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Item 2. Management’s Discussion and Analysis

2024-08-05 compared with 2024-05-07 · 167 added, 105 removed, 539 unchanged (34% of the section changed)

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

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is designed to provide a reader of AGNC Investment Corp.'s consolidated financial statements with a narrative from the perspective of management and should be read in conjunction with the consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q for quarterly period ended March 31, 2024.

Our MD&A is presented in the following sections:

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• Forward-Looking Statements

• Website and Social Media Disclosure

EXECUTIVE OVERVIEW

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Trends and Recent Market Impacts

The favorable macroeconomic environment for fixed income investors that began in late 2023 persisted through the conclusion of the first quarter of 2024.

During this period, interest rate volatility declined significantly, and Agency RMBS spreads to benchmark interest rates remained relatively stable.

The Federal Reserve also indicated that the peak of the interest rate tightening cycle had likely been reached and further noted that a reduction in the pace of its balance sheet runoff was probable in the near-term, signaling that an end to the quantitative tightening process was nearing.

Mortgage origination levels remained depressed as a result of seasonal factors and affordability challenges.

Additionally, bank demand for Agency RMBS was unexpectedly strong, driven in part by the expectation that the Basel III Endgame capital requirements, if and when finally adopted, will be less onerous on banks than originally proposed.

Together, these factors, reduced mortgage originations and incremental bank demand, provided a favorable backdrop for Agency RMBS supply-demand dynamics.

The outlook for monetary policy shifted materially in April in response to stronger-than-expected economic data.

Contrary to the Fed’s expectations, inflation readings showed no meaningful improvement.

As a result, after a period of relative stability in the first quarter, benchmark interest rates and volatility increased sharply in April, driven by less optimistic inflation expectations and escalating geopolitical risks.

In response, Agency RMBS spreads to benchmark interest rates widened modestly, causing valuations to decline.

Despite the recent volatility, the fundamental outlook for Agency RMBS remains positive.

With absolute yields back above 6% as of the end of April and explicit support from the U.S.

government, Agency RMBS are appealing to a broad universe of investors.

Agency RMBS spreads to benchmark interest rates remain wide by historical standards, providing the opportunity for favorable risk-adjusted returns for levered Agency RMBS investors.

Looking forward, if monetary policy

proceeds largely as anticipated, we would expect interest rate volatility to decline, the yield curve to steepen, and quantitative tightening to conclude.

Importantly, the precise timing of Fed rate cuts is not a critical factor in our favorable long-term performance expectations for Agency RMBS.

During the first quarter, the 10-year U.S.

Treasury increased 32 basis points, and the current coupon Agency RMBS spread to a blend of 5- and 10-year Treasuries was unchanged at 139 basis points as of March 31, 2024.

For the quarter, AGNC earned total comprehensive income of $0.48 per diluted common share and generated a total economic return of 5.7% on tangible common equity comprised of $0.36 dividends declared per common share and a $0.14 increase in tangible net book value per common share.

These results compare to total comprehensive income of $1.00 per diluted common share and economic return of 12.1% for the prior quarter.

Net spread and dollar roll income per diluted common share (a non-GAAP measure) totaled $0.58 for the first quarter, a decline of 2 cents per share from the prior quarter, as higher swap costs more than offset the increase in the average asset yield on our portfolio.

We maintained a large interest rate hedge position during the quarter, which covered 99% of the outstanding balance of Investment Securities Repo, TBA position and other debt as of the end of the quarter.

This was a slight decrease from 112% as of December 31, 2023.

“At risk” leverage was largely unchanged at 7.1x of our tangible stockholders’ equity as of March 31, 2024, compared to 7.0x as of December 31, 2023.

Our unencumbered cash and Agency RMBS grew to $5.4 billion, or 67% of our tangible stockholders' equity, as of the end of the first quarter, up from $5.1 billion, or 66% of tangible stockholders’ equity, as of December 31, 2023.

The weighted average coupon on our fixed-rate Agency RMBS and TBA securities increased slightly to 4.86%, from 4.83%, as of the end of the quarter, as we continued to shift a larger share of our asset portfolio toward higher coupon, high-quality specified pools.

Additionally, we issued $241 million of accretive common equity during the quarter through our At-the-Market offering program to capitalize on our material price to book premium.

