AGNC Investment Corp.

AGNC Investment Corp. operates as a leading provider of private capital to the U.S. housing market, primarily investing in Agency residential mortgage-backed securities (RMBS) on a leveraged basis to enhance liquidity and facilitate home ownership in the U.S. ¹. The company's investments consist of residential mortgage pass-through securities and collateralized mortgage obligations (CMOs) where principal and interest payments are guaranteed by U.S. Government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac, or by a U.S. Government agency such as Ginnie Mae ². AGNC also invests in Agency multifamily mortgage-backed securities (MBS) with similar GSE guarantees and other non-Agency assets related to housing, mortgage, or real estate markets ³. The company operates as a real estate investment trust (REIT) under the Internal Revenue Code, requiring it to distribute annually at least 90% of its taxable income to avoid U.S. federal or state corporate income tax ⁴.

The core business model of AGNC Investment Corp. is to generate favorable long-term stockholder returns with a substantial yield component ⁵. This is achieved through interest earned on investments, net of associated borrowing and hedging costs, and net realized gains and losses from investment and hedging activities ⁶. The company funds its investments primarily through collateralized borrowings structured as repurchase agreements ⁷. AGNC employs an active management strategy, dynamically adjusting its portfolio composition, investment, funding, and hedging strategies based on market conditions, which include interest rates, prepayment expectations, liquidity, housing prices, unemployment rates, general economic conditions, government participation in the mortgage market, regulations, and relative returns on other assets ⁸.

AGNC's targeted investments predominantly consist of Agency RMBS, which are pass-through certificates representing interests in pools of mortgage loans secured by residential real property, with principal and interest payments guaranteed by a GSE or U.S. Government agency ⁹. The company may also invest in Agency CMOs, which are structured instruments backed by Agency RMBS pools ¹⁰, and To-Be-Announced Forward Contracts (TBAs), which are forward contracts to purchase or sell Agency RMBS ¹¹. Additionally, AGNC invests in Agency multifamily MBS, guaranteed by a GSE, primarily through Fannie Mae's Delegated Underwriting and Servicing (DUS) program ¹². Non-Agency securities include Credit Risk Transfer (CRT) securities, which transfer credit loss risk from GSEs to private investors ¹³, Non-Agency Residential Mortgage-Backed Securities (Non-Agency RMBS) backed by privately issued residential mortgages ¹⁴, and Commercial Mortgage-Backed Securities (CMBS) backed by commercial property loans ¹⁵. As of December 31, 2025, 30-year fixed-rate Agency RMBS and TBAs constituted 95% of the investment portfolio ¹⁶. The weighted average coupon of the portfolio, excluding TBAs, increased to 5.19% as of December 31, 2025, from 5.03% as of December 31, 2024 ¹⁷. Including TBAs, the weighted average coupon of the fixed-rate portfolio increased to 5.12% from 5.02% ¹⁸. The portion of the fixed-rate investment portfolio with favorable prepayment attributes increased to 76% as of December 31, 2025, from 74% as of December 31, 2024 ¹⁹.

For the fiscal year ended December 31, 2025, AGNC reported total assets of $115.077 billion ²⁰, an increase from $88.015 billion in 2024 ²¹. Total liabilities were $102.684 billion ²², up from $78.253 billion in 2024 ²³. Total stockholders' equity stood at $12.393 billion ²⁴, compared to $9.762 billion in 2024 ²⁵. Net income for 2025 was $1.670 billion ²⁶, significantly higher than $863 million in 2024 ²⁷. Diluted EPS was $1.47 ²⁸ in 2025, up from $0.93 in 2024 ²⁹. Comprehensive income available to common stockholders was $1.777 billion ³⁰ in 2025, compared to $657 million in 2024 ³¹. Dividends declared per common share remained constant at $1.44 ³² for both 2025 and 2024. The company's "at risk" leverage was 7.2x tangible equity as of December 31, 2025, unchanged from December 31, 2024 ³³. AGNC ended 2025 with a liquidity position of $7.6 billion in unencumbered cash and Agency RMBS, representing 64% of tangible equity ³⁴.

