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Item 2. Management’s Discussion and Analysis

2023-05-08 compared with 2022-11-07 · 155 added, 227 removed, 457 unchanged (46% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is designed to provide a reader of AGNC Investment Corp.'s consolidated financial statements with a narrative from the perspective of management and should be read in conjunction with the consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q for quarterly period ended September 30, 2022.

Our MD&A is presented in the following sections:

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Trends and Recent Market Impacts

Financial markets experienced broad-based weakness in the third quarter of 2022.

Macroeconomic and monetary policy uncertainty both domestically and abroad intensified, leading to a sharp decline in investor sentiment and a significant repricing in the fixed income markets.

For the third quarter, the unlevered Bloomberg Aggregate Bond Index declined -4.75%, representing a year-to-date decline of -14.6%.

As the most liquid spread product within the fixed income spectrum, Agency RMBS often face greater selling pressure than other asset classes further down the liquidity and credit spectrum in the early stages of market downturns as investors seek to convert their holdings to cash.

This dynamic caused Agency RMBS to significantly underperform interest rate hedges and other fixed income products in the third quarter and was the primary driver of AGNC’s economic loss on tangible net book value per common share of -17.4 % for the quarter (or -35.5% year-to-date) comprised of dividends declared and the decline in tangible net book value per common share.

As a result of these challenging market conditions, we continued to prioritize risk management and a strong liquidity position in the third quarter.

We mitigated our interest rate exposure during the quarter with a hedge portfolio totaling 118% of the outstanding balance of our Agency repurchase agreements, net TBA position and other debt as of September 30, 2022.

Further, we operated with a reduced “at-risk” leverage position, as compared to historical operating levels, averaging 8.1x tangible stockholders’ equity for the third quarter.

As of September 30, 2022, our unencumbered assets totaled $3.7 billion, or 56% of tangible equity, consisting of $3.6 billion of unencumbered cash and Agency RMBS and $0.1 billion of unencumbered credit assets.

Additionally, during the third quarter, we opportunistically issued approximately $290 million of common equity through our at-the-market offering program and $150 million of fixed-rate reset preferred equity.

AGNC generated strong net spread and dollar roll income during the first three quarters of the year.

Excluding “catch-up” amortization, net spread and dollar roll income increased to $0.84 and $2.38 per common share for the three and nine months ended September 30, 2022, respectively, from $0.75 and $2.27 per common share for the comparable prior year period, respectively, as higher asset yields and our large pay-fixed/receive-variable interest rate swap portfolio more than offset rising repo funding costs and moderating TBA dollar roll income.

Looking ahead, the longer-term outlook for Agency RMBS has improved substantially.

Although Agency RMBS spreads relative to benchmark interest rates could potentially widen further, the historic move in these spreads that has already occurred, coupled with positive developments in the supply and demand outlook for Agency RMBS, suggest that this recent period of weakness in the Agency RMBS market may be nearing its end.

Importantly, although the Federal Reserve has begun to reduce its portfolio through prepayments, the pace of this runoff is expected to be materially slower than previously anticipated as a result of significantly higher mortgage rates.

At current valuation levels, we believe that Agency RMBS are extremely attractive on both an absolute and relative basis and that AGNC is well-positioned to take advantage of this historically favorable risk-adjusted return environment as overall financial market volatility and uncertainty subside.

Agency RMBS performed well during the first half of the first quarter of 2023, posting one of the asset class’s strongest monthly returns on record in January.

These favorable conditions, however, gave way to a more challenging investment environment in the second half of the quarter as stronger than expected economic data, followed by regional bank instability, led to elevated interest rate volatility and an increasingly uncertain macroeconomic outlook.

At its February meeting, the Federal Reserve raised the federal funds rate by 25 basis points.

In addition, Chairman Powell indicated that more hikes were likely and that short-term rates would likely remain higher for longer to combat persistently high inflation.

By early March, the terminal federal funds rate implied by the futures market approached 6%, implying that another 100 basis points of tightening was expected, and the spread between the two-year and 10-year Treasury yield reached negative 108 basis points.

The sharply inverted yield curve and more aggressive monetary policy outlook raised serious concerns about bank earnings and unrealized losses on asset portfolios that ultimately led to the abrupt failure of Silicon Valley Bank and a dramatic repricing of monetary policy expectations.

The turbulence in the banking sector also sparked concerns about a potential supply overhang of Agency RMBS from the liquidation of banks’ bond portfolios that would have to be absorbed by the private market.

Against this backdrop, interest rate volatility increased to crisis levels, with Treasury market volatility reaching a 15-year high during the quarter.

Short-term interest rates experienced the greatest volatility, with the two-year Treasury yield dropping 61 basis points in a single day, exceeding the worst decline experienced during the Great Financial Crisis.

Longer-term Treasury rates were also volatile, with the 10-year Treasury yield increasing 60 basis points in February and falling by a similar amount in March.

The spike in volatility and the possibility of sales of banks’ bond holdings, which became a reality after the Federal Deposit Insurance Corporation's seizure of Silicon Valley Bank and Signature Bank’s assets, weighed on Agency RMBS performance.

This underperformance relative to interest rate hedges late in the quarter was the primary driver of AGNC’s economic loss on tangible common equity of -0.7% for the quarter, comprised of a decline in tangible net book value per common share of $(0.43), or -4.4%, and $0.36 of dividends declared per common share for the quarter.

In light of a more uncertain supply and demand outlook for Agency RMBS and continued interest rate volatility, we maintained our relatively conservative positioning during the first quarter.

With the Fed tightening cycle likely nearing an end, we reduced our interest rate hedge position from 124% of our mortgage funding liabilities, as of December 31, 2022, to 114%, as of March 31, 2023, and shifted a larger portion of our hedges further out the yield curve.

We reduced our mortgage holdings by $2.7 billion during the quarter and maintained our “at risk” leverage ratio towards the lower end of our longer-term historical average at 7.2x tangible stockholders’ equity as of March 31, 2023.

Despite the intra-quarter rate volatility, our liquidity position remained strong throughout the quarter.

As of March 31, 2023, our unencumbered assets totaled $4.2 billion, or 58% of our tangible stockholders' equity, which consisted of $4.1 billion of cash and unencumbered Agency RMBS and $70 million of unencumbered CRT and non-Agency securities.

