Earnings Call Insights: AGNC Investment Corp. (AGNC) Q4 2025
Management View
- Peter Federico, President, CEO & Chief Investment Officer, emphasized AGNC’s strong results in 2025, noting “AGNC’s 11.6% economic return in the fourth quarter drove our impressive full year economic return of 22.7%. Even more noteworthy, AGNC’s total stock return in 2025 was 34.8% with dividends reinvested, nearly double the performance of the S&P 500.” He highlighted the stability in mortgage spreads and the constructive investment environment emerging as the Fed shifted to a more accommodative stance. Federico stated that AGNC is “very well positioned to generate compelling risk-adjusted returns with a substantial yield component for our shareholders.”
- Bernice Bell, Executive VP & CFO, reported, “For the fourth quarter, AGNC reported comprehensive income of $0.89 per common share. Our economic return on tangible common equity was 11.6% for the quarter, consisting of $0.36 of dividends declared per common share and a $0.60 increase in tangible net book value per share driven by lower interest rate volatility and tighter mortgage spreads to benchmark interest rates.” Bell also noted, “We ended the fourth quarter with leverage of 7.2x tangible equity, down from 7.6x at the end of the third quarter.”
- Federico explained that the company shifted its hedge mix toward a greater proportion of interest rate swaps, with the allocation to swap-based hedges increasing to 70% of the portfolio from 59% the prior quarter.
Outlook
- Management expects lower funding costs from the October and December rate cuts and anticipated future cuts, increased stability in funding markets, and the shift in the hedge mix to provide a “moderate tailwind to net spread and dollar roll income.”
- Federico stated, “as the largest pure-play agency mortgage REIT, we believe AGNC is very well positioned to generate compelling risk-adjusted returns with a substantial yield component for our shareholders.”
- The supply and demand outlook for agency MBS in 2026 is expected to remain well balanced, with private sector absorption of about $400 billion in MBS and potential for GSE purchases to consume about half of this supply.
Financial Results
- Comprehensive income was reported at $0.89 per common share for Q4 2025. Economic return on tangible common equity stood at 11.6% for the quarter.
- Tangible net book value per common share increased by $0.60. Monthly dividends declared totaled $0.36 per share for the quarter.
- Leverage decreased to 7.2x tangible equity by quarter end. Liquidity was strong with $7.6 billion in cash and unencumbered Agency MBS, representing 64% of tangible equity.
- Net spread and dollar roll income was unchanged for the quarter at $0.35 per common share.
- The asset portfolio totaled $95 billion at quarter end, up $4 billion from the prior quarter, with 76% of assets having favorable prepayment attributes.
Q&A
- Bose George, KBW: Asked about current spreads and dividend coverage. Federico responded, “mortgage spreads… have now sort of entered a new spread range,” estimating current coupon to swaps in the 120 to 160 range. He elaborated, “the return on our existing portfolio… aligns very, very well with our total cost of capital.”
- Douglas Harter, UBS: Inquired about spread risks and leverage. Federico explained that spread stability is key for leverage decisions, stating, “we have let our leverage come down consistent with the spread tightening.”
- Crispin Love, Piper Sandler: Asked about the administration’s housing affordability efforts. Federico credited the administration and GSEs for “the actions that they took in 2025” and emphasized the importance of continued focus on mortgage market stability.
- Trevor Cranston, Citizens JMP: Asked about swap spreads and volatility. Federico indicated the outlook is “favorable for swap spreads” and expects interest rate volatility to remain generally low.
- Jason Stewart, Compass Point: Queried about equity issuance and demand outside GSEs. Federico reported no equity issuance quarter-to-date and noted a “more diverse investor base” for agency MBS, with strong bond fund inflows and expected growth in bank and foreign demand.
- Richard Shane, JPMorgan: Clarified ATM issuance timing. Federico confirmed, “most companies… in a blackout period from the end of the previous period to sometime around their earnings call.”
- Eric Hagen, BTIG: Asked about prepayment speeds and hedging. Federico highlighted the importance of asset selection and maintaining a positive duration gap, noting “specified pool characteristics are going to be really important.”
- Harsh Hemnani, Green Street: Explored coupon composition and duration gap. Federico stated, “there is ample liquidity for us to position the portfolio anyway we want from an overall coupon distribution perspective,” and noted a current duration gap of about 0.5 years.
Sentiment Analysis
- Analysts focused on sustainability of returns, spread levels, and capital deployment, with a tone that was neutral to slightly positive as they probed both upside and risk scenarios.
- Management maintained a confident and constructive tone in prepared remarks and Q&A, emphasizing alignment of returns with capital costs and the favorable outlook for agency MBS, while acknowledging potential risks and the need for ongoing monitoring of market conditions.
- Compared to the previous quarter, management’s tone remained confident but with more emphasis on the need for spread stability and careful leverage management given the evolving environment.
Quarter-over-Quarter Comparison
- Guidance language shifted from highlighting the benefits of post-Fed pivot conditions in Q3 to emphasizing the sustainability of spread ranges and the impact of GSE actions in Q4.
- Leverage decreased from 7.6x to 7.2x tangible equity, and the hedge mix increased toward swap-based hedges (70% vs. 59%).
- Management’s tone evolved from optimism about new capital deployment and demand growth to a more nuanced focus on spread and leverage stability amid a favorable yet dynamic environment.
- Analysts in both quarters pressed on dividend sustainability and risk, but Q4 saw deeper exploration of policy and demand drivers.
Risks and Concerns
- Management identified potential negative impacts from policy changes such as streamlined refinance programs, g-fees, or mortgage portability, which could “have negative consequences, some of them significantly negative consequences.”
- Prepayment risk is higher given the direction of the administration, and asset selection is seen as critical to performance.
- Federico cautioned that leverage decisions depend on “how stable do we believe spreads will be” and highlighted the importance of monitoring government actions.
Final Takeaway
AGNC management highlighted its strong 2025 results and the favorable agency MBS environment heading into 2026, supported by a constructive macro backdrop, robust liquidity, and prudent risk management. The company remains focused on maintaining spread stability, optimizing portfolio composition, and leveraging a diversified investor base to drive sustained returns and reliable dividend coverage for shareholders.