AGNC Investment Corp.: Form 10-Q for the period ended Sep 30, 2025

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 September 30, 2025. Our MD&A is presented in the following sections:

• Executive Overview
• Financial Condition
• Results of Operations
• Liquidity and Capital Resources
• Off-Balance Sheet Arrangements
• Forward-Looking Statements
• Website and Social Media Disclosure

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 generating favorable long-term stockholder returns with a substantial yield component. We generate income from the interest earned on our investments, net of associated borrowing and hedging costs, and net realized gains and losses on our investment and hedging activities. We fund our investments primarily through collateralized borrowings structured as repurchase agreements. We operate in a manner to qualify to be taxed as a REIT under the Internal Revenue Code.

We employ an active management strategy that is dynamic and responsive to evolving market conditions. The composition of our portfolio and our investment, funding, and hedging strategies are tailored to reflect our analysis of market conditions and the relative values of available options. 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

Market Trends

In the third quarter of 2025, the pivot by the Federal Reserve (the "Fed") to a less restrictive monetary policy stance, combined with easing fiscal policy concerns, drove strong financial market performance and a notable improvement in investor sentiment. Agency RMBS were one of the best-performing fixed income asset classes during the quarter and have outperformed U.S. Treasuries for five consecutive months for the first time since 2013. In this favorable investment environment, AGNC generated an economic return on tangible common equity of 10.6% for the third quarter.

At its September meeting, the Fed lowered the federal funds rate as expected and signaled further monetary policy accommodation with the possibility of additional rate cuts at the October and December meetings. On the fiscal policy front, the passage of the tax bill early in the quarter and several positive tariff developments reduced uncertainty that had weighed on the investment outlook in the second quarter. Collectively, these investor-friendly developments contributed to a material decline in interest rate volatility and supported the relative outperformance of Agency RMBS.

Looking ahead, a number of macroeconomic dynamics support a constructive outlook for Agency RMBS. First, the Administration has begun to focus on mortgage spreads as a means of improving housing affordability. In a late-September interview, the Treasury Secretary underscored this view, stating: "the really important thing here is that we either maintain mortgage spreads, or narrow them further, to help the American people."

Second, the supply and demand dynamic for Agency RMBS remains well balanced. With the primary mortgage rate year-to-date remaining above 6%, net new issuance of Agency RMBS is expected to total approximately $200 billion in 2025—toward the lower end of initial expectations. Meanwhile, the demand outlook has improved, with banks expected to increase demand following anticipated regulatory reforms. In addition, money manager demand for Agency RMBS, which increased meaningfully in the third quarter, should remain robust given the favorable shift in monetary policy.

Third, the financing market for Agency RMBS remains strong. The Fed recently announced that it will conclude the reduction of its aggregate securities holdings on December 1, 2025 to ensure bank reserves remain at levels consistent with ongoing funding market liquidity. Over the longer-term, the Fed is also considering joining the FICC for purposes of the Standing Repo Facility and moving to a repo-based rate as its primary policy target. If implemented, each of these measures would further strengthen the repo market for U.S. Treasuries and Agency RMBS, particularly during periods of market stress.

Fourth, the outlook for GSE reform continues to move in a favorable direction, with policymakers emphasizing the importance of maintaining mortgage market stability. To that end, the Treasury Department has emphasized three guiding principles for GSE reform: (i) maximize taxpayer value; (ii) lower mortgage rates through stable or tighter mortgage spreads; and (iii) avoid disruptions to the housing finance system.

While these dynamics currently point in a favorable direction for Agency RMBS, episodes of financial market volatility and disruption are possible given ongoing monetary and fiscal policy uncertainty. In this evolving investment environment, AGNC’s disciplined approach to asset selection and risk management positions it well to generate favorable risk-adjusted returns.

