UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2021

OR


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-34057

AGNC INVESTMENT CORP.

(Exact name of registrant as specified in its charter)


Delaware						26-1701984
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

2 Bethesda Metro Center, 12th Floor

Bethesda, Maryland 20814

(Address of principal executive offices)

(301) 968-9315

(Registrant’s telephone number, including area code)

__________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Exchange on Which Registered

Common Stock, par value $0.01 per share

AGNC

The Nasdaq Global Select Market

Depositary shares of 7.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock

AGNCN

The Nasdaq Global Select Market

Depositary shares of 6.875% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock

AGNCM

The Nasdaq Global Select Market

Depositary shares of 6.50% Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock

AGNCO

The Nasdaq Global Select Market

Depositary shares of 6.125% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock

AGNCP

The Nasdaq Global Select Market

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller Reporting Company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The number of shares of the issuer's common stock, $0.01 par value, outstanding as of ~~April 30,~~October 31, 2021 was ~~524,907,212.~~524,908,382.

AGNC INVESTMENT CORP.

TABLE OF CONTENTS

1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AGNC INVESTMENT CORP.

CONSOLIDATED BALANCE SHEETS

(in millions, except per share data)


			March 31, 2021						December 31, 2020					September 30, 2021						December 31, 2020
			(Unaudited)											(Unaudited)
Assets:	Assets:											Assets:
Agency securities, at fair value (including pledged securities of $56,343 and $53,698, respectively)			$	63,286					$	64,836
Agency securities, at fair value (including pledged securities of $46,741 and $53,698, respectively)												Agency securities, at fair value (including pledged securities of $46,741 and $53,698, respectively)		$	53,517					$	64,836
Agency securities transferred to consolidated variable interest entities, at fair value (pledged securities)	Agency securities transferred to consolidated variable interest entities, at fair value (pledged securities)		270						295			Agency securities transferred to consolidated variable interest entities, at fair value (pledged securities)		226						295
Credit risk transfer securities, at fair value (including pledged securities of $406 and $455, respectively)			1,073						737
Non-Agency securities, at fair value (including pledged securities of $414 and $458, respectively)			868						546

Credit risk transfer securities, at fair value (including pledged securities of $534 and $455, respectively)												Credit risk transfer securities, at fair value (including pledged securities of $534 and $455, respectively)		1,072						737
Non-Agency securities, at fair value (including pledged securities of $380 and $458, respectively)												Non-Agency securities, at fair value (including pledged securities of $380 and $458, respectively)		578						546
U.S. Treasury securities, at fair value (including pledged securities of $645 and $0, respectively)												U.S. Treasury securities, at fair value (including pledged securities of $645 and $0, respectively)		645						—
Cash and cash equivalents	Cash and cash equivalents		963						1,017			Cash and cash equivalents		981						1,017
Restricted cash	Restricted cash		813						1,307			Restricted cash		464						1,307
Derivative assets, at fair value	Derivative assets, at fair value		698						391			Derivative assets, at fair value		402						391
Receivable for investment securities sold (including pledged securities of $0 and $207, respectively)			50						210
Receivable for investment securities sold (including pledged securities of $252 and $207, respectively)												Receivable for investment securities sold (including pledged securities of $252 and $207, respectively)		272						210
Receivable under reverse repurchase agreements	Receivable under reverse repurchase agreements		16,803						11,748			Receivable under reverse repurchase agreements		9,617						11,748
Goodwill	Goodwill		526						526			Goodwill		526						526
Other assets	Other assets		195						204			Other assets		505						204
Total assets	Total assets		$	85,545					$	81,817		Total assets		$	68,805					$	81,817
Liabilities:	Liabilities:											Liabilities:
Repurchase agreements	Repurchase agreements		$	55,056					$	52,366		Repurchase agreements		$	46,532					$	52,366
Debt of consolidated variable interest entities, at fair value	Debt of consolidated variable interest entities, at fair value		165						177			Debt of consolidated variable interest entities, at fair value		134						177
Payable for investment securities purchased	Payable for investment securities purchased		2,512						6,157			Payable for investment securities purchased		1,821						6,157
Derivative liabilities, at fair value	Derivative liabilities, at fair value		589						2			Derivative liabilities, at fair value		178						2
Dividends payable	Dividends payable		88						90			Dividends payable		88						90
Obligation to return securities borrowed under reverse repurchase agreements, at fair value	Obligation to return securities borrowed under reverse repurchase agreements, at fair value		15,090						11,727			Obligation to return securities borrowed under reverse repurchase agreements, at fair value		8,896						11,727
Accounts payable and other liabilities	Accounts payable and other liabilities		681						219			Accounts payable and other liabilities		477						219
Total liabilities	Total liabilities		74,181						70,738			Total liabilities		58,126						70,738
Stockholders' equity:	Stockholders' equity:											Stockholders' equity:
Preferred Stock - aggregate liquidation preference of $1,538	Preferred Stock - aggregate liquidation preference of $1,538		1,489						1,489			Preferred Stock - aggregate liquidation preference of $1,538		1,489						1,489
Common stock - $0.01 par value; 1,500 shares authorized; 524.9 and 539.5 shares issued and outstanding, respectively	Common stock - $0.01 par value; 1,500 shares authorized; 524.9 and 539.5 shares issued and outstanding, respectively		5						5			Common stock - $0.01 par value; 1,500 shares authorized; 524.9 and 539.5 shares issued and outstanding, respectively		5						5
Additional paid-in capital	Additional paid-in capital		13,736						13,972			Additional paid-in capital		13,747						13,972
Retained deficit	Retained deficit		(4,348)						(5,106)			Retained deficit		(4,973)						(5,106)
Accumulated other comprehensive income	Accumulated other comprehensive income		482						719			Accumulated other comprehensive income		411						719
Total stockholders' equity	Total stockholders' equity		11,364						11,079			Total stockholders' equity		10,679						11,079
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity		$	85,545					$	81,817		Total liabilities and stockholders' equity		$	68,805					$	81,817

See accompanying notes to consolidated financial statements.

2

AGNC INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in millions, except per share data)


			Three Months Ended March 31,											Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020					2021						2020						2021						2020
Interest income:	Interest income:											Interest income:
Interest income	Interest income		$	557					$	491		Interest income		$	293					$	364					$	1,099					$	1,284
Interest expense	Interest expense		29						426			Interest expense		14						62						60						622
Net interest income	Net interest income		528						65			Net interest income		279						302						1,039						662
Other gain (loss), net:	Other gain (loss), net:											Other gain (loss), net:
Gain (loss) on sale of investment securities, net	Gain (loss) on sale of investment securities, net		(13)						494			Gain (loss) on sale of investment securities, net		(5)						346						7						993
Unrealized gain (loss) on investment securities measured at fair value through net income, net	Unrealized gain (loss) on investment securities measured at fair value through net income, net		(955)						197			Unrealized gain (loss) on investment securities measured at fair value through net income, net		(141)						(365)						(1,124)						511
Gain (loss) on derivative instruments and other securities, net	Gain (loss) on derivative instruments and other securities, net		1,439						(3,154)			Gain (loss) on derivative instruments and other securities, net		101						400						922						(3,139)
Total other gain (loss), net:	Total other gain (loss), net:		471						(2,463)			Total other gain (loss), net:		(45)						381						(195)						(1,635)
Expenses:	Expenses:											Expenses:
Compensation and benefits	Compensation and benefits		16						13			Compensation and benefits		14						13						42						39
Other operating expense	Other operating expense		8						10			Other operating expense		8						8						26						29
Total operating expense	Total operating expense		24						23			Total operating expense		22						21						68						68
Net income (loss)	Net income (loss)		975						(2,421)			Net income (loss)		212						662						776						(1,041)
Dividends on preferred stock	Dividends on preferred stock		25						21			Dividends on preferred stock		25						25						75						71
Net income (loss) available (attributable) to common stockholders	Net income (loss) available (attributable) to common stockholders		$	950					$	(2,442)		Net income (loss) available (attributable) to common stockholders		$	187					$	637					$	701					$	(1,112)

Net income (loss)	Net income (loss)		$	975					$	(2,421)		Net income (loss)		$	212					$	662					$	776					$	(1,041)
Unrealized gain (loss) on investment securities measured at fair value through other comprehensive income (loss), net	Unrealized gain (loss) on investment securities measured at fair value through other comprehensive income (loss), net		(237)						464			Unrealized gain (loss) on investment securities measured at fair value through other comprehensive income (loss), net		6						70						(308)						737
Comprehensive income (loss)	Comprehensive income (loss)		738						(1,957)			Comprehensive income (loss)		218						732						468						(304)
Dividends on preferred stock	Dividends on preferred stock		25						21			Dividends on preferred stock		25						25						75						71
Comprehensive income (loss) available (attributable) to common stockholders	Comprehensive income (loss) available (attributable) to common stockholders		$	713					$	(1,978)		Comprehensive income (loss) available (attributable) to common stockholders		$	193					$	707					$	393					$	(375)

Weighted average number of common shares outstanding - basic	Weighted average number of common shares outstanding - basic		533.7						548.0			Weighted average number of common shares outstanding - basic		526.7						553.2						529.0						553.8
Weighted average number of common shares outstanding - diluted	Weighted average number of common shares outstanding - diluted		535.6						548.0			Weighted average number of common shares outstanding - diluted		528.6						554.3						530.8						553.8
Net income (loss) per common share - basic	Net income (loss) per common share - basic		$	1.78					$	(4.46)		Net income (loss) per common share - basic		$	0.36					$	1.15					$	1.33					$	(2.01)
Net income (loss) per common share - diluted	Net income (loss) per common share - diluted		$	1.77					$	(4.46)		Net income (loss) per common share - diluted		$	0.35					$	1.15					$	1.32					$	(2.01)
Dividends declared per common share	Dividends declared per common share		$	0.36					$	0.48		Dividends declared per common share		$	0.36					$	0.36					$	1.08					$	1.20

See accompanying notes to consolidated financial statements.

3

AGNC INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

(in millions)


			Preferred Stock						Common Stock												Additional Paid-in Capital						Retained Deficit						Accumulated Other Comprehensive Income (Loss)						Total					Preferred Stock						Common Stock												Additional Paid-in Capital						Retained Deficit						Accumulated Other Comprehensive Income (Loss)						Total
																																										Shares								Amount
Balance, June 30, 2020																																										Balance, June 30, 2020			$	1,489					555.5						$	6					$	14,191					$	(6,100)					$	764					$	10,350
Net income																																										Net income		—						—						—						—						662						—						662
Other comprehensive income:																																										Other comprehensive income:
Unrealized gain on available-for-sale securities, net																																										Unrealized gain on available-for-sale securities, net		—						—						—						—						—						70						70
Stock-based compensation, net																																										Stock-based compensation, net		—						—						—						5						—						—						5

Repurchase of common stock																																										Repurchase of common stock		—						(10.3)						(1)						(143)						—						—						(144)
Preferred dividends declared																																										Preferred dividends declared		—						—						—						—						(25)						—						(25)
Common dividends declared																																										Common dividends declared		—						—						—						—						(198)						—						(198)
Balance, September 30, 2020																																										Balance, September 30, 2020		$	1,489					545.2						$	5					$	14,053					$	(5,661)					$	834					$	10,720

Balance, June 30, 2021																																										Balance, June 30, 2021		$	1,489					524.9						$	5					$	13,741					$	(4,972)					$	405					$	10,668
Net income																																										Net income		—						—						—						—						212						—						212
Other comprehensive income:																																										Other comprehensive income:
Unrealized gain on available-for-sale securities, net																																										Unrealized gain on available-for-sale securities, net		—						—						—						—						—						6						6
Stock-based compensation, net																																										Stock-based compensation, net		—						—						—						6						—						—						6

Preferred dividends declared																																										Preferred dividends declared		—						—						—						—						(25)						—						(25)
Common dividends declared																																										Common dividends declared		—						—						—						—						(188)						—						(188)
Balance, September 30, 2021																																										Balance, September 30, 2021		$	1,489					524.9						$	5					$	13,747					$	(4,973)					$	411					$	10,679
						Preferred Stock						Shares						Amount								Additional Paid-in Capital						Retained Deficit						Accumulated Other Comprehensive Income (Loss)						Total
Balance, December 31, 2019	Balance, December 31, 2019								540.9						$	5					Balance, December 31, 2019		$	932																										540.9						$	5					$	13,893					$	(3,886)					$	97					$	11,041
Net loss	Net loss		—						—						—						—						(2,421)						—						(2,421)			Net loss		—						—						—						—						(1,041)						—						(1,041)
Other comprehensive income:	Other comprehensive income:																																									Other comprehensive income:
Unrealized gain on available-for-sale securities, net	Unrealized gain on available-for-sale securities, net		—						—						—						—						—						464						464			Unrealized gain on available-for-sale securities, net		—						—						—						—						—						737						737
Stock-based compensation, net	Stock-based compensation, net		—						0.1						—						3						—						—						3			Stock-based compensation, net		—						0.1						—						12						—						—						12
Issuance of preferred stock, net of offering cost	Issuance of preferred stock, net of offering cost		557						—						—						—						—						—						557			Issuance of preferred stock, net of offering cost		557						—						—						—						—						—						557
Issuance of common stock, net of offering cost	Issuance of common stock, net of offering cost		—						26.7						1						438						—						—						439			Issuance of common stock, net of offering cost		—						26.7						1						438						—						—						439
Repurchase of common stock																																										Repurchase of common stock		—						(22.5)						(1)						(290)						—						—						(291)
Preferred dividends declared	Preferred dividends declared		—						—						—						—						(21)						—						(21)			Preferred dividends declared		—						—						—						—						(71)						—						(71)
Common dividends declared	Common dividends declared		—						—						—						—						(264)						—						(264)			Common dividends declared		—						—						—						—						(663)						—						(663)
Balance, March 31, 2020			$	1,489					567.7						$	6					$	14,334					$	(6,592)					$	561					$	9,798
Balance, September 30, 2020																																										Balance, September 30, 2020		$	1,489					545.2						$	5					$	14,053					$	(5,661)					$	834					$	10,720

Balance, December 31, 2020	Balance, December 31, 2020		$	1,489					539.5						$	5					$	13,972					$	(5,106)					$	719					$	11,079		Balance, December 31, 2020		$	1,489					539.5						$	5					$	13,972					$	(5,106)					$	719					$	11,079
Net income	Net income		—						—						—						—						975						—						975			Net income		—						—						—						—						776						—						776
Other comprehensive loss:	Other comprehensive loss:																																									Other comprehensive loss:
Unrealized loss on available-for-sale securities, net	Unrealized loss on available-for-sale securities, net		—						—						—						—						—						(237)						(237)			Unrealized loss on available-for-sale securities, net		—						—						—						—						—						(308)						(308)
Stock-based compensation, net	Stock-based compensation, net		—						0.4						—						3						—						—						3			Stock-based compensation, net		—						0.4						—						14						—						—						14

Repurchase of common stock	Repurchase of common stock		—						(15.0)						0						(239)						—						—						(239)			Repurchase of common stock		—						(15.0)						—						(239)						—						—						(239)
Preferred dividends declared	Preferred dividends declared		—						—						—						—						(25)						—						(25)			Preferred dividends declared		—						—						—						—						(75)						—						(75)
Common dividends declared	Common dividends declared		—						—						—						—						(192)						—						(192)			Common dividends declared		—						—						—						—						(568)						—						(568)
Balance, March 31, 2021			$	1,489					524.9						$	5					$	13,736					$	(4,348)					$	482					$	11,364
Balance, September 30, 2021																																										Balance, September 30, 2021		$	1,489					524.9						$	5					$	13,747					$	(4,973)					$	411					$	10,679

See accompanying notes to consolidated financial statements.

4

AGNC INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in millions)


			Three Months Ended March 31,											Nine Months Ended September 30,
			2021						2020					2021						2020
Operating activities:	Operating activities:											Operating activities:
Net income (loss)	Net income (loss)		$	975					$	(2,421)		Net income (loss)		$	776					$	(1,041)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:	Adjustments to reconcile net income (loss) to net cash provided by operating activities:											Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of premiums and discounts on mortgage-backed securities, net	Amortization of premiums and discounts on mortgage-backed securities, net		(76)						384			Amortization of premiums and discounts on mortgage-backed securities, net		231						816
Stock-based compensation, net	Stock-based compensation, net		3						3			Stock-based compensation, net		14						12
(Gain) loss on sale of investment securities, net			13						(494)
Gain on sale of investment securities, net												Gain on sale of investment securities, net		(7)						(993)
Unrealized (gain) loss on investment securities measured at fair value through net income, net	Unrealized (gain) loss on investment securities measured at fair value through net income, net		955						(197)			Unrealized (gain) loss on investment securities measured at fair value through net income, net		1,124						(511)
(Gain) loss on derivative instruments and other securities, net	(Gain) loss on derivative instruments and other securities, net		(1,439)						3,154			(Gain) loss on derivative instruments and other securities, net		(922)						3,139
Decrease in other assets			9						78
(Increase) decrease in other assets												(Increase) decrease in other assets		(33)						104
Decrease in accounts payable and other accrued liabilities	Decrease in accounts payable and other accrued liabilities		(12)						(160)			Decrease in accounts payable and other accrued liabilities		(19)						(189)
Net cash provided by operating activities	Net cash provided by operating activities		428						347			Net cash provided by operating activities		1,164						1,337
Investing activities:	Investing activities:											Investing activities:
Purchases of Agency mortgage-backed securities	Purchases of Agency mortgage-backed securities		(14,029)						(23,339)			Purchases of Agency mortgage-backed securities		(34,575)						(44,753)
Purchases of credit risk transfer and non-Agency securities	Purchases of credit risk transfer and non-Agency securities		(497)						(347)			Purchases of credit risk transfer and non-Agency securities		(1,405)						(609)
Proceeds from sale of Agency mortgage-backed securities	Proceeds from sale of Agency mortgage-backed securities		6,366						49,596			Proceeds from sale of Agency mortgage-backed securities		27,713						68,920
Proceeds from sale of credit risk transfer and non-Agency securities	Proceeds from sale of credit risk transfer and non-Agency securities		137						492			Proceeds from sale of credit risk transfer and non-Agency securities		994						838
Principal collections on Agency mortgage-backed securities	Principal collections on Agency mortgage-backed securities		4,317						3,743			Principal collections on Agency mortgage-backed securities		12,167						12,635
Principal collections on credit risk transfer and non-Agency securities	Principal collections on credit risk transfer and non-Agency securities		9						11			Principal collections on credit risk transfer and non-Agency securities		73						115
Payments on U.S. Treasury securities	Payments on U.S. Treasury securities		(4,313)						(17,907)			Payments on U.S. Treasury securities		(18,560)						(22,090)
Proceeds from U.S. Treasury securities	Proceeds from U.S. Treasury securities		8,474						8,795			Proceeds from U.S. Treasury securities		15,261						20,112
Net proceeds from (payments on) reverse repurchase agreements			(5,055)						5,275
Net proceeds from reverse repurchase agreements												Net proceeds from reverse repurchase agreements		2,129						1,590
Net proceeds from (payments on) derivative instruments	Net proceeds from (payments on) derivative instruments		1,395						(2,742)			Net proceeds from (payments on) derivative instruments		918						(2,260)
Net cash provided by (used in) investing activities			(3,196)						23,577
Net cash provided by investing activities												Net cash provided by investing activities		4,715						34,498
Financing activities:	Financing activities:											Financing activities:
Proceeds from repurchase arrangements	Proceeds from repurchase arrangements		526,319						1,162,934			Proceeds from repurchase arrangements		1,650,800						2,651,280
Payments on repurchase agreements	Payments on repurchase agreements		(523,629)						(1,185,576)			Payments on repurchase agreements		(1,656,634)						(2,685,896)
Payments on debt of consolidated variable interest entities	Payments on debt of consolidated variable interest entities		(12)						(16)			Payments on debt of consolidated variable interest entities		(39)						(44)
Net proceeds from preferred stock issuances	Net proceeds from preferred stock issuances		0						557			Net proceeds from preferred stock issuances		—						557
Net proceeds from common stock issuances	Net proceeds from common stock issuances		0						439			Net proceeds from common stock issuances		—						439
Payments for common stock repurchases	Payments for common stock repurchases		(239)						0			Payments for common stock repurchases		(239)						(291)
Cash dividends paid	Cash dividends paid		(219)						(277)			Cash dividends paid		(646)						(748)
Net cash provided by (used in) financing activities			2,220						(21,939)
Net cash used in financing activities												Net cash used in financing activities		(6,758)						(34,703)
Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash		(548)						1,985			Net change in cash, cash equivalents and restricted cash		(879)						1,132
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period		2,324						1,282			Cash, cash equivalents and restricted cash at beginning of period		2,324						1,282
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period		$	1,776					$	3,267		Cash, cash equivalents and restricted cash at end of period		$	1,445					$	2,414

See accompanying notes to consolidated financial statements.

5

AGNC INVESTMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Organization

AGNC Investment Corp. (referred throughout this report as the "Company," "we," "us" and "our") was organized in Delaware on January 7, 2008 and commenced operations on May 20, 2008 following the completion of our initial public offering. Our common stock is traded on The Nasdaq Global Select Market under the symbol "AGNC."

We invest primarily in Agency residential mortgage-backed securities ("Agency RMBS") for which the principal and interest payments are guaranteed by a U.S. Government-sponsored enterprise ("GSE") or a U.S. Government agency. We also invest in other types of mortgage and mortgage-related securities, such as credit risk transfer ("CRT") securities and non-Agency residential and commercial mortgage-backed securities ("non-Agency RMBS" and "CMBS," respectively), where repayment of principal and interest is not guaranteed by a GSE or U.S. Government agency, and other assets related to the housing, mortgage or real estate markets. We fund our investments primarily through collateralized borrowings structured as repurchase agreements.

We operate to qualify to be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). As a REIT, we are required to distribute annually 90% of our taxable income, and we will generally not be subject to U.S. federal or state corporate income tax to the extent that we distribute our annual taxable income to our stockholders on a timely basis. It is our intention to distribute 100% of our taxable income, after application of available tax attributes, within the limits prescribed by the Internal Revenue Code, which may extend into the subsequent tax year.

We are internally managed with the principal objective of providing our stockholders with attractive risk-adjusted returns through a combination of monthly dividends and tangible net book value accretion. We generate income from the interest earned on our investments, net of associated borrowing and hedging costs, and net realized gains and losses on our investment and hedging activities.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

Our accompanying consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. The accompanying consolidated financial statements and related notes are unaudited and include the accounts of all our wholly-owned subsidiaries and variable interest entities for which we are the primary beneficiary. Significant intercompany accounts and transactions have been eliminated. The accompanying consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements included in our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. In the opinion of management, all adjustments, consisting solely of normal recurring accruals, necessary for the fair presentation of consolidated financial statements for the interim period have been included. The current period’s results of operations are not necessarily indicative of results that ultimately may be achieved for the year.

Investment Securities

Agency RMBS consist of residential mortgage pass-through securities and collateralized mortgage obligations ("CMOs") guaranteed by the Federal National Mortgage Association ("Fannie Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac," and together with Fannie Mae, the "GSEs") or the Government National Mortgage Association ("Ginnie Mae").

CRT securities are risk sharing instruments issued by the GSEs, and similarly structured transactions issued by third-party market participants, that synthetically transfer a portion of the risk associated with credit losses within pools of conventional residential mortgage loans from the GSEs and/or third parties to private investors. Unlike Agency RMBS, full repayment of the original principal balance of CRT securities is not guaranteed by a GSE or U.S. Government agency; rather, "credit risk transfer" is achieved by writing down the outstanding principal balance of the CRT securities if credit losses on a related pool

6

of loans exceed certain thresholds. By reducing the amount that they are obligated to repay to holders of CRT securities, the GSEs and/or other third parties offset credit losses on the related loans.

Non-Agency RMBS and CMBS (together, "Non-Agency MBS") are backed by residential and commercial mortgage loans, respectively, packaged and securitized by a private institution, such as a commercial bank. Non-Agency MBS typically benefit from credit enhancements derived from structural elements, such as subordination, ~~overcollateralization~~over-collateralization or insurance, but nonetheless carry a higher level of credit exposure than Agency RMBS.

All of our securities are reported at fair value on our consolidated balance sheet. Accounting Standards Codification ("ASC") Topic 320, Investments—Debt and Equity Securities, requires that at the time of purchase, we designate a security as held-to-maturity, available-for-sale or trading, depending on our ability and intent to hold such security to maturity. Alternatively, we may elect the fair value option of accounting for securities pursuant to ASC Topic 825, Financial Instruments. Prior to fiscal year 2017, we primarily designated our investment securities as available-for-sale. On January 1, 2017, we began electing the fair value option of accounting for all investment securities newly acquired after such date. Unrealized gains and losses on securities classified as available-for-sale are reported in accumulated other comprehensive income ("OCI"), whereas unrealized gains and losses on securities for which we elected the fair value option, or are classified as trading, are reported in net income through other gain (loss). Upon the sale of a security designated as available-for-sale, we determine the cost of the security and the amount of unrealized gain or loss to reclassify out of accumulated OCI into earnings based on the specific identification method. In our view, the election of the fair value option simplifies the accounting for investment securities and more appropriately reflects the results of our operations for a reporting period by presenting the fair value changes for these assets in a manner consistent with the presentation and timing of the fair value changes for our derivative instruments.

We generally recognize gains or losses through net income on available-for-sale securities only if the security is sold; however, if the fair value of a security declines below its amortized cost and we determine that it is more likely than not that we will incur a realized loss on the security when we sell the asset, we will recognize the difference between the amortized cost and the fair value in net income as a component of other gain (loss). Since all of our available-for-sale designated securities consist of Agency RMBS, we do not have an allowance for credit losses. We have not recognized impairment losses on our available-for-sale securities through net income for the periods presented in our consolidated financial statements.

Interest Income

Interest income is accrued based on the outstanding principal amount of the investment securities and their contractual terms. Premiums or discounts associated with the purchase of Agency RMBS and non-Agency MBS of high credit quality are amortized or accreted into interest income, respectively, over the projected lives of the securities, including contractual payments and estimated prepayments, using the effective interest method in accordance with ASC Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs.

We estimate long-term prepayment speeds of our mortgage securities using a third-party service and market data. The third-party service provider estimates prepayment speeds using models that incorporate the forward yield curve, primary to secondary mortgage rate spreads, current mortgage rates, mortgage rates of the outstanding loans, age and size of the outstanding loans, loan-to-value ratios, interest rate volatility and other factors. We review the prepayment speeds estimated by the third-party service for reasonableness with consideration given to both historical prepayment speeds and current market conditions. If based on our assessment, we believe that the third-party model does not fully reflect our expectations of the current prepayment landscape, such as during periods of elevated market uncertainty or unique market conditions, we may make adjustments to the models. We review our actual and anticipated prepayment experience on at least a quarterly basis and effective yields are recalculated when differences arise between (i) our previous estimate of future prepayments and (ii) actual prepayments to date and our current estimate of future prepayments. We are required to record an adjustment in the current period to premium amortization / discount accretion for the cumulative effect of the difference in the effective yields as if the recalculated yield had been in place as of the security's acquisition date through the reporting date.

At the time we purchase CRT securities and non-Agency MBS that are not of high credit quality, we determine an effective yield based on our estimate of the timing and amount of future cash flows and our cost basis. Our initial cash flow estimates for these investments are based on our observations of current information and events and include assumptions related to interest rates, prepayment rates and the impact of default and severity rates on the timing and amount of credit losses. On at least a quarterly basis, we review the estimated cash flows and make appropriate adjustments based on inputs and analysis received from external sources, internal models, and our judgment regarding such inputs and other factors. Any resulting changes in effective yield are recognized prospectively based on the current amortized cost of the investment adjusted for credit impairments, if any.

