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Item 2. Management’s Discussion and Analysis

2026-07-31 compared with 2026-05-04 · 158 added, 119 removed, 558 unchanged (33% 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, 2026.

Our MD&A is presented in the following sections:

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Market Trends

Agency RMBS performance in the first quarter of 2026 was driven by two divergent macroeconomic themes.

In January and February, the Administration’s focus on reducing interest rate volatility, maintaining mortgage spread stability, and improving housing affordability drove strong performance across the broader fixed income complex and Agency RMBS specifically.

This favorable investment environment was, however, quickly eclipsed in March by the war in Iran and the potential for more widespread conflict in the Middle East.

The associated increase in volatility and negative shift in investor sentiment caused Agency RMBS spreads to benchmark rates to widen, and, as a result, AGNC’s economic return on tangible net book value per common share in the first quarter was -1.6%.

1 Despite the quarter-over-quarter spread widening, Agency RMBS generated a positive excess return relative to both U.S.

Treasuries and investment grade corporate bonds in the first quarter, demonstrating the diversification benefit of this high credit quality, fixed income asset class.

We continue to believe that many of the positive catalysts for Agency RMBS performance observed at the beginning of the year remain intact, with several improving further during the first quarter.

First, mortgage spreads to benchmark rates widened significantly in March, and these wider spread levels provide investors with compelling value on both an absolute and relative basis.

Second, supply-demand technicals have improved as a result of higher mortgage rates, increased bond fund inflows, and proposed regulatory capital changes.

Third, the higher rate environment also increases the likelihood of actions by the Administration to stabilize or reduce mortgage spreads as a means to mitigate housing affordability issues.

Finally, although

interest rate volatility has increased and future Federal Reserve monetary policy actions have become somewhat more uncertain, we believe that, with some form of resolution or easing of tensions in the Middle East, these factors could quickly revert to positive catalysts for Agency RMBS.

As a result, our longer-term outlook for Agency RMBS remains constructive, despite near-term challenges associated with heightened geopolitical and macroeconomic risks.

The investment environment during the second quarter of 2026 was shaped by heightened geopolitical uncertainty as escalating rhetoric and hostilities between the United States and Iran dominated financial market performance.

With ship traffic through the Strait of Hormuz severely constrained, elevated energy prices and supply chain disruptions became the primary macroeconomic concerns.

These developments caused Treasury yields to increase, the yield curve to flatten, and market expectations for Federal Reserve policy to shift from anticipated rate cuts toward potential rate hikes by year-end.

Despite this challenging backdrop, Agency RMBS generated a positive excess return relative to U.S.

Treasuries for the fifth consecutive quarter, contributing to AGNC's economic return on tangible common equity per share of 6.7%, comprised of our monthly dividend and the improvement in tangible book value.

Agency RMBS Performance Drivers

During the first quarter, Agency RMBS performance varied meaningfully by coupon and hedge type.

Lower coupon Agency RMBS significantly outperformed higher coupon Agency RMBS due to strong index demand from money managers as a result of outsized bond fund inflows.

Specifically, spreads of lower coupon Agency RMBS to U.S.

Treasuries tightened about 10 basis points during the quarter, while spreads of higher coupon Agency RMBS to U.S.

Treasuries widened about 5 basis points on average.

Agency RMBS performance was also materially impacted by hedge type as U.S.

Treasury hedges outperformed swap hedges during the quarter.

Ten-year swap spreads to U.S.

Treasuries, for example, tightened by almost 10 basis points.

As a result, an Agency RMBS position hedged with a 10-year pay-fixed swap experienced spread widening of about 10 basis points when compared to the same position hedged with a 10-year Treasury.

This tightening in swap spreads was largely driven by increased demand for swap hedges amid heightened Middle East uncertainty.

In aggregate, Agency RMBS in the second quarter outperformed both Treasury and swap-based hedges, with performance varying meaningfully by coupon and hedge type.

Higher-coupon and production-coupon Agency RMBS outperformed lower-coupon securities as rising interest rates reduced both expected supply and prepayment concerns, reversing the coupon performance observed in the first quarter.

