What changed in this filing

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Item 1. Financial Statements

2020-11-05 compared with 2020-08-07 · 120 added, 126 removed, 783 unchanged (24% of the section changed)

3 unchanged sentences

(in millions, except per share data)

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Agency securities, at fair value (including pledged securities of $ 55,711 and $ 92,608 , respectively)

34 unchanged sentences

(in millions, except per share data)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

5 unchanged sentences

Gain on sale of investment securities, net 346 89 993 281

Unrealized gain on investment securities measured at fair value through net income, net 679 759 876 1,819

Loss on derivative instruments and other securities, net ( 385 ) ( 1,438 ) ( 3,539 ) ( 2,438 )

Unrealized gain (loss) on investment securities measured at fair value through net income, net ( 365 ) 355 511 2,174

Gain (loss) on derivative instruments and other securities, net 400 ( 548 ) ( 3,139 ) ( 2,986 )

Total other gain (loss), net:

28 unchanged sentences

Shares Amount

Balance, March 31, 2019 $ 711 536.3 $ 5 $ 13,795 $ ( 3,467 ) $ ( 543 ) $ 10,501

Balance, June 30, 2019 $ 711 547.8 $ 5 $ 13,988 $ ( 4,194 ) $ ( 164 ) $ 10,346

Net loss — — — — ( 4 ) — ( 4 )

2 unchanged sentences

Stock-based compensation — — — 3 — — 3

— 0.1 — 3 — — 3

Issuance of common stock, net of offering cost

— 11.4 — 190 — — 190

Repurchase of common stock — (6.9) — (103) — — ( 103 )

Preferred dividends declared — — — — ( 13 ) — ( 13 )

— — — — ( 13 ) — ( 13 )

Common dividends declared — — — — ( 262 ) — ( 262 )

— — — — ( 270 ) — ( 270 )

Balance, September 30, 2019 $ 711 540.9 $ 5 $ 13,888 $ ( 4,473 ) $ 82 $ 10,213

Balance, June 30, 2020 $ 1,489 555.5 $ 6 $ 14,191 $ ( 6,100 ) $ 764 $ 10,350

Balance, March 31, 2020 $ 1,489 567.7 $ 6 $ 14,334 $ ( 6,592 ) $ 561 $ 9,798

Net income — — — — 662 — 662

2 unchanged sentences

Stock-based compensation — — — 5 — — 5

— — — 4 — — 4

Repurchase of common stock — ( 10.3 ) ( 1 ) ( 143 ) — — ( 144 )

— ( 12.2 ) — ( 147 ) — — ( 147 )

Preferred dividends declared — — — — ( 25 ) — ( 25 )

— — — — ( 25 ) — ( 25 )

Common dividends declared — — — — ( 198 ) — ( 198 )

— — — — ( 201 ) — ( 201 )

Balance, June 30, 2020 $ 1,489 555.5 $ 6 $ 14,191 $ ( 6,100 ) $ 764 $ 10,350

Balance, September 30, 2020 $ 1,489 545.2 $ 5 $ 14,053 $ ( 5,661 ) $ 834 $ 10,720

Balance, December 31, 2018 $ 484 536.3 $ 5 $ 13,793 $ ( 3,433 ) $ ( 943 ) $ 9,906

3 unchanged sentences

Stock-based compensation — 0.1 — 8 — — 8

— 0.1 — 5 — — 5

Issuance of common stock, net of offering cost — 11.4 — 190 — — 190

— 11.4 — 190 — — 190

Repurchase of common stock — ( 6.9 ) — ( 103 ) — — (103)

Issuance of preferred stock, net of offering cost 227 — — — — — 227

227 — — — — — 227

Preferred dividends declared — — — — ( 36 ) — ( 36 )

— — — — ( 23 ) — ( 23 )

Common dividends declared — — — — ( 821 ) — ( 821 )

— — — — ( 559 ) — ( 559 )

Balance, June 30, 2019 $ 711 547.8 $ 5 $ 13,988 $ ( 4,194 ) $ ( 164 ) $ 10,346

Balance, September 30, 2019 $ 711 540.9 $ 5 $ 13,888 $ ( 4,473 ) $ 82 $ 10,213

Balance, December 31, 2019 $ 932 540.9 $ 5 $ 13,893 $ ( 3,886 ) $ 97 $ 11,041

3 unchanged sentences

Stock-based compensation — 0.1 — 12 — — 12

— 0.1 — 7 — — 7

Issuance of preferred stock, net of offering cost 557 — — — — — 557

557 — — — — — 557

Issuance of common stock, net of offering cost — 26.7 1 438 — — 439

— 26.7 1 438 — — 439

Repurchase of common stock — ( 22.5 ) ( 1 ) ( 290 ) — — ( 291 )