7

Repurchase Agreements

We finance the acquisition of securities for our investment portfolio primarily through repurchase agreements with financial institutions. Repurchase arrangements involve the sale and a simultaneous agreement to repurchase the transferred assets at a future date. We maintain a beneficial interest in the specific securities pledged during the term of each repurchase arrangement and we receive the related principal and interest payments. Pursuant to ASC Topic 860, Transfers and Servicing, we account for repurchase agreements as collateralized financing transactions, which are carried at their contractual amounts (cost), plus accrued interest. Our repurchase agreements typically have maturities of less than one year but may extend up to five years or more.

Reverse Repurchase Agreements and Obligation to Return Securities Borrowed under Reverse Repurchase Agreements

We borrow securities to cover short sales of U.S. Treasury securities through reverse repurchase transactions under our master repurchase agreements (see Derivative Instruments below). We account for these as securities borrowing transactions and recognize an obligation to return the borrowed securities at fair value on the balance sheet based on the value of the underlying borrowed securities as of the reporting date. We may also enter into reverse repurchase agreements to earn a yield on excess cash balances. The securities received as collateral in connection with our reverse repurchase agreements mitigate our credit risk exposure to counterparties. Our reverse repurchase agreements typically have maturities of 30 days or less.

Derivative Instruments

We use a variety of derivative instruments to hedge a portion of our exposure to market risks, including interest rate, prepayment, extension and liquidity risks. The objective of our risk management strategy is to reduce fluctuations in net book value over a range of interest rate scenarios. In particular, we attempt to mitigate the risk of the cost of our variable rate liabilities increasing during a period of rising interest rates. The primary instruments that we use are interest rate swaps, options to enter into interest rate swaps ("swaptions"), U.S. Treasury securities and U.S. Treasury futures contracts. We also use forward contracts in the Agency RMBS "to-be-announced" market, or TBA securities, to invest in and finance Agency securities and to periodically reduce our exposure to Agency RMBS.

We account for derivative instruments in accordance with ASC Topic 815, Derivatives and Hedging ("ASC 815"). ASC 815 requires an entity to recognize all derivatives as either assets or liabilities in our accompanying consolidated balance sheets and to measure those instruments at fair value. None of our derivative instruments have been designated as hedging instruments for accounting purposes under the provisions of ASC 815, consequently changes in the fair value of our derivative instruments are reported in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income.

Our derivative agreements generally contain provisions that allow for netting or setting off derivative assets and liabilities with the counterparty; however, we report related assets and liabilities on a gross basis in our consolidated balance sheets. Derivative instruments in a gain position are reported as derivative assets at fair value and derivative instruments in a loss position are reported as derivative liabilities at fair value in our consolidated balance sheets. Changes in fair value of derivative instruments and periodic settlements related to our derivative instruments are recorded in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income. Cash receipts and payments related to derivative instruments are classified in our consolidated statements of cash flows according to the underlying nature or purpose of the derivative transaction, generally in the investing section.

Interest rate swap agreements

We use interest rate swaps to economically hedge the variable cash flows associated with our borrowings made under repurchase agreements. Under our interest rate swap agreements, we typically pay a fixed rate and receive a floating rate ("payer swaps") based on a short-term benchmark rate, such as the Secured Overnight Financing Rate ("SOFR"), and Overnight Index Swap Rate ("OIS"~~) or three-month London Interbank Offered Rate ("LIBOR"~~). Our interest rate swaps typically have terms from one to 10 years but may extend up to 20 years or more. Our interest rate swaps are centrally cleared through a registered commodities exchange. The clearing exchange requires that we post an "initial margin" amount determined by the exchange, which is generally intended to be set at a level sufficient to protect the exchange from the interest rate swap's maximum estimated single-day price movement. We also exchange daily settlements of "variation margin" based upon changes in fair value, as measured by the exchange. Pursuant to rules governing central clearing activities, we recognize variation margin settlements as a direct reduction of the carrying value of the interest rate swap asset or liability.

8

Interest rate swaptions

We purchase interest rate swaptions to help mitigate the potential impact of larger, more rapid changes in interest rates on the performance of our investment portfolio. Interest rate swaptions provide us the option to enter into an interest rate swap agreement for a predetermined notional amount, stated term and pay and receive interest rates in the future. Our interest rate swaption agreements are not subject to central clearing. The premium paid for interest rate swaptions is reported as an asset in our consolidated balance sheets. The difference between the premium paid and the fair value of the swaption is reported in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income. If a swaption expires unexercised, the realized loss on the swaption would be equal to the premium paid. If we sell or exercise a swaption, the realized gain or loss on the swaption would be equal to the difference between the cash or the fair value of the underlying interest rate swap and the premium paid.

TBA securities

A TBA security is a forward contract for the purchase or sale of Agency RMBS at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date. The specific Agency RMBS to be delivered into the contract are not known until shortly before the settlement date. We may choose, prior to settlement, to move the settlement of these securities out to a later date by entering into an offsetting TBA position, net settling the offsetting positions for cash, and simultaneously purchasing or selling a similar TBA contract for a later settlement date (together referred to as a "dollar roll transaction"). The Agency securities purchased or sold for a forward settlement date are typically priced at a discount to equivalent securities settling in the current month. This difference, or "price drop," is the economic equivalent of interest income on the underlying Agency securities, less an implied funding cost, over the forward settlement period (referred to as "dollar roll income"). Consequently, forward purchases of Agency securities and dollar roll transactions represent a form of off-balance sheet financing.

We account for TBA contracts as derivative instruments since either the TBA contracts do not settle in the shortest period of time possible or we cannot assert that it is probable at inception and throughout the term of the TBA contract that we will physically settle the contract on the settlement date. We account for TBA dollar roll transactions as a series of derivative transactions.

U.S. Treasury securities

We use U.S. Treasury securities and U.S. Treasury futures contracts to mitigate the potential impact of changes in interest rates on the performance of our portfolio. We borrow U.S. Treasury securities under reverse repurchase agreements to cover short sales of U.S. Treasury securities. We account for these as securities borrowing transactions and recognize an obligation to return the borrowed securities at fair value on our accompanying consolidated balance sheets based on the value of the underlying U.S. Treasury security as of the reporting date. Gains and losses associated with U.S. Treasury securities and U.S. Treasury futures contracts are recognized in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income.

Fair Value Measurements

We determine the fair value of financial instruments based on our estimate of the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date. We utilize a three-level valuation hierarchy for disclosure of fair value measurements based upon the transparency of inputs to the valuation of the instrument as of the measurement date. We categorize a financial instrument within the hierarchy based upon the lowest level of input that is significant to the fair value measurement.

The three levels of valuation hierarchy are defined as follows:

•Level 1 Inputs —Quoted prices (unadjusted) for identical unrestricted assets and liabilities in active markets that are accessible at the measurement date.

•Level 2 Inputs —Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

•Level 3 Inputs —Instruments with primarily unobservable market data that cannot be corroborated.

The majority of our financial instruments are classified as Level 2 inputs. The availability of observable inputs can be affected by a wide variety of factors, including the type of instrument, whether the instrument is new and not yet established in the marketplace and other characteristics particular to the instrument. We typically obtain price estimates from multiple third-

9

party pricing sources, such as pricing services and dealers, or, if applicable, the registered clearing exchange. We make inquiries of third-party pricing sources to understand the significant inputs and assumptions they used to determine their prices and that they are derived from orderly transactions, particularly during periods of elevated market turbulence and reduced market liquidity. We also review third-party price estimates and perform procedures to validate their reasonableness, including an analysis of the range of estimates for each position, comparison to recent trade activity for similar securities and for consistency with market conditions observed as of the measurement date. While we do not adjust prices we obtain from pricing sources, we will exclude prices for securities from our estimation of fair value if we determine based on our validation procedures and our market knowledge and expertise that the price is significantly different from what observable market data would indicate and we cannot obtain an understanding from the third-party source as to the significant inputs used to determine the price.

The following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis classified as Level 2 inputs. These instruments trade in active markets such that participants transact with sufficient frequency and volume to provide transparent pricing information on an ongoing basis. The liquidity of these markets and the similarity of our securities and derivative instruments to those actively traded enable our pricing sources and us to observe quoted prices in the market and utilize those prices as a basis for formulating fair value measurements.

Investment securities - are valued based on prices obtained from multiple third-party pricing sources. The pricing sources utilize various valuation approaches, including market and income approaches. For Agency RMBS, the pricing sources primarily utilize a matrix pricing technique that interpolates the estimated fair value based on observed quoted prices for forward contracts in the Agency RMBS "to-be-announced" market ("TBA securities") of the same coupon, maturity and issuer, adjusted to reflect the specific characteristics of the pool of mortgages underlying the Agency security, such as maximum loan balance, loan vintage, loan-to-value ratio, geography and other characteristics as may be appropriate. For other investment securities, the pricing sources primarily utilize discounted cash flow model-derived pricing techniques to estimate the fair value. Such models incorporate market-based discount rate assumptions based on observable inputs such as recent trading activity, credit data, volatility statistics, benchmark interest rate curves, spread measurements to benchmark curves and other market data that are current as of the measurement date and may include certain unobservable inputs, such as assumptions of future levels of prepayment, defaults and loss severities.

TBA securities - are valued using prices obtained from third-party pricing sources based on pricing models that reference recent trading activity.

Interest rate swaps - are valued using the daily settlement price, or fair value, determined by the clearing exchange based on a pricing model that references observable market inputs, including current benchmark rates and the forward yield curve.

Interest rate swaptions - are valued using prices obtained from the counterparty and other third-party pricing models. The pricing models are based on the value of the future interest rate swap that we have the option to enter into as well as the remaining length of time that we have to exercise the option based on observable market inputs, adjusted for non-performance risk, if any.

U.S. Treasury securities and futures are valued based on quoted prices for identical instruments in active markets and are classified as Level 1 assets. None of our financial instruments are classified as Level 3 inputs.

Recent Accounting Pronouncements

We consider the applicability and impact of all ASUs issued by the FASB. There are no unadopted ASUs that are expected to have a significant impact on our consolidated financial statements when adopted or other recently adopted ASUs that had a significant impact on our consolidated financial statements upon adoption.

Note 3. Investment Securities

As of ~~March 31,~~September 30, 2021 and December 31, 2020, our investment portfolio consisted ~~of $65.5~~of: $55.4 billion and $66.4 billion of investment securities, at fair value, ~~respectively, and $24.8~~respectively; $28.3 billion and $31.5 billion of net TBA securities, at fair value, respectively; and $0.5 billion and zero forward settling non-Agency securities, at fair value, respectively. Our net TBA position isand forward settling non-Agency securities are reported at ~~its~~their net carrying value ~~of $(576)~~totaling $(171) million and $275 million as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, in derivative assets / (liabilities) on our accompanying consolidated balance sheets. The net carrying value of our TBA position and forward settling non-Agency securities represents the difference between the fair value of the underlying ~~Agency~~ security ~~in the TBA contract~~ and the cost basis or the forward price to be paid or received for the underlying ~~Agency~~ security.

10

As of ~~March 31,~~September 30, 2021 and December 31, 2020, our investment securities had a net unamortized premium balance of ~~$2.5~~$1.9 billion and $2.4 billion, respectively.

10

The following tables summarize our investment securities as of ~~March 31,~~September 30, 2021 and December 31, 2020, excluding TBA and forward settling securities, (dollars in millions). Details of our TBA and forward settling securities as of each of the respective dates are included in Note 5.


						March 31, 2021												December 31, 2020														September 30, 2021												December 31, 2020
Investment Securities	Investment Securities					Amortized Cost						Fair Value						Amortized Cost						Fair Value			Investment Securities					Amortized Cost						Fair Value						Amortized Cost						Fair Value
Agency RMBS:	Agency RMBS:																										Agency RMBS:
Fixed rate	Fixed rate					$	61,659					$	63,122					$	61,977					$	64,615		Fixed rate					$	52,185					$	53,395					$	61,977					$	64,615
Adjustable rate	Adjustable rate					61						62						69						70			Adjustable rate					49						51						69						70
CMO	CMO					249						259						289						301			CMO					200						207						289						301
Interest-only and principal-only strips	Interest-only and principal-only strips					96						113						105						126			Interest-only and principal-only strips					76						90						105						126
Multifamily	Multifamily					0						0						17						19			Multifamily					—						—						17						19
Total Agency RMBS	Total Agency RMBS					62,065						63,556						62,457						65,131			Total Agency RMBS					52,510						53,743						62,457						65,131
Non-Agency RMBS	Non-Agency RMBS					487						495						178						188			Non-Agency RMBS					189						197						178						188
CMBS	CMBS					356						373						333						358			CMBS					366						381						333						358
CRT securities	CRT securities					1,067						1,073						733						737			CRT securities					1,047						1,072						733						737
Total investment securities	Total investment securities					$	63,975					$	65,497					$	63,701					$	66,414		Total investment securities					$	54,112					$	55,393					$	63,701					$	66,414


						March 31, 2021																																												September 30, 2021
						Agency RMBS																		Non-Agency																										Agency RMBS																		Non-Agency
Investment Securities	Investment Securities					Fannie Mae						Freddie Mac						Ginnie Mae						RMBS						CMBS						CRT						Total			Investment Securities					Fannie Mae						Freddie Mac						Ginnie Mae						RMBS						CMBS						CRT						Total
Available-for-sale securities:	Available-for-sale securities:																																												Available-for-sale securities:
Par value	Par value					$	8,375					$	2,845					$	2					$	0					$	0					$	0					$	11,222		Par value					$	6,879					$	2,284					$	2					$	—					$	—					$	—					$	9,165
Unamortized discount	Unamortized discount					(4)						(1)						0						0						0						0						(5)			Unamortized discount					(3)						(1)						—						—						—						—						(4)
Unamortized premium	Unamortized premium					405						144						0						0						0						0						549			Unamortized premium					331						116						—						—						—						—						447
Amortized cost	Amortized cost					8,776						2,988						2						0						0						0						11,766			Amortized cost					7,207						2,399						2						—						—						—						9,608
Gross unrealized gains	Gross unrealized gains					369						113						0						0						0						0						482			Gross unrealized gains					317						94						—						—						—						—						411
Gross unrealized losses	Gross unrealized losses					0						0						0						0						0						0						0			Gross unrealized losses					—						—						—						—						—						—						—
Total available-for-sale securities, at fair value	Total available-for-sale securities, at fair value					9,145						3,101						2						0						0						0						12,248			Total available-for-sale securities, at fair value					7,524						2,493						2						—						—						—						10,019
Securities remeasured at fair value through earnings:	Securities remeasured at fair value through earnings:																																												Securities remeasured at fair value through earnings:
Par value	Par value					32,513						15,801						3						493						354						1,068						50,232			Par value					28,353						13,095						3						195						369						1,043						43,058
Unamortized discount	Unamortized discount					(19)						(1)						0						(12)						(4)						(12)						(48)			Unamortized discount					(14)						(3)						—						(10)						(6)						(9)						(42)
Unamortized premium	Unamortized premium					1,312						690						0						6						6						11						2,025			Unamortized premium					1,007						461						—						4						3						13						1,488
Amortized cost	Amortized cost					33,806						16,490						3						487						356						1,067						52,209			Amortized cost					29,346						13,553						3						189						366						1,047						44,504
Gross unrealized gains	Gross unrealized gains					875						463						0						10						18						13						1,379			Gross unrealized gains					707						294						—						9						16						27						1,053
Gross unrealized losses	Gross unrealized losses					(228)						(101)						0						(2)						(1)						(7)						(339)			Gross unrealized losses					(122)						(57)						—						(1)						(1)						(2)						(183)
Total securities remeasured at fair value through earnings	Total securities remeasured at fair value through earnings					34,453						16,852						3						495						373						1,073						53,249			Total securities remeasured at fair value through earnings					29,931						13,790						3						197						381						1,072						45,374
Total securities, at fair value	Total securities, at fair value					$	43,598					$	19,953					$	5					$	495					$	373					$	1,073					$	65,497		Total securities, at fair value					$	37,455					$	16,283					$	5					$	197					$	381					$	1,072					$	55,393
Weighted average coupon as of March 31, 2021						3.20		%				3.27		%				4.71		%				3.16		%				4.06		%				3.30		%				3.23		%
Weighted average yield as of March 31, 2021 1						2.35		%				2.36		%				2.53		%				1.56		%				4.31		%				3.79		%				2.39		%
Weighted average coupon as of September 30, 2021																																													Weighted average coupon as of September 30, 2021					3.16		%				3.07		%				4.72		%				4.18		%				3.70		%				3.60		%				3.15		%
Weighted average yield as of September 30, 2021 1																																													Weighted average yield as of September 30, 2021 1					2.42		%				2.34		%				2.56		%				13.88		%				4.06		%				4.01		%				2.48		%

________________________________

1.Incorporates a weighted average future constant prepayment rate assumption of ~~11.3%~~10.7% based on forward rates as of ~~March 31,~~September 30, 2021.

11


						December 31, 2020																																												December 31, 2020
						Agency RMBS																		Non-Agency																										Agency RMBS																		Non-Agency
Investment Securities	Investment Securities					Fannie Mae						Freddie Mac						Ginnie Mae						RMBS						CMBS						CRT						Total			Investment Securities					Fannie Mae						Freddie Mac						Ginnie Mae						RMBS						CMBS						CRT						Total
Available-for-sale securities:	Available-for-sale securities:																																												Available-for-sale securities:
Par value	Par value					$	9,325					$	3,416					$	2					$	0					$	0					$	0					$	12,743		Par value					$	9,325					$	3,416					$	2					$	—					$	—					$	—					$	12,743
Unamortized discount	Unamortized discount					(4)						(1)						0						0						0						0						(5)			Unamortized discount					(4)						(1)						—						—						—						—						(5)
Unamortized premium	Unamortized premium					389						152						0						0						0						0						541			Unamortized premium					389						152						—						—						—						—						541
Amortized cost	Amortized cost					9,710						3,567						2						0						0						0						13,279			Amortized cost					9,710						3,567						2						—						—						—						13,279
Gross unrealized gains	Gross unrealized gains					539						180						0						0						0						0						719			Gross unrealized gains					539						180						—						—						—						—						719
Gross unrealized losses	Gross unrealized losses					0						0						0						0						0						0						0			Gross unrealized losses					—						—						—						—						—						—						—
Total available-for-sale securities, at fair value	Total available-for-sale securities, at fair value					10,249						3,747						2						0						0						0						13,998			Total available-for-sale securities, at fair value					10,249						3,747						2						—						—						—						13,998
Securities remeasured at fair value through earnings:	Securities remeasured at fair value through earnings:																																												Securities remeasured at fair value through earnings:
Par value	Par value					32,824						14,447						3						187						331						735						48,527			Par value					32,824						14,447						3						187						331						735						48,527
Unamortized discount	Unamortized discount					(18)						(1)						0						(12)						(3)						(12)						(46)			Unamortized discount					(18)						(1)						—						(12)						(3)						(12)						(46)
Unamortized premium	Unamortized premium					1,314						607						0						4						6						10						1,941			Unamortized premium					1,314						607						—						4						6						10						1,941
Amortized cost	Amortized cost					34,120						15,053						3						179						334						733						50,422			Amortized cost					34,120						15,053						3						179						334						733						50,422
Gross unrealized gains	Gross unrealized gains					1,280						683						0						11						28						12						2,014			Gross unrealized gains					1,280						683						—						11						28						12						2,014
Gross unrealized losses	Gross unrealized losses					(5)						(1)						0						(2)						(4)						(8)						(20)			Gross unrealized losses					(5)						(1)						—						(2)						(4)						(8)						(20)
Total securities remeasured at fair value through earnings	Total securities remeasured at fair value through earnings					35,395						15,735						3						188						358						737						52,416			Total securities remeasured at fair value through earnings					35,395						15,735						3						188						358						737						52,416
Total securities, at fair value	Total securities, at fair value					$	45,644					$	19,482					$	5					$	188					$	358					$	737					$	66,414		Total securities, at fair value					$	45,644					$	19,482					$	5					$	188					$	358					$	737					$	66,414
Weighted average coupon as of December 31, 2020	Weighted average coupon as of December 31, 2020					3.30		%				3.56		%				4.73		%				4.28		%				4.13		%				3.43		%				3.39		%	Weighted average coupon as of December 31, 2020					3.30		%				3.56		%				4.73		%				4.28		%				4.13		%				3.43		%				3.39		%
Weighted average yield as of December 31, 2020 1	Weighted average yield as of December 31, 2020 1					2.25		%				2.39		%				2.46		%				4.33		%				4.29		%				3.71		%				2.33		%	Weighted average yield as of December 31, 2020 1					2.25		%				2.39		%				2.46		%				4.33		%				4.29		%				3.71		%				2.33		%

________________________________

1.Incorporates a weighted average future constant prepayment rate assumption of 17.6% based on forward rates as of December 31, 2020.

As of ~~March 31,~~September 30, 2021 and December 31, 2020, our investments in CRT and non-Agency securities had the following credit ratings (in millions):


						March 31, 2021																		December 31, 2020																				September 30, 2021																		December 31, 2020
CRT and Non-Agency Security Credit Ratings 1	CRT and Non-Agency Security Credit Ratings 1					CRT						RMBS						CMBS						CRT						RMBS						CMBS			CRT and Non-Agency Security Credit Ratings 1					CRT						RMBS						CMBS						CRT						RMBS						CMBS
AAA	AAA					$	0					$	302					$	20					$	0					$	0					$	35		AAA					$	—					$	—					$	21					$	—					$	—					$	35
AA	AA					0						20						167						0						20						190			AA					—						22						118						—						20						190
A	A					0						33						34						0						32						28			A					—						33						35						—						32						28
BBB	BBB					71						81						63						28						83						55			BBB					32						76						83						28						83						55
BB	BB					224						42						58						167						36						43			BB					263						42						83						167						36						43
B	B					447						6						31						304						6						7			B					351						9						27						304						6						7
Not Rated	Not Rated					331						11						0						238						11						0			Not Rated					426						15						14						238						11						—
Total	Total					$	1,073					$	495					$	373					$	737					$	188					$	358		Total					$	1,072					$	197					$	381					$	737					$	188					$	358

________________________________

1.Represents the lowest of Standard and Poor's ("S&P"), Moody's, Fitch, DBRS, Kroll Bond Rating Agency ("KBRA") and Morningstar credit ratings, stated in terms of the S&P equivalent rating as of each date.

Our CRT securities reference the performance of loans underlying Agency RMBS issued by Fannie Mae or Freddie Mac, which were subject to their underwriting standards.

The actual maturities of our investment securities are generally shorter than their stated contractual maturities. The actual maturities of our Agency and high credit quality non-Agency RMBS are primarily affected by principal prepayments and to a lesser degree the contractual lives of the underlying mortgages and periodic contractual principal repayments. The actual maturities of our credit-oriented investments are primarily impacted by their contractual lives and default and loss recovery rates. As of ~~March 31,~~September 30, 2021 and December 31, 2020, the weighted average expected constant prepayment rate ("CPR") over the remaining life of our Agency and high credit quality non-Agency RMBS investment portfolio was ~~11.3%~~10.7% and 17.6%, respectively. Our estimates can differ materially for different securities and thus our individual holdings have a wide range of projected CPRs. The following table summarizes our investments as of ~~March 31,~~September 30, 2021 and December 31, 2020 according to their estimated weighted average life classification (dollars in millions):

12


						March 31, 2021																								December 31, 2020																										September 30, 2021																								December 31, 2020
Estimated Weighted Average Life of Investment Securities	Estimated Weighted Average Life of Investment Securities					Fair Value						Amortized Cost						Weighted Average Coupon						Weighted Average Yield						Fair Value						Amortized Cost						Weighted Average Coupon						Weighted Average Yield			Estimated Weighted Average Life of Investment Securities					Fair Value						Amortized Cost						Weighted Average Coupon						Weighted Average Yield						Fair Value						Amortized Cost						Weighted Average Coupon						Weighted Average Yield
≤ 3 years	≤ 3 years					$	1,417					$	1,382					3.44%						2.91%						$	3,642					$	3,569					3.56%						2.15%			≤ 3 years					$	1,457					$	1,414					3.51%						4.28%						$	3,642					$	3,569					3.56%						2.15%
> 3 years and ≤ 5 years	> 3 years and ≤ 5 years					11,282						11,039						3.06%						2.14%						47,740						45,578						3.54%						2.42%			> 3 years and ≤ 5 years					8,766						8,426						3.90%						2.76%						47,740						45,578						3.54%						2.42%
> 5 years and ≤10 years	> 5 years and ≤10 years					50,166						48,918						3.31%						2.46%						15,019						14,541						2.87%						2.08%			> 5 years and ≤10 years					42,927						42,029						3.02%						2.38%						15,019						14,541						2.87%						2.08%
> 10 years	> 10 years					2,632						2,636						2.19%						1.84%						13						13						5.56%						3.59%			> 10 years					2,243						2,243						2.51%						2.11%						13						13						5.56%						3.59%
Total	Total					$	65,497					$	63,975					3.23%						2.39%						$	66,414					$	63,701					3.39%						2.33%			Total					$	55,393					$	54,112					3.15%						2.48%						$	66,414					$	63,701					3.39%						2.33%

Gains and Losses on Sale of Investment Securities

The following table is a summary of our net gain (loss) from the sale of investment securities for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 by investment classification of accounting (in millions):

Three Months Ended March 31,
2021 2020
Investment Securities
Available-for-Sale
Securities 2
Fair Value Option Securities Total
Available-for-Sale
Securities 2
Fair Value Option Securities Total
Investment securities sold, at cost $ (493) $ (5,864) $ (6,357) $ (155) $ (49,440) $ (49,595)
Proceeds from investment securities sold 1
511 5,833 6,344 156 49,933 50,089
Net gain (loss) on sale of investment securities $ 18 $ (31) $ (13) $ 1 $ 493 $ 494
Gross gain on sale of investment securities $ 18 $ 49 $ 67 $ 1 $ 567 $ 568
Gross loss on sale of investment securities 0 (80) (80) 0 (74) (74)
Net gain (loss) on sale of investment securities $ 18 $ (31) $ (13) $ 1 $ 493 $ 494


						Three Months Ended September 30,
						2021																		2020
Investment Securities						Available-for-Sale Securities 2						Fair Value Option Securities						Total						Available-for-Sale Securities 2						Fair Value Option Securities						Total
Investment securities sold, at cost						$	(309)					$	(9,285)					$	(9,594)					$	—					$	(13,430)					$	(13,430)
Proceeds from investment securities sold 1						313						9,276						9,589						—						13,776						13,776
Net gain (loss) on sale of investment securities						$	4					$	(9)					$	(5)					$	—					$	346					$	346

Gross gain on sale of investment securities						$	4					$	63					$	67					$	—					$	354					$	354
Gross loss on sale of investment securities						—						(72)						(72)						—						(8)						(8)
Net gain (loss) on sale of investment securities						$	4					$	(9)					$	(5)					$	—					$	346					$	346


						Nine Months Ended September 30,
						2021																		2020
Investment Securities						Available-for-Sale Securities 2						Fair Value Option Securities						Total						Available-for-Sale Securities 2						Fair Value Option Securities						Total
Investment securities sold, at cost						$	(4,953)					$	(23,808)					$	(28,761)					$	(1,433)					$	(67,342)					$	(68,775)
Proceeds from investment securities sold 1						4,989						23,779						28,768						1,473						68,295						69,768
Net gain (loss) on sale of investment securities						$	36					$	(29)					$	7					$	40					$	953					$	993

Gross gain on sale of investment securities						$	36					$	160					$	196					$	40					$	1,050					$	1,090
Gross loss on sale of investment securities						—						(189)						(189)						—						(97)						(97)
Net gain (loss) on sale of investment securities						$	36					$	(29)					$	7					$	40					$	953					$	993

________________________________

1.Proceeds include cash received during the period, plus receivable for investment securities sold during the period as of period end.

2.See Note 9 for a summary of changes in accumulated OCI.