Agency RMBS hedged with interest rate swaps also outperformed Treasury-hedged positions.

At quarter-end, the spread differential between a current-coupon mortgage-backed security and a blend of hedges was approximately 145 basis points across the swap curve and 115 basis points across the Treasury curve, compared to approximately 170 basis points and 135 basis points, respectively, as of March 31, 2026.

At June 30, 2026 spread levels, Agency RMBS were trading near the midpoint of our expected range.

Market Outlook

Looking forward, our outlook for Agency RMBS remains constructive.

With primary mortgage rates remaining well above 6.0%, net new Agency RMBS supply is estimated to be approximately $150 billion this year, materially below expectations at the beginning of the year.

Elevated mortgage rates have also slowed prepayment activity, reducing expected Federal Reserve portfolio runoff.

At the same time, demand for Agency RMBS has remained strong, supported by more than $400 billion of bond fund inflows during the first six months of the year and continued demand from banks, foreign investors, and REITs.

Agency RMBS spreads remain wide by historical standards despite improving supply-demand fundamentals, while corporate bond spreads remain near historic tights despite record issuance and rising credit concerns.

Accordingly, we believe Agency RMBS continue to offer compelling relative value.

Once geopolitical and monetary policy uncertainty subsides, these constructive dynamics should become more apparent and, over time, support favorable Agency RMBS performance.

Portfolio and Summary Financial Highlights

For the first quarter, AGNC generated a total comprehensive loss of $(0.18) per diluted common share and an economic return of -1.6% on tangible common equity, comprised of $0.36 in dividends per common share declared during the first quarter and a $(0.50) decrease in tangible net book value per common share.

This compares to total comprehensive income of $0.89 per diluted common share and an economic return of 11.6% for the fourth quarter of 2025, comprised of $0.36 in dividends and a $0.60 increase in tangible net book value per common share.

Net spread and dollar roll income (a non-GAAP measure) was $0.42 per diluted common share for the first quarter, compared to $0.35 per diluted common share for the fourth quarter.

The increase was largely due to a 25-basis point increase in our net interest spread, which was driven by the combination of a greater allocation to interest rate swaps in our hedge portfolio, lower repo funding costs, more favorable TBA implied financing levels, and a modest increase in the yield on our asset portfolio.

Quarter-over-quarter results also benefited from reduced compensation expense, as our fourth quarter results included year-end incentive compensation accrual adjustments.

Our investment portfolio totaled $94.7 billion as of March 31, 2026, compared to $94.8 billion as of December 31, 2025.

During the first quarter we rotated a portion of our portfolio down in coupon and purchased $1.7 billion of predominately low coupon specified pools.

Consistent with these portfolio changes, the weighted average coupon on our portfolio, inclusive of TBAs, declined to 4.95% from 5.12% as of December 31, 2025 and the portion of our fixed-rate portfolio with favorable prepayment attributes 2 increased slightly to 77% as of March 31, 2026, compared to 76% as of December 31, 2025.

The average projected life Constant Prepayment Rate ("CPR") for our portfolio increased to 10.3% as of March 31, 2026, from 9.6% as of December 31, 2025, largely due to prepayment model updates implemented in the first quarter and portfolio composition changes, partly offset by higher mortgage rates.

Actual CPRs averaged 13.2% for the first quarter, compared to 9.7% for the fourth quarter.

As of March 31, 2026, our "at risk" leverage was 7.4x tangible equity, compared to 7.2x as of December 31, 2025, while average leverage for the quarter was unchanged at 7.4x.

We ended the quarter with $7.0 billion of unencumbered cash and Agency RMBS, representing 60% of tangible equity, compared to $7.6 billion and 64%, respectively, as of December 31, 2025.

As of March 31, 2026, our hedge ratio was 83%, reflecting the level of interest rate swap and U.S.

Treasury hedges (excluding option-based hedges) relative to total funding liabilities, compared to 77% as of December 31, 2025.

The notional balance of our interest rate swaps increased to $76.5 billion, representing 89% of our funding liabilities as of March 31, 2026, compared to $64.6 billion and 75%, respectively, as of December 31, 2025.

