CYS Investments, Inc. Announces Second Quarter 2016 Financial Results
Second Quarter 2016 Summary Results
-
June 30, 2016 book value per common share of
\\$9.55 , after declaring a\\$0.25 dividend per common share onJune 8, 2016 , up from\\$9.46 at March 31, 2016. -
GAAP net income available to common stockholders of
\\$51.0 million , or\\$0.34 per diluted common share. -
Core Earnings plus Drop Income of
\\$38.7 million (\\$30.7 million Core Earnings and\\$8.0 million Drop Income), or\\$0.26 per diluted common share (\\$0.20 Core Earnings and\\$0.06 Drop Income). - Interest rate spread, net of hedge, including Drop Income, of 1.36%.
- Operating expense ratio of 1.36%, down from 1.48% in the prior quarter.
-
Weighted-average amortized cost of Agency RMBS and U.S. Treasuries
(collectively, "
Debt Securities ") of\\$103.42 . - Leverage ratio of 6.91:1 at June 30, 2016.
- Constant Prepayment Rate ("CPR") of 12.9%.
-
Repurchased 162,548 shares of the Company's common stock at a
weighted-average purchase price of
\\$7.93 per share or an aggregate of approximately\\$1.3 million . - Total stockholder return on common equity of 3.59%.
Market Commentary
In the second quarter of 2016 (the "Second Quarter"), longer-term
interest rates moved lower, continuing the trends of the latter part of
the first quarter of 2016 (the "First Quarter"). Short-term borrowing
rates moved somewhat higher as the markets anticipated further Federal
Reserve (the "Fed") rate hikes in 2016, though expectations are for the
pace of these hikes to be very slow. However, despite the Fed's desire
to normalize short-term interest rates, the emerging economic data
continues to be below the Fed's expectations and the bond market
continues to push out its expectations for rate hikes in 2016. Much of
the concerns about slow growth stem from sluggish economic conditions in
Reflecting the diminishing prospects for accelerating growth, in the
Second Quarter, the bond market rallied and the 10-year U.S. Treasury
yield, which began the year at 2.27%, hit a low for the First Quarter of
1.66% in mid-February, closed at 1.77% on
While prepayments picked up slightly in the Second Quarter, the wave of
refinancing activity was short-lived and CYS's portfolio prepaid at
12.9% in the Second Quarter. Mortgage rates have continued to lag the
drop in U.S. Treasury yields but we should anticipate a new round of
prepayment activity. We expect homeowners to respond to the lower rates
and expect prepayments on our portfolio assets to increase in the coming
months, which would impact our portfolio yield. With the current Fed
position of keeping interest rates lower for longer, we anticipate less
volatility in the prices of Agency RMBS securities. As of
Second Quarter 2016 Results
The Company’s book value per common share on June 30, 2016 was
The Company generated net income available to common stockholders of
In the Second Quarter, the Company had Core Earnings (defined below)
plus Drop Income (defined below) of
In the Second Quarter, total interest income decreased to
The Company's net interest income of
Economic net interest income and expense are non-GAAP measures. The following table presents a reconciliation of GAAP net interest income and total interest expense to economic net interest income and economic net interest expense, respectively, for each respective period.
(in thousands) | June 30, 2016 | March 31, 2016 | |||||
Net interest income | \\$ | 56,170 | \\$ | 63,506 | |||
Swap and cap interest expense | 14,779 | 18,398 | |||||
Economic net interest income | \\$ | 41,391 | \\$ | 45,108 | |||
Total interest expense | \\$ | 18,687 | \\$ | 17,945 | |||
Swap and cap interest expense | 14,779 | 18,398 | |||||
Economic interest expense | \\$ | 33,466 | \\$ | 36,343 |
The Company's economic net interest income, which takes into account
swap and cap interest expense, as well as interest expense on repo
borrowings and FHLBC Advances, was
In the Second Quarter, economic interest expense, comprised of interest
expense on repo borrowings and FHLBC Advances and swap and cap interest
expense, was
The Company recognized net realized and unrealized gain from investments
of
The Company recognized a net realized and unrealized loss on derivative
instruments of
The Company’s operating expense ratio as a percentage of average stockholders' equity was 1.36% in the Second Quarter, compared to 1.48% in the First Quarter.
