AGNC Investment Corp. Q4 FY2024 earnings call

• Favorable investment themes for agency mortgage-backed securities continued in 2024 with Fed shifting to neutral monetary policy, easing inflation and interest rate volatility. • AGNC generated positive economic return of 13.2% in 2024, but negative economic return in fourth quarter due to sharp increase in interest rates and modestly wider agency spreads. • In 2025, outlook for agency MBS remains favorable with balanced supply and demand, possible greater bank demand, and attractive return profile. • Raised $511 million of common stock in fourth quarter through at-the-market offering program, bringing total issuance of accretive common equity for the year to ~$2 billion. • Added ~$2 billion in agency MBS in fourth quarter, portfolio totaled $73.3 billion as of December 31st, concentrated later in the quarter at attractive spreads and continued to add in January. • Moved up in coupon, reducing holdings in 4.5s and lower coupons by ~$6 billion, adding ~$8 billion in 5% higher coupons. • Non-agency securities portfolio ended the quarter at $884 million, slightly down from previous quarter. • Added close to $12 billion in longer-term mostly treasury-based hedges during fourth quarter, hedge ratio to funding liabilities increased materially to 91% and treasury-based hedges as percentage of hedge portfolio was 53% on dollar duration basis as of quarter end

For the fourth quarter, AGNC had a comprehensive loss of $0.11 per common share. Economic return on tangible common equity was negative 0.6% for the quarter, comprised of $0.36 of dividends declared per common share and a $0.41 decline in tangible net book value per share. Full year economic return was a positive 13.2%, driven by a monthly dividend totaling $1.44 per common share and a $0.29 decline in tangible net book value per share. Average and ending leverage for the fourth quarter was unchanged at 7.2 times tangible equity. Concluded the quarter with unencumbered cash and agency MBS of $6.1 billion or 66% of tangible equity. Average projected life CPR for portfolio at quarter end decreased to 7.7% from 13.2% at end of third quarter. Actual CPRs for the quarter averaged 9.6% up from 7.3% in third quarter. Net spread and dollar roll income declined by $0.06 to $0.37 per common share in fourth quarter due to a 30 basis point narrowing of net interest rate spread to just above 190 basis points

• Outlook for agency mortgage-backed securities in 2025 is very favorable with balanced supply and demand, possible upside demand from greater bank demand. • Expect agency spreads to remain in current attractive trading range. • Will approach capital issuance and management opportunistically, looking at accretion benefit and book value benefit. • Expected gross ROEs on a go-forward basis between 17% and 18.5% align with total cost of capital. • Interest rate volatility expected to remain relatively low going forward, which should translate to lower hedge costs

• Monetary policy and interest rate volatility could cause interest rates to move materially higher or lower than anticipated, putting pressure on fixed income broadly and mortgage spreads. • Uncertainty regarding the GSE conservatorships and housing finance system changes could create spread volatility. • Bank regulation uncertainty could impact bank demand for mortgages. • Repo market volatility due to Fed draining bank reserves could lead to slightly higher costs, but not a limiting factor for demand

Q: Bose George asked about equity issuance potential magnitude, ROE math with treasury futures vs swaps.

A: Peter Federico discussed opportunistic equity issuance approach, difference in capital raises and deployments in previous quarters, and explained ROE math with treasury-based vs swap-based hedges.

Q: Doug Harter asked about dividend outlook.

A: Peter Federico talked about total cost of capital hurdle rate compared to expected gross ROEs and how interest rate volatility impacts.

Q: Crispin Love asked about hedge ratio and agency MBS demand.

A: Peter Federico explained increase in hedge ratio due to election uncertainty and interest rate volatility, and discussed agency MBS demand with supply and demand factors.

Q: Trevor Cranston asked about leverage target and TBA vs spec pools.

A: Peter Federico talked about leverage consistency and importance of spread attractiveness and stability, and Chris Kuehl discussed allocation to higher coupons and TBA vs spec pools.

Q: Eric Hagen asked about prepayment risk, bank regulation impact on repo.

A: Peter Federico discussed prepayment risk management and bank regulation impact on bank appetite and repo market.

Q: Jason Stewart asked about impact of ATM timing and treasury futures on earnings.

A: Peter Federico and Bernie Bell discussed impact of ATM timing on book value accretion and treasury futures carry component.

Q: Harsh Hemnani asked about risks to spread base case.

A: Peter Federico and Chris Kuehl discussed risks from monetary policy, GSE conservatorship uncertainty, bank securities growth, and overseas activity