AGNC posted a 6.7% economic return in Q2 2026 as tighter mortgage spreads lifted tangible book value to $8.58 per share; net spread income of $0.40 per share still covers the $0.36 dividend.
Revenue
$305M
+88.3% YoY
Net income
$654M
Diluted EPS
$0.52
This period vs a year ago
Same period last year
This period
Revenue▲+88.3%
≈$162M
$305M
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
Book value rose 2.4% in a volatile quarter, and core income still covers the dividend
AGNC Investment Corp. is an agency mortgage REIT. It buys bundles of US home mortgages that are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae ("Agency MBS"), so borrower defaults are not its main risk. It pays for those bonds mostly with very short-term borrowing (repurchase agreements, or "repo"), earns the gap between the bonds' yield and its funding cost, and pays most of that out as a monthly dividend. Because the business is a leveraged bond portfolio, "revenue" says little about it. What matters is tangible book value per share (what the portfolio is worth per share after debts, excluding goodwill), how much spread income it earns, and the economic return: dividends plus the change in book value.
In the second quarter of 2026 (to June 30), AGNC's tangible book value per common share rose to $8.58 from $8.38 at the end of March, and with $0.36 of dividends that gave a 6.7% economic return for the quarter. GAAP net income was $654 million ($0.52 per diluted share) against a $140 million loss a year earlier. The company's own measure of recurring income, net spread and dollar roll income, was $0.40 per share, down from $0.42 in Q1 but above the $0.38 of Q2 2025.
At a glance
6.7% economic return in the quarter — a recovery from the -1.6% of Q1, but tangible book value ($8.58) is still below the $8.88 it ended 2025 at.
$0.40 of net spread income per share vs a $0.36 dividend — the payout is covered about 1.1 times by recurring income, with a slim cushion.
7.4x "at risk" leverage — about $7.40 of mortgage bonds per $1 of tangible equity, unchanged from Q1 and slightly below 7.6x a year ago.
Key figures
Metric
Q2 2026
Q2 2025
YoY Change
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Net interest income (GAAP)
$305M
$162M
+88.3%
Net income (GAAP)
$654M
$(140)M
Loss to profit
Net income to common stockholders
$610M
$(178)M
Loss to profit
EPS (diluted, GAAP)
$0.52
$(0.17)
Loss to profit
Net spread and dollar roll income (non-GAAP)
$462M
$388M
+19.1%
Net spread and dollar roll income per share
$0.40
$0.38
+5.3%
Tangible net book value per share (period end)
$8.58
$7.81
+9.9%
Economic return on tangible common equity (quarter)
6.7%
(1.0)%
+7.7 pts
Dividends declared per share
$0.36
$0.36
Flat
Average net interest spread (annualized)
2.00%
2.01%
-0.01 pts
Tangible "at risk" leverage (period end)
7.4x
7.6x
-0.2x
Investment portfolio incl. net TBAs
$97.2B
—
—
Source: AGNC's Q2 2026 Form 10-Q and its July 20, 2026 earnings release. "At risk" leverage counts repo and net forward (TBA) positions against tangible equity and excludes repo used to fund short-term Treasury trades.
What drove the quarter
Book value: mortgage spreads tightened. Mortgage bonds are priced as a "spread" (extra yield) over Treasury and swap rates. When that spread narrows, AGNC's bonds gain value relative to its hedges and book value rises. Management says Q2 was dominated by US–Iran hostilities and the constrained Strait of Hormuz, which pushed Treasury yields up, flattened the yield curve and moved market expectations from Fed rate cuts toward possible hikes. Even so, Agency MBS beat Treasuries for a fifth straight quarter. With mortgage rates high, expected new Agency MBS supply fell (management now estimates about $150 billion of net supply this year) while demand stayed strong, including more than $400 billion of bond-fund inflows in the first half.
GAAP income: hedges offset the bond marks. "Other gain (loss), net" was a $379 million gain. The main pieces were $461 million of gains on interest rate swaps and $179 million of swap periodic income, partly offset by $102 million of losses on Treasury positions, $90 million of unrealized losses on securities marked through net income and $80 million of mark-to-market losses on forward (TBA) positions. In Q1 the same line was a $433 million loss. That swing, not a change in the underlying business, is why net income moved from a $148 million loss in Q1 to a $654 million profit in Q2.
