AGNC Investment Corp
For the period ended Dec 31, 2024. Filed Feb 21, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 21, 2025
AGNCL$23.80+0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-22.
0001423689-24-000005
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-21.
0001423689-25-000007
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 153 previous paragraphs and 157 current paragraphs.
116 unchanged; 26 reworded; 15 added; 11 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 19 previous and 19 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
•Website and Social Media Disclosure
Current report
In 2024, an increasingly favorable market environment for Agency RMBS investors emerged as the Fed pivoted from its restrictive monetary policy and began lowering short-term rates toward a neutral level. Declining inflationary pressures and the Fed’s more accommodative monetary policy helped reduce interest rate volatility and steepen the yield curve. These dynamics provided an improved investment backdrop that enabled AGNC to generate a positive economic return of 13.2% in 2024, comprised of our monthly dividends totaling $1.44 per common share for the year and a modest decline of our tangible net book value of $0.29 per common share.
Current report
The U.S. presidential election and its implications for deficit spending, fiscal policy and future Treasury issuance tempered the positive investment sentiment that existed during the first three quarters of the year. In addition, strong economic data late in the fourth quarter extended the Fed’s anticipated easing timeline as evidenced by its December Summary of Economic Projections, which indicated fewer expected rate cuts in 2025 and 2026 than previously projected.
Current report
Looking forward, our outlook for Agency mortgage-backed securities in 2025 remains very favorable. We anticipate that Agency RMBS spreads relative to benchmark rates will remain wide compared to historical averages and continue to trade within the well-defined range that has been established over the past several quarters. Agency RMBS spreads to benchmark rates in the current range offer investors attractive return opportunities. Further, longer-term interest rates have risen meaningfully, and as of year-end, the 30-year primary mortgage rate was once again near 7%. At current rate levels, we expect the supply of Agency RMBS in 2025 to be similar to that of 2024 and reasonably well-aligned with investor demand. Potential increases in bank demand as regulatory constraints ease could also provide incremental additional support for Agency RMBS valuations. Together, these positive dynamics create a constructive investment backdrop for AGNC in 2025.
Current report
Notwithstanding our favorable outlook for Agency RMBS as we begin 2025, financial market and macroeconomic uncertainty remains elevated as the new administration implements sweeping changes to tariff, immigration, fiscal, and regulatory policy. In addition, while GSE reform does not appear to be an immediate focus of the administration, it is possible that this topic could be revisited at some point during the next four years. Favorably in our view, there also appears to be a growing consensus that any change to the structure of the GSE’s and the Agency RMBS market should be done in a way that preserves the current functionality of the conventional mortgage market, avoids disrupting the real estate market and ensures that housing affordability does not decline further. Please refer to Item 1A. Risk Factors for additional information regarding potential changes to the Federal conservatorships of Fannie Mae and Freddie Mac, laws or regulations affecting the relationship between the GSEs and the U.S. Government or other housing finance reform initiatives.
Current report
Financial Highlights
Current report
AGNC earned total comprehensive income of $0.84 per diluted common share for fiscal year 2024, an increase from $0.30 per share in 2023. Net spread and dollar roll income per diluted common share decreased to $1.88 in 2024 from $2.61 in 2023, primarily due to a narrowing of our net interest rate spread, which averaged 242 basis points in 2024, down from 306 basis points in 2023.
Current report
The reduction in our net interest spread was largely driven by higher swap costs following the expiration of lower-cost pay-fixed interest rate swaps during the year and a strategic shift toward a greater proportion of Treasury-based hedges, which are not included in our reported net interest spread or net spread income. Additionally, we expanded our use of longer-term hedges in response to changes in monetary policy and expectations of further yield curve steepening.
Current report
As of December 31, 2024, our interest rate hedge position covered 91% of the outstanding balance of our repurchase agreements used to fund our investment portfolio ("Investment Securities Repo"), TBA position, and other debt, compared to 112% at the end of 2023. Our duration gap, which measures the estimated difference between the interest rate sensitivity of our assets and our liabilities, inclusive of interest rate hedges, extended to 0.3 years as of December 31, 2024, from -0.5 years as of December 31, 2023, consistent with higher long-term rates and shifts in portfolio and hedge composition.
Current report
The weighted average coupon on our fixed-rate Agency RMBS and TBA securities increased to 5.02% at the end of 2024, up from 4.83% at the end of 2023. The average projected life Constant Prepayment Rate (CPR) for the portfolio decreased to 7.7% at year-end, from 11.4% at the end of 2023. Actual CPRs for 2024 averaged 7.5%, slightly up from 6.3% in 2023.
Current report
AGNC's average and ending "at risk" leverage for 2024 was 7.2x tangible stockholders’ equity, compared to 7.4x and 7.0x, respectively, for 2023. We concluded 2024 with $6.1 billion in cash and unencumbered Agency RMBS, representing 66% of tangible stockholders’ equity, compared to $5.1 billion and 66% of tangible equity as of December 31, 2023.
Current report
During 2024, we raised $2.0 billion of common stock through our at-the-market offering program at a considerable premium to tangible net book value, generating meaningful book value accretion for our common stockholders.
Current report
Average coupon excludes interest-only and principal-only securities.
Current report
WEBSITE AND SOCIAL MEDIA DISCLOSURE
Current report
We use our website (www.AGNC.com) and AGNC’s LinkedIn (www.linkedin.com/company/agnc-investment-corp/) and X (www.x.com/AGNCInvestment) accounts to distribute information about the Company. Investors should monitor these channels in addition to our press releases, filings with the U.S. Securities and Exchange Commission (“SEC”), public conference calls and webcasts, as information posted through them may be deemed material. Our website, alerts and social media channels are not incorporated by reference into, and are not a part of, this or any other report filed with or furnished to the SEC. Investors and others may automatically receive emails and information about AGNC when they sign up for investor alerts on the "Investor Resources" tab of the Investor Relations section of our website.
Removed paragraphs (11)
Previous report
The Federal Reserve continued its unprecedented dual-track approach to monetary policy tightening in 2023. Since the beginning of this cycle in 2022, the Federal Reserve has raised the Federal Funds rate by 525 basis points and reduced its balance sheet by $1.3 trillion. This aggressive Federal Reserve campaign and a number of other macroeconomic and geopolitical factors, including persistent inflation, regional bank failures and fears of broader financial contagion, political uncertainty regarding the U.S. debt ceiling and gross supply of U.S. Treasury securities, and significant global geopolitical events, led to sharply higher interest rate and Agency RMBS spread volatility throughout the year. While a number of the risks related to these factors remain and will continue to influence Agency RMBS performance going forward, market uncertainty about many of them has declined considerably from peak levels experienced during the year.
Previous report
The 10-year U.S. Treasury increased 170 basis points from the April 2023 low of 3.3% to nearly 5.0% in mid-October before declining 110 basis points to 3.9% at year end, ending the year unchanged. The current coupon Agency RMBS spread to a blend of 5- and 10-year Treasuries began the year at 145 basis points and reached 190 basis points in May and again in October, approximating levels that Agency RMBS spreads had previously reached since 2000 only during extreme financial market dislocations - the Great Financial Crisis and the peak of the Covid pandemic - before declining to 139 basis points at year end.
Previous report
Challenging fixed income environments underscore the importance of active portfolio management and prioritization of risk management. To that end, AGNC maintained a large interest rate hedge position, averaging over 115% of our repo funding and TBA position for 2023 and 2022, and a reduced leverage profile, averaging 7.4x and 7.8x of our tangible stockholders' equity for 2023 and 2022, respectively. In addition, our liquidity as a percentage of our stockholders' equity remained within normal operating levels despite the difficult environment, with unencumbered cash and Agency RMBS growing to $5.1 billion, or 66% of our tangible stockholders' equity, as of the end of 2023, up from $4.3 billion, or 59% of tangible stockholders’
Previous report
equity, the previous year-end. To capitalize on higher asset yields and wider spreads, in 2023, we continued to shift our asset portfolio away from TBA and lower coupon holdings toward a greater share of higher coupon, high-quality specified pools. As a result, the weighted average coupon on our fixed-rate Agency RMBS and TBA securities increased to 4.83% as of December 31, 2023 from 4.13% as of the previous year-end. Additionally, we opportunistically issued $1.1 billion and $0.5 billion in 2023 and 2022, respectively, of accretive common equity through our At-the-Market offering program to capitalize on our material price to book premium.
Previous report
AGNC earned total comprehensive income of $0.30 per diluted common share for fiscal year 2023, versus a loss of $4.22 in fiscal year 2022. Our total economic return on tangible common equity was 3.0% for 2023, comprised of $1.44 dividends declared per common share and a $1.14 decline in tangible net book value per common share, compared to a loss of 28.4% for 2022. Net spread and dollar roll income (a non-GAAP measure) per diluted common share totaled $2.61 for fiscal year 2023, compared to $3.11 for 2022, as higher asset yields and our pay-fixed / receive-variable interest rate swap portfolio largely offset rising repo funding costs and declining TBA dollar roll income during the year.
Previous report
As a levered investor in Agency RMBS, AGNC's performance is primarily driven by changes in Agency RMBS spreads to benchmark interest rates and interest rate volatility. Looking ahead, although risk measures for volatility remain elevated by historical standards, we believe a more favorable investment environment for Agency RMBS is emerging, supported by three key developments. First, the Fed adopted a more neutral monetary policy stance in the fourth quarter and indicated that multiple rate cuts are possible in 2024 if inflation continues to improve as expected. Second, many of the factors that drove the high levels of interest rate volatility in 2023 have now largely subsided, which should, in turn, enhance the attractiveness of Agency RMBS and reduce the cost of our interest rate risk management activities. Third, Agency RMBS spreads appear to have settled into a new trading range, providing us additional confidence in our view that the secular spread widening associated with the Federal Reserve’s reduced presence in the Agency RMBS market has reached its conclusion. Importantly, the higher end of this recent trading range has held on several repeated occasions, as the nearly 2.0% yield benefit for Agency RMBS relative to Treasury securities at these wide spread levels led to strong incremental demand for Agency RMBS. These developments collectively position Agency RMBS as an attractive investment option, both on an absolute and relative basis, in our view, and form the basis for our positive investment outlook.
Previous report
1."Net spread and dollar roll income available to common stockholders" was previously referred to as "net spread and dollar roll income, excluding 'catch-up' premium amortization, available to common stockholders". "Net spread and dollar roll income available to common stockholders" continues to exclude "catch-up" premium amortization.
Previous report
In 2023, we began reporting price alignment interest income (expense) ("PAI") on interest swap margin deposits posted by or (to) us in other interest income (expense), net. PAI was previously reported in interest rate swap periodic cost (benefit). Both current and former categorizations are components of net spread and dollar roll income. Prior year amounts have been reclassified and our economic interest expense and cost of funds have been restated to conform to the current period's presentation.
Previous report
In 2023, we began reporting PAI in other interest income (expense), net. PAI was previously reported in interest rate swap periodic income (cost). Prior year amounts have been reclassified to conform to the current period's presentation.
Previous report
This measure was previously referred to as "net spread and dollar roll income, excluding 'catch-up' premium amortization cost/benefit, per common share." Though it continues to exclude "catch-up" premium amortization cost/benefit, its title has been condensed to its revised title in the table above.
Previous report
In 2023, we began reporting PAI in other interest income (expense), net. PAI was previously reported in interest rate swap periodic income (cost). Prior year amounts have been reclassified to conform to the current period's presentation.
Reworded paragraphs (26)
Previous wording
As of December 31, 2023 and 2022, our investment portfolio totaled $60.2 billion and $59.5 billion, respectively, consisting of: $54.8 billion and $40.9 billion investment securities, at fair value, respectively; $5.4 billion and $18.6 billion net TBA securities, at fair value, respectively; and other mortgage credit investments of $44 million and $25 million, respectively, which we account for under the equity method of accounting. The following table is a summary of our investment securities as of December 31, 2023 and 2022 (dollars in millions):
Current wording
As of December 31, 2024 and 2023, our investment portfolio totaled $73.3 billion and $60.2 billion, respectively, consisting of: $65.5 billion and $53.8 billion Agency RMBS, at fair value, respectively; $6.9 billion and $5.4 billion net TBA securities, at fair value, respectively; $0.9 billion and $1.0 billion CRT, non-Agency RMBS and CMBS, at fair value, respectively; and other mortgage credit investments of $64 million and $44 million, respectively, which we account for under the equity method of accounting. The following table is a summary of our investment securities (including TBA securities) as of December 31, 2024 and 2023 (dollars in millions):
Previous wording
Table excludes other mortgage credit investments of $44 million and $25 million as of December 31, 2023 and 2022, respectively.
Current wording
Table excludes other mortgage credit investments of $64 million and $44 million as of December 31, 2024 and 2023, respectively.
Previous wording
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 December 31, 2023 and 2022, our TBA securities had a net carrying value of $66 million and $167 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.
Current wording
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 December 31, 2024 and 2023, our TBA securities had a net carrying value of $(26) million and $66 million, respectively, reported in derivative assets/(liabilities) on our accompanying consolidated balance sheets. The net carrying value represents the difference between the fair value of the underlying security in the TBA contract and the price to be paid or received for the underlying security.
Previous wording
As of December 31, 2023 and 2022, the weighted average yield on our investment securities (excluding TBA and forward settling securities) was 4.41% and 3.37%, respectively.
Current wording
As of December 31, 2024 and 2023, the weighted average yield on our investment securities (excluding TBA and forward settling securities) was 4.77% and 4.41%, respectively.
Previous wording
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 December 31, 2023, lower balance specified pools had a weighted average original loan balance of $132,000 and $153,000 for 15-year and 30-year securities, respectively, and HARP pools had a weighted average original LTV of 128% and 141% for 15-year and 30-year securities, respectively.
Current wording
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 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.
Previous wording
See Note 1 of preceding table for specified pool composition. As of December 31, 2022, lower balance specified pools had a weighted average original loan balance of $123,000 and $140,000 for 15-year and 30-year securities, respectively, and HARP pools had a weighted average original LTV of 128% and 138% for 15-year and 30-year securities, respectively.
Current wording
See Note 1 of preceding table for specified pool composition. As of December 31, 2023, lower balance specified pools had a weighted average original loan balance of $132,000 and $153,000 for 15-year and 30-year securities, respectively, and HARP pools had a weighted average original LTV of 128% and 141% for 15-year and 30-year securities, respectively.
Previous wording
The effective yield on our Agency RMBS and non-Agency securities of high credit quality is highly impacted by our estimate of future prepayments. We accrue interest income based on the outstanding principal amount and contractual terms of these securities, and we amortize or accrete premiums and discounts associated with our purchase of these securities into interest income over their projected lives, incorporating scheduled contractual payments and estimated prepayments, using the effective interest method. The weighted average cost basis of our securities as of December 31, 2023 was 102.2% of par value; therefore, changes in our actual or projected prepayments can significantly alter the effective yield on our assets.
Current wording
The effective yield on our Agency RMBS and non-Agency securities of high credit quality is highly impacted by our estimate of future prepayments. We accrue interest income based on the outstanding principal amount and contractual terms of these securities, and we amortize or accrete premiums and discounts associated with our purchase of these securities into interest income over their projected lives, incorporating scheduled contractual payments and estimated prepayments, using the effective interest method. The weighted average cost basis of our securities as of December 31, 2024 was 101.5% of par value; therefore, changes in our actual or projected prepayments can significantly alter the effective yield on our assets.
Previous wording
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"1 and the related per common share measures and certain financial metrics derived from such non-GAAP information.
Current wording
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.
Previous wording
Our average investment portfolio, inclusive of TBAs (at cost), decreased 11% and 18% for fiscal years 2023 and 2022, respectively, primarily due to a decline in our average stockholders' equity and lower "at risk" leverage. The average yield on our investment portfolio, including TBA implied asset yields and excluding "catch-up" premium amortization, increased 111 and 88 basis points for fiscal years 2023 and 2022, respectively, largely as a result of shifting our asset portfolio away from TBA and lower coupon holdings toward a greater share of higher coupon, high-quality specified pools to capitalize on higher asset yields and wider spreads.
Current wording
Our average investment portfolio (at cost), inclusive of TBAs, increased 9% and decreased 11% for fiscal years 2024 and 2023, respectively, primarily due to changes in our capital base. The average yield on our investment portfolio, including TBA implied asset yields and excluding "catch-up" premium amortization, increased 59 and 111 basis points for fiscal years 2024 and 2023, respectively, largely as a result of shifting our asset portfolio from lower coupon holdings toward a greater share of higher coupon, specified pools.
Previous wording
The following table summarizes our economic interest expense and aggregate cost of funds (non-GAAP measures) for fiscal years 2023, 2022 and 2021 (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 (benefit) of our TBA securities and interest rate swap periodic cost (benefit):
Current wording
The following table summarizes our economic interest expense and aggregate cost of funds (non-GAAP measures) for fiscal years 2024, 2023 and 2022 (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:
Previous wording
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 investment securities repurchase agreements, other debt and TBA securities outstanding during the period and their respective cost of funds.
Current wording
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.
Previous wording
Interest rate swap periodic cost (benefit) is measured as a percent of average mortgage borrowings outstanding for the period.
Current wording
Interest rate swap periodic income is measured as a percent of average mortgage borrowings outstanding for the period.
Previous wording
Our average mortgage borrowings, inclusive of TBAs, decreased 13% and 22% for fiscal years 2023 and 2022, respectively, due to a decline in our asset base. The average interest rate on our mortgage borrowings, excluding the impact interest rate swap period income/cost, increased 372 and 141 basis points for fiscal years 2023 and 2022, respectively, due to higher short-term interest rates.
Current wording
Our average mortgage borrowings, inclusive of TBAs, increased 11% and decreased 13% for fiscal years 2024 and 2023, respectively, consistent with changes to our average investment portfolio. The average interest rate on our mortgage borrowings, excluding the impact of interest rate swap periodic income, increased 18 and 372 basis points for fiscal years 2024 and 2023, respectively, due to higher short-term interest rates.
Previous wording
Interest rate swap periodic income increased for fiscal years 2023 and 2022 primarily due to higher receive rates on our pay-fixed swaps, as the average pay rate on our swaps increased marginally and the average notional balance remained largely unchanged despite the decline in our average mortgage borrowings. The following is a summary of our average interest rate swaps outstanding and the related average swap pay and receive rates for fiscal years 2023, 2022 and 2021 (dollars in millions). Amounts exclude forward starting swaps not yet in effect.
Current wording
Interest rate swap periodic income declined for fiscal years 2024 and 2023 primarily due to higher pay rates on our pay-fixed swaps largely driven by the maturity of low cost interest rate swaps. The following is a summary of our interest rate swaps outstanding during fiscal years 2024, 2023 and 2022 (dollars in millions). Amounts exclude forward starting swaps not yet in effect.
Previous wording
For fiscal years 2023, 2022 and 2021, we had an average forward starting net pay and (receive) fixed rate swap balance of $(0.5) billion, $48 million and $149 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.
Current wording
For fiscal years 2024, 2023 and 2022, we had an average forward starting net pay-fixed rate swap balance of $672 million, $43 million and $48 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.
Previous wording
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 7.0x and 7.4x as of December 31, 2023 and 2022, respectively. The following table includes a summary of our mortgage borrowings outstanding as of December 31, 2023 and 2022 (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-K.
Current wording
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 7.2x and 7.0x as of December 31, 2024 and 2023, respectively. The following table includes a summary of our mortgage borrowings outstanding as of December 31, 2024 and 2023 (dollars in millions). For additional details of our mortgage borrowings refer to Notes 2, 4 and 5 to our Consolidated Financial Statements in this Form 10-K.
Previous wording
Includes Agency RMBS, CRT and non-Agency MBS repurchase agreements. Excludes U.S. Treasury repurchase agreements totaling $1,547 million and $355 million as of December 31, 2023 and 2022, respectively.
Current wording
Includes Agency RMBS, CRT and non-Agency MBS repurchase agreements. Excludes U.S. Treasury repurchase agreements totaling $1.4 billion and $1.5 billion as of December 31, 2024 and 2023, respectively.
Previous wording
As of December 31, 2023 and 2022, 43% and 48%, respectively, of our total repurchase agreements, including 45% and 48% or our investment securities repurchase agreements, respectively, were funded through the Fixed Income Clearing Corporation's GCF Repo service.
Current wording
As of December 31, 2024 and 2023, 47% and 43%, respectively, of our total repurchase agreements, including 49% and 45% or our investment securities repurchase agreements, respectively, were funded through the Fixed Income Clearing Corporation's GCF Repo service.
Previous wording
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 December 31, 2023, approximately 9% of our investment portfolio consisted of TBA securities, which are not subject to monthly principal pay-downs. The remainder of our portfolio primarily consisted of Agency RMBS, which had an average one-year CPR forecast of 9%.
Current wording
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 December 31, 2024, approximately 9% of our investment portfolio consisted of TBA securities, which are not subject to monthly principal pay-downs. The remainder of our portfolio primarily consisted of Agency RMBS, which had an average one-year CPR forecast of 7% as of December 31, 2024.
Previous wording
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 fiscal year 2023, haircuts on our repo funding arrangements remained stable. As of December 31, 2023, the weighted average haircut on our repurchase agreements was approximately 3.1% of the value of our collateral, compared to 3.7% as of December 31, 2022.
Current wording
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 fiscal year 2024, haircuts on our repo funding arrangements remained stable. As of December 31, 2024, the weighted average haircut on our repurchase agreements was approximately 3.2% of the value of our collateral, compared to 3.1% as of December 31, 2023.
Previous wording
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 December 31, 2023, our unencumbered assets totaled approximately $5.2 billion, or 67% of tangible equity, consisting of $5.1 billion of unencumbered cash and Agency RMBS and $0.1 billion of unencumbered credit assets. This compares to $4.4 billion of unencumbered assets, or 60% of tangible equity, as of December 31, 2022, consisting of $4.3 billion of unencumbered cash and Agency RMBS and $0.1 billion of unencumbered credit assets.
Current wording
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 December 31, 2024, our unencumbered assets totaled approximately $6.2 billion, or 67% of tangible equity, consisting of $6.1 billion of cash and unencumbered Agency RMBS and $0.1 billion of unencumbered credit assets. This compares to $5.2 billion of unencumbered assets, or 67% of tangible equity, as of December 31, 2023, consisting of $5.1 billion of cash and unencumbered Agency RMBS and $0.1 billion of unencumbered credit assets.
Previous wording
As of December 31, 2023, our maximum amount at risk (or the excess/shortfall of the value of collateral pledged/received over our repurchase agreement liabilities/reverse repurchase agreement receivables) with any of our repurchase agreement counterparties, excluding the FICC, was less than 3% of our tangible stockholders' equity, with our top five repo counterparties, excluding the FICC, representing approximately 7% of our tangible stockholders' equity. As of December 31, 2023, less than 7% of our tangible stockholder's equity was at risk with the FICC. Excluding central clearing exchanges, as of December 31, 2023, our amount at risk with any counterparty to our derivative agreements was less than 1% of our stockholders' equity.
Current wording
As of December 31, 2024, our maximum amount at risk (or the excess/shortfall of the value of collateral pledged/received over our repurchase agreement liabilities/reverse repurchase agreement receivables) with any of our repurchase agreement counterparties, excluding the FICC, was less than 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 December 31, 2024, 9% of our tangible stockholder's equity was at risk with the FICC. Excluding central clearing exchanges, as of December 31, 2024, our amount at risk with any counterparty to our derivative agreements was less than 1% of our stockholders' equity.
Previous wording
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 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 of our Consolidated Financial Statements in this Form 10-K for further details regarding our recent equity capital transactions, if any.
Current wording
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. Please refer to Note 9 of our Consolidated Financial Statements in this Form 10-K for further details regarding our recent equity capital transactions.
Previous wording
•changes to laws, regulations, rules or policies that affect U.S. housing finance activity, the GSE's or the markets for Agency RMBS; and
Current wording
•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
Previous wording
•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.
Current wording
•legislative or regulatory actions that affect our status as a REIT or our exemption from the Investment Company Act of 1940.
Previous wording
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 this document under Item 1A. Risk Factors. We caution readers not to place undue reliance on our forward-looking statements.
Current wording
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 this document. We caution readers not to place undue reliance on our forward-looking statements.