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Key Figures

 

(Dollars in millions. Except per share data)

 
1Q 2021  4Q 2020  3Q 2020  2Q 2020  1Q 2020 
 GAAP Earnings  $0.54   $0.49   $1.32   ($0.37)   ($2.08)  
 Core Earnings(1)  $0.36   $0.29   $0.33   $0.32   $0.56  
 Common Dividend  $0.30   $0.30   $0.30   $0.30   $0.50  
                 
 Total Assets  $16,699   $17,523   $18,094   $18,448   $19,242  
 Stockholders Equity  $3,566   $3,779   $3,697   $3,396   $3,244  
 GAAP Book Value  $11.44   $12.36   $11.91   $10.63   $12.45  
 Total Economic Return(2) - Trailing 12 mos.  1.5%   (14.8%)   (17.5%)   (23.4%)   (10.5%)  

(1)Core earnings is a non-GAAP measure.


(2)Economic return on book value is based on the change in GAAP book value per common share plus the dividend declared per common share.

Core Earnings Reconciliation9

Core earnings is a non-GAAP measure and is defined as GAAP net income excluding unrealized gains on the aggregate portfolio, provision for credit losses, interest expense on long term debt, impairment losses, realized gains on sales of investments, realized gains or losses on futures, realized gains or losses on swap terminations, gain on deconsolidation, extinguishment of debt and expenses incurred in relation to securitizations. In addition, stock compensation expense charges incurred on awards to retirement eligible employees is reflected as an expense over a vesting period (36 months) rather than reported as an immediate expense.

As defined, core earnings include interest income and expense, as well as periodic cash settlements on interest rate swaps used to hedge interest rate risk and other expenses. Core earnings is inclusive of preferred dividend charges, compensation and benefits (adjusted for awards to retirement eligible employees), general and administrative expenses, servicing fees, as well as income tax expenses incurred during the period. Management believes that the presentation of core earnings provides investors with a useful measure but has important limitations. We believe core earnings as described above helps us evaluate our financial performance period over period without the impact of certain transactions but is of limited usefulness as an analytical tool. Therefore, core earnings should not be viewed in isolation and is not a substitute for net income or net income per basic share computed in accordance with GAAP. In addition, our methodology for calculating core earnings may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and accordingly, our reported core earnings may not be comparable to the core earnings reported by other REITs.

The following table provides GAAP measures of net income and net income per diluted share available to common stockholders for the periods presented and details with respect to reconciling the line items to core earnings and related per average diluted common share amounts. The Core earnings is presented on an adjusted dilutive shares basis. The adjusted dilutive shares used for core earnings is a non-GAAP measure which includes the GAAP dilutive shares of 265 million, adjusted for the dilutive effect of approximately 20 million shares on warrants issued in second quarter of 2020. We exclude the dilutive effect of the warrants as the warrant holders do not participate in dividends. Certain prior period amounts have been reclassified to conform to the current period's presentation.

GAAP to Core Earnings Reconciliation

 

(Dollars in thousands. Except per share data)

 
1Q 2021  4Q 2020  3Q 2020  2Q 2020  1Q 2020 
 GAAP net income available to common shareholders  $139,153   $128,797   $348,891   ($73,393)   ($389,193)  
 Adjustments:                   
 Interest expense on long term debt  $1,076   $1,197   $1,495   $4,391   $0  
 Increase (decrease) in provision for credit losses  ($126)   $13   ($1,650)   ($4,497)   $6,314  
 Net unrealized (gains) losses on derivatives  $0   $0   $0   $0   ($201,000)  
 Net unrealized (gains) losses on financial instruments at fair value  ($270,012)   ($61,379)   ($260,766)   $171,921   $260,887  
 Net realized (gains) losses on sales of investments  ($37,796)   $329   ($65,041)   ($26,380)   ($75,854)  
 (Gains) losses on extinguishment of debt  $237,137   ($919)   $55,794   ($459)   $0  
 Realized (gains) losses on terminations of interest rate swaps  $0   $0   $0   $0   $463,966  
 Net realized (gains) losses on Futures(3)  $0   $0   $0   $0   $34,700  
  Transaction expenses $16,437   $3,827   $1,624   $4,710   $4,906  
  Stock compensation expense for retirement eligible awards $661   ($225)   ($275)   ($273)   $1,189  
 Core Earnings  $86,530   $71,640   $80,072   $76,020   $105,915  
                 
 GAAP net income per diluted common share  $0.54   $0.49   $1.32   ($0.37)   ($2.08)  
 Core earning per adjusted diluted common share (4)  $0.36   $0.29   $0.33   $0.32   $0.56  


(3) Included in net realized gain (losses) on derivatives in the Consolidated Statements of Operations.


(4) We note that core and taxable earnings will typically differ, and may materially differ, due to differences on realized gains and losses on investments and related hedges, credit loss recognition, timing differences in premium ammortization, accretion of discounts, equity compensation and other items.


Portfolio Income and Yield

 

(Dollars in thousands. Except per share data)

 
1Q 2021  4Q 2020  3Q 2020  2Q 2020  1Q 2020 
 Interest Income  $ 243,127    $ 236,156    $ 247,905    $ 245,922    $ 300,266   
 Interest Expense  $ 108,066    $ 120,285    $ 124,557    $ 129,256    $ 142,083   
 Net Interest Income  $ 135,061    $ 115,871    $ 123,348    $ 116,666    $ 158,183   
                 
 Average Yield, Interest-earning assets  6.4%   5.9%   6.0%   5.7%   5.3%  
 Average Cost, Interest-bearing liabilities  3.3%   3.6%   3.5%   3.3%   3.0%  
 Net Interest Spread  3.1%   2.3%   2.5%   2.4%   2.3%  

Portfolio Allocation

   1Q 2021  4Q 2020  3Q 2020  2Q 2020  1Q 2020 
 Agency RMBS as percent of portfolio  1%   1%   1%   1%   1%  
 Agency CMBS as percent of portfolio  8%   10%   10%   15%   15%  
 Securitized Loans as percent of portfolio  79%   77%   77%   73%   72%  
 Non-Agency RMBS as percent of portfolio  12%   13%   13%   12%   12%  
                 
 GAAP Leverage  3.6:1    3.6:1    3.7:1    4.3:1   4.7:1   
 GAAP Leverage (Recourse)  1.1:1    1.2:1    1.3:1    1.8:1   2.2:1