AGNC Investment Corp. 10-Q

Item 1. Financial Statements AGNC INVESTMENT CORP. CONSOLIDATED BALANCE SHEETS (in millions, except per share data) September 30, 2020 December 31, 2019 (Unaudited) Assets: Agency securities, at fair value (including pledged securities of $ 55,711 and $ 92,608 , respectively) $ 66,556 $ 98,516 Agency securities transferred to consolidated variable interest entities, at fair value (pledged securities) 323 371 Credit risk transfer securities, at fair value (including pledged securities of $ 413 and $ 309 , respectively) 653 976 Non-Agency securities, at fair value (including pledged securities of $ 455 and $ 0 , respectively) 512 579 U.S. Treasury securities, at fair value (including pledged securities of $ 0 and $ 97 , respectively) — 97 Cash and cash equivalents 857 831 Restricted cash 1,557 451 Derivative assets, at fair value 130 190 Receivable for investment securities sold (including pledged securities of $ 10 and $0, respectively) 10 — Receivable under reverse repurchase agreements 8,625 10,181 Goodwill 526 526 Other assets 219 364 Total assets $ 79,968 $ 113,082 Liabilities: Repurchase agreements $ 54,566 $ 89,182 Debt of consolidated variable interest entities, at fair value 192 228 Payable for investment securities purchased 5,887 2,554 Derivative liabilities, at fair value 13 6 Dividends payable 90 104 Obligation to return securities borrowed under reverse repurchase agreements, at fair value 8,372 9,543 Accounts payable and other liabilities 128 424 Total liabilities 69,248 102,041 Stockholders' equity: Preferred Stock - aggregate liquidation preference of $ 1,538 and $ 963 , respectively 1,489 932 Common stock - $ 0.01 par value; 1,500 and 900 shares authorized, respectively; 545.2 and 540.9 shares issued and outstanding, respectively 5 5 Additional paid-in capital 14,053 13,893 Retained deficit ( 5,661 ) ( 3,886 ) Accumulated other comprehensive income 834 97 Total stockholders' equity 10,720 11,041 Total liabilities and stockholders' equity $ 79,968 $ 113,082 See accompanying notes to consolidated financial statements. 2 AGNC INVESTMENT CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (in millions, except per share data) Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Interest income: Interest income $ 364 $ 676 $ 1,284 $ 2,074 Interest expense 62 557 622 1,668 Net interest income 302 119 662 406 Other gain (loss), net: Gain on sale of investment securities, net 346 89 993 281 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: 381 ( 104 ) ( 1,635 ) ( 531 ) Expenses: Compensation and benefits 13 10 39 31 Other operating expense 8 9 29 27 Total operating expense 21 19 68 58 Net income (loss) 662 ( 4 ) ( 1,041 ) ( 183 ) Dividends on preferred stock 25 13 71 36 Net income (loss) available (attributable) to common stockholders $ 637 $ ( 17 ) $ ( 1,112 ) $ ( 219 ) Net income (loss) $ 662 $ ( 4 ) $ ( 1,041 ) $ ( 183 ) Unrealized gain on investment securities measured at fair value through other comprehensive income, net 70 246 737 1,025 Comprehensive income (loss) 732 242 ( 304 ) 842 Dividends on preferred stock 25 13 71 36 Comprehensive income (loss) available (attributable) to common stockholders $ 707 $ 229 $ ( 375 ) $ 806 Weighted average number of common shares outstanding - basic 553.2 546.4 553.8 540.3 Weighted average number of common shares outstanding - diluted 554.3 546.4 553.8 540.3 Net income (loss) per common share - basic $ 1.15 $ ( 0.03 ) $ ( 2.01 ) $ ( 0.41 ) Net income (loss) per common share - diluted $ 1.15 $ ( 0.03 ) $ ( 2.01 ) $ ( 0.41 ) Dividends declared per common share $ 0.36 $ 0.48 $ 1.20 $ 1.52 See accompanying notes to consolidated financial statements. 3 AGNC INVESTMENT CORP. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (in millions) Preferred Stock Common Stock Additional Paid-in Capital Retained Deficit Accumulated Other Comprehensive Income (Loss) Total Shares Amount Balance, June 30, 2019 $ 711 547.8 $ 5 $ 13,988 $ ( 4,194 ) $ ( 164 ) $ 10,346 Net loss — — — — ( 4 ) — ( 4 ) Other comprehensive income: Unrealized gain on available-for-sale securities, net — — — — — 246 246 Stock-based compensation — — — 3 — — 3 Repurchase of common stock — (6.9) — (103) — — ( 103 ) Preferred dividends declared — — — — ( 13 ) — ( 13 ) Common dividends declared — — — — ( 262 ) — ( 262 ) 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 Net income — — — — 662 — 662 Other comprehensive income: Unrealized gain on available-for-sale securities, net — — — — — 70 70 Stock-based compensation — — — 5 — — 5 Repurchase of common stock — ( 10.3 ) ( 1 ) ( 143 ) — — ( 144 ) Preferred dividends declared — — — — ( 25 ) — ( 25 ) Common dividends declared — — — — ( 198 ) — ( 198 ) 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 Net loss — — — — ( 183 ) — ( 183 ) Other comprehensive income: Unrealized gain on available-for-sale securities, net — — — — — 1,025 1,025 Stock-based compensation — 0.1 — 8 — — 8 Issuance of common stock, net of offering cost — 11.4 — 190 — — 190 Repurchase of common stock — ( 6.9 ) — ( 103 ) — — (103) Issuance of preferred stock, net of offering cost 227 — — — — — 227 Preferred dividends declared — — — — ( 36 ) — ( 36 ) Common dividends declared — — — — ( 821 ) — ( 821 ) 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 Net loss — — — — ( 1,041 ) — ( 1,041 ) Other comprehensive income: Unrealized gain on available-for-sale securities, net — — — — — 737 737 Stock-based compensation — 0.1 — 12 — — 12 Issuance of preferred stock, net of offering cost 557 — — — — — 557 Issuance of common stock, net of offering cost — 26.7 1 438 — — 439 Repurchase of common stock — ( 22.5 ) ( 1 ) ( 290 ) — — ( 291 ) Preferred dividends declared — — — — ( 71 ) — ( 71 ) Common dividends declared — — — — ( 663 ) — ( 663 ) Balance, September 30, 2020 $ 1,489 545.2 $ 5 $ 14,053 $ ( 5,661 ) $ 834 $ 10,720 See accompanying notes to consolidated financial statements. 4 AGNC INVESTMENT CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions) Nine Months Ended September 30, 2020 2019 Operating activities: Net loss $ ( 1,041 ) $ ( 183 ) Adjustments to reconcile net income to net cash provided by operating activities: Amortization of premiums and discounts on mortgage-backed securities, net 816 517 Stock-based compensation 12 8 Gain on sale of investment securities, net ( 993 ) ( 281 ) Unrealized gain on investment securities measured at fair value through net income, net ( 511 ) ( 2,174 ) Loss on derivative instruments and other securities, net 3,139 2,986 (Increase) decrease in other assets 104 ( 35 ) Decrease in accounts payable and other accrued liabilities ( 189 ) ( 31 ) Net cash provided by operating activities 1,337 807 Investing activities: Purchases of Agency mortgage-backed securities ( 44,753 ) ( 37,199 ) Purchases of credit risk transfer and non-Agency securities ( 609 ) ( 1,233 ) Proceeds from sale of Agency mortgage-backed securities 68,920 17,620 Proceeds from sale of credit risk transfer and non-Agency securities 838 1,130 Principal collections on Agency mortgage-backed securities 12,635 8,508 Principal collections on credit risk transfer and non-Agency securities 115 15 Payments on U.S. Treasury securities ( 22,090 ) ( 26,169 ) Proceeds from U.S. Treasury securities 20,112 8,313 Net proceeds from reverse repurchase agreements 1,590 16,014 Net payments on derivative instruments ( 2,260 ) ( 1,990 ) Net cash provided by (used in) investing activities 34,498 ( 14,991 ) Financing activities: Proceeds from repurchase arrangements 2,651,280 3,251,916 Payments on repurchase agreements ( 2,685,896 ) ( 3,237,021 ) Payments on debt of consolidated variable interest entities ( 44 ) ( 42 ) Net proceeds from preferred stock issuances 557 227 Net proceeds from common stock issuances 439 190 Payments for common stock repurchases ( 291 ) ( 103 ) Cash dividends paid ( 748 ) ( 863 ) Net cash provided by (used in) financing activities ( 34,703 ) 14,304 Net change in cash, cash equivalents and restricted cash 1,132 120 Cash, cash equivalents and restricted cash at beginning of period 1,282 1,520 Cash, cash equivalents and restricted cash at end of period $ 2,414 $ 1,640 See accompanying notes to consolidated financial statements. 