AGNC's Tangible Book Value Per Share Rises 5.6% Despite Q4 Earnings Miss

AGNC Investment Corp. reported fourth-quarter 2025 results that presented a mixed picture for investors. While the company’s net spread and dollar roll income per common share came in at 35 cents—falling short of the consensus projection of 37 cents—a notable bright spot emerged in its book value per share metrics. The tangible net book value per share reached $8.88 as of December 31, 2025, representing a robust 5.6% year-over-year improvement that underscored the company’s ability to build shareholder equity despite near-term earnings headwinds.

Understanding the Book Value Per Share Drivers: Income Versus Costs

The composition of book value per share reflects the delicate balance between net interest income generation and the cost of funds deployed across AGNC’s portfolio. In the fourth quarter, net interest income (NII) totaled $206 million, a meaningful reversal from a net interest expense of $115 million in the prior-year quarter. However, for the full year 2025, NII reached $675 million, which underperformed the consensus estimate of $792.3 million. This shortfall highlighted growing pressure on the fundamental drivers that sustain book value per share growth.

The company’s average asset yield on its mortgage-backed securities portfolio declined to 4.87% in Q4 2025 from 5.02% a year earlier. Simultaneously, the weighted average cost of funds—inclusive of interest rate swaps—climbed to 3.10% from 2.89% in the fourth quarter of 2024. This compression of net interest spreads created a tightening squeeze on earnings power. The average net interest spread (excluding estimated “catch-up” premium amortization benefits) narrowed to 1.81% from 1.91%, a decline that directly impacts the earnings capacity available to support book value per share accumulation.

Despite these headwinds, the economic return on tangible common equity improved to 11.6% in the fourth quarter, versus an economic loss of 0.6% in the year-ago period. This turnaround demonstrated that the company’s book value per share positioning benefited from improved market conditions and strategic portfolio management decisions.

Portfolio Yield Compression Offsets Book Value Per Share Momentum

AGNC’s investment portfolio aggregated $94.8 billion as of December 31, 2025, comprising $81.1 billion of Agency mortgage-backed securities, $13 billion in net forward purchases of Agency MBS in the “to-be-announced” (TBA) securities market, and $0.7 billion of credit risk transfer (CRT) and non-Agency securities. The average constant prepayment rate across the portfolio stood at 9.7%, up slightly from 9.6% in the prior-year quarter, suggesting modest acceleration in mortgage refinancing activity.

The “at risk” leverage ratio remained stable at 7.2X as of year-end 2025, unchanged from the prior-year quarter. This consistency in leverage represented a stabilizing force for book value per share, as management maintained disciplined capital deployment even amid challenging spread dynamics. The stability in this leverage metric provided confidence that the company could sustain its dividend distributions while maintaining book value per share resilience.

Adjusted net interest and dollar roll income available to common stockholders reached $457 million in the quarter, representing a 12.8% increase from the year-ago period. For the full year 2025, adjusted net interest and dollar roll income totaled $1.8 billion, up 1% from 2024. These metrics, while moderate in growth, provided a foundation for the book value per share expansion that materialized during the period.

Dividend Sustainability and Book Value Per Share Growth

Management declared a fourth-quarter dividend of 36 cents per share, continuing the company’s commitment to returning capital to shareholders. Since its initial public offering in May 2008 through the fourth quarter of 2025, AGNC has distributed $15.5 billion, or $50.08 per share, in common stock dividends. The consistency of this dividend policy reflected confidence in the company’s ability to generate sufficient earnings and maintain book value per share levels that support ongoing shareholder distributions.

The company reported fourth-quarter comprehensive income per common share of 89 cents, compared to a comprehensive loss of 11 cents per common share in the year-ago quarter—a significant improvement that bolstered the book value per share trajectory. For the full year 2025, net spread and dollar roll income per common share totaled $1.50 per share, below the consensus estimate of $1.53 and down from $1.88 in 2024, indicating pressure on per-share earnings generation.

Cash and cash equivalents on the balance sheet totaled $450 million as of December 31, 2025, unchanged from the prior quarter, providing adequate liquidity to manage operational needs and opportunistic investment activity.

Risk Factors and Forward Outlook

Management acknowledged several headwinds that could weigh on portfolio performance in the near term. The declining average asset yield, compressed net interest spreads, and elevated weighted average cost of funds presented structural challenges to earnings sustainability. Additionally, volatility in the mortgage market and the possibility of accelerating prepayments posed ongoing risks to investment performance and book value per share accumulation.

However, the company’s portfolio repositioning moves and the maintenance of stable leverage ratios positioned it to cushion against higher interest rate environments and prepayment acceleration. The improvement in tangible book value per share during a challenging rate environment suggested that management’s strategic positioning was beginning to yield results.

AGNC Investment currently carries a Zacks Rank #3 (Hold), reflecting a balanced view of its risk-reward dynamics. Peer companies including Annaly Capital Management (NLY), slated to report fourth-quarter and full-year 2025 results on January 28, and Starwood Property Trust (STWD), expected to release results shortly, face similar dynamics in the mortgage REIT landscape. Market participants will continue monitoring how these companies navigate spread compression while sustaining shareholder returns and preserving book value per share integrity.