— ( 12.2 ) — ( 147 ) — — ( 147 )

Preferred dividends declared — — — — ( 71 ) — ( 71 )

— — — — ( 46 ) — ( 46 )

Common dividends declared — — — — ( 663 ) — ( 663 )

— — — — ( 465 ) — ( 465 )

Balance, June 30, 2020 $ 1,489 555.5 $ 6 $ 14,191 $ ( 6,100 ) $ 764 $ 10,350

Balance, September 30, 2020 $ 1,489 545.2 $ 5 $ 14,053 $ ( 5,661 ) $ 834 $ 10,720

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(in millions)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities:

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(Increase) decrease in other assets 104 ( 35 )

Increase (decrease) in accounts payable and other accrued liabilities ( 210 ) 22

Decrease in accounts payable and other accrued liabilities ( 189 ) ( 31 )

Net cash provided by operating activities 1,337 807

73 unchanged sentences

Since all of our available-for-sale designated securities consist of Agency RMBS, we do not have an allowance for credit losses.

We have not recognized impairment losses on our available-for-sale securities through net income for any of the periods presented in our consolidated financial statements.

We have not recognized impairment losses on our available-for-sale securities through net income for the periods presented in our consolidated financial statements.

Interest Income

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We use interest rate swaps to economically hedge the variable cash flows associated with our borrowings made under repurchase agreements.

Under our interest rate swap agreements, we typically pay a fixed rate and receive a floating rate ("payer swaps") based on a short-term benchmark rate, such as the Overnight Index Swap Rate ("OIS"), Secured Overnight Financing Rate ("SOFR") or three-month London Interbank Offered Rate ("LIBOR").

Under our interest rate swap agreements, we typically pay a fixed rate and receive a floating rate ("payer swaps") based on a short-term benchmark rate, such as the Secured Overnight Financing Rate ("SOFR"), Overnight Index Swap Rate ("OIS") or three-month London Interbank Offered Rate ("LIBOR").

Our interest rate swaps typically have terms from one to 10 years but may extend up to 20 years or more.

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Investment Securities

As of June 30, 2020 and December 31, 2019, our investment portfolio consisted of $ 77.1 billion and $ 100.4 billion of investment securities, at fair value, respectively, and $ 20.5 billion and $ 7.4 billion of net TBA securities, at fair value, respectively.

Our net TBA position is reported at its net carrying value of $ 130 million and $ 25 million as of June 30, 2020 and December 31, 2019, respectively, in derivative assets / (liabilities) on our accompanying consolidated balance sheets.

As of September 30, 2020 and December 31, 2019, our investment portfolio consisted of $ 68.0 billion and $ 100.4 billion of investment securities, at fair value, respectively, and $ 29.5 billion and $ 7.4 billion of net TBA securities, at fair value, respectively.

Our net TBA position is reported at its net carrying value of $ 76 million and $ 25 million as of September 30, 2020 and December 31, 2019, respectively, in derivative assets / (liabilities) on our accompanying consolidated balance sheets.

The net carrying value of our TBA position represents the difference between the fair value of the underlying Agency security in the TBA contract and the cost basis or the forward price to be paid or received for the underlying Agency security.

As of June 30, 2020 and December 31, 2019, our investment securities had a net unamortized premium balance of $ 2.9 billion and $ 3.1 billion, respectively.

The following tables summarize our investment securities as of June 30, 2020 and December 31, 2019, excluding TBA securities, (dollars in millions).

As of September 30, 2020 and December 31, 2019, our investment securities had a net unamortized premium balance of $ 2.6 billion and $ 3.1 billion, respectively.

The following tables summarize our investment securities as of September 30, 2020 and December 31, 2019, excluding TBA securities, (dollars in millions).

Details of our TBA securities as of each of the respective dates are included in Note 6.

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Investment Securities Amortized

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Total investment securities $ 65,024 $ 68,044 $ 98,670 $ 100,442

June 30, 2020

September 30, 2020

Agency RMBS Non-Agency

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Total securities, at fair value $ 46,087 $ 20,774 $ 18 $ 177 $ 335 $ 653 $ 68,044

Weighted average coupon as of June 30, 2020

Weighted average coupon as of September 30, 2020

3.49 % 3.79 % 3.58 % 4.20 % 4.13 % 3.31 % 3.59 %

Weighted average yield as of June 30, 2020 1

Weighted average yield as of September 30, 2020 1

2.49 % 2.66 % 2.22 % 0.53 % 4.40 % 3.47 % 2.56 %

________________________________

Incorporates a weighted average future constant prepayment rate assumption of 16.6 % based on forward rates as of June 30, 2020.

