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AGNC Investment (AGNC) Q4 Earnings Beat Estimates, BVPS Up

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Zacks Equity Research
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AGNC Investment Corp. AGNC reported fourth-quarter 2020 net spread and dollar-roll income (excluding estimated catch-up premium amortization costs) of 75 cents per share, beating the Zacks Consensus Estimate of 64 cents. However, the reported figure was lower than the prior-quarter figure of 81 cents.

For 2020, the company reported net spread and dollar-roll income (excluding estimated catch-up premium amortization costs) of $2.70 per share, beating the consensus mark of $2.60. The figure came in line with the prior year’s tally.

Adjusted net interest and dollar roll income (excluding catch-up premium amortization) was $459 million, surpassing the Zacks Consensus Estimate of $384 million. The reported figure, however, sequentially declined from $494 million posted in the September-end quarter.

Net interest income (NII) of $183 million declined from the prior quarter’s $302 million.

The company reported fourth-quarter comprehensive income per common share of $1.16 compared with the prior quarter’s $1.28.

Also, as of Dec 31, 2020, its tangible net book value per share (“BVPS”) was $16.71, up 5.2% from $15.88 as of Sep 30, 2020. However, it compares unfavorably with BVPS of $17.66 as of Dec 31, 2019.

The economic loss on tangible common equity for the company during the reported quarter was 7.5%. This included a dividend per share of 36 cents and an increase of 83 cents in BVPS.

Inside the Headlines

As of Dec 31, 2020, the company’s investment portfolio aggregated $97.9 billion. This included $65.1 billion of Agency mortgage backed securities (MBS), $31.5 billion of to-be-announced (TBA) securities and $1.3 billion of credit risk transfer and non-Agency securities.

Inclusive of its net TBA position and net payable/ (receivable) for unsettled securities, AGNC Investment’s tangible net book value "at risk" leverage ratio was 8.5X as of Dec 31, 2020, compared with 8.8X in the prior quarter.

For the December-end quarter, the company's investment portfolio bore a weighted average actual constant prepayment rate (CPR) of 27.6%, up from 24.3% witnessed in third-quarter 2020.

Excluding net TBA position, AGNC Investment's average asset yield on its portfolio, excluding the net TBA position, was 1.64% in the fourth quarter, down from 2.28% recorded in the previous quarter.

For the December-end quarter, the combined average cost of funds, inclusive of interest rate swap costs, was 0.05%, down from 0.15% witnessed in the previous quarter.

Average net interest spread (excluding catch-up premium amortization) was 2.02%, down from 2.15% reported in the prior quarter.

Also, as of Dec 31, 2020, AGNC Investment’s cash and cash equivalents totaled $1.01 billion, up from $831 million as of Dec 31, 2019.

Dividend Update and Share Repurchase

During the fourth quarter, AGNC Investment announced a monthly dividend of 12 cents per share each for October, November and December. Notably, the company announced $10.4 billion in common stock dividends or $42.88 per common share since its initial public offering in May 2008 through fourth-quarter 2020.

During the fourth quarter, the company repurchased 6.6 million shares or $101 million of its common stock for an average price of $15.32 per share.

For 2020, repurchase transactions amounted to $402 million, net of repurchase costs.

AGNC Investment currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AGNC Investment Corp. Price, Consensus and EPS Surprise

AGNC Investment Corp. Price, Consensus and EPS Surprise
AGNC Investment Corp. Price, Consensus and EPS Surprise

AGNC Investment Corp. price-consensus-eps-surprise-chart | AGNC Investment Corp. Quote

We now look forward to the earnings releases of other REITs like Welltower Inc. WELL, Highwoods Properties HIW and Healthpeak Properties PEAK. All three companies are slated to report fourth-quarter earnings on Feb 9.

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