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AGNC Investment (AGNC) Tops on Q2 Net Spread and Dollar Roll

·4 min read

AGNC Investment Corp. AGNC reported a second-quarter 2022 net spread and dollar roll income per common share (excluding estimated "catch-up" premium amortization costs) of 83 cents per share, beating the Zacks Consensus Estimate of 60 cents. The reported figure improved from 76 cents posted in second-quarter 2021.

Adjusted net interest and dollar roll income (excluding catch-up premium amortization) was $546 million, declining from the quarter-ago number of $375 million.

The company reported a second-quarter comprehensive loss per common share of $1.34 compared with the prior-year quarter’s 97 cents.

Inside the Headlines

Net interest income of $315 million jumped 35.8% year over year and beat the Zacks Consensus Estimate of $198 million.

AGNC Investment's average asset yield on its portfolio was 3.09% in the second quarter, up from 1.73% recorded in the prior-year quarter.

For the second quarter, the combined weighted average cost of funds, inclusive of interest rate swap, was 0.18%, higher than 0.06% witnessed in the prior-year quarter.

The average net interest spread (excluding catch-up premium amortization) was 2.70%, up from 2.09% reported in the prior-year quarter.

AGNC Investment’s tangible net book value "at risk" leverage ratio was 7.8X as of Jun 30, 2022, compared with 7.6X in the prior-year quarter.

For the second quarter, the company's investment portfolio bore a weighted average actual constant prepayment rate (CPR) of 12.4%, down from 25.7% witnessed in second-quarter 2021.

As of Jun 30, 2022, its tangible net book value per share (“BVPS”) was $11.43, down 12.9% from $13.12 as of Mar 31, 2022. Also, it compares unfavorably with BVPS of $16.39 as of Jun 30, 2021.

The annualized economic loss on tangible common equity for the company in the reported quarter was 10.1%. This included a dividend per share of 36 cents and a decrease of $1.69 in tangible net BVPS.

As of Jun 30, 2022, the company’s investment portfolio aggregated $61.3 billion. This included $43.6 billion of Agency mortgage-backed securities, $15.9 million of net to-be-announced mortgage position, and $1.8 billion of credit risk transfer and non-Agency securities.

As of Jun 30, 2022, AGNC Investment’s cash and cash equivalents totaled $906 million, down from $1 billion as of Mar 31, 2022.

Dividend Update

In the second quarter, AGNC Investment announced a dividend of 12 cents per share each for April, May and June. Notably, the company declared $11.6 billion in common stock dividends or $45.04 per common share since its initial public offering in May 2008 through second-quarter 2022.

Conclusion

In the second quarter, robust TBA dollar roll performance, rising asset yields and stable funding costs aided results. However, the shift in the Fed’s stance on monetary policy led to higher interest rate volatility. Amid this, AGNC continued to maintain a defensive position, with lower leverage and reduced interest rate exposure. Also, mortgage rates increased marginally on a sequential basis, limiting refinancing activities in the quarter. This likely reduced the CPR levels for AGNC Investment.

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

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

Performance and Earnings Release Dates of Other REITs

We now look forward to the earnings releases of Annaly Capital Management, Inc. NLY and Host Hotels & Resorts HST.

Annaly, scheduled to report quarterly figures on May 27, has an Earnings ESP of +5.40%. NLYcurrently carries a Zacks Rank of 3.

Host Hotels & Resorts,scheduled to report quarterly figures on Aug 3, has an Earnings ESP of 0.00%. HSTcurrently carries a Zacks Rank of 2 (Buy).


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