Incorporates a weighted average future constant prepayment rate assumption of 15.9 % based on forward rates as of September 30, 2020.

December 31, 2019

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Incorporates a weighted average future constant prepayment rate assumption of 10.8 % based on forward rates as of December 31, 2019.

As of June 30, 2020 and December 31, 2019, our investments in CRT and non-Agency securities had the following credit ratings:

June 30, 2020 December 31, 2019

As of September 30, 2020 and December 31, 2019, our investments in CRT and non-Agency securities had the following credit ratings:

September 30, 2020 December 31, 2019

CRT and Non-Agency Security Credit Ratings 1

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The actual maturities of our credit-oriented investments are primarily impacted by their contractual lives and default and loss recovery rates.

As of June 30, 2020 and December 31, 2019, the weighted average expected constant prepayment rate ("CPR") over the remaining life of our Agency and high credit quality non-Agency RMBS investment portfolio was 16.6 % and 10.8 %, respectively.

As of September 30, 2020 and December 31, 2019, the weighted average expected constant prepayment rate ("CPR") over the remaining life of our Agency and high credit quality non-Agency RMBS investment portfolio was 15.9 % and 10.8 %, respectively.

Our estimates can differ materially for different securities and thus our individual holdings have a wide range of projected CPRs.

The following table summarizes our investments as of June 30, 2020 and December 31, 2019 according to their estimated weighted average life classification (dollars in millions):

June 30, 2020 December 31, 2019

The following table summarizes our investments as of September 30, 2020 and December 31, 2019 according to their estimated weighted average life classification (dollars in millions):

September 30, 2020 December 31, 2019

Estimated Weighted Average Life of Investment Securities Fair Value Amortized

9 unchanged sentences

$ 68,044 $ 65,024 3.59 % 2.56 % $ 100,442 $ 98,670 3.68 % 3.07 %

The following table presents the gross unrealized loss and fair values of securities classified as available-for-sale by length of time that such securities have been in a continuous unrealized loss position as of June 30, 2020 and December 31, 2019 (in millions):

Unrealized Loss Position For

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Value Unrealized

June 30, 2020 $ — $ — $ 22 $ ( 1 ) $ 22 $ ( 1 )

September 30, 2020 $ 13 $ — $ — $ — $ 13 $ —

December 31, 2019 $ 1,653 $ ( 12 ) $ 6,984 $ ( 63 ) $ 8,637 $ ( 75 )

Gains and Losses on Sale of Investment Securities

The following table is a summary of our net gain (loss) from the sale of investment securities for the three and six months ended June 30, 2020 and 2019 by investment classification of accounting (in millions):

The following table is a summary of our net gain (loss) from the sale of investment securities for the three and nine months ended September 30, 2020 and 2019 by investment classification of accounting (in millions):

Three Months Ended June 30,

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Net gain (loss) on sale of investment securities $ — $ 346 $ 346 $ — $ 89 $ 89

Six Months Ended June 30,

Nine Months Ended September 30,

Investment Securities Available-for-Sale

17 unchanged sentences

If the fair value of our pledged securities declines, lenders will typically require us to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as "margin calls." Similarly, if the fair value of our pledged securities increases, lenders may release collateral back to us.

As of June 30, 2020, we had met all margin call requirements.

As of September 30, 2020, we had met all margin call requirements.

For additional information regarding our pledged assets, please refer to Note 7.

As of June 30, 2020 and December 31, 2019, we had $ 69.7 billion and $ 89.2 billion, respectively, of repurchase agreements outstanding used to fund our investment portfolio and temporary holdings of U.S.

As of September 30, 2020 and December 31, 2019, we had $ 54.6 billion and $ 89.2 billion, respectively, of repurchase agreements outstanding used to fund our investment portfolio and temporary holdings of U.S.

Treasury securities.

The terms and conditions of our repurchase agreements are typically negotiated on a transaction-by-transaction basis.

Our repurchase agreements with original maturities greater than one year have floating interest rates based on an index plus or minus a fixed spread.

The following table summarizes our borrowings under repurchase agreements by their remaining maturities as of June 30, 2020 and December 31, 2019 (dollars in millions):

June 30, 2020 December 31, 2019

Our repurchase agreements with original maturities greater than one year may have floating interest rates based on an index plus or minus a fixed spread.

