AGNC Investment Corp.

AGNC Investment Corp. (AGNC) operates as a leading provider of private capital to the U.S. housing market, primarily investing in Agency residential mortgage-backed securities (Agency RMBS) on a leveraged basis ¹. These investments consist of residential mortgage pass-through securities and collateralized mortgage obligations, with principal and interest payments 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. The company's objective is to generate favorable long-term stockholder returns with a substantial yield component, deriving income from the net interest earned on investments and net realized gains and losses from investment and hedging activities ³. AGNC operates as a real estate investment trust (REIT) under the Internal Revenue Code, requiring it to distribute annually 90% of its taxable income to avoid U.S. federal and state corporate income tax ⁴.

AGNC employs an active management strategy, dynamically adjusting its portfolio composition, investment, funding, and hedging strategies in response to evolving market conditions ⁵. The company's success is dependent on its ability to acquire assets at favorable spreads over borrowing costs and it competes with various investors including other mortgage REITs, government entities, banks, specialty finance companies, public and private funds, and insurance companies ⁶. These competitors may possess advantages such as lower cost of funds, access to different funding sources, or fewer regulatory constraints related to REIT and Investment Company Act status ⁷.

The core business model involves generating income from the interest earned on investments, net of associated borrowing and hedging costs, and net realized gains and losses on investment and hedging activities ⁸. The company funds its investments primarily through collateralized borrowings structured as repurchase agreements ⁹. AGNC's revenue mix is primarily recurring interest income, supplemented by transactional gains and losses from investment and hedging activities. Its primary customer segments are not explicitly detailed, but its role is described as enhancing liquidity in the residential real estate mortgage markets and facilitating home ownership in the U.S. ¹⁰.

AGNC's investment portfolio predominantly consists of Agency RMBS, which are pass-through certificates representing interests in pools of mortgage loans secured by residential real property ¹¹. These securities carry a GSE or U.S. Government guarantee against principal loss and are considered a cornerstone of the U.S. financial system, with the $9 trillion Agency market playing a vital role in providing liquidity to homeowners ¹². The company also invests in To-Be-Announced Forward Contracts (TBAs), which are forward contracts to purchase or sell Agency RMBS, and Agency multifamily mortgage-backed securities (Agency multifamily MBS) guaranteed by a GSE ¹³. Non-Agency securities include Credit Risk Transfer (CRT) securities, which transfer credit risk from GSEs or third parties to private investors, and Non-Agency Residential Mortgage-Backed Securities (Non-Agency RMBS) and Commercial Mortgage-Backed Securities (CMBS), which are structured securities backed by pools of residential and commercial mortgages, respectively, issued by private institutions ¹⁴.

As of December 31, 2025, the total investment portfolio was $94.8 billion ¹⁵, an increase from $73.3 billion as of December 31, 2024 ¹⁶. This included $81.1 billion in Agency RMBS at fair value ¹⁷, $13.0 billion in net TBA securities at fair value ¹⁸, and $0.6 billion in CRT, non-Agency RMBS, and CMBS at fair value ¹⁹. Other mortgage credit investments accounted for $70 million ²⁰. 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 ²¹. Including TBAs, the weighted average coupon of the fixed-rate portfolio increased to 5.12% from 5.02% ²². 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 ²³.

For the fiscal year 2025, AGNC generated total comprehensive income of $1.938 billion ²⁴, up from $789 million in 2024 ²⁵. Net income was $1.670 billion ²⁶, compared to $863 million in 2024 ²⁷. Basic earnings per share (EPS) was $1.48 ²⁸, and diluted EPS was $1.47 ²⁹, both higher than $0.93 for basic and diluted EPS in 2024 ³⁰. Interest income increased to $3.523 billion ³¹ in 2025 from $2.949 billion in 2024 ³², while interest expense decreased to $2.848 billion ³³ from $2.931 billion ³⁴. This resulted in net interest income of $675 million ³⁵, a significant increase from $18 million in 2024 ³⁶. Total assets were $115.077 billion ³⁷ as of December 31, 2025, compared to $88.015 billion in 2024 ³⁸. Total liabilities were $102.684 billion ³⁹, up from $78.253 billion ⁴⁰. Total stockholders' equity increased to $12.393 billion ⁴¹ from $9.762 billion ⁴². Repurchase agreements and other debt totaled $85.342 billion ⁴³ as of December 31, 2025, compared to $60.862 billion in 2024 ⁴⁴. The company's "at risk" leverage was 7.2x tangible equity as of December 31, 2025, unchanged from December 31, 2024 ⁴⁵.