Comparing fiscal year 2025 to 2024, total assets increased by $27.062 billion ³⁵. Total liabilities increased by $24.431 billion ³⁶. Total stockholders' equity increased by $2.631 billion ³⁷. Net interest income increased to $675 million ³⁸ in 2025 from $18 million in 2024 ³⁹. Other gain, net, increased to $1.122 billion ⁴⁰ in 2025 from $955 million in 2024 ⁴¹. Operating expenses increased to $127 million ⁴² in 2025 from $110 million in 2024 ⁴³. The average projected life Constant Prepayment Rate (CPR) for the portfolio increased to 9.6% as of December 31, 2025, from 7.7% as of December 31, 2024 ⁴⁴.

During 2025, AGNC generated total comprehensive income of $1.74 per diluted common share ⁴⁵ and an economic return of 22.7% on tangible common equity ⁴⁶. This economic return was comprised of $1.44 in dividends declared ⁴⁷ and a $0.47 increase in tangible net book value per common share ⁴⁸. The investment portfolio increased by $21.5 billion ⁴⁹ for the year, including a $6.1 billion increase in the TBA position to $13.0 billion ⁵⁰. The company increased its receiver swaption position by $6.9 billion ⁵¹ during the year to provide additional protection in a declining rate environment. AGNC issued $345 million of new preferred equity ⁵² and $2.0 billion of new common equity capital ⁵³ during the year.

Management anticipates that the favorable fundamental and technical backdrop for Agency RMBS, coupled with the Administration's focus on housing affordability and maintaining mortgage market stability, will provide a positive environment for mortgage spreads ⁵⁴. The net supply of new Agency RMBS in 2026 is projected to be approximately $200 billion ⁵⁵, which, combined with an anticipated $200 billion runoff of the Fed's Agency RMBS holdings, is expected to result in a total net supply of approximately $400 billion to be absorbed by the market in 2026 ⁵⁶. Demand for Agency RMBS is expected to remain robust, with GSE purchases potentially accounting for approximately half of the projected 2026 supply ⁵⁷. Banks, money managers, foreign investors, and REITs are also expected to continue as active purchasers of Agency RMBS ⁵⁸.

AGNC expects net spread and dollar roll income to benefit from several factors, including lower funding costs resulting from the September, October, and December 2025 rate cuts totaling 75 basis points ⁵⁹, potential future rate cuts, greater stability in funding markets, and a shift in the hedge mix toward a greater share of swap-based hedges in the fourth quarter of 2025 ⁶⁰. However, management notes that higher hedging costs due to the maturity of legacy lower pay-rate swaps, as well as reduced mortgage spreads, if they materialize in 2026, could offset some or all of these benefits ⁶¹.

The company's duration gap, which measures the estimated difference between the interest rate sensitivity of its assets and liabilities including hedges, extended slightly to 0.4 years as of year-end 2025, compared to 0.3 years as of December 31, 2024 ⁶². AGNC actively manages its portfolio and continuously adjusts the size and composition of its asset and hedge portfolio ⁶³.

As of December 31, 2025, $1.0 billion remained authorized to repurchase shares of common stock through December 31, 2026 ⁶⁴. The company will typically not issue common stock when it believes the capital raised will not be accretive to its tangible net book value or earnings, and will typically not issue preferred equity when its cost exceeds acceptable hurdle rates of return on its equity ⁶⁵.

Management has flagged that U.S. Government legislative and administrative actions may have an adverse impact on financial markets for Agency RMBS ⁶⁶. In January 2026, President Trump announced instructions to the GSEs to acquire approximately $200 billion of Agency MBS to lower mortgage rates and improve housing affordability ⁶⁷. The Administration has also sought input on measures to reduce homeownership costs ⁶⁸. Certain proposals, if implemented, could significantly change prepayment speeds, artificially alter mortgage spreads, or modify terms of existing mortgages and Agency RMBS unfavorably to holders ⁶⁹. Such actions could lead to reduced investor interest, lower market liquidity, increased volatility, and wider mortgage spreads, resulting in higher mortgage lending rates for homeowners ⁷⁰. New regulatory requirements, including changes to clearing U.S. Treasury and Agency RMBS transactions or greater constraints on banks, could adversely affect financing availability or terms, market liquidity, or demand for Agency RMBS ⁷¹. SEC regulations mandating central clearing of U.S. Treasury and U.S. Treasury repurchase agreement transactions will necessitate significant changes to trading operations and could adversely impact liquidity, funding, and efficiency of these markets ⁷².

