AGNC Investment Q2 Earnings Meet, Asset Yield Improves

AGNC Investment Corp.'s AGNC second-quarter 2024 net spread and dollar roll income per common share (excluding estimated "catch-up" premium amortization benefit) of 53 cents matched the Zacks Consensus Estimate. However, the bottom line declined from the 67 cents reported in the previous quarter.

Adjusted net interest and dollar roll income of $482 million moved down from $496 million in the previous quarter.

The company reported a second-quarter comprehensive loss per common share of 13 cents against comprehensive income per common share of 48 cents reported in the prior quarter.

Inside the Headlines

Net interest expenses were $3 million compared with $30 million in the prior quarter. The Zacks Consensus Estimate was pegged at $404 million.

AGNC Investment's average asset yield on its portfolio was 4.69% in the second quarter, up from 4.56% reported in the prior quarter.

The combined weighted average cost of funds, inclusive of interest rate swap, was 2% compared with 1.58% in the prior quarter.

The average net interest spread (excluding estimated "catch-up" premium amortization benefits) was 2.69%, down from 2.98% in the previous quarter.

As of Jun 30, 2024, AGNC's average tangible net book value "at risk" leverage ratio was 7.2X compared with 7X in the prior quarter.

In the second quarter, the company's investment portfolio bore an average actual constant prepayment rate of 7.1%, up from 5.7% in the previous quarter.

As of Jun 30, 2024, tangible net book value per common share (BVPS) was $8.40, down from $8.84 as of Mar 31, 2024.

The economic return on tangible common equity was negative 0.9% compared with 5.7% in the previous quarter. This included a dividend per share of 36 cents and a decline of 44 cents in tangible net BVPS.

As of Jun 30, 2024, the company's investment portfolio aggregated $66 billion. This included $59.7 billion of Agency mortgage-backed securities, $5.3 million of net forward purchases of Agency MBS in the to-be-announced market, and $1 billion of credit risk transfer and non-Agency securities and other mortgage credit investments.

As of Jun 30, 2024, AGNC Investment's cash and cash equivalents totaled $530 million, up from $505 billion as of Mar 31, 2024.

Dividend Update

In the second quarter, AGNC Investment announced a dividend of 12 cents per share each for April, May and June. Management declared $13.4 billion in common stock dividends or $47.92 per share since its initial public offering in May 2008 through the second quarter of 2024.

Conclusion

AGNC's second-quarter results benefited from an increase in asset yields. To navigate the monetary policy transition, the company has defensively positioned itself with prudent asset-selection efforts and timely portfolio adjustment. However, lower net interest spread and increased weighted average cost of funds acted as headwinds.

AGNC Investment currently carries a Zacks Rank #3 (Hold).

Upcoming Release Dates of Other REITs

Annaly Capital Management, Inc. NLY is slated to announce second-quarter 2024 results on Jul 24.

Over the past month, the Zacks Consensus Estimate for NLY's quarterly earnings has remained unchanged at 66 cents per share, indicating an 8.3% decline from the prior-year reported figure.

Starwood Property Trust, Inc. STWD is slated to post quarterly results on Aug 6.

Over the past month, the Zacks Consensus Estimate for STWD's quarterly earnings has been unchanged at 48 cents per share, indicating a decline of 2.04% from the prior-year quarter's reported figure.

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