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American Capital Agency Reports $1.48 Earnings Per Share and $25.96 Book Value Per Share
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BETHESDA, Md., April 25, 2011 /PRNewswire via COMTEX/ -- American Capital Agency Corp. ("AGNC" or the "Company") (Nasdaq: AGNC) today reported net income for the first quarter of 2011 of $133.5 million, or $1.48 per share, and book value of $25.96 per share.

FIRST QUARTER 2011 FINANCIAL HIGHLIGHTS

  • $1.48 per share of net income
    • $1.30 per share, excluding $0.18 per share of other investment related income
  • $1.68 per share of taxable income(1)
  • $1.40 per share first quarter dividend
  • $0.42 per share of undistributed taxable income as of March 31, 2011
    • Undistributed taxable income increased $16 million to $55 million
  • $25.96 book value per share as of March 31, 2011
    • Increased $1.72, or 7%, from $24.24 per share as of December 31, 2010
  • 22% annualized return on average stockholders' equity ("ROE") for the quarter(2)

OTHER FIRST QUARTER HIGHLIGHTS

  • $28 billion investment portfolio value as of March 31, 2011
  • 13% constant prepayment rate ("CPR") for the first quarter of 2011(3)
    • 11% CPR for the month of April 2011(4)
  • 7.6x leverage as of March 31, 2011(5)
    • 7.4x average leverage for the quarter
  • 2.58% annualized net interest rate spread for the quarter
    • 2.42% net interest spread as of March 31, 2011
  • $1.75 billion of net proceeds raised from equity offered during quarter
    • $1.61 billion raised in two follow-on offerings
    • $141 million raised pursuant to a Controlled Equity Offering(SM) Sales Agreement and via direct share purchase plan share issuances
    • All equity raised was accretive to book value

"Our American Capital Agency team delivered another strong quarter with our strategy of actively managing the portfolio," said John Erickson, AGNC Executive Vice President and Chief Financial Officer. "This strong performance occurred in a quarter marked by significant global economic and political events, which required the periodic reconsideration of investment strategies. Even in this challenging environment, we grew our book value by 7% to $25.96 per share and earned $1.48 per share of net income while taking steps to reduce risk. In addition, we have added to our AGNC investment staff to broaden our expertise, improve our depth and address the Company's significant growth."

"We continue to believe the combination of strong asset quality and diversification, coupled with a thoughtful hedging strategy, which includes some optional protection, remains critical to our ability to achieve our dual mandates of generating attractive returns for our shareholders and protecting book value within reasonable bands," said Gary Kain, President and Chief Investment Officer of AGNC. "During the first quarter of 2011, the Company raised over $1.7 billion in new equity and continued to produce solid returns across a wide range of different measures. Book value, undistributed taxable earnings and what many analysts call 'core earnings' were all higher during the quarter, despite lower leverage resulting from the typical time lags associated with deploying new capital."

INVESTMENT PORTFOLIO

As of March 31, 2011, the Company's investment portfolio totaled $28.2 billion of agency securities, at fair value, comprised of $22.9 billion of fixed-rate agency securities, $4.9 billion of adjustable-rate agency securities ("ARMs") and $0.4 billion of collateralized mortgage obligations ("CMOs") backed by fixed and adjustable-rate agency securities(6). As of March 31, 2011, AGNC's investment portfolio was comprised of 44% </= 15-year fixed-rate securities, 5% 20-year fixed-rate securities, 32% 30-year fixed-rate securities(7), 18% adjustable-rate securities and 1% 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 3.39% and its annualized average cost of funds was 0.81%, which resulted in a net interest rate spread of 2.58%, unchanged from the fourth quarter of 2010. As of March 31, 2011, the weighted average yield on the Company's earning assets was 3.47% and its weighted average cost of funds was 1.05%(8). This resulted in a net interest rate spread of 2.42% as of March 31, 2011, an increase of 14 bps from the weighted average net interest rate spread as of December 31, 2010 of 2.28%(9).

The weighted average cost basis of the investment portfolio was 104.4% (or 104.0% excluding interest-only strips) as of March 31, 2011. The amortization of premiums (net of any accretion of discounts) on the investment portfolio for the quarter was $48.0 million, or $0.53 per share. The unamortized net premium as of March 31, 2011 was $1.2 billion.

The Company's asset yield benefitted from purchases of higher yielding securities late in the fourth quarter of 2010 and during the quarter as the Company invested capital from its recent capital raises subsequent to recent increases in interest rates and from a decline in the projected CPR for the remaining life of the Company's investments. 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 projected CPR for the remaining life of the Company's investments as of March 31, 2011 was 10%; a decrease from 12% as of December 31, 2010. The decrease in the projected CPR is largely due to purchases of lower coupon securities during the quarter coupled with increases in both spot and forward interest rates. The actual CPR for the Company's portfolio held in the first quarter of 2011 was 13%, a decrease from 18% during the fourth quarter of 2010. The most recent CPR for the Company's portfolio for the month of April 2011 was 11%.

The Company's average cost of funds declined 9 basis points from 0.90% for the fourth quarter of 2010 to 0.81% for the first quarter of 2011, due largely to timing differences between asset settlements and the initiation of new interest rate swap contracts. These differences led to lower effective swap costs during the quarter than is expected to occur in future periods. The cost of funds as of March 31, 2011 includes both current and forward starting swaps balances, net of expirations, within three months of quarter end.

LEVERAGE AND HEDGING ACTIVITIES

As of March 31, 2011, the Company's $28.2 billion investment portfolio was financed with $22.0 billion of repurchase agreements, $0.1 billion of other debt(10) and $3.3 billion of equity capital, resulting in a leverage ratio of 6.6x. When adjusted for the net payable for agency securities not yet settled, the leverage ratio was 7.6x as of March 31, 2011. The average leverage for the quarter was 7.4x as the Company deployed capital from its recent equity raises.

Of the $22.0 billion borrowed under repurchase agreements as of March 31, 2011, $5.7 billion had original maturities of 30 days or less, $8.7billion had original maturities greater than 30 days and less than or equal to 60 days, $5.8 billion had original maturities greater than 60 days and less than or equal to 90 days and the remaining $1.8 billion had original maturities of 91 days or more. As of March 31, 2011, the Company had repurchase agreements with 25 financial institutions.

The Company's interest rate swap positions as of March 31, 2011 totaled $15.1 billion in notional amount at an average fixed pay rate of 1.79%, a weighted average receive rate of 0.25% and a weighted average maturity of 3.6 years. During the quarter, the Company increased its swap position, including forward starting swaps ranging up to twelve months, by $8.5 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 4.2 years and a weighted average fixed pay rate of 1.93%. The Company intends the use of swaps with longer maturities to protect its book value and longer term earnings potential.

The Company also utilizes swaptions to mitigate the Company's exposure to larger changes in interest rates. During the quarter, the Company added $1.6 billion of payer swaptions at a cost of $17.2 million and $0.3 billion of receiver swaptions at a cost of $0.4 million. During the quarter, $0.3 billion of payer swaptions from a previous quarter expired or were sold. As of March 31, 2011, the Company had $2.1 billion in payer swaptions outstanding at a market value of $21.3 million.

As of March 31, 2011, 68% 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 60%. These percentages do not reflect the swaps underlying the payer swaptions noted above, which have an average maturity of 6.1 years.

OTHER INCOME, NET

During the quarter, the Company produced $15.8 million in other income, net, or $0.18 per share. Other income is comprised of $4.2 million of net realized gains on sales of agency securities, $31.0 million of net realized gains on derivative and trading securities and $19.4 million of net unrealized losses, 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.

The net gains and losses (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 and short or long positions in "to-be-announced" mortgage securities (TBA's), Markit IOS total return swaps(11) and treasury securities). Under accounting rules, these positions are not in hedge relationships and consequently are accounted for through current income instead of shareholders' equity. The Company uses these supplemental hedges to reduce its exposure to interest rates.

TAXABLE INCOME

Taxable income for the first quarter of 2011 was $1.68 per share, or $0.20 higher than GAAP net income per share for the quarter. The primary difference between tax and GAAP net income is unrealized gains and losses associated with derivatives marked-to-market in current income for GAAP purposes but excluded from taxable income until realized or settled. Taxable income for the first quarter of 2011 benefited from the settlement of gains derived from short TBA positions and payer swaptions entered into during the fourth quarter of 2010. As of March 31, 2011, net unrealized gains that have been recognized for GAAP, but excluded from taxable income, totaled $10 million. Assuming no change in market prices as of March 31, 2011, the Company anticipates recognizing most of these net gains as taxable income during the second quarter of 2011.

NET ASSET VALUE

As of March 31, 2011, the Company's net asset value per share was $25.96, or $1.72 higher than the December 31, 2010 net asset value per share of $24.24.

FIRST QUARTER 2011 DIVIDEND DECLARATION

On March 7, 2011, the Board of Directors of the Company declared a first quarter 2011 dividend of $1.40 per share payable on April 27, 2011, to stockholders of record as of March 23, 2011. Since its May 2008 initial public offering, the Company has paid or declared a total of $499.2 million in dividends, or $14.66 per share. After adjusting for the first quarter 2011 accrued dividend, the Company had approximately $55 million of undistributed taxable income as of March 31, 2011, an increase of $16 million from December 31, 2010. Undistributed taxable income per share as of March 31, 2011 was $0.42 per share.

(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) Weighted average actual annualized CPR as of April 1, 2011 for securities held as of March 31, 2011

(5) 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 March 31, 2011

(6) CMO balance includes $110 million of fixed and adjustable rate interest-only strips.

(7) 30-year fixed rate securities includes $94 million of 40-year fixed rate securities

(8) Cost of funds as of March 31, 2011 includes the impact of swaps in effect as of March 31, 2011, plus $3.7 billion of forward starting swaps becoming effective, net of swap expirations, within the three month period following March 31, 2011

(9) Cost of funds as of December 31, 2010 includes the impact of swaps in effect as of December 31, 2010, plus $1.7 billion of forward starting swaps

(10) 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

(11) Long total return swap positions on the Markit IOS index synthetically replicate the purchase of interest only securities funded at 1 month LIBOR

Financial highlights for the quarter are as follows:

                                     AMERICAN CAPITAL AGENCY CORP.
                                      CONSOLIDATED BALANCE SHEETS
                                             (in thousands)

                                                      March 31,   December 31,
                                                        2011          2010
                                                    (unaudited)    (audited)
    Assets:
       Agency securities, at fair value
        (including pledged assets of $23,190,698;
        $12,270,909; $8,321,498 and $6,870,710,
        respectively)                                $28,192,575  $13,510,280
       Cash and cash equivalents                         300,574      173,258
       Restricted cash                                    75,221       76,094
       Interest receivable                               102,438       56,485
       Derivative assets, at fair value                  142,047       76,593
       Receivable for agency securities sold             298,320      258,984
       Principal payments receivable                      42,667       75,524
       Receivable under reverse repurchase
        agreements                                             -      247,438
       Other assets                                        1,121        1,173
           Total assets                              $29,154,963  $14,475,829
                                                     ===========  ===========

    Liabilities:
       Repurchase agreements                         $21,994,039  $11,680,092
       Other debt                                         67,845       72,927
       Payable for agency securities purchased         3,504,600      727,374
       Derivative liabilities, at fair value              92,658       78,590
       Dividend payable                                  135,280       90,798
       Obligation to return securities borrowed
        under reverse repurchase agreements, at
        fair value                                             -      245,532
       Accounts payable and other accrued
        liabilities                                       16,040        8,452
           Total liabilities                          25,810,462   12,903,765
                                                      ----------   ----------

    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, 128,829; 64,856; 38,967
        and 33,660 shares issued and outstanding,
        respectively                                       1,288          649
       Additional paid-in capital                      3,314,119    1,561,908
       Retained earnings                                  76,379       78,116
       Accumulated other comprehensive (loss)
        income                                           (47,285)     (68,609)
           Total stockholders' equity                  3,344,501    1,572,064
                                                       ---------    ---------

           Total liabilities and stockholders'
            equity                                   $29,154,963  $14,475,829
                                                     ===========  ===========



                                                       September     June 30,
                                                        30, 2010       2010
                                                      (unaudited) (unaudited)
    Assets:
       Agency securities, at fair value (including
        pledged assets of $23,190,698, $12,270,909,
        $8,321,498 and $6,870,710, respectively)      $9,736,463   $7,166,390
       Cash and cash equivalents                         115,266      150,081
       Restricted cash                                    62,462       37,877
       Interest receivable                                42,034       35,932
       Derivative assets, at fair value                   11,344        7,391
       Receivable for agency securities sold             350,056      311,794
       Principal payments receivable                      40,129       44,883
       Receivable under reverse repurchase
        agreements                                             -            -
       Other assets                                        1,052        1,139
           Total assets                              $10,358,806   $7,755,487
                                                     ===========   ==========

    Liabilities:
       Repurchase agreements                          $7,969,399   $6,634,342
       Other debt                                         80,822            -
       Payable for agency securities purchased         1,223,064      201,799
       Derivative liabilities, at fair value             113,900       76,220
       Dividend payable                                   54,554       47,124
       Obligation to return securities borrowed
        under reverse repurchase agreements, at fair
        value                                                  -            -
       Accounts payable and other accrued
        liabilities                                        4,022        3,572
           Total liabilities                           9,445,761    6,963,057
                                                       ---------    ---------

    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, 128,829, 64,856, 38,967 and
        33,660 shares issued and outstanding,
        respectively                                         390          337
       Additional paid-in capital                        880,571      738,525
       Retained earnings                                  30,835       25,359
       Accumulated other comprehensive (loss) income       1,249       28,209
           Total stockholders' equity                    913,045      792,430
                                                         -------      -------

           Total liabilities and stockholders'
            equity                                   $10,358,806   $7,755,487
                                                     ===========   ==========



                         AMERICAN CAPITAL AGENCY CORP.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (unaudited)
                     (in thousands, except per share data)

                                              Three Months Ended March 31,
                                              ----------------------------
                                                 2011            2010
                                                 ----            ----

    Interest income:
       Interest income                        $164,493         $38,797
       Interest expense                         35,648          15,510
                                                ------          ------
              Net interest income              128,845          23,287
                                               -------          ------

    Other income, net:
      Gain from sale of agency
       securities, net                           4,220          27,408
      Gain from derivative
       instruments and trading
       securities, net                          11,529           5,920
                                                ------           -----
              Total other income, net           15,749          33,328
                                                ------          ------

    Expenses:
       Management fees                           8,454           1,784
       General and administrative
        expenses                                 2,598           1,681
                                                 -----           -----
              Total expenses                    11,052           3,465
                                                ------           -----

    Net income                                $133,542         $53,150
                                              ========         =======

    Net income per common share -
     basic and diluted                           $1.48           $2.13
                                                 =====           =====

    Weighted average number of
     common shares outstanding -                90,304          25,002
          basic and diluted                     ======          ======

    Dividends declared per common
     share                                       $1.40           $1.40
                                                 =====           =====



                     AMERICAN CAPITAL AGENCY CORP.
                     KEY PORTFOLIO CHARACTERISTICS*
                             (unaudited)
                  (in thousands, except per share data)

                                     Three Months Ended
                          ------------------------------------------------
                             March 31,      December 31,     September 30,
                               2011            2010              2010
                          --------------   -------------    --------------

     Average agency
      securities, at
      cost                  $19,361,473     $11,603,957        $7,751,068
     Average total
      assets, at fair
      value                 $20,465,973     $11,605,200        $8,454,760
     Average repurchase
      agreements            $17,755,790     $10,813,568        $7,241,783
     Average
      stockholders'
      equity                 $2,411,628      $1,291,127          $853,250

     Fixed-rate agency
      securities, at
      fair value - as
      of period end         $22,875,909      $9,101,479        $5,647,393
     Adjustable-rate
      agency
      securities, at
      fair value - as
      of period end          $4,915,994      $3,950,164        $3,630,469
     CMO agency
      securities, at
      fair value -as
      of period end            $290,321        $401,898          $439,347
     Interest-only
      strips agency
      securities, at
      fair value - as
      of period end            $110,351         $56,739           $19,254

     Average coupon (1)            4.58%           4.86%             5.03%
     Average asset
      yield (2)                    3.39%           3.48%             3.23%
     Average cost of
      funds (3)                    0.81%           0.90%             1.02%
     Average cost of
      funds -
      terminated swap
      amortization
      expense (4)                     -               -                 -
     Average net
      interest rate
      spread (5)                   2.58%           2.58%             2.21%

     Average actual CPR
      for securities
      held during the
      period                         13%             18%               15%
     Average forecasted
      CPR as of period
      end                            10%             12%               18%

     Leverage (average
      during the
      period) (6)                 7.4:1           8.4:1             8.5:1
     Leverage (as of
      period end) (7)             7.6:1           7.8:1             9.8:1

     Expenses % of
      average assets
      (8)                          0.22%           0.23%             0.22%
     Expenses % of
      average
      stockholders'
      equity (9)                   1.86%           2.03%             2.15%

     Net asset value
      per common share
      as of period end
      (10)                       $25.96          $24.24            $23.43
     Dividends declared
      per common share            $1.40           $1.40             $1.40
     Annualized
      economic return
      (11)                         52.2%           37.4%             21.7%
     Net return on
      average
      stockholders'
      equity (12)                  22.5%           42.4%             27.9%



                                          Three Months Ended
                                   ---------------------------------
                                       June 30,           March 31,
                                         2010               2010
                                   -------------       -------------


     Average agency securities,
      at cost                         $5,886,806        $4,099,855
     Average total assets, at
      fair value                      $6,498,247        $4,591,850
     Average repurchase
      agreements                      $5,548,225        $3,787,583
     Average stockholders'
      equity                            $705,466          $580,056

     Fixed-rate agency
      securities, at fair value
      - as of period end              $3,063,016        $1,834,924
     Adjustable-rate agency
      securities, at fair value
      - as of period end              $3,589,711        $2,710,557
     CMO agency securities, at
      fair value -as of period
      end                               $483,667          $657,119
     Interest-only strips
      agency securities, at
      fair value - as of
      period end                         $29,996           $37,654

     Average coupon (1)                     5.20%             5.17%
     Average asset yield (2)                3.44%             3.78%
     Average cost of funds (3)              1.07%             1.23%
     Average cost of funds -
      terminated swap
      amortization expense (4)              0.19%             0.39%
     Average net interest rate
      spread (5)                            2.18%             2.16%

     Average actual CPR for
      securities held during
      the period                              28%               21%
     Average forecasted CPR as
      of period end                           20%               18%

     Leverage (average during
      the period) (6)                      7.9:1             6.5:1
     Leverage (as of period
      end) (7)                             8.2:1             7.9:1

     Expenses % of average
      assets (8)                            0.25%             0.31%
     Expenses % of average
      stockholders' equity (9)              2.33%             2.42%

     Net asset value per common
      share as of period end
      (10)                                $23.54            $22.91
     Dividends declared per
      common share                         $1.40             $1.40
     Annualized economic return
      (11)                                  35.5%             33.0%
     Net return on average
      stockholders' equity (12)             21.0%             37.2%

* 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, 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 issued 0.5 million shares under the Plan through direct stock purchases for cash proceeds of $14.9 million. AGNC did not issue any shares under the Plan through dividend reinvestment during the quarter.

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 April 26, 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 58474355. 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 Q1 2011 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 April 26. In addition, there will be a phone recording available from 2:00 pm ETApril 26 until 11:59 pm ETMay 10. 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 58474355.

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

ABOUT AMERICAN CAPITAL AGENCY CORP.

American Capital Agency Corp. 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 more than $20 billion in assets under management and eight offices in the U.S., Europe and Asia. American Capital and its affiliates will consider investment opportunities from $10 million to $300 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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