Spread income: the portfolio got bigger, the margin didn't. Net spread and dollar roll income rose 19.1% year on year to $462 million, mostly because the business grew. Average investment securities at cost were $83.4 billion vs $67.9 billion a year earlier, funded partly by new shares: 1,164.2 million common shares outstanding vs 1,041.7 million (+11.8%). Per share, the gain was only $0.38 to $0.40. The annualized net interest spread was 2.00%, almost the same as 2.01% a year ago. The average asset yield was 4.89% (excluding "catch-up" amortization), and the all-in cost of funds after swaps was 2.89%. Repo costs fell sharply over the year (3.74% vs 4.44%) because short-term rates are lower, but income from pay-fixed swaps fell too (0.81% of funding vs 1.56%). The swaps AGNC entered when rates were low are being replaced with higher-rate ones: the average fixed rate it pays rose to 2.71% from 1.94%.
Capital raising above book value. AGNC sold 16.2 million shares through its at-the-market program for $167 million net, about $10.31 per share against a tangible book value of $8.58. Selling stock above book value adds to book value per share for existing holders. The company says it generally only issues when that is the case. $2.1 billion of ATM capacity remained at quarter end.
What the headline numbers hide
The 88% jump in GAAP net interest income overstates the improvement. AGNC records periodic income from its interest rate swaps under "other gain (loss)", not in net interest income. As lower short-term rates cut repo costs, more of the benefit shows up in net interest income and less in swap income ($179 million vs $282 million a year earlier). On the company's all-in basis, adjusted net interest and dollar roll income rose from $457 million to $533 million (+16.6%), not +88%.
GAAP profit is mostly marks, not cash earnings. Q2 net income ($654 million) is well above net spread income to common ($462 million) because hedges and bonds gained value. The same accounting produced a $148 million loss in Q1. The year-to-date view is steadier: first-half net income was $506 million, and operating cash flow was $605 million, so cash conversion was not a problem.
The half-year return is modest. Tangible book value fell from $8.88 to $8.58 over the first half, while $0.72 of dividends were declared. By our arithmetic, that is an economic return of about 4.7% for the six months (not annualized), well below the Q2 figure on its own.
Dividend coverage is thin. $0.40 of net spread income per share against a $0.36 dividend leaves about $0.04 of cushion per quarter. Net spread income per share fell $0.02 from Q1. Another quarter or two like that, and the payout would no longer be covered by recurring income.
Book value is highly sensitive to mortgage spreads. Per the 10-Q, a 25 basis-point (0.25 percentage point) widening in mortgage spreads would cut tangible book value per share by about 12.2%, and 50 basis points by about 24.3%. The hedges are built for interest-rate moves, not spread moves. For rates, a parallel +50 basis-point move would cost about 5.3% of book value; a -50 basis-point move would add about 1.5%. The duration gap (how much more rate-sensitive the assets are than the hedged liabilities) widened to 0.7 years from 0.4 years at year end, so the portfolio now carries a little more rate risk.
Prepayments are elevated but falling in forecasts. Actual prepayment speed (CPR) was 13.0% in Q2 vs 8.7% a year ago. Faster prepayments shrink the yield on bonds bought above face value. The projected lifetime CPR fell to 8.6% from 10.3% at the end of March, and premium amortization cost was $47 million ($0.04 per share), including a small $5 million catch-up charge.
Leverage and liquidity were steady. Leverage held at 7.4x, and unencumbered cash plus Agency MBS were $7.5 billion, or 62% of tangible equity. That is a buffer against lenders' margin calls if bond prices fall.
Takeaway: AGNC's quarter was a spread story, not an earnings story. Tighter mortgage spreads lifted book value 2.4% and delivered a 6.7% return. Per-share spread income ($0.40) is barely above the $0.36 dividend, and a quarter-point widening in mortgage spreads would erase roughly 12% of book value. For shareholders, the direction of mortgage spreads matters more than anything in the income statement.
Outlook
Management calls its outlook for Agency MBS "constructive." Its reasoning: with mortgage rates well above 6%, new supply is running below early-2026 expectations, demand from bond funds, banks, foreign investors and REITs remains strong, and Agency MBS spreads are still wide by historical standards while corporate bond spreads are near historic tights. It expects those factors to support Agency MBS performance once geopolitical and monetary-policy uncertainty fades. AGNC does not give earnings guidance.
Our read: a 7.4x leverage level, 94% of the portfolio in 30-year fixed-rate Agency MBS and hedges covering 73% of funding liabilities (82% excluding options) mean results will track mortgage spreads and the Fed path. Continued spread tightening would lift book value, and ATM issuance above book would add to it. The risk is the other side of the same bet: another geopolitical shock that widens spreads, or a hiking cycle that reprices the remaining low-rate swaps faster, would hit book value and squeeze the $0.04 dividend cushion. Things to watch in Q3: whether net spread income per share holds at or above $0.40, whether tangible book value regains its $8.88 year-end level, and whether the monthly $0.12 dividend is maintained.