5 AGNC INVESTMENT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Basis of Presentation The unaudited interim consolidated financial statements of AGNC Investment Corp. (referred throughout this report as the "Company," "we," "us" and "our") are prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. In the opinion of management, all adjustments, consisting solely of normal recurring accruals, necessary for the fair presentation of financial statements for the interim period have been included. The current period’s results of operations are not necessarily indicative of results that ultimately may be achieved for the year. Our unaudited interim consolidated financial statements include the accounts of all our wholly-owned subsidiaries and variable interest entities for which we are the primary beneficiary. Significant intercompany accounts and transactions have been eliminated . Note 2. Organization We were organized in Delaware on January 7, 2008 and commenced operations on May 20, 2008 following the completion of our initial public offering. Our common stock is traded on The Nasdaq Global Select Market under the symbol "AGNC." We are internally managed, and our principal objective is to provide our stockholders with attractive risk-adjusted returns through a combination of monthly dividends and tangible net book value accretion. We generate income from the interest earned on our investments, net of associated borrowing and hedging costs, and net realized gains and losses on our investment and hedging activities. We operate to qualify to be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). As a REIT, we are required to distribute annually 90 % of our taxable income, and we will generally not be subject to U.S. federal or state corporate income tax to the extent that we distribute our annual taxable income to our stockholders on a timely basis. It is our intention to distribute 100 % of our taxable income, after application of available tax attributes, within the limits prescribed by the Internal Revenue Code, which may extend into the subsequent tax year. We invest primarily in Agency residential mortgage-backed securities ("Agency RMBS") for which the principal and interest payments are guaranteed by a U.S. Government-sponsored enterprise ("GSE") or a U.S. Government agency. We also invest in other types of mortgage and mortgage-related securities, such as credit risk transfer ("CRT") securities and non-Agency residential and commercial mortgage-backed securities ("non-Agency RMBS" and "CMBS," respectively), where repayment of principal and interest is not guaranteed by a GSE or U.S. Government agency, and in other investments in, or related to, the housing, mortgage or real estate markets. We fund our investments primarily through borrowings structured as repurchase agreements. Note 3. Summary of Significant Accounting Policies Investment Securities Agency RMBS consist of residential mortgage pass-through securities and collateralized mortgage obligations ("CMOs") guaranteed by the Federal National Mortgage Association ("Fannie Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac," and together with Fannie Mae, the "GSEs") or the Government National Mortgage Association ("Ginnie Mae"). CRT securities are risk sharing instruments issued by the GSEs, and similarly structured transactions issued by third-party market participants, that synthetically transfer a portion of the risk associated with credit losses within pools of conventional residential mortgage loans from the GSEs and/or third parties to private investors. Unlike Agency RMBS, full repayment of the original principal balance of CRT securities is not guaranteed by a GSE or U.S. Government agency; rather, "credit risk transfer" is achieved by writing down the outstanding principal balance of the CRT securities if credit losses on a related pool 6 of loans exceed certain thresholds. By reducing the amount that they are obligated to repay to holders of CRT securities, the GSEs and/or other third parties offset credit losses on the related loans. Non-Agency RMBS and CMBS (together, "Non-Agency MBS") are backed by residential and commercial mortgage loans, respectively, packaged and securitized by a private institution, such as a commercial bank. Non-Agency MBS typically benefit from credit enhancements derived from structural elements, such as subordination, overcollateralization or insurance, but nonetheless carry a higher level of credit exposure than Agency RMBS. All of our securities are reported at fair value on our consolidated balance sheet. Accounting Standards Codification ("ASC") Topic 320, Investments—Debt and Equity Securities , requires that at the time of purchase, we designate a security as held-to-maturity, available-for-sale or trading, depending on our ability and intent to hold such security to maturity. Alternatively, we may elect the fair value option of accounting for securities pursuant to ASC Topic 825, Financial Instruments . Prior to fiscal year 2017, we primarily designated our investment securities as available-for-sale. On January 1, 2017, we began electing the fair value option of accounting for all investment securities newly acquired after such date. Unrealized gains and losses on securities classified as available-for-sale are reported in accumulated other comprehensive income ("OCI"), whereas unrealized gains and losses on securities for which we elected the fair value option, or are classified as trading, are reported in net income through other gain (loss). Upon the sale of a security designated as available-for-sale, we determine the cost of the security and the amount of unrealized gain or loss to reclassify out of accumulated OCI into earnings based on the specific identification method. In our view, the election of the fair value option simplifies the accounting for investment securities and more appropriately reflects the results of our operations for a reporting period by presenting the fair value changes for these assets in a manner consistent with the presentation and timing of the fair value changes for our derivative instruments. We generally recognize gains or losses through net income on available-for-sale securities only if the security is sold; however, if the fair value of a security declines below its amortized cost and we determine that it is more likely than not that we will incur a realized loss on the security when we sell the asset, we will recognize the difference between the amortized cost and the fair in net income as a component of other gain (loss). 