The following table summarizes our borrowings under repurchase agreements by their remaining maturities as of September 30, 2020 and December 31, 2019 (dollars in millions):

September 30, 2020 December 31, 2019

Remaining Maturity Repurchase Agreements Weighted

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Total $ 54,566 0.37 % 55 $ 89,182 2.17 % 55

As of June 30, 2020 and December 31, 2019, $ 13.0 billion and $ 17.0 billion, respectively, of our repurchase agreements had a remaining maturity of one business day and none of our repurchase agreements were due on demand.

As of June 30, 2020, we had $ 1.5 billion of forward commitments to enter into repurchase agreements, with a weighted average forward start date of 1 day and a weighted average interest rate of 0.30 %.

As of September 30, 2020 and December 31, 2019, $ 8.9 billion and $ 17.0 billion, respectively, of our repurchase agreements had a remaining maturity of one business day and none of our repurchase agreements were due on demand.

As of September 30, 2020, we had $ 1.5 billion of forward commitments to enter into repurchase agreements, with a weighted average forward start date of 93 days and a weighted average interest rate of 0.25 %.

As of December 31, 2019, we had $ 4.5 billion of forward commitments to enter into repurchase agreements, with a weighted average forward start date of 12 days and a weighted average interest rate of 1.60 %.

As of June 30, 2020 and December 31, 2019, 48 % and 40 %, respectively, of our repurchase agreement funding was sourced through our wholly-owned captive broker-dealer subsidiary, Bethesda Securities, LLC ("BES").

Amounts sourced through BES include funding from the General Collateral Finance Repo service ("GCF Repo") offered by the Fixed Income Clearing Corporation ("FICC"), which totaled 47 % and 38 % of our repurchase agreement funding outstanding as of June 30, 2020 and December 31, 2019, respectively.

During the three and six months ended June 30, 2020, we terminated $ 3.7 billion of repurchase agreements with a weighted average interest rate of 2.11 % and a weighted average remaining maturity of 2.2 years.

As of September 30, 2020 and December 31, 2019, 48 % and 40 %, respectively, of our repurchase agreement funding was sourced through our wholly-owned captive broker-dealer subsidiary, Bethesda Securities, LLC ("BES").

Amounts sourced through BES include funding from the General Collateral Finance Repo service ("GCF Repo") offered by the Fixed Income Clearing Corporation ("FICC"), which totaled 48 % and 38 % of our repurchase agreement funding outstanding as of September 30, 2020 and December 31, 2019, respectively.

During the nine months ended September 30, 2020, we terminated $ 3.7 billion of repurchase agreements with a weighted average interest rate of 2.11 % and a weighted average remaining maturity of 2.2 years.

The terminated agreements were replaced with shorter duration repurchase agreements at lower prevailing market rates.

We recognized losses on debt extinguishment of $ 146 million in other gain (loss), net for the three and six months ended June 30, 2020 associated with the terminated repurchase agreements.

We did not terminate any repurchase agreements during the prior year periods.

We recognized losses on debt extinguishment of $ 146 million in other gain (loss), net for the nine months ended September 30, 2020 associated with the terminated repurchase agreements.

We did not terminate any repurchase agreements during the three months ended September 30, 2020 or the prior year periods.

Reverse Repurchase Agreements

As of June 30, 2020 and December 31, 2019, we had $7.9 billion and $10.2 billion, respectively, of reverse repurchase agreements outstanding used primarily to borrow securities to cover short sales of U.S.

As of September 30, 2020 and December 31, 2019, we had $8.6 billion and $10.2 billion, respectively, of reverse repurchase agreements outstanding used primarily to borrow securities to cover short sales of U.S.

Treasury securities, for which we had associated obligations to return borrowed securities at fair value of $8.4 billion and $9.5 billion, respectively.

As of June 30, 2020 and December 31, 2019, $ 4.3 billion and $ 5.4 billion, respectively, of our reverse repurchase agreements were with the FICC sourced through BES.

As of September 30, 2020 and December 31, 2019, $ 3.6 billion and $ 5.4 billion, respectively, of our reverse repurchase agreements were with the FICC sourced through BES.

Derivative and Other Hedging Instruments

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Derivative and Other Hedging Instrument Assets (Liabilities), at Fair Value

The table below summarizes fair value information about our derivative and other hedging instrument assets/(liabilities) as of June 30, 2020 and December 31, 2019 (in millions):

Derivative and Other Hedging Instruments Balance Sheet Location June 30,

The table below summarizes fair value information about our derivative and other hedging instrument assets/(liabilities) as of September 30, 2020 and December 31, 2019 (in millions):

Derivative and Other Hedging Instruments Balance Sheet Location September 30,

Interest rate swaps Derivative assets, at fair value $ 41 $ 21

2 unchanged sentences

Treasury futures - short Derivative assets, at fair value — 14

Other Derivative assets, at fair value 4 —

Total derivative assets, at fair value

9 unchanged sentences

$ ( 8,372 ) $ ( 9,446 )