Note 4. Repurchase Agreements and Reverse Repurchase Agreements

Repurchase Agreements

We pledge our securities as collateral under our borrowings structured as repurchase agreements with financial institutions. Amounts available to be borrowed are dependent upon the fair value of the securities pledged as collateral, which fluctuates with changes in interest rates, type of security and liquidity conditions within the banking, mortgage finance and real estate industries. If the fair value of our pledged securities declines, lenders will typically require us to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as "margin calls." Similarly, if the fair value of our pledged securities increases, lenders may release collateral back to us. As of ~~March 31,~~September 30, 2021, we had met all margin call requirements. For additional information regarding our pledged assets, please refer to Note 6.

As of ~~March 31,~~September 30, 2021 and December 31, 2020, we had ~~$55.1~~$46.5 billion and $52.4 billion, respectively, of repurchase agreements outstanding used to fund our investment ~~portfolio.~~portfolio and temporary holdings of U.S. Treasury securities. The terms and conditions of our repurchase agreements are typically negotiated on a transaction-by-transaction basis. Our repurchase agreements with original maturities greater than one year may have floating interest rates based on an index plus or minus a

13

fixed spread. The following table summarizes our borrowings under repurchase agreements by their remaining maturities as of ~~March 31,~~September 30, 2021 and December 31, 2020 (dollars in millions):

13


						March 31, 2021																		December 31, 2020																				September 30, 2021																		December 31, 2020
Remaining Maturity	Remaining Maturity					Repurchase Agreements						Weighted Average Interest Rate						Weighted Average Days to Maturity						Repurchase Agreements						Weighted Average Interest Rate						Weighted Average Days to Maturity			Remaining Maturity					Repurchase Agreements						Weighted Average Interest Rate						Weighted Average Days to Maturity						Repurchase Agreements						Weighted Average Interest Rate						Weighted Average Days to Maturity
Agency repo:	Agency repo:																																						Agency repo:
≤ 1 month	≤ 1 month					$	31,193					0.12		%				14						$	29,505					0.22		%				12			≤ 1 month					$	20,997					0.10		%				16						$	29,505					0.22		%				12
> 1 to ≤ 3 months	> 1 to ≤ 3 months					11,357						0.23		%				65						13,434						0.27		%				57			> 1 to ≤ 3 months					11,652						0.13		%				63						13,434						0.27		%				57
> 3 to ≤ 6 months	> 3 to ≤ 6 months					5,552						0.18		%				139						7,317						0.28		%				142			> 3 to ≤ 6 months					9,470						0.14		%				126						7,317						0.28		%				142
> 6 to ≤ 9 months	> 6 to ≤ 9 months					3,850						0.14		%				270						660						0.24		%				208			> 6 to ≤ 9 months					1,875						0.14		%				196						660						0.24		%				208
> 9 to ≤ 12 months	> 9 to ≤ 12 months					2,479						0.17		%				316						1,450						0.15		%				354			> 9 to ≤ 12 months					1,595						0.15		%				351						1,450						0.15		%				354
> 12 to ≤ 24 months						625						0.19		%				406						0						0		%				0

Total Agency repo																																							Total Agency repo					45,589						0.12		%				70						52,366						0.24		%				54
U.S. Treasury repo:																																							U.S. Treasury repo:
> 1 day to ≤ 1 month																																							> 1 day to ≤ 1 month					943						0.07		%				3						—						—		%				—
Total	Total					$	55,056					0.15		%				73						$	52,366					0.24		%				54			Total					$	46,532					0.12		%				69						$	52,366					0.24		%				54

As of ~~March 31,~~September 30, 2021 and December 31, 2020, ~~$4.3~~$3.7 billion and $11.2 billion, respectively, of our repurchase agreements had ~~a remaining~~an overnight maturity of one business day and none of our repurchase agreements were due on demand. As of ~~March 31,~~September 30, 2021, we had no$2.5 billion of forward commitments to enter into repurchase ~~agreements.~~agreements with a weighted average forward start date of 1 day and a weighted average interest rate of 0.06%. As of December 31, 2020, we had $2.9 billion of forward commitments to enter into repurchase agreements, with a weighted average forward start date of 4 days and a weighted average interest rate of 0.12%. As of ~~March 31,~~September 30, 2021 and December 31, 2020, ~~45%~~43% and 47%, respectively, of our repurchase agreement funding was sourced through our wholly-owned captive broker-dealer subsidiary, Bethesda Securities, LLC ("BES"). Amounts sourced through BES include funding from the General Collateral Finance Repo service ("GCF Repo") offered by the Fixed Income Clearing Corporation ("FICC"), which totaled ~~44%~~42% and 46% of our repurchase agreement funding outstanding as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

During the nine months ended September 30, 2020, we terminated $3.7 billion of repurchase agreements with a weighted average interest rate of 2.11% and a weighted average remaining maturity of 2.2 years. The terminated agreements were replaced with shorter duration repurchase agreements at lower prevailing market rates. We recognized losses on debt extinguishment of $146 million in other gain (loss), net for the nine months ended September 30, 2020 associated with the terminated repurchase agreements. We did not terminate any repurchase agreements during the current year periods.

Reverse Repurchase Agreements

As of ~~March 31,~~September 30, 2021 and December 31, 2020, we had ~~$16.8~~$9.6 billion and $11.7 billion, respectively, of reverse repurchase agreements outstanding used primarily to borrow securities to cover short sales of U.S. Treasury securities, for which we had associated obligations to return borrowed securities at fair value of ~~$15.1~~$8.9 billion and $11.7 billion, respectively. As of ~~March 31,~~September 30, 2021 and December 31, 2020, ~~$3.3~~$2.5 billion and $3.6 billion, respectively, of our reverse repurchase agreements were with the FICC sourced through BES.

Note 5. Derivative and Other Hedging Instruments

We hedge a portion of our interest rate risk primarily utilizing interest rate swaps, interest rate swaptions, U.S. Treasury securities and U.S. Treasury futures contracts. We utilize TBA securities primarily as a means of investing in the Agency securities market. For additional information regarding our derivative instruments and our overall risk management strategy, please refer to the discussion of derivative and other hedging instruments in Note 2.

14

Derivative and Other Hedging Instrument Assets (Liabilities), at Fair Value

The table below summarizes fair value information about our derivative and other hedging instrument assets/(liabilities) as of ~~March 31,~~September 30, 2021 and December 31, 2020 (in millions):


Derivative and Other Hedging Instruments	Derivative and Other Hedging Instruments					Balance Sheet Location						March 31, 2021						December 31, 2020			Derivative and Other Hedging Instruments					Balance Sheet Location						September 30, 2021						December 31, 2020
Interest rate swaps						Derivative assets, at fair value						$	45					$	0

Swaptions	Swaptions					Derivative assets, at fair value						607						116			Swaptions					Derivative assets, at fair value						$	374					$	116
TBA securities						Derivative assets, at fair value						13						275
TBA and forward settling non-Agency securities																					TBA and forward settling non-Agency securities					Derivative assets, at fair value						7						275
U.S. Treasury futures - short	U.S. Treasury futures - short					Derivative assets, at fair value						33						0			U.S. Treasury futures - short					Derivative assets, at fair value						21						—
Total derivative assets, at fair value	Total derivative assets, at fair value											$	698					$	391		Total derivative assets, at fair value											$	402					$	391

TBA securities						Derivative liabilities, at fair value						(589)						0
TBA and forward settling non-Agency securities																					TBA and forward settling non-Agency securities					Derivative liabilities, at fair value						(178)						—
U.S. Treasury futures - short	U.S. Treasury futures - short					Derivative liabilities, at fair value						0						(2)			U.S. Treasury futures - short					Derivative liabilities, at fair value						—						(2)
Total derivative liabilities, at fair value	Total derivative liabilities, at fair value											$	(589)					$	(2)		Total derivative liabilities, at fair value											$	(178)					$	(2)

U.S. Treasury securities - long																					U.S. Treasury securities - long					U.S. Treasury securities, at fair value						$	645					$	—
U.S. Treasury securities - short	U.S. Treasury securities - short					Obligation to return securities borrowed under reverse repurchase agreements, at fair value						(15,090)						(11,727)			U.S. Treasury securities - short					Obligation to return securities borrowed under reverse repurchase agreements, at fair value						(8,896)						(11,727)
Total U.S. Treasury securities, net at fair value	Total U.S. Treasury securities, net at fair value											$	(15,090)					$	(11,727)		Total U.S. Treasury securities, net at fair value											$	(8,251)					$	(11,727)

The following tables summarize certain characteristics of our derivative and other hedging instruments outstanding as of ~~March 31,~~September 30, 2021 and December 31, 2020 (dollars in millions):


						March 31, 2021																								December 31, 2020																										September 30, 2021																								December 31, 2020
Pay Fixed / Receive Variable Interest Rate Swaps	Pay Fixed / Receive Variable Interest Rate Swaps					Notional Amount						Average Fixed Pay Rate						Average Receive Rate						Average Maturity (Years)						Notional Amount						Average Fixed Pay Rate						Average Receive Rate						Average Maturity (Years)			Pay Fixed / Receive Variable Interest Rate Swaps					Notional Amount						Average Fixed Pay Rate						Average Receive Rate						Average Maturity (Years)						Notional Amount						Average Fixed Pay Rate						Average Receive Rate						Average Maturity (Years)
≤ 3 years	≤ 3 years					$	14,000					0.12%						0.02%						2.4						$	8,750					0.04%						0.08%						2.4			≤ 3 years					$	22,500					0.10%						0.05%						2.3						$	8,750					0.04%						0.08%						2.4
> 3 to ≤ 5 years	> 3 to ≤ 5 years					17,750						0.11%						0.03%						3.9						17,000						0.10%						0.08%						4.1			> 3 to ≤ 5 years					15,300						0.16%						0.05%						4.2						17,000						0.10%						0.08%						4.1
> 5 to ≤ 7 years	> 5 to ≤ 7 years					9,800						0.21%						0.02%						5.6						9,800						0.21%						0.08%						5.8			> 5 to ≤ 7 years					6,800						0.29%						0.05%						6.0						9,800						0.21%						0.08%						5.8
> 7 to ≤ 10 years	> 7 to ≤ 10 years					6,700						0.36%						0.02%						8.3						6,200						0.28%						0.07%						8.5			> 7 to ≤ 10 years					3,650						0.33%						0.05%						8.4						6,200						0.28%						0.07%						8.5
> 10 years	> 10 years					1,475						0.47%						0.02%						13.9						1,475						0.47%						0.07%						14.2			> 10 years					1,475						0.47%						0.05%						13.4						1,475						0.47%						0.07%						14.2
Total	Total					$	49,725					0.18%						0.02%						4.7						$	43,225					0.15%						0.08%						5.1			Total					$	49,725					0.17%						0.05%						4.2						$	43,225					0.15%						0.08%						5.1


Pay Fixed / Receive Variable Interest Rate Swaps by Receive Index (% of Notional Amount)	Pay Fixed / Receive Variable Interest Rate Swaps by Receive Index (% of Notional Amount)					March 31, 2021						December 31, 2020			Pay Fixed / Receive Variable Interest Rate Swaps by Receive Index (% of Notional Amount)					September 30, 2021						December 31, 2020
SOFR	SOFR					74		%				71		%	SOFR					74		%				71		%
OIS	OIS					26		%				29		%	OIS					26		%				29		%
Total	Total					100		%				100		%	Total					100		%				100		%

15


Swaptions	Swaptions					Option																		Underlying Payer Swap															Swaptions					Option																		Underlying Payer Swap
Current Option Expiration Date	Current Option Expiration Date					Cost Basis						Fair Value						Average Months to Current Option Expiration Date 1						Notional Amount						Average Fixed Pay Rate 2						Average Term (Years)			Current Option Expiration Date					Cost Basis						Fair Value						Average Months to Current Option Expiration Date 1						Notional Amount						Average Fixed Pay Rate 2						Average Term (Years)
March 31, 2021
September 30, 2021																																							September 30, 2021
≤ 1 year	≤ 1 year					$	116					$	110					6						$	5,400					2.17%						9.0			≤ 1 year					$	85					$	53					6						$	3,200					1.80%						8.3
> 1 year ≤ 2 years	> 1 year ≤ 2 years					62						182						20						2,750						1.39%						10.0			> 1 year ≤ 2 years					104						156						19						4,500						1.62%						10.0
> 2 year ≤ 3 years	> 2 year ≤ 3 years					129						292						33						4,750						1.96%						10.0			> 2 year ≤ 3 years					135						165						30						5,250						2.13%						10.0
> 3 year ≤ 4 years						8						23						37						250						1.43%						10.0

Total	Total					$	315					$	607					19						$	13,150					1.92%						9.6			Total					$	324					$	374					20						$	12,950					1.87%						9.6

December 31, 2020	December 31, 2020																																						December 31, 2020
≤ 1 year	≤ 1 year					$	123					$	15					5						$	5,900					2.17%						9.2			≤ 1 year					$	123					$	15					5						$	5,900					2.17%						9.2
> 1 year ≤ 2 years	> 1 year ≤ 2 years					41						33						20						2,000						1.38%						10.0			> 1 year ≤ 2 years					41						33						20						2,000						1.38%						10.0
> 2 year ≤ 3 years	> 2 year ≤ 3 years					65						60						33						2,250						1.40%						10.0			> 2 year ≤ 3 years					65						60						33						2,250						1.40%						10.0
> 3 year ≤ 4 years	> 3 year ≤ 4 years					8						8						40						250						1.43%						10.0			> 3 year ≤ 4 years					8						8						40						250						1.43%						10.0
Total	Total					$	237					$	116					15						$	10,400					1.84%						9.5			Total					$	237					$	116					15						$	10,400					1.84%						9.5

1.As of ~~March 31,~~September 30, 2021 and December 31, 2020, ≤ 1 year notional amount includes $700 million of Bermudan swaptions where the options may be exercised on predetermined dates up to their final exercise date, which is six months prior to the underlying swaps' maturity date.

2.As of ~~March 31,~~September 30, 2021, ~~20%~~95% and ~~80%~~5% of the underlying swap receive rates were tied to SOFR and 3-Month LIBOR, ~~and SOFR,~~ respectively. As of December 31, 2020, ~~33%~~67% and ~~67%~~33% of the underlying ~~payer~~ swap receive rates were tied to SOFR and 3-Month LIBOR, ~~and SOFR,~~ respectively.


U.S. Treasury Securities	U.S. Treasury Securities					March 31, 2021																		December 31, 2020															U.S. Treasury Securities					September 30, 2021																		December 31, 2020
Maturity	Maturity					Face Amount Long/(Short)						Cost Basis 1						Fair Value						Face Amount Long/(Short)						Cost Basis 1						Fair Value			Maturity					Face Amount Long/(Short)						Cost Basis 1						Fair Value						Face Amount Long/(Short)						Cost Basis 1						Fair Value
5 years	5 years					$	(1,965)					$	(1,946)					$	(1,921)					$	(425)					$	(425)					$	(425)		5 years					$	(171)					$	(165)					$	(162)					$	(425)					$	(425)					$	(425)
7 years	7 years					(1,333)						(1,323)						(1,282)						(1,083)						(1,081)						(1,089)			7 years					(733)						(730)						(706)						(1,083)						(1,081)						(1,089)
10 years	10 years					(12,229)						(12,269)						(11,887)						(9,780)						(9,862)						(10,213)			10 years					(7,285)						(7,281)						(7,383)						(9,780)						(9,862)						(10,213)
Total U.S. Treasury securities	Total U.S. Treasury securities					$	(15,527)					$	(15,538)					$	(15,090)					$	(11,288)					$	(11,368)					$	(11,727)		Total U.S. Treasury securities					$	(8,189)					$	(8,176)					$	(8,251)					$	(11,288)					$	(11,368)					$	(11,727)

1.As of ~~March 31,~~September 30, 2021 and December 31, 2020, short U.S. Treasury securities had a weighted average yield of ~~1.17%~~1.46% and 1.20%, ~~respectively.~~respectively, and long U.S. Treasury securities totaling $645 million, at fair value, had a weighted average yield of 0.56% as of September 30, 2021.


U.S. Treasury Futures	U.S. Treasury Futures					March 31, 2021																								December 31, 2020																					U.S. Treasury Futures					September 30, 2021																								December 31, 2020
Maturity	Maturity					Notional Amount Long (Short)						Cost Basis						Fair Value						Net Carrying Value 1						Notional Amount Long (Short)						Cost Basis						Fair Value						Net Carrying Value 1			Maturity					Notional Amount Long (Short)						Cost Basis						Fair Value						Net Carrying Value 1						Notional Amount Long (Short)						Cost Basis						Fair Value						Net Carrying Value 1
10 years	10 years					$	(1,000)					$	(1,342)					$	(1,309)					$	33					$	(1,000)					$	(1,379)					$	(1,381)					$	(2)		10 years					$	(1,500)					$	(1,995)					$	(1,974)					$	21					$	(1,000)					$	(1,379)					$	(1,381)					$	(2)

1.Net carrying value represents the difference between the fair market value and the cost basis (or the forward price to be paid/(received) for the underlying U.S. Treasury security) of the U.S. Treasury futures contract as of period-end and is reported in derivative assets/(liabilities), at fair value in our consolidated balance sheets.

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						March 31, 2021																								December 31, 2020																										September 30, 2021																								December 31, 2020
TBA Securities by Coupon						Notional Amount Long (Short)						Cost Basis						Fair Value						Net Carrying Value 1						Notional Amount Long (Short)						Cost Basis						Fair Value						Net Carrying Value 1
TBA Securities by Coupon 2																																																			TBA Securities by Coupon 2					Notional Amount Long (Short)						Cost Basis						Fair Value						Net Carrying Value 1						Notional Amount Long (Short)						Cost Basis						Fair Value						Net Carrying Value 1
15-Year TBA securities:	15-Year TBA securities:																																																		15-Year TBA securities:
≤ 2.0%	≤ 2.0%					$	(2,584)					$	(2,695)					$	(2,699)					(4)						$	6,540					$	6,708					$	6,771					$	63		≤ 2.0%					$	1,982					$	2,025					$	2,016					(9)						$	6,540					$	6,708					$	6,771					$	63
2.5%	2.5%					328						343						341						(2)						200						208						209						1			2.5%					—						—						—						—						200						208						209						1

Total 15-Year TBA securities	Total 15-Year TBA securities					(2,256)						(2,352)						(2,358)						(6)						6,740						6,916						6,980						64			Total 15-Year TBA securities					1,982						2,025						2,016						(9)						6,740						6,916						6,980						64
30-Year TBA securities:	30-Year TBA securities:																																																		30-Year TBA securities:
≤ 2.0%	≤ 2.0%					10,346						10,778						10,294						(484)						19,805						20,314						20,480						166			≤ 2.0%					5,774						5,852						5,776						(76)						19,805						20,314						20,480						166
2.5%	2.5%					14,524						14,932						14,855						(77)						3,167						3,291						3,335						44			2.5%					16,875						17,440						17,353						(87)						3,167						3,291						3,335						44
3.0%	3.0%					1,503						1,571						1,565						(6)						528						552						553						1			3.0%					2,417						2,524						2,525						1						528						552						553						1
3.5%	3.5%					401						426						423						(3)						124						131						131						0			3.5%					581						616						615						(1)						124						131						131						—

Total 30-Year TBA securities, net	Total 30-Year TBA securities, net					26,774						27,707						27,137						(570)						23,624						24,288						24,499						211			Total 30-Year TBA securities, net					25,647						26,432						26,269						(163)						23,624						24,288						24,499						211
Total TBA securities, net	Total TBA securities, net					$	24,518					$	25,355					$	24,779					$	(576)					$	30,364					$	31,204					$	31,479					$	275		Total TBA securities, net					$	27,629					$	28,457					$	28,285					$	(172)					$	30,364					$	31,204					$	31,479					$	275

1.Net carrying value represents the difference between the fair market value and the cost basis (or the forward price to be paid/(received) for the underlying Agency security) of the TBA contract as of period-end and is reported in derivative assets/(liabilities), at fair value in our consolidated balance sheets.

2.Table excludes forward settling non-Agency securities totaling $0.5 billion market value and $1 million net carrying value as of September 30, 2021.

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

The following table summarizes changes in our derivative and other hedge portfolio and their effect on our consolidated statements of comprehensive income for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (in millions):


Derivative and Other Hedging Instruments	Derivative and Other Hedging Instruments					Beginning Notional Amount						Additions						Settlement, Termination, Expiration or Exercise						Ending Notional Amount									Gain/(Loss) on Derivative Instruments and Other Securities, Net 1			Derivative and Other Hedging Instruments					Beginning Notional Amount						Additions						Settlement, Termination, Expiration or Exercise						Ending Notional Amount									Gain/(Loss) on Derivative Instruments and Other Securities, Net 1
Three months ended March 31, 2021:
Three months ended September 30, 2021:																																				Three months ended September 30, 2021:
TBA securities, net																																				TBA securities, net					$	26,567					86,363						(85,301)						$	27,629								$	30
Forward settling non-Agency securities																																				Forward settling non-Agency securities					$	300					750						(600)						$	450								3
Interest rate swaps - payer																																				Interest rate swaps - payer					$	49,725					500						(500)						$	49,725								57
Payer swaptions																																				Payer swaptions					$	11,450					3,000						(1,500)						$	12,950								28
U.S. Treasury securities - short position																																				U.S. Treasury securities - short position					$	(10,893)					(1,443)						3,498						$	(8,838)								(11)
U.S. Treasury securities - long position																																				U.S. Treasury securities - long position					$	397					4,098						(3,846)						$	649								(8)
U.S. Treasury futures contracts - short position																																				U.S. Treasury futures contracts - short position					$	(1,500)					(1,500)						1,500						$	(1,500)								5
																																																																				$	104
Three months ended September 30, 2020:																																				Three months ended September 30, 2020:
TBA securities, net	TBA securities, net					$	30,364					93,336						(99,182)						$	24,518								$	(926)		TBA securities, net					$	19,760					80,599						(71,838)						$	28,521								$	283
Interest rate swaps - payer	Interest rate swaps - payer					$	43,225					7,000						(500)						$	49,725								1,124			Interest rate swaps - payer					$	42,075					24,975						(24,075)						$	42,975								140
Payer swaptions	Payer swaptions					$	10,400					4,250						(1,500)						$	13,150								387			Payer swaptions					$	9,350					—						(2,450)						$	6,900								(1)
U.S. Treasury securities - short position	U.S. Treasury securities - short position					$	(11,287)					(7,261)						3,021						$	(15,527)								807			U.S. Treasury securities - short position					$	(7,247)					(2,735)						2,255						$	(7,727)								(15)
U.S. Treasury securities - long position	U.S. Treasury securities - long position					$	0					1,315						(1,315)						$	0								(10)			U.S. Treasury securities - long position					$	1,132					—						(1,132)						$	—								1
U.S. Treasury futures contracts - short position	U.S. Treasury futures contracts - short position					$	(1,000)					(1,000)						1,000						$	(1,000)								61			U.S. Treasury futures contracts - short position					$	(1,000)					(1,000)						1,000						$	(1,000)								(5)
																																	$	1,443																																		$	403
Three months ended March 31, 2020:
TBA securities, net						$	7,322					37,750						(24,793)						$	20,279								$	693
Interest rate swaps - payer						$	79,075					49,975						(82,575)						$	46,475								(2,795)
Payer swaptions						$	8,850					2,000						(1,300)						$	9,550								(134)
U.S. Treasury securities - short position						$	(9,224)					(6,045)						11,024						$	(4,245)								(937)
U.S. Treasury securities - long position						$	95					6,461						(2,987)						$	3,569								97
U.S. Treasury futures contracts - short position						$	(1,000)					(1,000)						1,000						$	(1,000)								(104)
																																	$	(3,180)

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Nine months ended September 30, 2021:
TBA securities, net						$	30,364					273,947						(276,682)						$	27,629								$	(500)
Forward settling non-Agency securities						$	—					1,050						(600)						$	450								3
Interest rate swaps - payer						$	43,225					7,500						(1,000)						$	49,725								781
Payer swaptions						$	10,400					7,250						(4,700)						$	12,950								102
U.S. Treasury securities - short position						$	(11,287)					(9,289)						11,738						$	(8,838)								463
U.S. Treasury securities - long position						$	—					6,749						(6,100)						$	649								(19)
U.S. Treasury futures contracts - short position						$	(1,000)					(4,500)						4,000						$	(1,500)								37
																																	$	867
Nine months ended September 30, 2020:
TBA securities, net						$	7,322					193,535						(172,336)						$	28,521								$	1,196
Interest rate swaps - payer						$	79,075					100,700						(136,800)						$	42,975								(3,034)
Payer swaptions						$	8,850					2,000						(3,950)						$	6,900								(149)
U.S. Treasury securities - short position						$	(9,224)					(12,967)						14,464						$	(7,727)								(1,012)
U.S. Treasury securities - long position						$	95					7,011						(7,106)						$	—								102
U.S. Treasury futures contracts - short position						$	(1,000)					(3,000)						3,000						$	(1,000)								(117)
																																	$	(3,014)

1.Amounts exclude other miscellaneous gains and losses recognized in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income. Amounts for the nine months ended September 30, 2020 exclude $146 million of losses on debt extinguishment (see Note 4).

Note 6. Pledged Assets

Our funding agreements require us to fully collateralize our obligations under the agreements based upon our counterparties' collateral requirements and their determination of the fair value of the securities pledged as collateral, which fluctuates with changes in interest rates, credit quality and liquidity conditions within the investment banking, mortgage finance and real estate industries. Our derivative contracts similarly require us to fully collateralize our obligations under such agreements, which will vary over time based on similar factors as well as our counterparties' determination of the value of the derivative contract. We are typically required to post initial margin upon execution of derivative transactions, such as under our

17

interest rate swap agreements and TBA contracts, and subsequently post or receive variation margin based on daily fluctuations in fair value. Our brokerage and custody agreements and the clearing organizations utilized by our wholly-owned captive broker-dealer subsidiary, Bethesda Securities, LLC, also require that we post minimum daily clearing deposits. If we breach our collateral requirements, we will be required to fully settle our obligations under the agreements, which could include a forced liquidation of our pledged collateral.

Our counterparties also apply a "haircut" to our pledged collateral, which means our collateral is valued at slightly less than market value and limits the amount we can borrow against our securities. This haircut reflects the underlying risk of the specific collateral and protects our counterparty against a change in its value. Our agreements do not specify the haircut; rather, haircuts are determined on an individual transaction basis. Consequently, our funding agreements and derivative contracts expose us to credit risk relating to potential losses that could be recognized if our counterparties fail to perform their obligations under such agreements. We minimize this risk by limiting our counterparties to major financial institutions with acceptable credit ratings or to registered clearinghouses and U.S. government agencies, and we monitor our positions with individual counterparties. In the event of a default by a counterparty, we may have difficulty obtaining our assets pledged as collateral to such counterparty and may not receive payments as and when due to us under the terms of our derivative agreements. In the case of centrally cleared instruments, we could be exposed to credit risk if the central clearing agency or a clearing member defaults on its respective obligation to perform under the contract. However, we believe that the risk is minimal due to the clearing exchanges' initial and daily mark-to-market margin requirements, clearinghouse guarantee funds and other resources that are available in the event of a clearing member default.

As of ~~March 31,~~September 30, 2021, our maximum amount at risk with any counterparty related to our repurchase agreements, excluding the Fixed Income Clearing Corporation, was less than 2% of our tangible stockholders' equity (or the excess/shortfall of the value of collateral pledged/received over our repurchase agreement liabilities/reverse repurchase agreement receivables). As of ~~March 31,~~September 30, 2021, approximately 9%7% of our tangible stockholder's equity was at risk with the Fixed Income Clearing Corporation.

