AGNC Investment Q2 earnings drop Q/Q as tight policy sparks volatility

AGNC Investment’s (NASDAQ:AGNC) Q2 earnings slipped from the previous quarter as agency mortgage-backed securities (“MBS”) spreads to benchmark rates widened as the Federal Reserve maintains tight monetary policy.

Q2 net spread and dollar roll income per share of $0.53, falling short of the average analyst estimate of $0.54, declined from $0.58 in Q1.

The most recent quarter’s earnings exclude $0.02 per share of estimated “catch-up” premium amortization benefit due to the change in the projected constant prepayment rate estimates.

The Federal Reserve’s continued tight policy even as consumer spending and confidence softened and the labor market moved into better balance led to increased intra-quarter volatility, interest rates edged higher, and agency MBS spreads to benchmark rates widened, said AGNC President and CEO Peter Federico.

“Nevertheless, the longer-term outlook for agency MBS remains very favorable and continues to provide reason for optimism,” he said. “Agency MBS spreads have continued to trade in a range that is conducive to favorable long-term risk-adjusted returns for levered investors such as AGNC.”

Tangible net book value of $8.40 per common share at June 30, 2024, dropped from $8.84 at March 31. Economic return on tangible common equity sank to -0.9% from +5.7% in Q1.

AGNC (AGNC) stock slipped 0.5% in Monday after-hours trading.

The REIT’s annualized net interest spread, including the TBA position and interest rate swaps and excluding “catch-up” premium amortization, was 2.69% vs. 2.98% in the previous quarter.

Its fixed-rate agency MBS and TBA securities’ weighted average coupon was 4.95% at June 30, 2024, vs. 4.86% at March 31.

During the quarter, AGNC (AGNC) issued 45.8M common shares through its at-the-market offerings for net proceeds of $434M.

Conference call on July 23 at 8:30 AM.

Earlier, AGNC Investment non-GAAP EPS of $0.53 misses by $0.01