The following tables summarize certain characteristics of our derivative and other hedging instruments outstanding as of June 30, 2020 and December 31, 2019 (dollars in millions):

June 30, 2020 December 31, 2019

The following tables summarize certain characteristics of our derivative and other hedging instruments outstanding as of September 30, 2020 and December 31, 2019 (dollars in millions):

September 30, 2020 December 31, 2019

Pay Fixed / Receive Variable Interest Rate Swaps Notional

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Total $ 42,975 0.15 % 0.08 % 5.3 $ 79,075 1.29 % 1.59 % 2.7

Pay Fixed / Receive Variable Interest Rate Swaps by Receive Index (% of Notional Amount) June 30, 2020 December 31, 2019

OIS 79 % 86 %

Pay Fixed / Receive Variable Interest Rate Swaps by Receive Index (% of Notional Amount) September 30, 2020 December 31, 2019

SOFR 69 % 3 %

OIS 31 % 86 %

3M LIBOR — % 11 %

5 unchanged sentences

Amount Average Fixed Pay

June 30, 2020

September 30, 2020

≤ 1 year $ 133 $ 3 6 $ 6,400 2.35 % 9.2

6 unchanged sentences

________________________________

As of June 30, 2020 and December 31, 2019, ≤ 1 year notional amount includes $ 700 million of Bermudan swaptions where the options may be exercised on predetermined dates up to their final exercise date, which is six months prior to the underlying swaps' maturity date.

As of June 30, 2020, 79% and 21% of the underlying swap receive rates were tied to 3-Month LIBOR and SOFR, respectively, and, as of December 31, 2019, 100% of the underlying payer swap receive rates were tied to 3-Month LIBOR.

Treasury Securities June 30, 2020 December 31, 2019

As of September 30, 2020 and December 31, 2019, ≤ 1 year notional amount includes $ 700 million of Bermudan swaptions where the options may be exercised on predetermined dates up to their final exercise date, which is six months prior to the underlying swaps' maturity date.

As of September 30, 2020, 71% and 29% of the underlying swap receive rates were tied to 3-Month LIBOR and SOFR, respectively, and, as of December 31, 2019, 100% of the underlying payer swap receive rates were tied to 3-Month LIBOR.

Treasury Securities September 30, 2020 December 31, 2019

Maturity Face Amount Long/(Short) Cost Basis 1

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________________________________

As of June 30, 2020 and December 31, 2019, short U.S.

Treasury securities had a weighted average yield of 1.33 % and 2.19 %, respectively, and long U.S.

Treasury securities had a weighted average yield of 0.61 % and 2.21 %, respectively.

Treasury Futures June 30, 2020 December 31, 2019

As of September 30, 2020 and December 31, 2019, short U.S.

Treasury securities had a weighted average yield of 1.32 % and 2.19 %, respectively, and, as of December 31, 2019, long U.S.

Treasury securities had a weighted average yield of 2.21 %.

Treasury Futures September 30, 2020 December 31, 2019

Maturity Notional

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Treasury futures contract as of period-end and is reported in derivative assets/(liabilities), at fair value in our consolidated balance sheets.

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

TBA Securities by Coupon Notional

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— — — — 241 250 250 —

— — — — 75 78 78 —

Total 15-Year TBA securities 11,094 11,421 11,456 35 2,180 2,222 2,226 4

5 unchanged sentences

— — — — ( 1,507 ) ( 1,565 ) ( 1,568 ) ( 3 )

— — — — 415 436 437 1

Total 30-Year TBA securities, net 17,427 18,039 18,080 41 5,142 5,182 5,203 21

3 unchanged sentences

Gain (Loss) From Derivative Instruments and Other Securities, Net

The following table summarizes changes in our derivative and other hedge portfolio and their effect on our consolidated statements of comprehensive income for the three and six months ended June 30, 2020 and 2019 (in millions):

The following table summarizes changes in our derivative and other hedge portfolio and their effect on our consolidated statements of comprehensive income for the three and nine months ended September 30, 2020 and 2019 (in millions):

Derivative and Other Hedging Instruments Beginning

4 unchanged sentences

on Derivative Instruments and Other Securities, Net 1

Three months ended June 30, 2020:

Three months ended September 30, 2020:

TBA securities, net $ 19,760 80,599 ( 71,838 ) $ 28,521 $ 283

4 unchanged sentences

Treasury futures contracts - short position $ ( 1,000 ) ( 1,000 ) 1,000 $ ( 1,000 ) ( 5 )

