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Key Figures

 

(Dollars in millions. Except per share data)

 
2Q 2021  1Q 2021  4Q 2020  3Q 2020  2Q 2020 
 GAAP Earnings  $0.60   $0.54   $0.49   $1.32   ($0.37)  
 Core Earnings(1)  $0.54   $0.36   $0.29   $0.33   $0.32  
 Common Dividend  $0.33   $0.30   $0.30   $0.30   $0.30  
                 
 Total Assets  $15,860   $16,699   $17,523   $18,094   $18,448  
 Stockholders Equity  $3,627   $3,566   $3,779   $3,697   $3,396  
 GAAP Book Value  $11.45   $11.44   $12.36   $11.91   $10.63  
 Total Economic Return(2) - Trailing 12 mos.  19.3%   1.5%   (14.8%)   (17.5%)   (23.4%)  

(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 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, core earnings 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 believe that the presentation of core earnings provides us and investors with a useful measure, but has important limitations. We believe core earnings as described above helps us and investors 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. Core earnings 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 Core Earnings Reconciliation

 

(Dollars in thousands. Except per share data)

 
2Q 2021  1Q 2021  4Q 2020  3Q 2020  2Q 2020 
 GAAP net income available to common shareholders  $144,883   $139,153   $128,797   $348,891   ($73,393)  
 Adjustments:                    
 Interest expense on long term debt  $959   $1,076   $1,197   $1,495   $4,391  
 Increase (decrease) in provision for credit losses  $453   ($126)   $13   ($1,650)   ($4,497)  
 Net unrealized (gains) losses on financial instruments at fair value  ($36,108)   ($270,012)   ($61,379)   ($260,766)   $171,921  
 Net realized (gains) losses on sales of investments  ($7,517)   ($37,796)   $329   ($65,041)   ($26,380)  
 (Gains) losses on extinguishment of debt  $21,777   $237,137   ($919)   $55,794   ($459)  
  Transaction expenses $5,745   $16,437   $3,827   $1,624   $4,710  
  Stock compensation expense for retirement eligible awards ($361)   $661   ($225)   ($275)   ($273)  
 Core Earnings  $129,831   $86,530   $71,640   $80,072   $76,020  
                 
 GAAP net income per diluted common share  $0.60   $0.54   $0.49   $1.32   ($0.37)  
 Core earning per adjusted diluted common share   $0.54   $0.36   $0.29   $0.33   $0.32  

Portfolio Income and Yield

 

(Dollars in thousands. Except per share data)

 
2Q 2021  1Q 2021  4Q 2020  3Q 2020  2Q 2020 
 Interest Income  $ 252,677    $ 243,127    $ 236,156    $ 247,905    $ 245,922   
 Interest Expense  $ 80,610    $ 108,066    $ 120,285    $ 124,557    $ 129,256   
 Net Interest Income  $ 172,067    $ 135,061    $ 115,871    $ 123,348    $ 116,666   
                 
 Average Yield, Interest-earning assets  7.0%   6.4%   5.9%   6.0%   5.7%  
 Average Cost, Interest-bearing liabilities  2.6%   3.3%   3.6%   3.5%   3.3%  
 Net Interest Spread  4.4%   3.1%   2.3%   2.5%   2.4%  

Portfolio Allocation

   2Q 2021  1Q 2021  4Q 2020  3Q 2020  2Q 2020 
 Agency RMBS as percent of portfolio  0%   1%   1%   1%   1%  
 Agency CMBS as percent of portfolio  9%   8%   10%   10%   15%  
 Securitized Loans as percent of portfolio  79%   79%   77%   77%   73%  
 Non-Agency RMBS as percent of portfolio  12%   12%   13%   13%   12%  
                 
 GAAP Leverage  3.3:1    3.6:1    3.6:1    3.7:1    4.3:1  
 GAAP Leverage (Recourse)  1.0:1    1.1:1    1.2:1    1.3:1    1.8:1