During the quarter, we continued to shift our portfolio higher in coupon, increasing the weighted average coupon on our fixed rate Agency RMBS and TBA securities to 4.24%, compared to 4.13% as of December 31, 2022, and reducing our exposure to the lowest Agency RMBS coupons, which represent the bulk of banks’ Agency RMBS holdings.

The average projected life CPR on our portfolio increased to 10.0% as of March 31, 2023, from 7.4% as of the prior quarter-end, consistent with our higher average coupon and moderately lower forward mortgage rate expectations.

Actual CPRs for the first quarter averaged less than 5.5%.

Net spread and dollar roll income, excluding “catch-up” premium amortization, (a non-GAAP measure) declined during the first quarter to $0.70 per diluted common share, compared to $0.74 per diluted common share for fourth quarter 2022 and $0.72 per diluted common share for the first quarter 2022.

The decline was largely due to higher funding costs and the addition of longer dated pay fixed interest rate swap hedges, which more than offset higher asset yields.

Despite the volatility that we experienced in March, our longer-run outlook for Agency RMBS continues to be very positive.

A key element of this optimism is our belief that Agency RMBS spreads to Treasury and swap rates will remain meaningfully wider than historical averages, providing a durable opportunity to generate highly attractive returns while maintaining a conservative risk position.

For much of the last 15 years, we have competed for investment assets with the world's largest and most price insensitive buyer of Agency MBS, the Federal Reserve.

With the Fed gradually repositioning its balance sheet and banks also now expected to reduce their bond portfolios, Agency RMBS valuations are historically attractive and appear poised to remain that way for some time.

As a result, we believe AGNC is well-positioned for this favorable investment environment, which, over the long term, will benefit both our earnings profile and franchise value.

For information regarding non-GAAP financial measures, including reconciliations to the most comparable GAAP measure please refer to Results of Operations included in this MD&A below.

For further discussion regarding the sensitivity of our tangible net book value to changes in interest rates and mortgage spreads, please refer to Item 3.

For information regarding the sensitivity of our tangible net book value per common share to changes in interest rates and mortgage spreads, please refer to Item 3.

Quantitative and Qualitative Disclosures about Market Risk in this form 10-Q.

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Interest Rate/Security Price 1

31, 2022 June 30, 2022 Sept.

30, 2022 Dec.

31, 2022 Mar.

31, 2022 June 30, 2022 Sept.

30, 2022 Sept.

June 30, 2022

31, 2023 Mar.

Target Federal Funds Rate:

Target Federal Funds Rate - Upper Band

0.25% 0.25% 0.50% 1.75% 3.25% +150 bps +300 bps

SOFR Rate 0.05% 0.05% 0.29% 1.50% 2.98% +148 bps +293 bps

0.50% 1.75% 3.25% 4.50% 5.00% +50 bps

SOFR Rate 0.29% 1.50% 2.98% 4.30% 4.87% +57 bps

SOFR Interest Rate Swap Rate:

0.24% 0.74% 2.28% 2.99% 4.25% +126 bps +351 bps

0.83% 1.12% 2.25% 2.79% 3.85% +106 bps +273 bps

1.26% 1.32% 2.13% 2.81% 3.59% +78 bps +227 bps

1.52% 1.46% 1.97% 2.66% 3.07% +41 bps +161 bps

2.28% 2.99% 4.25% 4.45% 4.06% -39 bps

2.25% 2.79% 3.85% 3.75% 3.34% -41 bps

2.13% 2.81% 3.59% 3.56% 3.17% -39 bps

1.97% 2.66% 3.07% 3.21% 2.93% -28 bps

Treasury Security Rate:

0.28% 0.73% 2.34% 2.96% 4.28% +132 bps +355 bps

0.97% 1.26% 2.46% 3.04% 4.09% +105 bps +283 bps

1.49% 1.51% 2.34% 3.02% 3.83% +81 bps +232 bps

2.05% 1.90% 2.45% 3.19% 3.78% +59 bps +188 bps

2.34% 2.96% 4.28% 4.43% 4.03% -40 bps

2.46% 3.04% 4.09% 4.01% 3.58% -43 bps

2.34% 3.02% 3.83% 3.88% 3.47% -41 bps

2.45% 3.19% 3.78% 3.97% 3.65% -32 bps

30-Year Fixed Rate Agency Price:

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4.5% $103.73 $100.51 $95.21 $96.59 $97.92 +$1.33

5.0% $105.13 $102.17 $97.39 $98.80 $99.69 +$0.89

5.5% $105.72 $103.87 $99.46 $100.47 $101.00 +$0.53

6.0% $106.56 $104.63 $101.61 $101.69 $102.08 +$0.39

15-Year Fixed Rate Agency Price:

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(EST) on such date and can vary by source.

Prices in the table above were obtained from Barclays.

Interest rates were obtained from Bloomberg.

Price information is sourced from Barclays.

Interest rate information is sourced from Bloomberg.

The following table summarizes mortgage and credit spreads as of each date presented below:

Mortgage Rate/Credit Spread Sept.

Mortgage Rate/Credit Spread Mar.

31, 2022 June 30, 2022 Sept.

30, 2022 Dec.

31, 2022 Mar.

31, 2022 June 30, 2022 Sept.

30, 2022 Sept.

June 30, 2022

31, 2023 Mar.

Mortgage Rate:

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Treasury Spread 103 134 159 138 147 +9

30-Year Agency Current Coupon Yield 1.97% 2.07% 3.49% 4.38% 5.68% +130 bps +361 bps

30-Year Mortgage Rate 3.18% 3.27% 4.90% 5.83% 7.06% +123 bps +379 bps

30-Year Agency Current Coupon Yield to 10-Year U.S.

Treasury Spread 115 136 185 151 158 +7

30-Year Agency Current Coupon Yield to 5/10-Year U.S.

Treasury Spread 109 136 171 145 152 +7

30-Year Agency Current Coupon Yield 3.49% 4.38% 5.68% 5.39% 5.05% -34 bps

30-Year Mortgage Rate 4.79% 5.79% 6.72% 6.52% 6.40% -12 bps

Credit Spread (in bps):

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30-Year Current Coupon Yield represents yield on new production Agency RMBS.

30-Year Current Coupon Yield and 30-Year Mortgage Rate are sourced from Bloomberg.

30-Year Current Coupon Yields are sourced from Bloomberg and 30-Year Mortgage Rates are sourced from Clear Blue.