Set forth below are summary financial data for the Second Quarter and First Quarter:
Summary Financial Data
(dollars in thousands except per share data) | Three Months Ended | ||||||||||
Key Balance Sheet Metrics | June 30, 2016 | March 31, 2016 | |||||||||
Average settled Debt Securities (1) | \\$ | 11,887,351 | \\$ | 11,905,997 | |||||||
Average total Debt Securities (2) | \\$ | 13,230,800 | \\$ | 12,945,855 | |||||||
Average repurchase agreements and FHLBC Advances (3) | \\$ | 10,412,784 | \\$ | 10,492,636 | |||||||
Average Debt Securities liabilities (4) | \\$ | 11,756,233 | \\$ | 11,532,494 | |||||||
Average stockholders' equity (5) | \\$ | 1,725,879 | \\$ | 1,714,728 | |||||||
Average common shares outstanding (6) | 151,452 | 151,788 | |||||||||
Leverage ratio (at period end) (7) |
6.91:1 |
6.76:1 |
|||||||||
Book value per common share (at period end) (8) | \\$ | 9.55 | \\$ | 9.46 | |||||||
Weighted average amortized cost of Agency RMBS and U.S. Treasuries (9) | \\$ | 103.42 | \\$ | 103.76 | |||||||
Key Performance Metrics* | |||||||||||
Average yield on settled Debt Securities (10) | 2.52 | % | 2.74 | % | |||||||
Average yield on total Debt Securities including Drop Income (11) | 2.50 | % | 2.71 | % | |||||||
Average cost of funds (12) | 0.72 | % | 0.68 | % | |||||||
Average cost of funds and hedge (13) | 1.29 | % | 1.39 | % | |||||||
Adjusted average cost of funds and hedge (14) | 1.14 | % | 1.26 | % | |||||||
Interest rate spread net of hedge (15) | 1.23 | % | 1.35 | % | |||||||
Interest rate spread net of hedge including Drop Income (16) | 1.36 | % | 1.45 | % | |||||||
Operating expense ratio (17) | 1.36 | % | 1.48 | % | |||||||
Total stockholder return on common equity (18) | 3.59 | % | 3.85 | % | |||||||
Constant prepayment rate (weighted average experienced 1-month) (19) | 12.9 | % | 7.6 | % |
__________________
(1) The average settled
(2)
The average total
(3) The average repurchase agreements and FHLBC
Advances are calculated by averaging the
month end repurchase agreements and FHLBC Advances balances during the
period.
(4) The average
(5)
The average stockholders' equity is calculated by averaging
the month end stockholders' equity during the period.
(6) The
average common shares outstanding are calculated by averaging
the daily common shares outstanding during the period.
(7) The
leverage ratio is calculated by dividing
(i) the Company's repurchase agreements and FHLBC Advances balances plus
payable for securities purchased minus receivable for securities sold plus
gross TBA Derivatives positions (as described below) by (ii)
stockholders' equity.
(8) Book value per common share is calculated
by dividing total stockholders' equity less
the liquidation value of preferred stock at period end by common shares
outstanding at period end.
(9) The weighted average amortized cost
of Agency RMBS and U.S. Treasuries is calculated using the weighted
average amortized cost by security divided
by the current face at period end.
(10) The average yield on
settled
(11) The
average yield on total
(12)
The average cost of funds for the period is calculated by dividing
repurchase agreement and FHLBC Advances interest expense by average
repurchase agreements and FHLBC Advances for the period.
(13) The
average cost of funds and hedge for the period is calculated by dividing
repurchase agreement, FHLBC Advances and swap and cap interest expense
by average repurchase agreements and FHLBC Advances.