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 the periods presented in our consolidated financial statements. Interest Income Interest income is accrued based on the outstanding principal amount of the investment securities and their contractual terms. Premiums or discounts associated with the purchase of Agency RMBS and non-Agency MBS of high credit quality are amortized or accreted into interest income, respectively, over the projected lives of the securities, including contractual payments and estimated prepayments, using the effective interest method in accordance with ASC Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs . We estimate long-term prepayment speeds of our mortgage securities using a third-party service and market data. The third-party service provider estimates prepayment speeds using models that incorporate the forward yield curve, primary to secondary mortgage rate spreads, current mortgage rates, mortgage rates of the outstanding loans, age and size of the outstanding loans, loan-to-value ratios, interest rate volatility and other factors. We review the prepayment speeds estimated by the third-party service for reasonableness with consideration given to both historical prepayment speeds and current market conditions. If based on our assessment, we believe that the third-party model does not fully reflect our expectations of the current prepayment landscape, such as during periods of elevated market uncertainty or unique market conditions, we may make adjustments to the models. We review our actual and anticipated prepayment experience on at least a quarterly basis and effective yields are recalculated when differences arise between (i) our previous estimate of future prepayments and (ii) actual prepayments to date and our current estimate of future prepayments. We are required to record an adjustment in the current period to premium amortization / discount accretion for the cumulative effect of the difference in the effective yields as if the recalculated yield had been in place as of the security's acquisition date through the reporting date. At the time we purchase CRT securities and non-Agency MBS that are not of high credit quality, we determine an effective yield based on our estimate of the timing and amount of future cash flows and our cost basis. Our initial cash flow estimates for these investments are based on our observations of current information and events and include assumptions related to interest rates, prepayment rates and the impact of default and severity rates on the timing and amount of credit losses. On at least a quarterly basis, we review the estimated cash flows and make appropriate adjustments based on inputs and analysis received from external sources, internal models, and our judgment regarding such inputs and other factors. Any resulting changes in effective yield are recognized prospectively based on the current amortized cost of the investment adjusted for credit impairments, if any. 7 Repurchase Agreements We finance the acquisition of securities for our investment portfolio primarily through repurchase transactions under master repurchase agreements. Pursuant to ASC Topic 860, Transfers and Servicing , we account for repurchase transactions as collateralized financing transactions, which are carried at their contractual amounts (cost), plus accrued interest. Our repurchase agreements typically have maturities of less than one year but may extend up to five years or more. Reverse Repurchase Agreements and Obligation to Return Securities Borrowed under Reverse Repurchase Agreements We borrow securities to cover short sales of U.S. Treasury securities through reverse repurchase transactions under our master repurchase agreements (see Derivative Instruments below). We account for these as securities borrowing transactions and recognize an obligation to return the borrowed securities at fair value on the balance sheet based on the value of the underlying borrowed securities as of the reporting date. We may also enter into reverse repurchase agreements to earn a yield on excess cash balances. The securities received as collateral in connection with our reverse repurchase agreements mitigate our credit risk exposure to counterparties. Our reverse repurchase agreements typically have maturities of 30 days or less. Derivative Instruments We use a variety of derivative instruments to hedge a portion of our exposure to market risks, including interest rate, prepayment, extension and liquidity risks. The objective of our risk management strategy is to reduce fluctuations in net book value over a range of interest rate scenarios. In particular, we attempt to mitigate the risk of the cost of our variable rate liabilities increasing during a period of rising interest rates. The primary instruments that we use are interest rate swaps, options to enter into interest rate swaps ("swaptions"), U.S. Treasury securities and U.S. Treasury futures contracts. We also use forward contracts in the Agency RMBS "to-be-announced" market, or TBA securities, to invest in and finance Agency securities and to periodically reduce our exposure to Agency RMBS. We account for derivative instruments in accordance with ASC Topic 815, Derivatives and Hedging ("ASC 815"). ASC 815 requires an entity to recognize all derivatives as either assets or liabilities in our accompanying consolidated balance sheets and to measure those instruments at fair value. None of our derivative instruments have been designated as hedging instruments for accounting purposes under the provisions of ASC 815, consequently changes in the fair value of our derivative instruments are reported in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income. Our derivative agreements generally contain provisions that allow for netting or setting off derivative assets and liabilities with the counterparty; however, we report related assets and liabilities on a gross basis in our consolidated balance sheets. Derivative instruments in a gain position are reported as derivative assets at fair value and derivative instruments in a loss position are reported as derivative liabilities at fair value in our consolidated balance sheets. Changes in fair value of derivative instruments and periodic settlements related to our derivative instruments are recorded in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income. Cash receipts and payments related to derivative instruments are classified in our consolidated statements of cash flows according to the underlying nature or purpose of the derivative transaction, generally in the investing section. Interest rate swap agreements 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 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. Our interest rate swaps are centrally cleared through a registered commodities exchange. The clearing exchange requires that we post an "initial margin" amount determined by the exchange, which is generally intended to be set at a level sufficient to protect the exchange from the interest rate swap's maximum estimated single-day price movement. We also exchange daily settlements of "variation margin" based upon changes in fair value, as measured by the exchange. Pursuant to rules governing central clearing activities, we recognize variation margin settlements as a direct reduction of the carrying value of the interest rate swap asset or liability. Interest rate swaptions We purchase interest rate swaptions to help mitigate the potential impact of larger, more rapid changes in interest rates on the performance of our investment portfolio. Interest rate swaptions provide us the option to enter into an interest rate swap agreement for a predetermined notional amount, stated term and pay and receive interest rates in the future. Our interest rate swaption agreements are not subject to central clearing. The premium paid for interest rate swaptions is reported as an asset in 8 our consolidated balance sheets. The difference between the premium paid and the fair value of the swaption is reported in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income. If a swaption expires unexercised, the realized loss on the swaption would be equal to the premium paid. If we sell or exercise a swaption, the realized gain or loss on the swaption would be equal to the difference between the cash or the fair value of the underlying interest rate swap and the premium paid. TBA securities A TBA security is a forward contract for the purchase or sale of Agency RMBS at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date. The specific Agency RMBS to be delivered into the