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American Capital Agency Reports $2.50 Earnings Per Share and $24.24 Book Value Per Share
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BETHESDA, Md., Feb. 8, 2011 /PRNewswire via COMTEX/ -- American Capital Agency Corp. ("AGNC" or the "Company") (Nasdaq: AGNC) today reported net income for the fourth quarter of 2010 of $138.1 million, or $2.50 per share, and book value of $24.24 per share.

FOURTH QUARTER 2010 FINANCIAL HIGHLIGHTS

  • $2.50 per share of net income
    • $1.26 per share, excluding $1.24 per share of other investment related income and excise tax
  • $1.64 per share of taxable income(1)
  • $1.40 per share fourth quarter dividend paid on January 27, 2011
  • $0.60 per share of undistributed taxable income as of December 31, 2010
    • Undistributed taxable income was $39 million as of December 31, 2010, essentially unchanged from September 30, 2010
  • $24.24 book value per share as of December 31, 2010
    • Increased from $23.43 per share as of September 30, 2010
    • Increased from $23.78 per share, pro forma, as of September 30, 2010 when adjusted for the follow-on equity offering that closed on October 1, 2010
  • 42% annualized return on average stockholders' equity ("ROE") for the quarter(2)

OTHER FOURTH QUARTER HIGHLIGHTS

  • $13.5 billion portfolio value as of December 31, 2010
    • 18%(3) constant prepayment rate ("CPR") for the fourth quarter of 2010
    • 16% CPR in December 2010 (based on data released in January 2011)
  • 7.8x(4) leverage as of December 31, 2010
    • 8.4x average leverage for the quarter
  • 2.58% annualized net interest rate spread for the quarter
  • $354 million of net proceeds raised from follow-on equity offerings during the quarter(5)
    • $227 million raised from a follow-on equity offering that settled on December 14
    • $127 million raised pursuant to a Controlled Equity Offering(SM) Sales Agreement
    • In January 2011 raised an additional $719 million from a subsequent follow-on equity offering
    • All equity raised was accretive to book value

2010 FULL YEAR FINANCIAL HIGHLIGHTS

  • $7.89 per share of net income
    • $4.50 per share, excluding $3.39 per share of other investment related income, amortization expense associated with the termination of interest rate swaps during 2009 and excise tax
    • 34% ROE
  • $5.60 per share dividends declared
    • $6.76 per share of taxable income(6)
    • Undistributed taxable income increased from $22 million as of December 31, 2009 to $39 million as of December 31, 2010
  • $1.76 per share or 7.8% increase in book value
    • Increased from $22.48 as of December 31, 2009 to $24.24 per share as of December 31, 2010
  • 33% economic return
    • Represents the combination of dividends paid plus book value appreciation over the year
  • 29% total return to shareholders
    • Represents the combination of dividends paid or accrued plus share price appreciation over the year

"We are proud of the performance of AGNC in 2010, successfully navigating multiple challenges in our markets," said Malon Wilkus, Chief Executive Officer of AGNC, "We delivered a 33% economic return to our shareholders in 2010, counting dividends paid plus book value appreciation and a 34% return on equity. We accomplished this due to the outstanding insights of Gary Kain our Chief Investment Officer and the AGNC team whose focus on relative value within the agency market proved highly successful. During the year, we also expanded the team, deepening and enhancing our overall capabilities. We are excited about the opportunity to perform for our shareholders in 2011 and beyond."

"2010 was an extremely volatile year," said Gary Kain, Chief Investment Officer of AGNC, "where every quarter had significant and unique challenges in the mortgage market. Despite this difficult backdrop, we were able to produce strong returns for our shareholders each quarter, broaden our shareholder base, and meaningfully grow our company. We paid $5.60 per share in dividends for the year and grew our book value per share by $1.76 from $22.48 as of December 31, 2009 to $24.24 as of December 31, 2010. We view the combination of these two metrics as an essential part of shareholder value creation over the long term.We are proud of these accomplishments and believe that our emphasis on asset selection coupled with our active approach to portfolio management was instrumental to this success."