(14) The
adjusted average cost of funds and hedge for the period is calculated by dividing
repurchase agreement, FHLBC Advances and swap and cap interest expense
by average total
(15) The interest
rate spread net of hedge for the period is calculated by subtracting
average cost of funds and hedge from average yield on settled
(16) The interest rate spread net of hedge including
Drop Income for the period is calculated by subtracting
adjusted average cost of funds and hedge from average yield on total
(17) The operating expense
ratio for the period is calculated by dividing
operating expenses by average stockholders' equity.
(18) The total
stockholder return on common equity is calculated using the change in
book value plus dividend distributions on
common stock.
(19) The constant prepayment rate ("CPR") represents
the weighted average 1-month CPR of the Company's Agency RMBS during the
period.
* All percentages are annualized except total stockholder
return on common equity.
Portfolio
Effective
The Company's
The following tables detail the Company's
June 30, 2016 | March 31, 2016 | ||||||||||||||||||
Fair Value (in thousands) | % of Total | Fair Value (in thousands) | % of Total | ||||||||||||||||
15-Year Fixed Rate | \\$ | 5,989,553 | 44 | % | \\$ | 5,663,867 | 43 | % | |||||||||||
20-Year Fixed Rate | 49,494 | — | % | 52,505 | — | % | |||||||||||||
30-Year Fixed Rate | 6,318,345 | 46 | % | 7,136,350 | 54 | % | |||||||||||||
Hybrid ARMs | 349,814 | 3 | % | 343,353 | 3 | % | |||||||||||||
U.S. Treasuries | 884,213 | 7 | % | 29,972 | — | % | |||||||||||||
Total | \\$ | 13,591,419 | 100 | % | \\$ | 13,226,047 | 100 | % | |||||||||||
Key metrics related to the Company’s
Face Value | Fair Value | Weighted-Average | |||||||||||||||||||||||||||||||
Asset Type | (in thousands) | Cost/Face | Fair Value/Face | Yield(1) | Coupon | CPR(2) | |||||||||||||||||||||||||||
15-Year Fixed Rate | \\$ | 5,714,808 | \\$ | 5,989,553 | \\$ | 102.77 | \\$ | 104.81 | 1.41 | % | 2.96 | % | 10.8 | % | |||||||||||||||||||
20-Year Fixed Rate | 45,186 | 49,494 | 102.75 | 109.53 | 1.54 | % | 4.50 | % | 17.1 | % | |||||||||||||||||||||||
30-Year Fixed Rate | 5,939,447 | 6,318,345 | 104.59 | 106.38 | 1.80 | % | 3.67 | % | 10.6 | % | |||||||||||||||||||||||
Hybrid ARMs (3) | 335,330 | 349,814 | 102.79 | 104.32 | 1.50 | % | 2.93 | % | 21.7 | % | |||||||||||||||||||||||
U.S. Treasury Securities | 880,000 | 884,213 | 100.12 | 100.48 | 0.69 | % | 0.86 | % | n/a | ||||||||||||||||||||||||
Total | \\$ | 12,914,771 | \\$ | 13,591,419 | \\$ | 103.42 | \\$ | 105.24 | 1.54 | % | 3.15 | % | 11.1 | % | |||||||||||||||||||
__________________
(1) Represents a forward yield and is calculated based on the
cost basis of the security at June 30, 2016.
(2) CPR
is a method of expressing the prepayment rate for a mortgage pool that
assumes a constant fraction of the remaining principal is prepaid each
month. Specifically, the constant prepayment rate is an annualized
version of the experienced prior three-month prepayment rate for those
bonds held at June 30, 2016. Securities with no prepayment history are
excluded from this calculation.
(3) The weighted-average
months to reset of our Hybrid ARM portfolio was 66.2 at June 30, 2016.
Months to reset is the number of months remaining before the fixed rate
on a Hybrid ARM becomes a variable rate. At the end of the fixed period,
the variable rate will be determined by the margin and the pre-specified
caps of the Hybrid ARM and will reset thereafter annually.
In
Leverage & Liquidity
Our leverage, which includes TBA Derivatives, was 6.91:1 at the end of
the Second Quarter, compared to 6.76:1 at the end of the First Quarter.