contract are not known until shortly before the settlement date. We may choose, prior to settlement, to move the settlement of these securities out to a later date by entering into an offsetting TBA position, net settling the offsetting positions for cash, and simultaneously purchasing or selling a similar TBA contract for a later settlement date (together referred to as a "dollar roll transaction"). The Agency securities purchased or sold for a forward settlement date are typically priced at a discount to equivalent securities settling in the current month. This difference, or "price drop," is the economic equivalent of interest income on the underlying Agency securities, less an implied funding cost, over the forward settlement period (referred to as "dollar roll income"). Consequently, forward purchases of Agency securities and dollar roll transactions represent a form of off-balance sheet financing. We account for TBA contracts as derivative instruments since either the TBA contracts do not settle in the shortest period of time possible or we cannot assert that it is probable at inception and throughout the term of the TBA contract that we will physically settle the contract on the settlement date. We account for TBA dollar roll transactions as a series of derivative transactions. U.S. Treasury securities We use U.S. Treasury securities and U.S. Treasury futures contracts to mitigate the potential impact of changes in interest rates on the performance of our portfolio. We borrow U.S. Treasury securities under reverse repurchase agreements to cover short sales of U.S. Treasury securities. We account for these as securities borrowing transactions and recognize an obligation to return the borrowed securities at fair value on our accompanying consolidated balance sheets based on the value of the underlying U.S. Treasury security as of the reporting date. Gains and losses associated with U.S. Treasury securities and U.S. Treasury futures contracts are recognized in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income. Recent Accounting Pronouncements In June 2016 the Financial Account Standards Board ("FASB") issued Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326), which replaces the incurred loss impairment methodology in prior GAAP with a methodology that better reflects expected credit losses. For financial instruments carried at amortized cost, impairment will be measured as a current estimate of expected lifetime credit losses. For available-for-sale investment securities with changes in fair value recorded in accumulated other comprehensive income, the FASB made targeted improvements eliminating the write-down of available-for-sale securities under the "other-than-temporary" impairment model replacing it with an allowance for credit loss model. We adopted ASU 2016-13 effective January 1, 2020, which had no material effect on our financial results. We consider the applicability and impact of all ASUs issued by the FASB. There are no unadopted ASUs that are expected to have a significant impact on our consolidated financial statements when adopted or other recently adopted ASUs that had a significant impact on our consolidated financial statements upon adoption. Note 4. Investment Securities 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 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. 9 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. September 30, 2020 December 31, 2019 Investment Securities Amortized Cost Fair Value Amortized Cost Fair Value Agency RMBS: Fixed rate $ 63,307 $ 66,278 $ 96,375 $ 98,074 Adjustable rate 96 99 160 163 CMO 327 341 441 447 Interest-only and principal-only strips 117 142 146 164 Multifamily 17 19 37 39 Total Agency RMBS 63,864 66,879 97,159 98,887 Non-Agency RMBS 172 177 198 209 CMBS 310 335 352 370 CRT securities 678 653 961 976 Total investment securities $ 65,024 $ 68,044 $ 98,670 $ 100,442 September 30, 2020 Agency RMBS Non-Agency Investment Securities Fannie Mae Freddie Mac Ginnie Mae RMBS CMBS CRT Total Available-for-sale securities: Par value $ 10,703 $ 4,046 $ 14 $ — $ — $ — $ 14,763 Unamortized discount ( 6 ) ( 1 ) — — — — ( 7 ) Unamortized premium 479 204 — — — — 683 Amortized cost 11,176 4,249 14 — — — 15,439 Gross unrealized gains 618 215 1 — — — 834 Gross unrealized losses — — — — — — — Total available-for-sale securities, at fair value 11,794 4,464 15 — — — 16,273 Securities remeasured at fair value through earnings: Par value 31,624 14,891 3 181 309 678 47,686 Unamortized discount ( 20 ) ( 1 ) — ( 11 ) ( 4 ) ( 12 ) ( 48 ) Unamortized premium 1,285 641 — 3 6 12 1,947 Amortized cost 32,889 15,531 3 173 311 678 49,585 Gross unrealized gains 1,411 782 — 8 28 3 2,232 Gross unrealized losses ( 7 ) ( 3 ) — ( 4 ) ( 4 ) ( 28 ) ( 46 ) Total securities remeasured at fair value through earnings 34,293 16,310 3 177 335 653 51,771 Total securities, at fair value $ 46,087 $ 20,774 $ 18 $ 177 $ 335 $ 653 $ 68,044 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 September 30, 2020 1 2.49 % 2.66 % 2.22 % 0.53 % 4.40 % 3.47 % 2.56 % ________________________________ 1. Incorporates a weighted average future constant prepayment rate assumption of 15.9 % based on forward rates as of September 30, 2020. 10 December 31, 2019 Agency RMBS Non-Agency Investment Securities Fannie Mae Freddie Mac Ginnie Mae RMBS CMBS CRT Total Available-for-sale securities: Par value $ 14,301 $ 4,762 $ 18 $ — $ — $ — $ 19,081 Unamortized discount ( 10 ) ( 2 ) — — — — ( 12 ) Unamortized premium 711 276 — — — — 987 Amortized cost 15,002 5,036 18 — — — 20,056 Gross unrealized gains 142 29 1 — — — 172 Gross unrealized losses ( 50 ) ( 25 ) — — — — ( 75 ) Total available-for-sale securities, at fair value 15,094 5,040 19 — — — 20,153 Securities remeasured at fair value through earnings: Par value 45,106 29,881 — 208 348 937 76,480 Unamortized discount ( 68 ) ( 2 ) — ( 10 ) ( 3 ) ( 2 ) ( 85 ) Unamortized premium 1,218 967 — 1 7 26 2,219 Amortized cost 46,256 30,846 — 199 352 961 78,614 Gross unrealized gains 991 691 — 10 19 18 1,729 Gross unrealized losses ( 32 ) ( 18 ) — — ( 1 ) ( 3 ) ( 54 ) Total securities remeasured at fair value through earnings 47,215 31,519 — 209 370 976 80,289 Total securities, at fair value $ 62,309 $ 36,559 $ 19 $ 209 $ 370 $ 976 $ 100,442 Weighted average coupon as of December 31, 2019 3.62 % 3.75 % 3.77 % 4.05 % 4.49 % 5.07 % 3.68 % Weighted average yield as of December 31, 2019 1 3.03 % 3.09 % 2.08 % 4.39 % 4.38 % 4.05 % 3.07 % ________________________________ 1. Incorporates a weighted average future constant prepayment rate assumption of 10.8 % based on forward rates as of 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 CRT RMBS CMBS CRT RMBS CMBS AAA $ — $ — $ 39 $ — $ — $ 43 AA — 20 181 — 81 214 A — 33 22 13 25 34 BBB 42 82 55 67 71 69 BB 204 27 34 471 21 10 B 252 5 4 308 4 — Not Rated 155 10 — 117 7 — Total $ 653 $ 177 $ 335 $ 976 $ 209 $ 370 ________________________________ 1. Represents the lowest of Standard and Poor's ("S&P"), Moody's, Fitch, DBRS, Kroll Bond Rating Agency ("KBRA") and Morningstar credit ratings, stated in terms of the S&P equivalent rating as of each date. Our CRT securities reference the performance of loans underlying Agency RMBS issued by Fannie Mae or Freddie Mac, which were subject to their underwriting standards. The actual maturities of our investment securities are generally shorter than their stated contractual maturities. The actual maturities of our Agency and high credit quality non-Agency RMBS are primarily affected by principal prepayments and to a lesser degree the contractual lives of the underlying mortgages and periodic contractual principal repayments. The actual maturities of our credit-oriented investments are primarily impacted by their contractual lives and default and loss recovery rates. 