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Key Figures

 

(Dollars in millions. Except per share data)

 
3Q 2021  2Q 2021  1Q 2021  4Q 2020  3Q 2020 
 GAAP Earnings  $1.30   $0.60   $0.54   $0.49   $1.32  
 Earnings Available for Distribution(1)  $0.42   $0.54   $0.36   $0.29   $0.33  
 Common Dividend  $0.33   $0.33   $0.30   $0.30   $0.30  
                 
 Total Assets  $16,004   $15,860   $16,699   $17,523   $18,094  
 Stockholders Equity  $3,849   $3,627   $3,566   $3,779   $3,697  
 GAAP Book Value  $12.32   $11.45   $11.44   $12.36   $11.91  
 Total Economic Return(2) - Trailing 12 mos.  14.0%   19.3%   1.5%   (14.8%)   (17.5%)  

(1)Earnings Available for Distribution 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.

Earnings Available for Distribution Reconciliation9

Commencing with the quarter ended September 30, 2021, we will no longer report our non-GAAP measure of core earnings (and by calculation, core earnings per adjusted diluted common share). Instead, we are reporting the new measure Earnings available for distribution (and by calculation, earnings available for distribution per adjusted diluted common share).

Earnings available for distribution is a non-GAAP measure and is defined as GAAP net income excluding unrealized gains or losses on financial instruments carried at fair value with changes in fair value recorded in earnings, realized gains or losses on the sales of investments, gains or losses on the extinguishment of debt, interest expense on long term debt, changes in the provision for credit losses, and transaction expenses incurred. 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, Earnings available for distribution is the economic net interest income, as defined previously, reduced by compensation and benefits expenses (adjusted for awards to retirement eligible employees), general and administrative expenses, servicing and asset manager fees, income tax benefits or expenses incurred during the period, as well as the preferred dividend charges. We view Earnings available for distribution as a consistent measure of our investment portfolio's ability to generate income for distribution to common stockholders. Earnings available for distribution is one of the metrics, but not the exclusive metric, that our board of directors uses to determine the amount, if any, of dividends on our common stock. In addition, Earnings available for distribution is different than REIT taxable income and the determination of whether the Company has met the requirement to distribute at least 90% of its annual REIT taxable income (subject to certain adjustments) to its stockholders in order to maintain qualification as a REIT is not based on Earnings available for distribution. Therefore, Earnings available for distribution should not be considered as an indication of our REIT taxable income, a guaranty of our ability to pay dividends, or as a proxy for the amount of dividends we may pay, because Earnings available for distribution excludes certain items that impact our cash needs. We believe Earnings available for distribution as described above helps us and investors evaluate our financial performance period over period without the impact of certain transactions. Therefore, Earnings available for distribution 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 earnings available for distribution may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and accordingly, our Earnings available for distribution may not be comparable to the Earnings available for distribution 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 Earnings available for distribution and related per average diluted common share amounts. Earnings available for distribution is presented on an adjusted dilutive shares basis. Certain prior period amounts have been reclassified to conform to the current period's presentation.

GAAP to Earnings Available for Distribution Reconciliation

 

(Dollars in thousands. Except per share data)

 
3Q 2021  2Q 2021  1Q 2021  4Q 2020  3Q 2020 
 GAAP net income available to common shareholders  $313,030   $144,883   $139,153   $128,797   $348,891  
 Adjustments:                     
 Interest expense on long term debt  $238   $959   $1,076   $1,197   $1,495  
 Increase (decrease) in provision for credit losses  ($386)   $453   ($126)   $13   ($1,650)  
 Net unrealized (gains) losses on financial instruments at fair value  ($239,524)   ($36,108)   ($270,012)   ($61,379)   ($260,766)  
 Net realized (gains) losses on sales of investments  $0   ($7,517)   ($37,796)   $329   ($65,041)  
 (Gains) losses on extinguishment of debt  $25,622   $21,777   $237,137   ($919)   $55,794  
  Transaction expenses $3,432   $5,745   $16,437   $3,827   $1,624  
  Stock compensation expense for retirement eligible awards ($365)   ($361)   $661   ($225)   ($275)  
 Earnings Available for Distribution  $102,047   $129,831   $86,530   $71,640   $80,072  
                 
 GAAP net income per diluted common share  $1.30   $0.60   $0.54   $0.49   $1.32  
 Earnings available for distribution per adjusted diluted common share   $0.42   $0.54   $0.36   $0.29   $0.33  

Portfolio Income and Yield

 

(Dollars in thousands. Except per share data)

 
3Q 2021  2Q 2021  1Q 2021  4Q 2020  3Q 2020 
 Interest Income  $ 220,579    $ 252,677    $ 243,127    $ 236,156    $ 247,905   
 Interest Expense  $ 71,353    $ 80,610    $ 108,066    $ 120,285    $ 124,557   
 Net Interest Income  $ 149,226    $ 172,067    $ 135,061    $ 115,871    $ 123,348   
                 
 Average Yield, Interest-earning assets  6.3%   7.0%   6.4%   5.9%   6.0%  
 Average Cost, Interest-bearing liabilities  2.4%   2.6%   3.3%   3.6%   3.5%  
 Net Interest Spread  3.9%   4.4%   3.1%   2.3%   2.5%  

Portfolio Allocation

   3Q 2021  2Q 2021  1Q 2021  4Q 2020  3Q 2020 
 Agency RMBS as percent of portfolio  0%   0%   1%   1%   1%  
 Agency CMBS as percent of portfolio  7%   9%   8%   10%   10%  
 Securitized Loans as percent of portfolio  81%   79%   79%   77%   77%  
 Non-Agency RMBS as percent of portfolio  12%   12%   12%   13%   13%  
                 
 GAAP Leverage  3.1:1    3.3:1    3.6:1    3.6:1    3.7:1   
 GAAP Leverage (Recourse)  1.0:1    1.0:1    1.1:1    1.2:1    1.3:1