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Assets Pledged to Counterparties

The following tables summarize our assets pledged as collateral under our funding, derivative and brokerage and clearing agreements by type, including securities pledged related to securities sold but not yet settled, as of ~~March 31,~~September 30, 2021 and December 31, 2020 (in millions):


						March 31, 2021																																September 30, 2021
Assets Pledged to Counterparties 1	Assets Pledged to Counterparties 1					Repurchase Agreements 2						Debt of Consolidated VIEs						Derivative Agreements						Brokerage and Clearing Agreements 3						Total			Assets Pledged to Counterparties 1					Repurchase Agreements 2						Debt of Consolidated VIEs						Derivative Agreements						Brokerage and Clearing Agreements 3						Total
Agency RMBS - fair value	Agency RMBS - fair value					$	55,977					$	270					$	319					$	153					$	56,719		Agency RMBS - fair value					$	46,144					$	226					$	448					$	491					$	47,309
CRT - fair value	CRT - fair value					406						—						0						—						406			CRT - fair value					534						—						—						—						534
Non-Agency - fair value	Non-Agency - fair value					414						—						0						—						414			Non-Agency - fair value					380						—						—						—						380
U.S. Treasury securities - fair value	U.S. Treasury securities - fair value					342						—						0						1,039						1,381			U.S. Treasury securities - fair value					917						—						—						286						1,203
Accrued interest on pledged securities	Accrued interest on pledged securities					145						1						1						0						147			Accrued interest on pledged securities					117						1						1						1						120
Restricted cash	Restricted cash					34						—						779						0						813			Restricted cash					18						—						446						—						464
Total	Total					$	57,318					$	271					$	1,099					$	1,192					$	59,880		Total					$	48,110					$	227					$	895					$	778					$	50,010


						December 31, 2020																																December 31, 2020
Assets Pledged to Counterparties 1	Assets Pledged to Counterparties 1					Repurchase Agreements 2						Debt of Consolidated VIEs						Derivative Agreements						Brokerage and Clearing Agreements 3						Total			Assets Pledged to Counterparties 1					Repurchase Agreements 2						Debt of Consolidated VIEs						Derivative Agreements						Brokerage and Clearing Agreements 3						Total
Agency RMBS - fair value	Agency RMBS - fair value					$	53,401					$	295					$	365					$	258					$	54,319		Agency RMBS - fair value					$	53,401					$	295					$	365					$	258					$	54,319
CRT - fair value	CRT - fair value					455						—						0						—						455			CRT - fair value					455						—						—						—						455
Non-Agency - fair value	Non-Agency - fair value					458						—						0						—						458			Non-Agency - fair value					458						—						—						—						458

Accrued interest on pledged securities	Accrued interest on pledged securities					147						1						1						1						150			Accrued interest on pledged securities					147						1						1						1						150
Restricted cash	Restricted cash					417						—						890						0						1,307			Restricted cash					417						—						890						—						1,307
Total	Total					$	54,878					$	296					$	1,256					$	259					$	56,689		Total					$	54,878					$	296					$	1,256					$	259					$	56,689

1.Includes repledged assets received as collateral from counterparties and securities sold but not yet settled.

2.Includes ~~$106~~$89 million and $119 million of retained interests in our consolidated VIEs pledged as collateral under repurchase agreements as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

3.Includes margin for TBAs cleared through prime brokers and other clearing deposits.

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The following table summarizes our securities pledged as collateral under our repurchase agreements by the remaining maturity of our borrowings, including securities pledged related to sold but not yet settled securities, as of ~~March 31,~~September 30, 2021 and December 31, 2020 (in millions). For the corresponding borrowings associated with the following amounts and the interest rates thereon, refer to Note 4.


						March 31, 2021																		December 31, 2020																				September 30, 2021																		December 31, 2020
Securities Pledged by Remaining Maturity of Repurchase Agreements 1,2	Securities Pledged by Remaining Maturity of Repurchase Agreements 1,2					Fair Value of Pledged Securities						Amortized Cost of Pledged Securities						Accrued Interest on Pledged Securities						Fair Value of Pledged Securities						Amortized Cost of Pledged Securities						Accrued Interest on Pledged Securities			Securities Pledged by Remaining Maturity of Repurchase Agreements 1,2					Fair Value of Pledged Securities						Amortized Cost of Pledged Securities						Accrued Interest on Pledged Securities						Fair Value of Pledged Securities						Amortized Cost of Pledged Securities						Accrued Interest on Pledged Securities
≤ 30 days	≤ 30 days					$	31,543					$	30,658					$	81					$	29,674					$	28,208					$	82		≤ 30 days					$	21,772					$	21,202					$	54					$	29,674					$	28,208					$	82
> 30 and ≤ 60 days	> 30 and ≤ 60 days					4,205						4,080						12						8,438						8,013						23			> 30 and ≤ 60 days					5,933						5,745						15						8,438						8,013						23
> 60 and ≤ 90 days	> 60 and ≤ 90 days					6,975						6,797						17						5,782						5,495						16			> 60 and ≤ 90 days					7,503						7,258						20						5,782						5,495						16
> 90 days	> 90 days					14,074						13,786						35						10,420						10,068						26			> 90 days					12,496						12,313						28						10,420						10,068						26
Total	Total					$	56,797					$	55,321					$	145					$	54,314					$	51,784					$	147		Total					$	47,704					$	46,518					$	117					$	54,314					$	51,784					$	147

1.Includes ~~$106~~$89 million and $119 million of retained interests in our consolidated VIEs pledged as collateral under repurchase agreements as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

2.Excludes ~~$1.4~~$0.6 billion of repledged U.S. Treasury securities received as collateral from counterparties as of ~~March 31,~~September 30, 2021.

Assets Pledged from Counterparties

As of ~~March 31,~~September 30, 2021 and December 31, 2020, we had assets pledged to us from counterparties as collateral under our reverse repurchase and derivative agreements summarized in the tables below (in millions).

March 31, 2021 December 31, 2020
Assets Pledged to AGNC Reverse Repurchase Agreements Derivative Agreements Repurchase Agreements Total Reverse Repurchase Agreements Derivative Agreements Repurchase Agreements Total
U.S. Treasury securities - fair value 1
$ 16,633 $ 0 $ 10 $ 16,643 $ 11,727 $ 0 $ 13 $ 11,740
Cash — 594 10 604 — 107 3 110
Total $ 16,633 $ 594 $ 20 $ 17,247 $ 11,727 $ 107 $ 16 $ 11,850

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						September 30, 2021																								December 31, 2020
Assets Pledged to AGNC						Reverse Repurchase Agreements						Derivative Agreements						Repurchase Agreements						Total						Reverse Repurchase Agreements						Derivative Agreements						Repurchase Agreements						Total
U.S. Treasury securities - fair value 1						$	9,520					$	—					$	32					$	9,552					$	11,727					$	—					$	13					$	11,740
Cash						—						380						—						380						—						107						3						110
Total						$	9,520					$	380					$	32					$	9,932					$	11,727					$	107					$	16					$	11,850

1.As of ~~March 31,~~September 30, 2021, ~~$1.4~~$0.6 billion of U.S. Treasury securities received from counterparties were repledged as collateral. As of ~~March 31,~~September 30, 2021 and December 31, 2020, ~~$15.1~~$8.9 billion and $11.7 billion, respectively, of U.S. Treasury securities received from counterparties were used to cover short sales of U.S. Treasury securities.

Offsetting Assets and Liabilities

Certain of our repurchase agreements and derivative transactions are governed by underlying agreements that generally provide for a right of setoff under master netting arrangements (or similar agreements), including in the event of default or in the event of bankruptcy of either party to the transactions. We present our assets and liabilities subject to such arrangements on a gross basis in our consolidated balance sheets. The following tables present information about our assets and liabilities that are subject to master netting arrangements and can potentially be offset on our consolidated balance sheets as of ~~March 31,~~September 30, 2021 and December 31, 2020 (in millions):


						Offsetting of Financial and Derivative Assets
						Gross Amounts of Recognized Assets						Gross Amounts Offset in the Consolidated Balance Sheets						Net Amounts of Assets Presented in the Consolidated Balance Sheets						Gross Amounts Not Offset in the Consolidated Balance Sheets												Net Amount
																								Financial Instruments						Collateral Received 2
September 30, 2021
Interest rate swap and swaption agreements, at fair value 1						$	374					$	—					$	374					$	—					$	(372)					$	2
TBA and forward settling non-Agency securities, at fair value						7						—						7						(7)						—						—
Receivable under reverse repurchase agreements						9,617						—						9,617						(6,625)						(2,992)						—
Total						$	9,998					$	—					$	9,998					$	(6,632)					$	(3,364)					$	2

December 31, 2020
Interest rate swap and swaption agreements, at fair value 1						$	116					$	—					$	116					$	—					$	(105)					$	11
TBA securities, at fair value						275						—						275						—						—						275
Receivable under reverse repurchase agreements						11,748						—						11,748						(6,522)						(5,223)						3
Total						$	12,139					$	—					$	12,139					$	(6,522)					$	(5,328)					$	289


						Offsetting of Financial and Derivative Liabilities
						Gross Amounts of Recognized Liabilities						Gross Amounts Offset in the Consolidated Balance Sheets						Net Amounts of Liabilities Presented in the Consolidated Balance Sheets						Gross Amounts Not Offset in the Consolidated Balance Sheets												Net Amount
																								Financial Instruments						Collateral Pledged 2
September 30, 2021

TBA and forward settling non-Agency securities, at fair value						$	178					$	—					$	178					$	(7)					$	(171)					$	—
Repurchase agreements						46,532						—						46,532						(6,625)						(39,907)						—
Total						$	46,710					$	—					$	46,710					$	(6,632)					$	(40,078)					$	—

December 31, 2020


Repurchase agreements						$	52,366					$	—					$	52,366					$	(6,522)					$	(45,844)					$	—
Total						$	52,366					$	—					$	52,366					$	(6,522)					$	(45,844)					$	—

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Offsetting of Financial and Derivative Assets
Gross Amounts of Recognized Assets Gross Amounts Offset in the Consolidated Balance Sheets Net Amounts of Assets Presented in the Consolidated Balance Sheets Gross Amounts Not Offset
in the
Consolidated Balance Sheets Net Amount
Financial Instruments
Collateral Received 2
March 31, 2021
Interest rate swap and swaption agreements, at fair value 1
$ 652 $ — $ 652 $ 0 $ (593) $ 59
TBA securities, at fair value 13 — 13 (13) — 0
Receivable under reverse repurchase agreements 16,803 0 16,803 (8,435) (8,368) 0
Total $ 17,468 $ 0 $ 17,468 $ (8,448) $ (8,961) $ 59
December 31, 2020
Interest rate swap and swaption agreements, at fair value 1
$ 116 $ — $ 116 $ 0 $ (105) $ 11
TBA securities, at fair value 275 — 275 0 — 275
Receivable under reverse repurchase agreements 11,748 — 11,748 (6,522) (5,223) 3
Total $ 12,139 $ — $ 12,139 $ (6,522) $ (5,328) $ 289

Offsetting of Financial and Derivative Liabilities
Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Consolidated Balance Sheets Net Amounts of Liabilities Presented in the Consolidated Balance Sheets Gross Amounts Not Offset
in the
Consolidated Balance Sheets Net Amount
Financial Instruments
Collateral Pledged 2
March 31, 2021
TBA securities, at fair value 589 — 589 (13) (576) 0
Repurchase agreements 55,056 0 55,056 (8,435) (46,621) 0
Total $ 55,645 $ 0 $ 55,645 $ (8,448) $ (47,197) $ 0
December 31, 2020
Repurchase agreements 52,366 — 52,366 (6,522) (45,844) 0
Total $ 52,366 $ — $ 52,366 $ (6,522) $ (45,844) $ 0

1.Reported under derivative assets / liabilities, at fair value in the accompanying consolidated balance sheets. Refer to Note 5 for a reconciliation of derivative assets / liabilities, at fair value to their sub-components.

2.Includes cash and securities pledged / received as collateral, at fair value. Amounts include repledged collateral. Amounts presented are limited to collateral pledged sufficient to reduce the net amount to zero for individual counterparties, as applicable.

Note 7. Fair Value Measurements

The following table provides a summary of our assets and liabilities that are measured at fair value on a recurring basis, as of ~~March 31,~~September 30, 2021 and December 31, 2020, based on their categorization within the valuation hierarchy (in millions). There were no transfers between valuation hierarchy levels during the periods presented in our accompanying consolidated statements of comprehensive income.

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						March 31, 2021																		December 31, 2020																				September 30, 2021																		December 31, 2020
						Level 1						Level 2						Level 3						Level 1						Level 2						Level 3								Level 1						Level 2						Level 3						Level 1						Level 2						Level 3
Assets:	Assets:																																						Assets:
Agency securities	Agency securities					$	—					$	63,286					$	—					$	—					$	64,836					$	—		Agency securities					$	—					$	53,517					$	—					$	—					$	64,836					$	—
Agency securities transferred to consolidated VIEs	Agency securities transferred to consolidated VIEs					—						270						—						—						295						—			Agency securities transferred to consolidated VIEs					—						226						—						—						295						—
Credit risk transfer securities	Credit risk transfer securities					—						1,073						—						—						737						—			Credit risk transfer securities					—						1,072						—						—						737						—
Non-Agency securities	Non-Agency securities					—						868						—						—						546						—			Non-Agency securities					—						578						—						—						546						—
U.S. Treasury securities																																							U.S. Treasury securities					645						—						—						—						—						—

Interest rate swaps						—						45						—						—						0						—
Swaptions	Swaptions					—						607						—						—						116						—			Swaptions					—						374						—						—						116						—
TBA securities						—						13						—						—						275						—
TBA and forward settling securities																																							TBA and forward settling securities					—						7						—						—						275						—
U.S. Treasury futures	U.S. Treasury futures					33						—						—						0						—						—			U.S. Treasury futures					21						—						—						—						—						—
Total	Total					$	33					$	66,162					$	—					$	0					$	66,805					$	—		Total					$	666					$	55,774					$	—					$	—					$	66,805					$	—
Liabilities:	Liabilities:																																						Liabilities:
Debt of consolidated VIEs	Debt of consolidated VIEs					$	—					$	165					$	—					$	—					$	177					$	—		Debt of consolidated VIEs					$	—					$	134					$	—					$	—					$	177					$	—
Obligation to return U.S. Treasury securities borrowed under reverse repurchase agreements	Obligation to return U.S. Treasury securities borrowed under reverse repurchase agreements					15,090						—						—						11,727						—						—			Obligation to return U.S. Treasury securities borrowed under reverse repurchase agreements					8,896						—						—						11,727						—						—
Interest rate swaps						—						0						—						—						0						—
TBA securities						—						589						—						—						0						—

TBA and forward settling securities																																							TBA and forward settling securities					—						178						—						—						—						—
U.S. Treasury futures	U.S. Treasury futures					0						—						—						2						—						—			U.S. Treasury futures					—						—						—						2						—						—
Total	Total					$	15,090					$	754					$	—					$	11,729					$	177					$	—		Total					$	8,896					$	312					$	—					$	11,729					$	177					$	—

Excluded from the table above are financial instruments presented in our consolidated financial statements at cost. The fair value of our repurchase agreements approximated cost as of ~~March 31,~~September 30, 2021 and December 31, 2020, as the rates on our outstanding repurchase agreements largely corresponded to prevailing rates observed in the repo market. The fair value of cash and cash equivalents, restricted cash, receivables and other payables were determined to approximate cost as of ~~March 31,~~September 30, 2021 and December 31, 2020 due to their short duration. We estimate the fair value of these instruments carried at cost using "Level 1" or "Level 2" inputs.

Note 8. Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing (i) net income (loss) available (attributable) to common stockholders by (ii) the sum of our weighted-average number of common shares outstanding and the weighted-average number of vested but not yet issued time and performance-based restricted stock units ("RSUs") outstanding for the period granted under our long-term incentive program to employees and non-employee Board of Directors. Diluted net income (loss) per common share assumes the issuance of all potential common stock equivalents unless the effect is to reduce a loss or increase the income per common share. Our potential common stock equivalents consist of unvested time and performance-based RSUs. The following table presents the computations of basic and diluted net income (loss) per common share for the periods indicated (shares and dollars in millions):

Three Months Ended March 31,
2021 2020
Weighted average number of common shares issued and outstanding 532.5 547.5
Weighted average number of fully vested restricted stock units outstanding 1.2 0.5
Weighted average number of common shares outstanding - basic 533.7 548.0
Weighted average number of dilutive unvested restricted stock units outstanding 1.9 0
Weighted average number of common shares outstanding - diluted 535.6 548.0
Net income (loss) available (attributable) to common stockholders $ 950 $ (2,442)
Net income (loss) per common share - basic $ 1.78 $ (4.46)
Net income (loss) per common share - diluted $ 1.77 $ (4.46)

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						Three Months Ended September 30,												Nine Months Ended September 30,
						2021						2020						2021						2020
Weighted average number of common shares issued and outstanding						524.9						552.1						527.4						552.9
Weighted average number of fully vested restricted stock units outstanding						1.8						1.1						1.6						0.9
Weighted average number of common shares outstanding - basic						526.7						553.2						529.0						553.8
Weighted average number of dilutive unvested restricted stock units outstanding						1.9						1.1						1.8						—
Weighted average number of common shares outstanding - diluted						528.6						554.3						530.8						553.8
Net income (loss) available (attributable) to common stockholders						$	187					$	637					$	701					$	(1,112)
Net income (loss) per common share - basic						$	0.36					$	1.15					$	1.33					$	(2.01)
Net income (loss) per common share - diluted						$	0.35					$	1.15					$	1.32					$	(2.01)

For the ~~three~~nine months ended ~~March 31,~~September 30, 2020 ~~1.2~~1.0 million of potentially dilutive unvested time and performance based RSUs outstanding were excluded from the computation of diluted net income (loss) per common share because to do so would have been anti-dilutive for the period.

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Note 9. Stockholders' Equity

Preferred Stock

We are authorized to designate and issue up to 10.0 million shares of preferred stock in one or more classes or series. As of ~~March 31,~~September 30, 2021 and December 31, 2020, 13,800, 10,350, 16,100 and 23,000 shares of preferred stock were designated as 7.00% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, 6.875% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, 6.50% Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock and 6.125% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, respectively, (referred to as "Series C, D, E and F Preferred Stock", respectively). As of ~~March 31,~~September 30, 2021 and December 31, 2020, 13,000, 9,400, 16,100 and 23,000 shares of Series C, D, E and F Preferred Stock, respectively, were issued and outstanding. Each share of preferred stock is represented by 1,000 depositary shares. Each share of preferred stock has a liquidation preference of $25,000 per share (or $25 per depositary share).

Our preferred stock ranks senior to our common stock with respect to the payment of dividends and the distribution of assets upon a voluntary or involuntary liquidation, dissolution or winding up of the Company. Our preferred stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and each series of preferred stock ranks on parity with one another. Under certain circumstances upon a change of control, our preferred stock is convertible to shares of our common stock. Holders of our preferred stock and depositary shares underlying our preferred stock have no voting rights, except under limited conditions. Beginning on each series' optional redemption date, we may redeem shares at $25.00 per depositary share, plus accumulated and unpaid dividends (whether or not declared), exclusively at our option.

The following table includes a summary of preferred stock depositary shares issued and outstanding as of ~~March 31,~~September 30, 2021 (dollars and shares in millions):


Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock 1						Issuance Date						Depositary Shares Issued and Outstanding						Carrying Value						Aggregate Liquidation Preference						Fixed Rate						Optional Redemption Date 2						Fixed-to-Floating Rate Conversion Date						Floating Annual Rate
Series C						August 22, 2017						13.0						315						325						7.000%						October 15, 2022						October 15, 2022						3M LIBOR + 5.111%
Series D						March 6, 2019						9.4						227						235						6.875%						April 15, 2024						April 15, 2024						3M LIBOR + 4.332%
Series E						October 3, 2019						16.1						390						403						6.500%						October 15, 2024						October 15, 2024						3M LIBOR + 4.993%
Series F						February 11, 2020						23.0						557						575						6.125%						April 15, 2025						April 15, 2025						3M LIBOR + 4.697%
Total												61.5						$	1,489					$	1,538

1.Fixed-to-floating rate redeemable preferred stock accrue dividends at an annual fixed rate of the $25.00 liquidation preference per depositary share from the issuance date up to, but not including, the fixed-to-floating rate conversion date; thereafter, dividends will accrue on a floating rate basis equal to 3-month LIBOR plus a fixed spread.

2.Shares may be redeemed prior to our optional redemption date under certain circumstances intended to preserve our qualification as a REIT for U.S federal income tax purposes.

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At-the-Market Offering Program

We are authorized by our Board of Directors to enter into agreements with sales agents to publicly offer and sell shares of our common stock in privately negotiated and/or at-the-market transactions from time-to-time up to a maximum aggregate offering price of our common stock. As of ~~March 31,~~September 30, 2021, shares of our common stock with an aggregate offering price of ~~$26 million~~$1.25 billion remained authorized for issuance under this program through June ~~14,~~11, 2024. We did not issue shares under the program during the nine months ended September 30, 2021.

Common Stock Repurchase Program

~~In October 2020,~~We are authorized by our Board of Directors ~~authorized the~~to repurchase ~~of up to $1 billion of our outstanding common stock through December 31, 2021. During the three months ended March 31, 2021, we repurchased 15.0 million~~ shares ~~or $239 million,~~ of our common stock ~~for an average repurchase price of $16.00 per common share, inclusive of transaction cost and including amounts repurchased~~ in ~~December 2020 that settled in January 2021. As of March 31, 2021, we had $0.7 billion of common stock remaining available for repurchase through December 31, 2021.~~

~~We may repurchase shares in the~~ open market or through privately negotiated transactions or pursuant to a trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). During the three months ended March 31, 2021, we repurchased 15.0 million shares, or $239 million, of our common stock for an average repurchase price of $16.00 per common share, inclusive of transaction costs and including amounts repurchased in December 2020 that settled in January 2021. During the six months ended September 30, 2021, we did not repurchase shares of our common stock. As of September 30, 2021, shares of our common stock with an aggregate repurchase price of $684 million remained authorized for repurchase through December 31, 2021. (See Note 10. Subsequent Events for additional information regarding our stock repurchase plan.)

Accumulated Other Comprehensive Income (Loss)

The following table summarizes changes to accumulated OCI for the three and nine months ended September 30, 2021 and 2020 (in millions):


						Three Months Ended September 30,												Nine Months Ended September 30,
Accumulated Other Comprehensive Income (Loss)						2021						2020						2021						2020
Beginning Balance						$	405					$	764					$	719					$	97
OCI before reclassifications						10						70						(272)						777
Net loss amounts for available-for-sale securities reclassified from accumulated OCI to realized gain (loss) on sale of investment securities, net						(4)						—						(36)						(40)
Ending Balance						$	411					$	834					$	411					$	834

Note 10. Subsequent Events

Common Stock Repurchase Program

On October 21, 2021 our Board of Directors terminated our existing stock repurchase plan (see Note 9) that was due to expire on December 31, 2021 and replaced it with a new plan authorizing us to repurchase up to $1 billion of common stock through December 31, 2022. Under the new plan, we may repurchase shares in the open market or through privately negotiated transactions or pursuant to a trading plan that may be adopted in accordance with Rule 10b5-1 of the Exchange Act. Our stock repurchase program may be limited or terminated at any time without prior notice. We intend to repurchase shares under the stock repurchase program only when the repurchase price is less than our then-current estimate of ~~our~~ tangible net book value per common share.

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~~Accumulated Other Comprehensive Income (Loss)~~

~~The following table summarizes changes to accumulated OCI for the three months ended March 31, 2021 and 2020 (in millions):~~

Three Months Ended March 31,
Accumulated Other Comprehensive Income (Loss) 2021 2020
Beginning Balance $ 719 $ 97
OCI before reclassifications (219) 465
Net loss amounts for available-for-sale securities reclassified from accumulated OCI to realized gain (loss) on sale of investment securities, net (18) (1)
Ending Balance $ 482 $ 561

Item 2. 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,~~September 30, 2021. Our MD&A is presented in six sections:

•Executive Overview

•Financial Condition

•Results of Operations

•Liquidity and Capital Resources

•Off-Balance Sheet Arrangements

•Forward-Looking Statements

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EXECUTIVE OVERVIEW

We are a leading provider of private capital to the U.S. housing market, enhancing liquidity in the residential real estate mortgage markets and, in turn, facilitating home ownership in the U.S. We invest primarily in Agency residential mortgage-backed securities ("Agency RMBS") on a leveraged basis. These investments consist of residential mortgage pass-through securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by a U.S. Government-sponsored enterprise, such as Federal National Mortgage Association ("Fannie Mae") and Federal Home Loan Mortgage Corporation ("Freddie Mac," and together with Fannie Mae, the "GSEs"), or by a U.S. Government agency, such as Government National Mortgage Association ("Ginnie Mae"). We may also invest in other assets related to the housing, mortgage or real estate markets that are not guaranteed by a GSE or U.S. Government agency.

We are internally managed with the principal objective of providing our stockholders with attractive risk-adjusted returns through a combination of monthly dividends and tangible net book value accretion. We generate income from the interest earned on our investments, net of associated borrowing and hedging costs, and net realized gains and losses on our investment and hedging activities. We fund our investments primarily through collateralized borrowings structured as repurchase agreements. We operate in a manner to qualify to be taxed as a REIT under the Internal Revenue Code.

The size and composition of our investment portfolio depends on the investment strategies we implement, availability of attractively priced investments, suitable financing to appropriately leverage our investment portfolio and overall market conditions. Market conditions are influenced by a variety of factors, including interest rates, prepayment expectations, liquidity, housing prices, unemployment rates, general economic conditions, government participation in the mortgage market, regulations and relative returns on other assets.

Trends and Recent Market Impacts

~~Optimism regarding~~In the third quarter, several positive developments benefited the Agency RMBS market. First, the Federal Reserve (the “Fed”) communicated a potential timeline for ~~a strong economic recovery~~the reduction of its asset purchases that was largely in line with market expectations and, as result, did not precipitate material mortgage spread widening or interest rate volatility. The interest rate and prepayment landscape also improved, with intermediate and longer-term rates increasing late in the ~~second half of 2021 pushed most risk-asset prices higher in~~quarter. Primary mortgage rates also ended the ~~first~~ quarter ~~of 2021. The improved economic outlook and additional fiscal stimulus led~~well above their intra-year low, which should lead to a ~~substantial~~more benign prepayment environment. Collectively, these favorable developments contributed to our stable tangible net book value and 2.3% economic return for the quarter, which consisted of a $0.02 increase in longer term interest rates and a material steepening of the yield curve during the quarter, with the 10-year U.S. Treasury yield increasing 82 basis points to close the first quarter at 1.74%, nearly 125 basis points above its historical low in August 2020. Despite the sharp rise in rates, Agency RMBS performed well during the quarter, outperforming interest rate hedges. Residential credit performance was mixed and ranged from largely flat to modest increases in valuations.

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~~For the first quarter, we earned an economic return of 8.2%, comprised of $1.01 increase in~~our tangible net book value per common share and $0.36 of dividends per common ~~share. Our performance~~share for the quarter. Notably, despite significant interest rate volatility and elevated prepayment speeds in the first ~~quarter marks our fourth consecutive quarter~~half of ~~economic returns of 7.5% or more and brings our last twelve-month cumulative~~the year, AGNC’s year-to-date economic return totaled 4.7% through the third quarter.

In November, the Fed announced that it will begin tapering Agency RMBS purchases at the pace of $5 billion per month over an estimated eight-month period but may adjust the pace consistent with changes in its economic outlook. Importantly, when tapering is complete, it is expected that the Fed will continue to ~~40.7%.~~

~~Asset positioning remained an important factor in driving our favorable performance~~purchase significant amounts of Agency RMBS as it reinvests paydowns on its existing portfolio. As a result, we do not expect significant Agency RMBS spread widening during the ~~first quarter. Similar~~Fed taper cycle, though some spread volatility could occur.