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 September 30, 2020 and December 31, 2019 according to their estimated weighted average life classification (dollars in millions): 11 September 30, 2020 December 31, 2019 Estimated Weighted Average Life of Investment Securities Fair Value Amortized Cost Weighted Average Coupon Weighted Average Yield Fair Value Amortized Cost Weighted Average Coupon Weighted Average Yield ≤ 3 years $ 2,420 $ 2,387 3.65 % 2.01 % $ 2,671 $ 2,654 3.54 % 2.61 % > 3 years and ≤ 5 years 37,564 35,873 3.76 % 2.62 % 10,822 10,563 3.85 % 3.20 % > 5 years and ≤10 years 27,961 26,665 3.35 % 2.51 % 86,492 85,002 3.67 % 3.07 % > 10 years 99 99 4.08 % 3.71 % 457 451 3.31 % 3.06 % Total $ 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 September 30, 2020 and December 31, 2019 (in millions): Unrealized Loss Position For Less than 12 Months 12 Months or More Total Securities Classified as Available-for-Sale Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss 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 nine months ended September 30, 2020 and 2019 by investment classification of accounting (in millions): Three Months Ended June 30, 2020 2019 Investment Securities Available-for-Sale Securities 2 Fair Value Option Securities Total Available-for-Sale Securities 2 Fair Value Option Securities Total Investment securities sold, at cost $ — $ ( 13,430 ) $ ( 13,430 ) $ — $ ( 5,048 ) $ ( 5,048 ) Proceeds from investment securities sold 1 — 13,776 13,776 — 5,137 5,137 Net gain (loss) on sale of investment securities $ — $ 346 $ 346 $ — $ 89 $ 89 Gross gain on sale of investment securities $ — $ 354 $ 354 $ — $ 90 $ 90 Gross loss on sale of investment securities — ( 8 ) ( 8 ) — ( 1 ) ( 1 ) Net gain (loss) on sale of investment securities $ — $ 346 $ 346 $ — $ 89 $ 89 Nine Months Ended September 30, 2020 2019 Investment Securities Available-for-Sale Securities 2 Fair Value Option Securities Total Available-for-Sale Securities 2 Fair Value Option Securities Total Investment securities sold, at cost $ ( 1,433 ) $ ( 67,342 ) $ ( 68,775 ) $ ( 705 ) $ ( 17,379 ) $ ( 18,084 ) Proceeds from investment securities sold 1 1,473 68,295 69,768 696 17,669 18,365 Net gain (loss) on sale of investment securities $ 40 $ 953 $ 993 $ ( 9 ) $ 290 $ 281 Gross gain on sale of investment securities $ 40 $ 1,050 $ 1,090 $ — $ 294 $ 294 Gross loss on sale of investment securities — ( 97 ) ( 97 ) ( 9 ) ( 4 ) ( 13 ) Net gain (loss) on sale of investment securities $ 40 $ 953 $ 993 $ ( 9 ) $ 290 $ 281 ________________________________ 1. Proceeds include cash received during the period, plus receivable for investment securities sold during the period as of period end. 2. See Note 10 for a summary of changes in accumulated OCI. Note 5. Repurchase Agreements and Reverse Repurchase Agreements Repurchase Agreements We pledge our securities as collateral under our borrowings structured as repurchase agreements with financial institutions. Amounts available to be borrowed are dependent upon the fair value of the securities pledged as collateral, which 12 fluctuates with changes in interest rates, type of security and liquidity conditions within the banking, mortgage finance and real estate industries. 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 September 30, 2020, we had met all margin call requirements. For additional information regarding our pledged assets, please refer to Note 7. 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 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 Average Interest Rate Weighted Average Days to Maturity Repurchase Agreements Weighted Average Interest Rate Weighted Average Days to Maturity Agency repo: ≤ 1 month $ 28,119 0.21 % 10 $ 56,664 2.19 % 10 > 1 to ≤ 3 months 12,906 0.21 % 50 20,761 2.01 % 53 > 3 to ≤ 6 months 7,642 1.27 % 104 5,683 2.19 % 100 > 6 to ≤ 9 months 5,041 0.32 % 216 1,500 2.66 % 182 > 9 to ≤ 12 months 658 0.62 % 282 2,152 2.41 % 351 > 12 to ≤ 24 months — — % — 625 2.38 % 411 > 24 to ≤ 36 months — — % — 1,700 2.45 % 833 Total Agency repo 54,366 0.37 % 55 89,085 2.17 % 55 U.S. Treasury repo: > 1 day to ≤ 1 month 200 0.10 % 1 97 1.63 % 2 Total $ 54,566 0.37 % 55 $ 89,182 2.17 % 55 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 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 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 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 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. 13 Note 6. Derivative and Other Hedging Instruments We hedge a portion of our interest rate risk primarily utilizing interest rate swaps, interest rate swaptions, U.S. Treasury securities and U.S. Treasury futures contracts. We utilize TBA securities primarily as a means of investing in the Agency securities market. For additional information regarding our derivative instruments and our overall risk management strategy, please refer to the discussion of derivative and other hedging instruments in Note 3. 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 September 30, 2020 and December 31, 2019 (in millions): Derivative and Other Hedging Instruments Balance Sheet Location September 30, 2020 December 31, 2019 Interest rate swaps Derivative assets, at fair value $ 41 $ 21 Swaptions Derivative assets, at fair value 5 126 TBA securities Derivative assets, at fair value 84 29 U.S. Treasury futures - short Derivative assets, at fair value — 14 Total derivative assets, at fair value $ 130 $ 190 Interest rate swaps Derivative liabilities, at fair value $ — $ ( 2 ) TBA securities Derivative liabilities, at fair value ( 8 ) ( 4 ) U.S. Treasury futures - short Derivative liabilities, at fair value ( 5 ) — Total derivative liabilities, at fair value $ ( 13 ) $ ( 6 ) U.S. Treasury securities - long U.S. Treasury securities, at fair value $ — $ 97 U.S. Treasury securities - short Obligation to return securities borrowed under reverse repurchase agreements, at fair value ( 8,372 ) ( 9,543 ) Total U.S. Treasury securities, net at fair value $ ( 8,372 ) $ ( 9,446 ) 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 Amount Average Fixed Pay Rate Average Receive Rate Average Maturity (Years) Notional Amount Average Fixed Pay Rate Average Receive Rate Average Maturity (Years) ≤ 3 years $ 8,750 0.04 % 0.08 % 2.6 $ 59,700 1.30 % 1.58 % 1.6 > 3 to ≤ 5 years 16,750 0.10 % 0.08 % 4.3 9,850 1.17 % 1.55 % 3.8 > 5 to ≤ 7 years 9,800 0.21 % 0.08 % 6.0 5,650 1.34 % 1.70 % 6.4 > 7 to ≤ 10 years 6,200 0.28 % 0.08 % 8.8 2,850 1.36 % 1.58 % 8.9 > 10 years 1,475 0.47 % 0.08 % 14.4 1,025 1.64 % 1.78 % 15.4 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) September 30, 2020 December 31, 2019 SOFR 69 % 3 % OIS 31 % 86 % 3M LIBOR — % 11 % Total 100 % 100 % 14 Swaptions Option Underlying Payer Swap Current Option Expiration Date Cost Basis Fair Value Average Months to Current Option Expiration Date 1 Notional Amount Average Fixed Pay Rate 2 Average Term (Years) September 30, 2020 ≤ 1 year $ 133 $ 3 6 $ 6,400 2.35 % 9.2 > 1 year ≤ 2 years 8 2 17 500 1.87 % 10.0 Total $ 141 $ 5 7 $ 6,900 2.32 % 9.3 December 31, 2019 ≤ 1 year $ 123 $ 80 8 $ 5,650 2.26 % 9.3 > 1 year ≤ 2 years 53 46 16 3,200 2.50 % 10.0 Total $ 176 $ 126 11 $ 8,850 2.34 % 9.5 ________________________________ 1. 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. 2. 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. U.S. Treasury Securities September 30, 2020 December 31, 2019 Maturity Face Amount Long/(Short) Cost Basis 1 Fair Value Face Amount Long/(Short) Cost Basis 1 Fair Value 5 years $ ( 425 ) $ ( 425 ) $ ( 426 ) $ 95 $ 95 $ 97 7 years ( 1,083 ) ( 1,081 ) ( 1,097 ) — — — 10 years ( 6,220 ) ( 6,386 ) ( 6,849 ) ( 9,224 ) ( 9,329 ) ( 9,543 ) Total U.S. Treasury securities $ ( 7,728 ) $ ( 7,892 ) $ ( 8,372 ) $ ( 9,129 ) $ ( 9,234 ) $ ( 9,446 ) ________________________________ 1. 