial markets repriced significantly in April due to greater governmental policy risk, causing interest rate volatility to increase and Agency MBS spreads to widen, resulting in a -1.0% economic return for AGNC[6] * The company maintains a favorable outlook for levered and hedged Agency MBS, citing elevated spreads, balanced supply/demand, potential for increased bank participation, and the administration's intent to preserve the credit profile of Agency MBS[7] * CFO Bernice Bell stated that the company navigated April's volatility well, used its ATM program to raise accretive capital, and ended the quarter with 7.6x 'at risk' leverage and a substantial liquidity position of $6.4 billion (65% of tangible equity)[7] Portfolio and Risk Management AGNC's $82.3 billion investment portfolio primarily comprised 30-year fixed-rate Agency MBS, with leverage at 7.6x supported by a robust hedging program covering 89% of financing liabilities through interest rate swaps and U.S. Treasury positions Investment Portfolio The $82.3 billion investment portfolio was heavily concentrated in Agency MBS and TBA securities, with 96% in 30-year fixed-rate securities, and a projected constant prepayment rate (CPR) of 7.8% Investment Portfolio Composition as of June 30, 2025 | Security Type | Value (in billions) | | :--- | :--- | | Agency MBS and TBA Securities | $81.6 | | - 30-year fixed-rate MBS & TBA | $78.6 | | - 15 & 20-year MBS & TBA | $0.8 | | - CMOs, adjustable-rate, etc. | $2.2 | | CRT, non-Agency, and other | $0.7 | | Total Investment Portfolio | $82.3 | * The weighted average projected CPR for the life of Agency securities decreased to 7.8% as of June 30, 2025, from 8.3% at the end of Q1, while the actual portfolio CPR for Q2 was 8.7%, up from 7.0% in the prior quarter[11] Leverage and Liquidity The company's tangible net book value 'at risk' leverage ratio increased slightly to 7.6x, with the portfolio primarily funded by $66.0 billion in repurchase agreements, 53% of which was through its captive broker-dealer subsidiary * The tangible net book value 'at risk' leverage ratio was 7.6x as of June 30, 2025, compared to 7.5x as of March 31, 2025, with the average leverage for the quarter at 7.5x[21] * As of quarter-end, $34.7 billion, or 53%, of the Company's Investment Securities Repo was funded through its captive broker-dealer subsidiary, Bethesda Securities, LLC[22] Hedging Activities The company's hedging portfolio covered 89% of its financing liabilities, primarily through $45.1 billion in interest rate swaps and a net short U.S. Treasury position that increased to $20.0 billion * As of June 30, 2025, various interest rate hedges equaled 89% of the Company's outstanding balance of Investment Securities Repo, TBA position and other debt, down from 91% as of March 31, 2025[23] Key Hedging Positions as of June 30, 2025 | Hedge Instrument | Position (billions) | Change from Q1 2025 (billions) | | :--- | :--- | :--- | | Pay-Fixed Interest Rate Swaps | $45.1 notional | Decreased from $47.8 | | Net Short U.S. Treasury Position | $20.0 | Increased from $15.7 | | Net Payer Swaptions | $1.9 notional | Unchanged | Financial Performance Analysis The company's Q2 financial performance saw a 5.3% decline in tangible net book value and a decrease in non-GAAP net spread and dollar roll income to $0.38 per share, with the annualized net interest spread compressing to 2.01% Tangible Net Book Value (TNBV) Tangible net book value per common share declined 5.3% to $7.81 as of June 30, 2025, from $8.25 in the prior quarter, excluding goodwill of $0.50 per share * As of June 30, 2025, tangible net book value per common share was $7.81, a decrease of $(0.44) or -5.3% for the quarter from $8.25 as of March 31, 2025[4][9] Net Spread and Dollar Roll Income The company's non-GAAP net spread and dollar roll income for Q2 2025 was $0.38 per common share, a decrease from $0.44 per common share in the prior quarter * Net spread and dollar roll income (a non-GAAP measure) was $0.38 per common share for Q2 2025, compared to $0.44 per common share for Q1 2025[18] Asset Yields, Cost of Funds, and Net Interest Spread The annualized net interest spread compressed to 2.01% in Q2 2025 from 2.12% in Q1, driven by an increased cost of funds to 2.86% while average asset yield remained stable at 4.87% Net Interest Spread Components (Q2 2025 vs Q1 2025) | Metric | Q2 2025 (%) | Q1 2025 (%) | | :--- | :--- | :--- | | Average Asset Yield (incl. TBA, excl. catch-up) | 4.87 | 4.87 | | Combined Weighted Average Cost of Funds | 2.86 | 2.75 | | Annualized Net Interest Spread | 2.01 | 2.12 | Other Gain (Loss), Net & OCI AGNC recorded a net loss of $(274) million in 'other gain (loss), net,' primarily from losses on interest rate swaps and U.S. Treasury positions, partially offset by $48 million in Other Comprehensive Income (OCI) from unrealized gains on Agency securities * The company recorded a net loss of $(274) million in other gain (loss), net, which included $(518) million of net losses on interest rate swaps and $(135) million of net losses on U.S. Treasury positions[26] * The company recorded other comprehensive income (OCI) of $48 million, or $0.05 per common share, from net unrealized gains on Agency securities recognized through OCI[27] Common Stock Dividends AGNC declared total dividends of $0.36 per common share for Q2, maintaining its monthly rate, bringing the cumulative common stock dividends since IPO to $14.7 billion * The company declared dividends of $0.12 per share for April, May, and June, totaling $0.36 per share for the second quarter[28] * From its May 2008 IPO through Q2 2025, AGNC has declared a total of $14.7 billion in common stock dividends, or $49.36 per common share[28] Financial Statements and Key Statistics This section presents detailed financial statements and key statistics for Q2 2025, including a Consolidated Balance Sheet showing $102.0 billion in total assets, a Consolidated Statement of Operations detailing a net loss of $(178) million, and reconciliations for non-GAAP measures like Net Spread and Dollar Roll Income of $388 million Consolidated Balance Sheets As of June 30, 2025, total assets increased to $102.0 billion, driven by Agency securities and reverse repurchase agreements, with total liabilities rising to $91.7 billion and total stockholders' equity reaching $10.3 billion Selected Balance Sheet Data (in millions) | Account | June 30, 2025 (millions) | March 31, 2025 (millions) | | :--- | :--- | :--- | | Agency securities, at fair value | $73,232 | $70,363 | | Total assets | $102,021 | $95,889 | | Repurchase agreements | $69,153 | $66,138 | | Total liabilities | $91,674 | $85,847 | | Total stockholders' equity | $10,347 | $10,042 | Consolidated Statements of Operations For Q2 2025, the company reported net interest income of $162 million, but a total other loss of $(274) million led to a net loss of $(140) million, with a comprehensive loss available to common stockholders of $(130) million or $(0.13) per share Selected Statement of Operations Data (in millions) | Account | Three Months Ended June 30, 2025 (millions) | | :--- | :--- | | Net interest income | $162 | | Total other (loss) gain, net | $(274) | | Net income (loss) | $(140) | | Net income (loss) available to common stockholders | $(178) | | Comprehensive income (loss) available to common stockholders | $(130) | Reconciliation to Non-GAAP Measures The company reconciled its GAAP comprehensive loss of $(130) million to a non-GAAP Net Spread and Dollar Roll Income of $388 million for Q2 2025, adjusted for items like unrealized gains/losses and swap income * For Q2 2025, the company reconciled a GAAP comprehensive loss attributable to common stockholders of $(130) million to a non-GAAP Net Spread and Dollar Roll Income of $388 million[37] * Key adjustments included adding back net unrealized and realized losses on securities and derivatives, and including periodic interest rate swap income of $282 million and TBA dollar roll income of $24 million[37] Key Statistics The Key Statistics table provides a quarterly comparison of critical metrics, highlighting a period-end tangible 'at risk' leverage of 7.6x, an average actual CPR of 8.7%, and a negative economic return of -1.0% on tangible common equity for Q2 2025 Selected Key Statistics (Q2 2025 vs Q1 2025) | Metric | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Tangible net book value "at risk" leverage - period end | 7.6:1 | 7.5:1 | | Average actual CPR for securities held | 8.7% | 7.0% | | Average forecasted CPR - period end | 7.8% | 8.3% | | Combined net interest spread (excl. catch-up) | 2.01% | 2.12% | | Economic return (loss) on tangible common equity | (1.0)% | 2.4% | Company and Investor Information This section provides corporate and investor information, including details for the upcoming stockholder conference call and a detailed explanation of the company's use of non-GAAP financial measures for greater transparency * AGNC will host a stockholder call on July 22, 2025, at 8:30 am ET, with a corresponding slide presentation available on its website[44][45] * The company is a leading investor in Agency residential mortgage-backed securities (MBS), which are guaranteed against credit loss by Fannie Mae, Freddie Mac, or Ginnie Mae[48] * The press release includes a detailed explanation of its non-GAAP measures, such as "net spread and dollar roll income," stating they provide greater transparency into the information used by management for financial and operational decision-making[53][55]