Portfolio and Summary Financial Results

For the third quarter, AGNC generated total comprehensive income of $0.78 per diluted common share and an economic return of 10.6% on tangible common equity, comprised of $0.36 in dividends declared and a $0.47 increase in tangible net book value per common share. For the first three quarters of 2025, total comprehensive income was $0.80 per diluted common share, resulting in an economic return of 11.3%, comprised of $1.08 in dividends and a $0.13 decline in tangible net book value per common share.

Agency spreads to both Treasury and swap rates tightened meaningfully across the coupon stack during the third quarter, reflecting a sharp decline in interest rate volatility. Intermediate coupon securities performed the best, supported by strong index-based demand from money managers. Higher coupon RMBS also generated positive excess returns, though to a lesser extent, as the sizable intra-quarter rally in long-term interest rates increased prepayment concerns associated with these coupons. Hedge composition was another meaningful driver of performance, as swap spreads widened 2 to 5 basis points across the curve.

Our investment portfolio totaled $90.8 billion as of September 30, 2025, an increase of $8.5 billion from the prior quarter, reflecting the full deployment of preferred and common equity capital raised in the second and third quarters. As is typically the case when new capital is deployed, the assets added were primarily newly originated production coupon RMBS. Over time, we seek to optimize the composition of our asset base by rotating into pools with more favorable prepayment characteristics as market opportunities arise.

Consistent with the growth in our investment portfolio, our TBA position increased to $13.8 billion at quarter end from $8.3 billion as of June 30, 2025. As a result, the percentage of assets with favorable prepayment attributes1 declined to 76%, compared to 81% at June 30, 2025. The weighted average coupon of our portfolio, excluding TBAs, increased modestly to 5.17% as of quarter end, compared to 5.14% as of June 30, 2025. Including TBAs, the weighted average coupon was unchanged at 5.15%.

The average projected life CPR of our portfolio increased to 8.6% at quarter end from 7.8% as of June 30, 2025, reflecting lower mortgage rates. Actual CPRs averaged 8.3% for the quarter, down from 8.7% in the second quarter.

We ended the third quarter with tangible “at risk” leverage of 7.6x, unchanged from the prior quarter, and a substantial liquidity position of $7.2 billion in unencumbered cash and Agency RMBS, which represented 66% of tangible equity, up slightly from the second quarter.

The notional balance of our swap and Treasury-based hedges remained relatively stable during the third quarter; however, the composition shifted toward a greater share of longer-dated swap-based hedges. In duration dollar terms, swap-based hedges increased to 59% of our overall hedge portfolio, compared to 54% as of June 30, 2025.

Given the convexity profile of our assets and the significant decline in interest rate volatility, we added $7 billion of receiver swaptions during the third quarter to provide additional protection in a declining rate environment. Our duration gap, which measures the estimated difference between the interest rate sensitivity of our assets and liabilities including hedges, was 0.3 years at quarter end compared to 0.2 years as of June 30, 2025.

Net spread and dollar roll income (a non-GAAP measure) declined $0.03 to $0.35 per common share for the third quarter. This decline was primarily driven by lower swap income due to the maturity of legacy interest rate swaps with ultra-low fixed pay rates totaling $3.8 billion in the third quarter and $5.3 billion in the second quarter, as well as a timing mismatch between the issuance and deployment of new preferred and common equity capital.

Another important driver of net spread and dollar roll income is the amount of unhedged short-term debt in our funding mix, as measured by our hedge ratio. As of September 30, 2025, our interest rate hedge ratio—excluding option-based hedges—declined to 77% of total funding liabilities, compared to 86% as of June 30, 2025. This decline reflects our expectations for an accommodative monetary policy environment and positions AGNC’s earnings profile to benefit from future rate cuts as they occur.

Looking ahead, lower funding costs resulting from the September rate cut and potential future rate cuts, together with the full deployment of recently raised equity capital and a shift in our hedge mix toward a greater share of swap-based hedges, are likely to benefit net spread and dollar roll income, despite a gradual decline in the benefit of legacy swaps.