Three months ended June 30, 2019:

Three months ended September 30, 2019:

TBA securities, net $ 11,043 24,305 ( 33,381 ) $ 1,967 $ 144

Interest rate swaps $ 48,175 65,000 ( 38,225 ) $ 74,950 ( 1,019 )

Interest rate swaps - payer $ 74,950 82,625 ( 75,800 ) $ 81,775 ( 482 )

Interest rate swaps - receiver $ — ( 175 ) 175 $ — —

Payer swaptions $ 4,400 4,500 ( 250 ) $ 8,650 ( 19 )

2 unchanged sentences

Treasury futures contracts - short position $ ( 1,650 ) ( 1,000 ) 1,650 $ ( 1,000 ) ( 40 )

Six months ended June 30, 2020:

Nine months ended September 30, 2020:

TBA securities, net $ 7,322 193,535 ( 172,336 ) $ 28,521 $ 1,196

4 unchanged sentences

Treasury futures contracts - short position $ ( 1,000 ) ( 3,000 ) 3,000 $ ( 1,000 ) ( 117 )

Six months ended June 30, 2019:

Nine months ended September 30, 2019:

TBA securities, net $ 7,152 70,606 ( 75,791 ) $ 1,967 $ 390

Interest rate swaps $ 51,625 70,350 ( 47,025 ) $ 74,950 ( 1,615 )

Interest rate swaps - payer $ 51,625 152,975 ( 122,825 ) $ 81,775 ( 2,097 )

Interest rate swaps - receiver $ — ( 175 ) 175 $ — —

Payer swaptions $ 3,500 7,150 ( 2,000 ) $ 8,650 ( 71 )

3 unchanged sentences

________________________________

Amounts exclude $ 146 million of losses on debt extinguishment for the three and six months ended June 30, 2020 (see Note 5) and other miscellaneous gains and losses for all periods presented recognized in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income.

Amounts exclude $ 146 million of losses on debt extinguishment for the nine months ended September 30, 2020 (see Note 5) and other miscellaneous gains and losses for all periods presented recognized in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income.

Pledged Assets

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However, we believe that the risk is minimal due to the clearing exchanges' initial and daily mark-to-market margin requirements, clearinghouse guarantee funds and other resources that are available in the event of a clearing member default.

As of June 30, 2020, our maximum amount at risk with any counterparty related to our repurchase agreements, excluding the Fixed Income Clearing Corporation, was less than 3 % of our tangible stockholders' equity (measured as the excess of the value of collateral pledged over the amount of our repurchase liabilities).

As of June 30, 2020, approximately 11 % of our tangible stockholder's equity was at risk with the Fixed Income Clearing Corporation.

As of September 30, 2020, our maximum amount at risk with any counterparty related to our repurchase agreements, excluding the Fixed Income Clearing Corporation, was less than 2 % of our tangible stockholders' equity (measured as the excess of the value of collateral pledged over the amount of our repurchase liabilities).

As of September 30, 2020, approximately 10 % of our tangible stockholder's equity was at risk with the Fixed Income Clearing Corporation.

Assets Pledged to Counterparties

The following tables summarize our assets pledged as collateral under our funding, derivative and brokerage and clearing agreements by type, including securities pledged related to securities sold but not yet settled, as of June 30, 2020 and December 31, 2019 (in millions):

June 30, 2020

September 30, 2020

Assets Pledged to Counterparties 1

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Includes repledged assets received as collateral from counterparties and securities sold but not yet settled.

Includes $ 111 million and $ 144 million of retained interests in our consolidated VIEs pledged as collateral under repurchase agreements as of June 30, 2020 and December 31, 2019, respectively.

Includes $ 131 million and $ 144 million of retained interests in our consolidated VIEs pledged as collateral under repurchase agreements as of September 30, 2020 and December 31, 2019, respectively.

Includes margin for TBAs cleared through prime brokers and other clearing deposits.

The following table summarizes our securities pledged as collateral under our repurchase agreements by the remaining maturity of our borrowings, including securities pledged related to sold but not yet settled securities, as of June 30, 2020 and December 31, 2019 (in millions).

For the corresponding borrowings associated with the following amounts and the interest rates thereon, refer to Note 5 .

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Securities Pledged by Remaining Maturity of Repurchase Agreements 1,2

Fair Value of Pledged Securities Amortized

Cost of Pledged Securities Accrued

Pledged Securities Accrued

Securities Fair Value of Pledged Securities Amortized

Cost of Pledged Securities Accrued

Pledged Securities Accrued

≤ 30 days $ 28,729 $ 27,243 $ 82 $ 56,990 $ 55,951 $ 167

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________________________________

Includes $ 111 million and $ 144 million of retained interests in our consolidated VIEs pledged as collateral under repurchase agreements as of June 30, 2020 and December 31, 2019, respectively.