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 %. U.S. Treasury Futures September 30, 2020 December 31, 2019 Maturity Notional Amount Long (Short) Cost Basis Fair Value Net Carrying Value 1 Notional Amount Long (Short) Cost Basis Fair Value Net Carrying Value 1 10 years $ ( 1,000 ) $ ( 1,390 ) $ ( 1,395 ) $ ( 5 ) $ ( 1,000 ) $ ( 1,298 ) $ ( 1,284 ) $ 14 ________________________________ 1. Net carrying value represents the difference between the fair market value and the cost basis (or the forward price to be paid/(received) for the underlying U.S. Treasury security) of the U.S. Treasury futures contract as of period-end and is reported in derivative assets/(liabilities), at fair value in our consolidated balance sheets. 15 September 30, 2020 December 31, 2019 TBA Securities by Coupon Notional Amount Long (Short) Cost Basis Fair Value Net Carrying Value 1 Notional Amount Long (Short) Cost Basis Fair Value Net Carrying Value 1 15-Year TBA securities: ≤ 2.0% $ 10,228 $ 10,514 $ 10,552 38 $ — $ — $ — $ — 2.5% 866 907 904 ( 3 ) 805 811 812 1 3.0% — — — — 1,059 1,083 1,086 3 3.5% — — — — 241 250 250 — 4.0% — — — — 75 78 78 — Total 15-Year TBA securities 11,094 11,421 11,456 35 2,180 2,222 2,226 4 30-Year TBA securities: 2.0% 11,375 11,694 11,736 42 — — — — 2.5% 5,489 5,752 5,753 1 — — — — 3.0% 395 415 413 ( 2 ) 5,008 5,052 5,073 21 3.5% 168 178 178 — 1,226 1,259 1,261 2 4.0% — — — — ( 1,507 ) ( 1,565 ) ( 1,568 ) ( 3 ) ≥ 4.5% — — — — 415 436 437 1 Total 30-Year TBA securities, net 17,427 18,039 18,080 41 5,142 5,182 5,203 21 Total TBA securities, net $ 28,521 $ 29,460 $ 29,536 $ 76 $ 7,322 $ 7,404 $ 7,429 $ 25 ________________________________ 1. Net carrying value represents the difference between the fair market value and the cost basis (or the forward price to be paid/(received) for the underlying Agency security) of the TBA contract as of period-end and is reported in derivative assets/(liabilities), at fair value in our consolidated balance sheets. 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 nine months ended September 30, 2020 and 2019 (in millions): Derivative and Other Hedging Instruments Beginning Notional Amount Additions Settlement, Termination, Expiration or Exercise Ending Notional Amount Gain/(Loss) on Derivative Instruments and Other Securities, Net 1 Three months ended September 30, 2020: TBA securities, net $ 19,760 80,599 ( 71,838 ) $ 28,521 $ 283 Interest rate swaps - payer $ 42,075 24,975 ( 24,075 ) $ 42,975 140 Payer swaptions $ 9,350 — ( 2,450 ) $ 6,900 ( 1 ) U.S. Treasury securities - short position $ ( 7,247 ) ( 2,735 ) 2,255 $ ( 7,727 ) ( 15 ) U.S. Treasury securities - long position $ 1,132 — ( 1,133 ) $ ( 1 ) 1 U.S. Treasury futures contracts - short position $ ( 1,000 ) ( 1,000 ) 1,000 $ ( 1,000 ) ( 5 ) $ 403 Three months ended September 30, 2019: TBA securities, net $ 11,043 24,305 ( 33,381 ) $ 1,967 $ 144 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 ) U.S. Treasury securities - short position $ ( 7,245 ) ( 98 ) 2,710 $ ( 4,633 ) ( 154 ) U.S. Treasury securities - long position $ 1,134 353 ( 1,278 ) $ 209 5 U.S. Treasury futures contracts - short position $ ( 1,650 ) ( 1,000 ) 1,650 $ ( 1,000 ) ( 40 ) $ ( 546 ) 16 Nine months ended September 30, 2020: TBA securities, net $ 7,322 193,535 ( 172,336 ) $ 28,521 $ 1,196 Interest rate swaps - payer $ 79,075 100,700 ( 136,800 ) $ 42,975 ( 3,034 ) Payer swaptions $ 8,850 2,000 ( 3,950 ) $ 6,900 ( 149 ) U.S. Treasury securities - short position $ ( 9,224 ) ( 12,967 ) 14,464 $ ( 7,727 ) ( 1,012 ) U.S. Treasury securities - long position $ 95 7,011 ( 7,107 ) $ ( 1 ) 102 U.S. Treasury futures contracts - short position $ ( 1,000 ) ( 3,000 ) 3,000 $ ( 1,000 ) ( 117 ) $ ( 3,014 ) Nine months ended September 30, 2019: TBA securities, net $ 7,152 70,606 ( 75,791 ) $ 1,967 $ 390 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 ) U.S. Treasury securities - short position $ ( 21,345 ) ( 7,404 ) 24,116 $ ( 4,633 ) ( 1,084 ) U.S. Treasury securities - long position $ 45 1,776 ( 1,612 ) $ 209 11 U.S. Treasury futures contracts - short position $ ( 1,650 ) ( 4,300 ) 4,950 $ ( 1,000 ) ( 128 ) $ ( 2,979 ) ________________________________ 1. 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. Note 7. Pledged Assets Our funding agreements require us to fully collateralize our obligations under the agreements based upon our counterparties' collateral requirements and their determination of the fair value of the securities pledged as collateral, which fluctuates with changes in interest rates, credit quality and liquidity conditions within the investment banking, mortgage finance and real estate industries. Our derivative contracts similarly require us to fully collateralize our obligations under such agreements, which will vary over time based on similar factors as well as our counterparties' determination of the value of the derivative contract. We are typically required to post initial margin upon execution of derivative transactions, such as under our interest rate swap agreements and TBA contracts, and subsequently post or receive variation margin based on daily fluctuations in fair value. Our brokerage and custody agreements and the clearing organizations utilized by our wholly-owned captive broker-dealer subsidiary, Bethesda Securities, LLC, also require that we post minimum daily clearing deposits. If we breach our collateral requirements, we will be required to fully settle our obligations under the agreements, which could include a forced liquidation of our pledged collateral. Our counterparties also apply a "haircut" to our pledged collateral, which means our collateral is valued at slightly less than market value and limits the amount we can borrow against our securities. This haircut reflects the underlying risk of the specific collateral and protects our counterparty against a change in its value. Our agreements do not specify the haircut; rather haircuts are determined on an individual transaction basis. Consequently, our funding agreements and derivative contracts expose us to credit risk relating to potential losses that could be recognized if our counterparties fail to perform their obligations under such agreements. We minimize this risk by limiting our counterparties to major financial institutions with acceptable credit ratings or to registered clearinghouses and U.S. government agencies, and we monitor our positions with individual counterparties. In the event of a default by a counterparty, we may have difficulty obtaining our assets pledged as collateral to such counterparty and may not receive payments as and when due to us under the terms of our derivative agreements. In the case of centrally cleared instruments, we could be exposed to credit risk if the central clearing agency or a clearing member defaults on its respective obligation to perform under the contract. 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 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. 17 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 September 30, 2020 and December 31, 2019 (in millions): September 30, 2020 Assets Pledged to Counterparties 1 Repurchase Agreements 2 Debt of Consolidated VIEs Derivative Agreements Brokerage and Clearing Agreements 3 Total Agency RMBS - fair value $ 55,136 $ 323 $ 405 $ 301 $ 56,165 CRT - fair value 423 — — — 423 Non-Agency - fair value 455 — — — 455 U.S. Treasury securities - fair value 200 — — — 200 Accrued interest on pledged securities 158 1 1 1 161 Restricted cash 648 — 909 — 1,557 Total $ 57,020 $ 324 $ 1,315 $ 302 $ 58,961 December 31, 2019 Assets Pledged to Counterparties 1 Repurchase Agreements 2 Debt of Consolidated VIEs Derivative Agreements Brokerage and Clearing Agreements 3 Total Agency RMBS - fair value $ 92,142 $ 371 $ 404 $ 206 $ 93,123 CRT - fair value 309 — — — 309 U.S. Treasury securities - fair value 453 — — 28 481 Accrued interest on pledged securities 267 1 1 1 270 Restricted cash 111 — 340 — 451 Total $ 93,282 $ 372 $ 745 $ 235 $ 94,634 ________________________________ 1. Includes repledged assets received as collateral from counterparties and securities sold but not yet settled. 