AGNC Q4 2020 Earnings Report
Key Takeaways
AGNC Investment Corp. reported a strong fourth quarter in 2020, with a 7.5% economic return on tangible common equity. The company's disciplined investment framework and risk management contributed to the positive results, despite the challenges posed by the COVID-19 pandemic.
Comprehensive income per common share was $1.16.
Net spread and dollar roll income per common share was $0.75, excluding estimated 'catch-up' premium amortization cost.
Tangible net book value per common share increased to $16.71.
The company repurchased 6.6 million shares of common stock for $101 million during the quarter.
AGNC
AGNC
Forward Guidance
The company anticipates that slower prepayments and attractive funding levels should continue to support the risk/return equation for levered investors in Agency MBS.
Positive Outlook
- Longer-term interest rates increased modestly during the fourth quarter, and the yield curve steepened.
- The yield on the 10-year U.S. Treasury ended the quarter at 0.92%, an increase of 23 basis points from the prior quarter.
- Significant Fed purchases, the potential for slower prepayments, and attractive funding levels that will likely remain for an extended period of time should continue to support the risk/return equation for levered investors in Agency MBS.
- Mortgage supply dynamics, together with the Fed's significant purchase activity, continued to result in attractive return opportunities in the TBA dollar roll market
- AGNC generated strong net spread and dollar roll income despite operating with lower average tangible 'at risk' leverage during the quarter of 8.4x, down from 8.9x in the third quarter
Challenges Ahead
- Economic headwinds associated with the pandemic remain.
- Incremental benefit of TBA positions has begun to revert to levels more in line with historical averages.
- Net premium amortization cost on the Company's investment portfolio for the fourth quarter was $(266) million, or $(0.49) per common share
- The Company's average asset yield on its investment portfolio, excluding the TBA position, was 1.64% for the fourth quarter, compared to 2.28% for the prior quarter.
- The weighted average projected CPR for the remaining life of the Company's Agency securities held as of December 31, 2020 increased to 17.6% from 15.9% as of September 30, 2020 largely due to lower primary mortgage rates.