American Capital Agency reports 4Q earnings rise to $40.7 million, interest income jumps

American Capital Agency says earnings rose in 4Q

BETHESDA, Md. — American Capital Agency Corp. reported sharply higher earnings for the fourth quarter of 2009 Monday as the government-backed mortgage securities it holds gained value.

The company said it earned $40.7 million, or $1.79 per share, for the fourth quarter of 2009, compared to $11 million, or 73 cents per share, in the fourth quarter of 2008.

Net interest income swelled to $26.8 million from $6.8 million.

For the year, the Bethesda, Md.-based real estate investment trust earned $118.6 million, or $6.78 per share. The company started operation in May 2008, so there is no comparable figure for that year.

American Capital is paying dividends for the quarter of $1.40 per share, bringing the annual dividend to $5.15 per share. REITs are exempt from federal taxes because they distribute their taxable income as dividends.

The REIT is a subsidiary of American Capital, a publicly traded private equity and asset management firm. It invests exclusively in mortgage securities backed by government agencies like Fannie Mae, Freddie Mac, Ginnie Mae and the Federal Home Loan Corp.

Executives said the company is focused on adjusting its portfolio to avoid the risk that borrowers will prepay their mortgages, reducing how much interest they pay over the course of the loan. It also wants to hedge against future interest rate hikes, which could affect the values of its securities.

“We realize that both risks and opportunities will evolve over time and are committed to continuously reevaluating our strategies to best position the portfolio to generate attractive risk-adjusted returns as market conditions dictate,” Gary Kain, chief investment officer of the REIT, said in a statement.