CRT and CDX spreads sourced from JP Morgan.

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FINANCIAL CONDITION

As of September 30, 2022 and December 31, 2021, our investment portfolio totaled $61.5 billion and $82.0 billion, respectively, consisting of:

As of March 31, 2023 and December 31, 2022, our investment portfolio totaled $56.7 billion and $59.5 billion, respectively, consisting of:

$46.4 billion and $40.9 billion investment securities, at fair value, respectively;

$10.4 billion and $18.6 billion net TBA securities, at fair value, respectively.

and, as of December 31, 2021, $0.4 billion forward settling non-Agency securities, at fair value.

The following table is a summary of our investment portfolio as of September 30, 2022 and December 31, 2021 (dollars in millions):

September 30, 2022 December 31, 2021

Investment Portfolio (Includes TBAs) Amortized Cost Fair Value Average Coupon % Amortized Cost Fair Value Average Coupon %

The following table is a summary of our investment securities as of March 31, 2023 and December 31, 2022 (dollars in millions):

March 31, 2023 December 31, 2022

Investment Securities (Includes TBAs) 1

Amortized Cost Fair Value Average Coupon % Amortized Cost Fair Value Average Coupon %

Fixed rate Agency RMBS and TBA securities:

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Non-Agency RMBS 67 53 4.74 % — % 111 90 4.52 % — %

254 222 3.80 % — % 763 767 2.85 % 1 %

CMBS 484 452 6.44 % 1 % 605 567 6.06 % 1 %

CRT 775 769 9.13 % 1 % 779 757 8.48 % 1 %

Total investment portfolio $ 68,278 $ 61,494 3.84 % 100 % $ 81,250 $ 81,999 2.85 % 100 %

Total investment securities $ 59,960 $ 56,734 4.29 % 100 % $ 63,287 $ 59,478 4.18 % 100 %

________________________________

Table excludes other mortgage credit investments of $25 million as of March 31, 2023 and December 31, 2022 accounted for under the equity method of accounting.

TBA securities are presented net of long and short positions.

For further details of our TBA securities refer to Note 5 of our Consolidated Financial Statements in this Form 10-Q

September 30, 2022 non-Agency RMBS balance includes mortgage credit investment fund limited partnership interest totaling approximately $27 million reported in non-Agency securities on the accompanying consolidated balance sheets.

Average coupon excludes limited partnership interest.

December 31, 2021 balance includes $0.4 billion of forward settling non-Agency securities reported in derivative assets/(liabilities) on the accompanying consolidated balance sheets.

TBA and forward settling securities are recorded as derivative instruments in our accompanying consolidated financial statements, and our TBA dollar roll transactions represent a form of off-balance sheet financing.

As of September 30, 2022 and December 31, 2021, our TBA position and forward settling securities had a net carrying value of $(1.2) billion and $(44) million, respectively, reported in derivative assets/(liabilities) on our accompanying consolidated balance sheets.

The net carrying value represents the difference between the fair value of the underlying security in the TBA contract or forward purchase agreement and the price to be paid or received for the underlying security.

As of September 30, 2022 and December 31, 2021, the weighted average yield on our investment securities (excluding TBA and forward settling securities) was 3.14% and 2.43%, respectively.

The following tables summarize certain characteristics of our fixed rate Agency RMBS portfolio, inclusive of TBA securities, as of September 30, 2022 and December 31, 2021 (dollars in millions):

September 30, 2022

TBA securities are recorded as derivative instruments in our accompanying consolidated financial statements, and our TBA dollar roll transactions represent a form of off-balance sheet financing.

As of March 31, 2023 and December 31, 2022, our TBA securities had a net carrying value of $10 million and $167 million, respectively, reported in derivative assets/(liabilities) on our accompanying consolidated balance sheets.

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

As of March 31, 2023 and December 31, 2022, the weighted average yield on our investment securities (excluding TBA and forward settling securities) was 3.55% and 3.37%, respectively.

The following tables summarize certain characteristics of our fixed rate Agency RMBS portfolio, inclusive of TBA securities, as of March 31, 2023 and December 31, 2022 (dollars in millions):

March 31, 2023

Includes Net TBA Position Excludes Net TBA Position

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Cost Fair Value Specified Pool % 1

Weighted Average Coupon Amortized

Cost Basis Weighted Average Projected

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Specified pools include pools backed by lower balance loans with original loan balances of up to $200K, HARP pools (defined as pools that were issued between May 2009 and December 2018 and backed by 100% refinance loans with original LTVs ≥ 80%), and pools backed by loans 100% originated in New York and Puerto Rico.

As of September 30, 2022, lower balance specified pools had a weighted average original loan balance of $123,000 and $136,000 for 15-year and 30-year securities, respectively, and HARP pools had a weighted average original LTV of 128% and 138% for 15-year and 30-year securities, respectively.

WAC represents the weighted average coupon of the underlying collateral.

Portfolio yield incorporates a projected life CPR based on forward rate assumptions as of September 30, 2022.

As of March 31, 2023, lower balance specified pools had a weighted average original loan balance of $123,000 and $142,000 for 15-year and 30-year securities, respectively, and HARP pools had a weighted average original LTV of 128% and 138% for 15-year and 30-year securities, respectively.

Portfolio yield incorporates a projected life CPR based on forward rate assumptions as of March 31, 2023.

December 31, 2022

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Cost Fair Value Specified Pool % 1

Weighted Average Coupon Amortized

Cost Basis Weighted Average Projected

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As of December 31, 2022, lower balance specified pools had a weighted average original loan balance of $123,000 and $140,000 for 15-year and 30-year securities, respectively, and HARP pools had a weighted average original LTV of 128% and 138% for 15-year and 30-year securities, respectively.

WAC represents the weighted average coupon of the underlying collateral.

Portfolio yield incorporates a projected life CPR based on forward rate assumptions as of December 31, 2022.

For additional details regarding our CRT and non-Agency securities, including credit ratings, as of September 30, 2022 and December 31, 2021, please refer to Note 3 of our Consolidated Financial Statements in this Form 10-Q.

For additional details regarding our CRT and non-Agency securities, including credit ratings, as of March 31, 2023 and December 31, 2022, please refer to Note 3 of our Consolidated Financial Statements in this Form 10-Q.