While market turbulence may persist in the short term due to factors such as inflation expectations and geopolitical risks, we believe AGNC is well positioned to navigate this environment.

Our active management strategy, strategic focus on high-quality Agency RMBS assets, attractive funding sources, and strong liquidity position should allow us not only to withstand episodes of volatility but also to take advantage of attractive investment opportunities as they arise.

The strong fixed income momentum that began in the fourth quarter of 2023 abated in the second quarter of 2024, as the Federal Reserve (the “Fed”) and market participants looked for indications that the economy was slowing and inflation moderating.

On balance, the data showed that consumer spending and confidence were weakening, the labor market was moving into better balance, and most importantly, inflation measures were trending toward the Fed’s long run target.

Nevertheless, the Fed was unwilling to adopt a more accommodative monetary policy stance.

Against the backdrop of diverging economic and monetary policy outlooks, fixed income markets became more cautious, and intra-quarter volatility increased.

In aggregate, interest rates edged higher and Agency RMBS spreads to benchmark interest rates widened, which drove our negative economic return for the second quarter of -0.9%.

For Agency RMBS, the second quarter was a push and pull between evolving supply and demand dynamics.

On the demand side, bank and foreign demand moderated in the second quarter, while demand from bond funds remained steady, but limited, given an already overweight position.

On the supply side, seasonal dynamics led to an uptick in Agency RMBS supply, with $52 billion in supply for the quarter, double the pace of the first quarter.

As a result, Agency RMBS spreads to Treasuries widened approximately five to 10 basis points across the coupon stack, with current production securities, namely the 5.5% and 6% coupons, experiencing the greatest spread widening given the uptick in supply.

Despite the intra-quarter rate volatility, Agency RMBS continued to trade within the relatively narrow spread range that has emerged over the course of the last several quarters.

For current coupon Agency RMBS, that trading range has evolved to approximately 140 to 160 basis points to a blend of 5- and 10-year Treasury hedges.

Using a similar combination of swap

hedges, that range has evolved to approximately 170 to 190 basis points.

At quarter end, Agency RMBS spreads to Treasuries and swaps were approximately 150 and 180 basis points, respectively, squarely in the middle of these recent ranges.

We view this range-bound trading behavior as a positive development for Agency RMBS.

Economic data released in July has continued to be supportive of a more accommodative Fed monetary policy stance.

The shift in Fed policy will likely occur over the next several months and start a new, more favorable monetary policy cycle.

Although we may continue to experience bouts of market turbulence in the short term due to evolving monetary policy expectations, political uncertainty and geopolitical risks, we believe AGNC is well positioned for this environment.

Our active management strategy, core focus on high-quality Agency RMBS assets, attractive funding sources, and strong liquidity position should allow us not only to withstand episodes of volatility but also to take advantage of attractive investment opportunities as they arise.

The moderate spread widening that occurred during the second quarter drove AGNC’s total comprehensive loss of $(0.13) per diluted common share and economic loss of -0.9% on tangible common equity for the quarter, comprised of $0.36 dividends declared per common share and a $(0.44) decrease in tangible net book value per common share.

For the first two quarters of 2024, AGNC had total comprehensive income of $0.33 per diluted common share and generated an economic return of 4.8%, comprised of $0.72 dividends per common share and a $(0.30) decrease in tangible net book value per common share.

During the first two quarters, we maintained a significant interest rate hedge position, which covered 98% of the outstanding balance of our Investment Securities Repo, TBA position and other debt as of the end of the second quarter.

“At risk” leverage increased modestly for the second quarter to 7.4x tangible stockholders’ equity as of the end of the quarter from 7.1x as of March 31, 2024.

At the same time, our unencumbered cash and Agency RMBS was largely unchanged at the end of the second quarter from the first quarter at $5.3 billion, or 65% of our tangible stockholders' equity.

The weighted average coupon on our fixed-rate Agency RMBS and TBA securities increased to 4.95% as of the end of the second quarter, from 4.86% as of the first quarter, as we continued to shift a larger share of our asset portfolio toward higher coupon, high-quality specified pools.

Consistent with the increase in interest rates, the average projected life CPR for our portfolio at quarter-end decreased 120 basis points to 9.2%.

Seasonal factors drove an increase in our actual CPRs for the quarter to an average of 7.1%, up from 5.7% for the prior quarter.