2. 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. 3. 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 September 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 . 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 Interest on Pledged Securities Fair Value of Pledged Securities Amortized Cost of Pledged Securities Accrued Interest on Pledged Securities ≤ 30 days $ 28,729 $ 27,243 $ 82 $ 56,990 $ 55,951 $ 167 > 30 and ≤ 60 days 8,666 8,214 24 14,410 14,114 42 > 60 and ≤ 90 days 4,568 4,378 12 7,637 7,536 20 > 90 days 14,051 13,380 40 13,510 13,286 38 Total $ 56,014 $ 53,215 $ 158 $ 92,547 $ 90,887 $ 267 ________________________________ 1. 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. 2. 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 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). 18 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 U.S. Treasury securities - fair value 1 $ 8,579 $ — $ 211 $ 8,790 $ 10,099 $ — $ 1 $ 10,100 Cash — 5 4 9 — 116 — 116 Total $ 8,579 $ 5 $ 215 $ 8,799 $ 10,099 $ 116 $ 1 $ 10,216 ________________________________ 1. 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. Treasury securities. Offsetting Assets and Liabilities Certain of our repurchase agreements and derivative transactions are governed by underlying agreements that generally provide for a right of setoff under master netting arrangements (or similar agreements), including in the event of default or in the event of bankruptcy of either party to the transactions. 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 September 30, 2020 and December 31, 2019 (in millions): Offsetting of Financial and Derivative Assets Gross Amounts of Recognized Assets Gross Amounts Offset in the Consolidated Balance Sheets Net Amounts of Assets Presented in the Consolidated Balance Sheets Gross Amounts Not Offset in the Consolidated Balance Sheets Net Amount Financial Instruments Collateral Received 2 September 30, 2020 Interest rate swap and swaption agreements, at fair value 1 $ 46 $ — $ 46 $ — $ ( 3 ) $ 43 TBA securities, at fair value 84 — 84 ( 8 ) — 76 Receivable under reverse repurchase agreements 8,625 — 8,625 ( 5,463 ) ( 3,147 ) 15 Total $ 8,755 $ — $ 8,755 $ ( 5,471 ) $ ( 3,150 ) $ 134 December 31, 2019 Interest rate swap and swaption agreements, at fair value 1 $ 147 $ — $ 147 $ ( 2 ) $ ( 116 ) $ 29 TBA securities, at fair value 29 — 29 ( 4 ) — 25 Receivable under reverse repurchase agreements 10,181 — 10,181 ( 9,852 ) ( 329 ) — Total $ 10,357 $ — $ 10,357 $ ( 9,858 ) $ ( 445 ) $ 54 Offsetting of Financial and Derivative Liabilities Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Consolidated Balance Sheets Net Amounts of Liabilities Presented in the Consolidated Balance Sheets Gross Amounts Not Offset in the Consolidated Balance Sheets Net Amount Financial Instruments Collateral Pledged 2 September 30, 2020 Interest rate swap agreements, at fair value 1 $ — $ — $ — $ — $ — $ — TBA securities, at fair value 8 — 8 ( 8 ) — — Repurchase agreements 54,566 — 54,566 ( 5,463 ) ( 49,103 ) — Total $ 54,574 $ — $ 54,574 $ ( 5,471 ) $ ( 49,103 ) $ — December 31, 2019 Interest rate swap agreements, at fair value 1 $ 2 $ — $ 2 $ ( 2 ) $ — $ — TBA securities, at fair value 4 — 4 ( 4 ) — — Repurchase agreements 89,182 — 89,182 ( 9,852 ) ( 79,330 ) — Total $ 89,188 $ — $ 89,188 $ ( 9,858 ) $ ( 79,330 ) $ — 19 ________________________________ 1. Reported under derivative assets / liabilities, at fair value in the accompanying consolidated balance sheets. Refer to Note 6 for a reconciliation of derivative assets / liabilities, at fair value to their sub-components. 2. Includes cash and securities pledged / received as collateral, at fair value. Amounts include repledged collateral. Amounts presented are limited to collateral pledged sufficient to reduce the net amount to zero for individual counterparties, as applicable. Note 8. Fair Value Measurements We determine the fair value of financial instruments based on our estimate of the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date. We utilize a three-level valuation hierarchy for disclosure of fair value measurements based upon the transparency of inputs to the valuation of the instrument as of the measurement date. We categorize a financial instrument within the hierarchy based upon the lowest level of input that is significant to the fair value measurement. The three levels of valuation hierarchy are defined as follows: • Level 1 Inputs —Quoted prices (unadjusted) for identical unrestricted assets and liabilities in active markets that are accessible at the measurement date. • Level 2 Inputs —Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. • Level 3 Inputs —Instruments with primarily unobservable market data that cannot be corroborated. We typically obtain price estimates from multiple third-party pricing services and dealers or, if applicable, the registered clearing exchange. The following is a description of the valuation methodologies used for instruments carried at fair value on a recurring basis. U.S. Treasury securities and futures prices - are valued based on quoted prices for identical instruments in active markets and are classified as Level 1 assets. TBA securities - are valued using prices obtained from third-party pricing sources based on pricing models that reference recent trading activity. Interest rate swaps - are valued using the daily settlement price, or fair value, determined by the clearing exchange based on a pricing model that references observable market inputs, including current benchmark rates and the forward yield curve. Interest rate swaptions - are valued using prices obtained from the counterparty and other third-party pricing models. 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 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. For other investment securities, the pricing sources primarily utilize discounted cash flow model-derived pricing techniques to estimate the fair value. Such models incorporate market-based discount rate assumptions based on observable inputs such as recent trading activity, credit data, volatility statistics, benchmark interest rate curves, spread measurements to benchmark curves and other market data that are current as of the measurement date and may include certain unobservable inputs, such as assumptions of future levels of prepayment, defaults and loss severities. The availability of observable inputs can be affected by a wide variety of factors, including the type of instrument, whether the instrument is new and not yet established in the marketplace and other characteristics particular to the instrument. We make inquiries of third-party pricing sources to understand the significant inputs and assumptions they used to determine their prices and that they are derived from orderly transactions, particularly during periods of elevated market turbulence and reduced market liquidity. We also review third-party price estimates and perform procedures to validate their reasonableness, including an analysis of the range of estimates for each position, comparison to recent trade activity for similar securities and for consistency with market conditions observed as of the measurement date. While we do not adjust prices we obtain from pricing sources, we will exclude prices for securities from our estimation of fair value if we determine based on our validation 20 procedures and our market knowledge and expertise that the price is significantly different from what observable market data would indicate and we cannot obtain an understanding from the third-party source as to the significant inputs used to determine the price. The markets for interest rate swap, swaption and TBA derivatives and for the investment securities that we invest in are considered to be active markets such that participants transact with sufficient frequency and volume to provide transparent pricing information on an ongoing basis. The liquidity of these markets and the similarity of our securities and derivative instruments to those actively traded enable our pricing sources and us to observe quoted prices in the market and utilize those prices as a basis for formulating fair value measurements. 