RESULTS OF OPERATIONS

Non-GAAP Financial Measures

In addition to the results presented in accordance with GAAP, our results of operations discussed below include certain non-GAAP financial information, including "economic interest income," "economic interest expense," "net spread and dollar roll income" and "net spread and dollar roll income, excluding 'catch-up' premium amortization, available to common stockholders," "estimated taxable income (loss)" and the related per common share measures and certain financial metrics derived from such non-GAAP information.

In addition to the results presented in accordance with GAAP, our results of operations discussed below include certain non-GAAP financial information, including "economic interest income," "economic interest expense," "net spread and dollar roll income" and "net spread and dollar roll income, excluding 'catch-up' premium amortization, available to common stockholders," and the related per common share measures and certain financial metrics derived from such non-GAAP information.

"Economic interest income" is measured as interest income (GAAP measure), adjusted to (i) exclude retrospective "catch-up" adjustments to premium amortization cost associated with changes in projected CPR estimates and (ii) include TBA dollar roll implied interest income.

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"Net spread and dollar roll income, excluding 'catch-up' premium amortization, available to common stockholders" is measured as comprehensive income (loss) available (attributable) to common stockholders (GAAP measure) adjusted to:

(i) exclude gains/losses on investment securities recognized through net income or other comprehensive income and gains/losses on derivative instruments and other securities (GAAP measures) and (ii) include interest rate swap periodic income/cost and TBA dollar roll income.

As defined "Net spread and dollar roll income, excluding 'catch-up' premium amortization, available to common stockholders" includes (i) the components of "economic interest income" and "economic interest expense" less (ii) total operating expenses and dividends on preferred stock (GAAP measures).

(i) exclude gains/losses on investment securities recognized through net income and other comprehensive income and gains/losses on derivative instruments and other securities (GAAP measures) and (ii) include interest rate swap periodic income/cost, TBA dollar roll income and other miscellaneous interest income/expense.

As defined "Net spread and dollar roll income, excluding 'catch-up' premium amortization, available to common stockholders" includes (i) the components of "economic interest income" and "economic interest expense", plus (ii) other interest income/expense, and less (iii) total operating expenses and dividends on preferred stock (GAAP measures).

By providing such measures, in addition to the related GAAP measures, we believe we give greater transparency into the information used by our management in its financial and operational decision-making.

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Additionally, we believe the exclusion of "catch-up" premium amortization adjustments is meaningful as it excludes the cumulative effect from prior reporting periods due to current changes in future prepayment expectations and, therefore, exclusion of such adjustments is more indicative of the current earnings potential of our investment portfolio.

In the case of "estimated taxable income (loss)", we believe it is meaningful information because it directly relates to the amount of dividends that we are required to distribute to maintain our REIT qualification status.

However, because such measures are incomplete measures of our financial performance and involve differences from results computed in accordance with GAAP, they should be considered as supplementary to, and not as a substitute for, results computed in accordance with GAAP.

In addition, because not all companies use identical calculations, our presentation of such non-GAAP measures may not be comparable to other similarly titled measures of other companies.

Furthermore, estimated taxable income can include certain information that is subject to potential adjustments up to the time of filing our income tax returns, which occurs after the end of our fiscal year.

Selected Financial Data

The following selected financial data is derived from our interim consolidated financial statements and the notes thereto.

The tables below present our condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021 and condensed consolidated statements of comprehensive income and key statistics for the three and nine months ended September 30, 2022 and 2021 (in millions, except per share amounts):

September 30,

The tables below present our condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022 and condensed consolidated statements of comprehensive income and key statistics for the three months ended March 31, 2023 and 2022 (in millions, except per share amounts):

Balance Sheet Data 2023

Investment securities, at fair value $ 43,618 $ 54,421

Investment securities, at fair value of $46,339 and $40,904, respectively, and other mortgage credit investments

$ 46,364 $ 40,929

Total assets $ 66,111 $ 51,748

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Statement of Comprehensive Income Data (Unaudited)

2022 2021 2022 2021

Interest income $ 351 $ 475

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Dividends on preferred stock 30 25

Net income (loss) available (attributable) to common stockholders $ (692) $ 187 $ (1,827) $ 701

Net loss attributable to common stockholders $ (181) $ (676)

Net income (loss) $ (151) $ (651)

Other comprehensive income (loss), net 142 (491)

Comprehensive income (loss) (1,038) 218 (2,859) 468

Comprehensive loss (9) (1,142)

Dividends on preferred stock 30 25

Comprehensive income (loss) available (attributable) to common stockholders $ (1,064) $ 193 $ (2,935) $ 393

Comprehensive loss attributable to common stockholders $ (39) $ (1,167)

Weighted average number of common shares outstanding - basic 579.3 524.3

Weighted average number of common shares outstanding - diluted 579.3 524.3

Net income (loss) per common share - basic $ (1.31) $ 0.36 $ (3.47) $ 1.33

Net income (loss) per common share - diluted $ (1.31) $ 0.35 $ (3.47) $ 1.32

Net loss per common share - basic $ (0.31) $ (1.29)

Net loss per common share - diluted $ (0.31) $ (1.29)

Comprehensive income (loss) per common share - basic $ (0.07) $ (2.23)

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Other Data (Unaudited) * 2023 2022

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Average tangible net book value "at risk" leverage 5

8.1:1 7.5:1 8.1:1 7.7:1

Tangible net book value "at risk" leverage (as of period end) 6

8.7:1 7.5:1 8.7:1 7.5:1

Economic return on tangible common equity - unannualized 7

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Economic Interest Income and Asset Yields

The following table summarizes our economic interest income (a non-GAAP measure) for the three and nine months ended September 30, 2022 and 2021, which includes the combination of interest income (a GAAP measure) on our holdings reported as investment securities on our consolidated balance sheets, adjusted to exclude estimated "catch-up" premium amortization adjustments for the cumulative effect from prior reporting periods due to changes in our CPR forecast, and implied interest income on our TBA securities (dollars in millions):

Three Months Ended September 30,

Nine Months Ended September 30,

2022 2021 2022 2021

Amount Yield Amount Yield Amount Yield Amount Yield

The following table summarizes our economic interest income (a non-GAAP measure) for the three months ended March 31, 2023 and 2022, which includes the combination of interest income (a GAAP measure) on our holdings reported as investment securities on our consolidated balance sheets, adjusted to exclude estimated "catch-up" premium amortization adjustments for the cumulative effect from prior reporting periods due to changes in our CPR forecast, and implied interest income on our TBA securities (dollars in millions):

Three Months Ended March 31,

Amount Yield Amount Yield

Interest income:

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The combined asset yield is calculated on a weighted average basis based on our average investment and TBA balances outstanding during the period and their respective yields.

