What changed in this filing

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Item 1. Business

2024-02-22 compared with 2023-02-27 · 36 added, 40 removed, 163 unchanged (32% of the section changed)

14 unchanged sentences

It is our intention to distribute 100% of our taxable income within the time limits prescribed by the Internal Revenue Code, which may extend into the subsequent taxable year.

We are internally managed with the principal objective of providing our stockholders with favorable long-term returns on a risk-adjusted basis through attractive monthly dividends.

We are internally managed with the principal objective of generating favorable long-term stockholder returns with a substantial yield component.

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 fund our investments primarily through collateralized borrowings structured as repurchase agreements.

Investment Strategy

Our investment strategy is intended to:

• generate attractive risk-adjusted returns for our stockholders through monthly dividend distributions;

• manage an investment portfolio consisting primarily of Agency securities;

• invest a subset of the portfolio in credit-oriented securities that are not guaranteed by a GSE or U.S.

Government agency and other assets related to the housing, mortgage or real estate markets;

Investment Management Strategy

We employ an active management strategy that is dynamic and responsive to evolving market conditions.

The composition of our portfolio and our investment, funding, and hedging strategies are tailored to reflect our analysis of market conditions and the relative values of available options.

Our portfolio management philosophy is based upon the following core objectives:

• deliver attractive risk-adjusted returns for our stockholders primarily through monthly dividend distributions;

• maintain an investment portfolio consisting predominantly of Agency RMBS;

• capitalize on discrepancies in the relative valuations in the Agency and non-Agency securities market;

• manage financing, interest rate, prepayment, extension and credit risks;

• continue to qualify as a REIT;

• qualify as a REIT;

• remain exempt from the requirements of the Investment Company Act of 1940 (the "Investment Company Act").

Targeted Investments

Asset selection is a central component of our overall investment approach.

Our investments consist predominantly of Agency RMBS which, in addition to carrying a GSE or U.S.

Government guarantee against loss of principal, are considered a cornerstone of the U.S.

financial system.

The $9 trillion Agency market plays a vital role in providing liquidity to homeowners and prospective homeowners to purchase or refinance homes.

Our team of investment professionals has decades of experience investing in Agency RMBS.

Our asset selection process involves assessing relative risk-return profiles against the backdrop of broader market conditions.

Our team of investment professionals seeks to select assets with favorable underlying loan characteristics utilizing sophisticated modeling techniques to analyze each asset’s risk profile and optimize returns over the life of the investment.

Agency Securities

• Agency Residential Mortgage-Backed Securities.

Our primary investments consist of Agency pass-through certificates representing interests in "pools" of mortgage loans secured by residential real property.

Agency RMBS consist of pass-through certificates representing interests in "pools" of mortgage loans secured by residential real property.

Monthly payments of principal and interest made by the individual borrowers on the mortgage loans underlying the pools are in effect "passed through" to the security holders, after deducting guarantee and servicer fees.

1 unchanged sentence

Security holders also receive guarantor advances of principal and interest for delinquent loans in the mortgage pools.

We may also invest in Agency collateralized mortgage obligations ("CMOs"), which are structured instruments backed by a pool of Agency mortgage-backed securities.

invest in Agency collateralized mortgage obligations ("CMOs"), which are structured instruments backed by a pool of Agency mortgage-backed securities.

• To-Be-Announced Forward Contracts ("TBAs").

3 unchanged sentences

• Credit Risk Transfer ("CRT") Securities.

CRT securities are risk sharing instruments that 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.

CRT securities are risk sharing instruments that 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.

Full repayment of the original principal balance of CRT securities is not guaranteed by the GSE or other third-party;

11 unchanged sentences

We intend to focus on CMBS where the underlying collateral is secured by commercial properties located within the United States.

Active Portfolio Management Strategy

We employ an active management strategy designed to achieve our principal objectives of generating attractive risk-adjusted returns and managing our tangible net book value within reasonable bands.

As part of our investment strategy, we use leverage on our investment portfolio to increase potential returns to our stockholders.

We invest in securities based on our assessment of their relative risk-return profiles and our ability to effectively hedge a portion of the securities' exposure to market risks.

The composition of our portfolio and the strategies we use will vary based on our view of prevailing market conditions and the availability of suitable investment, hedging and funding opportunities.

Financing Strategy

We finance our investment portfolio primarily through collateralized borrowings structured as repurchase agreements ("repo").

Repurchase agreements involve the sale and a simultaneous agreement to repurchase the transferred assets at a future date.

Our borrowings through repurchase transactions are generally short-term and have maturities ranging from one day to one year but may have maturities up to five or more years.

Our investments in Agency RMBS benefit from asset-driven, as well as AGNC-specific, funding advantages, that enable us to enhance returns using leverage via low-cost and highly liquid collateralized borrowings structured as repurchase agreements.

Repurchase agreements ("repo") involve the sale and a simultaneous agreement to repurchase the transferred assets at a future date.

Our borrowings through repurchase transactions are generally short-term, with maturities typically ranging from one day to one year, but may sometimes have maturities of up to five or more years.

Our financing rates are primarily impacted by short-term benchmark rates and liquidity in the Agency repo and short-term funding markets.

9 unchanged sentences

The discount, or "price drop", is the economic equivalent of interest income on the underlying Agency RMBS, less an implied financing cost, between the current month and forward month settlement dates.

Prior to the forward settlement date, we may choose to roll the position to a later date by entering into an offsetting TBA position, net settling the paired off positions for cash, and simultaneously entering into a similar TBA contract for a new forward settlement date.

Prior to the forward settlement date, we may choose to roll the position to a later date by entering into an offsetting TBA

position, net settling the paired off positions for cash, and simultaneously entering into a similar TBA contract for a new forward settlement date.

Hence the discount or price drop from rolling TBA positions forward is commonly referred to as "TBA dollar roll income." We recognize TBA contracts as derivative instruments on our consolidated financial statements at their net carrying value, which is their fair value less the purchase price to be paid or received under the TBA contract.

Consequently,

dollar roll transactions represent a form of off-balance sheet financing.

Consequently, dollar roll transactions represent a form of off-balance sheet financing.

In evaluating our overall leverage, we consider both our on-balance sheet and off-balance sheet financing.

Risk Management Strategy

As a levered investor in fixed income securities, risk management is core to our business.

We are exposed to a variety of market risks, including interest rate, prepayment, extension, spread and credit risks.

Our investment strategies are based on our assessment of these risks, our ability to hedge a portion of these risks and our intention to qualify as a REIT.

We employ a variety of investment and risk management strategies to reduce our exposure to market risks, and we continuously monitor and adjust our hedge portfolio, the net duration (or interest rate sensitivity) of our investment portfolio, and leverage in order to optimize returns over the longer term as market conditions warrant.

Our hedging strategies are generally not designed to protect our net book value from spread risk, which as a levered investor in mortgage-backed securities is the inherent risk we take that the spread between the market yield on our investments and the benchmark interest rates linked to our interest rate hedges fluctuates.

29 unchanged sentences

however, we treat these as qualifying income for this purpose based on an opinion of legal counsel.

The treatment of interest income from other real estate

securities depends on their specific tax structure.

The treatment of interest income from other real estate securities depends on their specific tax structure.

Income and gains from instruments that we use to hedge the interest rate risk associated with our borrowings incurred, or to be incurred, to acquire real estate assets will generally be excluded from both gross income tests, provided that specified requirements are met.

13 unchanged sentences

Regulatory Requirements of our Captive Broker-Dealer Subsidiary

BES is subject to ongoing membership and regulatory requirements as a member of the FICC and FINRA and as a registered broker-dealer that include but are not limited to trade practices, use and safekeeping of funds and securities, capital structure, recordkeeping and conduct of directors, officers and employees.