Excludes $ 357 million of repledged U.S.

Treasury securities received as collateral from counterparties as of December 31, 2019.

Includes $ 131 million and $ 144 million of retained interests in our consolidated VIEs pledged as collateral under repurchase agreements as of September 30, 2020 and December 31, 2019, respectively.

Excludes $ 200 million and $ 357 million of repledged U.S.

Treasury securities received as collateral from counterparties as of September 30, 2020 and December 31, 2019, respectively.

Assets Pledged from Counterparties

As of June 30, 2020 and December 31, 2019, we had assets pledged to us from counterparties as collateral under our reverse repurchase and derivative agreements summarized in the tables below (in millions).

June 30, 2020 December 31, 2019

As of September 30, 2020 and December 31, 2019, we had assets pledged to us from counterparties as collateral under our reverse repurchase and derivative agreements summarized in the tables below (in millions).

September 30, 2020 December 31, 2019

Assets Pledged to AGNC Reverse Repurchase Agreements Derivative Agreements Repurchase Agreements Total Reverse Repurchase Agreements Derivative Agreements Repurchase Agreements Total

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________________________________

As of June 30, 2020 and December 31, 2019, $ 0 million and $ 357 million, respectively, of U.S.

As of September 30, 2020 and December 31, 2019, $ 200 million and $ 357 million, respectively, of U.S.

Treasury securities received from counterparties were repledged as collateral and $8.4 billion and $9.5 billion, respectively, were used to cover short sales of U.S.

3 unchanged sentences

We present our assets and liabilities subject to such arrangements on a gross basis in our consolidated balance sheets.

The following tables present information about our assets and liabilities that are subject to master netting arrangements and can potentially be offset on our consolidated balance sheets as of June 30, 2020 and December 31, 2019 (in millions):

Offsetting of Financial and Derivative Assets

2 unchanged sentences

Financial Instruments Collateral Received 2

June 30, 2020

September 30, 2020

Interest rate swap and swaption agreements, at fair value 1

13 unchanged sentences

Financial Instruments Collateral Pledged 2

June 30, 2020

September 30, 2020

Interest rate swap agreements, at fair value 1

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The pricing models are based on the value of the future interest rate swap that we have the option to enter into as well as the remaining length of time that we have to exercise the option based on observable market inputs, adjusted for non-performance risk, if any.

Investment securities - are valued based on prices obtained from multiple third-party pricing services and non-binding dealer quotes.

These pricing sources utilize various valuation approaches, including market and income approaches.

Investment securities - are valued based on prices obtained from multiple third-party pricing sources.

The pricing sources utilize various valuation approaches, including market and income approaches.

For Agency RMBS, the pricing sources primarily utilize a matrix pricing technique that interpolates the estimated fair value based on observed quoted prices for forward contracts in the Agency RMBS "to-be-announced" market ("TBA securities") of the same coupon, maturity and issuer, adjusted to reflect the specific characteristics of the pool of mortgages underlying the Agency security, which may include maximum loan balance, loan vintage, loan-to-value ratio, geography and other characteristics as may be appropriate.

9 unchanged sentences

Consequently, we classify these instruments as Level 2 inputs in the fair value hierarchy.

The following table provides a summary of our assets and liabilities that are measured at fair value on a recurring basis, as of June 30, 2020 and December 31, 2019, based on their categorization within the valuation hierarchy (in millions).

The following table provides a summary of our assets and liabilities that are measured at fair value on a recurring basis, as of September 30, 2020 and December 31, 2019, based on their categorization within the valuation hierarchy (in millions).

There were no transfers between valuation hierarchy levels during the periods presented.

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

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Treasury securities

1,181 — — 97 — —

Interest rate swaps

— 41 — — 21 —

— 5 — — 126 —

TBA securities

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Excluded from the table above are financial instruments presented in our consolidated financial statements at cost.

The fair value of our repurchase agreements approximated cost as of June 30, 2020 and December 31, 2019, as the rates on our outstanding repurchase agreements largely corresponded to prevailing rates observed in the repo market.

The fair value of cash and cash equivalents, restricted cash, receivables and other payables were determined to approximate cost as of June 30, 2020 and December 31, 2019 due to their short duration.

The fair value of our repurchase agreements approximated cost as of September 30, 2020 and December 31, 2019, as the rates on our outstanding repurchase agreements largely corresponded to prevailing rates observed in the repo market.