The principal elements impacting our economic interest income are the size of our average investment portfolio and the yield on our securities.

The following table includes a summary of the estimated impact of each of these elements on our economic interest income for the three and nine months ended September 30, 2022 compared to the prior year period (in millions):

30-year fixed rate mortgage rates are sourced from Clear Blue.

Treasury rates are sourced from Bloomberg.

The principal elements impacting our economic interest income are the average size of our investment portfolio and the average yield on our securities.

The following table includes a summary of the estimated impact of each of these elements on our economic interest income for the three months ended March 31, 2023 compared to the prior year period (in millions):

Impact of Changes in the Principal Elements Impacting Economic Interest Income

Periods ended September 30, 2022 vs.

September 30, 2021

Due to Change in Average

Three months ended:

Total Increase /

(Decrease) Portfolio

Interest Income (GAAP measure) $ 80 $ (14) $ 94

Estimated "catch-up" premium amortization due to change in CPR forecast (20) — (20)

Interest income, excluding "catch-up" premium amortization 60 (14) 74

TBA dollar roll income - implied interest income 71 (47) 118

Economic interest income, excluding "catch-up" amortization (non-GAAP measure) $ 131 $ (61) $ 192

Three Months Ended March 31, 2023 vs.

March 31, 2022

Due to Change in Average

Nine months ended:

Total Increase /

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Economic interest income, excluding "catch-up" amortization (non-GAAP measure) $ 201 $ (80) $ 281

Our average investment portfolio, inclusive of TBAs (at cost), decreased 15% and 16% for the three and nine months ended September 30, 2022, respectively, compared to the prior year period, due to a decline in stockholders' equity.

The average yield on our investment portfolio, including TBA implied asset yields and excluding "catch-up" premium amortization, increased 115 and 69 basis points, respectively, due to changes in asset composition and slower CPR projections.

Our average investment portfolio, inclusive of TBAs (at cost), decreased 15% for the three months ended March 31, 2023 primarily due to a decline in stockholders' equity.

The average yield on our investment portfolio, including TBA implied asset yields and excluding "catch-up" premium amortization, increased 162 basis points for the three months ended March 31, 2023 largely due to changes in our asset composition as we shifted our portfolio higher in coupon.

Our primary measure of leverage is our tangible net book value "at risk" leverage ratio, which is measured as the sum of our repurchase agreements and other debt used to fund our investment securities and net TBA and forward settling securities position (at cost) (together referred to as "mortgage borrowings") and our net receivable/payable for unsettled investment securities, divided by our total stockholders' equity adjusted to exclude goodwill.

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Amount Ending

September 30, 2022 $ 40,530 $ 41,834 $ 39,169 $ 20,331 $ 19,116 8.1:1 8.7:1

June 30, 2022 $ 42,997 $ 44,243 $ 41,406 $ 19,653 $ 16,001 7.8:1 7.4:1

March 31, 2023 $ 39,824 $ 42,919 $ 42,022 $ 17,851 $ 10,385 7.7:1 7.2:1

December 31, 2022 $ 35,486 $ 39,399 $ 36,002 $ 18,988 $ 18,407 7.8:1 7.4:1

September 30, 2021 $ 45,847 $ 49,021 $ 45,723 $ 30,312 $ 28,912 7.5:1 7.5:1

June 30, 2021 $ 52,374 $ 60,186 $ 48,488 $ 28,082 $ 27,611 7.6:1 7.9:1

March 31, 2022 $ 46,570 $ 47,940 $ 44,150 $ 23,605 $ 20,152 7.8:1 7.5:1

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Economic Interest Expense and Aggregate Cost of Funds

The following table summarizes our economic interest expense and aggregate cost of funds (non-GAAP measures) for the three and nine months ended September 30, 2022 and 2021 (dollars in millions), which includes the combination of interest expense on Agency repurchase agreements and other debt (GAAP measure), implied financing cost (benefit) of our TBA securities and interest rate swap periodic cost (benefit):

Three Months Ended September 30,

Nine Months Ended September 30,

2022 2021 2022 2021

The following table summarizes our economic interest expense and aggregate cost of funds (non-GAAP measures) for the three months ended March 31, 2023 and 2022 (dollars in millions), which includes the combination of interest expense on Agency repurchase agreements and other debt (GAAP measure), implied financing cost (benefit) of our TBA securities and interest rate swap periodic cost (benefit):

Three Months Ended March 31,

Economic Interest Expense and Aggregate Cost of Funds 1

Amount Cost of Funds Amount Cost of Funds Amount Cost of Funds Amount Cost of Funds

Amount Cost of Funds Amount Cost of Funds

Repurchase agreement and other debt - interest expense (GAAP measure) $ 449 4.51 % $ 27 0.23 %

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651 4.52 % (2) (0.01) %

Interest rate swap periodic cost (income), net 2,5

Interest rate swap periodic cost (benefit), net 2,5

(504) (3.50) % 18 0.10 %

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The combined cost of funds for total mortgage borrowings outstanding, before interest rate swap costs, is calculated on a weighted average basis based on average repo, other debt and TBA balances outstanding during the period and their respective cost of funds.

Interest rate swap periodic income/cost is measured as a percent of average mortgage borrowings outstanding for the period.

Interest rate swap periodic cost (benefit) is measured as a percent of average mortgage borrowings outstanding for the period.

The principal elements impacting our economic interest expense are (i) the size of our average mortgage borrowings and interest rate swap portfolio outstanding during the period, (ii) the average interest rate on our mortgage borrowings and (iii) the average net interest rate paid/received on our interest rate swaps.

The following table includes a summary of the estimated impact of these elements on our economic interest expense for the three and nine months ended September 30, 2022 compared to the prior year period (in millions):

The following table includes a summary of the estimated impact of these elements on our economic interest expense for the three months ended March 31, 2023 compared to the prior year period (in millions):

Impact of Changes in the Principal Elements of Economic Interest Expense

Periods ended September 30, 2022 vs.