As of June 30, 2016 and March 31, 2016, the Company had financed its
portfolio with approximately
At June 30, 2016, and March 31, 2016, the Company’s liquidity position,
consisting of unpledged Agency RMBS, U.S. Treasuries and cash, was
approximately
Financing
During the Second Quarter, the Company financed its investment portfolio
with average repo borrowings and FHLBC Advances of
During the Second Quarter, the Company did not experience any reductions in the availability of repo borrowings. At June 30, 2016 repo borrowings with any individual counterparty were less than 8% of our total outstanding borrowings. As of June 30, 2016, we had 48 counterparties available to finance the Company's operations.
Below is a summary, by region, of our outstanding borrowings at June 30, 2016 (dollars in thousands):
Counterparty Region | Number of Counterparties | Total Outstanding Borrowings | % of Total | ||||||||
North America | 22 | \\$ | 6,427,663 | 61.7% | |||||||
Europe | 8 | 2,201,699 | 21.1% | ||||||||
Asia | 5 | 1,795,139 | 17.2% | ||||||||
Total | 35 | \\$ | 10,424,501 | 100.0% |
Hedging
The Company utilizes interest rate swap and cap contracts (a "swap" or
"cap", respectively) to manage interest rate risk associated with the
financing of its
As of June 30, 2016, the Company held swaps with an aggregate notional
amount of
As of March 31, 2016, the Company held swaps with an aggregate notional amount of \\$7.5 billion, a weighted-average fixed rate of 1.26%, a weighted average receive rate of 0.62%, a weighted average net pay rate of 0.64% and a weighted-average expiration of 3.1 years. At March 31, 2016, the Company held caps with a notional amount of \\$2.5 billion, a weighted-average cap rate of 1.28%, and a weighted-average expiration of 3.8 years.
Key provisions of the Company's outstanding swaps and caps at June 30, 2016 are summarized below (dollars in thousands):
Interest Rate Swaps | Weighted-Average | |||||||||||||||||||||
Expiration Year | Fixed Pay Rate | Receive Rate * | Net Pay Rate | Notional Amount | Fair Value | |||||||||||||||||
2017 | 0.80 | % | 0.68 | % | 0.12 | % | \\$ | 1,500,000 | \\$ | (2,078 | ) | |||||||||||
2018 | 1.00 | % | 0.65 | % | 0.35 | % | 1,500,000 | (7,018 | ) | |||||||||||||
2020 | 1.45 | % | 0.64 | % | 0.81 | % | 1,750,000 | (38,208 | ) | |||||||||||||
2021 | 1.21 | % | 0.63 | % | 0.58 | % | 1,700,000 | (18,091 | ) | |||||||||||||
2022 | 1.98 | % | 0.63 | % | 1.35 | % | 500,000 | (26,212 | ) | |||||||||||||
Total | 1.19 | % | 0.65 | % | 0.54 | % | \\$ | 6,950,000 | \\$ | (91,607 | ) | |||||||||||
Interest Rate Caps | Weighted-Average | |||||||||||||||||||||
Expiration Year | Cap Rate | Receive Rate | Cap Rate | Notional Amount | Fair Value | |||||||||||||||||
2019 | 1.34 | % | n/a | 1.34 | % | \\$ | 800,000 | \\$ | 2,662 | |||||||||||||
2020 | 1.25 | % | n/a | 1.25 | % | 1,700,000 | 13,359 | |||||||||||||||
Total | 1.28 | % | n/a | 1.28 | % | \\$ | 2,500,000 | \\$ | 16,021 |
* The receive rate on the Company's swaps is the three-month LIBOR, which resets quarterly.
Duration Gap
Our net duration gap increased marginally to 0.35 at June 30, 2016, compared to 0.30 at March 31, 2016.
Drop Income
"Drop Income" is a component of our net realized and unrealized gain (loss) on investments and net realized and unrealized gain (loss) on derivative instruments in the consolidated statements of operations, and is therefore excluded from Core Earnings. Drop Income is the difference between the spot price and the forward settlement price for the same Agency RMBS on trade date. This difference is also the economic equivalent of the assumed net interest spread (yield less financing costs) of the Agency RMBS from trade date to settlement date. The Company derives Drop Income through utilization of forward settling transactions of Agency RMBS. The Company's Drop Income and average market value of all TBAs outstanding during the Second Quarter and First Quarter are shown in the chart below (dollars in thousands):
June 30, 2016 | March 31, 2016 |
\\$ Change |
|||||||||||||
Drop Income | \\$ | 7,996 | \\$ | 6,315 | \\$ | 1,681 | |||||||||
Average market value of all TBAs | 1,290,798 | 1,060,866 | 229,932 |
Prepayments
The portfolio recognized
Dividend
The Company declared a common dividend of
Share Repurchase Program
In the Second Quarter, we repurchased 162,548 shares of the Company's
common stock at a weighted-average purchase price of
Conference Call
The Company will host a conference call at
A dial-in replay of the call will be available on Thursday, July 28,
2016, at approximately
Additional Information
The Company plans to make available a supplemental presentation ("Presentation") for the benefit of its stockholders at the Company's website, www.cysinv.com, prior to the conference call. The Presentation will be available on the Webcasts/Presentations tab of the Investor Relations section of the Company's website.
About
Ginnie Mae. The Company refers
to these securities as Agency RMBS.
Forward-Looking Statements Disclaimer
This release contains “forward-looking statements” made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act
of 1995, including those relating to interest rates and interest rate
volatility, the prices, supply and volatility of Agency RMBS, earnings,
yields, investment environment, hedges, forward settling transactions,
liquidity, prepayments, and the effect of actions of the U.S.
government, including the Federal Reserve (the "Fed") and the Federal
Open Market Committee (the "FOMC") on our results. Forward-looking
statements typically are identified by use of the terms such as
“believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,”
“intend,” “should,” “may” or similar expressions. Forward-looking
statements are based on the Company's beliefs, assumptions and
expectations of the Company's future performance, taking into account
all information currently available to the Company. The Company cannot
assure you that actual results will not vary from the expectations
contained in the forward-looking statements. All of the forward-looking
statements are subject to numerous possible events, factors and
conditions, many of which are beyond the control of the Company and not
all of which are known to the Company, including, without limitation,
market conditions and those described in the Company's Annual Report on
Form 10-K for the fiscal year ended
CYS INVESTMENTS, INC. | ||||||||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||||||||
(dollars in thousands, except per share data) |
||||||||||||||||
June 30, 2016 | March 31, 2016 | December 31, 2015* | ||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Assets: | ||||||||||||||||
Cash | \\$ | 13,182 | \\$ | 6,262 | \\$ | 9,982 | ||||||||||
Investments in securities, at fair value: | ||||||||||||||||
Agency mortgage-backed securities (including pledged assets of \\$10,106,787, \\$10,868,773 and \\$11,587,014, respectively) | 11,879,933 | 12,888,430 | 12,927,996 | |||||||||||||
U.S. Treasury securities (including pledged assets of \\$884,213, \\$29,972 and \\$14,886, respectively) | 884,213 | 29,972 | 99,711 | |||||||||||||