Our duration gap, which measures the estimated difference between the interest rate sensitivity of our assets and liabilities, including hedges, extended to 0.7 years as of quarter-end, compared to 0.4 years as of December 31, 2025, which we believe provides additional prepayment protection in a declining rate scenario.

AGNC generated total comprehensive income of $0.52 per diluted common share and an economic return on tangible common equity per share of 6.7% for the second quarter, consisting of $0.36 of dividends declared per common share during the second quarter and a $0.20 increase in tangible net book value per common share.

This compares to a total comprehensive loss of $(0.18) per diluted common share and an economic loss of -1.6% per common share for the first quarter of 2026.

Net spread and dollar roll income (a non-GAAP measure) was $0.40 per diluted common share, compared to $0.42 in the prior quarter.

The decrease primarily reflects a 6-basis point decline in net interest spread for the second quarter driven by lower asset yields associated with portfolio repositioning, partly offset by modestly lower funding costs.

At June 30, 2026, our investment portfolio, inclusive of TBAs, totaled $97.2 billion, compared to $94.7 billion as of March 31, 2026.

During the second quarter, we added approximately $2.2 billion of primarily intermediate-coupon specified pools and repositioned a portion of the portfolio from lower-coupon into higher-coupon holdings.

As a result, the weighted average coupon at quarter-end increased to 5.04% from 4.95% as of March 31, 2026, while the portion of our fixed-rate portfolio with favorable prepayment attributes (“specified pools”) increased to 79% from 77% as of March 31, 2026.

The average projected life Constant Prepayment Rate ("CPR") for our portfolio declined to 8.6% at quarter-end from 10.3% as of March 31, 2026, primarily reflecting coupon and TBA versus specified pool repositioning.

Actual CPRs averaged 13.0% during the quarter, largely unchanged from 13.2% in the prior quarter.

At June 30, 2026, "at-risk" leverage was 7.4x tangible equity, unchanged from March 31, 2026, while average leverage for the quarter also remained at 7.4x, unchanged from the first quarter.

AGNC ended the quarter with $7.5 billion of unencumbered cash and Agency RMBS, representing 62% of tangible equity, compared to $7.0 billion and 60%, respectively, at March 31, 2026.

At June 30, 2026, our hedge ratio was 82%, reflecting the level of interest rate swap and U.S.

Treasury hedges (excluding option-based hedges) relative to total funding liabilities, compared to 83% as of March 31, 2026.

The notional balance of our interest rate swaps decreased to $73.8 billion, representing 83% of our funding liabilities as of June 30, 2026, compared to $76.5 billion and 89%, respectively, as of March 31, 2026.

Our duration gap, which measures the estimated difference between the interest rate sensitivity of our assets and liabilities, including hedges, was 0.7 years as of quarter-end, unchanged from March 31, 2026.

We continued to favor a positive duration gap given the current level of interest rates, the convexity profile of our portfolio, and the additional prepayment protection it provides in a declining interest rate environment.

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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Economic return represents the sum of the change in tangible net book value per common share and dividends declared per share of common stock during the period over beginning tangible net book value per common share.

Agency RMBS with favorable prepayment attributes include:

(i) specified 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 and (ii) other pools backed by loans with credit, loan balances, geographies, occupancy types, and other characteristics that exhibit favorable prepayment behavior.

Specified pools include pools backed by loans with characteristics related to loan size, borrower credit profiles, loan-to-value ratios, geographic concentrations, occupancy types, and other characteristics that are expected to result in more favorable prepayment behavior than generic TBA-eligible collateral.

Market Information

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31, 2025 Mar.

31, 2026 Mar.