AGNC Investment Corp. faces inherent spread risk as a levered investor in Agency RMBS, where widening differentials between asset market yield and interest rate hedges can reduce tangible net book value, and hedging instruments typically do not protect against this risk ⁷³. Interest rate and spread volatility pose significant risks, potentially affecting liquidity, increasing costs, and impairing risk management effectiveness, with heightened volatility amplifying exposure to margin calls and reducing unencumbered liquidity ⁷⁴. The participation of the Federal Reserve and other government-related entities in the Agency mortgage market can adversely affect Agency RMBS investments, with reductions in holdings potentially increasing market volatility, reducing liquidity, and widening RMBS spreads, which could materially impact tangible net book value and financial condition ⁷⁵. The company's active portfolio management strategy may lead to greater losses or lower returns if market assessments are incorrect ⁷⁶. A decline in the fair value of assets reduces comprehensive income and can trigger margin calls, requiring additional collateral and potentially forcing asset sales at adverse prices ⁷⁷. Changes in prepayment rates, which are difficult to predict and influenced by various factors beyond interest rates, may adversely affect investment returns by impacting reinvestment yields or extending asset maturities, potentially requiring asset sales to maintain liquidity ⁷⁸. The analytical models and third-party data used for valuation and risk management may be incorrect, misleading, or incomplete, especially during volatile periods or with evolving AI technologies, leading to faulty decisions and potential losses ⁷⁹. The fair value of investments may not be readily determinable or realizable, particularly in forced liquidations, negatively affecting financial results ⁸⁰. Credit-oriented securities, such as CRT and non-Agency MBS, expose AGNC to principal and interest loss due to delinquency or foreclosure on underlying mortgage loans, with private mortgage insurance not guaranteeing full coverage ⁸¹. Geographic concentration of assets can heighten default and loss risk from regional economic conditions or environmental hazards ⁸². Changes in credit spreads, which are often unhedged, can negatively impact profitability and financial condition ⁸³. Competition, reduced supply of desirable Agency RMBS, or other factors may hinder the acquisition of target assets at attractive prices, impacting investment objectives or REIT qualification ⁸⁴. AGNC may change its targeted investments and operational policies without stockholder consent, potentially increasing risk exposure ⁸⁵. Significant leverage amplifies risk exposure to borrowing costs, asset value changes, and margin calls, potentially leading to substantial losses ⁸⁶. The company may be unable to procure or renew funding on favorable terms due to market disruptions, higher interest rates, declining collateral values, increased haircuts, or regulatory limitations on lenders ⁸⁷. Borrowing costs may increase faster than asset yields, negatively impacting net interest margin ⁸⁸. It may become uneconomical to roll TBA dollar roll transactions, requiring physical delivery of securities and potentially forcing asset sales ⁸⁹. Repurchase and derivative agreements subject AGNC to margin calls, which, if unmet, could result in defaults and forced asset sales under adverse market conditions or foreclosure ⁹⁰. Changes to FICC margin requirements could limit access to tri-party repo and centrally-cleared TBA transactions, potentially leading to default and liquidation of collateral ⁹¹. Repurchase and derivative agreements may contain financial and non-financial covenants, and non-compliance could lead to defaults, termination of transactions, and acceleration of obligations ⁹². Rights under repurchase and derivative agreements may be limited in bankruptcy or insolvency, potentially leading to delays or losses in recovering assets ⁹³. Counterparties may not fulfill their obligations, leading to losses, despite diversification efforts ⁹⁴. Hedging strategies may be ineffective due to complexity, inaccurate risk assessment, or external factors like regulatory changes, potentially increasing losses ⁹⁵. The loss of executive officers or key personnel could materially adversely affect the business ⁹⁶. Dependence on information systems and third-party service providers exposes AGNC to significant disruption from system failures or cybersecurity incidents, which could lead to operational disruption, data breaches, regulatory fines, and reputational damage ⁹⁷. The use of artificial intelligence by AGNC or its vendors could introduce additional risks related to data quality, model accuracy, cybersecurity, bias, and operational challenges ⁹⁸. Failure to qualify as a REIT would result in substantial tax liabilities and reduced funds for investments and distributions, adversely impacting stock price ⁹⁹. REIT distribution requirements limit the ability to retain earnings, potentially forcing borrowing or asset sales to meet distribution obligations ¹⁰⁰. Taxable dividends paid in stock may require stockholders to pay income taxes in excess of cash received ¹⁰¹. Even if REIT-qualified, AGNC may face other tax liabilities that reduce cash flow ¹⁰². Complying with REIT requirements may force liquidation or foregoing attractive investment opportunities ¹⁰³. REIT requirements may limit effective hedging and incur tax liabilities ¹⁰⁴. Uncertainty exists regarding the tax treatment of TBAs for REIT asset and income tests, potentially leading to penalty taxes or loss of REIT qualification if challenged by the IRS ¹⁰⁵. REIT qualification involves highly technical and complex Internal Revenue Code provisions, with even technical violations jeopardizing status ¹⁰⁶. The 100% tax on prohibited transactions could limit engaging in certain beneficial transactions ¹⁰⁷. Distributions to tax-exempt investors may be classified as unrelated business taxable income under certain circumstances ¹⁰⁸. Federal housing finance reform and changes to GSE conservatorship or related laws could adversely affect business by altering credit support, modifying GSE roles, or impacting Agency RMBS value and liquidity ¹⁰⁹. Actions by the U.S. Government, including Congress, Fed, Treasury, and FHFA, could adversely affect financial markets for Agency RMBS, potentially changing prepayment speeds, altering mortgage spreads, or modifying existing mortgages unfavorably ¹¹⁰. Failure to satisfy regulatory requirements of the captive broker-dealer subsidiary, Bethesda Securities, LLC, could result in inability to access tri-party repo funding through FICC's GCF Repo service, harming business operations ¹¹¹. Loss of exemption from regulation under the Investment Company Act would substantially reduce leverage ability and materially affect business ¹¹². New legislation or administrative/judicial action could make it difficult or impossible to remain REIT-qualified or otherwise adversely affect REITs ¹¹³. The market price and trading volume of common stock may be volatile due to various factors, including general market conditions, government policy changes, operating results, and changes in dividend policy ¹¹⁴. AGNC has not established a minimum dividend payment level and may be unable to pay dividends in the future ¹¹⁵. The certificate of incorporation generally prohibits ownership of more than 9.8% of common or capital stock, which could delay or prevent a change in control ¹¹⁶.

Management's message to shareholders conveys a positive outlook, emphasizing the company's best-in-class economic return for 2025, driven by favorable Agency RMBS performance and active portfolio management strategies ¹¹⁷. The total return of the Bloomberg US Mortgage Backed Securities Index was 8.6% for the year ¹¹⁸, outperforming the Bloomberg US Treasury Index by 2.3 percentage points ¹¹⁹. This strong performance was attributed to the Federal Reserve's shift towards lower short-term interest rates and greater accommodation, increased fiscal policy clarity, improved short-term funding markets, and the Administration's framework for GSE reform focused on reducing Agency mortgage spreads and improving housing affordability ¹²⁰. Looking ahead, management anticipates a well-balanced supply and demand outlook for Agency RMBS, with an expected net supply of approximately $200 billion in new Agency RMBS in 2026 ¹²¹, and an additional $200 billion from the Fed's anticipated runoff of Agency RMBS holdings ¹²², totaling approximately $400 billion of net supply ¹²³. Management expects robust demand, with GSE purchases potentially accounting for approximately half of the projected 2026 supply ¹²⁴. Strategic priorities include benefiting from lower funding costs due to recent rate cuts totaling 75 basis points ¹²⁵, potential future rate cuts, greater stability in funding markets, and a shift in the hedge mix toward a greater share of swap-based hedges ¹²⁶.