AGNC Investment Corp. 10-K

Item 8. Financial Statements Our management is responsible for the accompanying consolidated financial statements and the related financial information. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States and necessarily include certain amounts that are based on estimates and informed judgments. Our management also prepared the related financial information included in this Annual Report on Form 10-K and is responsible for its accuracy and consistency with the consolidated financial statements. The consolidated financial statements as of December 31, 2023 and 2022 and for fiscal years 2023, 2022 and 2021 have been audited by Ernst & Young LLP, an independent registered public accounting firm, who conducted their audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). The independent registered public accounting firm's responsibility is to express an opinion on these consolidated financial statements based on their audits. For further information refer to the Ernst & Young LLP (PCAOB ID: 42 ) audit opinion included in this Item 8 of our Annual Report. Management's Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and Board of Directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023, utilizing the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its Internal Control-Integrated Framework (2013 framework). Based on this assessment and those criteria, management determined that our internal control over financial reporting was effective as of December 31, 2023. The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by Ernst & Young LLP, our independent registered public accounting firm, as stated in their attestation report included in this Form 10-K. 48 Report of Independent Registered Public Accounting Firm The Stockholders and the Board of Directors of AGNC Investment Corp. Opinion on Internal Control over Financial Reporting We have audited AGNC Investment Corp.’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, AGNC Investment Corp. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria . We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes, and our report dated February 22, 2024 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Tysons, Virginia February 22, 2024 49 Report of Independent Registered Public Accounting Firm The Stockholders and the Board of Directors of AGNC Investment Corp. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of AGNC Investment Corp. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 22, 2024 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 50 Agency securities and non-agency securities of high credit quality net premium amortization Description of the Matter As of December 31, 2023, the Company’s investment securities had a net unamortized premium balance of $1.2 billion, including interest and principal-only securities, and it recorded $201 million of net premium amortization for the year then ended. As explained in Note 2 to the financial statements, premiums or discounts associated with the purchase of Agency residential mortgage-backed securities (“Agency RMBS") and non-Agency mortgage-backed securities 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. The effective yield on the Company’s Agency RMBS and non-Agency mortgage-backed securities of high credit quality is highly impacted by the Company’s estimate of future prepayments. The Company estimates long-term prepayment speeds of such securities using a third-party service provider and market data. The third-party service provider estimates long-term prepayment speeds using a prepayment model that incorporates the forward yield curve, 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. Auditing the Company's estimation of long-term prepayment speeds used for the amortization of premiums and accretion of discounts is subjective due to the significant judgments and estimates required by management and the third-party service provider, as inputs into prepayment models are prone to fluctuation based on changing macroeconomic conditions. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the estimation of long-term prepayment speeds, including management’s review of the estimated prepayment speeds provided by the third-party service provider. Our audit procedures included, among others, performing comparative analyses between the Company’s long-term prepayment speed estimates and long-term prepayment speed estimates data from independent third-party sources, reconciling the Company’s estimates of long-term prepayment speeds to source prepayment speeds data provided by management’s third-party service provider, evaluating the competency and objectivity of management’s third-party service provider, and identifying potential sources of contrary information, with the assistance of an internal valuation specialist. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2008. Tysons, Virginia February 22, 2024 51 AGNC INVESTMENT CORP. CONSOLIDATED BALANCE SHEETS (in millions, except per share data) December 31, 2023 2022 Assets: Agency securities, at fair value (including pledged securities of $ 49,575 and $ 35,800 , respectively) $ 53,673 $ 39,346 Agency securities transferred to consolidated variable interest entities, at fair value (pledged securities) 121 144 Credit risk transfer securities, at fair value (including pledged securities of $ 678 and $ 703 , respectively) 723 757 Non-Agency securities, at fair value, and other mortgage credit investments (including pledged securities of $ 262 and $ 605 , respectively) 351 682 U.S. Treasury securities, at fair value (including pledged securities of $ 1,530 and $ 353 , respectively) 1,540 353 Cash and cash equivalents 518 1,018 Restricted cash 1,253 1,316 Derivative assets, at fair value 185 617 Receivable for investment securities sold (including pledged securities of $0 and $ 119 , respectively) — 120 Receivable under reverse repurchase agreements 11,618 6,622 Goodwill 526 526 Other assets 1,088 247 Total assets $ 71,596 $ 51,748 Liabilities: Repurchase agreements $ 50,426 $ 36,262 Debt of consolidated variable interest entities, at fair value 80 95 Payable for investment securities purchased 210 302 Derivative liabilities, at fair value 362 99 Dividends payable 115 100 Obligation to return securities borrowed under reverse repurchase agreements, at fair value 10,894 6,534 Other liabilities 1,252 486 Total liabilities 63,339 43,878 Stockholders' equity: Preferred Stock - aggregate liquidation preference of $ 1,688 1,634 1,634 Common stock - $ 0.01 par value; 1,500 shares authorized; 694.3 and 574.6 shares issued and outstanding, respectively 7 6 Additional paid-in capital 15,281 14,186 Retained deficit ( 8,148 ) ( 7,284 ) Accumulated other comprehensive loss ( 517 ) ( 672 ) Total stockholders' equity 8,257 7,870 Total liabilities and stockholders' equity $ 71,596 $ 51,748 See accompanying notes to consolidated financial statements. 52 AGNC INVESTMENT CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions, except per share data) Year Ended December 31, 2023 2022 2021 Interest income: Interest income $ 2,041 $ 1,590 $ 1,361 Interest expense 2,287 625 75 Net interest income ( 246 ) 965 1,286 Other gain (loss), net: Loss on sale of investment securities, net ( 1,567 ) ( 2,916 ) ( 57 ) Unrealized gain (loss) on investment securities measured at fair value through net income, net 1,678 ( 3,795 ) ( 1,502 ) Gain on derivative instruments and other investments, net 386 4,630 1,110 Total other gain (loss), net: 497 ( 2,081 ) ( 449 ) Expenses: Compensation and benefits 62 41 54 Other operating expense 34 33 34 Total operating expense 96 74 88 Net income (loss) 155 ( 1,190 ) 749 Dividends on preferred stock 123 105 100 Net income (loss) available (attributable) to common stockholders $ 32 $ ( 1,295 ) $ 649 Net income (loss) $ 155 $ ( 1,190 ) $ 749 Unrealized gain (loss) on investment securities measured at fair value through other comprehensive income (loss), net 155 ( 973 ) ( 418 ) Comprehensive income (loss) 310 ( 2,163 ) 331 Dividends on preferred stock 123 105 100 Comprehensive income (loss) available (attributable) to common stockholders $ 187 $ ( 2,268 ) $ 231 Weighted average number of common shares outstanding - basic 618.4 537.0 528.1 Weighted average number of common shares outstanding - diluted 619.6 537.0 530.0 Net income (loss) per common share - basic $ 0.05 $ ( 2.41 ) $ 1.23 Net income (loss) per common share - diluted $ 0.05 $ ( 2.41 ) $ 1.22 See accompanying notes to consolidated financial statements. 53 AGNC INVESTMENT CORP. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in millions) Preferred Stock Common Stock Additional Paid-in Capital Retained Deficit Accumulated Other Comprehensive Income (Loss) Total Shares Amount Balance, December 31, 2020 $ 1,489 539.5 $ 5 $ 13,972 $ ( 5,106 ) $ 719 $ 11,079 Net income — — — — 749 — 749 Other comprehensive loss: Unrealized loss on available-for-sale securities, net — — — — — ( 418 ) ( 418 ) Stock-based compensation, net — 0.4 — 19 — — 19 Repurchase of common stock — ( 17.7 ) — ( 281 ) — — ( 281 ) Preferred dividends declared — — — — ( 100 ) — ( 100 ) Common dividends declared — — — — ( 757 ) — ( 757 ) Balance, December 31, 2021 $ 1,489 522.2 $ 5 $ 13,710 $ ( 5,214 ) $ 301 $ 10,291 Net loss — — — — ( 1,190 ) — ( 1,190 ) Other comprehensive loss: Unrealized loss on available-for-sale securities, net — — — — — ( 973 ) ( 973 ) Stock-based compensation, net — 1.1 — 2 — — 2 Issuance of preferred stock 145 — — — — — 145 Issuance of common stock — 56.0 1 525 — — 526 Repurchase of common stock — ( 4.7 ) — ( 51 ) — — ( 51 ) Preferred dividends declared — — — — ( 105 ) — ( 105 ) Common dividends declared — — — — ( 775 ) — ( 775 ) Balance, December 31, 2022 $ 1,634 574.6 $ 6 $ 14,186 $ ( 7,284 ) $ ( 672 ) $ 7,870 Net income — — — — 155 — 155 Other comprehensive income: Unrealized gain on available-for-sale securities, net — — — — — 155 155 Stock-based compensation, net — 0.9 — 11 — — 11 Issuance of common stock — 118.8 1 1,084 — — 1,085 Preferred dividends declared — — — — ( 123 ) — ( 123 ) Common dividends declared — — — — ( 896 ) — ( 896 ) Balance, December 31, 2023 $ 1,634 694.3 $ 7 $ 15,281 $ ( 8,148 ) $ ( 517 ) $ 8,257 See accompanying notes to consolidated financial statements. 54 AGNC INVESTMENT CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2023 2022 2021 Operating activities: Net income (loss) $ 155 $ ( 1,190 ) $ 749 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Amortization of premiums and discounts on mortgage-backed securities, net 201 13 369 Stock-based compensation, net 11 2 19 Loss on sale of investment securities, net 1,567 2,916 57 Unrealized (gain) loss on investment securities measured at fair value through net income, net ( 1,678 ) 3,795 1,502 Gain on derivative instruments and other securities, net ( 386 ) ( 4,630 ) ( 1,110 ) (Increase) decrease in other assets ( 892 ) 38 ( 29 ) Increase (decrease) in other liabilities 904 69 ( 17 ) Net cash (used in) provided by operating activities ( 118 ) 1,013 1,540 Investing activities: Purchases of Agency mortgage-backed securities ( 32,216 ) ( 26,842 ) ( 45,345 ) Purchases of credit risk transfer and non-Agency securities and other mortgage credit investments ( 364 ) ( 1,173 ) ( 2,031 ) Proceeds from sale of Agency mortgage-backed securities 13,608 25,978 34,595 Proceeds from sale of credit risk transfer and non-Agency securities 732 1,199 1,434 Principal collections on Agency mortgage-backed securities 4,327 6,525 15,042 Principal collections on credit risk transfer and non-Agency securities 68 209 84 Payments on U.S. Treasury securities ( 30,535 ) ( 27,494 ) ( 22,055 ) Proceeds from U.S. Treasury securities 33,229 25,878 19,795 Net proceeds from (payments on) reverse repurchase agreements ( 4,510 ) 4,001 1,272 Net proceeds from derivative instruments 989 2,907 1,045 Net cash (used in) provided by investing activities ( 14,672 ) 11,188 3,836 Financing activities: Proceeds from repurchase arrangements 3,282,218 2,360,328 2,189,555 Payments on repurchase agreements ( 3,268,054 ) ( 2,371,447 ) ( 2,194,540 ) Payments on debt of consolidated variable interest entities ( 17 ) ( 24 ) ( 49 ) Net proceeds from preferred stock issuances — 145 — Net proceeds from common stock issuances 1,085 526 — Payments for common stock repurchases — ( 51 ) ( 281 ) Cash dividends paid ( 1,005 ) ( 869 ) ( 860 ) Net cash provided by (used in) financing activities 14,227 ( 11,392 ) ( 6,175 ) Net change in cash, cash equivalents and restricted cash ( 563 ) 809 ( 799 ) Cash, cash equivalents and restricted cash at beginning of period 2,334 1,525 2,324 Cash, cash equivalents and restricted cash at end of period $ 1,771 $ 2,334 $ 1,525 Reconciliation of cash, cash equivalents and restricted cash end of period: Cash and cash equivalents $ 518 $ 1,018 $ 998 Restricted cash 1,253 1,316 527 Total cash, cash equivalents and restricted cash, end of period $ 1,771 $ 2,334 $ 1,525 Supplemental disclosure to cash flow information: Interest paid $ 2,246 $ 557 $ 89 See accompanying notes to consolidated financial statements. 55 AGNC INVESTMENT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Organization AGNC Investment Corp. (referred throughout this report as the "Company," "we," "us" and "our") was 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 a leading provider of private capital to the U.S. housing market, enhancing liquidity in the residential real estate mortgage markets and, in turn, facilitating home ownership in the U.S. 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 other assets related to the housing, mortgage or real estate markets. We fund our investments primarily through collateralized borrowings structured as repurchase agreements. 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 within the time limits prescribed by the Internal Revenue Code, which may extend into the subsequent tax year. 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. Note 2. Summary of Significant Accounting Policies Basis of Presentation and Consolidation Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). Our consolidated financial statements include the accounts of all subsidiaries and variable interest entities for which we are the primary beneficiary. Significant intercompany accounts and transactions have been eliminated. Use of Estimates 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, disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the period reported. Actual results could differ from those estimates. 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 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, over-collateralization or insurance, but nonetheless carry a higher level of credit exposure than Agency RMBS. 56 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 value in net income as a component of other gain (loss). As of December 31, 2023, we did not intend to sell available-for-sale securities in an unrealized loss position and it was not more likely than not that we would be required to sell such securities before recovery of their amortized cost basis. 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 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, collateral call provisions, 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. Repurchase Agreements We finance the acquisition of securities for our investment portfolio primarily through repurchase agreements with our lending counterparties. Repurchase arrangements involve the sale and a simultaneous agreement to repurchase the securities at a future date. We maintain a beneficial interest in the specific securities pledged during the term of each repurchase arrangement and we receive the related principal and interest payments. Pursuant to ASC Topic 860, Transfers and Servicing , we account for 57 repurchase agreements 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. 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. Net cash receipts from and payments on our 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") and Overnight Index Swap Rate ("OIS"). Our interest rate swaps typically have terms from one to 10 years. 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. The initial margin amount is intended to be set at a level sufficient to protect the exchange from the interest rate swap's maximum estimated single-day price movement and is subject to adjustment based on changes in market volatility and other factors. 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 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. 58 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 and US Treasury futures contracts 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 enter into short-sales of U.S. Treasury securities by borrowing the securities under reverse repurchase agreements and selling them into the market. 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. Treasury futures contracts are standardized contracts that obligate us to sell or buy U.S. Treasury securities for future delivery. 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. 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. The majority of our financial instruments are classified as Level 2 inputs. 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 typically obtain price estimates from multiple third-party pricing sources, such as pricing services and dealers, or, if applicable, from the registered clearing exchange. 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 procedures and our market knowledge and expertise that the price is significantly different from what observable market data 59 would indicate and we cannot obtain an understanding from the third-party source as to the significant inputs used to determine the price. The following is a description of the valuation methodologies used for financial instruments measured at fair value on a recurring basis classified as Level 2 inputs. These instruments trade in 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 instruments to those actively traded enable our pricing sources and us to utilize the observed quoted prices as a basis for formulating fair value measurements. 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 TBA market of the same coupon, maturity and issuer, adjusted to reflect the specific characteristics of the pool of mortgages underlying the Agency security, such as 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. 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. U.S. Treasury securities and futures are valued based on quoted prices for identical instruments in active markets and are classified as Level 1 assets. None of our financial instruments are classified as Level 3 inputs. Consolidated Variable Interest Entities ASC Topic 810, Consolidation ("ASC 810"), requires an enterprise to consolidate a variable interest entity ("VIE") if it is deemed the primary beneficiary of the VIE. As of December 31, 2023 and 2022, our consolidated financial statements reflect the consolidation of certain VIEs for which we have determined we are the primary beneficiary. The consolidated VIEs consist of CMO trusts backed by fixed or adjustable-rate Agency RMBS. Fannie Mae or Freddie Mac guarantees the payment of interest and principal and acts as the trustee and administrator of their respective securitization trusts. Accordingly, we are not required to provide the beneficial interest holders of the CMO securities any financial or other support. Our maximum exposure to loss related to our involvement with the CMO trusts is the fair value of the CMO securities and interest and principal-only securities held by us, less principal amounts guaranteed by Fannie Mae and Freddie Mac. Cash and Cash Equivalents Cash and cash equivalents include cash held in bank accounts and cash held in money market funds on an overnight basis. Restricted Cash Restricted cash includes cash pledged as collateral for clearing and executing trades, repurchase agreements, and interest rate swaps and other derivative instruments. Goodwill Goodwill is the cost of an acquisition in excess of the fair value of identified assets acquired and liabilities assumed and is recognized as an asset on our consolidated balance sheets. As of December 31, 2023 and 2022, we had $ 526 million of goodwill related to our acquisition of AGNC Management, LLC, our former manager, on July 1, 2016. Goodwill is not subject to amortization but must be tested for impairment at least annually and at interim periods when events or circumstances may make it more likely than not that an impairment has occurred. If a qualitative analysis indicates that there may be an 60 impairment, a quantitative analysis is performed. The quantitative analysis requires that we compare the carrying value of the identified reporting unit comprising the goodwill to the reporting unit's fair value. If the reporting unit's carrying value is greater than its fair value, an impairment charge is recognized to the extent the carrying amount of the reporting unit exceeds its fair value. During the three fiscal years ended December 31, 2023, we did not recognize a goodwill impairment charge. Stock-Based Compensation Under our Amended and Restated AGNC Investment Corp. 2016 Equity and Incentive Compensation Plan (the "2016 Equity Plan" or "the Plan"), we may grant equity-based compensation to our officers and other employees and non-employee directors for the purpose of providing incentives and rewards for service or performance. Stock-based awards issued under the Plan include time-based and performance-based restricted stock unit awards ("RSU" and "PSU" awards, respectively), but may include other forms of equity-based compensation. RSU and PSU awards are an agreement to issue an equivalent number of shares of our common stock, plus any equivalent shares for dividends declared on our common stock, at the time the award vests, or later if distribution of such shares has been deferred beyond the vesting date. RSU awards vest over a specified service period. PSU awards vest over a specified service period subject to achieving long-term performance criteria. We measure and recognize compensation expense for all stock-based payment awards made to employees and non-employee directors based on their fair values. We value RSU and PSU awards based on the fair value of our common stock on the date of grant. Compensation expense is recognized over each award’s respective service period. For PSU awards, we estimate the probability that the performance criteria will be achieved and recognize expense only for those awards expected to vest. We reevaluate our estimates each reporting period and recognize a cumulative effect adjustment to expense if our estimates change from the prior period. We do not estimate forfeiture rates; rather, we adjust for forfeitures in the periods in which they occur. Shares underlying RSU and PSU awards are issued when the awards vest, or later if distribution of such shares has been deferred beyond the vest date. Shares issued are net of shares withheld to cover minimum statutory tax withholding obligations. The fair value of shares withheld for tax withholdings is recorded as a reduction to additional paid-in capital. Recent Accounting Pronouncements 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 3. Investment Securities As of December 31, 2023 and 2022, our investment portfolio consisted of $54.8 billion and $40.9 billion investment securities, at fair value, respectively, $ 5.4 billion and $ 18.6 billion net TBA securities, at fair value, respectively, and other mortgage credit investments of $ 44 million and $ 25 million, respectively, which we account for under the equity method of accounting. Our TBA position is reported at its net carrying value totaling $ 66 million and $ 167 million as of December 31, 2023 and 2022, 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 security and the cost basis or the forward price to be paid or received for the underlying security. As of December 31, 2023 and 2022, our investment securities had a net unamortized premium balance of $ 1.2 billion and $ 1.5 billion, respectively. 61 The following tables summarize our investment securities as of December 31, 2023 and 2022, excluding TBA securities and other mortgage credit investments (dollars in millions). Details of our TBA securities are included in Note 5. December 31, 2023 December 31, 2022 Investment Securities Amortized Cost Fair Value Amortized Cost Fair Value Agency RMBS: Fixed rate $ 55,289 $ 53,161 $ 43,046 $ 39,169 Adjustable rate 293 290 126 122 CMO 127 120 136 129 Interest-only and principal-only strips 67 61 77 70 Multifamily 161 162 — — Total Agency RMBS 55,937 53,794 43,385 39,490 Non-Agency RMBS 1 43 34 111 90 CMBS 303 273 605 567 CRT securities 682 723 779 757 Total investment securities $ 56,965 $ 54,824 $ 44,880 $ 40,904 December 31, 2023 Agency RMBS Non-Agency 1 Investment Securities Fannie Mae Freddie Mac Ginnie Mae RMBS CMBS CRT Total Available-for-sale securities: Par value $ 3,881 $ 1,152 $ 1 $ — $ — $ — $ 5,034 Unamortized discount ( 1 ) — — — — — ( 1 ) Unamortized premium 227 73 — — — — 300 Amortized cost 4,107 1,225 1 — — — 5,333 Gross unrealized gains — — — — — — — Gross unrealized losses ( 392 ) ( 125 ) — — — — ( 517 ) Total available-for-sale securities, at fair value 3,715 1,100 1 — — — 4,816 Securities remeasured at fair value through earnings: Par value 29,910 19,503 283 44 307 679 50,726 Unamortized discount ( 108 ) ( 59 ) ( 3 ) ( 3 ) ( 7 ) ( 9 ) ( 189 ) Unamortized premium 702 376 — 2 3 12 1,095 Amortized cost 30,504 19,820 280 43 303 682 51,632 Gross unrealized gains 170 111 1 — 2 41 325 Gross unrealized losses ( 1,270 ) ( 638 ) — ( 9 ) ( 32 ) — ( 1,949 ) Total securities remeasured at fair value through earnings 29,404 19,293 281 34 273 723 50,008 Total securities, at fair value $ 33,119 $ 20,393 $ 282 $ 34 $ 273 $ 723 $ 54,824 Weighted average coupon as of December 31, 2023 4.69 % 4.91 % 4.94 % 5.10 % 7.27 % 10.45 % 4.86 % Weighted average yield as of December 31, 2023 2 4.22 % 4.53 % 5.16 % 4.92 % 7.04 % 8.87 % 4.41 % 62 December 31, 2022 Agency RMBS Non-Agency 1 Investment Securities Fannie Mae Freddie Mac Ginnie Mae RMBS CMBS CRT Total Available-for-sale securities: Par value $ 4,696 $ 1,535 $ 1 $ — $ — $ — $ 6,232 Unamortized discount ( 1 ) — — — — — ( 1 ) Unamortized premium 275 93 — — — — 368 Amortized cost 4,970 1,628 1 — — — 6,599 Gross unrealized gains — — — — — — — Gross unrealized losses ( 500 ) ( 172 ) — — — — ( 672 ) Total available-for-sale securities, at fair value 4,470 1,456 1 — — — 5,927 Securities remeasured at fair value through earnings: Par value 24,231 11,444 2 112 609 773 37,171 Unamortized discount ( 61 ) ( 37 ) — ( 4 ) ( 8 ) ( 6 ) ( 116 ) Unamortized premium 855 352 — 3 4 12 1,226 Amortized cost 25,025 11,759 2 111 605 779 38,281 Gross unrealized gains 13 8 — — — 8 29 Gross unrealized losses ( 2,307 ) ( 937 ) — ( 21 ) ( 38 ) ( 30 ) ( 3,333 ) Total securities remeasured at fair value through earnings 22,731 10,830 2 90 567 757 34,977 Total securities, at fair value $ 27,201 $ 12,286 $ 3 $ 90 $ 567 $ 757 $ 40,904 Weighted average coupon as of December 31, 2022 3.79 % 3.92 % 4.66 % 4.52 % 6.06 % 8.48 % 3.94 % Weighted average yield as of December 31, 2022 2 3.17 % 3.41 % 2.58 % 4.34 % 6.02 % 7.93 % 3.37 % ________________________________ 1. Non-Agency amounts exclude other mortgage credit investments of $ 44 million and $ 25 million as of December 31, 2023 and December 31, 2022, respectively. 2. Incorporates a weighted average future constant prepayment rate assumption of 11.4 % and 7.4 % based on forward rates as of December 31, 2023 and December 31, 2022, respectively. As of December 31, 2023 and 2022, our investments in CRT and non-Agency securities had the following credit ratings (in millions): December 31, 2023 December 31, 2022 CRT and Non-Agency Security Credit Ratings 1 CRT RMBS 2 CMBS CRT RMBS 2 CMBS AAA $ — $ 1 $ 9 $ — $ 9 $ 184 AA — — 31 2 3 117 A — — 25 16 13 38 BBB 144 14 44 91 40 65 BB 137 7 81 299 13 91 B 39 2 55 72 2 58 Not Rated 403 10 28 277 10 14 Total $ 723 $ 34 $ 273 $ 757 $ 90 $ 567 ________________________________ 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. 2. RMBS excludes other mortgage credit investments of $ 44 million and $ 25 million as of December 31, 2023 and 2022, respectively. 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 December 31, 2023 and 2022, 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 11.4 % and 7.4 %, 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 December 31, 2023 and 2022 according to their estimated weighted average life classification (dollars in millions): 63 December 31, 2023 December 31, 2022 Estimated Weighted Average Life of Investment Securities 1 Fair Value Amortized Cost Weighted Average Coupon Weighted Average Yield Fair Value Amortized Cost Weighted Average Coupon Weighted Average Yield ≤ 3 years $ 942 $ 961 6.61 % 5.93 % $ 512 $ 537 5.19 % 4.66 % > 3 years and ≤ 5 years 10,381 10,331 5.98 % 5.52 % 2,643 2,824 4.57 % 3.79 % > 5 years and ≤10 years 40,895 42,988 4.55 % 4.10 % 30,958 33,985 3.96 % 3.30 % > 10 years 2,606 2,685 4.77 % 4.63 % 6,791 7,534 3.56 % 3.43 % Total $ 54,824 $ 56,965 4.86 % 4.41 % $ 40,904 $ 44,880 3.94 % 3.37 % ________________________________ 1. Table excludes other mortgage credit investments of $ 44 million and $ 25 million as of December 31, 2023 and 2022, respectively. 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 December 31, 2023 and 2022 (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 December 31, 2023 $ — $ — $ 4,797 $ ( 517 ) $ 4,797 $ ( 517 ) December 31, 2022 $ 5,846 $ ( 665 ) $ 52 $ ( 7 ) $ 5,898 $ ( 672 ) 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 fiscal years 2023, 2022 and 2021 by investment classification of accounting (in millions): Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021 Investment Securities Available-for-Sale Securities 2,3 Fair Value Option Securities Total Available-for-Sale Securities 2,3 Fair Value Option Securities Total Available-for-Sale Securities 2,3 Fair Value Option Securities Total Investment securities sold, at cost $ ( 524 ) $ ( 15,263 ) $ ( 15,787 ) $ ( 786 ) $ ( 29,427 ) $ ( 30,213 ) $ ( 4,972 ) $ ( 30,903 ) $ ( 35,875 ) Proceeds from investment securities sold 1 461 13,759 14,220 744 26,553 27,297 5,008 30,810 35,818 Net gain (loss) on sale of investment securities $ ( 63 ) $ ( 1,504 ) $ ( 1,567 ) $ ( 42 ) $ ( 2,874 ) $ ( 2,916 ) $ 36 $ ( 93 ) $ ( 57 ) Gross gain on sale of investment securities $ — $ 19 $ 19 $ 2 $ 10 $ 12 $ 36 $ 176 $ 212 Gross loss on sale of investment securities ( 63 ) ( 1,523 ) ( 1,586 ) ( 44 ) ( 2,884 ) ( 2,928 ) — ( 269 ) ( 269 ) Net gain (loss) on sale of investment securities $ ( 63 ) $ ( 1,504 ) $ ( 1,567 ) $ ( 42 ) $ ( 2,874 ) $ ( 2,916 ) $ 36 $ ( 93 ) $ ( 57 ) ________________________________ 1. Proceeds include cash received during the period, plus receivable for investment securities sold during the period as of period end. 2. See Note 9 for a summary of changes in accumulated OCI. 3. During fiscal years 2023, 2022 and 2021, we received principal repayments on available-for-sale securities of $ 704 million, $ 1,501 million and $ 3,574 million, respectively. Note 4. 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 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 December 31, 2023, we had met all margin call requirements. For additional information regarding our pledged assets, please refer to Note 6. 64 As of December 31, 2023 and 2022, we had $ 50.4 billion and $ 36.3 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 or subject to a tri-party repo agreement. The following table summarizes our borrowings under repurchase agreements by their remaining maturities as of December 31, 2023 and 2022 (dollars in millions): December 31, 2023 December 31, 2022 Remaining Maturity Repurchase Agreements Weighted Average Interest Rate Weighted Average Days to Maturity Repurchase Agreements Weighted Average Interest Rate Weighted Average Days to Maturity Investment securities repo ≤ 1 month $ 40,946 5.61 % 11 $ 26,712 4.42 % 12 > 1 to ≤ 3 months 7,933 5.55 % 64 7,762 4.48 % 38 > 3 to ≤ 6 months — — % — 1,433 1.42 % 141 Investment securities repo 48,879 5.60 % 19 35,907 4.31 % 23 U.S. Treasury repo: ≤ 1 month 1,547 5.54 % 2 355 4.37 % 3 Total $ 50,426 5.60 % 19 $ 36,262 4.31 % 22 As of December 31, 2023 and 2022, $ 16.7 billion and $ 9.6 billion, respectively, of our investment securities repurchase agreements and all of our U.S. Treasury repurchase agreements had an overnight maturity of one business day and none of our repurchase agreements were due on demand. As of December 31, 2023, we had $ 8.8 billion of forward commitments to enter into repurchase agreements with a weighted average forward start date of 4 days and a weighted average interest rate of 5.54 %. As of December 31, 2022, we had $ 6.4 billion of forward commitments to enter into repurchase agreements, with a weighted average forward start date of 4 days and a weighted average interest rate of 4.38 %. As of December 31, 2023 and 2022, 48 % and 49 %, 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 43 % and 48 % of our repurchase agreement funding outstanding as of December 31, 2023 and 2022, respectively. Reverse Repurchase Agreements As of December 31, 2023 and 2022, we had $11.6 billion and $6.6 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 $10.9 billion and $6.5 billion, respectively. As of December 31, 2023 and 2022, $ 3.1 billion and $ 1.5 billion, respectively, of our reverse repurchase agreements were with the FICC sourced through BES. Note 5. Derivative and Other Hedging Instruments For the periods presented, our interest rate based hedges primarily consisted of interest rate swaps, interest rate swaptions, U.S. Treasury securities and U.S. Treasury futures contracts. We also utilized forward contracts, primarily consisting of TBA securities, for the purchase and sale of investment securities. 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 2. 65 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 December 31, 2023 and 2022 (in millions): December 31, Derivative and Other Hedging Instruments Balance Sheet Location 2023 2022 Interest rate swaps 1 Derivative assets, at fair value $ 15 $ 2 Swaptions Derivative assets, at fair value 89 293 TBA and forward settling non-Agency securities Derivative assets, at fair value 81 266 U.S. Treasury futures - short Derivative assets, at fair value — 56 Total derivative assets, at fair value $ 185 $ 617 Interest rate swaps 1 Derivative liabilities, at fair value $ ( 1 ) $ — TBA and forward settling non-Agency securities Derivative liabilities, at fair value ( 15 ) ( 99 ) U.S. Treasury futures - short Derivative liabilities, at fair value ( 336 ) — SOFR futures contracts - long Derivative liabilities, at fair value ( 10 ) — Credit default swaps 1 Derivative liabilities, at fair value — — Total derivative liabilities, at fair value $ ( 362 ) $ ( 99 ) U.S. Treasury securities - long U.S. Treasury securities, at fair value $ 1,540 $ 353 U.S. Treasury securities - short Obligation to return securities borrowed under reverse repurchase agreements, at fair value ( 10,894 ) ( 6,534 ) Total U.S. Treasury securities, net at fair value $ ( 9,354 ) $ ( 6,181 ) ________________________________ 1. As of December 31, 2023 and 2022, the net fair value of our interest rate swaps excluding the recognition of variation margin settlements as a direct reduction of carrying value (see Note 2) was a net asset (liability) of $ 2.9 billion and $ 4.5 billion, respectively. As of December 31, 2023 and 2022, the net fair value of our credit default swaps excluding the recognition of variation margin settlements was $( 6 ) million and $( 2 ) million, respectively. The following tables summarize certain characteristics of our derivative and other hedging instruments outstanding as of December 31, 2023 and 2022 (dollars in millions): Pay Fixed / Receive Variable Interest Rate Swaps December 31, 2023 1 December 31, 2022 Years to Maturity Notional Amount Average Fixed Pay Rate Average Receive Rate Average Maturity (Years) Notional Amount Average Fixed Pay Rate Average Receive Rate Average Maturity (Years) ≤ 1 years $ 13,750 0.14 % 5.37 % 0.4 $ 5,250 0.03 % 4.30 % 0.7 > 1 to ≤ 3 years 14,800 0.48 % 5.32 % 2.0 22,250 0.14 % 4.31 % 1.9 > 3 to ≤ 5 years 5,800 0.24 % 5.38 % 3.9 10,550 0.22 % 4.31 % 3.8 > 5 to ≤ 7 years 3,900 0.92 % 5.37 % 6.2 5,625 0.85 % 4.30 % 6.1 > 7 to ≤ 10 years 5,226 3.06 % 5.38 % 9.2 3,650 1.60 % 4.31 % 8.4 > 10 years — — % — % 0.0 500 3.54 % 4.30 % 10.0 Total $ 43,476 0.68 % 5.35 % 3.0 $ 47,825 0.37 % 4.31 % 3.2 ________________________________ 1. December 31, 2023 amounts are net of $ 1 billion receive fixed interest rate swaps. December 31, Pay Fixed / Receive Variable Interest Rate Swaps by Receive Index (% of Notional Amount) 2023 2022 SOFR 80 % 81 % OIS 20 % 19 % Total 100 % 100 % 66 Payer Swaptions Option Underlying Payer Swap Current Option Expiration Date Cost Basis Fair Value Average Months to Current Option Expiration Date Notional Amount Average Fixed Pay Rate 1 Average Term (Years) December 31, 2023 ≤ 1 year $ 28 $ 86 5 $ 1,250 2.61 % 10.0 Total $ 28 $ 86 5 $ 1,250 2.61 % 10.0 December 31, 2022 ≤ 1 year $ 26 $ 145 6 $ 1,300 2.04 % 9.4 > 1 year ≤ 2 years 39 148 18 1,750 2.52 % 10.0 Total $ 65 $ 293 13 $ 3,050 2.32 % 9.8 ________________________________ 1. Receive index references SOFR. Receiver Swaptions Option Underlying Receiver Swap Current Option Expiration Date Cost Basis Fair Value Average Months to Current Option Expiration Date Notional Amount Average Fixed Receive Rate Average Term (Years) December 31, 2023 ≤ 1 year $ 3 $ 3 24 $ 150 2.98 % 5.0 As of December 31, 2022, we had no receiver swaptions outstanding. U.S. Treasury Securities 1 December 31, 2023 December 31, 2022 Years to Maturity Face Amount Long/(Short) Cost Basis Fair Value Face Amount Long/(Short) Cost Basis Fair Value ≤ 5 years $ 1,408 $ 1,419 $ 1,454 $ 356 $ 354 $ 353 > 5 year ≤ 7 years ( 818 ) ( 821 ) ( 703 ) ( 745 ) ( 747 ) ( 658 ) > 7 year ≤ 10 years ( 8,649 ) ( 8,277 ) ( 8,187 ) ( 5,532 ) ( 5,225 ) ( 4,823 ) > 10 years ( 1,796 ) ( 1,796 ) ( 1,918 ) ( 1,095 ) ( 1,048 ) ( 1,053 ) Total U.S. Treasury securities $ ( 9,855 ) $ ( 9,475 ) $ ( 9,354 ) $ ( 7,016 ) $ ( 6,666 ) $ ( 6,181 ) ________________________________ 1. As of December 31, 2023 and 2022, short U.S. Treasury securities totaling $(10.9) billion and $(6.5) billion, at fair value, respectively, had a weighted average yield of 3.64 % and 2.80 %, respectively. As of December 31, 2023 and 2022, long U.S. Treasury securities totaling $ 1.5 billion and $ 0.4 billion, at fair value, respectively, had a weighted average yield of 4.39 % and 3.86 %, respectively. U.S. Treasury Futures December 31, 2023 December 31, 2022 Years to 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 > 5 year ≤ 7 years $ ( 2,714 ) $ ( 2,961 ) $ ( 3,064 ) $ ( 103 ) $ ( 7,498 ) $ ( 8,463 ) $ ( 8,420 ) $ 43 > 7 year ≤ 10 years ( 2,924 ) ( 3,294 ) ( 3,451 ) ( 157 ) ( 901 ) ( 1,070 ) ( 1,065 ) 5 > 10 years ( 791 ) ( 913 ) ( 989 ) ( 76 ) ( 814 ) ( 1,028 ) ( 1,020 ) 8 Total U.S. Treasury futures $ ( 6,429 ) $ ( 7,168 ) $ ( 7,504 ) $ ( 336 ) $ ( 9,213 ) $ ( 10,561 ) $ ( 10,505 ) $ 56 ________________________________ 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. 67 December 31, 2023 December 31, 2022 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: ≥ 5.0% $ 90 $ 89 $ 91 $ 2 $ — $ — $ — $ — Total 15-Year TBA securities 90 89 91 2 — — — — 30-Year TBA securities: ≤ 3.0% ( 29 ) ( 24 ) ( 25 ) ( 1 ) 1,635 1,415 1,408 ( 7 ) 3.5% — — — — 373 342 340 ( 2 ) 4.0% — — — — 585 550 550 — 4.5% 363 343 352 9 2,382 2,248 2,295 47 5.0% 1,717 1,704 1,704 — 8,343 8,197 8,231 34 5.5% 2,034 2,014 2,047 33 5,576 5,504 5,591 87 6.0% 20 10 21 11 139 134 142 8 ≥ 6.5% 1,137 1,152 1,164 12 17 17 17 — Total 30-Year TBA securities, net 5,242 5,199 5,263 64 19,050 18,407 18,574 167 Total TBA securities, net $ 5,332 $ 5,288 $ 5,354 $ 66 $ 19,050 $ 18,407 $ 18,574 $ 167 ________________________________ 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. As of December 31, 2023, we had a two-year swap equivalent SOFR futures contract long notional position of $ 0.9 billion, with a net carrying value of $( 10 ) million. As of December 31, 2023 and 2022, we had $ 95 million and $ 215 million, respectively, notional value of centrally cleared credit default swaps ("CDS") outstanding that reference the Markit CDX Investment Grade or High Yield Grade Index, maturing in December 2028 and June 2027, respectively. Under the terms of our CDS, we pay fixed periodic payments equal to 1% per annum of the notional value and we are entitled to receive payments for qualified credit events. As of December 31, 2023 and 2022, the CDS had a market value of $( 6 ) million and $( 2 ) million, respectively, and a net carrying value of zero dollars, net of variation margin settlements. Pursuant to rules governing central clearing activities, we recognize variation margin settlements as a direct reduction of the carrying value of the CDS asset or liability. 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 fiscal years 2023, 2022 and 2021 (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 Fiscal Year 2023: TBA securities, net $ 19,050 164,465 ( 178,183 ) $ 5,332 $ 49 Interest rate swaps - payer $ 47,825 5,746 ( 9,095 ) $ 44,476 666 Interest rate swaps - receiver $ — ( 1,000 ) — $ ( 1,000 ) 4 Credit default swaps - buy protection $ ( 215 ) ( 1,322 ) 1,441 $ ( 96 ) ( 13 ) Payer swaptions $ 3,050 — ( 1,800 ) $ 1,250 ( 21 ) Receiver swaptions $ — ( 150 ) — $ ( 150 ) — U.S. Treasury securities - short position $ ( 7,373 ) ( 20,143 ) 16,169 $ ( 11,347 ) ( 54 ) U.S. Treasury securities - long position $ 357 14,272 ( 13,137 ) $ 1,492 ( 30 ) U.S. Treasury futures contracts - short position $ ( 9,213 ) ( 31,465 ) 34,249 $ ( 6,429 ) ( 42 ) $ 559 68 Fiscal Year 2022: TBA securities, net $ 26,673 312,307 ( 319,930 ) $ 19,050 $ ( 2,860 ) Forward settling non-Agency securities $ 450 — ( 450 ) $ — — Interest rate swaps - payer $ 51,225 5,895 ( 9,295 ) $ 47,825 4,400 Credit default swaps - buy protection $ — ( 5,835 ) 5,620 $ ( 215 ) 21 Payer swaptions $ 13,000 1,750 ( 11,700 ) $ 3,050 857 Receiver swaptions $ — ( 150 ) 150 $ — — U.S. Treasury securities - short position $ ( 9,590 ) ( 15,548 ) 17,765 $ ( 7,373 ) 1,482 U.S. Treasury securities - long position $ 472 10,202 ( 10,317 ) $ 357 ( 32 ) U.S. Treasury futures contracts - short position $ ( 1,500 ) ( 37,493 ) 29,780 $ ( 9,213 ) 811 $ 4,679 Fiscal Year 2021: TBA securities, net $ 30,364 352,658 ( 356,349 ) $ 26,673 $ ( 552 ) Forward settling non-Agency securities $ — 1,800 ( 1,350 ) $ 450 5 Interest rate swaps - payer $ 43,225 9,000 ( 1,000 ) $ 51,225 1,117 Payer swaptions $ 10,400 8,050 ( 5,450 ) $ 13,000 23 U.S. Treasury securities - short position $ ( 11,287 ) ( 12,691 ) 14,388 $ ( 9,590 ) 444 U.S. Treasury securities - long position $ — 7,618 ( 7,146 ) $ 472 ( 25 ) U.S. Treasury futures contracts - short position $ ( 1,000 ) ( 6,000 ) 5,500 $ ( 1,500 ) 42 $ 1,054 ________________________________ 1. Amounts exclude other miscellaneous gains and losses and other interest income (expense) recognized in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income. Additionally, as of December 31, 2023, we had SOFR futures contracts, measured on a two-year swap equivalent basis, of $ 0.9 billion. For fiscal year 2023, we recognized a loss of $( 10 ) million on our SOFR futures position in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income. Note 6. 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. 69 As of December 31, 2023, our maximum amount at risk with any counterparty related to our repurchase agreements, excluding the Fixed Income Clearing Corporation, was less than 3 % of our tangible stockholders' equity (or the excess/shortfall of the value of collateral pledged/received over our repurchase agreement liabilities/reverse repurchase agreement receivables). As of December 31, 2023, less than 7 % of our tangible stockholder's equity was at risk with the Fixed Income Clearing Corporation. Assets Pledged to Counterparties The following tables summarize our assets pledged as collateral under our funding, derivative and brokerage and clearing agreements by type, including securities pledged related to securities sold but not yet settled, as of December 31, 2023 and 2022 (in millions): December 31, 2023 Assets Pledged to Counterparties 1 Repurchase Agreements 2 Debt of Consolidated VIEs Derivative Agreements and Other Total Agency RMBS - fair value $ 49,602 $ 121 $ 15 $ 49,738 CRT - fair value 678 — — 678 Non-Agency - fair value 262 — — 262 U.S. Treasury securities - fair value 1,865 — 62 1,927 Accrued interest on pledged securities 217 — — 217 Restricted cash 9 — 1,244 1,253 Total $ 52,633 $ 121 $ 1,321 $ 54,075 December 31, 2022 Assets Pledged to Counterparties 1 Repurchase Agreements 2 Debt of Consolidated VIEs Derivative Agreements and Other Total Agency RMBS - fair value $ 35,765 $ 144 $ 203 $ 36,112 CRT - fair value 703 — — 703 Non-Agency - fair value 605 — — 605 U.S. Treasury securities - fair value 353 — — 353 Accrued interest on pledged securities 127 1 — 128 Restricted cash 211 — 1,105 1,316 Total $ 37,764 $ 145 $ 1,308 $ 39,217 ________________________________ 1. Includes repledged assets received as collateral from counterparties and securities sold but not yet settled. 2. Includes $ 42 million and $ 49 million of retained interests in our consolidated VIEs pledged as collateral under repurchase agreements as of December 31, 2023 and 2022, respectively. 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 December 31, 2023 and 2022 (in millions). For the corresponding borrowings associated with the following amounts and the interest rates thereon, refer to Note 4 . December 31, 2023 December 31, 2022 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 ≤ 1 month $ 43,701 $ 44,918 $ 188 $ 27,525 $ 30,168 $ 94 > 1 and ≤ 2 months 2,847 3,069 10 7,922 8,680 27 > 2 and ≤ 3 months 5,524 5,947 19 240 252 — > 3 months — — — 1,739 1,870 6 Total $ 52,072 $ 53,934 $ 217 $ 37,426 $ 40,970 $ 127 ________________________________ 70 1. Includes $ 42 million and $ 49 million of retained interests in our consolidated VIEs pledged as collateral under repurchase agreements as of December 31, 2023 and 2022, respectively. 2. Excludes $ 397 million of repledged U.S. Treasury securities received as collateral from counterparties as of December 31, 2023. Assets Pledged from Counterparties As of December 31, 2023 and 2022, we had assets pledged to us from counterparties as collateral under our reverse repurchase and derivative agreements summarized in the tables below (in millions). December 31, 2023 December 31, 2022 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 $ 11,667 $ — $ 306 $ 11,973 $ 6,572 $ — $ 28 $ 6,600 Cash — 89 49 138 46 296 6 348 Total $ 11,667 $ 89 $ 355 $ 12,111 $ 6,618 $ 296 $ 34 $ 6,948 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 December 31, 2023 and 2022 (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 December 31, 2023 Interest rate swap and swaption agreements, at fair value 1 $ 104 $ — $ 104 $ — $ ( 89 ) $ 15 TBA securities, at fair value 1 80 — 80 ( 15 ) ( 65 ) — Receivable under reverse repurchase agreements 11,618 — 11,618 ( 8,433 ) ( 3,181 ) 4 Total $ 11,802 $ — $ 11,802 $ ( 8,448 ) $ ( 3,335 ) $ 19 December 31, 2022 Interest rate swap and swaption agreements, at fair value 1 $ 295 $ — $ 295 $ — $ ( 293 ) $ 2 TBA securities, at fair value 1 266 — 266 ( 99 ) ( 167 ) — Receivable under reverse repurchase agreements 6,622 — 6,622 ( 4,007 ) ( 2,610 ) 5 Total $ 7,183 $ — $ 7,183 $ ( 4,106 ) $ ( 3,070 ) $ 7 71 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 December 31, 2023 TBA securities, at fair value 1 $ 15 $ — $ 15 $ ( 15 ) $ — $ — Repurchase agreements 50,426 — 50,426 ( 8,433 ) ( 41,993 ) — Total $ 50,441 $ — $ 50,441 $ ( 8,448 ) $ ( 41,993 ) $ — December 31, 2022 TBA securities, at fair value 1 $ 99 $ — $ 99 $ ( 99 ) $ — $ — Repurchase agreements 36,262 — 36,262 ( 4,007 ) ( 32,255 ) — Total $ 36,361 $ — $ 36,361 $ ( 4,106 ) $ ( 32,255 ) $ — ________________________________ 1. Reported under derivative assets / liabilities, at fair value in the accompanying consolidated balance sheets. Refer to Note 5 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 7. Fair Value Measurements The following table provides a summary of our assets and liabilities that are measured at fair value on a recurring basis, as of December 31, 2023 and 2022, based on their categorization within the valuation hierarchy (in millions). There were no transfers between valuation hierarchy levels during the periods presented in our accompanying consolidated statements of comprehensive income. December 31, 2023 December 31, 2022 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets: Agency securities $ — $ 53,673 $ — $ — $ 39,346 $ — Agency securities transferred to consolidated VIEs — 121 — — 144 — Credit risk transfer securities — 723 — — 757 — Non-Agency securities — 307 — — 657 — U.S. Treasury securities 1,540 — — 353 — — Interest rate swaps 1 — 15 — — 2 — Swaptions — 89 — — 293 — TBA securities — 81 — — 266 — U.S. Treasury futures — — — 56 — — Total $ 1,540 $ 55,009 $ — $ 409 $ 41,465 $ — Liabilities: Debt of consolidated VIEs $ — $ 80 $ — $ — $ 95 $ — Obligation to return U.S. Treasury securities borrowed under reverse repurchase agreements 10,894 — — 6,534 — — Interest rate swaps 1 — 1 — — — — Credit default swaps 1 — — — — — — TBA securities — 15 — — 99 — U.S. Treasury futures 336 — — — — — SOFR Futures 10 — — — — — Total $ 11,240 $ 96 $ — $ 6,534 $ 194 $ — ________________________________ 1. As of December 31, 2023 and 2022, the net fair value of our interest rate swaps excluding the recognition of variation margin settlements as a direct reduction of carrying value was a net asset (liability) of $ 2.9 billion and $ 4.5 billion, respectively, based on "Level 2" inputs. As of December 31, 2023 and 2022, the net fair value of our credit default swaps excluding the recognition of variation margin settlements was $( 6 ) million and $( 2 ) million, respectively, based on "Level 2" inputs. See Notes 2 and 5 for additional details. Excluded from the table above are financial instruments reported at cost and other mortgage credit investments reported under the equity method of accounting in our consolidated financial statements. As of December 31, 2023 and 2022, the fair 72 value of our repurchase agreements approximated cost, 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 such dates due to their short duration. We estimate the fair value of these instruments carried at cost using "Level 1" or "Level 2" inputs. As of December 31, 2023 and 2022, the carrying value of other mortgage credit investments reported under the equity method of accounting was $ 44 million and $ 25 million, respectively. Note 8. 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): Fiscal Year 2023 2022 2021 Weighted average number of common shares issued and outstanding 616.6 535.4 526.5 Weighted average number of fully vested restricted stock units outstanding 1.8 1.6 1.6 Weighted average number of common shares outstanding - basic 618.4 537.0 528.1 Weighted average number of dilutive unvested restricted stock units outstanding 1.2 — 1.9 Weighted average number of common shares outstanding - diluted 619.6 537.0 530.0 Net income (loss) available (attributable) to common stockholders $ 32 $ ( 1,295 ) $ 649 Net income (loss) per common share - basic $ 0.05 $ ( 2.41 ) $ 1.23 Net income (loss) per common share - diluted $ 0.05 $ ( 2.41 ) $ 1.22 For fiscal year 2022 1.1 million of potentially dilutive unvested time and performance based RSUs outstanding were excluded from the computation of diluted net income (loss) per common share because to do so would have been anti-dilutive for the period. Note 9. 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 December 31, 2023 and 2022, 13,800 , 10,350 , 16,100 , 23,000 and 6,900 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, 6.125 % Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock and 7.75 % Series G Fixed-Rate Reset Cumulative Redeemable Preferred Stock, respectively, (referred to as "Series C, D, E, F and G Preferred Stock", respectively). As of December 31, 2023 and 2022, 13,000 , 9,400 , 16,100 , 23,000 and 6,000 shares of Series C, D, E, F and G Preferred Stock, respectively, were issued and outstanding. Each share of preferred stock is represented by 1,000 depositary shares. Each share of preferred stock has a liquidation preference of $25,000 per share ($25 per depositary share). 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 December 31, 2023 (dollars and shares in millions): 73 Cumulative Redeemable Preferred Stock 1 Issue Date Depositary Shares Issued and Outstanding Carrying Value Aggregate Liquidation Preference Per Annum Dividend Rate 2,3 First Optional Redemption Date / Conversion Date 3,4 Fixed-to-Floating Rate: Series C August 22, 2017 13.0 $ 315 $ 325 10.775 % October 15, 2022 Series D March 6, 2019 9.4 227 235 6.875 % April 15, 2024 Series E October 3, 2019 16.1 390 403 6.500 % October 15, 2024 Series F February 11, 2020 23.0 557 575 6.125 % April 15, 2025 Fixed-Rate Reset: Series G September 14, 2022 6.0 145 150 7.750 % October 15, 2027 Total 67.5 $ 1,634 $ 1,688 ________________________________ 1. The depositary shares underlying our preferred stock accrue dividends at an initial 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 or fixed-rate-reset conversion date; thereafter, dividends will accrue on a floating rate or fixed-rate-reset basis equal to the conversion rate plus a fixed spread. 2. The Series C per annum dividend rate represents the dividend rate in effect as of December 31, 2023. 3. The Series C dividend accrues at a rate equal to the 3-Month CME Term SOFR plus 0.26161%, plus a spread of 5.111 %, per annum, resetting quarterly in accordance with the certificate of designations for such series and the Adjustable Interest Rate (LIBOR) Act of 2021 (the “LIBOR Act”). At the conclusion of the fixed rate period (the conversion date) for each of the Series D, E, and F Preferred Stock, the dividend for such series will accrue at a rate equal to the 3-Month CME Term SOFR plus 0.26161%, plus a spread of 4.332 %, 4.993 % and 4.697 %, respectively, per annum, resetting quarterly in accordance with the certificate of designations for such series and the LIBOR Act. At the conclusion of the fixed rate period for the Series G Preferred Stock, the dividend will accrue at a floating rate equal to the 5-Year US Treasury rate, plus a spread of 4.39 %, per annum and will reset in accordance with the certificate of designations for such series. 4. 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. 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. The following table includes a summary of shares of our common stock sold under the sales agreements during fiscal years 2023 and 2022 (in millions, except for per share data). During fiscal year 2021 we did not issue shares under this program. As of December 31, 2023, shares of our common stock with an aggregate offering price of $ 0.9 billion remained authorized for issuance under this program through December 31, 2024. ATM Offerings Average Price Received Per Share, Net Shares Net Proceeds Fiscal Year 2023 $ 9.14 118.8 $ 1,085 Fiscal Year 2022 $ 9.39 56.0 $ 526 Common Stock Repurchase Program We are authorized by our Board of Directors to repurchase shares of our common stock in 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 (the "Exchange Act"). The following table includes a summary of shares of our common stock repurchased during fiscal years 2022 and 2021 (in millions, except for per share data). During fiscal year 2023 we did not repurchase shares under this program. As of December 31, 2023, shares of our common stock with an aggregate repurchase price of $ 1 billion remained authorized for repurchase through December 31, 2024. Common Stock Repurchases Average Price Paid Per Share 1 Shares Net Cost Fiscal Year 2022 $ 10.78 4.7 $ 51 Fiscal Year 2021 2 $ 15.96 17.7 $ 281 ________________________________ 1. Average price paid per share includes transaction costs. 2. Includes December 2020 share repurchases that settled in January 2021 totaling $ 24 million, or 1.6 million shares. 74 Distributions to Stockholders The following table summarizes dividends declared during fiscal years 2023, 2022 and 2021 (in millions, except per share amounts): Dividends Declared Dividends Declared Per Share 1 Series C Preferred Stock Fiscal year 2023 $ 34 $ 2.660390 Fiscal year 2022 $ 25 $ 1.886880 Fiscal year 2021 $ 23 $ 1.750000 Series D Preferred Stock Fiscal year 2023 $ 16 $ 1.718750 Fiscal year 2022 $ 16 $ 1.718750 Fiscal year 2021 $ 16 $ 1.718750 Series E Preferred Stock Fiscal year 2023 $ 26 $ 1.625000 Fiscal year 2022 $ 26 $ 1.625000 Fiscal year 2021 $ 26 $ 1.625000 Series F Preferred Stock Fiscal year 2023 $ 35 $ 1.531250 Fiscal year 2022 $ 35 $ 1.531250 Fiscal year 2021 $ 35 $ 1.531250 Series G Preferred Stock Fiscal year 2023 $ 12 $ 1.937520 Fiscal year 2022 $ 4 $ 0.651220 Common Stock Fiscal year 2023 $ 896 $ 1.440000 Fiscal year 2022 $ 775 $ 1.440000 Fiscal year 2021 $ 757 $ 1.440000 ________________________________ 1. Preferred stock per share amounts are per depositary share. 75 The following table summarizes our tax characterization of distributions to stockholders for fiscal years 2023, 2022 and 2021. Distributions included in the table below are based on the fiscal tax year for which the distribution is attributed to for stockholders in accordance with rules promulgated under the Internal Revenue Code: Tax Characterization 1 Tax Year Distribution Rate 1 Ordinary Dividend Per Share Qualified Dividends Capital Gain Dividend Per Share Non-Dividend Distributions Section 199A Dividend Series C Preferred Stock Fiscal year 2023 $ 2.546340 $ 2.546340 $ — $ — $ — $ 2.546340 Fiscal year 2022 $ 1.750000 $ 1.750000 $ — $ — $ — $ 1.750000 Fiscal year 2021 $ 1.750000 $ 0.341718 $ — $ 0.095782 $ 1.312500 $ 0.341718 Series D Preferred Stock Fiscal year 2023 $ 1.718750 $ 1.718750 $ — $ — $ — $ 1.718750 Fiscal year 2022 $ 1.718750 $ 1.718750 $ — $ — $ — $ 1.718750 Fiscal year 2021 $ 1.718750 $ 0.335616 $ — $ 0.094072 $ 1.289063 $ 0.335616 Series E Preferred Stock Fiscal year 2023 $ 1.625000 $ 1.625000 $ — $ — $ — $ 1.625000 Fiscal year 2022 $ 1.625000 $ 1.625000 $ — $ — $ — $ 1.625000 Fiscal year 2021 $ 1.625000 $ 0.317310 $ — $ 0.088940 $ 1.218750 $ 0.317310 Series F Preferred Stock Fiscal year 2023 $ 1.531250 $ 1.531250 $ — $ — $ — $ 1.531250 Fiscal year 2022 $ 1.531250 $ 1.531250 $ — $ — $ — $ 1.531250 Fiscal year 2021 $ 1.531250 $ 0.299004 $ — $ 0.083809 $ 1.148438 $ 0.299004 Series G Preferred Stock Fiscal year 2023 $ 2.104360 $ 2.104360 $ — $ — $ — $ 2.104360 Common Stock Fiscal year 2023 $ 1.560000 $ 1.560000 $ — $ — $ — $ 1.560000 Fiscal year 2022 $ 1.440000 $ 0.669420 $ — $ — $ 0.770580 $ 0.669420 Fiscal year 2021 $ 1.320000 $ 0.095930 $ — $ 0.026889 $ 1.197181 $ 0.095930 ________________________________ 1. Preferred stock per share amounts are per depositary share. Accumulated Other Comprehensive Income (Loss) The following table summarizes changes to accumulated OCI for fiscal years 2023, 2022 and 2021 (in millions): Fiscal Year Accumulated Other Comprehensive Income (Loss) 2023 2022 2021 Beginning Balance $ ( 672 ) $ 301 $ 719 OCI before reclassifications 92 ( 1,015 ) ( 382 ) Net loss amounts for available-for-sale securities reclassified from accumulated OCI to realized gain (loss) on sale of investment securities, net 63 42 ( 36 ) Ending Balance $ ( 517 ) $ ( 672 ) $ 301 Note 10. Stock-Based Compensation During fiscal years 2023, 2022 and 2021, we granted RSU awards to employees with a grant date fair value of $ 11 million, $ 8 million and $ 8 million, respectively, which generally vest annually over a three-year period, and we granted RSU awards to independent directors of $ 1.2 million, $ 1.0 million and $ 0.9 million, respectively, which vest at the end of a one-year period from grant date. We also granted PSU awards to employees which generally vest at the end of a three-year 76 period provided that specified performance criteria are met. The performance criteria are based on a formula tied to our achievement of long-term economic returns consisting of the change in tangible net book value and dividends paid per common share on an absolute basis and relative to a select group of our peers. The fair value of the PSU awards granted during fiscal years 2023, 2022 and 2021 as of the grant date was $ 10 million, $ 11 million and $ 10 million, respectively, assuming the target levels of performance are achieved. The actual value of the awards will vary within a range of 0% to 200% of the target based on the actual performance achieved relative to the targets. Our 2016 Equity Plan, as amended, authorizes a total of 40 million shares of our common stock that may be used to satisfy awards granted under the Plan, subject to the share counting rules set forth within the Plan. As of December 31, 2023, 28.7 million shares remained available for awards under the 2016 Equity Plan. For purposes of determining the total number of shares available for awards under the 2016 Equity Plan, available shares are reduced by (i) shares issued for vested awards, net of units withheld to cover minimum statutory tax withholding requirements paid by us in cash on behalf of the employee, (ii) outstanding unvested awards, (iii) outstanding previously vested awards, if distribution of such awards has been deferred beyond the vesting date ("deferred awards"), and (iv) accrued dividend equivalent units on outstanding awards through December 31, 2023. Unvested PSU awards assume the maximum potential payout under the terms of the award. As of December 31, 2023, 1.7 million of deferred awards, including accrued dividend equivalents, were outstanding. During fiscal years 2023, 2022 and 2021, we recognized total compensation expense of $ 15.0 million, $ 11.6 million and $ 21.4 million, respectively, for stock-based awards to employees, and we recognized other operating expense of $ 1.1 million, $ 1.0 million and $ 0.8 million, respectively, for stock-based awards to independent directors. Compensation expense for PSU awards is based on our estimate of the probability that the performance criteria for PSU awards will be achieved and, if applicable, includes a cumulative effect adjustment for changes in our estimate from the prior year period. As of December 31, 2023, we estimate that 66.4 % of target for PSU awards granted in fiscal year 2021 will vest based on actual performance achieved through the end of the performance measurement period and that 50 % and 100 % of target will vest for PSU awards granted in fiscal years 2022 and 2023, respectively, based on our estimate of the probability that the performance criteria for these awards will be achieved. As of December 31, 2023, we had $ 17 million of unrecognized expense related to stock-based awards that we expect to recognize over a weighted average period of 1.8 years. The following tables summarizes awards under our 2016 Equity Plan for fiscal years 2023, 2022 and 2021: RSU Awards RSU Awards Weighted Average Grant Date Fair Value 1 Weighted Average Vest Date Fair Value Unvested balance as of December 31, 2020 908,984 $ 15.57 $ — Granted 567,426 $ 16.10 $ — Accrued RSU dividend equivalents 84,976 $ — $ — Vested ( 483,601 ) $ 14.31 $ 16.64 Forfeitures ( 27,758 ) $ 15.98 $ — Unvested balance as of December 31, 2021 1,050,027 $ 15.15 $ — Granted 687,733 $ 12.85 $ — Accrued RSU dividend equivalents 159,039 $ — $ — Vested ( 558,796 ) $ 14.68 $ 12.70 Forfeitures ( 4,312 ) $ 13.43 $ — Unvested balance as of December 31, 2022 1,333,691 $ 12.36 $ — Granted 1,140,758 $ 10.67 $ — Accrued RSU dividend equivalents 273,189 $ — $ — Vested ( 703,557 ) $ 12.28 $ 9.88 Unvested balance as of December 31, 2023 2,044,081 $ 9.79 $ — ________________________________ 1. Accrued RSU award dividend equivalents have a weighted average grant date fair value of $0. 77 PSU Awards PSUs at Target Performance Level Weighted Average Grant Date Fair Value 1 Weighted Average Vest Date Fair Value Unvested balance as of December 31, 2020 1,626,785 $ 15.15 $ — Granted 630,886 $ 15.96 $ — Accrued PSU dividend equivalents 157,539 $ — $ — Performance adjustment - base grant 2 206,547 $ 17.56 $ — Performance adjustment - accrued PSU dividend equivalents 2 70,953 $ — $ — Vested ( 466,224 ) $ 12.86 $ 16.52 Forfeitures ( 13,826 ) $ 15.54 $ — Unvested balance as of December 31, 2021 2,212,660 $ 14.52 $ — Granted 826,971 $ 12.99 $ — Accrued PSU dividend equivalents 279,484 $ — $ — Vested ( 938,540 ) $ 13.02 $ 13.85 Unvested balance as of December 31, 2022 2,380,575 $ 12.87 $ — Granted 950,840 $ 10.59 $ — Accrued PSU dividend equivalents 402,368 $ — $ — Performance adjustment - base grant 2 ( 210,425 ) $ 15.96 $ — Performance adjustment - accrued PSU dividend equivalents 2 ( 87,375 ) $ — $ — Vested ( 699,128 ) $ 14.18 $ 11.48 Unvested balance as of December 31, 2023 3 2,736,855 $ 10.03 $ — _______________________ 1. Accrued PSU award dividend equivalents have a weighted average grant date fair value of $0. 2. Performance adjustments reflect adjustments for actual performance achieved relative to target, measured at the end of the performance period. 3. The unvested balance as of December 31, 2023 assumes actual performance achievement of 66.4 % of target for PSU awards granted in fiscal year 2021 that are scheduled to vest in fiscal year 2024 and target levels of performance (100%) for PSU awards granted in fiscal years 2022 and 2023. The actual number of PSUs that will vest for the 2022 and 2023 PSU awards will vary within a range of 0% to 200% of the target based on the actual performance achieved relative to the targets. As of December 31, 2023, we estimate that 50 % and 100 % of the 2022 and 2023 PSU awards, respectively, will vest based on our estimate of the probability that the performance criteria for the awards will be achieved. Note 11. Income Taxes We did not incur an income tax liability for the years ended December 31, 2022 and 2021 and we do not expect to incur an income tax liability for the year ended December 31, 2023. Based on our analysis of any potential uncertain income tax positions, we concluded that we do not have any uncertain tax positions that meet the recognition or measurement criteria of ASC Topic 740, Income Taxes , as of December 31, 2023 or prior periods. Our tax returns for tax years 2020 and forward are open to examination by the IRS. If we incur income tax related interest and penalties, our policy is to classify them as a component of provision for income taxes. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.