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 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. September 30, 2020 December 31, 2019 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets: Agency securities $ — $ 66,556 $ — $ — $ 98,516 $ — Agency securities transferred to consolidated VIEs — 323 — — 371 — Credit risk transfer securities — 653 — — 976 — Non-Agency securities — 512 — — 579 — U.S. Treasury securities — — — 97 — — Interest rate swaps — 41 — — 21 — Swaptions — 5 — — 126 — TBA securities — 84 — — 29 — U.S. Treasury futures — — — 14 — — Total $ — $ 68,174 $ — $ 111 $ 100,618 $ — Liabilities: Debt of consolidated VIEs $ — $ 192 $ — $ — $ 228 $ — Obligation to return U.S. Treasury securities borrowed under reverse repurchase agreements 8,372 — — 9,543 — — Interest rate swaps — — — — 2 — TBA securities — 8 — — 4 — U.S. Treasury futures 5 — — — — — Total $ 8,377 $ 200 $ — $ 9,543 $ 234 $ — 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 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. Note 9. Net Income (Loss) Per Common Share Basic net income (loss) per common share is computed by dividing (i) net income (loss) available (attributable) to common stockholders by (ii) the sum of our weighted-average number of common shares outstanding and the weighted-average number of vested but not yet issued time and performance-based restricted stock units ("RSUs") outstanding for the period granted under our long-term incentive program to employees and non-employee Board of Directors. Diluted net income (loss) per common share assumes the issuance of all potential common stock equivalents unless the effect is to reduce a loss or increase the income per common share. Our potential common stock equivalents consist of unvested time and performance-based RSUs. The following table presents the computations of basic and diluted net income (loss) per common share for the periods indicated (shares and dollars in millions): 21 Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Weighted average number of common shares issued and outstanding 552.1 546.0 552.9 539.9 Weighted average number of fully vested restricted stock units outstanding 1.1 0.4 0.9 0.4 Weighted average number of common shares outstanding - basic 553.2 546.4 553.8 540.3 Weighted average number of dilutive unvested restricted stock units outstanding 1.1 — — — Weighted average number of common shares outstanding - diluted 554.3 546.4 553.8 540.3 Net income (loss) available (attributable) to common stockholders $ 637 $ ( 17 ) $ ( 1,112 ) $ ( 219 ) Net income (loss) per common share - basic $ 1.15 $ ( 0.03 ) $ ( 2.01 ) $ ( 0.41 ) Net income (loss) per common share - diluted $ 1.15 $ ( 0.03 ) $ ( 2.01 ) $ ( 0.41 ) 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. Note 10. Stockholders' Equity Preferred Stock 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 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 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. Our preferred stock ranks senior to our common stock with respect to the payment of dividends and the distribution of assets upon a voluntary or involuntary liquidation, dissolution or winding up of the Company. Our preferred stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and each series of preferred stock ranks on parity with one another. Under certain circumstances upon a change of control, our preferred stock is convertible to shares of our common stock. Holders of our preferred stock and depositary shares underlying our preferred stock have no voting rights, except under limited conditions. 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 September 30, 2020 (dollars and shares in millions): Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock 1 Issuance Date Depositary Shares Issued and Outstanding Carrying Value Aggregate Liquidation Preference Fixed Rate Optional Redemption Date 2 Fixed-to-Floating Rate Conversion Date Floating Annual Rate Series C August 22, 2017 13.0 315 325 7.000 % October 15, 2022 October 15, 2022 3M LIBOR + 5.111% Series D March 6, 2019 9.4 227 235 6.875 % April 15, 2024 April 15, 2024 3M LIBOR + 4.332% Series E October 3, 2019 16.1 390 403 6.500 % October 15, 2024 October 15, 2024 3M LIBOR + 4.993% Series F February 11, 2020 23.0 557 575 6.125 % April 15, 2025 April 15, 2025 3M LIBOR + 4.697% Total 61.5 $ 1,489 $ 1,538 ________________________________ 1. Fixed-to-floating rate redeemable preferred stock accrue dividends at an annual fixed rate of the $25.00 liquidation preference per depositary share from the issuance date up to, but not including, the fixed-to-floating rate conversion date; thereafter, dividends will accrue on a floating rate basis equal to 3-month LIBOR plus a fixed spread. 2. Shares may be redeemed prior to our optional redemption date under certain circumstances intended to preserve our qualification as a REIT for U.S federal income tax purposes. 22 At-the-Market Offering Program 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 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 From time-to-time we are authorized by our Board of Directors to repurchase shares of our common stock under certain conditions. 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 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. See also Note 11. Subsequent Events for additional information pertaining to our common stock repurchase program. Accumulated Other Comprehensive Income (Loss) The following table summarizes changes to accumulated OCI for the three and nine months ended September 30, 2020 and 2019 (in millions): Three Months Ended September 30, Nine Months Ended September 30, Accumulated Other Comprehensive Income (Loss) 2020 2019 2020 2019 Beginning Balance $ 764 $ ( 164 ) $ 97 $ ( 943 ) OCI before reclassifications 70 246 777 1,016 Net loss amounts for available-for-sale securities reclassified from accumulated OCI to realized gain (loss) on sale of investment securities, net — — ( 40 ) 9 Ending Balance $ 834 $ 82 $ 834 $ 82 Note 11. Subsequent Events Common Stock Dividend Declaration On October 8, 2020, our Board of Directors declared a monthly dividend of $ 0.12 per common share payable on November 11, 2020 to common stockholders of record as of October 31, 2020. Common Stock Repurchase Program On October 22, 2020 our Board of Directors terminated our existing stock repurchase plan (see Note 10) that was due to expire on December 31, 2020 and replaced it with a new plan authorizing us to repurchase up to $ 1 billion of common stock through December 31, 2021. Under the new plan, we may repurchase shares in the open market or through privately negotiated transactions or pursuant to a trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. Our stock repurchase program may be limited or terminated at any time without prior notice. We intend to repurchase shares under the stock repurchase program only when the repurchase price is less than our then-current estimate of tangible net book value per common share. 23