September 30, 2021

Due to Change in Average

Three months ended:

Total Increase / (Decrease) Borrowing / Swap Balance Borrowing / Swap Rate

Repurchase agreements and other debt interest expense $ 182 $ (2) $ 184

TBA dollar roll income - implied interest benefit/expense 127 11 116

Interest rate swap periodic income/cost (224) — (224)

Total change in economic interest benefit/expense $ 85 $ 9 $ 76

Three Months Ended March 31, 2023 vs.

March 31, 2022

Due to Change in Average

Nine months ended:

Total Increase / (Decrease) Borrowing / Swap Balance Borrowing / Swap Rate

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Total change in economic interest benefit/expense $ 131 $ 2 $ 129

Our average mortgage borrowings, inclusive of TBAs, decreased 20% for the three and nine months ended September 30, 2022 compared to the prior year period due to a decline in stockholders' equity and smaller asset base.

The average interest rate on our mortgage borrowings for the three and nine months ended September 30, 2022 increased 196 and 79 basis points, respectively, due to higher short-term rates.

The decrease in our interest rate swap periodic cost for the three and nine months ended September 30, 2022 was primarily a function of higher receive rates.

The following is a summary of our average interest rate swaps outstanding and the related average swap pay and receive rates for the three and nine months ended September 30, 2022 and 2021 (dollars in millions).

Our average mortgage borrowings, inclusive of TBAs, decreased 18% for the three months ended March 31, 2023 due to a decline in our asset base.

The average interest rate on our mortgage borrowings increased 453 basis points for the three months ended March 31, 2023 due to higher short-term interest rates.

The decrease in our interest rate swap periodic cost for March 31, 2023 was primarily attributable to higher receive rates on our pay-fixed swaps.

The following is a summary of our average interest rate swaps outstanding and the related average swap pay and receive rates for the three months ended March 31, 2023 and 2022 (dollars in millions).

Amounts exclude forward starting swaps not yet in effect.

Three Months Ended

September 30,

Nine Months Ended

September 30,

Average Ratio of Interest Rate Swaps (Excluding Forward Starting Swaps) to Mortgage Borrowings Outstanding 2023 2022

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Ratio of average interest rate swaps to mortgage borrowings outstanding

81 % 65 % 78 % 59 %

Average interest rate swap pay-fixed rate (excluding forward starting swaps) 0.45 % 0.23 %

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(4.09) % 0.14 %

For the three and nine months ended September 30, 2022, we had an average forward starting swap balance of zero and $31 million, respectively, and for the three and nine months ended September 30, 2021, an average forward starting swap balance of $9 million and $97 million, respectively.

For the three months ended March 31, 2023 and 2022, we had an average forward starting swap balance of $101 million and $59 million, respectively.

Forward starting interest rate swaps do not impact our economic interest expense and aggregate cost of funds until they commence accruing net interest settlements on their forward start dates.

Net Interest Spread

The following table presents a summary of our net interest spread (including the impact of TBA dollar roll income, interest rate swaps and excluding "catch-up" premium amortization) for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30,

Nine Months Ended

September 30,

Three Months Ended

Investment and TBA Securities - Net Interest Spread 2023 2022

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Net Spread and Dollar Roll Income

The following table presents a reconciliation of net spread and dollar roll income, excluding "catch-up" premium amortization, available to common stockholders (non-GAAP measure) from comprehensive income (loss) available (attributable) to common stockholders (the most comparable GAAP financial measure) for the three and nine months ended September 30, 2022 and 2021 (dollars in millions):

Three Months Ended September 30,

Nine Months Ended

September 30,

2022 2021 2022 2021

Comprehensive income (loss) available (attributable) to common stockholders

The following table presents a reconciliation of net spread and dollar roll income, excluding "catch-up" premium amortization, available to common stockholders (non-GAAP measure) from comprehensive income (loss) available (attributable) to common stockholders (the most comparable GAAP financial measure) for the three months ended March 31, 2023 and 2022 (dollars in millions):

Three Months Ended

Comprehensive loss attributable to common stockholders

$ (39) $ (1,167)

Adjustments to exclude realized and unrealized (gains) losses reported through net income:

Realized (gain) loss on sale of investment securities, net

560 5 1,848 (7)

Unrealized loss on investment securities measured at fair value through net income, net

1,738 141 5,257 1,124

Gain on derivative instruments and other securities, net

(1,474) (101) (4,474) (922)

Realized loss on sale of investment securities, net

Unrealized (gain) loss on investment securities measured at fair value through net income, net

(Gain) loss on derivative instruments and other securities, net

Adjustment to exclude unrealized (gain) loss reported through other comprehensive income:

Unrealized (gain) loss on available-for-sale securities measure at fair value through other comprehensive income, net

372 (6) 1,108 308

Other adjustments:

TBA dollar roll income, net 1

119 175 453 491

Interest rate swap periodic (cost) income, net 1

211 (13) 242 (44)

Interest rate swap periodic income (cost), net 1

Other interest income (expense), net 1,3

Net spread and dollar roll income available to common stockholders (non-GAAP measure) 339 536

Estimated "catch-up" premium amortization cost (benefit) due to change in CPR forecast 2

(18) 2 (243) (140)

Net spread and dollar roll income, excluding "catch-up" premium amortization, available to common stockholders (non-GAAP measure) $ 408 $ 377

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Reported in interest income in our consolidated statements of comprehensive income.

Other interest income (expense), net includes interest income on cash and cash equivalents;

price alignment interest income (expense) ("PAI") on interest rate swap margin deposits posted by or (to) the Company;

and other miscellaneous interest income (expense).

Gain (Loss) on Investment Securities, Net

The following table is a summary of our net gain (loss) on investment securities for the three and nine months ended September 30, 2022 and 2021 (in millions):

Three Months Ended September 30,

Nine Months Ended

September 30,

The following table is a summary of our net gain (loss) on investment securities for the three months ended March 31, 2023 and 2022 (in millions):

Three Months Ended

Gain (Loss) on Investment Securities, Net 1

2022 2021 2022 2021

Gain (loss) on sale of investment securities, net $ (560) $ (5) $ (1,848) $ 7

Loss on sale of investment securities, net $ (81) $ (342)

Unrealized loss on investment securities measured at fair value through net income, net 2

(1,738) (141) (5,257) (1,124)

Unrealized loss on investment securities measured at fair value through other comprehensive income, net 142 (491)

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

The following table is a summary of our gain (loss) on derivative instruments and other securities, net for the three and nine months ended September 30, 2022 and 2021 (in millions):

Three Months Ended September 30,

Nine Months Ended

September 30,

2022 2021 2022 2021

The following table is a summary of our gain (loss) on derivative instruments and other securities, net for the three months ended March 31, 2023 and 2022 (in millions):

Three Months Ended

TBA securities, dollar roll income $ 18 $ 152

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Treasury futures contracts - short position (235) 196

Other (4) (3) (24) 55

SOFR futures contracts - long position (3) —

Other interest income (expense), net (33) —

Other gain (loss), net (2) (37)

Total gain (loss) on derivative instruments and other securities, net $ (544) $ 1,796

For further details regarding our use of derivative instruments and related activity refer to Notes 2 and 5 of our Consolidated Financial Statements in this Form 10-Q.

