AGNC Investment (NASDAQ: AGNC) Inventory fell 3.3% Monday after-hours trading after the mortgage REIT’s net book value declined in the second quarter with weakness in the agency mortgage-backed securities market, leading to continued negative economic conditions return on tangible equity.
Tangible net book value per common share of $11.43 as of June 30, 2022 decreased from $13.12 as of March 31, and AGNC’s (AGNC) economic return on tangible equity during the quarter was -10.1% against -14.4% in the first quarter.
“The expectation of significantly higher short-term rates has resulted in significant interest rate volatility and increased the likelihood of a recession,” said Peter Federico, President and Chief Executive Officer of AGNC (AGNC). This led to weakness in agency MBS as the spread between agency MBS and swap and treasury widened during the quarter. “Looking ahead, while the short-term outlook continues to be uncertain, the longer-term outlook for MBS agencies has improved significantly,” he added. Importantly, the net supply of agency MBS is expected to be “significantly lower than prior expectations.”
Second quarter net variance and dollar earnings per share of $0.83 versus consensus estimate of $0.59 and up from $0.72 in the prior quarter. Figure excludes $0.13 per share of estimated “catch-up” premium amortization cost due to change in projected constant prepayment rate (CPR) estimates. It includes $0.35 per common share of dollar income associated with the company’s $19.7 billion average net long position in agency mortgage-backed securities in the “to be announced” (TBA) market. .
The company’s annualized net interest spread, including the TBA position and interest rate swaps and excluding the amortization of “catch-up” premiums, for the second quarter was 2.70%, compared to 2 .19% in the first quarter.
Unencumbered cash and agency MBS totaled ~$2.8 billion as of June 30, 2022 versus ~$3.5 billion as of March 31.
The weighted average CPR of AGNC’s investment portfolio was 12.4% compared to 14.5% in the first quarter of 2022.
The expected weighted average APR for the remaining life of the Company’s agency securities held as of June 30, 2022 decreased to 7.2% from 7.9% as of March 31, 2022.
Conference call on July 26 at 8:30 a.m. ET.
Earlier, AGNC Investment (AGNC) EPS beats $0.24, revenue of $315m misses $8.75m
In a two-part series, SA contributor Scott Kennedy gave his projections for AGNC’s second-quarter earnings.