31, 2026 June 30, 2026 June 30, 2026

June 30, 2026

Target Federal Funds Rate:

Target Federal Funds Rate - Upper Band

4.50% 4.50% 4.25% 3.75% 3.75% — bps

SOFR Rate 4.41% 4.45% 4.24% 3.87% 3.68% -19 bps

4.50% 4.25% 3.75% 3.75% 3.75% — bps — bps

SOFR Rate 4.45% 4.24% 3.87% 3.68% 3.68% — bps -19 bps

SOFR Interest Rate Swap Rate:

3.72% 3.49% 3.40% 3.31% 3.62% +31 bps

3.65% 3.43% 3.39% 3.46% 3.62% +16 bps

3.76% 3.69% 3.66% 3.80% 3.87% +7 bps

3.79% 3.90% 3.93% 4.17% 4.13% -4 bps

3.49% 3.40% 3.31% 3.62% 4.02% +40 bps +71 bps

3.43% 3.39% 3.46% 3.62% 3.93% +31 bps +47 bps

3.69% 3.66% 3.80% 3.87% 4.05% +18 bps +25 bps

3.90% 3.93% 4.17% 4.13% 4.21% +8 bps +4 bps

Treasury Security Rate:

3.89% 3.72% 3.61% 3.48% 3.80% +32 bps

3.95% 3.80% 3.74% 3.73% 3.94% +21 bps

4.21% 4.23% 4.15% 4.17% 4.32% +15 bps

4.57% 4.78% 4.73% 4.85% 4.91% +6 bps

3.72% 3.61% 3.48% 3.80% 4.18% +38 bps +70 bps

3.80% 3.74% 3.73% 3.94% 4.23% +29 bps +50 bps

4.23% 4.15% 4.17% 4.32% 4.47% +15 bps +30 bps

4.78% 4.73% 4.85% 4.91% 4.95% +4 bps +10 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, 2025 June 30, 2025 Sept.

Mortgage Rate/Credit Spread June 30, 2025 Sept.

30, 2025 Dec.

31, 2025 Mar.

31, 2026 Mar.

31, 2026 June 30, 2026 June 30, 2026

June 30, 2026

Mortgage Rate:

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30-Year Agency Current Coupon Yield to 2/5/10-Year Swap Spread 194 172 152 168 141 -27 -11

30-Year Agency Current Coupon Yield 5.51% 5.48% 5.20% 5.04% 5.38% +34 bps

30-Year Mortgage Rate 6.60% 6.67% 6.32% 6.16% 6.35% +19 bps

30-Year Agency Current Coupon Yield 5.48% 5.20% 5.04% 5.38% 5.41% +3 bps +37 bps

30-Year Mortgage Rate 6.67% 6.32% 6.16% 6.35% 6.45% +10 bps +29 bps

Credit Spread (in bps):

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FINANCIAL CONDITION

As of March 31, 2026 and December 31, 2025, our investment portfolio totaled $94.7 billion and $94.8 billion, respectively, consisting of:

As of June 30, 2026 and December 31, 2025, our investment portfolio totaled $97.2 billion and $94.8 billion, respectively, consisting of:

$86.8 billion and $81.1 billion Agency RMBS, at fair value, respectively;

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and other mortgage credit investments of $70 million and $70 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, 2026 and December 31, 2025 (dollars in millions):

March 31, 2026 December 31, 2025

The following table is a summary of our investment securities (including TBA securities) as of June 30, 2026 and December 31, 2025 (dollars in millions):

June 30, 2026 December 31, 2025

Investment Securities (Includes TBAs) 1

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________________________________

Table excludes other mortgage credit investments of $69 million and $70 million as of March 31, 2026 and December 31, 2025, respectively.

Table excludes other mortgage credit investments of $70 million and $70 million as of June 30, 2026 and December 31, 2025, respectively.

TBA securities are presented net of long and short positions.

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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, 2026 and December 31, 2025, our TBA securities had a net carrying value of $(194) million and $71 million, respectively, reported in derivative assets/(liabilities) on our accompanying consolidated balance sheets.

As of June 30, 2026 and December 31, 2025, our TBA securities had a net carrying value of $52 million and $71 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, 2026 and December 31, 2025, the weighted average yield on our investment securities (excluding TBA and forward settling securities) was 4.93% and 4.93%, respectively.

