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Introduction & Market Context
AGNC Investment Corp. (NASDAQ:AGNC) released its Q1 2025 stockholder presentation on April 22, showcasing a return to profitability after a challenging fourth quarter. The mortgage REIT, which positions itself as "The Premier Agency Residential Mortgage REIT," reported comprehensive income of $0.12 per share for Q1, a significant improvement from the comprehensive loss of $0.11 per share in Q4 2024.
The company maintained its attractive 15.0% dividend yield while growing its asset base to $78.9 billion, up from $73.3 billion at the end of 2024. This performance comes amid a shifting interest rate environment, where the company has benefited from decreasing funding costs while navigating market volatility.
As shown in the following capital structure highlights, AGNC has maintained a strong market position with $9.1 billion in market capitalization and has paid $14.3 billion in total dividends since its IPO in May 2008:
Quarterly Performance Highlights
AGNC’s Q1 2025 results demonstrate a notable improvement over the previous quarter. The company reported comprehensive income per share of $0.12, economic return of 2.4%, and net spread and dollar roll income of $0.44 per share. These figures represent a positive turnaround from Q4 2024, when the company experienced a comprehensive loss and negative economic return.
The following slide details the key financial metrics for Q1 2025:
The company’s operational metrics also showed improvement in several areas. Average asset yield increased to 4.87% from 4.80% in the previous quarter, while average repo cost decreased significantly from 4.86% to 4.45%. The average cost of funds also declined from 2.89% to 2.75%, contributing to improved net interest margins.
The following operational highlights provide additional context for AGNC’s Q1 performance:
Portfolio Strategy and Positioning
AGNC continued its strategic focus on agency mortgage-backed securities, with a portfolio totaling $77.9 billion as of March 31, 2025. The company maintained a conservative approach to risk management, with a hedge ratio of 91% and a slight increase in duration gap from 0.3 to 0.4 years.
The portfolio composition shows a strong preference for 30-year fixed-rate securities, which make up the vast majority of holdings. The company’s actual portfolio CPR (Constant Prepayment Rate) was 7.0% for Q1, lower than the average projected portfolio life CPR of 8.3%, indicating better-than-expected prepayment performance.
The following slide illustrates AGNC’s agency portfolio composition:
In addition to its agency MBS holdings, AGNC maintains a smaller credit portfolio of $0.9 billion, primarily consisting of Credit Risk Transfer (CRT) securities (74%), Residential Mortgage-Backed Securities (RMBS) (24%), and Commercial Mortgage-Backed Securities (CMBS) (2%). This diversification provides additional yield opportunities while maintaining the company’s focus on mortgage-related investments.
Market Outlook and Guidance
The market environment for mortgage-backed securities showed mixed signals during Q1 2025. Agency MBS yields decreased during the quarter, with 30-year current coupon yield declining by 32 basis points and 15-year current coupon yield falling by 35 basis points. However, spreads to U.S. Treasuries and swaps widened slightly, indicating some relative value deterioration.
The following market highlights provide context for AGNC’s operating environment:
Interest rates also showed significant movement during the quarter, with 10-year and 2-year U.S. Treasury yields both declining by 36 basis points. This rate environment has implications for AGNC’s funding costs and reinvestment opportunities.
AGNC’s management maintains a positive outlook for agency MBS in 2025, citing attractive spreads and the potential for lower interest rate volatility. The company expects to continue benefiting from the wide spread between asset yields and funding costs, supporting its ability to maintain its high dividend yield.
Financial Position and Capital Management
AGNC’s financial position remains strong, with total common equity capital of $8.4 billion and unencumbered cash and agency MBS of $6.0 billion, representing 63% of tangible equity. The company’s leverage ratio increased slightly to 7.5x from 7.2x at the end of 2024, reflecting a measured approach to risk management.
During Q1 2025, AGNC issued $509 million in common equity through its at-the-market (ATM) offerings, continuing its strategy of accretive capital raises. This follows approximately $2 billion in common equity issuance during 2024, which helped strengthen the company’s capital base.
The company’s financing strategy continues to focus on repurchase agreements, with a weighted average interest rate of 4.47% as of March 31, 2025. AGNC’s hedging portfolio includes interest rate swaps, swaptions, SOFR futures, and U.S. Treasuries, providing protection against interest rate volatility.
The following slide details AGNC’s financing summary:
AGNC’s hedging strategy is designed to mitigate interest rate risk while allowing for potential upside in favorable market conditions. The company’s interest rate swaps had a total notional amount of $47.8 billion with an average pay rate of 4.40% as of March 31, 2025.
In conclusion, AGNC Investment Corp.’s Q1 2025 presentation demonstrates a return to profitability after a challenging fourth quarter, with improved comprehensive income, economic return, and operational metrics. The company continues to maintain its attractive 15.0% dividend yield while strategically managing its portfolio and capital structure in a dynamic interest rate environment. With a strong financial position and focused investment strategy, AGNC appears well-positioned to navigate market conditions in 2025.
Full presentation:
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