For information regarding non-GAAP financial measures, including reconciliations to the most comparable GAAP measure please refer to Results of Operations included in this MD&A below. For information regarding the sensitivity of our tangible net book value per common share to changes in interest rates and mortgage spreads, please refer to Item 3. Quantitative and Qualitative Disclosures about Market Risk in this form 10-Q.

1. Specified pools with favorable prepayment attributes include: (i) specified pools backed by lower balance loans with original loan balances of up to $200K, HARP pools (defined as pools that were issued between May 2009 and December 2018 and backed by 100% refinance loans with original LTVs ≥ 80%), and pools backed by loans 100% originated in New York and Puerto Rico and (ii) other pools backed by loans with credit, loan balances, geographies, occupancy types, and other characteristics that exhibit favorable prepayment behavior.

Market Information

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

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. Price information is sourced from Barclays. Interest rate information is sourced from Bloomberg.

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

1. 30-Year Current Coupon Yield represents the yield on new production Agency RMBS. 30-Year Current Coupon Yields are sourced from Bloomberg and 30-Year Mortgage Rates are sourced from Clear Blue.

2. CRT and CDX spreads sourced from JP Morgan. CMBS spreads are the average of spreads sourced from Bank of America, JP Morgan and Wells Fargo.

FINANCIAL CONDITION

As of September 30, 2025 and December 31, 2024, our investment portfolio totaled $90.8 billion and $73.3 billion, respectively, consisting of: $76.3 billion and $65.5 billion Agency RMBS, at fair value, respectively; $13.8 billion and $6.9 billion net TBA securities, at fair value, respectively; $0.6 billion and $0.9 billion CRT, non-Agency RMBS and CMBS, at fair value, respectively; and other mortgage credit investments of $69 million and $64 million, respectively, which we account for under the equity method of accounting. The following table is a summary of our investment securities (including TBA securities) as of September 30, 2025 and December 31, 2024 (dollars in millions):

1. Table excludes other mortgage credit investments of $69 million and $64 million as of September 30, 2025 and December 31, 2024, respectively.

2. 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

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

TBA securities are recorded as derivative instruments in our accompanying consolidated financial statements, and our TBA dollar roll transactions represent a form of off-balance sheet financing. As of September 30, 2025 and December 31, 2024, our TBA securities had a net carrying value of $36 million and $(26) million, respectively, reported in derivative assets/(liabilities) on our accompanying consolidated balance sheets. The net carrying value represents the difference between the fair value of the underlying security in the TBA contract and the price to be paid or received for the underlying security.

As of September 30, 2025 and December 31, 2024, the weighted average yield on our investment securities (excluding TBA and forward settling securities) was 4.94% and 4.77%, respectively.

The following tables summarize certain characteristics of our fixed rate Agency RMBS portfolio, inclusive of TBA securities, as of September 30, 2025 and December 31, 2024 (dollars in millions):

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 September 30, 2025, lower balance specified pools had a weighted average original loan balance of $188,000 and $141,000 for 15-year and 30-year securities, respectively, and HARP pools had a weighted average original LTV of 128% and 142% for 15-year and 30-year securities, respectively.

2. Portfolio yield incorporates a projected life CPR based on forward rate assumptions as of September 30, 2025.

1. See Note 1 of the preceding table for specified pool composition. As of December 31, 2024, lower balance specified pools had a weighted average original loan balance of $188,000 and $148,000 for 15-year and 30-year securities, respectively, and HARP pools had a weighted average original LTV of 128% and 141% for 15-year and 30-year securities, respectively.

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

For additional details regarding our CRT and non-Agency securities, including credit ratings, as of September 30, 2025 and December 31, 2024, 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," and "net spread and dollar roll income available to common stockholders" and the related per common share measures and certain financial metrics derived from such non-GAAP information.