The following tables summarize certain characteristics of our fixed rate Agency RMBS portfolio, inclusive of TBA securities, as of March 31, 2026 and December 31, 2025 (dollars in millions):

March 31, 2026

As of June 30, 2026 and December 31, 2025, the weighted average yield on our investment securities (excluding TBA and forward settling securities) was 4.91% and 4.93%, respectively.

The following tables summarize certain characteristics of our fixed rate Agency RMBS portfolio, inclusive of TBA securities, as of June 30, 2026 and December 31, 2025 (dollars in millions):

June 30, 2026

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, 2026, lower balance specified pools had a weighted average original loan balance of $181,000 and $143,000 for 15-year and 30-year securities, respectively, and HARP pools had a weighted average original LTV of 128% and 146% for 15-year and 30-year securities, respectively.

Portfolio yield incorporates a projected life CPR based on forward rate assumptions as of March 31, 2026.

Portfolio yield incorporates a projected life CPR based on forward rate assumptions as of June 30, 2026.

December 31, 2025

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See Note 1 of the preceding table for specified pool composition.

As of December 31, 2025, lower balance specified pools had a weighted average original loan balance of $181,000 and $142,000 for 15-year and 30-year securities, respectively, and HARP pools had a weighted average original LTV of 128% and 142% for 15-year and 30-year securities, respectively.

Portfolio yield incorporates a projected life CPR based on forward rate assumptions as of December 31, 2025.

For additional details regarding our CRT and non-Agency securities, including credit ratings, as of March 31, 2026 and December 31, 2025, 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, 2026 and December 31, 2025, please refer to Note 3 of our Consolidated Financial Statements in this Form 10-Q.

RESULTS OF OPERATIONS

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and (iii) include interest rate swap periodic income/cost, TBA dollar roll income and other interest income/expense.

“Net spread and dollar roll income available to common stockholders” includes (i) the components of “economic interest income” and “economic interest expense”, plus (ii) other interest income/expense, and less (iii) total operating expenses and dividends on preferred stock (GAAP measures).

As defined, “Net spread and dollar roll income available to common stockholders” includes (i) the components of “economic interest

income” and “economic interest expense”, plus (ii) other interest income/expense, and less (iii) total operating expenses and dividends on preferred stock (GAAP measures).

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

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Three Months Ended

Six Months Ended

Statement of Comprehensive Income Data (Unaudited)

2026 2025 2026 2025

Interest income $ 1,014 $ 830 $ 2,064 $ 1,676

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Net interest income (expense) 305 162 624 321

Other loss, net (433) (81)

Other gain (loss), net 379 (274) (54) (355)

Operating expenses 30 28 64 56

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Three Months Ended

Six Months Ended

Other Data (Unaudited) * 2026 2025 2026 2025

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Average tangible net book value “at risk” leverage 5

7.4:1 7.5:1 7.4:1 7.4:1

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

7.4:1 7.6:1 7.4:1 7.6:1

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, 2026 and 2025, 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, 2026 and 2025, 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

2026 2025 2026 2025

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, 2026 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, 2026 compared to the prior year period (in millions):

Impact of Changes in the Principal Elements Impacting Economic Interest Income

Three Months Ended March 31, 2026 vs.

March 31, 2025

Due to Change in Average

Three months ended:

Total Increase /

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Economic interest income, excluding “catch-up” amortization (non-GAAP measure) $ 201 $ 198 $ 3

Our average investment portfolio (at cost), inclusive of TBAs, increased 22% for the three months ended March 31, 2026, compared to the prior year period, 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 11 basis points for the three months ended March 31, 2026, largely due to an increase in the average coupon of our portfolio.

Due to Change in Average

Six months ended:

Total Increase /

(Decrease) Portfolio

Interest Income (GAAP measure) $ 388 $ 358 $ 30

Estimated “catch-up” premium amortization due to change in CPR forecast 9 — 9

Interest income, excluding “catch-up” premium amortization 397 358 39

TBA dollar roll income - implied interest income 37 48 (11)

Economic interest income, excluding “catch-up" amortization (non-GAAP measure) $ 434 $ 406 $ 28

Our average investment portfolio (at cost), inclusive of TBAs, increased 20% and 21% for the three and six months ended June 30, 2026, respectively, compared to the prior year period, 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 2 and 6 basis points for the three and six months ended June 30, 2026, respectively, largely due to an increase in the average coupon of our portfolio.