In 2025, AGNC generated an economic return of 22.7% on tangible common equity ⁴⁶, comprised of $1.44 in dividends declared ⁴⁷ and a $0.47 increase in tangible net book value per common share ⁴⁸. This compares to an economic return of 13.2% in 2024 ⁴⁹. Net spread and dollar roll income per diluted common share decreased to $1.50 in 2025 from $1.88 in 2024 ⁵⁰, primarily due to lower swap income from maturing legacy interest rate swaps and a timing mismatch in deploying new equity capital ⁵¹. The hedge ratio declined to 77% as of December 31, 2025, from 88% as of December 31, 2024 ⁵². 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 ⁵³, reflecting a 70 basis point decline in the average 30-year mortgage rate to 6.16% at year-end ⁵⁴. AGNC increased its receiver swaption position by $6.9 billion during the year ⁵⁵ to provide additional protection in a declining rate environment. The duration gap extended slightly to 0.4 years as of year-end 2025, compared to 0.3 years as of December 31, 2024 ⁵⁶.

AGNC anticipates a favorable backdrop for mortgage spreads in 2026, supported by current market dynamics and the Administration's focus on housing affordability and mortgage market stability ⁵⁷. The supply and demand outlook for Agency RMBS appears well balanced, with an expected net supply of new Agency RMBS of approximately $200 billion in 2026 ⁵⁸. Coupled with an anticipated $200 billion runoff of the Fed's Agency RMBS holdings, this yields a total net supply of approximately $400 billion to be absorbed by the market in 2026, comparable to the prior two years ⁵⁹. Demand for Agency RMBS is expected to remain robust, with GSE purchases potentially accounting for approximately half of the projected 2026 supply, and continued active purchasing by banks, money managers, foreign investors, and REITs ⁶⁰.

The company 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 ⁶¹. Potential future rate cuts and greater stability in funding markets are also expected to contribute positively ⁶². Additionally, a shift in the hedge mix toward a greater share of swap-based hedges in the fourth quarter of 2025 is anticipated to be beneficial ⁶³.

However, management also flags potential headwinds that could offset some or all of these benefits, specifically higher hedging costs due to the maturity of legacy lower pay-rate swaps, as well as reduced mortgage spreads, if they materialize in 2026 ⁶⁴.

AGNC's planned capital allocation includes maintaining a stock repurchase plan, with $1.0 billion remaining authorized to repurchase shares of common stock through December 31, 2026 ⁶⁵. 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 not issue preferred equity when its cost exceeds acceptable hurdle rates of return on equity ⁶⁶. AGNC intends to pay monthly dividends to its common stockholders in an amount that distributes all or substantially all of its taxable income to maintain its REIT status ⁶⁷.

AGNC faces significant risks, including inherent spread risk as a levered investor in Agency RMBS, where widening spreads between asset yields and interest rate hedges can reduce tangible net book value ⁶⁸. Interest rate and spread volatility pose substantial risks, potentially affecting liquidity, increasing costs, and impairing risk management effectiveness, with heightened volatility amplifying exposure to margin calls and potentially forcing asset sales under adverse conditions ⁶⁹. The Federal Reserve's participation in the Agency mortgage market, including potential changes in its balance sheet reduction strategy or asset sales, could adversely impact mortgage spreads, pricing, and returns ⁷⁰. Active portfolio management, while dynamic, carries the risk of incorrect market assessments leading to underperformance compared to static strategies ⁷¹. A decline in the fair value of assets could reduce comprehensive income, trigger margin calls, and limit the ability to acquire new investments or renew borrowings ⁷². Prepayment and extension risks, driven by unpredictable changes in mortgage rates and other factors, can negatively affect net interest margins and the ability to reinvest at acceptable yields ⁷³. Reliance on analytical models and third-party data for valuation and risk management is subject to inaccuracies, especially during volatile periods or with the evolving use of AI technologies ⁷⁴. The fair value of investments may not be readily determinable or realizable upon disposal, potentially leading to losses ⁷⁵. Credit-oriented securities, such as CRT and non-Agency MBS, expose the company to delinquency and foreclosure risks, which private mortgage insurance may not fully cover ⁷⁶. Changes in credit spreads, which are difficult to hedge, can adversely affect profitability ⁷⁷. Competition and limited supply of desirable Agency RMBS with specific attributes could hinder investment objectives or REIT/Investment Company Act qualification ⁷⁸. Significant leverage, typically six to ten times tangible stockholders' equity, amplifies losses and increases exposure to margin calls and forced asset sales ⁷⁹. The inability to procure or renew funding on favorable terms, or at all, due to market disruptions, higher short-term rates, or increased collateral requirements, could adversely affect business growth ⁸⁰. Borrowing costs may increase faster than asset yields, negatively impacting net interest margin ⁸¹. The FICC's changing margin requirements could limit access to tri-party repo funding and centrally-cleared TBA transactions, potentially leading to default and liquidation of collateral ⁸². Covenants in funding and derivative agreements could trigger defaults if violated, leading to termination of transactions and acceleration of obligations ⁸³. Counterparty defaults on repurchase and derivative agreements could result in losses, despite diversification efforts ⁸⁴. Ineffective hedging strategies, due to complexity, unhedged risks like spread risk, or regulatory changes, could lead to greater losses ⁸⁵. Operational risks include dependence on executive officers and key personnel, and vulnerability to information system failures, cybersecurity incidents, or third-party vendor failures, which could disrupt operations, lead to data breaches, and incur regulatory fines or reputational damage ⁸⁶. The use of AI by AGNC or its vendors introduces risks related to data quality, model accuracy, and bias ⁸⁷. Failure to qualify as a REIT would result in substantial tax liabilities and reduced funds for investments and distributions ⁸⁸. REIT distribution requirements limit capital retention, potentially forcing unfavorable borrowing or asset sales ⁸⁹. Legislative and regulatory changes, particularly regarding federal housing finance reform, the GSE conservatorships, or U.S. fiscal policy, could adversely affect the Agency RMBS market, liquidity, and the company's business ⁹⁰. Failure of the captive broker-dealer subsidiary, Bethesda Securities, LLC, to meet regulatory requirements could prevent access to critical funding sources ⁹¹. Loss of the Investment Company Act exemption would substantially reduce leverage capacity and fundamentally alter the business model ⁹². Finally, the market price and trading volume of common stock may be volatile due to various factors, and there is no guarantee of future dividend payments ⁹³.

Management's message to shareholders emphasizes AGNC's strong performance in 2025, with Agency RMBS outperforming domestic fixed income alternatives, driving a best-in-class economic return of 22.7% on tangible common equity ⁹⁴. This return was comprised of $1.44 in dividends declared and a $0.47 increase in tangible net book value per common share ⁹⁵. The company highlights the Federal Reserve's shift towards lower short-term interest rates and greater accommodation, greater fiscal policy clarity, and improved short-term funding markets as key factors contributing to the strong performance of Agency RMBS ⁹⁶. Management also notes the Administration's articulated framework for GSE reform, focusing on reducing Agency mortgage spreads, maintaining mortgage market stability, and improving housing affordability, as a favorable backdrop for mortgage spreads ⁹⁷. Looking ahead to 2026, management expects net spread and dollar roll income to benefit from lower funding costs due to the 75 basis points in rate cuts in September, October, and December 2025, potential future rate cuts, and greater stability in funding markets ⁹⁸. A strategic shift in the hedge mix towards a greater share of swap-based hedges in the fourth quarter of 2025 is also anticipated to be beneficial ⁹⁹. However, management acknowledges that higher hedging costs from maturing legacy lower pay-rate swaps and reduced mortgage spreads in 2026 could offset some of these benefits ¹⁰⁰. The company's strategic priorities include maintaining an active management strategy that is dynamic and responsive to evolving market conditions, with a focus on asset selection, managing financing, interest rate, prepayment, extension, and credit risks, and ensuring compliance with REIT and Investment Company Act exemption requirements ¹⁰¹.