American Capital Turns To Profit In Q2, Shares Rise

(RTTNews) - Shares of American Capital Agency Corp. (AGNC) rose more than 5 percent in extended trades on Monday after the company reported a turnaround to profit in the second quarter. The company noted that its exposure to higher rates is lower than it has been in years and its 'pay-up' risk is now minimal.

American Capital is a real estate investment trust that invests in agency pass-through securities and collateralized mortgage obligations which the principal and interest payments are guaranteed by a U.S. Government agency or a U.S. Government-sponsored entity.

American Capital's second-quarter net income available to common shareholders was $1.83 billion or $4.61 per share, compared to loss of $264 million or $0.88 per share in the prior-year period. Estimated REIT taxable income per common share was $1.04 for the quarter.

Comprehensive loss attributable to shareholders for the quarter was $939 million or $2.37 per share, compared to comprehensive income of $477 million or $1.58 per share in the year-ago period.

Net interest income increased 8 percent to $414 million from $384 million in the same period last year. Total other income was $1.46 billion, compared to loss of $612 million in the year-ago period.

"Other income" for the quarter includes a gain on the sale of agency securities of $17 million, compared to a gain of $417 million in the prior-year period. The company also recorded a gain on securities of $1.44 billion in the quarter, compared to loss of $1.03 billion last year.

Gary Kain, President and Chief Investment Officer of American Capital said, "The second quarter was characterized by extreme volatility in both interest rates and mortgage spreads. In response, we remained highly disciplined with respect to our risk management activities. We reduced the size of our asset portfolio, adjusted our asset composition to be more consistent with a higher rate environment, and materially increased the duration of our hedges."

Meanwhile, net book value for the quarter declined to $25.51 per share from $29.41 per share in the previous-year quarter. Net book value also declined 12 percent from the preceding first quarter, driven primarily by wider spreads in the broader mortgage-backed securities market.

AGNC closed Monday's regular trading session at $21.85, up $0.21 or 0.97 percent on a volume of 9.72 million shares. In after-hours, the stock further gained $1.15 or 5.26 percent to $23.00.