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AGNC Investment (AGNC) Tops on Q1 Net Spread and Dollar Roll

Zacks Equity Research
·4-min read

AGNC Investment Corp. AGNC reported a first-quarter 2022 net spread and dollar roll income per common share (excluding estimated "catch-up" premium amortization costs) of 72 cents per share, beating the Zacks Consensus Estimate of 61 cents. The reported figure declined 5.3% from first-quarter 2021.

Adjusted net interest and dollar roll income (excluding catch-up premium amortization) was $423 million, declining from the quarter-ago number of $457 million.

The company reported a first-quarter comprehensive loss per common share of $2.23 against the prior-year quarter’s income of $1.33.

Inside the Headlines

Net interest income of $448 million declined 15.2% sequentially.

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AGNC Investment's average asset yield on its portfolio was 3.55% in the first quarter, down from 3.78% recorded in the prior-year quarter.

For the March-end quarter, the combined weighted average cost of funds, inclusive of interest rate swap, was 0.09%, higher than 0.02% witnessed in the prior-year quarter.

The average net interest spread (excluding catch-up premium amortization) was 2.19%, up from 2% reported in the prior-year quarter.

AGNC Investment’s tangible net book value "at risk" leverage ratio was 7.8X as of Mar 31, 2022, compared with 7.6X in the prior-year quarter.

For the March-end quarter, the company's investment portfolio bore a weighted average actual constant prepayment rate (CPR) of 14.5%, down from 24.6% witnessed in first-quarter 2021.

As of Mar 31, 2022, its tangible net book value per share (“BVPS”) was $13.12, down 16.7% from $15.75 as of Dec 31, 2021. Also, it compares unfavorably with BVPS of $17.72 as of Mar 31, 2021.

The annualized economic loss on tangible common equity for the company in the reported quarter was 14.4%. This included a dividend per share of 36 cents and a decrease of $2.63 in tangible net BVPS.

As of Mar 31, 2022, the company’s investment portfolio aggregated $68.6 billion. This included $47.4 billion of Agency mortgage-backed securities, $19.5 million of net to-be-announced mortgage position, and $1.7 billion of credit risk transfer and non-Agency securities.

As of Mar 31, 2022, AGNC Investment’s cash and cash equivalents totaled $1,004 million, up from $998 billion as of Dec 31, 2021.

Dividend Update

In the first quarter, AGNC Investment announced a dividend of 12 cents per share each for October, November and December. Notably, the company declared $11.4 billion in common stock dividends or $44.68 per common share since its initial public offering in May 2008 through first-quarter 2022.

Conclusion

In the first quarter, mortgage rates increased marginally on a sequential basis, limiting refinancing activities in the quarter. This likely reduced CPR levels for AGNC Investment.However, the shift in the Fed’s stance on monetary policy led to higher interest rate volatility. This resulted in the dismal performance of Agency mortgage-backed securities in the first quarter.

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 carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance and Earnings Release Dates of Other REITs

Annaly Capital Management, Inc. NLY reported first-quarter 2022 earnings available for distribution (EAD) per share of 28 cents, which surpassed the Zacks Consensus Estimate of 23 cents. The figure, however, compared unfavorably with the year-ago quarter’s 29 cents.

NLY registered a year-over-year decline in BVPS and the average yield on interest-earning assets.At the first-quarter end, Annaly had $84.4 billion of total assets, with $76.1 billion invested in the Agency portfolio. At the end of the quarter, unencumbered assets stood at $7.2 billion.

Host Hotels & Resorts, Inc. HST, scheduled to report quarterly figures on May 4, has an Earnings ESP of +4.07% and it currently sports a Zacks Rank of 1.


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