"Economic interest income" is measured as interest income (GAAP measure), adjusted to (i) exclude retrospective "catch-up" adjustments to premium amortization cost associated with changes in projected CPR estimates and (ii) 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 available to common stockholders" is measured as comprehensive income (loss) available (attributable) to common stockholders (GAAP measure) adjusted to: (i) exclude gains/losses on investment securities recognized through net income and other comprehensive income and gains/losses on derivative instruments and other securities (GAAP measures); (ii) exclude retrospective "catch-up" adjustments to premium amortization cost associated with changes in projected CPR estimates; and (iii) include interest rate swap periodic income/cost, TBA dollar roll income and other interest income/expense. As defined,

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

By providing such measures, in addition to the related GAAP measures, we believe we give greater transparency into the information used by our management in its financial and operational decision-making. 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 "net spread and dollar roll income available to common stockholders" and components of such measure, "economic interest income" and "economic interest expense," 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 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. Additionally, we believe the exclusion of "catch-up" premium amortization adjustments 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 adjustments is more indicative of the current earnings potential of our investment portfolio.

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.

Selected Financial Data

The following selected financial data is derived from our interim consolidated financial statements and the notes thereto. The selected financial data should be read in conjunction with the more detailed information contained in Item 1. Financial Statements and in this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (in millions, except per share amounts):

(Unaudited)

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* 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 represents the daily weighted average repurchase agreements outstanding for the period used to fund our investment securities and other debt. 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) (collectively "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 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 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.

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 September 30, 2025 and 2024, which includes the combination of interest income (a GAAP measure) on our holdings reported as investment securities on our consolidated balance sheets, adjusted to exclude estimated "catch-up" premium amortization adjustments for the cumulative effect from prior reporting periods due to changes in our CPR forecast, and implied interest income on our TBA securities (dollars in millions):

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. 30-year fixed rate mortgage rates are sourced from Optimal Blue. 10-year U.S. Treasury rates are sourced from Bloomberg.

The principal elements impacting our economic interest income are the average size of our investment portfolio and the average yield on our securities. The following table includes a summary of the estimated impact of each of these elements on our economic interest income for the three and nine months ended September 30, 2025 compared to the prior year period (in millions):

Impact of Changes in the Principal Elements Impacting Economic Interest Income

Our average investment portfolio (at cost), inclusive of TBAs, increased 23% and 23% for the three and nine months ended September 30, 2025, respectively, compared to the prior year period, primarily due to an increase in our capital base. The average yield on our investment portfolio, including TBA implied asset yields and excluding "catch-up" premium amortization, increased 22 and 24 basis points for the three and nine months ended September 30, 2025, respectively, largely as a result of shifting our asset portfolio from lower coupon holdings toward a greater share of higher coupon, specified pools.

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 in this Form 10-Q 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):

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.

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 September 30, 2025 and 2024 (dollars in millions), which includes the combination of interest expense on repurchase agreements and other debt used to fund acquisitions of investment securities (GAAP measure), implied financing cost of our TBA securities and interest rate swap periodic income:

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 periodic income, is calculated on a weighted average basis based on average investment securities repurchase agreements, other debt and TBA securities outstanding during the period and their respective cost of funds.

5. Interest rate swap periodic income 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 on our mortgage borrowings and (iii) the average net interest rate paid/received on our interest rate swaps. The following table includes a summary of the estimated impact of these elements on our economic interest expense for the three and nine months ended September 30, 2025 compared to the prior year period (in millions):

Impact of Changes in the Principal Elements of Economic Interest Expense

Our average mortgage borrowings, inclusive of TBAs, increased 24% and 25% for the three and nine months ended September 30, 2025, respectively, consistent with the increase to our average investment portfolio. The average interest rate on our mortgage borrowings, excluding the impact of interest rate swap periodic income, decreased 98 and 99 basis points for the three and nine months ended September 30, 2025, respectively, due to lower short-term interest rates.

Interest rate swap periodic income declined for the three and nine months ended September 30, 2025, primarily due to higher pay rates on our pay-fixed swaps—driven by the maturity of lower-cost swaps—and lower receive rates. The ratio of interest rate swaps outstanding to mortgage borrowings also declined, reflecting a decline in the Company's total hedge ratio and a shift towards a higher proportion of U.S. Treasury-based hedges. The following is a summary of our interest rate swaps outstanding during the three and nine months ended September 30, 2025 (dollars in millions). Amounts exclude forward starting swaps not yet in effect.

For the three and nine months ended September 30, 2025, we had an average forward starting net pay-fixed rate swap balance of $238 million and $196 million, respectively. For the three and nine months ended September 30, 2024, we had an average forward starting net pay-fixed rate swap balance of $1 million and $894 million, respectively. Forward starting interest rate swaps do not impact our economic interest expense and aggregate cost of funds until they commence accruing net interest settlements on their forward start dates.

Net Interest Spread

The following table presents a summary of our net interest spread (including the impact of TBA dollar roll income, interest rate swaps and excluding "catch-up" premium amortization) for the three and nine months ended September 30, 2025 and 2024:

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Net Spread and Dollar Roll Income

The following table presents a reconciliation of net spread and dollar roll income available to common stockholders (non-GAAP measure) from comprehensive income (loss) available (attributable) to common stockholders (the most comparable GAAP financial measure) for the three and nine months ended September 30, 2025 and 2024 (dollars in millions):

1. Reported in interest income in our consolidated statements of comprehensive income.

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

3. Other interest income (expense), net includes interest income on cash and cash equivalents; price alignment interest income (expense) ("PAI") on interest rate swap margin deposits posted by or (to) the Company; and other miscellaneous interest income (expense).

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 September 30, 2025 and 2024 (in millions):

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).

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 September 30, 2025 and 2024 (in millions):

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.

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. There are various risks and uncertainties that can impact our liquidity, such as those described in Item 1A. Risk Factors of our most recent Annual Report on Form 10-K and Item 3. Quantitative and Qualitative Disclosures of Market Risks in this Form 10-Q. 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. We believe that we have sufficient liquidity and capital resources available to meet our obligations and execute our business strategy.

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 7.6x and 7.2x as of September 30, 2025 and December 31, 2024, respectively. The following table includes a summary of our mortgage borrowings outstanding as of September 30, 2025 and December 31, 2024 (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.

1. Includes Agency RMBS, CRT and non-Agency MBS repurchase agreements. Excludes U.S. Treasury repurchase agreements totaling $5.2 billion and $1.4 billion as of September 30, 2025 and December 31, 2024, respectively.

2. As of September 30, 2025 and December 31, 2024, 44% and 47%, respectively, of our total repurchase agreements, including 47% and 49% or our investment securities repurchase agreements, respectively, were funded through the Fixed Income Clearing Corporation's GCF Repo service.

We primarily finance our assets through collateralized borrowings structured as repurchase agreements (“repo”). We enter into these agreements on a bilateral basis with financial institutions and independent dealers, as well as through tri-party and centrally cleared repo platforms—such as the FICC’s GCF Repo service—accessed through our wholly owned, registered broker-dealer subsidiary, Bethesda Securities, LLC. We manage our repo funding through counterparty diversification, maintaining a suitable maturity profile, interest rate hedging, and other strategies. In addition to repo, we also utilize TBA dollar roll transactions to synthetically finance Agency RMBS.

The terms of bilateral repurchase agreements are established on a transaction-by-transaction basis at the time each borrowing is initiated or renewed and are governed by the provisions of a Master Repurchase Agreement. For GCF Repo transactions, the terms and conditions are set by the FICC's clearing rules and applicable operating procedures. Each of our repurchase agreements requires that borrowed amounts be subject to collateralization requirements, and interest rates are generally fixed and reflect prevailing market rates for the specified borrowing term and collateral type. Our repurchase agreement counterparties are not obligated to renew or enter into new borrowings upon the maturity of existing agreements.

TBA dollar roll transactions enhance our funding diversification, expand our available pool of assets, and improve our liquidity position by typically requiring lower collateral than Agency RMBS financed with repo. These transactions may also benefit from lower implied costs, or "specialness." However, if rolling TBA contracts into future months becomes uneconomical, we may need to take physical delivery of the underlying securities and fund those securities with other sources, potentially reducing our liquidity position.

Collateral Requirements and Unencumbered Assets

Borrowing capacity under our repurchase agreements is influenced by counterparty margin requirements, collateral values, interest rates and counterparties’ willingness and ability to lend. These factors can change over time in response to interest rate movements, overall market liquidity, shifts in credit quality and changes in bank regulatory requirements. Centrally cleared repo capacity also depends on Bethesda Securities’ satisfying membership and regulatory requirements and maintaining its risk exposure within limits established by the FICC.

Haircuts for bilateral repurchase agreements are determined on a transaction-specific basis. A haircut is a discount applied to the market value of pledged collateral to protect the counterparty against potential declines in its value. Margin requirements for GCF Repo are set by the FICC. These include an initial margin requirement, calculated daily using a Value-at-Risk (“VaR”) model, which evaluates Bethesda Securities’ net exposure to the FICC, taking into account the offsetting risk sensitivities of positions such as repos and reverse repos. Initial margin is designed to protect the FICC against potential future exposure from a member default and may also be used to cover losses arising from the default of other clearing members, subject to assessments from the loss mutualization waterfall and applicable caps and withdrawal provisions set pursuant to FICC rules. The FICC also imposes daily variation margin, based on amounts borrowed plus accrued interest, adjusted for fluctuations in collateral value, and is intended to cover the current exposure associated with the repo transaction. Margin thresholds may increase during periods of elevated market volatility, causing an adverse change in our liquidity position.

When collateral values decline, counterparties typically issue margin calls requiring us to post additional collateral to restore the required collateralization level. Conversely, if the value of pledged securities rises, we may request the return of excess collateral. Collateral values are determined by our counterparties, who are required to act in good faith. Margin calls are typically due on the same business day, subject to notice provisions. As of September 30, 2025, we were in compliance with all margin requirements.

Fannie Mae and Freddie Mac publish monthly pay-down factors on the fifth business day following month-end, and repo counterparties typically reduce the values they assign to Agency RMBS collateral to account for the pay-down factor data, even though principal payments on Agency RMBS are generally not received until the 25th calendar day following month-end. Bilateral repo counterparties make this adjustment at the time Fannie Mae and Freddie Mac publish the pay-down factors. In contrast, the FICC assesses margin on the last business day of each month—prior to the factor release—using internally projected pay-down rates. This estimate-based collateral adjustment is referred to as the "blackout period exposure adjustment" or "blackout margin." On the factor release date, the FICC releases the blackout margin and updates collateral requirements to reflect the actual factor data.

The timing difference between margin calls related to principal pay-downs and our receipt of the corresponding cash flows temporarily reduces our available liquidity each month. We manage this liquidity risk by monitoring factors that influence prepayment activity and through disciplined asset selection. As of September 30, 2025, approximately 15% of our investment portfolio consisted of TBA securities, which are not subject to monthly principal pay-downs. The remainder of our portfolio, primarily consisting of Agency RMBS, had an average one-year CPR forecast of 10%.

Collateral requirements under our derivative agreements are typically subject to initial and variation margin requirements, similar to those for centrally cleared repo transactions, and may be adjusted based on changes in the value of the derivative agreements, collateral values, market volatility, and other factors. Collateral requirements for our TBA contracts are governed by the Mortgage-Backed Securities Division ("MBSD") of the FICC. Collateral levels for interest rate swap agreements are established by the central clearing exchange and the associated futures commission merchants ("FCMs"), which may impose margin requirements in excess of the clearing exchange. Non-centrally cleared derivative collateral requirements are set by the counterparty financial institution.

Haircut levels and initial or minimum margin requirements reduce the amount of our unencumbered assets and limit our borrowing capacity. During the three and nine months ended September 30, 2025, haircuts and initial margin requirements on our repo funding arrangements remained stable. As of September 30, 2025, the weighted average haircut and initial margin on our repurchase agreements was approximately 2.9% of the value of our collateral, compared to 3.2% as of December 31, 2024.

To mitigate the risk of margins calls, we seek to maintain excess liquidity by holding unencumbered liquid assets that can be used to satisfy collateral requirements, collateralize additional borrowings or sold for cash. As of September 30, 2025, our unencumbered assets totaled approximately $7.3 billion, or 66% of tangible equity, consisting of $7.2 billion of cash and unencumbered Agency RMBS and $0.1 billion of unencumbered credit assets. This compares to $6.2 billion of unencumbered assets, or 67% of tangible equity, as of December 31, 2024, consisting of $6.1 billion of cash and unencumbered Agency RMBS and $0.1 billion of unencumbered credit assets.

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

Counterparty Risk

Collateral requirements imposed by counterparties subject us to the risk that pledged assets may not be returned to us as required. We attempt to manage this risk by actively monitoring our collateral positions and limiting our counterparties to registered clearinghouses and regulated financial institutions with acceptable credit ratings. We also diversify our funding sources across multiple counterparties and geographic region.

As of September 30, 2025, 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 September 30, 2025, less than 8% of our tangible stockholders' equity was at risk with the FICC. Excluding central clearing exchanges, as of September 30, 2025, 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). Although market conditions fluctuate, the vitality of these markets enables us to sell assets under most 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 carrying value of our securities. We attempt to manage this risk by maintaining at least 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. Please refer to Trends and Recent Market Impacts of this Management Discussion and Analysis for further information regarding Agency RMBS and TBA 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 at times when we believe the capital raised will not be accretive to our tangible net book value or earnings, and we will typically not issue preferred equity when its cost exceeds acceptable hurdle rates of return on our equity. We may also be unable to raise additional equity capital at suitable times or on favorable terms. Furthermore, when the trading price of our common stock is less than our then-current estimate of our tangible net book value per common share, among other conditions, we may repurchase shares of our common stock pursuant to the stock repurchase plan authorized by our Board, which as of September 30, 2025, shares of our common stock with an aggregate repurchase price of $1.0 billion remained authorized for repurchase through December 31, 2026. Please refer to Note 9 of our Consolidated Financial Statements in this Form 10-Q for further details regarding our recent equity capital transactions.

OFF-BALANCE SHEET ARRANGEMENTS

As of September 30, 2025, 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 September 30, 2025, 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 level, degree and extent of volatility in interest rates or the yield on our assets relative to interest rate benchmarks;
• fluctuations in mortgage prepayment rates on the loans underlying our Agency RMBS;
• the availability and terms of our financing and hedge positions;
• changes in the market value of our assets, including from changes in net interest spreads, market liquidity or depth, and changes in our "at risk" leverage or hedge positions;
• fluctuations in the yield curve;
• the effectiveness of our risk mitigation strategies;
• conditions in the market for Agency RMBS and other mortgage securities, including changes in the available supply of such securities or investor appetite therefor;
• changes in U.S. monetary policy or interest rates, including actions taken by the Federal Reserve to normalize monetary policy and to reduce the size of its U.S. Treasury and Agency RMBS bond portfolio;
• the direct or indirect effects of actions by the federal, state, or local governments that affect the economy, the housing sector or financial markets, including actions relating to fiscal policy;
• the direct or indirect effects of geopolitical events, including war, terrorism, civil discord, embargos, trade or other disputes, or natural disasters, on conditions in the markets for Agency RMBS or other mortgage securities, the terms or availability of funding for our business, or our ongoing business operations;
• the availability of personnel, operational resources, information technology and other systems to conduct our operations;
• changes to laws, regulations, rules or policies that affect the GSE's, the primary or secondary mortgage markets in which we participate or U.S. housing finance activity, including actions that would end or alter the conservatorships of Fannie Mae or Freddie Mac or their quasi-governmental status; and
• legislative or regulatory actions that affect our status as a REIT or our exemption from the Investment Company Act of 1940.

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 under Item 1A. Risk Factors in Part I of our most recent Annual Report on Form 10-K and Part II of this Form 10-Q. We caution readers not to place undue reliance on our forward-looking statements.

WEBSITE AND SOCIAL MEDIA DISCLOSURE

We use our website (www.AGNC.com (http://www.AGNC.com)) and AGNC’s LinkedIn (www.linkedin.com/company/agnc-investment-corp/ (http://www.linkedin.com/company/agnc-investment-corp/)) and X (www.x.com/AGNCInvestment (http://www.x.com/AGNCInvestment)) accounts to distribute information about the Company. Investors should monitor these channels in addition to our press releases, filings with the U.S. Securities and Exchange Commission (“SEC”), public conference calls and webcasts, as information posted through them may be deemed material. Our website, alerts and social media channels are not incorporated by reference into, and are not a part of, this or any other report filed with or furnished to the SEC. Investors and others may automatically receive emails and information about AGNC when they sign up for investor alerts on the "Investor Resources" tab of the Investor Relations section of our website.

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 risks.

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 estimates for reasonableness, giving consideration to any unique characteristics of our securities, market conditions and other factors likely to impact these estimates, and based on our judgment we may make adjustments to the third-party estimates. Our estimated duration gap, which is a measure of the difference between the interest rate sensitivity of our assets and our liabilities, inclusive of interest rate hedges, was 0.3 years as of September 30, 2025 and December 31, 2024.

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 September 30, 2025 and December 31, 2024 should interest rates go up or down by 25, 50 and 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 percentage changes from the base interest rate scenario. The base interest rate scenario assumes interest rates and prepayment projections as of September 30, 2025 and December 31, 2024.

To the extent that these estimates or other assumptions do not hold true, which may be more likely during periods of 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

1. Derived from models that are dependent on inputs and assumptions, 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 and Extension 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, declining mortgage rates increase the rate of prepayments, while rising rates have the 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 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 September 30, 2025 and December 31, 2024, our investment securities (excluding TBAs) had a weighted average projected CPR of 8.6% and 7.7%, respectively, and a weighted average yield of 4.94% and 4.77%, 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 and 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.

Interest Rate Sensitivity 1

1. Derived from models that are dependent on inputs and assumptions 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. 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 September 30, 2025 and December 31, 2024 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 5.1 as of September 30, 2025 and December 31, 2024 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

1. Spread sensitivity is derived from models that are dependent on inputs and assumptions, 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 requirements and the lenders’ determination of the fair value of the securities pledged as collateral. These factors can change over time in response to interest rate movements, overall market liquidity, shifts in credit quality and changes in bank regulatory requirements. Borrowings under centrally cleared repo also depend on Bethesda Securities’ satisfying membership and regulatory requirements and maintaining its risk exposure within limits established by the FICC.

As of September 30, 2025, 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, or margin requirements increase, we may be required to post additional collateral for these arrangements, 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 bilateral counterparties have the option to increase our haircuts (margin requirements) on the assets we pledge against our funding liabilities, and our central clearing counterparties may adjust their risk models impacting the amount of initial margin we are required to post, thereby reducing the amount that can be borrowed against our assets even if they agree to renew or roll our funding liabilities. Significantly higher haircuts or initial margin requirements 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 regulated 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. However, our efforts to manage credit risk may be unsuccessful and we could suffer losses as a result. Excluding central clearing exchanges, as of September 30, 2025, our maximum amount at risk with any counterparty related to our repurchase agreements and derivative agreements was less than 2% and less than 1%, respectively, of tangible stockholders' equity.

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 September 30, 2025. 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.

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, 2024.