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AGNC Investment (AGNC) Tops on Q3 Net Spread and Dollar Roll
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AGNC Investment Corp. (AGNC - Free Report) reported a third-quarter 2021 net spread and dollar roll income per common share (excluding estimated "catch-up" premium amortization costs) of 75 cents per share, beating the Zacks Consensus Estimate of 63 cents. However, the reported figure declined from the third-quarter 2020 number of 81 cents.
Adjusted net interest and dollar roll income (excluding catch-up premium amortization) was $443 million, surpassing the Zacks Consensus Estimate of $397 million. The reported figure, however, declined from the year-ago number of $494 million.
Net interest income of $279 million declined 7.6% from the prior-year quarter’s $302 million.
The company reported a third-quarter comprehensive income per common share of 37 cents compared with the prior quarter’s income of $1.28.
As of Sep 30, 2021, its tangible net book value per share (“BVPS”) was $16.41, up marginally from $16.39 as of Jun 30, 2021. Also, it compares favorably with BVPS of $15.88 as of Sep 30, 2020.
The economic return on tangible common equity for the company in the reported quarter was 2.3%. This included a dividend per share of 36 cents and an increase of 2 cents in tangible net BVPS.
Inside the Headlines
As of Sep 30, 2021, the company’s investment portfolio aggregated $84.1 billion. This included $53.7 billion of Agency mortgage backed securities, $28.3 billion of to-be-announced (TBA) securities, and $2.1 billion of credit risk transfer and non-Agency securities.
Inclusive of its net TBA position and net payable/ (receivable) for unsettled securities, AGNC Investment’s tangible net book value "at risk" leverage ratio was 7.5X as of Sep 30, 2021, compared with 8.8X in the prior-year quarter.
For the September-end quarter, the company's investment portfolio bore a weighted average actual constant prepayment rate of 22.5%, down from 24.3 % witnessed in third-quarter 2020.
Excluding the net TBA position, AGNC Investment's average asset yield on its portfolio, excluding the net TBA position, was 2.3% in the third quarter, up from 2.28% recorded in the prior-year quarter.
For the September-end quarter, the combined average cost of funds, inclusive of interest rate swap costs, was a net benefit of 0.03%, against net costs of 0.15% witnessed in the previous year.
The average net interest spread (excluding catch-up premium amortization) was 2.19%, up from 2.15% reported in the prior-year quarter.
As of Sep 30, 2021, AGNC Investment’s cash and cash equivalents totaled $981 million, down from $1.01 billion as of Dec 31, 2020.
Dividend Update and Share Repurchase
In the third quarter, AGNC Investment announced a dividend of 12 cents per share each for July, August and September. Notably, the company announced $11 billion in common stock dividends or $43.96 per common share since its initial public offering in May 2008 through third-quarter 2021.
On Oct 21, 2021, the company's board of directors replaced its existing stock repurchase plan, expiring Dec 31, 2021, with a $1-billion plan to repurchase through Dec 31, 2022.
Our Take
In the third quarter, mortgage rates increased marginally on a sequential basis. This limited refinancing activities in the quarter, thereby, reducing levels of constant prepayment rate for AGNC Investment.Also, the near-zero interest rate environment has facilitated a reduction in funding costs. This has kept interest expenses under control in the third quarter.
However, the increasing risk of rate volatility over the upcoming months on the Fed’s tapering plans keeps us apprehensive.
AGNC Investment Corp. Price, Consensus and EPS Surprise
We now look forward to the earnings releases of other mortgage REITs like Annaly Capital Management, Inc. (NLY - Free Report) , Arbor Realty Trust, Inc. (ABR - Free Report) and Chimera Investment Corporation (CIM - Free Report) , which are scheduled to release their results on Oct 27, Oct 29 and Nov 3, respectively.
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AGNC Investment (AGNC) Tops on Q3 Net Spread and Dollar Roll
AGNC Investment Corp. (AGNC - Free Report) reported a third-quarter 2021 net spread and dollar roll income per common share (excluding estimated "catch-up" premium amortization costs) of 75 cents per share, beating the Zacks Consensus Estimate of 63 cents. However, the reported figure declined from the third-quarter 2020 number of 81 cents.
Adjusted net interest and dollar roll income (excluding catch-up premium amortization) was $443 million, surpassing the Zacks Consensus Estimate of $397 million. The reported figure, however, declined from the year-ago number of $494 million.
Net interest income of $279 million declined 7.6% from the prior-year quarter’s $302 million.
The company reported a third-quarter comprehensive income per common share of 37 cents compared with the prior quarter’s income of $1.28.
As of Sep 30, 2021, its tangible net book value per share (“BVPS”) was $16.41, up marginally from $16.39 as of Jun 30, 2021. Also, it compares favorably with BVPS of $15.88 as of Sep 30, 2020.
The economic return on tangible common equity for the company in the reported quarter was 2.3%. This included a dividend per share of 36 cents and an increase of 2 cents in tangible net BVPS.
Inside the Headlines
As of Sep 30, 2021, the company’s investment portfolio aggregated $84.1 billion. This included $53.7 billion of Agency mortgage backed securities, $28.3 billion of to-be-announced (TBA) securities, and $2.1 billion of credit risk transfer and non-Agency securities.
Inclusive of its net TBA position and net payable/ (receivable) for unsettled securities, AGNC Investment’s tangible net book value "at risk" leverage ratio was 7.5X as of Sep 30, 2021, compared with 8.8X in the prior-year quarter.
For the September-end quarter, the company's investment portfolio bore a weighted average actual constant prepayment rate of 22.5%, down from 24.3 % witnessed in third-quarter 2020.
Excluding the net TBA position, AGNC Investment's average asset yield on its portfolio, excluding the net TBA position, was 2.3% in the third quarter, up from 2.28% recorded in the prior-year quarter.
For the September-end quarter, the combined average cost of funds, inclusive of interest rate swap costs, was a net benefit of 0.03%, against net costs of 0.15% witnessed in the previous year.
The average net interest spread (excluding catch-up premium amortization) was 2.19%, up from 2.15% reported in the prior-year quarter.
As of Sep 30, 2021, AGNC Investment’s cash and cash equivalents totaled $981 million, down from $1.01 billion as of Dec 31, 2020.
Dividend Update and Share Repurchase
In the third quarter, AGNC Investment announced a dividend of 12 cents per share each for July, August and September. Notably, the company announced $11 billion in common stock dividends or $43.96 per common share since its initial public offering in May 2008 through third-quarter 2021.
On Oct 21, 2021, the company's board of directors replaced its existing stock repurchase plan, expiring Dec 31, 2021, with a $1-billion plan to repurchase through Dec 31, 2022.
Our Take
In the third quarter, mortgage rates increased marginally on a sequential basis. This limited refinancing activities in the quarter, thereby, reducing levels of constant prepayment rate for AGNC Investment.Also, the near-zero interest rate environment has facilitated a reduction in funding costs. This has kept interest expenses under control in the third quarter.
However, the increasing risk of rate volatility over the upcoming months on the Fed’s tapering plans keeps us apprehensive.
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 #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
We now look forward to the earnings releases of other mortgage REITs like Annaly Capital Management, Inc. (NLY - Free Report) , Arbor Realty Trust, Inc. (ABR - Free Report) and Chimera Investment Corporation (CIM - Free Report) , which are scheduled to release their results on Oct 27, Oct 29 and Nov 3, respectively.