"As we look ahead," continued Mr. Kain, "we believe that the economic and competitive landscape is very favorable for our industry. The changes we are witnessing at the GSE's, coupled with a prepayment environment that is likely to be more benign, should provide for an attractive backdrop for mortgage investors. When you combine this with a very steep yield curve, and a Federal Reserve that is likely to keep short term funding rates low for an extended period of time, we continue to remain optimistic."

INVESTMENT PORTFOLIO

As of December 31, 2010, the Company's investment portfolio totaled $13.5 billion of agency securities, at fair value, comprised of $9.1 billion of fixed-rate agency securities, $3.9 billion of adjustable-rate agency securities ("ARMs") and $0.5 billion of collateralized mortgage obligations ("CMOs") backed by fixed and adjustable-rate agency securities(7). As of December 31, 2010, AGNC's investment portfolio was comprised of 40% </=15-year fixed-rate securities, 6% 20-year fixed-rate securities, 22% 30-year fixed-rate securities(8), 29% adjustable-rate securities and 3% CMOs backed by fixed and adjustable-rate agency securities.

ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE SPREAD

During the quarter, the annualized weighted average yield on the Company's average earning assets was 3.48% and its annualized average cost of funds was 0.90%, which resulted in a net interest rate spread of 2.58%, versus the third quarter of 2010 net interest rate spread of 2.21%. As of December 31, 2010, the weighted average yield on the Company's earning assets was 3.31% and its weighted average cost of funds was 1.03%. This resulted in a net interest rate spread of 2.28% as of December 31, 2010, an increase of 12 bps from the weighted average net interest rate spread as of September 30, 2010 of 2.16%.

The weighted average cost basis of the investment portfolio was 104.9% (or 104.5% excluding interest-only strips) as of December 31, 2010. The amortization of premiums (net of any accretion of discounts) on the investment portfolio for the quarter was $33.2 million, or $0.60 per share. The unamortized net premium as of December 31, 2010 was $626.3 million.

The Company's asset yields benefited from a decline in the Company's projected CPR for the remaining life of its investments and from purchases of higher yielding securities toward the end of the quarter as the Company invested capital from its December capital raise after interest rates increased. Premiums and discounts associated with purchases of agency securities are amortized or accreted into interest income over the estimated life of such securities using the effective yield method. Given the relatively high cost basis of the Company's mortgage assets, slower prepayment projections can have a meaningful positive impact on asset yields. The Company's projected CPR for the remaining life of its investments as of December 31, 2010 was 12%. This reflects a decrease from 18% as of September 30, 2010. The decrease in the Company's projected CPR is largely due to increases in interest rates coupled with new purchases of lower coupon securities near the end of the quarter. The actual CPR for the Company's portfolio held in the fourth quarter of 2010 was 18%, an increase from 15% during the third quarter of 2010. The most recent prepayment speed for the Company's portfolio for the month of January 2011 was 12%.

The cost of funds at the end of the quarter reflects both a higher relative interest rate swap portfolio to borrowings at the end of the quarter compared to the average during the quarter, as well as a temporary increase in repurchase agreement financing rates extending over the end of the year.

LEVERAGE AND HEDGING ACTIVITIES

As of December 31, 2010, the Company's $13.5 billion investment portfolio was financed with $11.7 billion of repurchase agreements, $0.1 billion of other debt(9) and $1.6 billion of equity capital, resulting in a leverage ratio of 7.5x. When adjusted for the net payable for agency securities not yet settled, the leverage ratio was 7.8x as of December 31, 2010. Due in part to the equity raise the Company completed towards the end of the fourth quarter, the Company's leverage at the end of the quarter was lower than the average leverage for the quarter of 8.4x.

Of the $11.7 billion borrowed under repurchase agreements as of December 31, 2010, $3.3 billion had original maturities of 30 days or less, $5.7billion had original maturities greater than 30 days and less than or equal to 60 days, $1.5 billion had original maturities greater than 60 days and less than or equal to 90 days and the remaining $1.2 billion had original maturities of 91 days or more. As of December 31, 2010, the Company had repurchase agreements with 22 financial institutions.

The Company's interest rate swap positions as of December 31, 2010 totaled $6.5 billion in notional amount at an average fixed pay rate of 1.61%, a weighted average receive rate of 0.26% and a weighted average maturity of 3.1 years. During the quarter, the Company increased its swap position by $2.5 billion in conjunction with an increase in the portfolio size. The new swap agreements entered into during the quarter have an average term of approximately 3.8 years and a weighted average fixed pay rate of 1.35%.

The Company also utilizes swaptions to help mitigate the Company's exposure to larger changes in interest rates. During the quarter, the Company added $850 million of payer swaptions at a cost of $4.6 million. The Company also had $200 million of payer swaptions from a previous quarter expire during the fourth quarter. As of December 31, 2010, the Company still had $850 million in payer swaptions outstanding at a market value of $16.8 million.

As of December 31, 2010, 55% of the Company's repurchase agreement balance and other debt were hedged through interest rate swap agreements. If net unsettled purchases and sales of securities are incorporated, this percentage declines to 53%. These percentages do not reflect the swaps underlying the swaptions noted above.

OTHER INCOME, NET

During the quarter, the Company produced $68.5 million in other income, net, or $1.24 per share. Other income is comprised of $10.4 million of net realized gains on sales of agency securities, $20.6 million of net realized gains on derivative and trading securities and $37.5 million of net unrealized gains, including reversals of prior period unrealized gains and losses realized during the current quarter, on derivative and trading securities that are marked-to-market in current income.

Sales of agency securities during the quarter were largely driven by actions taken by the Company in the ordinary course in response to changing relative values perceived by the Company.

The net gains (realized and unrealized) on derivative and trading securities generally represent instruments that are used to supplement the Company's interest rate swaps (such as swaptions, short or long positions in "to-be-announced" mortgage securities (TBA's) and short or long positions in treasury securities); however, these are not in hedge relationships for accounting purposes and consequently are accounted for through current income as opposed to shareholders' equity. The Company uses these supplemental hedges to reduce its exposure to interest rates, which, given the increase in interest rates experienced in December, resulted in the significant net derivative gains discussed above and helped to protect the Company's book value.

TAXABLE INCOME

For the quarter ended December 31, 2010, GAAP income exceeded taxable net income by $0.86 per share. This was comprised of $0.18 per share of net temporary differences between GAAP and taxable income related to premium amortization and net realized gains, as well as $0.68 per share of net unrealized gains, net of prior period reversals, associated with derivatives marked-to-market in current income for GAAP purposes, but excluded from taxable income until realized or settled.

NET ASSET VALUE

As of December 31, 2010, the Company's net asset value per share was $24.24, or $0.81 higher than the September 30, 2010 net asset value per share of $23.43, or $0.46 higher than pro forma net asset value per share of $23.78, when adjusted for the follow on equity offering that settled on October 1, 2010.

FOURTH QUARTER 2010 DIVIDEND DECLARATION

On December 17, 2010, the Board of Directors of the Company declared a fourth quarter 2010 dividend of $1.40 per share payable to stockholders of record as of December 31, 2010, which was paid on January 27, 2011. Since its May 2008 initial public offering, the Company has paid or declared a total of $364.0 million in dividends, or $13.26 per share. After adjusting for the fourth quarter 2010 accrued dividend, the Company had approximately $39 million of undistributed taxable income as of December 31, 2010, essentially unchanged from September30, 2010. Undistributed taxable income per share as of December 31, 2010 was $0.60 per share.

The Company has also announced the tax characteristics of its 2010 distributions. The Company's 2010 distributions of $5.60 per share consisted of $4.93 per share of ordinary income and $0.67 per share of long-term capital gains for federal income tax purposes. AGNC stockholders should receive an IRS Form 1099-DIV containing this information from their brokers, transfer agents or other institutions. For additional detail please visit the Company's Investor Relations website at http://www.agnc.com/.

(1) Based on the weighted average shares outstanding for the quarter. Please refer to the section on the use of Non-GAAP financial information

(2) Annualized ROE based on net income and average monthly stockholders' equity for the quarter

(3) Weighted average monthly annualized CPR for securities held during the quarter

(4) Leverage calculated as the sum of total repurchase agreements, net payable for unsettled purchases and sales of securities and other debt divided by total stockholders' equity as of December 31, 2010

(5) Excludes $328 million of net proceeds from the September follow-on equity offering that settled on October 1, 2010

(6) Based on weighted average shares outstanding for the year. Please refer to the section on the use of Non-GAAP financial information

(7) CMO balance includes $57 million of fixed and adjustable rate interest-only strips

(8) 30-year fixed rate securities includes $76 million of 40-year fixed rate securities

(9) Other debt consists of other variable rate debt outstanding at Libor + 25 bps in connection with the consolidation of a structured transaction recorded as a financing transaction under GAAP

Financial highlights for the quarter are as follows:

                                      AMERICAN CAPITAL AGENCY CORP.
                                       CONSOLIDATED BALANCE SHEETS
                                               (unaudited)
                                              (in thousands)
                              December 31, September 30, June 30,  March 31,
                                  2010         2010       2010       2010
                              ----------- ----------- ---------- ----------
    Assets:
      Agency securities,
        at fair value (including
        pledged assets of
        $12,270,909, $8,321,498,
        $6,870,710 and
        $4,855,633,
        respectively)         $13,510,280  $9,736,463 $7,166,390 $5,240,254
      Cash and cash equivalents   173,258     115,266    150,081    105,264
      Restricted cash              76,094      62,462     37,877     26,630
      Interest receivable          56,485      42,034     35,932     26,168
      Derivative assets, at fair
       value                       76,593      11,344      7,391      8,736
      Receivable for agency
       securities sold            258,984     350,056    311,794    273,832
      Principal payments
       receivable                  75,524      40,129     44,883     88,474
      Receivable under reverse
       repurchase agreements      247,438           -          -          -
      Other assets                  1,173       1,052      1,139        631
                              ----------- ----------- ---------- ----------
        Total assets          $14,475,829 $10,358,806 $7,755,487 $5,769,989
                              =========== =========== ========== ==========
    Liabilities:
      Repurchase agreements   $11,680,092  $7,969,399 $6,634,342 $4,651,115
      Other debt                   72,927      80,822          -          -
      Payable for
       agency securities
       purchased                  727,374   1,223,064    201,799    436,100
      Derivative liabilities,
       at fair value               78,590     113,900     76,220     28,689
      Dividend payable             90,798      54,554     47,124     37,465
      Obligation to return
       securities borrowed
       under reverse
       repurchase
       agreements, at
       fair value                 245,532           -          -          -
      Accounts payable and
       other accrued
       liabilities                  8,452       4,022      3,572      3,501
                              ----------- ----------- ---------- ----------
          Total liabilities    12,903,765   9,445,761  6,963,057  5,156,870
                              ----------- ----------- ---------- ----------
    Stockholders' equity:
      Preferred stock,
       $0.01 par value;
       10,000 shares authorized,
       0 shares issued and
        outstanding, respectively       -           -          -          -
      Common stock, $0.01
       par value;  150,000
       shares authorized,
       64,856, 38,967,
       33,660, and 26,760
       shares issued and
       outstanding,
       respectively                   649         390        337        268
      Additional paid-in
       capital                  1,561,908     880,571    738,525    569,595
      Retained earnings            78,116      30,835     25,359     35,625
      Accumulated other
       comprehensive (loss)
       income                     (68,609)      1,249     28,209      7,631
                              ----------- ----------- ---------- ----------
           Total stockholders'
            equity              1,572,064     913,045    792,430    613,119
                              ----------- ----------- ---------- ----------
           Total liabilities
            and stockholders'
            equity            $14,475,829 $10,358,806 $7,755,487 $5,769,989
                              =========== =========== ========== ==========

                       AMERICAN CAPITAL AGENCY CORP.
                   CONSOLIDATED STATEMENTS OF OPERATIONS
                   (in thousands, except per share data)
                              Three Months Ended             Year Ended
                                  December 31,               December 31,
                            ----------------------     ----------------------
                              2010          2009         2010          2009
                            --------       -------     --------      --------
                          (unaudited)    (unaudited)  (unaudited)
    Interest income:
      Interest income       $101,019       $41,086     $253,005      $127,920
      Interest expense        24,637        14,274       76,026        43,539
                            --------       -------     --------      --------
        Net interest
         income               76,382        26,812      176,979        84,381
                            --------       -------     --------      --------
    Other income, net:
      Gain from sale of
       agency securities,
       net                    10,451        19,529       92,009        49,947
      Gain (loss) from
       derivative
       instruments
       and trading
       securities, net        58,069        (1,670)      38,389        (4,237)
                            --------       -------     --------      --------
        Total other
         income, net          68,520        17,859      130,398        45,710
                            --------       -------     --------      --------
    Expenses:
      Management fees          4,483         1,660       11,278         4,668
      General and
       administrative
       expenses                2,134         1,979        7,528         6,477
                            --------       -------     --------      --------
        Total expenses         6,617         3,639       18,806        11,145
                            --------       -------     --------      --------
    Income before tax        138,285        41,032      288,571       118,946
       Excise tax                205           335          455           335
                            --------       -------     --------      --------
    Net income              $138,080       $40,697     $288,116      $118,611
                            ========       =======     ========      ========
    Net income per common
     share - basic and
     diluted                   $2.50         $1.79        $7.89         $6.78
                            ========       =======     ========      ========
    Weighted average
     number of common
     shares outstanding
     -basic and diluted       55,291        22,746       36,495        17,507
                            ========       =======     ========      ========
    Dividends declared per
     common share              $1.40         $1.40        $5.60         $5.15
                            ========       =======     ========      ========

                               AMERICAN CAPITAL AGENCY CORP.
                               KEY PORTFOLIO CHARACTERISTICS*
                                        (unaudited)
                           (in thousands, except per share data)
                                    Three Months Ended
                  ----------------------------------------------------------
                  December    September    June 30,     March 31,   December
                  31, 2010     30, 2010      2010         2010      31, 2009
                  --------     --------     -------     --------    --------
    Average agency
     securities,
     at cost     $11,603,957  $7,751,068  $5,886,806   $4,099,855  $3,912,087
    Average total
     assets,
     at fair
     value       $11,605,200  $8,454,760  $6,498,247   $4,591,850  $4,434,206
    Average
     repurchase
     agreements  $10,813,568  $7,241,783  $5,548,225   $3,787,583  $3,637,220
    Average
     stockholders'
     equity       $1,291,127    $853,250    $705,466     $580,056    $533,453
    Fixed-rate
     agency securities,
     at fair value
     - as of
     period end   $9,101,479  $5,647,393  $3,063,016   $1,834,924  $1,887,404
    Adjustable-
     rate agency
     securities,
     at fair
     value - as
     of period
     end          $3,950,164  $3,630,469  $3,589,711   $2,710,557  $1,705,487
    CMO agency
     securities,
     at fair
     value -as
     of period
     end            $401,898    $439,347    $483,667     $657,119    $707,224
    Interest-
     only strips
     agency
     securities,
     at fair
     value - as
     of period
     end             $56,739     $19,254     $29,996      $37,654          $-
    Average coupon (1)  4.86%       5.03%       5.20%        5.17%       5.43%
    Average asset
     yield (2)          3.48%       3.23%       3.44%        3.78%       4.20%
    Average cost of
     funds (3)          0.90%       1.02%       1.07%        1.23%       1.17%
    Average cost of
     funds - terminated
     swap amortization
     expense (4)           -           -        0.19%        0.39%       0.40%
    Average net
     interest rate
     spread (5)         2.58%       2.21%       2.18%        2.16%       2.63%
    Average actual
     CPR for securities
     held during
     the period           18%         15%         28%          21%         16%
    Average forecasted
     CPR as of
     period end           12%         18%         20%          18%         16%
    Leverage (average
     during the
     period) (6)       8.4:1       8.5:1       7.9:1        6.5:1       6.8:1
    Leverage (as of
     period end) (7)   7.8:1       9.8:1       8.2:1        7.9:1       7.3:1
    Expenses % of
     average assets
     (8)                0.23%       0.22%       0.25%        0.31%       0.33%
    Expenses % of
     average
     stockholders'
     equity (9)         2.03%       2.15%       2.33%        2.42%       2.71%
    Net asset
     value per
     common share
     as of period
     end (10)         $24.24      $23.43      $23.54       $22.91      $22.48
    Dividends
     declared per
     common share      $1.40       $1.40       $1.40        $1.40       $1.40
    Annualized
     economic return
     (11)               37.4%       21.7%       35.5%        33.0%       29.5%
    Net return
     on average
     stockholders'
     equity (12)        42.4%       27.9%       21.0%        37.2%       30.3%

    *   Average numbers for each period are weighted based on days on the
    Company's books and records. All percentages are annualized.
    (1)  Weighted average coupon for the period was calculated by dividing the
    Company's total coupon (or cash) interest income on our agency securities
    by the Company's weighted average agency securities.
    (2)  Weighted average asset yield for the period was calculated by
    dividing the Company's total interest income on agency securities, less
    amortization of premiums and discounts, by the Company's average agency
    securities.
    (3)  Weighted average cost of funds for the period was calculated by
    dividing the Company's total interest expense, less amortization expense
    related to the termination of interest rate swaps, by the Company's
    weighted average repurchase agreements.
    (4)  Weighted average cost of funds related to terminated interest rate
    swap amortization expense was calculated by dividing the Company's
    amortization expense by the Company's weighted average repurchase
    agreements.  The amortization expense associated with the termination of
    interest rate swaps was $ - , $ -, $2.6 million, $3.7 million and $3.7
    million for the respective periods presented.
    (5)  Net interest rate spread for the period was calculated by subtracting
    the Company's weighted average cost of funds, net of interest rate swaps
    and terminated swap amortization expense, from the Company's weighted
    average asset yield.
    (6)  Leverage during the period was calculated by dividing the Company's
    average repurchase agreements outstanding for the period by the Company's
    average stockholders' equity for the period.
    (7)  Leverage at period end was calculated by dividing the sum of the
    amount outstanding under the Company's repurchase agreements, net
    receivable / payable for unsettled agency securities and other debt by the
    Company's total stockholders' equity at period end.
    (8)  Expenses as a % of average total assets was calculated by dividing
    the Company's total expenses by the Company's average total assets for the
    period.
    (9)  Expenses as a % of average stockholders' equity was calculated by
    dividing the Company's total expenses by the Company's average
    stockholders' equity.
    (10)  Book value per share was calculated by dividing the Company's total
    stockholders' equity by the Company's number of shares outstanding.
    (11)  Annualized economic return represents the sum of the change in net
    asset value over the period and dividends declared during the period over
    the beginning net asset value on an annualized basis.
    (12)  Annualized net return on average stockholders' equity for the period
    was calculated by dividing our net income by our average stockholders'
    equity on an annualized basis.

DIVIDEND REINVESTMENT AND DIRECT STOCK PURCHASE PLAN

During the quarter, AGNC did not issue any shares through its DSPP and DRIP plans.

AGNC's Dividend Reinvestment and Direct Stock Purchase Plan provide prospective investors and existing stockholders with a convenient and economical method to purchase shares of the Company's common stock. By participating in the Plan, investors may purchase additional shares of common stock by reinvesting some or all of the cash dividends received on shares of the Company's common stock. Investors may also make optional cash purchases of shares of the Company's common stock subject to certain limitations detailed in the Plan prospectus. To review the Plan Prospectus, please visit the Company's Investor Relations website at http://www.agnc.com/.

STOCKHOLDER CALL

AGNC invites stockholders, prospective stockholders and analysts to attend the AGNC stockholder call on February 9, 2011 at 11:00 am ET. The stockholder call can be accessed through a live webcast, free of charge, at http://www.agnc.com/ or by dialing (877) 569-8701 (U.S. domestic) or +1 (574) 941-7382 (international). Please provide the operator with the conference ID number 39941876. If you do not plan on asking a question on the call and have access to the internet, please take advantage of the webcast.

A slide presentation will accompany the call and will be available at http://www.agnc.com/. Select the Q4 2010 Earnings Presentation link to download and print the presentation in advance of the Stockholder Call.

An archived audio of the stockholder call combined with the slide presentation will be made available on the Company's website after the call on February 9. In addition, there will be a phone recording available from 2:00 pm ETFebruary 9 until 11:59 pm ETFebruary 23. If you are interested in hearing the recording of the presentation, please dial (800) 642-1687 (U.S. domestic) or +1 (706) 645-9291 (international). The conference ID number is 39941876.

For further information, please contact Investor Relations at (301) 968-9300 or IR@AGNC.com

ABOUT AGNC

AGNC is a REIT that invests in agency pass-through securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by a U.S. Government agency or a U.S. Government-sponsored entity. The Company is externally managed and advised by American Capital Agency Management, LLC, an affiliate of American Capital, Ltd.("American Capital"). For further information, please refer to http://www.agnc.com/.

ABOUT AMERICAN CAPITAL

American Capital is a publicly traded private equity firm and global asset manager. American Capital, both directly and through its asset management business, originates, underwrites and manages investments in middle market private equity, leveraged finance, real estate and structured products. Founded in 1986, American Capital has $18 billion in capital resources under management and eight offices in the U.S., Europe and Asia. American Capital and its affiliates will consider investment opportunities from $5 million to $100 million. For further information, please refer to http://www.americancapital.com/.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements. Forward-looking statements are based on estimates, projections, beliefs and assumptions of management of the Company at the time of such statements and are not guarantees of future performance. Forward-looking statements involve risks and uncertainties in predicting future results and conditions. Actual results could differ materially from those projected in these forward-looking statements due to a variety of factors, including, without limitation, changes in interest rates, changes in the yield curve, changes in prepayment rates, the availability and terms of financing, changes in the market value of our assets, general economic conditions, market conditions, conditions in the market for agency securities, and legislative and regulatory changes that could adversely affect the business of the Company. Certain factors that could cause actual results to differ materially from those contained in the forward-looking statements, are included in the Company's periodic reports filed with the Securities and Exchange Commission ("SEC"). Copies are available on the SEC's website, http://www.sec.gov/. The Company disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt or new information, or otherwise.

USE OF NON-GAAP FINANCIAL INFORMATION

In addition to the results presented in accordance with GAAP, this release includes non-GAAP financial information, including our taxable income and certain financial metrics derived based on taxable income, which management uses in its internal analysis of results, and believes may be informative to investors. Taxable income is pre-tax income calculated in accordance with the requirements of the Internal Revenue Code rather than GAAP. Taxable income differs from GAAP income because of both temporary and permanent differences in income and expense recognition. Examples include temporary differences for unrealized gains and losses on derivative instruments and trading securities recognized in income for GAAP but excluded from taxable income until realized or settled, differences in the CPR used to amortize premiums or accrete discounts as well as treatment of start-up organizational costs, hedge ineffectiveness, and stock-based compensation and permanent differences for excise tax expense. Furthermore, taxable income can include certain estimated information and is subject to potential adjustments up to the time of filing of the appropriate tax returns, which occurs after the end of the calendar year of the Company. The Company believes that these non-GAAP financial measures provide information useful to investors because taxable income is directly related to the amount of dividends the Company is required to distribute in order to maintain its REIT tax qualification status. The Company also believes that providing investors with our taxable income and certain financial metrics derived based on such taxable income, in addition to the related GAAP measures, gives investors greater transparency to the information used by management in its financial and operational decision-making. However, because taxable income is an incomplete measure of the Company's financial performance and involves differences from net income computed in accordance with GAAP, taxable income should be considered as supplementary to, and not as a substitute for, the Company's net income computed in accordance with GAAP as a measure of the Company's financial performance. In addition, because not all companies use identical calculations, our presentation of our estimated taxable income may not be comparable to other similarly-titled measures of other companies.

CONTACT:

Investors - (301) 968-9300

Media - (301) 968-9400

SOURCE: American Capital Agency Corp.


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