Estimated Taxable Income (Loss)

For the three months ended September 30, 2022 and 2021, we had estimated taxable income (loss) attributed to common stockholders of $174 million and $45 million, respectively, or $0.33 and $0.09 per diluted common share, respectively.

For the nine months ended September 30, 2022 and 2021, we had estimated taxable income (loss) attributed to common stockholders of $153 million and $(277) million, respectively, or $0.29 and $(0.52) per diluted common share, respectively.

Income determined under GAAP differs from income determined under U.S.

federal income tax rules because of both temporary and permanent differences in income and expense recognition.

The primary differences are (i) unrealized gains and losses on investment securities and derivative instruments marked-to-market in current income for GAAP purposes, but excluded from taxable income until realized, settled or amortized over the instrument's original term, (ii) timing differences, both temporary and potentially permanent, in the recognition of certain realized gains and losses and (iii) temporary differences related to the amortization of premiums and discounts on investments.

Furthermore, our estimated taxable income is subject to potential adjustments up to the time of filing our appropriate tax returns, which occurs after the end of our fiscal year.

The following is a

reconciliation of our GAAP net income to our estimated taxable income (loss) for the three and nine months ended September 30, 2022 and 2021 (dollars in millions, except per share amounts):

Three Months Ended September 30,

Nine Months Ended

September 30,

2022 2021 2022 2021

Net income (loss) $ (666) $ 212 $ (1,751) $ 776

Book to tax differences:

Premium amortization, net (15) (45) (269) (313)

Realized gain/loss, net (1,454) (342) (5,029) (1,793)

Net capital loss/(utilization of net capital loss carryforward) 353 (141) 2,887 —

Unrealized loss, net 2,034 358 4,406 1,055

Other (2) 3 (15) (2)

Total book to tax differences 916 (167) 1,980 (1,053)

REIT taxable income (loss) 250 45 229 (277)

REIT taxable income attributed to preferred stock 76 — 76 —

REIT taxable income (loss) attributed to common stock $ 174 $ 45 $ 153 $ (277)

Weighted average common shares outstanding - basic 528.7 526.7 526.4 529.0

Weighted average common shares outstanding - diluted 529.8 528.6 527.5 529.0

REIT taxable income (loss) per common share - basic $ 0.33 $ 0.09 $ 0.29 $ (0.52)

REIT taxable income (loss) per common share - diluted $ 0.33 $ 0.09 $ 0.29 $ (0.52)

Beginning net capital loss carryforward $ 2,534 $ 141 $ — $ —

Increase (decrease) in net capital loss carryforward 353 (141) 2,887 —

Ending net capital loss carryforward $ 2,887 $ — $ 2,887 $ —

Ending net capital loss carryforward per common share $ 5.24 $ — $ 5.24 $ —

LIQUIDITY AND CAPITAL RESOURCES

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Our leverage will vary depending on market conditions and our assessment of relative risks and returns, but we generally expect our leverage to be between six and twelve times the amount of our tangible stockholders' equity, measured as the sum of our total mortgage borrowings and net payable / (receivable) for unsettled investment securities, divided by the sum of our total stockholders' equity adjusted to exclude goodwill.

Our tangible net book value "at risk" leverage ratio was 8.7x and 7.7x as of September 30, 2022 and December 31, 2021, respectively.

The following table includes a summary of our mortgage borrowings outstanding as of September 30, 2022 and December 31, 2021 (dollars in millions).

Our tangible net book value "at risk" leverage ratio was 7.2x and 7.4x as of March 31, 2023 and December 31, 2022, respectively.

The following table includes a summary of our mortgage borrowings outstanding as of March 31, 2023 and December 31, 2022 (dollars in millions).

For additional details of our mortgage borrowings refer to Notes 2, 4 and 5 to our Consolidated Financial Statements in this Form 10-Q.

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Mortgage Borrowings Amount % Amount %

Repurchase agreements 1,2

Agency repurchase agreements 1,2

$ 41,930 80 % $ 35,907 66 %

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________________________________

As of September 30, 2022 and December 31, 2021, 48% and 42%, respectively, of our repurchase agreements were funded through the Fixed Income Clearing Corporation's GCF Repo service.

Amounts exclude U.S.

Treasury repurchase agreements.

Includes Agency RMBS, CRT and non-Agency MBS repurchase agreements.

E xcludes U.S.

Treasury repurchase agreements totaling $6,454 million and $355 million as of March 31, 2023 and December 31, 2022, respectively.

As of March 31, 2023 and December 31, 2022, 38% and 48%, respectively, of our repurchase agreements, including 44% and 48% or our Agency repurchase agreements, respectively, were funded through the Fixed Income Clearing Corporation's GCF Repo service.

Our primary financing sources are collateralized borrowings structured as repurchase agreements.

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Our agreements generally provide that in the event of a margin call, collateral must be posted on the same business day, subject to notice requirements.

As of September 30, 2022, we had met all our margin requirements.

As of March 31, 2023, we had met all our margin requirements.

The value of Agency RMBS collateral is impacted by market factors and is reduced by monthly principal pay-downs on the underlying mortgage pools.

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We attempt to manage the liquidity risk associated with principal pay-downs by monitoring conditions impacting prepayment rates and through asset selection.

As of September 30, 2022, approximately 29% our investment portfolio consisted of TBA securities, which are not subject to monthly principal pay-downs.

As of March 31, 2023, approximately 18% our investment portfolio consisted of TBA securities, which are not subject to monthly principal pay-downs.

The remainder of our portfolio, primarily consisted of Agency RMBS, which had an average one-year CPR forecast of 7%.

