AGNC Investment Corp. 8.75% Series H Fixed-Rate Cumulative Redeemable Preferred Stock Q4 FY2024 earnings call

Peter Federico mentioned favorable investment themes for agency mortgage-backed securities with Fed policy shifts. Chris Kuehl discussed fixed income landscape in 2024 with agency MBS performance affected by policy and election. AGNC added ~$2 billion in agency MBS in Q4, portfolio totaled $73.3 billion. Moved to higher coupons, TBA position mainly Ginnie Mae TBAs. Non-agency portfolio down slightly. Added ~$12 billion in longer-term treasury-based hedges, hedge ratio increased to 91%, may increase swap-based hedges.

AGNC had a positive economic return of 13.2% in 2024. For the fourth quarter, there was a comprehensive loss of $0.11 per common share, with economic return on tangible common equity negative 0.6%. The company opportunistically raised $511 million of common stock in the fourth quarter, bringing total issuance of accretive common equity for the year to approximately $2 billion. Average and ending leverage for the fourth quarter was 7.2 times tangible equity. Unencumbered cash and agency MBS at quarter end were $6.1 billion or 66% of tangible equity. Net spread and dollar roll income declined by $0.06 to $0.37 per common share in the fourth quarter.

Management expects favorable outlook for agency mortgage-backed securities in 2025 with balanced supply and demand. Agency spreads expected to remain in attractive range. Long-term interest rates increased, 30-year primary mortgage rate near 7%. Supply and demand for agency MBS well balanced, bank demand possible increase. AGNC's common stock provides easy investment in this asset class.

Risks include monetary and fiscal policy uncertainty, Fed rate cut expectations change, presidential election impact on fiscal policy and treasury issuance. Interest rate volatility affecting returns. Uncertainty in agency mortgage market structure changes. Repo market volatility may increase costs.

Q: Bose George asked about equity issuance magnitude and ROE math when funding with treasury futures vs swaps.

A: Peter Federico discussed opportunistic equity issuance and differences in ROE with treasury vs swap hedges.

Q: Doug Harter asked about dividend outlook and volatility.

A: Peter Federico talked about dividend outlook based on cost of capital and expected ROE, and volatility impact.

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

A: Peter Federico and Chris Kuehl discussed hedge ratio change and agency MBS demand outlook.

Q: Trevor Cranston asked about leverage target and relative value.

A: Peter Federico and Christopher Kuehl answered on leverage and relative value of TBAs vs spec pools.

Q: Eric Hagen asked about bank regulation impact and repo market.

A: Peter Federico discussed bank regulation impact and repo market volatility.

Q: Jason Stewart asked about futures impact and ATM timing.

A: Peter Federico and Bernie Bell answered on futures impact and ATM timing.

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

A: Peter Federico and Christopher Kuehl discussed risks to spread base case.