The fair value of cash and cash equivalents, restricted cash, receivables and other payables were determined to approximate cost as of September 30, 2020 and December 31, 2019 due to their short duration.

We estimate the fair value of these instruments carried at cost using "Level 1" or "Level 2" inputs.

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Three Months Ended

Six Months Ended June 30,

September 30,

Nine Months Ended September 30,

2020 2019 2020 2019

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Net income (loss) per common share - diluted $ 1.15 $ ( 0.03 ) $ ( 2.01 ) $ ( 0.41 )

For the six months ended June 30, 2020, 0.8 million and, for the three and six months ended June 30, 2019, 0.6 million of potentially dilutive unvested time and performance based RSUs outstanding were excluded from the computation of diluted net income (loss) per common share because to do so would have been anti-dilutive for the period.

For the nine months ended September 30, 2020 and for the three and nine months ended September 30, 2019, 1.0 million, 0.7 million and 0.6 million, respectively, of potentially dilutive unvested time and performance based RSUs outstanding were excluded from the computation of diluted net income (loss) per common share because to do so would have been anti-dilutive for the period.

Stockholders' Equity

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We are authorized to designate and issue up to 10.0 million shares of preferred stock in one or more classes or series.

As of June 30, 2020, 13,800 , 10,350 , 16,100 and 23,000 shares of preferred stock were designated as 7.00 % Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, 6.875 % Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, 6.50 % Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock and 6.125 % Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, respectively, (referred to as "Series C, D, E and F Preferred Stock", respectively).

As of September 30, 2020, 13,800 , 10,350 , 16,100 and 23,000 shares of preferred stock were designated as 7.00 % Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, 6.875 % Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, 6.50 % Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock and 6.125 % Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, respectively, (referred to as "Series C, D, E and F Preferred Stock", respectively).

During February 2020, we issued $575 million, or 23,000 shares, of 6.125% Series F Preferred Stock, for net proceeds of $557 million.

As of June 30, 2020, 13,000 , 9,400 , 16,100 and 23,000 shares of Series C, D, E and F Preferred Stock, respectively, were issued and outstanding, with an aggregate carrying value of $ 1,489 million and aggregate liquidation preference of $ 1,538 million.

As of September 30, 2020, 13,000 , 9,400 , 16,100 and 23,000 shares of Series C, D, E and F Preferred Stock, respectively, were issued and outstanding, with an aggregate carrying value of $ 1,489 million and aggregate liquidation preference of $ 1,538 million.

Each share of preferred stock is represented by 1,000 depositary shares.

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Beginning on each series' optional redemption date, we may redeem shares at $ 25.00 per depositary share, plus accumulated and unpaid dividends (whether or not declared), exclusively at our option.

The following table includes a summary of preferred stock depositary shares issued and outstanding as of June 30, 2020 (dollars and shares in millions):

The following table includes a summary of preferred stock depositary shares issued and outstanding as of September 30, 2020 (dollars and shares in millions):

Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock 1

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We are authorized by our Board of Directors to enter into agreements with sales agents to publicly offer and sell shares of our common stock in privately negotiated and/or at-the-market transactions from time-to-time up to a maximum aggregate offering price of our common stock.

During the six months ended June 30, 2020, we sold 26.7 million shares of our common stock under the sales agreements for proceeds of $ 439 million, or $ 16.46 per common share, net of offering costs.

As of June 30, 2020, shares of our common stock with an aggregate offering price of $ 26 million remained authorized for issuance under this program through June 14, 2021.

During the nine months ended September 30, 2020, we sold 26.7 million shares of our common stock under the sales agreements for proceeds of $ 439 million, or $ 16.46 per common share, net of offering costs.

As of September 30, 2020, shares of our common stock with an aggregate offering price of $ 26 million remained authorized for issuance under this program through June 14, 2021.

Common Stock Repurchase Program

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In July 2019, our Board of Directors authorized the repurchase of up to $ 1 billion of our outstanding shares of common stock through December 31, 2020.

During the three and six months ended June 30, 2020, we repurchased 12.2 million shares, or $ 147 million, of our common stock for an average repurchase price of $ 11.99 per common share, inclusive of transaction costs.

As of June 30, 2020, we had $ 750 million of common stock remaining available for repurchase.

During the three and nine months ended September 30, 2020, we repurchased 11.0 million and 23.3 million shares, or $ 154 million and $ 301 million, respectively, of our common stock for an average repurchase price of $ 13.95 and $ 12.92 per common share, respectively, including 0.7 million shares, or $10 million, of share repurchases settling in October 2020 and inclusive of transaction costs.

As of September 30, 2020, we had $ 597 million of common stock remaining available for repurchase.

What changed 10-Q

Item 1. Financial Statements