BES is subject to ongoing membership and regulatory requirements as a member of the FICC and FINRA and as an SEC registered broker-dealer that include but are not limited to trade practices, use and safekeeping of funds and securities, capital structure, recordkeeping and conduct of directors, officers and employees.

Additionally, as a self-clearing, registered broker-dealer, BES is subject to minimum net capital requirements.

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Our competitive and comprehensive benefits package is carefully designed to attract and retain talented personnel.

We believe our low voluntary employee turnover and favorable employee survey results are a testament to the success of our human capital management initiatives.

We believe our

low voluntary employee turnover and favorable employee survey results are a testament to the success of our human capital management initiatives.

Employee Turnover Metrics

9 unchanged sentences

We regularly engage with our employees in a variety of ways through ongoing direct engagement with each member of our staff, anonymous annual employee surveys and regular town hall meetings.

Our anonymous employee surveys

are an important component of our employee engagement that provide a means of assessing job satisfaction, engagement, and specific concerns of our employees.

Our anonymous employee surveys are an important component of our employee engagement that provide a means of assessing job satisfaction, engagement, and specific concerns of our employees.

To enhance the candor and comfort of our employees, we use outside vendors that provide verbatim comments and analysis of engagement levels on an anonymous basis.

In 2021, AGNC received the Great Place to Work™ certification in recognition of employee engagement efforts.

In 2023, AGNC was recertified as a Great Place to Work™ in recognition of employee engagement efforts.

The prestigious certification was based entirely on feedback from employees through an extensive anonymous survey about their experiences working at AGNC, during which 96% of our employees said AGNC is a great place to work.

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All employees are required to affirm their understanding of these standards on at least an annual basis.

In 2022, we conducted mandatory compliance training on the Code of Conduct, insider trading, whistleblower protections and anti-harassment.

We also regularly conduct mandatory compliance training on the Code of Conduct, insider trading, whistleblower protections, anti-harassment and other legal and corporate policies.

Our executive officers and human resources department maintain "open door" policies, and any form of retaliation for bona fide reporting of Code of Conduct violations is expressly prohibited.

21 unchanged sentences

We provide our employees with access to flexible, comprehensive and convenient medical coverage intended to meet their needs and the needs of their families.

In addition to standard medical coverage, we offer employees dental and vision coverage, health savings and flexible spending accounts, paid time off, parental leave and adoption assistance, voluntary short-term and long-term disability insurance, term life insurance, employee assistance

programs, and other benefits.

We also believe in the long-term financial wellness of our employees, and to foster maximum savings rates by our employees we offer a 401(k) Savings Plan with Company matching contributions of 100% up to 6% of each employee’s eligible compensation, subject to IRS limits.

Workforce Safety;

and Hybrid Work Model

To protect the health and safety of our workforce, during the COVID-19 pandemic (the "Pandemic" or "COVID-19"), we shifted to a fully remote work-from-home environment prior to any jurisdiction’s mandate to do so.

Based in part on employee survey results conducted after the onset of the Pandemic, in 2021, we commenced a gradual return to in-office work, with employees having the choice to work in the office subject to safety protocols or to continue working remotely.

In 2022, we implemented a hybrid model through which employees are able to split hours between the office and remote work.

We hold regular town hall meetings (typically quarterly) to ensure sufficient company-wide communication with our workforce in light of our hybrid working model.

Our success depends, in large part, on our ability to acquire assets at favorable spreads over our borrowing costs.

1 unchanged sentence

Corporate Information

Our executive offices are located at Two Bethesda Metro Center, 12 th Floor, Bethesda, MD 20814 and our telephone number is (301) 968-9315.

Our executive offices are located at 7373 Wisconsin Avenue, 22 nd Floor, Bethesda, MD 20814 and our telephone number is (301) 968-9315.

We make available our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports as well as our Code of Ethics and Conduct on our internet website at www.AGNC.com.

1 unchanged sentence

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-K

Item 1. Business