AGNC Investment Corp.

Good morning and welcome to the AG&C Investment Corp Second Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note that this event is being recorded.

Thank you all for joining AGNC Investment Corp's second quarter 2022 earnings call. Before we begin, I'd like to review the safe harbor statement. This conference call and corresponding slide presentation contains statements that, to the extent they are not recitations of historical fact, 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 AGNC. 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 factor section of AGNC'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 Peter Federico, Director, President, and Chief Executive Officer, Bernie Bell, Executive Vice President and Chief Financial Officer, Chris Kuehl, Executive Vice President and Chief Investment Officer, Aaron Pass, Senior Vice President, Non-Agency Portfolio Management, and Sean Reed, Executive Vice President, Strategy and Corporate Development. With that, I'll turn the call over to Peter Federico.

Good morning, and thank you all for joining AGNC's second quarter earnings call. In my prepared remarks today, I'll discuss the macroeconomic factors that drove the performance of the financial markets during the second quarter. Importantly, I will also discuss the improvement in our earnings and why we believe AGNC is entering a favorable environment that will be conducive to generating strong risk-adjusted returns for our shareholders. Financial markets remained under significant pressure during the second quarter as the Fed indicated an accelerated pace of monetary policy tightening following worse than expected inflation data. The likelihood of materially higher short-term rates increased the probability of a recession and led to historically high interest rate volatility. This challenging monetary policy and macroeconomic environment caused significant and broad-based financial market weakness during the quarter, particularly in June. The S&P index fell 16.5 percent in the second quarter and 20.6 percent year-to-date, making it the worst first-half-year performance in more than 50 years. The Bloomberg Aggregate Bond Index, representing more than 25 trillion in bonds, fell 5.6 percent in the quarter and 11.2 percent year-to-date. The performance of agency MBS, as measured by the Bloomberg Agency MBS Index, was in line with the broader fixed income market, falling 5.2 percent in the second quarter and 9 percent year-to-date. Note these fixed income performance measures represent the percentage change in price on unlevered bond positions. The performance of agency MBS on a hedge basis was also weak as the spread or yield differential between agency MBS and swap and treasury rates widened meaningfully in April and again in June. Over the last 12 months, spreads on agency MBS have widened meaningfully by any measure. One of the simplest measures is the yield differential between the 30-year current coupon MBS and the 10-year Treasury NOB. By this measure, agency MBS spreads have widened by more than 100 basis points over the last year to end the second quarter at a spread of about 140 basis points. This yield differential rarely gets that wide or stays that wide for any meaningful period of time. Only in 2008, in the midst of the great housing crisis, did this spread trade at or above today's level for an extended period of time. As we have discussed, wider spreads ultimately lead to enhanced earnings on our existing portfolio. The second quarter provides a great example of this dynamic as our net spread and dollar roll income increased nearly 15 percent to 83 cents per common share. Our net interest margin also improved materially. So, despite the decline in book value associated with wider spreads, our net spread and dollar roll income improved on a per share basis in the second quarter. In addition to strong earnings, we are also seeing a number of positive indicators that give us confidence that the performance of agency MBS is poised to improve. First, at current valuation levels, agency MBS are attractive by almost any historical measure. Looking back over history, spreads at these levels have consistently proven to be good buying opportunities. Second, we believe the risk of asset sales by the Fed is extremely low. The Fed has made it clear through their actions and their words that their primary monetary policy tool is adjusting the federal funds rate, not balance sheet reduction. Third, and most importantly, the supply outlook for agency MBS has improved materially. At the beginning of the year, the net supply of agency MBS to the private sector was expected to be in the $700 billion range, which would have made it the largest issuance year on record. Today, however, with mortgage rates higher, house prices elevated, and the economy slowing, the net supply of agency MBS is now expected to be closer to $400 billion, with most of that supply having already occurred in the first half of the year. These are significant positive developments for the agency MBS market, and they give us confidence that this protracted period of weakness is nearing its end. With mortgage valuations near their historical low, levered returns on agency MBS in the current environment are as favorable as they have been at any point during AGNC's existence. Given this improved outlook, as this period of volatility subsides, we will look for opportunities to adjust our conservative positioning, including increasing leverage, to further capitalize on this favorable investment environment. With that, I'll now turn the call over to Bernie Bell to review our financial results in greater detail.