Net spread and dollar roll income per diluted common share (a non-GAAP measure) totaled $0.53 for the second quarter, a decline of 5 cents per share from the first quarter of $0.58 per share.

This decline was primarily due to higher swap costs resulting from the replacement of maturing interest rate swaps and an overall increase in our interest rate swap position, which more than offset the increase in the average asset yield on our portfolio.

During the first two quarters, we utilized our At-the-Market offering program (“ATM”) to opportunistically create incremental value for existing stockholders through book value and earnings accretion.

In the first and second quarters, we issued $241 million and $434 million of common equity, respectively, at significant price-to-book premiums and invested those proceeds in attractively priced assets.

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

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31, 2023 Mar.

31, 2024 Mar.

31, 2024 June 30, 2024 June 30, 2024

June 30, 2024

Target Federal Funds Rate:

Target Federal Funds Rate - Upper Band

5.00% 5.25% 5.50% 5.50% 5.50% — bps

SOFR Rate 4.87% 5.09% 5.31% 5.38% 5.34% -4 bps

5.25% 5.50% 5.50% 5.50% 5.50% — bps — bps

SOFR Rate 5.09% 5.31% 5.38% 5.34% 5.33% -1 bps -5 bps

SOFR Interest Rate Swap Rate:

4.06% 4.82% 4.97% 4.07% 4.55% +48 bps

3.34% 3.94% 4.38% 3.53% 3.98% +45 bps

3.17% 3.58% 4.27% 3.47% 3.84% +37 bps

2.93% 3.20% 4.01% 3.32% 3.62% +30 bps

4.82% 4.97% 4.07% 4.55% 4.61% +6 bps +54 bps

3.94% 4.38% 3.53% 3.98% 4.10% +12 bps +57 bps

3.58% 4.27% 3.47% 3.84% 3.98% +14 bps +51 bps

3.20% 4.01% 3.32% 3.62% 3.76% +14 bps +44 bps

Treasury Security Rate:

4.03% 4.90% 5.05% 4.25% 4.62% +37 bps

3.58% 4.16% 4.61% 3.85% 4.21% +36 bps

3.47% 3.84% 4.57% 3.88% 4.20% +32 bps

3.65% 3.86% 4.70% 4.03% 4.34% +31 bps

4.90% 5.05% 4.25% 4.62% 4.76% +14 bps +51 bps

4.16% 4.61% 3.85% 4.21% 4.38% +17 bps +53 bps

3.84% 4.57% 3.88% 4.20% 4.40% +20 bps +52 bps

3.86% 4.70% 4.03% 4.34% 4.56% +22 bps +53 bps

30-Year Fixed Rate Agency Price:

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

Mortgage Rate/Credit Spread Mar.

31, 2023 June 30, 2023 Sept.

Mortgage Rate/Credit Spread June 30, 2023 Sept.

30, 2023 Dec.

31, 2023 Mar.

31, 2024 Mar.

31, 2024 June 30, 2024 June 30, 2024

June 30, 2024

Mortgage Rate:

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Treasury Spread 163 177 139 139 149 +10 +10

30-Year Agency Current Coupon Yield 5.05% 5.63% 6.36% 5.25% 5.60% +35 bps

30-Year Mortgage Rate 6.40% 6.78% 7.41% 6.56% 6.74% +18 bps

30-Year Agency Current Coupon Yield 5.63% 6.36% 5.25% 5.60% 5.87% +27 bps +62 bps

30-Year Mortgage Rate 6.78% 7.41% 6.56% 6.74% 6.94% +20 bps +38 bps

Credit Spread (in bps):

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FINANCIAL CONDITION

As of March 31, 2024 and December 31, 2023, our investment portfolio totaled $63.3 billion and $60.2 billion, respectively, consisting of:

As of June 30, 2024 and December 31, 2023, our investment portfolio totaled $66.0 billion and $60.2 billion, respectively, consisting of:

$59.7 billion and $53.8 billion Agency RMBS, at fair value, respectively;

$5.3 billion and $5.4 billion net TBA securities, at fair value, respectively;

$1.0 billion CRT, non-Agency RMBS and CMBS, at fair value;

$0.9 billion and $1.0 billion CRT, non-Agency RMBS and CMBS, at fair value, respectively;

and other mortgage credit investments of $60 million and $44 million, respectively, which we account for under the equity method of accounting.

The following table is a summary of our investment securities (including TBA securities) as of March 31, 2024 and December 31, 2023 (dollars in millions):

March 31, 2024 December 31, 2023

The following table is a summary of our investment securities (including TBA securities) as of June 30, 2024 and December 31, 2023 (dollars in millions):

June 30, 2024 December 31, 2023

Investment Securities (Includes TBAs) 1

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Total CMO Agency RMBS 3

177 163 3.30 % — % 194 181 3.28 % 1 %

Total Agency RMBS and TBA securities 3

68,006 65,040 4.94 % 99 % 61,225 59,148 4.83 % 98 %

Non-Agency RMBS 1,3

17 14 5.31 % — % 43 34 4.61 % — %

CMBS 304 280 7.28 % — % 303 273 7.27 % — %

267 243 6.69 % — % 303 273 7.27 % — %

CRT 627 683 11.04 % 1 % 682 723 10.45 % 1 %

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$ 68,917 $ 65,980 5.01 % 100 % $ 62,253 $ 60,178 4.90 % 100 %

Table excludes other mortgage credit investments of $59 million and $44 million as of March 31, 2024 and December 31, 2023, respectively.

________________________________

Table excludes other mortgage credit investments of $60 million and $44 million as of June 30, 2024 and December 31, 2023, respectively.

TBA securities are presented net of long and short positions.

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

Average coupon excludes interest-only and principal-only securities.

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

As of March 31, 2024 and December 31, 2023, our TBA securities had a net carrying value of $43 million and $66 million, respectively, reported in derivative assets/(liabilities) on our accompanying consolidated balance sheets.

As of June 30, 2024 and December 31, 2023, our TBA securities had a net carrying value of $30 million and $66 million, respectively, reported in derivative assets/(liabilities) on our accompanying consolidated balance sheets.

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

As of March 31, 2024 and December 31, 2023, the weighted average yield on our investment securities (excluding TBA and forward settling securities) was 4.52% and 4.41%, respectively.

The following tables summarize certain characteristics of our fixed rate Agency RMBS portfolio, inclusive of TBA securities, as of March 31, 2024 and December 31, 2023 (dollars in millions):

March 31, 2024

As of June 30, 2024 and December 31, 2023, the weighted average yield on our investment securities (excluding TBA and forward settling securities) was 4.70% and 4.41%, respectively.

The following tables summarize certain characteristics of our fixed rate Agency RMBS portfolio, inclusive of TBA securities, as of June 30, 2024 and December 31, 2023 (dollars in millions):

June 30, 2024

Includes Net TBA Position Excludes Net TBA Position

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

As of March 31, 2024, lower balance specified pools had a weighted average original loan balance of $188,000 and $153,000 for 15-year and 30-year securities, respectively, and HARP pools had a weighted average original LTV of 128% and 141% for 15-year and 30-year securities, respectively.

Portfolio yield incorporates a projected life CPR based on forward rate assumptions as of March 31, 2024.

As of June 30, 2024, lower balance specified pools had a weighted average original loan balance of $188,000 and $153,000 for 15-year and 30-year securities, respectively, and HARP pools had a weighted average original LTV of 128% and 141% for 15-year and 30-year securities, respectively.

Portfolio yield incorporates a projected life CPR based on forward rate assumptions as of June 30, 2024.

December 31, 2023

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

For additional details regarding our CRT and non-Agency securities, including credit ratings, as of March 31, 2024 and December 31, 2023, please refer to Note 3 of our Consolidated Financial Statements in this Form 10-Q.

For additional details regarding our CRT and non-Agency securities, including credit ratings, as of June 30, 2024 and December 31, 2023, please refer to Note 3 of our Consolidated Financial Statements in this Form 10-Q.

RESULTS OF OPERATIONS

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

The tables below present our condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023 and condensed consolidated statements of comprehensive income and key statistics for the three months ended March 31, 2024 and 2023 (in millions, except per share amounts):

The tables below present our condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023 and condensed consolidated statements of comprehensive income and key statistics for the three and six months ended June 30, 2024 (in millions, except per share amounts):

Balance Sheet Data 2024

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Three Months Ended

Six Months Ended

Statement of Comprehensive Income Data (Unaudited)

2024 2023 2024 2023

Interest income $ 695 $ 457 $ 1,337 $ 808

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Three Months Ended

Six Months Ended

Other Data (Unaudited) * 2024 2023 2024 2023

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Average tangible net book value "at risk" leverage 5

7.2:1 7.2:1 7.2:1 7.4:1

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

7.4:1 7.2:1 7.4:1 7.2:1

Economic return on tangible common equity 7

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Economic Interest Income and Asset Yields

The following table summarizes our economic interest income (a non-GAAP measure) for the three months ended March 31, 2024 and 2023, which includes the combination of interest income (a GAAP measure) on our holdings reported as investment securities on our consolidated balance sheets, adjusted to exclude estimated "catch-up" premium amortization adjustments for the cumulative effect from prior reporting periods due to changes in our CPR forecast, and implied interest income on our TBA securities (dollars in millions):

The following table summarizes our economic interest income (a non-GAAP measure) for the three and six months ended June 30, 2024 and 2023, which includes the combination of interest income (a GAAP measure) on our holdings reported as investment securities on our consolidated balance sheets, adjusted to exclude estimated "catch-up" premium amortization adjustments for the cumulative effect from prior reporting periods due to changes in our CPR forecast, and implied interest income on our TBA securities (dollars in millions):

Three Months Ended

Amount Yield Amount Yield

Six Months Ended

2024 2023 2024 2023

Amount Yield Amount Yield Amount Yield Amount Yield

Interest income:

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

The following table includes a summary of the estimated impact of each of these elements on our economic interest income for the three months ended March 31, 2024 compared to the prior year period (in millions):

The following table includes a summary of the estimated impact of each of these elements on our economic interest income for the three and six months ended June 30, 2024 compared to the prior year period (in millions):

Impact of Changes in the Principal Elements Impacting Economic Interest Income

Three Months Ended March 31, 2024 vs.

March 31, 2023

Periods ended June 30, 2024 vs.

June 30, 2023

Due to Change in Average

Three months ended:

Total Increase /

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Economic interest income, excluding "catch-up" amortization (non-GAAP measure) $ 199 $ 53 $ 146

Our average investment portfolio (at cost), inclusive of TBAs, decreased 4% for the three months ended March 31, 2024.

The decline was primarily due to operating with lower "at risk" leverage, partly offset by a modest increase in our average stockholders' equity.

The average yield on our investment portfolio, including TBA implied asset yields and excluding "catch-up" premium amortization, increased 66 basis points for the three months ended March 31, 2024 largely as a result of shifting

our asset portfolio away from TBA and lower coupon holdings toward a greater share of higher coupon, high-quality specified pools.

Due to Change in Average

Six months ended:

Total Increase /

(Decrease) Portfolio

Interest Income (GAAP measure) $ 529 $ 157 $ 372

Estimated "catch-up" premium amortization due to change in CPR forecast (82) — (82)

Interest income, excluding "catch-up" premium amortization 447 157 290

TBA dollar roll income - implied interest income (172) (186) 14

Economic interest income, excluding "catch-up" amortization (non-GAAP measure) $ 275 $ (29) $ 304

Our average investment portfolio (at cost), inclusive of TBAs, increased 12% and 3% for the three and six months ended June 30, 2024, respectively, primarily due to an increase in our capital base.

The average yield on our investment portfolio, including TBA implied asset yields and excluding "catch-up" premium amortization, increased 80 and 73 basis points for the three and six months ended June 30, 2024, respectively, largely as a result of shifting our asset portfolio from TBA and lower coupon holdings toward a greater share of higher coupon, specified pools.

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

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Amount Ending

June 30, 2024 $ 50,784 $ 55,507 $ 54,682 $ 6,805 $ 5,318 7.2:1 7.4:1

March 31, 2024 $ 48,730 $ 49,894 $ 48,216 $ 6,190 $ 8,405 7.0:1 7.1:1

December 31, 2023 $ 47,548 $ 52,643 $ 48,959 $ 4,993 $ 5,288 7.4:1 7.0:1

September 30, 2023 $ 47,073 $ 52,888 $ 51,931 $ 7,340 $ 2,407 7.5:1 7.9:1

June 30, 2023 $ 41,546 $ 42,408 $ 40,962 $ 9,985 $ 10,320 7.2:1 7.2:1

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

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Economic Interest Expense and Aggregate Cost of Funds

The following table summarizes our economic interest expense and aggregate cost of funds (non-GAAP measures) for the three months ended March 31, 2024 and 2023 (dollars in millions), which includes the combination of interest expense on repurchase agreements and other debt used to fund acquisitions of investment securities (GAAP measure), implied financing cost of our TBA securities and interest rate swap periodic income:

The following table summarizes our economic interest expense and aggregate cost of funds (non-GAAP measures) for the three and six months ended June 30, 2024 and 2023 (dollars in millions), which includes the combination of interest expense on repurchase agreements and other debt used to fund acquisitions of investment securities (GAAP measure), implied financing cost of our TBA securities and interest rate swap periodic income:

Three Months Ended

Six Months Ended

2024 2023 2024 2023

Economic Interest Expense and Aggregate Cost of Funds 1

Amount Cost of Funds Amount Cost of Funds

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

Investment securities repurchase agreement and other debt - interest expense (GAAP measure) $ 698 5.44 % $ 526 5.01 % $ 1,370 5.44 % $ 975 4.77 %

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

The following table includes a summary of the estimated impact of these elements on our economic interest expense for the three months ended March 31, 2024 compared to the prior year period (in millions):

The following table includes a summary of the estimated impact of these elements on our economic interest expense for the three and six months ended June 30, 2024 compared to the prior year period (in millions):

Impact of Changes in the Principal Elements of Economic Interest Expense

Three Months Ended March 31, 2024 vs.

March 31, 2023

Periods ended June 30, 2024 vs.

June 30, 2023

Due to Change in Average

Three months ended:

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

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Total change in economic interest expense $ 210 $ 115 $ 95

Our average mortgage borrowings, inclusive of TBAs, decreased 5% for the three months ended March 31, 2024, consistent with the decline in our asset balance and lower operating leverage.

The average interest rate on our mortgage borrowings, excluding the impact interest rate swap period income, increased 92 basis points for the three months ended March 31, 2024 due to higher short-term interest rates.

Interest rate swap periodic income increased for the three months ended March 31, 2024 due to higher receive rates on our pay-fixed swaps, partly offset by modestly higher pay rates and a smaller swap balance.

The following is a summary of our average interest rate swaps outstanding and the related average swap pay and receive rates for the three months ended March 31, 2024 and 2023 (dollars in millions).

Due to Change in Average

Six months ended:

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

Investment securities repurchase agreement and other debt interest expense $ 395 $ 221 $ 174

TBA dollar roll income - implied interest benefit/expense (153) (172) 19

Interest rate swap periodic income/cost 41 82 (41)

Total change in economic interest benefit/expense $ 283 $ 131 $ 152

Our average mortgage borrowings, inclusive of TBAs, increased 12% and 3% for the three and six months ended June 30, 2024, respectively, consistent with the increase in our investment portfolio.

The average interest rate on our mortgage borrowings, excluding the impact interest rate swap period income, increased 41 and 68 basis points for the three and six months ended June 30, 2024, respectively, due to higher short-term interest rates.

Interest rate swap periodic income declined for the three and six months ended June 30, 2024 primarily due to higher pay rates on our pay-fixed swaps, which were partly offset by higher receive rates.

The following is a summary of our average interest rate swaps outstanding and their average pay and receive rates for the three and six months ended June 30, 2024 (dollars in millions).

Amounts exclude forward starting swaps not yet in effect.

Three Months Ended

Six Months Ended

Average Ratio of Interest Rate Swaps (Excluding Forward Starting Swaps) to Mortgage Borrowings Outstanding 2024 2023 2024 2023

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Ratio of average interest rate swaps to mortgage borrowings outstanding

79 % 94 % 79 % 89 %

Average interest rate swap pay-fixed rate (excluding forward starting swaps) 1.18 % 0.44 % 1.01 % 0.45 %

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(4.32) % (4.63) % (4.57) % (4.36) %

For the three months ended March 31, 2024 and 2023, we had an average forward starting net pay and (receive) fixed rate swap balance of $(0.4) billion and $101 million, respectively.

For the three and six months ended June 30, 2024, we had an average forward starting net pay-fixed rate swap balance of $1.8 billion and $0.7 billion, respectively.

For the three and six months ended June 30, 2023, we had an average forward starting net pay and (receive) fixed rate swap balance of $(12) million and $45 million, respectively.

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

Net Interest Spread

The following table presents a summary of our net interest spread (including the impact of TBA dollar roll income, interest rate swaps and excluding "catch-up" premium amortization) for the three months ended March 31, 2024 and 2023:

Three Months Ended

Three Months Ended June 30,

Six Months Ended

Investment and TBA Securities - Net Interest Spread 2024 2023 2024 2023

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Net Spread and Dollar Roll Income

The following table presents a reconciliation of net spread and dollar roll income available to common stockholders (non-GAAP measure) from comprehensive income (loss) available (attributable) to common stockholders (the most comparable GAAP financial measure) for the three months ended March 31, 2024 and 2023 (dollars in millions):

Three Months Ended

The following table presents a reconciliation of net spread and dollar roll income available to common stockholders (non-GAAP measure) from comprehensive income (loss) available (attributable) to common stockholders (the most comparable GAAP financial measure) for the three and six months ended June 30, 2024 and 2023 (dollars in millions):

Three Months Ended June 30,

Six Months Ended

2024 2023 2024 2023

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

$ (98) $ 190 $ 237 $ 151

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

Realized loss on sale of investment securities, net

115 255 206 336

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

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

261 363 732 (231)

Gain on derivative instruments and other securities, net

(355) (996) (1,414) (452)

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

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

18 65 95 (77)

Other adjustments:

Estimated "catch-up" premium amortization cost (benefit) due to change in CPR forecast 1

(14) (11) (24) 58

TBA dollar roll income, net 2

Interest rate swap periodic income, net 2

Interest rate swap periodic income (cost), net 2

494 567 1,030 1,071

Other interest income (expense), net 2,3

(32) (35) (67) (68)

Net spread and dollar roll income available to common stockholders (non-GAAP measure) 4

394 404 800 812

Weighted average number of common shares outstanding - basic 740.0 598.8 721.1 589.1

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Gain (Loss) on Investment Securities, Net

The following table is a summary of our net gain (loss) on investment securities for the three months ended March 31, 2024 and 2023 (in millions):

Three Months Ended

The following table is a summary of our net gain (loss) on investment securities for the three and six months ended June 30, 2024 and 2023 (in millions):

Three Months Ended June 30,

Six Months Ended

Gain (Loss) on Investment Securities, Net 1

2024 2023 2024 2023

Loss on sale of investment securities, net $ (115) $ (255) $ (206) $ (336)

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

(261) (363) (732) 231

Unrealized (loss) gain on investment securities measured at fair value through other comprehensive income, net (18) (65) (95) 77

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

The following table is a summary of our gain (loss) on derivative instruments and other securities, net for the three months ended March 31, 2024 and 2023 (in millions):

Three Months Ended

The following table is a summary of our gain (loss) on derivative instruments and other securities, net for the three and six months ended June 30, 2024 and 2023 (in millions):

Three Months Ended June 30,

Six Months Ended

2024 2023 2024 2023

TBA securities, dollar roll income $ 5 $ 6 $ 5 $ 24

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Other interest income (expense), net

(32) (35) (67) (68)

Other gain (loss), net — (11) 2 (13)

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

Our tangible net book value "at risk" leverage ratio was 7.1x and 7.0x as of March 31, 2024 and December 31, 2023, respectively.

The following table includes a summary of our mortgage borrowings outstanding as of March 31, 2024 and December 31, 2023 (dollars in millions).

Our tangible net book value "at risk" leverage ratio was 7.4x and 7.0x as of June 30, 2024 and December 31, 2023, respectively.

The following table includes a summary of our mortgage borrowings outstanding as of June 30, 2024 and December 31, 2023 (dollars in millions).

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Mortgage Borrowings Amount % Amount %

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E xcludes U.S.

Treasury repurchase agreements totaling $1.8 billion and $1.5 billion as of March 31, 2024 and December 31, 2023, respectively.

As of March 31, 2024 and December 31, 2023, 42% and 43%, respectively, of our total repurchase agreements, including 43% and 45% or our investment securities repurchase agreements, respectively, were funded through the Fixed Income Clearing Corporation's GCF Repo service.

Treasury repurchase agreements totaling $2.3 billion and $1.5 billion as of June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024 and December 31, 2023, 42% and 43%, respectively, of our total repurchase agreements, including 44% and 45% or our investment securities repurchase agreements, respectively, were funded through the Fixed Income Clearing Corporation's GCF Repo service.

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

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

As of March 31, 2024, we had met all our margin requirements.

As of June 30, 2024, we had met all our margin requirements.

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

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

As of March 31, 2024, approximately 13% of our investment portfolio consisted of TBA securities, which are not subject to monthly principal pay-downs.

As of June 30, 2024, approximately 8% of our investment portfolio consisted of TBA securities, which are not subject to monthly principal pay-downs.

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

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

During the three months ended March 31, 2024, haircuts on our repo funding arrangements remained stable.

As of March 31, 2024, the weighted average haircut on our repurchase agreements was approximately 3.0% of the value of our collateral, compared to 3.1% as of December 31, 2023.

During the six months ended June 30, 2024, haircuts on our repo funding arrangements remained stable.

As of June 30, 2024, the weighted average haircut on our repurchase agreements was approximately 3.0% of the value of our collateral, compared to 3.1% as of December 31, 2023.

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

As of March 31, 2024, our unencumbered assets totaled approximately $5.4 billion, or 68% of tangible equity, consisting of $5.4 billion of unencumbered cash and Agency RMBS and $0.1 billion of unencumbered credit assets.

As of June 30, 2024, our unencumbered assets totaled approximately $5.3 billion, or 66% of tangible equity, consisting of $5.3 billion of unencumbered cash and Agency RMBS and $0.1 billion of unencumbered credit assets.

This compares to $5.2 billion of unencumbered assets, or 67% of tangible equity, as of December 31, 2023, consisting of $5.1 billion of unencumbered cash and Agency RMBS and $0.1 billion of unencumbered credit assets.

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

As of March 31, 2024, our maximum amount at risk (or the excess/shortfall of the value of collateral pledged/received over our repurchase agreement liabilities/reverse repurchase agreement receivables) with any of our repurchase agreement counterparties, excluding the FICC, was less than 3% of our tangible stockholders' equity, with our top five repo counterparties, excluding the FICC, representing approximately 6% of our tangible stockholders' equity.

As of March 31, 2024, 5% of our tangible stockholder's equity was at risk with the FICC.

Excluding central clearing exchanges, as of March 31, 2024, our amount at risk with any counterparty to our derivative agreements was less than 1% of our stockholders' equity.

As of June 30, 2024, our maximum amount at risk (or the excess/shortfall of the value of collateral pledged/received over our repurchase agreement liabilities/reverse repurchase agreement receivables) with any of our repurchase agreement counterparties, excluding the FICC, was 2% of our tangible stockholders' equity, with our top five repo counterparties, excluding the FICC, representing less than 6% of our tangible stockholders' equity.

As of June 30, 2024, 6% of our tangible stockholder's equity was at risk with the FICC.

Excluding central clearing exchanges, as of June 30, 2024, our amount at risk with any counterparty to our derivative agreements was less than 1% of our stockholders' equity.

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

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OFF-BALANCE SHEET ARRANGEMENTS

As of March 31, 2024, we did not maintain relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance, or special purpose or variable interest entities, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes.

Additionally, as of March 31, 2024, we had not guaranteed obligations of unconsolidated entities or entered into a commitment or intent to provide funding to such entities.

As of June 30, 2024, we did not maintain relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance, or special purpose or variable interest entities, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes.

Additionally, as of June 30, 2024, we had not guaranteed obligations of unconsolidated entities or entered into a commitment or intent to provide funding to such entities.

FORWARD-LOOKING STATEMENTS

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We caution readers not to place undue reliance on our forward-looking statements.

WEBSITE AND SOCIAL MEDIA DISCLOSURE

We use our website (www.AGNC.com) and AGNC’s LinkedIn (www.linkedin.com/company/agnc-investment-corp/) and X (www.x.com/AGNCInvestment) accounts to distribute information about the Company.

Investors should monitor these channels in addition to our press releases, filings with the U.S.

Securities and Exchange Commission (“SEC”), public conference calls and webcasts, as information posted through them may be deemed material.

Our website, alerts and social media channels are not incorporated by reference into, and are not a part of, this or any other report filed with or furnished to the SEC.

Investors and others may automatically receive emails and information about AGNC when they sign up for investor alerts on the "Investor Resources" tab of the Investor Relations section of our website.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis