AGNC Investment (NASDAQ:AGNC) released first-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.
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Summary
AGNC Investment Corp reported a comprehensive loss of $0.18 per common share in Q1 2026, with an economic return on tangible common equity of negative 1.6%.
The company highlighted increased geopolitical and macroeconomic risks, leading to widened mortgage-backed securities (MBS) spreads, but noted that agency MBS outperformed US Treasuries and investment-grade corporate bonds.
AGNC Investment Corp maintained a leverage of 7.4 times tangible equity, with liquidity of $7 billion in unencumbered cash and agency MBS.
The management expressed optimism about the attractive return profile of agency MBS at current spread levels and highlighted improved demand and supply outlooks.
The company executed $401 million in common equity issuance through an at-the-market offering program, emphasizing its strategy to manage capital actively and generate accretion for stockholders.
AGNC Investment Corp remains cautiously optimistic about the future outlook, with expectations of favorable conditions for agency MBS and potential actions by the administration to improve housing affordability.
Full Transcript
OPERATOR
Good morning and welcome to the AGNC Investment Corp. First quarter 2026 shareholder call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation there will be an opportunity to ask questions. To ask a question, you may press Star then one on your touchtone phone. To withdraw your question, please press Star then two. Please note this event is being recorded. I would now like to turn the conference over to Katie Turlington in Investor Relations. Please go ahead.
Katie Turlington (Investor Relations)
Thank you all for joining AGNC Investment Corp’s first quarter 2026 earnings call. Before we begin, I’d like to review the safe Harbor Statement. This conference call and corresponding slide presentation contain statements that, to the extent they are not recitations of historical fact, constitute forward looking statements within the meaning of the Private Securities Litigation Reform act of 1995. All such forward looking statements are intended to be subject to the safe harbor protection provided by the Reform Act. Actual outcomes and results could differ materially from those forecasts due to the impact of many factors beyond the control of AGNC. All forward looking statements included in this presentation are made only as of the date of this presentation and are subject to change without notice. Certain factors that could cause actual results to differ materially from those contained in the forward looking statements are included in AGNC’s periodic reports filed with the Securities and Exchange Commission. Copies are available on the SEC’s website at SEC.gov. We disclaim any obligation to update our forward looking statements unless required by law. Participants on the call include Peter Federico, President, Chief Executive Officer and Chief Investment Officer Bernie Bell, Executive Vice President and Chief Financial Officer and Sean Reed, Executive Vice President, Strategy and Corporate Development. With that, I’ll turn the call over to Peter Federico.
Peter Federico (President, Chief Executive Officer, and Chief Investment Officer)
Good morning and thank you all for joining our first quarter earnings conference call. Agency MBS performance in the first quarter was driven by two very divergent investment themes. In January and February, the Administration’s focus on reducing interest rate volatility, maintaining mortgage spread stability and improving housing affordability drove strong performance across the fixed income markets. Agency MBS performance was particularly strong during this period as The Administration’s January 8th directive instructing the GSEs to purchase $200 billion of agency mortgage backed securities pushed spreads through the lower end of the recent three year trading range. In March, however, uncertainty associated with the war in Iran and the potential for a more widespread conflict in the Middle East caused interest rate volatility to increase, investor sentiment to turn negative and Agency MBS spreads to widen significantly. As a result, AGNC’s economic return in the first quarter was negative 1.6%. Despite the spread widening to swaps quarter over quarter, agency MBS outperformed US Treasuries and investment grade corporate bonds in the first quarter, again demonstrating the diversification benefits of this unique high credit quality fixed income asset class. At the beginning of the year, I discussed a number of factors that we believe would benefit agency MBS performance in 2026. Among these were low interest rate volatility and an accommodative monetary policy stance. In the first quarter. However, the Middle east conflict caused interest rate volatility to increase and Fed rate cuts to become more uncertain. While the duration and economic implications of the conflict are still unknown, recent developments are encouraging and these factors could once again be positive catalysts for agency MBS performance. More importantly, many of the other factors that I discussed actually improved in the first quarter and now further strengthened the outlook for agency mbs. Most notably, at current spread levels, the return profile on agency MBS is more attractive. At the time of our fourth quarter earnings conference call, the spread differential between current coupon MBS and a blend of swaps was 135 basis points. Over the last two months, that spread has ranged between 150 and 175 basis points. As a result of heightened geopolitical and macroeconomic risks, we believe agency MBS in this spread range represent compelling value on both an absolute and relative basis. The supply outlook for agency MBS also improved in the first quarter. At the start of the year, the net new supply of agency MBS was expected to be approximately $250 billion. Assuming a mortgage rate of just below 6%. With mortgage rates now about 50 basis points higher, MBS supply could be 50 to $70 billion lower this year. The demand outlook for agency MBS improved in the first quarter as well. Money manager demand for MBS increased materially in the first quarter as bond fund inflows came in about double the pace of the previous two years. US bank regulators also released their proposed bank regulatory capital framework for comment. As expected, the proposal includes lower capital requirements for high quality mortgage credit. These favorable capital requirements could lead banks to retain a greater share of mortgage credit in whole loan form or to utilize the private label securitization path to a greater extent, thereby reducing the GSE footprint over time. Finally, with mortgage spreads wider and the mortgage rate now in the low to mid 6% range, the administration may take further actions to improve housing affordability. Such actions could include more aggressive GSE purchases or increases in GSE portfolio size limits. Either or both of these actions would benefit mortgage performance. In addition, while the funding markets for agency MBS are deep and liquid, further actions by the Fed to improve the functionality and accessibility of the standing repo program could also be catalysts for tighter mortgage spreads and lower mortgage rates. In summary, although the sharp increase in geopolitical and macroeconomic risk creates a more challenging investment environment over the near term, the return profile and technical backdrop for agency mortgage backed securities and improved in the first quarter. In addition, actions by the administration to improve housing affordability are more likely. As we are continually reminded, market conditions change quickly. A prompt resolution to the Middle east conflict, while at times difficult to predict, could lead to a substantial reduction in volatility and inflationary pressures. Collectively, these conditions support our favorable outlook for agency mortgage backed securities. Moreover, AGNC remains well positioned to capitalize on these favorable conditions and build upon our lengthy track record of generating strong risk adjusted returns for our stockholders over a wide range of market cycles. With that, I’ll now turn the call over to Bernie Bell to discuss our financial results in greater detail.
Bernie Bell (Executive Vice President and Chief Financial Officer)
Thank you, Peter for the first quarter, AGNC reported a comprehensive loss of $0.18 per common share. Our economic return on tangible common Equity was negative 1.6% for the quarter, consisting of 36 cents of dividends declared per common share and a 50 cent decrease in tangible net book value per share driven by wider mortgage spreads to benchmark rates. As of late last week, our tangible net book value per common share was up approximately 6% for April or 5% net of our monthly dividend accrual. With the recovery in April through the end of last week, our tangible net book value has now largely reversed the first quarter decline we ended the first quarter with leverage of 7.4 times tangible equity, up slightly from 7.2 times as of Q4, while average leverage for the quarter was unchanged at 7.4 times. We also ended the quarter with a significant liquidity position of 7 billion of unencumbered cash and agency MBS representing 60% of tangible equity. Net spread and dollar roll income was $0.42 per common share for the quarter, up $0.07 from the fourth quarter. The increase was largely due to a 25 basis point increase in our net interest spread, which was driven by a combination of a greater allocation of interest rate swaps in our hedge portfolio, lower repo funding cost, more favorable TBA implied financing levels and a modest increase in the yield on our asset portfolio. Our quarter over quarter results also benefited from reduced compensation expense as Our fourth quarter results included year end incentive compensation accrual adjustments. The average projected life CPR of Our portfolio increased 70 basis points to 10.3% at quarter end from 9.6% as of Q4. The increase was largely due to prepayment model updates implemented in the first quarter and portfolio composition changes partly offset by higher mortgage rates. Actual CPRs averaged 13.2% for the quarter compared to 9.7% in the prior quarter. Lastly, during the first quarter we issued $401 million of common equity through our at the Market Offering program at a significant premium to tangible net book value per share, continuing our active capital management strategy and generating meaningful accretion for our common stockholders. And with that I will now turn the call back over to Peter to discuss our portfolio.
Peter Federico (President, Chief Executive Officer, and Chief Investment Officer)
Thank you Bernie Agency MBS performance varied. meaningfully by coupon and hedge type in the first quarter. Low coupon MBS meaningfully outperformed high coupon MBS due to heavy index buying from money managers in response to outsized bond fund inflows. This variation in performance by coupon was significant with lower coupon MBS tightening about 10 basis points to Treasuries during the quarter while higher Coupon MBS widened about 5 basis points on average. MBS performance also varied materially by hedge type as swap spreads tightened during the quarter. 10 year swap spreads, for example tightened by almost 10 basis points. As a result, an MBS position hedged with a 10 year pay fixed swap versus …
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