AGNC Investment Corp.

Good morning, and welcome to the AGNC Investment Corp. Second Quarter 2020 Shareholder Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist for pressing the star key, follow a zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your touchstone phone. To withdraw your question, please press star, then 2. Please note that this event is being recorded. I would now like to turn the conference over to Katie Wisecarver in Investor Relations. Please go ahead.

Thank you all for joining AGNC Investment Corp. second quarter 2020 earnings call. Before we begin, I'd like to review the Safe Harbor Statement. This conference call and corresponding slide presentation contain statements that, to the extent they are not recitations of historical facts, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act. Actual outcomes and results could differ materially from those forecast due to the impact of many factors beyond the control of AGM states. All forward-looking statements included in this presentation are made only as of the date of this presentation and are subject to change without notice. Certain factors that could cause actual results to differ materially from those contained in the forward-looking statements are included in the risk factors section of AGMC's periodic reports filed with the Securities and Exchange Commission. Copies are available on the SEC's website at sec.gov. We disclaim any obligation to update our forward-looking statements unless required by law. Participants on the call include Gary Kain, Chief Executive Officer, Bernie Bell, Senior Vice President and Chief Financial Officer, Chris Kuehl, Executive Vice President, Aaron Pas, Senior Vice President, and Peter Federico, President and Chief Operating Officer. With that, I'll turn the call over to Gary Kain.

Thanks, Katie. and thanks to all of you for your interest in AGNC. We were very pleased with the performance of our portfolio in the second quarter with economic return totaling just over 12% as we recovered a significant portion of our Q1 loss. More importantly, we remain optimistic about the earnings power of the portfolio across a wide range of possible economic scenarios. This favorable earnings backdrop is evident in our net spread in dollar roll income, which increased one cent per share to 58 cents in Q2, despite a smaller portfolio and lower average leverage. During the second quarter, market conditions improved materially as the unprecedented monetary and fiscal support drove a dramatic recovery in equity markets around the world. The S&P 500 recouped almost all of the Q1 losses, while the NASDAQ finished Q2 over 10% higher than where it began the year, a quarterly increase of over 30%. Fixed income credit also performed very well, with most credit spreads recovering close to 70% of the Q1 widening. Interest rates were very stable with the yield on the 10-year Treasury ending the quarter within a basis point of where it closed on March 31. The short end of the Treasury and swap curves performed better in response to growing confidence that the Fed will keep the funds rate near zero for multiple years. Despite very limited interest rate volatility, massive Fed support, and the dramatic recovery in credit-centric products, generic agency MBS performance was mixed, with lower coupons tightening modestly while higher coupons widened. Specified pools, which underperformed dramatically in March, saw a significant recovery. The outperformance of specs drove our strong book value and economic return performance for the quarter. Contrary to expectations, the mortgage origination market was less impacted by lockdowns and social distancing. Refinancing volumes remained very robust and we saw a rapid recovery in the home purchase market. The heavier than expected origination volume which totaled $730 billion in the second quarter, served as a major offset to Fed MBS purchases. As a result, lower coupon agency MBS valuations, while modestly tighter quarter over quarter, remained attractive both in absolute and relative terms. This attractiveness is further enhanced by improved dollar role specialness in lower coupons. a trend we expected to see during the quarter. As Chris will discuss shortly, incremental levered ROE potential on low coupon 30-year TBAs is still in the low to mid teens depending on the amount and durability of role specialness. In contrast, the projected returns on most higher coupon specs have declined to the lower double digits on the back of Price increases and faster prepayment expectations. From a big picture perspective, the current investment environment is very different and more favorable for us than the QE3 era. Back in late 2012 and early 2013, the Fed's purchases drove agency MBS spreads to valuations around 50 basis points tighter than today's levels by most measures. While the QE3 tightening was temporarily good for book value, it materially lowered our expected returns on new purchases and set the stage for the significant widening and spreads that occurred when the Fed telegraphed the tapering of its purchases. Despite Fed purchases of over $850 billion since mid-March, MBS valuations remain attractive, benefit from favorable dollar roll levels, and are easier to hedge given the zero interest rate bound. In summary, we feel good about AGMC's performance in Q2 and remain confident about the earnings potential of the company. Given the lack of credit risk in our agency MBS portfolio and the favorable funding backdrop, we believe AGNC should be able to produce strong returns regardless of the progression of COVID-19 or broader moves in the global economy. This potential for our portfolio to perform well in either a risk-on or risk-off scenario is somewhat unique to AGNC. At this point, I will turn the call over to Bernie to review our financial results for the quarter.