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AGNC Investment Corp. (AGNC) shareholders got a mixed bag on Monday, and the market's reaction Tuesday morning was not kind. The mortgage REIT reported third-quarter results that were fine on the earnings line and short on the top line, and the stock was trading lower in premarket action.
Adjusted EPS of 37 cents landed right in line with estimates. Revenue of $402 million, though, fell short of the $448.4 million analyst consensus. That gap is the kind of thing that gets noticed.
Here's the number that matters most for a mortgage REIT: tangible net book value came in at $7.13 per common share as of Sept. 30, 2026. That's down 16.9% from $8.58 at the end of the prior quarter.
The company recorded a negative 12.7% economic return on tangible common equity for the quarter. CFO Bernice Bell put the pieces together plainly: the return reflected 36 cents in dividends per share and a $1.45 decline in tangible book value per share.
Net spread and dollar roll income was 37 cents per common share, down from 40 cents in the prior quarter.
AGNC's investment portfolio totaled $94.4 billion as of Sept. 30, including $91.4 billion in Agency mortgage-backed securities. The breakdown also cited $93.8 billion in Agency MBS and to-be-announced securities, with 30-year fixed-rate securities making up 94% of the portfolio.
The weighted average coupon on fixed-rate Agency MBS and TBA securities ticked up to 5.13% from 5.04% in June. Prepayment behavior moved in the friendlier direction too: the projected prepayment rate over the remaining life of its Agency securities fell to 6.7% from 8.6%, while the actual prepayment rate declined to 8.2% from 13%.
The annualized net interest spread narrowed to 1.86% from 2.00%, excluding catch-up premium amortization. AGNC's combined weighted average cost of funds, including interest rate swaps, rose to 3.09% from 2.89%.
Leverage climbed as well. The quarter-end at-risk leverage ratio rose to 7.9x from 7.4x, while the average leverage ratio stood at 7.6x.
The hedge book got beefier. Hedges covered 90% of funding liabilities, up from 73% in June, or 97% excluding option-based hedges, compared with 82% previously. As of Sept. 30, pay-fixed interest rate swaps totaled $74.6 billion in notional value, the net short U.S. Treasury position stood at $11.1 billion, and receiver swaptions totaled $6.3 billion.
Unencumbered cash and Agency MBS totaled $6.3 billion, equal to 57% of tangible equity. AGNC also raised $992 million in net proceeds by issuing 97.6 million common shares through its at-the-market offering program.
Bell noted the company benefited from higher trading volumes and issued shares at a significant premium to tangible book value. AGNC also joined the S&P MidCap 400 Index during the quarter.
President and CEO Peter Federico did not sugarcoat the quarter. Rising interest rates and heightened volatility pressured fixed-income markets, he said, with Agency MBS becoming the weakest-performing sector of the Bloomberg U.S. Aggregate Bond Index.
But he sees potential for a recovery. Mortgage spreads are approaching the upper end of their multiyear range, refinancing risk is declining, and supply-demand conditions remain balanced. For a sector that just got beaten up, that's the pitch.
The company's quarterly conference call is scheduled today at 8:30 AM.
Price Action: AGNC Investment shares were trading lower by 0.85% at $8.36 during premarket trading on Tuesday. The stock is trading at a new 52-week low, according to market data.
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