Despite the Fed providing clarity regarding its tapering plan, broader macroeconomic uncertainty remains. Inflation measures remain elevated, and supply chain shortages and disruptions have become more widespread. Further, the employment outlook appears poised for strong growth and could put upward pressure on wages. Collectively, uncertainty surrounding these inflationary pressures reduces the predictability as to ~~prior quarters, we benefited from~~when and how significantly the ~~differing risk profiles of~~Fed will increase short-term interest rates, creating the ~~two primary components of our asset portfolio: low coupon generic securities and higher coupon specified pool securities, which together have bolstered our performance across a wide range of~~potential for increased interest rate ~~and spread scenarios over~~volatility. As a result, we favor operating with a more conservative risk profile in the past twelve months. During the first quarter, our higher coupon specified pools benefited from the steep rise in rates and corresponding reduction in prepayment expectations. This contrasts with the third and fourth quarters of 2020, during which our lower coupon generic securities outperformed as mortgage rates declined to historic lows and drove mortgage prepayment rates to a 20-year high. Our hedge portfolio, which was mainly comprised of intermediate and longer-term hedges, also contributed significantly to our positive first quarter results as hedge gains exceeded the aggregate price declines on our asset portfolio.current environment.

As of ~~March 31,~~September 30, 2021, our ~~investment portfolio totaled $90.3 billion, compared~~“at-risk” leverage ratio declined to ~~$97.9 billion~~7.5x tangible equity, from 7.9x as of ~~December 31, 2020 and consisted of $63.6 billion Agency RMBS, $24.8 billion net TBA securities, and $1.9 billion of CRT and non-Agency securities.~~June 30, 2021. Our "at risk" leverage, as of March 31, 2021, was 7.7x our tangible equity, compared to 8.5x as of December 31, 2020. Our liquidity position, consisting of unencumbered Agency RMBS, US Treasury securities and cash and excluding both unencumbered credit assets and assets held at our broker-dealer subsidiary, was largely unchanged during the first quarter at $5.2 billion as of March 31, 2021, compared to $5.4 billion as of December 31, 2020, or 48% and 51%, respectively, of our tangible equity. The average prepayment rate on our Agency RMBS holdings during the first quarter was 24.6%, down from 27.6% for the fourth quarter of 2020. Consistent with the significant increase in primary mortgage rates of approximately 50 basis points over the first quarter, our average CPR forecast for the remaining life of our Agency RMBS decreased to 11.3% as of March 31, 2021, from 17.6% as of December 31, 2020.

Our interest rate exposure remained limited during the first quarter as we managed the size and composition of our hedge position in response to changing market conditions. We proactively increased our interest rate hedge portfolio ~~during the first quarter to $79~~totaled $72.9 billion, ~~through the addition of interest rate swaps, swaptions and U.S. Treasury hedges to provide incremental protection against rising interest rates. As of March 31, 2021, our interest rate hedges totaled~~or 98% of our ~~funding liabilities, up from 80%~~mortgage borrowings, compared to $74 billion and 97%, respectively, as of December 31, 2020 and from a twelve-month low of 66% at the end of the second quarter of 2020. As of March 31, 2021, 72% of our hedges had a maturity of four years or more, which was a significant contributor to our first quarter hedge performance given the sharp rise in longer term rates. Consistent with the increase in interest rates and the corresponding extension of mortgage durations during the quarter, ourJune 30, 2021. Our duration gap, which is a measure of the difference between the interest rate sensitivity of our assets and liabilities, inclusive of our interest rate hedges, ~~increased to 0.6~~was largely unchanged during the third quarter at 0.4 years as of ~~March 31,~~September 30, 2021, ~~from -0.5~~compared to 0.3 years as of ~~December 31, 2020.~~June 30, 2021.

~~Net spread~~Our investment portfolio totaled $84.1 billion as of September 30, 2021, a decline of $3.4 billion from $87.5 billion as of June 30, 2021, and ~~dollar roll income (a non-GAAP measure) was $0.76 per diluted common share~~consisted of $53.7 billion Agency RMBS, $28.3 billion TBA securities and $2.1 billion CRT and non-Agency securities, including forward setting non-Agency securities. As of September 30, 2021, our portfolio remained positioned for a range of interest rate scenarios, with our Agency portfolio comprised roughly of 60% lower coupon generic securities and 40% higher coupon specified pools. Our forecasted life CPRs decreased during the ~~first~~ quarter ~~which excludes a "catch-up" premium amortization benefit~~to 10.7% as of ~~$0.40 per diluted common share due to changes in CPR projections for securities acquired prior to the first quarter. This compares to net spread and dollar roll income~~September 30, 2021, from 11.6% as of $0.75 and $0.57 per diluted common share for the fourth and first quarters of 2020, respectively, excluding $0.44 and $0.20 of "catch-up" premium amortization expense, respectively. The marginal improvement in net spread and dollar roll income for the first quarter wasJune 30, 2021, due to the combination of ~~lower funding costs, the sharp decline~~moderate changes in ~~CPR projections,~~portfolio composition and earnings accretion due to common stock share repurchases, which more than offset our lower operating leverage and an overall decline in asset yields during the quarter. (Please refer to Results of Operations below for further information regarding non-GAAP measures.)

Our average asset yield, excluding "catch-up" amortization and including the implied yield on our TBA securities, declined to 2.02% for the first quarter, compared to 2.07% for the fourth quarter and to 2.97% for the first quarter 2020, as lower prevailing yields on new asset purchases outweighed the yield improvement due to lower CPR projections.

The funding environment for Agency RMBS remained very favorable during the first quarter, with our average repo funding cost declining to 21 basis points from 38 basis points for the fourth quarter and 180 basis points for the first quarter 2020. As of March 31, 2021, our average repo rate was 0.15%, compared to 0.24% as of December 31, 2020. Favorable repo rates, and even lower implied financing rates in the TBA dollar roll market, more than offset a modest increase in our interest rate swap costs during the first quarter. Our aggregate cost of funds, including implied TBA dollar roll funding and interest rate swap costs, for the first quarter was 0.02%, compared to 0.05% for the fourth quarter and 1.67% for the first quarter of 2020.

Looking ahead, we expect that the near zero short-term interest rate environment is likely to remain in place through at least 2023 and the Federal Reserve ("Fed") is unlikely to begin tapering its Agency RMBS purchases before 2022, with any such tapering likely to gradually occur over a multi-month period. The Fed has also indicated it will communicate its intentions well in advance of taking any such action to reduce market uncertainty. Importantly, even after the Fed completes the taper

24

~~process, it has indicated that it intends~~higher interest rates. Our actual prepayment rate for the third quarter also trended lower to ~~continue~~22.5% from 25.7% for the prior quarter.

Net spread and dollar roll income, excluding “catch-up” premium amortization as a result of changes in projected CPRs for securities acquired in prior quarters, a non-GAAP measure, was $0.75 per diluted common share for the third quarter, and was largely unchanged from the first two quarters of the year as favorable short-term funding, attractive TBA dollar roll opportunities and stable hedge costs continued to ~~reinvest portfolio paydowns~~offset our smaller asset base. (Please refer to Results of Operations for ~~an extended period~~further information regarding non-GAAP measures).

As of ~~time. Against this backdrop,~~September 30, 2021, our unencumbered cash and Agency MBS increased to $5.2 billion, or 51% of our tangible equity, which excludes unencumbered credit assets and assets held at our captive broker-dealer subsidiary, compared to $4.7 billion and 47%, respectively, as of June 30, 2021. Looking ahead, we believe the Agency RMBS sector remains attractive, particularly when compared on a relative value basis to other asset classes. Nonetheless, given the significant spread tightening that has occurred in the sector relative to benchmark interest rates, we chose to operate with sequentially lower leverage in recent quarters. Going forward, we may choose to operate at somewhat lower leverage levels than the first quarter of 2021 to mitigate the potential downside risk to our ~~tangible net book value associated with reduced Fed purchases~~current positioning and ~~future spread widening, as well as to provide capacity for~~strong liquidity position offers us flexibility to increase leverage ~~opportunistically when expected return levels are more favorable.~~to take advantage of favorable investment opportunities as they arise.

Market Information

The following table summarizes interest rates and prices of generic fixed rate Agency RMBS as of each date presented below:


Interest Rate/Security Price 1	Interest Rate/Security Price 1					Mar. 31, 2020						June 30, 2020						Sept. 30, 2020						Dec. 31, 2020						Mar. 31, 2021												Mar. 31, 2021 vs Dec. 31, 2020						Interest Rate/Security Price 1					Sept. 30, 2020						Dec. 31, 2020						Mar. 31, 2021						June 30, 2021						Sept. 30, 2021						Sept. 30, 2021 vs June 30, 2021									Sept. 30, 2021 vs Dec. 31, 2020
Target Federal Funds Rate:	Target Federal Funds Rate:																																																		Target Federal Funds Rate:
Target Federal Funds Rate - Upper Band	Target Federal Funds Rate - Upper Band					0.25%						0.25%						0.25%						0.25%						0.25%															—			bps			Target Federal Funds Rate - Upper Band					0.25%						0.25%						0.25%						0.25%						0.25%						—			bps						—			bps
SOFR:	SOFR:																																																		SOFR:
SOFR Rate	SOFR Rate					0.01%						0.10%						0.08%						0.07%						0.01%															-6			bps			SOFR Rate					0.08%						0.07%						0.01%						0.05%						0.05%						—			bps						-2			bps
SOFR Interest Rate Swap Rate:	SOFR Interest Rate Swap Rate:																																																		SOFR Interest Rate Swap Rate:
2-Year Swap	2-Year Swap					0.09%						—%						0.03%						0.06%						0.12%															+6			bps			2-Year Swap					0.03%						0.06%						0.12%						0.19%						0.24%						+5			bps						+18			bps
5-Year Swap	5-Year Swap					0.24%						0.08%						0.13%						0.24%						0.82%															+58			bps			5-Year Swap					0.13%						0.24%						0.82%						0.75%						0.83%						+8			bps						+59			bps
10-Year Swap	10-Year Swap					0.45%						0.38%						0.47%						0.71%						1.52%															+81			bps			10-Year Swap					0.47%						0.71%						1.52%						1.19%						1.26%						+7			bps						+55			bps
30-Year Swap	30-Year Swap					0.61%						0.63%						0.86%						1.15%						1.92%															+77			bps			30-Year Swap					0.86%						1.15%						1.92%						1.50%						1.52%						+2			bps						+37			bps
U.S. Treasury Security Rate:	U.S. Treasury Security Rate:																																																		U.S. Treasury Security Rate:
2-Year U.S. Treasury	2-Year U.S. Treasury					0.25%						0.15%						0.13%						0.12%						0.16%															+4			bps			2-Year U.S. Treasury					0.13%						0.12%						0.16%						0.25%						0.28%						+3			bps						+16			bps
5-Year U.S. Treasury	5-Year U.S. Treasury					0.38%						0.29%						0.28%						0.36%						0.94%															+58			bps			5-Year U.S. Treasury					0.28%						0.36%						0.94%						0.89%						0.97%						+8			bps						+61			bps
10-Year U.S. Treasury	10-Year U.S. Treasury					0.67%						0.66%						0.69%						0.92%						1.74%															+82			bps			10-Year U.S. Treasury					0.69%						0.92%						1.74%						1.47%						1.49%						+2			bps						+57			bps
30-Year U.S. Treasury	30-Year U.S. Treasury					1.32%						1.41%						1.46%						1.65%						2.41%															+76			bps			30-Year U.S. Treasury					1.46%						1.65%						2.41%						2.09%						2.05%						-4			bps						+40			bps
30-Year Fixed Rate Agency Price:	30-Year Fixed Rate Agency Price:																																																		30-Year Fixed Rate Agency Price:
1.5%						N/A						N/A						$100.66						$101.05						$96.59															-$4.46

2.0%	2.0%					$100.91						$102.33						$103.39						$103.88						$99.70												-$4.18						2.0%					$103.39						$103.88						$99.70						$101.09						$100.21						-$0.88									-$3.67
2.5%	2.5%					$103.59						$104.26						$104.90						$105.41						$102.55												-$2.86						2.5%					$104.90						$105.41						$102.55						$103.48						$103.04						-$0.44									-$2.37
3.0%	3.0%					$104.83						$105.33						$104.75						$104.77						$104.13												-$0.64						3.0%					$104.75						$104.77						$104.13						$104.27						$104.61						+$0.34									-$0.16
3.5%	3.5%					$105.70						$105.18						$105.40						$105.66						$105.63												-$0.03						3.5%					$105.40						$105.66						$105.63						$105.28						$105.80						+$0.52									+$0.14
4.0%	4.0%					$106.67						$105.98						$106.64						$106.78						$107.31												+$0.53						4.0%					$106.64						$106.78						$107.31						$106.53						$107.13						+$0.60									+$0.35
4.5%																																																			4.5%					$108.16						$108.39						$108.91						$107.66						$108.13						+$0.47									-$0.26
15-Year Fixed Rate Agency Price:	15-Year Fixed Rate Agency Price:																																																		15-Year Fixed Rate Agency Price:
1.5%	1.5%					N/A						N/A						$102.31						$102.89						$100.40															-$2.49						1.5%					$102.31						$102.89						$100.40						$101.23						$100.95						-$0.28									-$1.94
2.0%	2.0%					$102.66						$103.46						$103.95						$104.55						$102.61												-$1.94						2.0%					$103.95						$104.55						$102.61						$103.19						$102.96						-$0.23									-$1.59
2.5%	2.5%					$103.72						$104.70						$104.44						$104.30						$104.06												-$0.24						2.5%					$104.44						$104.30						$104.06						$104.29						$104.16						-$0.13									-$0.14
3.0%	3.0%					$104.61						$105.09						$104.94						$104.97						$105.59												+$0.62						3.0%					$104.94						$104.97						$105.59						$105.05						$105.14						+$0.09									+$0.17
3.5%	3.5%					$105.19						$105.06						$105.81						$106.03						$106.69												+$0.66						3.5%					$105.81						$106.03						$106.69						$106.83						$106.56						-$0.27									+$0.53
4.0%	4.0%					$105.56						$105.75						$106.15						$106.28						$106.34												+$0.06						4.0%					$106.15						$106.28						$106.34						$106.19						$106.06						-$0.13									-$0.22

1.Price information is for generic instruments only and is not reflective of our specific portfolio holdings. Price information is as of 3:00 p.m. (EST) on such date and can vary by source. Prices in the table above were obtained from Barclays. Interest and LIBOR rates were obtained from Bloomberg.

25

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


Mortgage Rate/Credit Spread						Sept. 30, 2020						Dec. 31, 2020						Mar. 31, 2021						June 30, 2021						Sept. 30, 2021						Sept. 30, 2021 vs June 30, 2021									Sept. 30, 2021 vs Dec. 31, 2020
Mortgage Rate: 1
30 Year Mortgage Rate						3.08%						2.87%						3.27%						3.13%						3.18%						+5			bps						+31			bps
30 Year Agency Current Coupon						1.40%						1.34%						2.04%						1.83%						1.97%						+14			bps						+63			bps
30 Year Primary to Secondary Spread						1.68%						1.53%						1.23%						1.30%						1.21%						-9			bps						-32			bps
Credit Spread (in bps): 2
CRT M2						302						216						235						179						171						-8									-45
CMBS AAA						86						66						69						65						66						+1									—
CDX IG						59						50						54						48						53						+5									+3

1.30 Year Mortgage rates are sourced from Bloomberg; 30 Year Current Coupon rates represent current coupon rates for new production Agency RMBS sourced from Bloomberg; and the 30 Year Primary to Secondary Spreads represent the 30 Year Mortgage Rate and 30 Year Agency Current Coupon rate spread differential as of each date.

2.CRT and CMBS spreads are averages of JP Morgan, Bank of America and Wells Fargo. CRT spreads are discount margins. CMBS spreads are spreads to the swap curve. CDX spreads are sourced from JP Morgan.

25

26

FINANCIAL CONDITION

As of ~~March 31,~~September 30, 2021 and December 31, 2020, our investment portfolio ~~consisted of $65.5~~totaled $84.1 billion and $97.9 billion, respectively, consisting of: $55.4 billion and $66.4 billion of investment securities, at fair value, ~~respectively, and $24.8~~respectively; $28.3 billion and $31.5 billion ofnet TBA securities, at fair value, respectively; and $0.5 billion and zero forward settling non-Agency securities, at fair value, respectively. The following table is a summary of our investment portfolio as of ~~March 31,~~September 30, 2021 and December 31, 2020 (dollars in millions):


						March 31, 2021																								December 31, 2020																										September 30, 2021																								December 31, 2020
Investment Portfolio (Includes TBAs)	Investment Portfolio (Includes TBAs)					Amortized Cost						Fair Value						Average Coupon						%						Amortized Cost						Fair Value						Average Coupon						%			Investment Portfolio (Includes TBAs)					Amortized Cost						Fair Value						Average Coupon						%						Amortized Cost						Fair Value						Average Coupon						%
Fixed rate Agency RMBS and TBA securities:	Fixed rate Agency RMBS and TBA securities:																																																		Fixed rate Agency RMBS and TBA securities:
≤ 15-year:	≤ 15-year:																																																		≤ 15-year:
≤ 15-year RMBS	≤ 15-year RMBS					$	15,402					$	15,469					2.24		%				17		%				$	9,256					$	9,482					2.48		%				10		%	≤ 15-year RMBS					$	2,975					$	3,091					3.19		%				4		%				$	9,256					$	9,482					2.48		%				10		%
15-year TBA securities, net 1	15-year TBA securities, net 1					(2,352)						(2,358)						2.38		%				(3)		%				6,916						6,980						1.74		%				7		%	15-year TBA securities, net 1					2,025						2,016						1.73		%				2		%				6,916						6,980						1.74		%				7		%
Total ≤ 15-year	Total ≤ 15-year					13,050						13,111						2.22		%				15		%				16,172						16,462						2.16		%				17		%	Total ≤ 15-year					5,000						5,107						2.60		%				6		%				16,172						16,462						2.16		%				17		%
20-year RMBS	20-year RMBS					2,626						2,627						2.49		%				3		%				2,409						2,470						2.58		%				3		%	20-year RMBS					2,092						2,102						2.52		%				2		%				2,409						2,470						2.58		%				3		%
30-year:	30-year:																																																		30-year:
30-year RMBS	30-year RMBS					43,631						45,026						3.58		%				50		%				50,312						52,663						3.55		%				54		%	30-year RMBS					47,118						48,202						3.13		%				57		%				50,312						52,663						3.55		%				54		%
30-year TBA securities, net 1	30-year TBA securities, net 1					27,707						27,137						2.35		%				30		%				24,288						24,499						2.05		%				25		%	30-year TBA securities, net 1					26,432						26,269						2.46		%				31		%				24,288						24,499						2.05		%				25		%
Total 30-year	Total 30-year					71,338						72,163						3.10		%				80		%				74,600						77,162						3.06		%				79		%	Total 30-year					73,550						74,471						2.89		%				89		%				74,600						77,162						3.06		%				79		%
Total fixed rate Agency RMBS and TBA securities	Total fixed rate Agency RMBS and TBA securities					87,014						87,901						2.95		%				97		%				93,181						96,094						2.89		%				98		%	Total fixed rate Agency RMBS and TBA securities					80,642						81,680						2.86		%				97		%				93,181						96,094						2.89		%				98		%
Adjustable rate Agency RMBS	Adjustable rate Agency RMBS					61						62						2.30		%				—		%				69						70						2.35		%				—		%	Adjustable rate Agency RMBS					49						51						2.27		%				—		%				69						70						2.35		%				—		%
Multifamily	Multifamily					—						—						—		%				—		%				17						19						3.31		%				—		%	Multifamily					—						—						—		%				—		%				17						19						3.31		%				—		%
CMO Agency RMBS:	CMO Agency RMBS:																																																		CMO Agency RMBS:
CMO	CMO					249						259						3.23		%				—		%				289						301						3.30		%				1		%	CMO					200						207						3.14		%				—		%				289						301						3.30		%				1		%
Interest-only strips	Interest-only strips					42						55						5.59		%				—		%				45						59						5.57		%				—		%	Interest-only strips					34						43						5.61		%				—		%				45						59						5.57		%				—		%
Principal-only strips	Principal-only strips					54						58						—		%				—		%				60						67						—		%				—		%	Principal-only strips					42						47						—		%				—		%				60						67						—		%				—		%
Total CMO Agency RMBS	Total CMO Agency RMBS					345						372						4.10		%				1		%				394						427						4.10		%				1		%	Total CMO Agency RMBS					276						297						4.09		%				—		%				394						427						4.10		%				1		%
Total Agency RMBS and TBA securities	Total Agency RMBS and TBA securities					87,420						88,335						2.95		%				98		%				93,661						96,610						2.90		%				99		%	Total Agency RMBS and TBA securities					80,967						82,028						2.87		%				97		%				93,661						96,610						2.90		%				99		%
Non-Agency RMBS						487						495						3.16		%				1		%				178						188						4.28		%				—		%
Non-Agency RMBS 2																																																			Non-Agency RMBS 2					644						653						3.01		%				1		%				178						188						4.28		%				—		%
CMBS	CMBS					356						373						4.06		%				—		%				333						358						4.13		%				—		%	CMBS					366						381						3.70		%				—		%				333						358						4.13		%				—		%
CRT	CRT					1,067						1,073						3.30		%				1		%				733						737						3.43		%				1		%	CRT					1,047						1,072						3.60		%				1		%				733						737						3.43		%				1		%
Total investment portfolio	Total investment portfolio					$	89,330					$	90,276					2.96		%				100		%				$	94,905					$	97,893					2.91		%				100		%	Total investment portfolio					$	83,024					$	84,134					2.86		%				100		%				$	94,905					$	97,893					2.91		%				100		%

1.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.

2.Includes $0.5 billion of forward settling non-Agency securities.

TBA and forward settling securities are recorded as derivative instruments in our accompanying consolidated financial statements, and our TBA dollar roll transactions represent a form of off-balance sheet financing. As of ~~March 31,~~September 30, 2021 and December 31, 2020, our TBA ~~positions~~position and forward settling securities had a net carrying value of ~~$(576)~~$(171) million and $275 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 ~~Agency~~ security in the TBA contract or forward purchase agreement and the ~~contract~~ price to be paid or received for the underlying ~~Agency~~ security.

As of ~~March 31,~~September 30, 2021 and December 31, 2020, the weighted average yield on our investment securities (excluding TBA and forward settling securities) was ~~2.39%~~2.48% and 2.33%, respectively.

2627

The following tables summarize certain characteristics of our fixed rate Agency RMBS portfolio, inclusive of ~~TBAs,~~TBA securities, as of ~~March 31,~~September 30, 2021 and December 31, 2020 (dollars in millions):


						March 31, 2021																																																								September 30, 2021
						Includes Net TBA Position																								Excludes Net TBA Position																																Includes Net TBA Position																								Excludes Net TBA Position
Fixed Rate Agency RMBS and TBA Securities	Fixed Rate Agency RMBS and TBA Securities					Par Value						Amortized Cost						Fair Value						Specified Pool % 1						Amortized Cost Basis						Weighted Average																		Projected CPR 3			Fixed Rate Agency RMBS and TBA Securities					Par Value						Amortized Cost						Fair Value						Specified Pool % 1						Amortized Cost Basis						Weighted Average																		Projected CPR 3
																																				WAC 2						Yield 3						Age (Months)																																												WAC 2						Yield 3						Age (Months)
Fixed rate	Fixed rate																																																								Fixed rate
≤ 15-year:	≤ 15-year:																																																								≤ 15-year:
1.5%	1.5%					$	3,462					$	3,518					$	3,474					—%						102.4%						2.31%						0.99%						4						10%			1.5%					$	1,185					$	1,200					$	1,194					—%						102.3%						2.33%						0.93%						11						13%
2.0%	2.0%					5,593						5,794						5,747						1%						103.3%						2.55%						1.30%						3						9%			2.0%					996						1,030						1,024						6%						102.8%						2.69%						1.34%						10						10%
2.5%	2.5%					771						812						807						58%						105.7%						3.06%						1.22%						17						11%			2.5%					330						348						347						100%						105.5%						3.03%						1.20%						24						12%
3.0%	3.0%					1,082						1,099						1,153						94%						101.6%						3.55%						2.47%						47						14%			3.0%					915						929						971						95%						101.6%						3.55%						2.45%						53						15%
3.5%	3.5%					1,147						1,171						1,240						100%						102.1%						4.03%						2.76%						43						16%			3.5%					950						970						1,023						100%						102.1%						4.03%						2.74%						49						17%
≥ 4.0%	≥ 4.0%					637						656						690						91%						103.0%						4.61%						2.93%						42						17%			≥ 4.0%					508						523						548						92%						103.0%						4.61%						2.89%						47						18%
Total ≤ 15-year	Total ≤ 15-year					12,692						13,050						13,111						27%						103.0%						2.82%						1.53%						11						11%			Total ≤ 15-year					4,884						5,000						5,107						56%						102.5%						3.76%						2.38%						44						16%
20-year:	20-year:																																																								20-year:
≤ 2.0%						1,454						1,500						1,473						—%						103.1%						2.87%						1.51%						5						6%
2.0%																																																									2.0%					1,108						1,141						1,127						—%						103.0%						2.86%						1.44%						11						10%
2.5%	2.5%					560						583						579						—%						104.2%						3.28%						1.74%						9						9%			2.5%					472						492						488						—%						104.3%						3.28%						1.53%						15						13%
3.0%	3.0%					45						46						48						98%						103.3%						3.78%						2.26%						20						12%			3.0%					38						39						40						98%						103.4%						3.78%						2.18%						26						14%
3.5%	3.5%					209						213						225						81%						101.8%						4.05%						2.96%						92						13%			3.5%					181						184						196						81%						101.8%						4.05%						2.95%						98						13%
≥ 4.0%	≥ 4.0%					273						284						302						96%						104.1%						4.74%						3.13%						52						15%			≥ 4.0%					227						236						251						96%						104.1%						4.74%						3.09%						58						16%
Total 20-year:	Total 20-year:					2,541						2,626						2,627						20%						103.4%						3.27%						1.87%						18						9%			Total 20-year:					2,026						2,092						2,102						21%						103.3%						3.29%						1.79%						25						12%
30-year:	30-year:																																																								30-year:
2.0%	2.0%					13,606						14,076						13,545						1%						101.2%						2.80%						1.85%						1						6%			2.0%					16,909						17,068						16,946						2%						100.7%						2.87%						1.90%						5						6%
2.5%	2.5%					19,072						19,723						19,531						1%						105.4%						3.44%						1.76%						7						8%			2.5%					26,543						27,532						27,367						9%						104.4%						3.26%						1.92%						4						7%
3.0%	3.0%					4,119						4,280						4,314						13%						103.5%						3.74%						2.38%						36						10%			3.0%					3,613						3,740						3,798						13%						101.6%						3.62%						2.73%						60						10%
3.5%	3.5%					11,575						12,102						12,543						87%						104.5%						4.06%						2.64%						70						11%			3.5%					9,162						9,585						9,970						87%						104.5%						4.05%						2.61%						79						11%
4.0%	4.0%					12,596						13,235						13,851						92%						105.1%						4.51%						2.93%						56						13%			4.0%					9,730						10,238						10,719						92%						105.2%						4.51%						2.85%						62						14%
≥ 4.5%	≥ 4.5%					7,482						7,922						8,379						98%						105.9%						5.01%						3.21%						42						15%			≥ 4.5%					5,079						5,387						5,671						97%						106.1%						5.02%						3.12%						50						15%
Total 30-year	Total 30-year					68,450						71,338						72,163						45%						104.7%						4.19%						2.66%						46						12%			Total 30-year					71,036						73,550						74,471						37%						103.8%						3.80%						2.41%						38						10%
Total fixed rate	Total fixed rate					$	83,683					$	87,014					$	87,901					42%						104.2%						3.81%						2.34%						36						11%			Total fixed rate					$	77,946					$	80,642					$	81,680					38%						103.7%						3.78%						2.38%						38						11%

1.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,~~September 30, 2021, lower balance specified pools had a weighted average original loan balance of $119,000 and ~~$116,000~~$115,000 for 15-year and 30-year securities, respectively, and HARP pools had a weighted average original LTV of 127% and ~~137%~~138% for 15-year and 30-year securities, respectively.

2.WAC represents the weighted average coupon of the underlying collateral.

3.Portfolio yield incorporates a projected life CPR based on forward rate assumptions as of ~~March 31,~~September 30, 2021.

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						December 31, 2020
						Includes Net TBA Position																								Excludes Net TBA Position
Fixed Rate Agency RMBS and TBA Securities						Par Value						Amortized Cost						Fair Value						Specified Pool % 1						Amortized Cost Basis						Weighted Average																		Projected CPR 3
																																				WAC 2						Yield 3						Age (Months)
Fixed rate
≤ 15-year:
1.5%						$	5,001					$	5,107					$	5,144					—%						102.4%						2.28%						0.91%						1						13%
2.0%						6,718						6,958						7,023						—%						103.8%						2.62%						1.01%						2						15%
2.5%						795						836						840						59%						105.5%						3.07%						1.10%						13						15%
3.0%						1,168						1,186						1,248						94%						101.5%						3.55%						2.46%						44						16%
3.5%						1,249						1,275						1,356						100%						102.1%						4.03%						2.75%						40						18%
≥ 4.0%						788						810						851						92%						102.8%						4.63%						2.92%						47						19%
Total ≤ 15-year						15,719						16,172						16,462						23%						103.1%						3.09%						1.59%						17						16%
20-year:
≤ 2.0%						1,168						1,202						1,215						—%						103.0%						2.87%						1.29%						3						15%
2.5%						597						620						630						—%						103.9%						3.28%						1.33%						6						20%
3.0%						48						50						52						98%						103.0%						3.78%						2.10%						17						19%
3.5%						226						230						246						81%						101.6%						4.05%						2.93%						89						18%
≥ 4.0%						296						307						327						96%						103.6%						4.73%						3.05%						48						20%
Total 20-year:						2,335						2,409						2,470						23%						103.2%						3.34%						1.70%						18						17%
30-year:
≤ 2.0%						23,805						24,445						24,628						—%						103.2%						2.89%						1.51%						—						11%
2.5%						8,995						9,423						9,506						4%						105.2%						3.43%						1.35%						4						16%
3.0%						3,507						3,619						3,709						17%						102.9%						3.74%						2.03%						33						22%
3.5%						12,913						13,428						14,151						88%						104.0%						4.07%						2.48%						66						17%
4.0%						14,245						14,847						15,734						92%						104.2%						4.51%						2.81%						52						19%
≥ 4.5%						8,417						8,838						9,434						98%						105.0%						5.01%						3.04%						38						21%
Total 30-year						71,882						74,600						77,162						48%						104.3%						4.17%						2.43%						42						18%
Total fixed rate						$	89,936					$	93,181					$	96,094					43%						104.0%						3.98%						2.28%						37						18%

1.See Note 1 of preceding table for specified pool composition. As of December 31, 2020, lower balance specified pools had a weighted average original loan balance of $117,000 and $117,000 for 15-year and 30-year securities, respectively, and HARP pools had a weighted average original LTV of 126% and 137% for 15-year and 30-year securities, respectively.

2.WAC represents the weighted average coupon of the underlying collateral.

3.Portfolio yield incorporates a projected life CPR based on forward rate assumptions as of December 31, 2020.

For additional details regarding our CRT and non-Agency securities, including credit ratings, as of ~~March 31,~~September 30, 2021 and December 31, 2020, please refer to Note 3 of our Consolidated Financial Statements in this Form 10-Q.

RESULTS OF OPERATIONS

Non-GAAP Financial Measures

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

"Economic interest income" is measured as interest income (GAAP measure), adjusted (i) to exclude "catch-up" premium amortization associated with changes in CPR estimates and (ii) to include TBA dollar roll implied interest income. "Economic interest expense" is measured as interest expense (GAAP measure) adjusted to include TBA dollar roll implied interest expense/(benefit) and interest rate swap periodic cost/(income). "Net spread and dollar roll income, excluding "catch-up" premium amortization" includes (i) the components of economic interest income and economic interest expense and other interest and dividend income (referred to as "adjusted net interest and dollar roll income"), less (ii) total operating expenses (GAAP measure).

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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. We also believe it is important for users of our financial information to consider information related to our current financial performance without the effects of certain measures and one-time events that are not necessarily indicative of our current investment portfolio performance and operations.

Specifically, in the case of "adjusted net interest and dollar roll income," we believe the inclusion of TBA dollar roll income is meaningful as TBAs, which are accounted for under GAAP as derivative instruments with gains and losses recognized in other gain (loss) in our consolidated statement of comprehensive income, are economically equivalent to holding and financing generic Agency RMBS using short-term repurchase agreements. Similarly, we believe that the inclusion of periodic interest rate swap settlements in "economic interest expense" is meaningful as interest rate swaps are the primary instrument we use to economically hedge against fluctuations in our borrowing costs and it is more indicative of our total cost of funds than interest expense alone. In the case of "economic interest income" and "net spread and dollar roll income, excluding 'catch-up' premium amortization," we believe the exclusion of "catch-up" adjustments to premium amortization cost or benefit is meaningful as it excludes the cumulative effect from prior reporting periods due to current changes in future prepayment expectations and, therefore, exclusion of such cost or benefit is more indicative of the current earnings potential of our investment portfolio. In the case of estimated taxable income, we believe it is meaningful information because it directly relates to the amount of dividends that we are required to distribute to maintain our REIT qualification status.

However, because such measures are incomplete measures of our financial performance and involve differences from results computed in accordance with GAAP, they should be considered as supplementary to, and not as a substitute for, results computed in accordance with GAAP. In addition, because not all companies use identical calculations, our presentation of such non-GAAP measures may not be comparable to other similarly-titled measures of other companies. Furthermore, estimated taxable income can include certain information that is subject to potential adjustments up to the time of filing our income tax returns, which occurs after the end of our fiscal year.

Selected Financial Data

The following selected financial data is derived from our interim consolidated financial statements and the notes thereto. The tables below present our condensed consolidated balance sheets as of ~~March 31,~~September 30, 2021 and December 31, 2020 and condensed consolidated statements of comprehensive income and key statistics for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (in millions, except per share amounts):


						March 31,						December 31,														September 30,						December 31,
Balance Sheet Data	Balance Sheet Data					2021						2020									Balance Sheet Data					2021						2020
						(Unaudited)																				(Unaudited)
Investment securities, at fair value	Investment securities, at fair value					$	65,497					$	66,414								Investment securities, at fair value					$	55,393					$	66,414
Total assets	Total assets					$	85,545					$	81,817								Total assets					$	68,805					$	81,817
Repurchase agreements and other debt	Repurchase agreements and other debt					$	55,221					$	52,543								Repurchase agreements and other debt					$	46,666					$	52,543
Total liabilities	Total liabilities					$	74,181					$	70,738								Total liabilities					$	58,126					$	70,738
Total stockholders' equity	Total stockholders' equity					$	11,364					$	11,079								Total stockholders' equity					$	10,679					$	11,079
Net book value per common share 1	Net book value per common share 1					$	18.72					$	17.68								Net book value per common share 1					$	17.41					$	17.68
Tangible net book value per common share 2	Tangible net book value per common share 2					$	17.72					$	16.71								Tangible net book value per common share 2					$	16.41					$	16.71

2930


												Three Months Ended March 31,														Three Months Ended September 30,												Nine Months Ended September 30,
Statement of Comprehensive Income Data (Unaudited)	Statement of Comprehensive Income Data (Unaudited)																	2021						2020									Statement of Comprehensive Income Data (Unaudited)					2021						2020						2021						2020
Interest income	Interest income																	$	557					$	491								Interest income					$	293					$	364					$	1,099					$	1,284
Interest expense	Interest expense																	29						426									Interest expense					14						62						60						622
Net interest income	Net interest income																	528						65									Net interest income					279						302						1,039						662
Other gain (loss), net	Other gain (loss), net																	471						(2,463)									Other gain (loss), net					(45)						381						(195)						(1,635)
Operating expenses	Operating expenses																	24						23									Operating expenses					22						21						68						68
Net income (loss)	Net income (loss)																	975						(2,421)									Net income (loss)					212						662						776						(1,041)
Dividends on preferred stock	Dividends on preferred stock																	25						21									Dividends on preferred stock					25						25						75						71
Net income (loss) available (attributable) to common stockholders	Net income (loss) available (attributable) to common stockholders																	$	950					$	(2,442)								Net income (loss) available (attributable) to common stockholders					$	187					$	637					$	701					$	(1,112)

Net income (loss)	Net income (loss)																	$	975					$	(2,421)								Net income (loss)					$	212					$	662					$	776					$	(1,041)
Other comprehensive income (loss), net	Other comprehensive income (loss), net																	(237)						464									Other comprehensive income (loss), net					6						70						(308)						737
Comprehensive income (loss)	Comprehensive income (loss)																	738						(1,957)									Comprehensive income (loss)					218						732						468						(304)
Dividends on preferred stock	Dividends on preferred stock																	25						21									Dividends on preferred stock					25						25						75						71
Comprehensive income (loss) available (attributable) to common stockholders	Comprehensive income (loss) available (attributable) to common stockholders																	$	713					$	(1,978)								Comprehensive income (loss) available (attributable) to common stockholders					$	193					$	707					$	393					$	(375)

Weighted average number of common shares outstanding - basic	Weighted average number of common shares outstanding - basic																	533.7						548.0									Weighted average number of common shares outstanding - basic					526.7						553.2						529.0						553.8
Weighted average number of common shares outstanding - diluted	Weighted average number of common shares outstanding - diluted																	535.6						548.0									Weighted average number of common shares outstanding - diluted					528.6						554.3						530.8						553.8
Net income (loss) per common share - basic	Net income (loss) per common share - basic																	$	1.78					$	(4.46)								Net income (loss) per common share - basic					$	0.36					$	1.15					$	1.33					$	(2.01)
Net income (loss) per common share - diluted	Net income (loss) per common share - diluted																	$	1.77					$	(4.46)								Net income (loss) per common share - diluted					$	0.35					$	1.15					$	1.32					$	(2.01)
Comprehensive income (loss) per common share - basic	Comprehensive income (loss) per common share - basic																	$	1.34					$	(3.61)								Comprehensive income (loss) per common share - basic					$	0.37					$	1.28					$	0.74					$	(0.68)
Comprehensive income (loss) per common share - diluted	Comprehensive income (loss) per common share - diluted																	$	1.33					$	(3.61)								Comprehensive income (loss) per common share - diluted					$	0.37					$	1.28					$	0.74					$	(0.68)
Dividends declared per common share	Dividends declared per common share																	$	0.36					$	0.48								Dividends declared per common share					$	0.36					$	0.36					$	1.08					$	1.20


												Three Months Ended March 31,														Three Months Ended September 30,												Nine Months Ended September 30,
Other Data (Unaudited) *	Other Data (Unaudited) *																	2021						2020									Other Data (Unaudited) *					2021						2020						2021						2020
Average investment securities - at par	Average investment securities - at par																	$	56,641					$	94,933								Average investment securities - at par					$	49,077					$	61,398					$	53,655					$	75,108
Average investment securities - at cost	Average investment securities - at cost																	$	58,948					$	97,889								Average investment securities - at cost					$	50,866					$	63,893					$	55,579					$	77,783
Average net TBA portfolio - at cost	Average net TBA portfolio - at cost																	$	32,022					$	7,487								Average net TBA portfolio - at cost					$	30,312					$	27,785					$	30,132					$	17,017
Average total assets - at fair value	Average total assets - at fair value																	$	79,415					$	113,930								Average total assets - at fair value					$	68,472					$	80,058					$	74,952					$	93,541
Average repurchase agreements and other debt outstanding 3	Average repurchase agreements and other debt outstanding 3																	$	54,602					$	93,538								Average repurchase agreements and other debt outstanding 3					$	45,847					$	61,008					$	50,909					$	74,649
Average stockholders' equity 4	Average stockholders' equity 4																	$	11,312					$	10,735								Average stockholders' equity 4					$	10,638					$	10,527					$	11,018					$	10,595
Average tangible net book value "at risk" leverage 5	Average tangible net book value "at risk" leverage 5																	8.0:1						9.9:1									Average tangible net book value "at risk" leverage 5					7.5:1						8.9:1						7.7:1						9.1:1
Tangible net book value "at risk" leverage (as of period end) 6	Tangible net book value "at risk" leverage (as of period end) 6																	7.7:1						9.4:1									Tangible net book value "at risk" leverage (as of period end) 6					7.5:1						8.8:1						7.5:1						8.8:1
Economic return on tangible common equity - unannualized 7	Economic return on tangible common equity - unannualized 7																	8.2		%				(20.2)		%							Economic return on tangible common equity - unannualized 7					2.3		%				8.8		%				4.7		%				(3.3)		%
Expenses % of average total assets - annualized	Expenses % of average total assets - annualized																	0.12		%				0.08		%							Expenses % of average total assets - annualized					0.13		%				0.10		%				0.12		%				0.10		%
Expenses % of average assets, including average net TBA position - annualized	Expenses % of average assets, including average net TBA position - annualized																	0.09		%				0.08		%							Expenses % of average assets, including average net TBA position - annualized					0.09		%				0.08		%				0.09		%				0.08		%
Expenses % of average stockholders' equity - annualized	Expenses % of average stockholders' equity - annualized																	0.85		%				0.86		%							Expenses % of average stockholders' equity - annualized					0.83		%				0.80		%				0.82		%				0.86		%

* Except as noted below, average numbers for each period are weighted based on days on our books and records.

1.Net book value per common share is calculated as total stockholders' equity, less preferred stock liquidation preference, divided by number of common shares outstanding as of period end.

2.Tangible net book value per common share excludes goodwill.

3.Amount excludes U.S. Treasury repurchase agreements and TBA contracts. Other debt includes debt of consolidated VIEs.

4.Average stockholders' equity calculated as average month-ended stockholders' equity during the period.

5.Average tangible net book value "at risk" leverage is calculated by dividing the sum of daily weighted average repurchase agreements used to fund our investment securities, other debt, and TBA and forward settling securities (at cost) (together "mortgage borrowings") outstanding for the period by the sum of average stockholders' equity adjusted to exclude goodwill for the period. Leverage excludes U.S. Treasury repurchase agreements.

6.Tangible net book value ~~"At~~"at risk" leverage as of period end is calculated by dividing the sum of mortgage borrowings outstanding and receivable/payable for unsettled investment securities as of period end (at cost) by the sum of total stockholders' equity adjusted to exclude goodwill as of period end. Leverage excludes U.S. Treasury repurchase agreements.

7.Economic return on tangible common equity 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.

3031

Economic Interest Income and Asset Yields

The following table summarizes our economic interest income (a non-GAAP measure) for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020, 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 of changes in our CPR forecast, and implied interest income on our TBA securities (dollars in millions):


												Three Months Ended March 31,																																						Three Months Ended September 30,																								Nine Months Ended September 30,
																		2021												2020																				2021												2020												2021												2020
																														Amount						Yield						Amount						Yield																				Amount						Yield						Amount						Yield						Amount						Yield						Amount						Yield
Interest income:	Interest income:																																																														Interest income:
Cash/coupon interest income	Cash/coupon interest income																													$	481					3.40		%				$	875					3.68		%													Cash/coupon interest income					$	399					3.25		%				$	573					3.73		%				$	1,330					3.31		%				$	2,100					3.72		%
Net premium amortization benefit (cost)	Net premium amortization benefit (cost)																													76						0.38		%				(384)						(1.67)		%													Net premium amortization benefit (cost)					(106)						(0.95)		%				(209)						(1.45)		%				(231)						(0.67)		%				(816)						(1.52)		%
Interest income (GAAP measure)	Interest income (GAAP measure)																													557						3.78		%				491						2.01		%													Interest income (GAAP measure)					293						2.30		%				364						2.28		%				1,099						2.64		%				1,284						2.20		%
Estimated "catch-up" premium amortization cost (benefit) due to change in CPR forecast	Estimated "catch-up" premium amortization cost (benefit) due to change in CPR forecast																													(213)						(1.45)		%				243						0.99		%													Estimated "catch-up" premium amortization cost (benefit) due to change in CPR forecast					2						0.02		%				50						0.31		%				(140)						(0.34)		%				350						0.60		%
Interest income, excluding "catch-up" premium amortization	Interest income, excluding "catch-up" premium amortization																													344						2.33		%				734						3.00		%													Interest income, excluding "catch-up" premium amortization					295						2.32		%				414						2.59		%				959						2.30		%				1,634						2.80		%
TBA dollar roll income - implied interest income 1,2	TBA dollar roll income - implied interest income 1,2																													116						1.44		%				48						2.54		%													TBA dollar roll income - implied interest income 1,2					142						1.88		%				114						1.64		%				397						1.75		%				236						1.86		%
Economic interest income, excluding "catch-up" amortization (non-GAAP measure) 3	Economic interest income, excluding "catch-up" amortization (non-GAAP measure) 3																													$	460					2.02		%				$	782					2.97		%													Economic interest income, excluding "catch-up" amortization (non-GAAP measure) 3					$	437					2.16		%				$	528					2.30		%				$	1,356					2.11		%				$	1,870					2.63		%

Weighted average actual portfolio CPR for investment securities held during the period	Weighted average actual portfolio CPR for investment securities held during the period																													24.6		%										12.2		%																			Weighted average actual portfolio CPR for investment securities held during the period					22.5		%										24.3		%										24.5		%										18.0		%
Weighted average projected CPR for the remaining life of investment securities held as of period end	Weighted average projected CPR for the remaining life of investment securities held as of period end																													11.3		%										14.5		%																			Weighted average projected CPR for the remaining life of investment securities held as of period end					10.7		%										15.9		%										10.7		%										15.9		%
Average 30-year fixed rate mortgage rate as of period end 4																														3.17		%										3.50		%
30-year fixed rate mortgage rate as of period end 4																																																															30-year fixed rate mortgage rate as of period end 4					3.18		%										3.08		%										3.18		%										3.08		%
10-year U.S. Treasury rate as of period end	10-year U.S. Treasury rate as of period end																													1.74		%										0.67		%																			10-year U.S. Treasury rate as of period end					1.49		%										0.69		%										1.49		%										0.69		%

________________________________

1.Reported in gain (loss) on derivatives instruments and other securities, net in the accompanying consolidated statements of operations.

2.Implied interest income from TBA dollar roll transactions is computed as the sum of (i) TBA dollar roll income and (ii) estimated TBA implied funding cost (see Economic Interest Expense and Aggregate Cost of Funds below). TBA dollar roll income represents the price differential, or "price drop," between the TBA price for current month settlement versus the TBA price for forward month settlement and is the economic equivalent to interest income on the underlying Agency securities, less an implied funding cost, over the forward settlement period. Amount is net of TBAs used for hedging purposes. Amount excludes TBA mark-to-market adjustments.

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

4.Source: ~~Freddie Mac Primary Fixed Mortgage Rate Mortgage Market Survey~~Bloomberg

The principal elements impacting our economic interest income are the size of our average investment portfolio and the yield (actual and implied) on our securities. The following table includes a summary of the estimated impact of each of these elements on our economic interest income for the three and nine months ended ~~March 31,~~September 30, 2021 compared to the prior year period (in millions):

Impact of Changes in the Principal Elements Impacting Economic Interest Income
Three Months Ended March 31, 2021 vs. March 31, 2020
Due to Change in Average
Total Increase /
(Decrease) Portfolio
Size Asset
Yield
Three months ended:
Interest Income (GAAP measure) $ 66 $ (195) $ 261
Estimated "catch-up" premium amortization due to change in CPR forecast (456) — (456)
Interest income, excluding "catch-up" premium amortization (390) (195) (195)
TBA dollar roll income - implied interest income 68 156 (88)
Economic interest income, excluding "catch-up" amortization (non-GAAP measure) $ (322) $ (39) $ (283)

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Impact of Changes in the Principal Elements Impacting Economic Interest Income
Periods ended September 30, 2021 vs. September 30, 2020
												Due to Change in Average
						Total Increase / (Decrease)						Portfolio Size						Asset Yield
Three months ended:
Interest Income (GAAP measure)						$	(71)					$	(74)					$	3
Estimated "catch-up" premium amortization due to change in CPR forecast						(48)						—						(48)
Interest income, excluding "catch-up" premium amortization						(119)						(74)						(45)
TBA dollar roll income - implied interest income						28						10						18
Economic interest income, excluding "catch-up" amortization (non-GAAP measure)						$	(91)					$	(64)					$	(27)

												Due to Change in Average
Nine months ended:						Total Increase / (Decrease)						Portfolio Size						Asset Yield
Interest Income (GAAP measure)						$	(185)					$	(367)					$	182
Estimated "catch-up" premium amortization due to change in CPR forecast						(490)						—						(490)
Interest income, excluding "catch-up" premium amortization						(675)						(367)						(308)
TBA dollar roll income - implied interest income						161						182						(21)
Economic interest income, excluding "catch-up" amortization (non-GAAP measure)						$	(514)					$	(185)					$	(329)

Our average investment portfolio, inclusive of TBAs (at cost), decreased ~~14%~~11% and 10% for the three and nine months ended ~~March 31,~~September 30, 2021, respectively, compared to the prior year period, ~~largely~~primarily due to lower operating leverage and a decline in our ~~total~~average stockholders' ~~equity outstanding as a result of common stock repurchases.~~equity. The decrease in the average yield on our investment portfolio, including TBA implied asset yields and excluding "catch-up" premium amortization, of 9514 basis points ~~compared to~~and 52 basis points for the ~~prior year period,~~three and nine months ended September 30, 2021, respectively, was largely due to changes in asset composition and lower prevailing yields on new asset purchases.

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Leverage

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.

We include our net TBA position in our measure of leverage because a forward contract to acquire Agency RMBS in the TBA market carries similar risks to Agency RMBS purchased in the cash market and funded with on-balance sheet liabilities. Similarly, a TBA contract for the forward sale of Agency securities has substantially the same effect as selling the underlying Agency RMBS and reducing our on-balance sheet funding commitments. (Refer to Liquidity and Capital Resources for further discussion of TBA securities and dollar roll transactions). Repurchase agreements used to fund short-term investments in U.S. Treasury securities ("U.S. Treasury repo") are excluded from our measure of leverage due to the temporary and highly liquid nature of these investments. The following table presents a summary of our leverage ratios for the periods listed (dollars in millions):


						Repurchase Agreements and Other Debt 1																		Net TBA Position Long/(Short) 2												Average Tangible Net Book Value "At Risk" Leverage during the Period 3						Tangible Net Book Value "At Risk" Leverage as of Period End 4								Repurchase Agreements and Other Debt 1																		Net TBA Position Long/(Short) 2												Average Tangible Net Book Value "At Risk" Leverage during the Period 3						Tangible Net Book Value "At Risk" Leverage as of Period End 4
Quarter Ended	Quarter Ended					Average Daily Amount						Maximum Daily Amount						Ending Amount						Average Daily Amount						Ending Amount															Quarter Ended					Average Daily Amount						Maximum Daily Amount						Ending Amount						Average Daily Amount						Ending Amount
September 30, 2021																																													September 30, 2021					$	45,847					$	49,021					$	45,723					$	30,312					$	28,912					7.5:1						7.5:1
June 30, 2021																																													June 30, 2021					$	52,374					$	60,186					$	48,488					$	28,082					$	27,611					7.6:1						7.9:1
March 31, 2021	March 31, 2021					$	54,602					$	57,153					$	55,221					$	32,022					$	25,355					8.0:1						7.7:1			March 31, 2021					$	54,602					$	57,153					$	55,221					$	32,022					$	25,355					8.0:1						7.7:1
December 31, 2020	December 31, 2020					$	53,645					$	55,249					$	52,543					$	33,753					$	31,204					8.4:1						8.5:1			December 31, 2020					$	53,645					$	55,249					$	52,543					$	33,753					$	31,204					8.4:1						8.5:1

September 30, 2020																																													September 30, 2020					$	61,008					$	69,628					$	54,558					$	27,785					$	29,460					8.9:1						8.8:1
June 30, 2020																																													June 30, 2020					$	69,552					$	72,399					$	69,370					$	15,662					$	20,413					8.8:1						9.2:1
March 31, 2020	March 31, 2020					$	93,538					$	104,773					$	63,241					$	7,487					$	20,648					9.9:1						9.4:1			March 31, 2020					$	93,538					$	104,773					$	63,241					$	7,487					$	20,648					9.9:1						9.4:1

1.Other debt includes debt of consolidated VIEs. Amounts exclude U.S. Treasury repo agreements.

2.Daily average and ending net TBA position outstanding measured at cost. Includes forward settling non-Agency securities.

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3.Average tangible net book value "at risk" leverage during the period represents the sum of our daily weighted average repurchase agreements and other debt used to fund acquisitions of investment securities and net TBA and forward settling securities position outstanding, divided by the sum of our average month-ended stockholders' equity, adjusted to exclude goodwill.

4.Tangible net book value "at risk" leverage as of period end represents the sum of our repurchase agreements and other debt used to fund acquisitions of investments securities, net TBA and forward settling securities position (at cost), and net receivable/payable for unsettled investment securities outstanding as of period end, divided by total stockholders' equity, adjusted to exclude goodwill as of period end.

Economic Interest Expense and Aggregate Cost of Funds

The following table summarizes our economic interest expense and aggregate cost of funds (non-GAAP measures) for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (dollars in millions), which includes the combination of interest expense on Agency repurchase agreements and other debt (GAAP measure), implied financing cost (benefit) of our TBA securities and interest rate swap periodic ~~interest cost (income):~~cost:


												Three Months Ended March 31,																										Three Months Ended September 30,																								Nine Months Ended September 30,
																		2021												2020																				2021												2020												2021												2020
Economic Interest Expense and Aggregate Cost of Funds 1	Economic Interest Expense and Aggregate Cost of Funds 1																													Amount						Cost of Funds						Amount						Cost of Funds															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
Repurchase agreement and other debt - interest expense (GAAP measure)	Repurchase agreement and other debt - interest expense (GAAP measure)																													$	29					0.21		%				$	426					1.80		%													Repurchase agreement and other debt - interest expense (GAAP measure)					$	14					0.12		%				$	62					0.40		%				$	60					0.16		%				$	622					1.09		%
TBA dollar roll income - implied interest expense (benefit) 2,3	TBA dollar roll income - implied interest expense (benefit) 2,3																													(38)						(0.48)		%				32						1.67		%													TBA dollar roll income - implied interest expense (benefit) 2,3					(33)						(0.42)		%				(41)						(0.58)		%				(94)						(0.41)		%				(13)						(0.10)		%
Economic interest expense - before interest rate swap periodic cost (income), net 4																														(9)						(0.04)		%				458						1.79		%
Interest rate swap periodic interest cost (income), net 2,5																														12						0.06		%				(31)						(0.12)		%
Total economic interest expense (non-GAAP measure)																														$	3					0.02		%				$	427					1.67		%
Economic interest expense (benefit) - before interest rate swap periodic cost, net 4																																																															Economic interest expense (benefit) - before interest rate swap periodic cost, net 4					(19)						(0.10)		%				21						0.09		%				(34)						(0.05)		%				609						0.87		%
Interest rate swap periodic cost 2,5																																																															Interest rate swap periodic cost 2,5					13						0.07		%				13						0.06		%				44						0.07		%				41						0.06		%
Total economic interest expense (benefit) (non-GAAP measure)																																																															Total economic interest expense (benefit) (non-GAAP measure)					$	(6)					(0.03)		%				$	34					0.15		%				$	10					0.02		%				$	650					0.93		%

________________________________

1.Amounts exclude interest rate swap termination fees and variation margin settlements paid or received, forward starting swaps and the impact of other supplemental hedges, such as swaptions and U.S. Treasury positions.

2.Reported in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income.

3.The implied funding cost (benefit) of TBA dollar roll transactions is determined using the price differential, or "price drop," between the TBA price for current month settlement versus the TBA price for forward month settlement and market based assumptions regarding the "cheapest-to-deliver" collateral that can be delivered to satisfy the TBA contract, such as the anticipated collateral’s weighted average coupon, weighted average maturity and projected 1-month CPR. The average implied funding cost (benefit) for all TBA transactions is weighted based on our daily average TBA balance outstanding for the period.

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

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

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

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summary of the estimated impact of these elements on our economic interest expense for the three and nine months ended ~~March 31,~~September 30, 2021 compared to the prior year period (in millions):


Impact of Changes in the Principal Elements of Economic Interest Expense	Impact of Changes in the Principal Elements of Economic Interest Expense																				Impact of Changes in the Principal Elements of Economic Interest Expense
Three Months Ended March 31, 2021 vs. March 31, 2020
Periods ended September 30, 2021 vs. September 30, 2020																					Periods ended September 30, 2021 vs. September 30, 2020
												Due to Change in Average																				Due to Change in Average
						Total Increase / (Decrease)						Borrowing / Swap Balance						Borrowing / Swap Rate								Total Increase / (Decrease)						Borrowing / Swap Balance						Borrowing / Swap Rate
Three months ended:	Three months ended:																				Three months ended:
Repurchase agreements and other debt interest expense	Repurchase agreements and other debt interest expense					$	(397)					$	(177)					$	(220)		Repurchase agreements and other debt interest expense					$	(48)					$	(15)					$	(33)
TBA dollar roll income - implied interest benefit/expense	TBA dollar roll income - implied interest benefit/expense					(70)						103						(173)			TBA dollar roll income - implied interest benefit/expense					8						(4)						12
Interest rate swap periodic interest expense/benefit						43						11						32
Total change in economic interest expense						$	(424)					$	(63)					$	(361)
Interest rate swap periodic cost																					Interest rate swap periodic cost					—						3						(3)
Total change in economic interest benefit/expense																					Total change in economic interest benefit/expense					$	(40)					$	(16)					$	(24)

																										Due to Change in Average

Nine months ended:																					Nine months ended:					Total Increase / (Decrease)						Borrowing / Swap Balance						Borrowing / Swap Rate
Repurchase agreements and other debt interest expense																					Repurchase agreements and other debt interest expense					$	(562)					$	(198)					$	(364)
TBA dollar roll income - implied interest benefit/expense																					TBA dollar roll income - implied interest benefit/expense					(81)						(10)						(71)
Interest rate swap periodic cost																					Interest rate swap periodic cost					3						(3)						6
Total change in economic interest benefit/expense																					Total change in economic interest benefit/expense					$	(640)					$	(211)					$	(429)

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Our average mortgage borrowings, inclusive of TBAs, decreased 14% and 12% for the three and nine months ended ~~March 31,~~September 30, 2021, respectively, compared to the prior year period, consistent with the decline in our average investment ~~portfolio due to lower operating leverage and a decline in our total stockholders' equity outstanding as a result of common stock repurchases.~~

portfolio. The decline in the average interest rate (actual and implied) on our mortgage borrowings for the three and nine months ended ~~March 31,~~September 30, 2021 of 19 basis points and 92 basis points, respectively, was due to the combination of ~~very low financing~~lower short-term interest rates ~~available in the Agency repo market~~ and ~~even lower implied financing rates available in the TBA dollar roll market, as repo and dollar roll funding levels benefited from~~ favorable technical supply and demand ~~factors.~~factors in the repo and TBA dollar roll markets.

The ~~increase~~change in our interest rate swap periodic cost for the three and nine months ended ~~March 31,~~September 30, 2021 was ~~primarily due to~~ a ~~decline in~~function of our average swap balance outstanding and the average fixed rate paid and floating rate received on our interest rate swaps ~~consistent with lower short-term interest rates, which was partly offset by a decline in~~as compared to the ~~average fixed rate paid on our interest rate swaps.~~prior year periods. The following ~~table presents~~is a summary ~~of the ratio~~ of our average interest ~~rates~~rate swaps outstanding ~~excluding~~and the related average swap pay and receive rates for each of the periods presented (dollars in millions). Amounts exclude forward starting swaps ~~to our average mortgage borrowings and the weighted average pay-fixed / receive-floating rates on our interest rate swaps for the three months ended March 31, 2021 and 2020 (dollars~~not yet in ~~millions):~~effect.


												Three Months Ended March 31,														Three Months Ended September 30,												Nine Months Ended September 30,
Average Ratio of Interest Rate Swaps (Excluding Forward Starting Swaps) to Mortgage Borrowings Outstanding	Average Ratio of Interest Rate Swaps (Excluding Forward Starting Swaps) to Mortgage Borrowings Outstanding																	2021						2020									Average Ratio of Interest Rate Swaps (Excluding Forward Starting Swaps) to Mortgage Borrowings Outstanding					2021						2020						2021						2020
Average Agency repo and other debt outstanding	Average Agency repo and other debt outstanding																	$	54,602					$	93,538								Average Agency repo and other debt outstanding					$	45,847					$	61,008					$	50,909					$	74,649
Average net TBA portfolio outstanding - at cost	Average net TBA portfolio outstanding - at cost																	$	32,022					$	7,487								Average net TBA portfolio outstanding - at cost					$	30,312					$	27,785					$	30,132					$	17,017
Average mortgage borrowings outstanding	Average mortgage borrowings outstanding																	$	86,624					$	101,025								Average mortgage borrowings outstanding					$	76,159					$	88,793					$	81,041					$	91,666
Average notional amount of interest rate swaps outstanding (excluding forward starting swaps)	Average notional amount of interest rate swaps outstanding (excluding forward starting swaps)																	$	45,211					$	71,659								Average notional amount of interest rate swaps outstanding (excluding forward starting swaps)					$	49,268					$	41,094					$	48,108					$	52,268
Ratio of average interest rate swaps to mortgage borrowings outstanding	Ratio of average interest rate swaps to mortgage borrowings outstanding																	52		%				71		%							Ratio of average interest rate swaps to mortgage borrowings outstanding					65		%				46		%				59		%				57		%

Average interest rate swap pay-fixed rate (excluding forward starting swaps)	Average interest rate swap pay-fixed rate (excluding forward starting swaps)																	0.16		%				1.22		%							Average interest rate swap pay-fixed rate (excluding forward starting swaps)					0.17		%				0.22		%				0.17		%				0.80		%
Average interest rate swap receive-floating rate	Average interest rate swap receive-floating rate																	(0.05)		%				(1.39)		%							Average interest rate swap receive-floating rate					(0.07)		%				(0.09)		%				(0.05)		%				(0.70)		%
Average interest rate swap net pay/(receive) rate	Average interest rate swap net pay/(receive) rate																	0.11		%				(0.17)		%							Average interest rate swap net pay/(receive) rate					0.10		%				0.13		%				0.12		%				0.10		%

For the three and nine months ended ~~March 31,~~September 30, 2021, ~~and 2020,~~ we had ~~an average~~a forward starting swap average balance of ~~$0.3~~$9 million and $0.1 billion, respectively, and, for the three and nine months ended September 30, 2020, an average balance of $0.7 billion and ~~$1.5~~$1.0 billion, 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. Including forward starting swaps, our average ratio of interest rate swaps outstanding to our average mortgage borrowings for the three and nine months ended ~~March 31,~~September 30, 2021 was 65% and ~~2020 was 53%~~59%, respectively, and ~~72%,~~47% and 58% for the three and nine months ended September 30, 2020, respectively.

Net Interest Spread

The following table presents a summary of our net interest spread (including the impact of TBA dollar roll income, interest rate swaps and excluding "catch-up" premium amortization) for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020:


						Three Months Ended September 30,												Nine Months Ended September 30,
Investment and TBA Securities - Net Interest Spread						2021						2020						2021						2020
Average asset yield, excluding "catch-up" premium amortization						2.16		%				2.30		%				2.11		%				2.63		%
Average aggregate cost of funds						0.03		%				(0.15)		%				(0.02)		%				(0.93)		%
Average net interest spread, excluding "catch-up" premium amortization						2.19		%				2.15		%				2.09		%				1.70		%

33

35

Three Months Ended
March 31,
Investment and TBA Securities - Net Interest Spread 2021 2020
Average asset yield, excluding "catch-up" premium amortization 2.02 % 2.97 %
Average aggregate cost of funds (0.02) % (1.67) %
Average net interest spread, excluding "catch-up" premium amortization 2.00 % 1.30 %

Net Spread and Dollar Roll Income

The following table presents a summary of our net spread and dollar roll income, excluding estimated "catch-up" premium amortization, per diluted common share (a non-GAAP financial measure) and a reconciliation to our net interest income (the most comparable GAAP financial measure) for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (dollars in millions):


												Three Months Ended March 31,														Three Months Ended September 30,												Nine Months Ended September 30,
																		2021						2020														2021						2020						2021						2020
Net interest income (GAAP measure)	Net interest income (GAAP measure)																	$	528					$	65								Net interest income (GAAP measure)					$	279					$	302					$	1,039					$	662
TBA dollar roll income, net 1	TBA dollar roll income, net 1																	154						16									TBA dollar roll income, net 1					175						155						491						249
Interest rate swap periodic (cost) income, net 1																		(12)						31
Interest rate swap periodic cost, net 1																																	Interest rate swap periodic cost, net 1					(13)						(13)						(44)						(41)
Other interest and dividend income 1	Other interest and dividend income 1																	—						2									Other interest and dividend income 1					—						—						—						3
Adjusted net interest and dollar roll income	Adjusted net interest and dollar roll income																	670						114									Adjusted net interest and dollar roll income					441						444						1,486						873
Operating expense	Operating expense																	(24)						(23)									Operating expense					(22)						(21)						(68)						(68)
Net spread and dollar roll income	Net spread and dollar roll income																	646						91									Net spread and dollar roll income					419						423						1,418						805
Dividend on preferred stock	Dividend on preferred stock																	25						21									Dividend on preferred stock					25						25						75						71
Net spread and dollar roll income available to common stockholders (non-GAAP measure)	Net spread and dollar roll income available to common stockholders (non-GAAP measure)																	621						70									Net spread and dollar roll income available to common stockholders (non-GAAP measure)					394						398						1,343						734
Estimated "catch-up" premium amortization cost (benefit) due to change in CPR forecast	Estimated "catch-up" premium amortization cost (benefit) due to change in CPR forecast																	(213)						243									Estimated "catch-up" premium amortization cost (benefit) due to change in CPR forecast					2						50						(140)						350
Net spread and dollar roll income, excluding "catch-up" premium amortization, available to common stockholders (non-GAAP measure)	Net spread and dollar roll income, excluding "catch-up" premium amortization, available to common stockholders (non-GAAP measure)																	$	408					$	313								Net spread and dollar roll income, excluding "catch-up" premium amortization, available to common stockholders (non-GAAP measure)					$	396					$	448					$	1,203					$	1,084

Weighted average number of common shares outstanding - basic	Weighted average number of common shares outstanding - basic																	533.7						548.0									Weighted average number of common shares outstanding - basic					526.7						553.2						529.0						553.8
Weighted average number of common shares outstanding - diluted	Weighted average number of common shares outstanding - diluted																	535.6						549.2									Weighted average number of common shares outstanding - diluted					528.6						554.3						530.8						554.8
Net spread and dollar roll income per common share - basic	Net spread and dollar roll income per common share - basic																	$	1.16					$	0.13								Net spread and dollar roll income per common share - basic					$	0.75					$	0.72					$	2.54					$	1.33
Net spread and dollar roll income per common share - diluted	Net spread and dollar roll income per common share - diluted																	$	1.16					$	0.13								Net spread and dollar roll income per common share - diluted					$	0.75					$	0.72					$	2.53					$	1.32
Net spread and dollar roll income, excluding "catch-up" premium amortization, per common share - basic	Net spread and dollar roll income, excluding "catch-up" premium amortization, per common share - basic																	$	0.76					$	0.57								Net spread and dollar roll income, excluding "catch-up" premium amortization, per common share - basic					$	0.75					$	0.81					$	2.27					$	1.96��
Net spread and dollar roll income, excluding "catch-up" premium amortization, per common share - diluted	Net spread and dollar roll income, excluding "catch-up" premium amortization, per common share - diluted																	$	0.76					$	0.57								Net spread and dollar roll income, excluding "catch-up" premium amortization, per common share - diluted					$	0.75					$	0.81					$	2.27					$	1.95

1.Reported in gain (loss) on derivative instruments and other securities, net in our consolidated statements of comprehensive income

Gain (Loss) on Investment Securities, Net

The following table is a summary of our net gain (loss) on investment securities for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (in millions):


												Three Months Ended March 31,														Three Months Ended September 30,												Nine Months Ended September 30,
Gain (Loss) on Investment Securities, Net 1	Gain (Loss) on Investment Securities, Net 1																	2021						2020									Gain (Loss) on Investment Securities, Net 1					2021						2020						2021						2020
Gain (loss) on sale of investment securities, net	Gain (loss) on sale of investment securities, net																	$	(13)					$	494								Gain (loss) on sale of investment securities, net					$	(5)					$	346					$	7					$	993
Unrealized gain (loss) on investment securities measured at fair value through net income, net 2	Unrealized gain (loss) on investment securities measured at fair value through net income, net 2																	(955)						197									Unrealized gain (loss) on investment securities measured at fair value through net income, net 2					(141)						(365)						(1,124)						511
Unrealized gain (loss) on investment securities measured at fair value through other comprehensive income, net	Unrealized gain (loss) on investment securities measured at fair value through other comprehensive income, net																	(237)						464									Unrealized gain (loss) on investment securities measured at fair value through other comprehensive income, net					6						70						(308)						737
Total gain (loss) on investment securities, net	Total gain (loss) on investment securities, net																	$	(1,205)					$	1,155								Total gain (loss) on investment securities, net					$	(140)					$	51					$	(1,425)					$	2,241

1.Amounts exclude gain (loss) on TBA securities, which are reported in gain (loss) on derivative instruments and other securities, net in our Consolidated Statements of Comprehensive Income.

2.Investment securities acquired after fiscal year 2016 are measured at fair value through net income (see Note 2 of our Consolidated Financial Statements in this Form 10-Q).

3436

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

The following table is a summary of our gain (loss) on derivative instruments and other securities, net for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (in millions):

Three Months Ended
March 31,
2021 2020
Interest rate swap periodic income (cost), net $ (12) $ 31
Realized gain (loss) on derivative instruments and other securities, net:
TBA securities - dollar roll income, net 154 16
TBA securities - mark-to-market net gain (loss) (228) 129
Payer swaptions (24) (22)
U.S. Treasury securities - long position (10) 60
U.S. Treasury securities - short position 1 (634)
U.S. Treasury futures - short position 27 (21)
Interest rate swaps - termination fees and variation margin settlements, net 1,090 (2,806)
Other — 27
Total realized gain (loss) on derivative instruments and other securities, net 1,010 (3,251)
Unrealized gain (loss) on derivative instruments and other securities, net:
TBA securities - mark-to-market net gain (loss) (852) 548
Interest rate swaps 46 (20)
Payer swaptions 411 (112)
U.S. Treasury securities - long position — 37
U.S. Treasury securities - short position 806 (303)
U.S. Treasury futures - short position 34 (83)
Other (4) (1)
Total unrealized gain (loss) on derivative instruments and other securities, net 441 66
Total gain (loss) on derivative instruments and other securities, net $ 1,439 $ (3,154)


						Three Months Ended September 30,												Nine Months Ended September 30,
						2021						2020						2021						2020
TBA securities, dollar roll income						$	175					$	155					$	491					$	249
TBA securities, mark-to-market gain/(loss)						(145)						128						(991)						947
Forward settling non-Agency, mark-to-market gain/(loss)						3						—						3						—
Interest rate swaps, periodic cost						(13)						(13)						(44)						(41)
Interest rate swaps, mark-to-market gain/(loss)						70						153						825						(2,993)
Payer swaptions						28						(1)						102						(149)
U.S. Treasury securities - short position						(11)						(15)						463						(1,012)
U.S. Treasury securities - long position						(8)						1						(19)						102
U.S. Treasury futures contracts - short position						5						(5)						37						(117)
Other						(3)						(3)						55						(125)
Total gain (loss) on derivative instruments and other securities, net						$	101					$	400					$	922					$	(3,139)

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

Estimated Taxable Income (Loss)

For the three months ended ~~March 31,~~September 30, 2021 and 2020, we had estimated taxable income attributed to common stockholders of $45 million and $508 million, respectively, or $0.09 and $0.92 per diluted common share, respectively. For the nine months ended September 30, 2021 and 2020, we had estimated taxable income (loss) available (attributable) to common stockholders of ~~$(164)~~$(277) million and ~~$111~~$615 million, respectively, or ~~$(0.31)~~$(0.52) and ~~$0.20~~$1.11 per diluted common share, respectively. Income determined under GAAP differs from income determined under U.S. federal income tax rules because of both temporary and permanent differences in income and expense recognition. The primary differences are (i) unrealized gains and losses on investment securities and derivative instruments marked-to-market in current income for GAAP purposes, but excluded from taxable income until realized, settled or amortized over the instrument's original term, (ii) timing differences, both temporary and potentially permanent, in the recognition of certain realized gains and losses and (iii) temporary differences related to the amortization of premiums and discounts on investments. Furthermore, our estimated taxable income is subject to potential adjustments up to the time of filing our appropriate tax returns, which occurs after the end of our fiscal year. The following is a reconciliation of our GAAP net income to our estimated taxable income for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (dollars in millions, except per share amounts):

3537


												Three Months EndedMarch 31,														Three Months Ended September 30,												Nine Months Ended September 30,
																		2021						2020														2021						2020						2021						2020
Net income/(loss)	Net income/(loss)																	$	975					$	(2,421)								Net income/(loss)					$	212					$	662					$	776					$	(1,041)
Book to tax differences:	Book to tax differences:																																Book to tax differences:
Premium amortization, net	Premium amortization, net																	(269)						237									Premium amortization, net					(45)						(11)						(313)						248
Realized gain/loss, net	Realized gain/loss, net																	(1,494)						2,555									Realized gain/loss, net					(342)						(472)						(1,793)						2,083
Net capital loss/(utilization of net capital loss carryforward)	Net capital loss/(utilization of net capital loss carryforward)																	89						32									Net capital loss/(utilization of net capital loss carryforward)					(141)						—						—						(394)
Unrealized (gain)/loss, net	Unrealized (gain)/loss, net																	545						(263)									Unrealized (gain)/loss, net					358						354						1,055						(200)
Other	Other																	(10)						(8)									Other					3						—						(2)						(10)
Total book to tax differences	Total book to tax differences																	(1,139)						2,553									Total book to tax differences					(167)						(129)						(1,053)						1,727
REIT taxable income (loss)	REIT taxable income (loss)																	(164)						132									REIT taxable income (loss)					45						533						(277)						686
REIT taxable income attributed to preferred stock	REIT taxable income attributed to preferred stock																	—						21									REIT taxable income attributed to preferred stock					—						25						—						71
REIT taxable income (loss), attributed to common stock	REIT taxable income (loss), attributed to common stock																	$	(164)					$	111								REIT taxable income (loss), attributed to common stock					$	45					$	508					$	(277)					$	615
Weighted average common shares outstanding - basic	Weighted average common shares outstanding - basic																	533.7						548.0									Weighted average common shares outstanding - basic					526.7						553.2						529.0						553.8
Weighted average common shares outstanding - diluted	Weighted average common shares outstanding - diluted																	533.7						549.2									Weighted average common shares outstanding - diluted					528.6						554.3						529.0						554.8
REIT taxable income (loss) per common share - basic	REIT taxable income (loss) per common share - basic																	$	(0.31)					$	0.20								REIT taxable income (loss) per common share - basic					$	0.09					$	0.92					$	(0.52)					$	1.11
REIT taxable income (loss) per common share - diluted	REIT taxable income (loss) per common share - diluted																	$	(0.31)					$	0.20								REIT taxable income (loss) per common share - diluted					$	0.09					$	0.92					$	(0.52)					$	1.11

Beginning net capital loss carryforward	Beginning net capital loss carryforward																	$	—					$	394								Beginning net capital loss carryforward					$	141					$	—					$	—					$	394
Increase (decrease) in net capital loss carryforward	Increase (decrease) in net capital loss carryforward																	89						32									Increase (decrease) in net capital loss carryforward					(141)						—						—						(394)
Ending net capital loss carryforward	Ending net capital loss carryforward																	$	89					$	426								Ending net capital loss carryforward					$	—					$	—					$	—					$	—
Ending net capital loss carryforward per common share	Ending net capital loss carryforward per common share																	$	0.17					$	0.75								Ending net capital loss carryforward per common share					$	—					$	—					$	—					$	—

3638

LIQUIDITY AND CAPITAL RESOURCES

Our business is dependent on our ability to maintain adequate levels of liquidity and capital resources to fund day-to-day operations, fulfill collateral requirements under our funding and derivative agreements, and to satisfy our dividend distribution requirement of at least 90% of our taxable income to maintain our qualification as a REIT. Our primary sources of liquidity are unencumbered cash and securities, borrowings available under repurchase agreements, TBA dollar roll financing and monthly receipts of principal and interest payments. We may also conduct asset sales, change our asset or funding mix, issue equity or undertake other capital enhancing actions to maintain adequate levels of liquidity and capital resources.

We believe that we have sufficient liquidity and capital resources available to meet our obligations and execute our business strategy. In assessing our liquidity, we consider a number of factors, including our current leverage, collateral levels, access to capital markets, overall market conditions, and the sensitivity of our tangible net book value over a range of scenarios. However, these and other factors impacting our liquidity are subject to numerous risks and uncertainties, including as described in the Quantitative and Qualitative Disclosures of Market Risks and Risk Factors sections of this Form 10-Q.

Leverage and Financing Sources

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 ~~7.7x~~7.5x and 8.5x as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. The following table includes a summary of our mortgage borrowings outstanding as of ~~March 31,~~September 30, 2021 and December 31, 2020 (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, 2021												December 31, 2020														September 30, 2021												December 31, 2020
Mortgage Borrowings	Mortgage Borrowings					Amount						%						Amount						%			Mortgage Borrowings					Amount						%						Amount						%
Repurchase agreements 1	Repurchase agreements 1					$	55,056					68		%				$	52,366					63		%	Repurchase agreements 1					$	45,589					61		%				$	52,366					63		%
Debt of consolidated variable interest entities, at fair value	Debt of consolidated variable interest entities, at fair value					165						—		%				177						—		%	Debt of consolidated variable interest entities, at fair value					134						—		%				177						—		%
Total debt	Total debt					55,221						69		%				52,543						63		%	Total debt					45,723						61		%				52,543						63		%
Net TBA position, at cost						25,355						31		%				31,204						37		%
TBA and forward settling non-Agency securities, at cost																											TBA and forward settling non-Agency securities, at cost					28,912						39		%				31,204						37		%
Total mortgage borrowings	Total mortgage borrowings					$	80,576					100		%				$	83,747					100		%	Total mortgage borrowings					$	74,635					100		%				$	83,747					100		%

1.As of ~~March 31,~~September 30, 2021 and December 31, 2020, ~~44%~~42% and 46%, respectively, of our repurchase ~~agreement funding was~~agreements were funded through the Fixed Income Clearing Corporation's GCF Repo service.

Our primary financing sources are collateralized borrowings structured as repurchase agreements. We enter into repurchase agreements, or "repo," through bi-lateral arrangements with financial institutions and independent dealers. We also enter into third-party repurchase agreements through our wholly-owned registered broker-dealer subsidiary, Bethesda Securities, LLC, such as tri-party repo offered through the FICC's GCF Repo service. We manage our repurchase agreement funding position through a variety of methods, including diversification of counterparties, maintaining a staggered maturity profile and utilization of interest rate hedging strategies. We also use TBA dollar roll transactions as a means of synthetically financing Agency RMBS.

The terms and conditions of our repurchase agreements are determined on a transaction-by-transaction basis when each such borrowing is initiated or renewed and, in the case of GCF Repo, by the variable margin requirements calculated by the FICC, which acts as the central counterparty. The amount borrowed is generally equal to the fair value of the securities pledged, as determined by the lending counterparty, less an agreed-upon discount, referred to as a "haircut," which reflects the underlying risk of the specific collateral and protects the counterparty against a change in its value. Interest rates are generally fixed based on prevailing rates corresponding to the term of the borrowing. None of our repo counterparties are obligated to renew or otherwise enter into new borrowings at the conclusion of our existing borrowings.

The use of TBA dollar roll transactions increases our funding diversification, expands our available pool of assets, and increases our overall liquidity position, as TBA contracts typically have lower implied haircuts relative to Agency RMBS pools funded with repo financing. TBA dollar roll transactions may also have a lower implied cost of funds than comparable repo funded transactions (referred to as "dollar roll specialness") offering incremental return potential. However, if it were to become uneconomical to roll our TBA contracts into future months it may be necessary to take physical delivery of the underlying securities and fund those assets with cash or other financing sources, which could reduce our liquidity position.

3739

Collateral Requirements and Unencumbered Assets

Amounts available to be borrowed under our repurchase agreements are dependent upon prevailing interest rates, the lender’s "haircut" requirements and collateral value. Each of these elements may fluctuate with changes in interest rates, credit quality and liquidity conditions within the financial markets. To help manage the adverse impact of interest rate changes on our borrowings, we utilize an interest rate risk management strategy involving the use of derivative financial instruments. In particular, we attempt to mitigate the risk of the cost of our short-term funding liabilities increasing at a faster rate than the earnings of our long-term fixed rate assets during a period of rising interest rates.

The collateral requirements, or haircut levels, under our repo agreements are typically determined on an individual transaction basis or by the prevailing requirements established by the FICC for GCF tri-party repo. Consequently, haircut levels and minimum margin requirements can change over time and may increase during periods of elevated market volatility. If the fair value of our collateral declines, our counterparties will typically require that we post additional collateral to re-establish the agreed-upon collateral levels, referred to as "margin calls." Similarly, if the estimated fair value of our investment securities increases, we may request that counterparties release collateral back to us. Our counterparties typically have the sole discretion to determine the value of pledged collateral but are required to act in good faith in making determinations of value. 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,~~September 30, 2021, 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. Fannie Mae and Freddie Mac publish monthly security pay-down factors for their mortgage pools on the fifth day after month-end, but do not remit payment to security holders until generally the 25th day after month-end. Bi-lateral repo counterparties assess margin to account for the reduction in value of Agency collateral when factors are released. The FICC assesses margin on the last day of each month, prior to the factor release date, based on its internally projected pay-down rates (referred to as the "blackout period exposure adjustment" or "blackout margin"). On the factor release date, the blackout margin is released and collateralization requirements are adjusted to actual factor data. Due to the timing difference between associated margin calls and our receipt of principal pay-downs, our liquidity is temporarily reduced each month for principal repayments. 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,~~September 30, 2021, our portfolio largely consisted of lower coupon 30 and 15-year TBA securities, which are not subject to monthly principal pay-downs, and higher coupon holdings concentrated in high quality, specified Agency RMBS pools, which have a lower risk of prepayment than similar coupon generic Agency RMBS.

Collateral requirements under our derivative agreements are subject to our counterparties' assessment of their maximum risk of loss associated with the derivative instrument measured over a certain period of time, referred to as the initial or minimum margin requirement. We are also subject to daily variation margin requirements based on changes in the value of the derivative instrument and/or collateral pledged. Daily variation margin requirements also entitle us to receive collateral if the value of amounts owed to us under the derivative agreement exceeds the minimum margin requirement. The collateral requirements under our TBA contracts are governed by the Mortgage-Backed Securities Division ("MBSD") of the FICC and, if applicable, by our third-party brokerage agreements, which may establish margin levels in excess of the MBSD. Collateral levels for interest rate derivative agreements are typically governed by the central clearing exchange and the associated futures commission merchants ("FCMs"), which may establish margin levels in excess of the clearing exchange. Collateral levels for interest rate derivative agreements not subject to central clearing are established by the counterparty financial institution.

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~~nine months ended ~~March 31,~~September 30, 2021, haircuts remained stable, and, as of ~~March 31,~~September 30, 2021, the weighted average haircut on our repurchase agreements was approximately ~~4.2%~~4.0% of the value of our collateral, compared to 4.6% as of December 31, 2020.

To mitigate the risk of future 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,~~September 30, 2021, our unencumbered assets totaled ~~62%~~66% of our tangible net equity, compared to 60% as of ~~December 31,~~ December 31, 2020. The majority of our liquidity is held at AGNC, but we also maintain capital and excess liquidity at Bethesda Securities to meet regulatory standards, satisfy counterparty and clearing organization expectations, and for risk management purposes. As of ~~March 31,~~September 30, 2021, we had cash and unencumbered Agency RMBS and U.S. Treasury securities totaling $5.2 billion, or ~~48%~~51% of our tangible equity, which excludes unencumbered CRT securities, non-Agency securities and assets held at Bethesda Securities, compared to $5.4 billion and 51%, respectively, as of December 31, 2020.

3840

Counterparty Risk

Collateral requirements imposed by counterparties subject us to the risk that the counterparty does not return pledged assets to us as and when required. We attempt to manage this risk by monitoring our collateral positions and limiting our counterparties to registered clearinghouses and major financial institutions with acceptable credit ratings. We also diversify our funding across multiple counterparties and by region.

As of ~~March 31,~~September 30, 2021, 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,~~September 30, 2021, approximately 9%7% of our tangible stockholder's equity was at risk with the FICC. Excluding central clearing exchanges, as of ~~March 31,~~September 30, 2021, our amount at risk with any counterparty to our derivative agreements was less than 1% of our stockholders' equity.

Asset Sales

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. Treasury market). The vitality of these markets enables us to sell assets under most market conditions to generate liquidity through direct sales or delivery into TBA contracts, subject to "good delivery" provisions promulgated by the Securities Industry and Financial Markets Association ("SIFMA"). Under certain market conditions, however, we may be unable to realize the full "pay-up" value of our specified pool securities, or premium relative to generic Agency RMBS. We attempt to manage this risk by maintaining a minimum level of securities that trade at or near TBA values that in our estimation enhances our portfolio liquidity across a wide range of market conditions.

Capital Markets

The equity capital markets serve as a source of capital to grow our business and to meet potential liquidity needs of our business. The availability of equity capital is dependent on market conditions and investor demand for our common and preferred stock. We will typically not issue common stock when the price of our common stock trades below our tangible net book value or issue preferred equity when its cost exceeds acceptable hurdle rates of return on our equity. There can be no assurance that we will be able to raise additional equity capital at any particular time or on any particular terms. Furthermore, when the trading price of our common stock is less than our estimate of our current tangible net book value per common share, among other conditions, we may repurchase shares of our common stock. Please refer to Note 9 and 10 of our Consolidated Financial Statements in this Form 10-Q for further details regarding our recent equity capital transactions and ~~our~~ stock repurchase plan.

OFF-BALANCE SHEET ARRANGEMENTS

As of ~~March 31,~~September 30, 2021, 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,~~September 30, 2021, 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.

Forward looking statements are based on management’s assumptions, projections and beliefs as of the date of this Quarterly Report, but they involve a number of risks and uncertainties. Actual results may differ materially from those anticipated in forward-looking statements, as well as from historical performance. Factors that could cause actual results to vary from our forward-looking statements include, but are not limited to, the following:

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

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

41

•changes in U.S. monetary policy or interest rates, including Fed purchases of Agency RMBS;

•fluctuations in the yield curve;

39

•fluctuations in mortgage prepayment rates on the loans underlying our Agency RMBS;

•the availability and terms of financing;

•changes in the market value of our assets, including from changes in net interest spreads, and changes in market liquidity or depth;

•the effectiveness of our risk mitigation strategies;

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

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

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

Forward-looking statements speak only as of the date made, and we do not assume any duty and do not undertake to update forward-looking statements. A further discussion of risks and uncertainties that could cause actual results to differ from any of our forward-looking statements is included in our most recent Annual Report on Form 10-K and this document under Item 1A. Risk Factors. We caution readers not to place undue reliance on our forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the exposure to loss resulting from changes in market factors such as interest rates, foreign currency exchange rates, commodity prices and equity prices. The primary market risks that we are exposed to are interest rate, prepayment, spread, liquidity, extension and credit risk.

Interest Rate Risk

We are subject to interest rate risk in connection with the fixed income nature of our assets and the short-term, variable rate nature of our financing obligations. Our operating results depend in large part on differences between the income earned on our assets and our cost of borrowing and hedging activities. The costs associated with our borrowings are generally based on prevailing market interest rates. During a period of rising interest rates, our borrowing costs generally will increase while the yields earned on our existing portfolio of leveraged fixed-rate assets will largely remain static. This can result in a decline in our net interest spread. Changes in the level of interest rates can also affect the rate of mortgage prepayments and the value of our assets.

Interest rates are highly sensitive to many factors, including fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond our control. Subject to maintaining our qualification as a REIT, we engage in a variety of interest rate management techniques to mitigate the influence of interest rate changes on our net interest income and fluctuations of our tangible net book value. The principal instruments that we use to hedge our interest rate risk are interest rate swaps, swaptions, U.S. Treasury securities and U.S. Treasury futures contracts. Our hedging techniques are highly complex and are partly based on assumed levels of prepayments of our assets. If prepayments are slower or faster than assumed, the maturity of our investments will also differ from our expectations, which could reduce the effectiveness of our hedging strategies and may cause losses on such transactions and adversely affect our cash flow.

The severity of potential declines in our tangible net book value due to fluctuations in interest rates would depend on our asset, liability, and hedge composition at the time, as well as the magnitude and duration of the interest rate change. Primary measures of an instrument's price sensitivity to interest rate fluctuations are its duration and convexity. Duration measures the estimated percentage change in market value of an instrument that would be caused by a parallel change in short and long-term interest rates. The duration of our assets will vary with changes in interest rates and tends to increase when interest rates rise and decrease when interest rates fall. This "negative convexity" generally increases the interest rate exposure of our investment portfolio in excess of what is measured by duration alone.

We estimate the duration and convexity of our assets using a third-party risk management system and market data. We review the duration estimates from the third-party model and may make adjustments based on our judgment to better reflect any unique characteristics and market trading conventions associated with certain types of securities.

The table below quantifies the estimated changes in the fair value of our investment portfolio (including derivatives and other securities used for hedging purposes) and in our tangible net book value per common share as of ~~March 31,~~September 30, 2021 and December 31, 2020 should interest rates go up or down by 25, 50 75 and ~~100~~75 basis points, assuming instantaneous parallel shifts in the yield curve and including the impact of both duration and convexity. All values in the table below are measured as

42

percentage changes from the base interest rate scenario. The base interest rate scenario assumes interest rates and prepayment projections as of ~~March 31,~~September 30, 2021 and December 31, 2020.

40

To the extent that these estimates or other assumptions do not hold true, which ismay be more likely ~~in a period~~during periods of ~~high~~elevated market volatility, actual results could differ materially from our projections. Moreover, if different models were employed in the analysis, materially different projections could result. Lastly, while the table below reflects the estimated impact of interest rate changes on a static portfolio, we actively manage our portfolio and we continuously adjust the size and composition of our asset and hedge portfolio.


Interest Rate Sensitivity 1,2	Interest Rate Sensitivity 1,2																										Interest Rate Sensitivity 1,2
						March 31, 2021												December 31, 2020														September 30, 2021												December 31, 2020
Change in Interest Rate	Change in Interest Rate					Estimated Change in Portfolio Market Value						Estimated Change in Tangible Net Book Value Per Common Share						Estimated Change in Portfolio Market Value						Estimated Change in Tangible Net Book Value Per Common Share			Change in Interest Rate					Estimated Change in Portfolio Market Value						Estimated Change in Tangible Net Book Value Per Common Share						Estimated Change in Portfolio Market Value						Estimated Change in Tangible Net Book Value Per Common Share
-100 Basis Points						-0.6%						-5.8%						-1.2%						-12.6%

-75 Basis Points	-75 Basis Points					-0.3%						-2.6%						-0.9%						-9.7%			-75 Basis Points					-0.5%						-5.2%						-0.9%						-9.7%
-50 Basis Points	-50 Basis Points					0.0%						-0.4%						-0.5%						-5.8%			-50 Basis Points					-0.2%						-2.0%						-0.5%						-5.8%
-25 Basis Points																											-25 Basis Points					—%						—%						-0.2%						-2.1%
+25 Basis Points																											+25 Basis Points					-0.2%						-1.9%						—%						0.4%
+50 Basis Points	+50 Basis Points					-0.5%						-4.6%						-0.1%						-1.1%			+50 Basis Points					-0.5%						-5.2%						-0.1%						-1.1%
+75 Basis Points	+75 Basis Points					-0.8%						-8.1%						-0.4%						-4.0%			+75 Basis Points					-1.0%						-9.6%						-0.4%						-4.0%
+100 Basis Points						-1.2%						-12.0%						-0.8%						-8.1%

1.Derived from models that are dependent on inputs and assumptions provided by third parties, assumes there are no changes in mortgage spreads and assumes a static portfolio. Actual results could differ materially from these estimates.

2.Includes the effect of derivatives and other securities used for hedging purposes. Interest rates are assumed to be floored at 0% in down rate scenarios.

Prepayment Risk

Prepayment risk is the risk that our assets will be repaid at a faster rate than anticipated. Interest rates and numerous other factors affect the rate of prepayments, such as housing prices, general economic conditions, loan age, size and loan-to-value ratios, and GSE buyouts of delinquent loans underlying our securities. Generally, lower mortgage rates increase the rate of prepayments, ~~increase during periods of falling mortgage interest~~while higher rates ~~and decrease during periods of rising mortgage interest rates. However, this may not always be~~have the ~~case.~~opposite effect.

If our assets prepay at a faster rate than anticipated, we may be unable to reinvest the repayments at acceptable yields. If the proceeds are reinvested at lower yields than our existing assets, our net interest income would be negatively impacted. We also amortize or accrete premiums and discounts we pay or receive at purchase relative to the stated principal of our assets into interest income over their projected lives using the effective interest method. If the actual and estimated future prepayment experience differs from our prior estimates, we are required to record an adjustment to interest income for the impact of the cumulative difference in the effective yield.

Extension Risk

Extension risk is the risk that our assets will be repaid at a slower rate than anticipated and generally increases when interest rates rise. In a rising or higher interest rate environment, we may be required to finance our investments at potentially higher costs without the ability to reinvest principal into higher yielding securities as a result of borrowers prepaying their mortgages at a slower pace than originally anticipated, adversely impacting our net interest spread, and thus our net interest income.

As of ~~March 31,~~September 30, 2021 and December 31, 2020, our investment securities (excluding TBAs) had a weighted average projected CPR of ~~11.3%~~10.7% and 17.6%, respectively, and a weighted average yield of ~~2.39%~~2.48% and 2.33%, respectively. The table below presents estimated weighted average projected CPRs and yields for our investment securities should interest rates go up or down instantaneously by 25, 50 75 and ~~100~~75 basis points. Estimated yields exclude the impact of retroactive "catch-up" premium amortization adjustments for prior periods due to changes in the projected CPR assumption.

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Interest Rate Sensitivity 1	Interest Rate Sensitivity 1																										Interest Rate Sensitivity 1
						March 31, 2021												December 31, 2020														September 30, 2021												December 31, 2020
Change in Interest Rate	Change in Interest Rate					Weighted Average Projected CPR						Weighted Average Asset Yield 2						Weighted Average Projected CPR						Weighted Average Asset Yield 2			Change in Interest Rate					Weighted Average Projected CPR						Weighted Average Asset Yield 2						Weighted Average Projected CPR						Weighted Average Asset Yield 2
-100 Basis Points						17.7%						2.06%						25.6%						1.91%

-75 Basis Points	-75 Basis Points					15.7%						2.16%						23.9%						1.99%			-75 Basis Points					16.8%						2.23%						23.9%						1.99%
-50 Basis Points	-50 Basis Points					13.9%						2.25%						21.9%						2.09%			-50 Basis Points					14.1%						2.33%						21.9%						2.09%
-25 Basis Points																											-25 Basis Points					12.1%						2.42%						19.7%						2.20%
Actual as of Period End	Actual as of Period End					11.3%						2.39%						17.6%						2.33%			Actual as of Period End					10.7%						2.48%						17.6%						2.33%
+25 Basis Points																											+25 Basis Points					9.6%						2.53%						15.9%						2.38%
+50 Basis Points	+50 Basis Points					9.7%						2.47%						14.3%						2.45%			+50 Basis Points					8.9%						2.56%						14.3%						2.45%
+75 Basis Points	+75 Basis Points					9.1%						2.50%						13.0%						2.51%			+75 Basis Points					8.2%						2.60%						13.0%						2.51%
+100 Basis Points						8.6%						2.52%						11.9%						2.56%

1.Derived from models that are dependent on inputs and assumptions provided by third parties and assumes a static portfolio. Actual results could differ materially from these estimates. Table excludes TBA securities.

2.Asset yield based on historical cost basis and does not include the impact of retroactive "catch-up" premium amortization adjustments due to changes in projected CPR.

Spread Risk

Spread risk is the risk that the market spread between the yield on our assets and the yield on benchmark interest rates linked to our interest rate hedges, such as U.S. Treasury rates and interest rate swap rates, may vary. As a levered investor in mortgage-backed securities, spread risk is an inherent component of our investment strategy. ~~Consequently,~~Therefore, although we use hedging instruments to attempt to protect against moves in interest rates, our hedges are generally not designed to protect against spread risk, and our tangible net book value could decline if spreads widen.

Fluctuations in mortgage spreads can occur due to a variety of factors, including changes in interest rates, prepayment expectations, actual or anticipated monetary policy actions by the U.S. and foreign central banks, liquidity conditions, required rates of returns on different assets and other market supply and demand factors. The table below quantifies the estimated changes in the fair value of our assets, net of hedges, and our tangible net book value per common share as of ~~March 31,~~September 30, 2021 and December 31, 2020 should spreads widen or tighten by 10, 25 and 50 basis points. The estimated impact of changes in spreads is in addition to our interest rate shock sensitivity included in the interest rate shock table above. The table below assumes a spread duration of 5.6 and 4.4 years as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, based on interest rates and prices as of such dates; however, our portfolio's sensitivity to mortgage spread changes will vary with changes in interest rates and in the size and composition of our portfolio. Therefore, actual results could differ materially from our estimates.

Spread Sensitivity 1,2

Spread Sensitivity 1,2

Spread Sensitivity 1,2

March 31, 2021

December 31, 2020

September 30, 2021

December 31, 2020

Change in MBS Spread

Change in MBS Spread

Estimated Change in Portfolio Market Value

Estimated Change in Tangible Net Book Value Per Common Share

Estimated Change in Portfolio Market Value

Estimated Change in Tangible Net Book Value Per Common Share

Change in MBS Spread

Estimated Change in Portfolio Market Value

Estimated Change in Tangible Net Book Value Per Common Share

Estimated Change in Portfolio Market Value

Estimated Change in Tangible Net Book Value Per Common Share

-50 Basis Points

-50 Basis Points

+2.8%

+27.0%

+2.2%

+23.9%

-50 Basis Points

+2.8%

+27.2%

+2.2%

+23.9%

-25 Basis Points

-25 Basis Points

+1.4%

+13.5%

+1.1%

+11.9%

-25 Basis Points

+1.4%

+13.6%

+1.1%

+11.9%

-10 Basis Points

-10 Basis Points

+0.6%

+5.4%

+0.4%

+4.8%

-10 Basis Points

+0.6%

+5.4%

+0.4%

+4.8%

+10 Basis Points

+10 Basis Points

-0.6%

-5.4%

-0.4%

-4.8%

+10 Basis Points

-0.6%

-5.4%

-0.4%

-4.8%

+25 Basis Points

+25 Basis Points

-1.4%

-13.5%

-1.1%

-11.9%

+25 Basis Points

-1.4%

-13.6%

-1.1%

-11.9%

+50 Basis Points

+50 Basis Points

-2.8%

-27.0%

-2.2%

-23.9%

+50 Basis Points

-2.8%

-27.2%

-2.2%

-23.9%

1.Spread sensitivity is derived from models that are dependent on inputs and assumptions provided by third parties, assumes there are no changes in interest rates and assumes a static portfolio. Actual results could differ materially from these estimates.

2.Includes the effect of derivatives and other securities used for hedging purposes.

Liquidity Risk

Our liquidity risk principally arises from financing long-term fixed rate assets with shorter-term variable rate borrowings. Future borrowings are dependent upon the willingness of lenders to finance our investments, lender collateral

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requirements and the lenders’ determination of the fair value of the securities pledged as collateral, which fluctuates with changes in interest rates and liquidity conditions within the commercial banking and mortgage finance industries.

As of ~~March 31,~~September 30, 2021, we believe that we have sufficient liquidity and capital resources available to execute our business strategy (see Liquidity and Capital Resources in this Form 10-Q for additional details). However, should the value of our collateral or the value of our derivative instruments suddenly decrease, margin calls relating to our funding liabilities and derivative agreements could increase, causing an adverse change in our liquidity position. Furthermore, there is no assurance that we will always be able to renew (or roll) our short-term funding liabilities. In addition, our counterparties have the option to increase our haircuts (margin requirements) on the assets we pledge against our funding liabilities, thereby reducing the amount that can be borrowed against an asset even if they agree to renew or roll our funding liabilities. Significantly higher haircuts can reduce our ability to leverage our portfolio or may even force us to sell assets, especially if correlated with asset price declines or faster prepayment rates on our assets.

Credit Risk

Our credit sensitive investments, such as CRT and non-Agency securities, expose us to the risk of nonpayment of principal, interest or other remuneration we are contractually entitled to. We are also exposed to credit risk in the event our repurchase agreement counterparties default on their obligations to resell the underlying collateral back to us at the end of the repo term or in the event our derivative counterparties do not perform under the terms of our derivative agreements.

We accept credit exposure related to our credit sensitive assets at levels we deem prudent within the context of our overall investment strategy. We attempt to manage this risk through careful asset selection, pre-acquisition due diligence, post-acquisition performance monitoring, and the sale of assets where we identify negative credit trends. We may also manage credit risk with credit default swaps or other financial derivatives that we believe are appropriate. Additionally, we may vary the mix of our interest rate and credit sensitive assets or our duration gap to adjust our credit exposure and/or improve the return profile of our assets, such as when we believe credit performance is inversely correlated with changes in interest rates. Our credit risk related to derivative and repurchase agreement transactions is largely mitigated by limiting our counterparties to major financial institutions with acceptable credit ratings or to registered central clearinghouses and monitoring concentration levels with any one counterparty. We also continuously monitor and adjust the amount of collateral pledged based on changes in market value.

There is no guarantee that our efforts to manage credit risk will be successful and we could suffer losses if credit performance is worse than our expectations or our counterparties default on their obligations. Excluding central clearing exchanges, as of ~~March 31,~~September 30, 2021, our maximum amount at risk with any counterparty related to our repurchase agreements ~~was less than 2% of tangible stockholders' equity~~ and ~~related to our~~ derivative agreements was less than 2% and 1%, respectively, of tangible stockholders' equity.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based on the definition of "disclosure controls and procedures" as promulgated under the Exchange Act and the rules and regulations thereunder. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

We, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of ~~March 31,~~September 30, 2021. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There have been no changes in our "internal control over financial reporting" (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Neither we, nor any of our consolidated subsidiaries, are currently subject to any material litigation nor, to our knowledge, is any material litigation threatened against us or any consolidated subsidiary, other than routine litigation and administrative proceedings arising in the ordinary course of business. Such proceedings are not expected to have a material adverse effect on the business, financial conditions, or results of our operations.

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~Stock Repurchase Program~~

In October of 2020, our Board of Directors authorized the repurchase of up to $1 billion of our outstanding shares of common stock through December 31, 2021. As of March 31, 2021, the Company has repurchased shares at an aggregate amount of $316 million under the program. As of March 31, 2021, $0.7 billion of common stock remained available for repurchase under the program. The following table presents information with respect to purchases of our common stock made during the three months ended March 31, 2021 by us or any "affiliated purchaser" of us, as defined in Rule 10b-18(a)(3) under the Exchange Act (in millions, except per share amounts):

Period 1
Total Number of Shares Purchased Average Net Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 2
Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Publicly Announced Plans or Programs (in millions)
January 1, 2021 - January 31, 2021 1.7 $15.67 1.7 $872
February 1, 2021 - February 28, 2021 5.2 $16.12 5.2 787
March 1, 2021 - March 31, 2021 6.4 $16.09 6.4 684
Total 13.3 $16.05 13.3 $684

~~___________________________~~

1.~~Amounts are reported based on the trade date of the share repurchase.~~

2.~~All shares purchased by the Company were pursuant to the stock repurchase program described in Note 9 of our accompanying Consolidated Financial Statements in this Form 10-Q.~~None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits and Financial Statement Schedules

(a) Exhibit Index

Exhibit No. Description

*3.1 AGNC Investment Corp. Amended and Restated Certificate of Incorporation, as amended, incorporated by reference from Exhibit 3.1 of Form 10-Q for the quarter ended March 31, 2020 (File No. 001-34057), filed May 11, 2020.

*3.2 AGNC Investment Corp. Fourth Amended and Restated Bylaws, as amended, incorporated herein by reference to Exhibit 3.1 of Form 8-K (File No. 001-34057), filed March 11, 2021.

*3.3 Certificate of Designations of 7.00% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, incorporated herein by reference to Exhibit 3.5 of Form 8-A (File No. 001-34057), filed August 18, 2017.

44

*3.4 Certificate of Elimination of 8.000% Series A Cumulative Redeemable Preferred Stock, incorporated herein by reference to Exhibit 3.1 of Form 8-K (File No 001-34057), filed October 26, 2017.

*3.5 Certificate of Designations of 6.875% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, incorporated herein by reference to Exhibit 3.5 of Form 8-A (File No 001-34057), filed March 6, 2019.

*3.6 Certificate of Designations of 6.50% Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, incorporated herein by reference to Exhibit 3.6 of Form 8-A (File No 001-34057), filed October 3, 2019.

*3.7 Certificate of Elimination of 7.750% Series B Cumulative Redeemable Preferred Stock, incorporated herein by reference to Exhibit 3.1 of Form 8-K (File No 001-34057), filed December 13, 2019.

*3.8 Certificate of Designations of 6.125% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, incorporated herein by reference to Exhibit 3.6 of Form 8-A (File No 001-34057), filed February 11, 2020.

*4.1 Instruments defining the rights of holders of securities: See Article IV of our Amended and Restated Certificate of Incorporation, as amended, incorporated herein by reference to Exhibit 3.1 of Form 10-Q for the quarter ended March 31, ~~2018~~2020 (File No. 001-34057) filed May ~~7, 2018.~~11, 2020.

46

*4.2 Instruments defining the rights of holders of securities: See Article VI of our ~~Third~~Fourth Amended and Restated Bylaws, as amended, incorporated herein by reference to Exhibit ~~3.2~~3.1 of Form ~~10-Q for the quarter ended September 30, 2016~~8-K (File No. 001-34057) filed ~~November 7, 2016.~~March 11, 2021.

*4.3 Form of Certificate for Common Stock, incorporated herein by reference to Exhibit 4.3 of Form 10-Q for the quarter ended September 30, 2016 (File No. 001-34057), filed November 7, 2016.

*4.4 Specimen 7.00% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock Certificate, incorporated herein by reference to Exhibit 4.1 of Form 8-A (File No. 001-34057), filed August 18, 2017.

*4.5 Specimen 6.875% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock Certificate, incorporated herein by reference to Exhibit 4.1 of Form 8-A (File No. 001-34057), filed March 6, 2019.

*4.6 Specimen 6.50% Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock Certificate, incorporated herein by reference to Exhibit 4.1 of Form 8-A (File No. 001-34057), filed October 3, 2019.

*4.7 Specimen 6.125% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock Certificate, incorporated herein by reference to Exhibit 4.1 of Form 8-A (File No 001-34057), filed February 11, 2020.

*4.8 Deposit Agreement relating to 7.00% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, dated August 22, 2017, among AGNC Investment Corp., Computershare Inc. and Computershare Trust Company, N.A., jointly as depositary, incorporated herein by reference to Exhibit 4.2 of Form 8-K (File No. 001-34057) filed August 22, 2017.

*4.9 Form of Depositary Receipt representing 1/1,000th of a share of 7.00% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (included as part of Exhibit 4.8), incorporated herein by reference to Exhibit A of Exhibit 4.2 of Form 8-K (File No. 001-34057) filed August 22, 2017.

*4.10 Deposit Agreement relating to 6.875% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, dated March 6, 2019, among AGNC Investment Corp., Computershare Inc. and Computershare Trust Company, N.A., jointly as depositary, incorporated herein by reference to Exhibit 4.2 of Form 8-K (File No. 001-34057) filed March 6, 2019.

*4.11 Form of Depositary Receipt representing 1/1,000th of a share of 6.875% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (included as part of Exhibit 4.10), incorporated herein by reference to Exhibit A of Exhibit 4.2 of Form 8-K (File No. 001-34057) filed March 6, 2019.

*4.12 Deposit Agreement relating to 6.50% Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, dated October 3, 2019, among AGNC Investment Corp., Computershare Inc. and Computershare Trust Company, N.A., jointly as depositary, incorporated herein by reference to Exhibit 4.2 of Form 8-K (File No. 001-34057) filed October 3, 2019.

45

*4.13 Form of Depositary Receipt representing 1/1,000th of a share of 6.50% Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (included as part of Exhibit 4.12), incorporated herein by reference to Exhibit A of Exhibit 4.2 of Form 8-K (File No. 001-34057) filed October 3, 2019.

*4.14 Deposit Agreement relating to 6.125% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, dated February 11, 2020, among AGNC Investment Corp., Computershare Inc. and Computershare Trust Company, N.A., jointly as depositary, incorporated herein by reference to Exhibit 4.1 of Form 8-K (File No. 001-34057) filed February 11, 2020.

*4.15 Form of Depositary Receipt representing 1/1,000th of a share of 6.125% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (included as part of Exhibit 4.14), incorporated herein by reference to Exhibit A of Exhibit 4.1 of Form 8-K (File No. 001-34057) filed February 11, 2020.

*10 Form of Indemnification Agreement, incorporated herein by reference to Exhibit 10.1 of Form 8-K (File No. 001-34057) filed October 25, 2021.

31.1 Certification of CEO Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.

31.2 Certification of CFO Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.

32 Certification of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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101.INS** The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document

101.SCH** XBRL Taxonomy Extension Schema Document

101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB** XBRL Taxonomy Extension Labels Linkbase Document

101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF** XBRL Taxonomy Extension Definition Linkbase Document

* Previously filed

** This exhibit is being furnished rather than filed, and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K

~~† Management contract or compensatory plan or arrangement~~

(b) Exhibits

See the exhibits filed herewith.

(c) Additional financial statement schedules

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AGNC INVESTMENT CORP.

By:

/s/ GP~~ARY~~ETER ~~D. K~~J. F~~AIN~~EDERICO

~~Gary D. Kain~~Peter J. Federico
President and
Chief Executive Officer and
Chief Investment Officer (Principal Executive Officer)

Date:

~~May 7,~~November 5, 2021

By:

/s/ BERNICE E. BELL

Bernice E. Bell
Senior Vice President and
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Date:

~~May 7,~~November 5, 2021

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