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, 2026 $ 75,070 $ 80,083 $ 79,512 $ 12,729 $ 9,676 7.4:1 7.4:1

March 31, 2026 $ 77,120 $ 79,681 $ 75,840 $ 10,343 $ 9,742 7.4:1 7.4:1

December 31, 2025 $ 69,943 $ 74,195 $ 73,002 $ 13,764 $ 12,917 7.4:1 7.2:1

September 30, 2025 $ 66,654 $ 70,066 $ 69,057 $ 10,163 $ 13,805 7.5:1 7.6:1

June 30, 2025 $ 59,469 $ 66,790 $ 66,052 $ 11,996 $ 8,162 7.5:1 7.6:1

March 31, 2025 $ 61,707 $ 63,789 $ 63,312 $ 7,428 $ 7,429 7.3:1 7.5:1

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Economic Interest Expense and Aggregate Cost of Funds

The following table summarizes our economic interest expense and aggregate cost of funds (non-GAAP measures) for the three months ended March 31, 2026 and 2025 (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, 2026 and 2025 (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

2026 2025 2026 2025

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) $ 709 3.74 % $ 668 4.44 % $ 1,440 3.76 % $ 1,355 4.45 %

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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, 2026 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, 2026 compared to the prior year period (in millions):

Impact of Changes in the Principal Elements of Economic Interest Expense

Three Months Ended March 31, 2026 vs.

March 31, 2025

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 $ 125 $ 2 $ 123

Our average mortgage borrowings, inclusive of TBAs, increased 27% for the three months ended March 31, 2026, consistent with the increase to our average investment portfolio.

The average interest rate on our mortgage borrowings, excluding the impact of interest rate swap periodic income, decreased 69 basis points for the three months ended March 31, 2026, due to a decline in short-term interest rates.

Interest rate swap periodic income declined for the three months ended March 31, 2026, primarily due to higher pay rates on our pay-fixed swaps, driven by the maturity of lower-cost legacy swaps and an increase in our interest rate swap position at higher prevailing rates, as well as lower receive rates.

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 $ 85 $ 347 $ (262)

TBA dollar roll income - implied interest benefit/expense (11) 39 (50)

Interest rate swap periodic income/cost 214 (363) 577

Total change in economic interest benefit/expense $ 288 $ 23 $ 265

Our average mortgage borrowings, inclusive of TBAs, increased 23% and 25% for the three and six months ended June 30, 2026, respectively, consistent with the increase to our average investment portfolio.

The average interest rate on our mortgage borrowings, excluding the impact of interest rate swap periodic income, decreased 72 and 71 basis points for the three and six months ended June 30, 2026, respectively, due to a decline in short-term interest rates.

Interest rate swap periodic income declined for the three and six months ended June 30, 2026, primarily due to higher pay rates on our pay-fixed swaps, driven by the maturity of lower-cost swaps, an increase in our interest rate swap position at higher

prevailing rates, and lower receive rates.

The ratio of interest rate swaps outstanding to mortgage borrowings increased due to a greater allocation to interest rate swaps in our hedge portfolio.

The following table summarizes our interest rate swaps outstanding during the three months ended March 31, 2026 and 2025 (dollars in millions).

The following table summarizes our interest rate swaps outstanding during the three and six months ended June 30, 2026 (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 2026 2025 2026 2025

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Ratio of average interest rate swaps to mortgage borrowings outstanding

86 % 64 % 84 % 64 %

Average interest rate swap pay-fixed rate (excluding forward starting swaps) 2.71 % 1.94 % 2.68 % 1.84 %

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(0.94) % (2.44) % (0.98) % (2.54) %

For the three months ended March 31, 2026 and 2025, we had an average forward starting net pay-fixed rate swap balance of $2.1 billion and $286 million, respectively.

For the three and six months ended June 30, 2026, we had an average forward starting net pay-fixed rate swap balance of $43 million and $1.1 billion, respectively.

For the three and six months ended June 30, 2025, we had an average forward starting net pay-fixed rate swap balance of $63 million and $173 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, 2026 and 2025:

Three Months Ended

Three Months Ended June 30,

Six Months Ended

Investment and TBA Securities - Net Interest Spread 2026 2025 2026 2025

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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, 2026 and 2025 (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, 2026 and 2025 (dollars in millions):

Three Months Ended June 30,

Six Months Ended

2026 2025 2026 2025

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

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

16 177 (58) 422

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

90 (270) 979 (1,453)

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

(485) 367 (867) 1,386

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

7 (48) 15 (141)

Other adjustments:

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TBA dollar roll income, net 2

Interest rate swap periodic income, net 2

Interest rate swap periodic income (cost), net 2

179 282 361 575

Other interest income (expense), net 2,3

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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, 2026 and 2025 (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, 2026 and 2025 (in millions):

Three Months Ended June 30,

Six Months Ended

Gain (Loss) on Investment Securities, Net 1

2026 2025 2026 2025

Gain (loss) on sale of investment securities, net $ (16) $ (177) $ 58 $ (422)

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

(90) 270 (979) 1,453

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

(7) 48 (15) 141

Total (loss) gain on investment securities, net

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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, 2026 and 2025 (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, 2026 and 2025 (in millions):

Three Months Ended June 30,

Six Months Ended

2026 2025 2026 2025

TBA securities, dollar roll income $ 44 $ 24 $ 95 $ 47

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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 ten 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 7.4x and 7.2x as of March 31, 2026 and December 31, 2025, respectively.

The following table includes a summary of our mortgage borrowings outstanding as of March 31, 2026 and December 31, 2025 (dollars in millions).

Our tangible net book value “at risk” leverage ratio was 7.4x and 7.2x as of June 30, 2026 and December 31, 2025, respectively.

The following table includes a summary of our mortgage borrowings outstanding as of June 30, 2026 and December 31, 2025 (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, 2026 December 31, 2025

June 30, 2026 December 31, 2025

Mortgage Borrowings Amount % Amount %

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E xcludes U.S.

Treasury repurchase agreements totaling $11.8 billion and $12.3 billion as of March 31, 2026 and December 31, 2025, respectively.

As of March 31, 2026 and December 31, 2025, 43% and 44%, respectively, of our total repurchase agreements, including 49% and 51% or our investment securities repurchase agreements, respectively, were funded through the Fixed Income Clearing Corporation’s GCF Repo service.

Treasury repurchase agreements totaling $10.3 billion and $12.3 billion as of June 30, 2026 and December 31, 2025, respectively.

As of June 30, 2026 and December 31, 2025, 44% and 44%, respectively, of our total repurchase agreements, including 49% and 51% or our investment securities repurchase agreements, respectively, were funded through the Fixed Income Clearing Corporation’s GCF Repo service.

We primarily finance our assets through collateralized borrowings structured as repurchase agreements (“repo”).

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We manage this liquidity risk by monitoring factors that influence prepayment activity and through disciplined asset selection.

As of March 31, 2026, approximately 10% of our investment portfolio consisted of TBA securities, which are not subject to monthly principal pay-downs.

As of June 30, 2026, approximately 10% of our investment portfolio consisted of TBA securities, which are not subject to monthly principal pay-downs.

The remainder of our portfolio, primarily consisting of Agency RMBS, had an average one-year CPR forecast of 8%.

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Margin calls for repo and TBA transactions are typically due on the same business day, while margin calls for interest rate swaps and other derivative transactions are typically due on the next business day, subject to notice provisions.

During the three months ended March 31, 2026, haircuts and initial margin requirements on our repo funding arrangements remained stable.

As of March 31, 2026, the weighted average haircut and initial margin on our repurchase agreements were approximately 3.3% of the value of our collateral, compared to 3.1% as of December 31, 2025.

We were in compliance with all margin requirements as of March 31, 2026.

During the three and six months ended June 30, 2026, haircuts and initial margin requirements on our repo funding arrangements remained stable.

As of June 30, 2026, the weighted average haircut and initial margin on our repurchase agreements were approximately 3.3% of the value of our collateral, compared to 3.1% as of December 31, 2025.

We were in compliance with all margin requirements as of June 30, 2026.

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

As of March 31, 2026, our unencumbered assets totaled approximately $7.1 billion, or 61% of tangible equity, consisting of $7.0 billion of cash and unencumbered Agency RMBS and $0.1 billion of unencumbered credit assets.

This compares to $7.7 billion of unencumbered assets, or 65% of tangible equity, as of December 31, 2025, consisting of $7.6 billion of cash and unencumbered Agency RMBS and $0.1 billion of unencumbered credit assets.

As of June 30, 2026, our unencumbered assets totaled approximately $7.5 billion, or 63% of tangible equity, consisting of $7.5 billion of cash and unencumbered Agency RMBS and $0.1 billion of unencumbered credit assets.

This compares to approximately $7.7 billion of unencumbered assets, or 65% of tangible equity, as of December 31, 2025, consisting of $7.6 billion of cash and unencumbered Agency RMBS and $0.1 billion of unencumbered credit assets.

For additional details regarding assets pledged under our repo and derivative agreements refer to Note 6 to our Consolidated Financial Statements in this Form 10-Q.

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We also diversify our funding sources across multiple counterparties and geographic region.

As of March 31, 2026, 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 2% of our tangible stockholders’ equity, with our top five repo counterparties, excluding the FICC, representing less than 5% of our tangible stockholders’ equity.

As of March 31, 2026, less than 11% of our tangible stockholders’ equity was at risk with the FICC.

Excluding central clearing exchanges, as of March 31, 2026, our amount at risk with any counterparty to our derivative agreements was less than 1% of our stockholders’ equity.

As of June 30, 2026, 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 1% of our tangible stockholders’ equity, with our top five repo counterparties, excluding the FICC, representing less than 5% of our tangible stockholders’ equity.

As of June 30, 2026, less than 11% of our tangible stockholders’ equity was at risk with the FICC.

Excluding central clearing exchanges, as of June 30, 2026, our amount at risk with any counterparty to our derivative agreements was less than 1% of our stockholders’ equity.

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

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We may also be unable to raise additional equity capital at suitable times or on favorable terms.

Furthermore, when the trading price of our common stock is less than our then-current estimate of our tangible net book value per common share, among other conditions, we may repurchase shares of our common stock pursuant to the stock repurchase plan authorized by our Board.

As of March 31, 2026, $1.0 billion remained authorized to repurchase shares of our common stock through December 31, 2026.

As of June 30, 2026, we were 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 under two separate at-the-market programs, up to a maximum aggregate offering price under each program.

As of June 30, 2026, shares of our common stock with an aggregate offering price of $0.1 billion remained authorized for issuance through December 31, 2026 under one program and $2.0 billion remained authorized for issuance through December 31, 2027 under a second program.

Separately, when the trading price of our common stock is less than our then-current estimate of our tangible net book value per common share, among other conditions, we may repurchase shares of our common stock pursuant to the stock repurchase plan authorized by our Board.

As of June 30, 2026, $1.0 billion remained authorized to repurchase shares of our common stock through December 31, 2026.

Please refer to Note 9 of our Consolidated Financial Statements in this Form 10-Q for further details regarding our recent equity capital transactions.

OFF-BALANCE SHEET ARRANGEMENTS

As of March 31, 2026, 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, 2026, 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, 2026, 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, 2026, we had not guaranteed obligations of unconsolidated entities or entered into a commitment or intent to provide funding to such entities.

FORWARD-LOOKING STATEMENTS

The statements contained in this Quarterly Report that are not historical facts, including estimates, projections, beliefs, expectations concerning conditions, events, or the outlook for our business, strategy, performance, operations or the markets or industries in which we operate, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act.

Forward-looking statements are typically identified by words such as “believe,” “plan,” “expect,” “anticipate,” “see,” “intend,” “outlook,” “potential,” “forecast,” “estimate,” “will,” “could,” “should” “likely” and other similar, correlative or comparable words and expressions.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis