Like Annaly (NYSE:NLY), American Capital Agency (NASDAQ:AGNC) is a real estate investment trust that primarily buys mortgage-backed securities insured by government-sponsored entities Fannie and Freddie. Also like Annaly, American Capital Agency reported fourth-quarter earnings this week -- but most similarities end right there.

Income looking good, spread even better
One common thread between the two REITs concerns income. American Capital reported a sweet $810 million, or $2.37 net income per common share -- up from $208.7 million, or $0.99 per share, at the same time last year. Earnings at Annaly rose 57% year over year, so both of these pure-agency REITs deserve kudos for those numbers.

In other areas, such as interest rate spread, the two begin to diverge. Annaly's spread dropped by 76 basis points from the year-ago quarter and 7 basis points from the previous quarter, down to a measly 0.95%. American Capital Agency, on the other hand, reported a spread of 1.63%, comparable with hybrid REIT Invesco Mortgage (NYSE:IVR). While this represents a drop of 27 basis points from the last quarter of 2011, it is an increase of 21 basis points from last quarter. How did the company manage to achieve this?

American Capital Agency has been taking advantage of the TBA ("to be announced") dollar roll market, grabbing a favorable spread while the Federal Reserve continues to siphon up what's available in the traditional agency-backed MBS market. Management credits this technique with bolstering the net rate interest spread, as well as generating $98 million in dollar roll income for the quarter.

Prepayments: A mREIT's second worst enemy
Constant prepayment rates differed quite a lot for these two mREITs as well. Annaly reports a constant prepayment rate of 19%, while American Capital Agency notes a CPR of just 11%, a drop from the third quarter's 14%. This represents a real gain, since the rate was a mere 9% in the year-ago quarter, which now looks achievable again in the near future. Even Invesco sports a fourth-quarter overall CPR of 14.6%.

Invesco notes that it has recently moved into lower-coupon paper, where borrowers are less apt to prepay their loans. This has resulted in about 90% of the company's agency portfolio being prepayment protected. American Capital Agency has taken a similar tack and has been scarfing up the types of low loan balance mortgages that are less apt to be refinanced, and thus paid off early. In addition, the company has stocked up on loans refinanced via the Home Affordable Refinance Program.

In addition to all of these prescient moves -- or, perhaps because of them -- American Capital Agency has also been able to bestow upon its investors a juicy dividend of $5.00 per share, annualized. From the looks of this earnings report, I don't see that ending any time soon.