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Daily variation margin requirements also entitle us to receive collateral if the value of amounts owed to us under the derivative agreement exceeds the minimum margin requirement.

The collateral requirements under our TBA contracts are governed by the Mortgage-Backed Securities Division ("MBSD") of the FICC and, if applicable, by third-party brokerage agreements, which may establish margin levels in excess of the MBSD.

The collateral requirements under our TBA contracts are governed by the Mortgage-Backed Securities Division ("MBSD") of the FICC.

Collateral levels for interest rate derivative agreements are typically governed by the central clearing exchange and the associated futures commission merchants ("FCMs"), which may establish margin levels in excess of the clearing exchange.

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Haircut levels and minimum margin requirements imposed by our counterparties reduce the amount of our unencumbered assets and limit the amount we can borrow against our investment securities.

During the nine months ended September 30, 2022, haircuts on our repo funding arrangements remained stable.

As of September 30, 2022, the weighted average haircut on our repurchase agreements was approximately 3.9% of the value of our collateral, compared to 3.8% as of December 31, 2021.

During the three months ended March 31, 2023, haircuts on our repo funding arrangements remained stable.

As of March 31, 2023, the weighted average haircut on our repurchase agreements was approximately 3.6% of the value of our collateral, compared to 3.7% as of December 31, 2022.

To mitigate the risk of margins calls, we seek to maintain excess liquidity by holding unencumbered liquid assets that can be used to satisfy collateral requirements, collateralize additional borrowings or sold for cash.

As of September 30, 2022, our unencumbered assets totaled approximately $3.7 billion, or 56% of tangible equity, consisting of $3.6 billion of unencumbered cash and Agency RMBS and $0.1 billion of unencumbered credit assets.

As of March 31, 2023, our unencumbered assets totaled approximately $4.2 billion, or 58% of tangible equity, consisting of $4.1 billion of unencumbered cash and Agency RMBS and $0.1 billion of unencumbered credit assets.

This compares to $4.4 billion of unencumbered assets, or 60% of tangible equity, as of December 31, 2022, consisting of $4.3 billion of unencumbered cash and Agency RMBS and $0.1 billion of unencumbered credit assets.

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Collateral requirements imposed by counterparties subject us to the risk that the counterparty does not return pledged assets to us as and when required.

We attempt to manage this risk by monitoring our collateral positions and limiting our

counterparties to registered clearinghouses and major financial institutions with acceptable credit ratings.

We attempt to manage this risk by monitoring our collateral positions and limiting our counterparties to registered clearinghouses and major financial institutions with acceptable credit ratings.

We also diversify our funding across multiple counterparties and by region.

As of September 30, 2022, our maximum amount at risk (or the excess/shortfall of the value of collateral pledged/received over our repurchase agreement liabilities/reverse repurchase agreement receivables) with any of our repurchase agreement counterparties, excluding the FICC, was less than 3% of our tangible stockholders' equity, with our top five repo counterparties, excluding the FICC, representing approximately 6% of our tangible stockholders' equity.

As of September 30, 2022, approximately 7% of our tangible stockholder's equity was at risk with the FICC.

Excluding central clearing exchanges, as of September 30, 2022, our amount at risk with any counterparty to our derivative agreements was less than 1% of our stockholders' equity.

As of March 31, 2023, our maximum amount at risk (or the excess/shortfall of the value of collateral pledged/received over our repurchase agreement liabilities/reverse repurchase agreement receivables) with any of our repurchase agreement counterparties, excluding the FICC, was less than 4% of our tangible stockholders' equity, with our top five repo counterparties, excluding the FICC, representing approximately 8% of our tangible stockholders' equity.

As of March 31, 2023, less than 8% of our tangible stockholder's equity was at risk with the FICC.

Excluding central clearing exchanges, as of March 31, 2023, our amount at risk with any counterparty to our derivative agreements was less than 1% of our stockholders' equity.

Agency RMBS securities are among the most liquid fixed income securities, and the TBA market is the second most liquid market (after the U.S.

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We attempt to manage this risk by maintaining at least a minimum level of securities that trade at or near TBA values that in our estimation enhances our portfolio liquidity across a wide range of market conditions.

Please refer to Trends and Recent Market Impacts of this Management Discussion and Analysis for further information regarding Agency RMBS and TBA market conditions during the third quarter.

Please refer to Trends and Recent Market Impacts of this Management Discussion and Analysis for further information regarding Agency RMBS and TBA market conditions.

Capital Markets

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OFF-BALANCE SHEET ARRANGEMENTS

As of September 30, 2022, we did not maintain relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance, or special purpose or variable interest entities, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes.

Additionally, as of September 30, 2022, we had not guaranteed obligations of unconsolidated entities or entered into a commitment or intent to provide funding to such entities.

As of March 31, 2023, we did not maintain relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance, or special purpose or variable interest entities, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes.

Additionally, as of March 31, 2023, we had not guaranteed obligations of unconsolidated entities or entered into a commitment or intent to provide funding to such entities.

FORWARD-LOOKING STATEMENTS

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• changes in U.S.

monetary policy or interest rates, including actions taken by the Federal Reserve to normalize monetary policy, to terminate its purchases of Agency RMBS and to reduce the size of its U.S.

monetary policy or interest rates, including actions taken by the Federal Reserve to normalize monetary policy and to reduce the size of its U.S.

Treasury and Agency RMBS bond portfolio;

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• the effectiveness of our risk mitigation strategies;

• conditions in the market for Agency RMBS and other mortgage securities;

• the impact of the COVID-19 pandemic and of measures taken in response to the COVID-19 pandemic by various governmental authorities, businesses and other third parties;

• actions by the federal, state, or local governments to stabilize the economy, the housing sector or financial markets;

• conditions in the market for Agency RMBS and other mortgage securities, including changes in the available supply of such securities or investor appetite therefor;

• actions by the federal, state, or local governments that affect the economy, the housing sector or financial markets;

• the ongoing availability of personnel and systems to conduct our operations;

• changes to laws, regulations, rules or policies that affect U.S.

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• legislative or regulatory changes that affect our status as a REIT, our exemption from the Investment Company Act of 1940 or the mortgage markets in which we participate.

• other risks discussed under the heading “Risk Factors” herein and in our Annual Report on Form 10-K.

Forward-looking statements speak only as of the date made, and we do not assume any duty and do not undertake to update forward-looking statements.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis