• Comprehensive Loss: $0.11 per common share for Q4 2024.
• Economic Return on Tangible Common Equity: Negative 0.6% for Q4 2024.
• Dividends Declared: $0.36 per common share for Q4 2024.
• Tangible Net Book Value Decline: $0.41 per share for Q4 2024.
• Full Year Economic Return: Positive 13.2% for 2024.
• Common Stock Issuance: $511 million raised in Q4 2024, totaling approximately $2 billion for the year.
• Leverage: 7.2 times tangible equity for Q4 2024.
• Unencumbered Cash and Agency MBS: $6.1 billion or 66% of tangible equity at Q4 2024 end.
• Average Projected Life CPR: Decreased to 7.7% from 13.2% at the end of Q3 2024.
• Actual CPRs: Averaged 9.6% in Q4 2024, up from 7.3% in Q3 2024.
• Net Spread and Dollar Roll Income: Declined by $0.06 to $0.37 per common share in Q4 2024.
• Net Interest Rate Spread: Narrowed to just above 190 basis points in Q4 2024.
• Investment Portfolio: Totaled $73.3 billion as of December 31, 2024.
• Non-Agency Securities Portfolio: $884 million at Q4 2024 end.
• Hedge Ratio to Funding Liabilities: Increased to 91% at Q4 2024 end.

• Warning! GuruFocus has detected 3 Warning Sign with AGNC.

Release Date: January 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• AGNC Investment Corp (NASDAQ:AGNC) generated a positive economic return of 13.2% in 2024, driven by a compelling monthly dividend.
• The company successfully raised $511 million of common stock through its at-the-market offering program, contributing to book value accretion.
• AGNC's leverage remained stable at 7.2 times tangible equity, with a significant portion of capital unencumbered, indicating strong risk management.
• The supply and demand outlook for agency mortgage-backed securities (MBS) appears well balanced, with potential for increased bank demand.
• AGNC's common stock offers investors an easy way to invest in agency MBS, providing unique diversification benefits and an attractive return profile.

Negative Points

• AGNC reported a comprehensive loss of $0.11 per common share for the fourth quarter, with a negative economic return on tangible common equity of 0.6%.
• Higher interest rates and modestly wider spreads led to a decline in tangible net book value per share by $0.41 in the fourth quarter.
• Net spread and dollar roll income declined by $0.06 to $0.37 per common share due to a narrowing of the net interest rate spread.
• The evolving monetary policy outlook and risk-off sentiment ahead of the presidential election caused agency MBS to underperform swap and treasury hedges.
• There is uncertainty regarding the US housing finance system and the status of the GSEs, which could impact the agency MBS market.

Q & A Highlights

Q: Can you discuss the potential magnitude of equity issuance this year and your thoughts on balance sheet size? A: Peter Federico, President and CEO, explained that AGNC will continue to approach capital issuance opportunistically, focusing on accretion benefits and book value for shareholders. There is no need to grow for the sake of growing, and decisions will be made based on market conditions and shareholder benefits.

Q: How do you calculate the ROE when using treasury futures versus swaps? A: Peter Federico noted that the net spread and dollar roll income only includes swap-based hedges. Treasury-based hedges have less carry compared to swaps due to current swap spreads. AGNC uses a blend of treasury and swap-based hedges to optimize returns, with current coupon spreads to swaps ranging from 160 to 180 basis points.

Q: What is your outlook on the dividend, considering the current economic environment? A: Peter Federico stated that AGNC evaluates the total cost of capital against expected returns. With current spreads, AGNC expects gross ROEs between 17% and 18.5%, aligning well with their total cost of capital, supporting the current dividend level.

Q: Can you explain the increase in the hedge ratio during the fourth quarter? A: Peter Federico explained that the hedge ratio was increased to 91% due to expected interest rate volatility around the presidential election. The strategy was to maintain a stable duration gap, anticipating that long-term rates would remain stable.

Q: What is your view on Agency MBS demand from banks and money managers? A: Peter Federico highlighted that the supply of Agency MBS in 2025 is expected to be similar to 2024, with stable demand from money managers and potential increased demand from banks due to less onerous regulation.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.