Receivable for securities sold and principal repayments | 1,507 | 1,586 | 1,084,844 | |||||||||||||
Receivable for cash pledged as collateral | 97,309 | 85,097 | 21,751 | |||||||||||||
Interest receivable | 32,460 | 34,033 | 34,563 | |||||||||||||
Derivative assets, at fair value | 24,650 | 32,701 | 100,778 | |||||||||||||
Other investments | 31,028 | 34,028 | 50,028 | |||||||||||||
Other assets | 1,625 | 1,219 | 1,051 | |||||||||||||
Total assets | \\$ | 12,965,907 | \\$ | 13,113,328 | \\$ | 14,330,704 | ||||||||||
Liabilities and stockholders' equity: | ||||||||||||||||
Liabilities: | ||||||||||||||||
Repurchase agreements | \\$ | 9,849,501 | \\$ | 9,656,969 | \\$ | 8,987,776 | ||||||||||
FHLBC Advances, at fair value | 575,000 | 649,553 | 2,098,701 | |||||||||||||
Payable for securities purchased | 652,619 | 937,163 | 1,475,974 | |||||||||||||
Payable for cash received as collateral | 4,826 | 9,141 | 18,534 | |||||||||||||
Accrued interest payable | 20,307 | 20,020 | 32,588 | |||||||||||||
Accrued expenses and other liabilities | 4,857 | 3,113 | 4,083 | |||||||||||||
Dividends payable | 42,259 | 43,809 | 4,410 | |||||||||||||
Derivative liabilities, at fair value | 95,529 | 85,461 | 14,024 | |||||||||||||
Total liabilities | \\$ | 11,244,898 | \\$ | 11,405,229 | \\$ | 12,636,090 | ||||||||||
Stockholders' equity: | ||||||||||||||||
Preferred Stock, \\$0.01 par value, 50,000 shares authorized: | ||||||||||||||||
7.75% Series A Cumulative Redeemable Preferred Stock, (3,000 shares issued and outstanding, respectively, \\$75,000 in aggregate liquidation preference) | \\$ | 72,369 | \\$ | 72,369 | \\$ | 72,369 | ||||||||||
7.50% Series B Cumulative Redeemable Preferred Stock, (8,000 shares issued and outstanding, respectively, \\$200,000 in aggregate liquidation preference) | 193,531 | 193,531 | 193,531 | |||||||||||||
Common Stock, \\$0.01 par value, 500,000 shares authorized (151,394, 151,535 and 151,740 shares issued and outstanding, respectively) |
1,514 | 1,515 | 1,517 | |||||||||||||
Additional paid in capital | 1,942,930 | 1,943,177 | 1,946,419 | |||||||||||||
Retained earnings (accumulated deficit) | (489,335 | ) | (502,493 | ) | (519,222 | ) | ||||||||||
Total stockholders' equity | \\$ | 1,721,009 | \\$ | 1,708,099 | \\$ | 1,694,614 | ||||||||||
Total liabilities and stockholders' equity | \\$ | 12,965,907 | \\$ | 13,113,328 | \\$ | 14,330,704 | ||||||||||
Book value per common share | \\$ | 9.55 | \\$ | 9.46 | \\$ | 9.36 |
__________________
* Derived from audited consolidated financial statements.
CYS INVESTMENTS, INC. | |||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | |||||||||||
Three Months Ended | |||||||||||
(dollars in thousands, except per share data) | June 30, 2016 | March 31, 2016 | |||||||||
Interest income: | |||||||||||
Agency RMBS | \\$ | 74,176 | \\$ | 81,323 | |||||||
Other | 681 | 128 | |||||||||
Total interest income | 74,857 | 81,451 | |||||||||
Interest expense: | |||||||||||
Repurchase agreements | 16,910 | 15,886 | |||||||||
FHLBC Advances | 1,777 | 2,059 | |||||||||
Total interest expense | 18,687 | 17,945 | |||||||||
Net interest income | 56,170 | 63,506 | |||||||||
Other income (loss): | |||||||||||
Net realized gain (loss) on investments | 36,359 | 1,202 | |||||||||
Net unrealized gain (loss) on investments | 28,915 | 162,286 | |||||||||
Net unrealized gain (loss) on FHLBC Advances | (448 | ) | (851 | ) | |||||||
Other income | 387 | 463 | |||||||||
Net realized and unrealized gain (loss) on investments, FHLBC Advances and other income | 65,213 | 163,100 | |||||||||
Swap and cap interest expense | (14,779 | ) | (18,398 | ) | |||||||
Net realized and unrealized gain (loss) on derivative instruments | (44,535 | ) | (140,524 | ) | |||||||
Net gain (loss) on derivative instruments | (59,314 | ) | (158,922 | ) | |||||||
Total other income (loss) | 5,899 | 4,178 | |||||||||
Expenses: | |||||||||||
Compensation and benefits | 3,565 | 3,865 | |||||||||
General, administrative and other | 2,294 | 2,488 | |||||||||
Total expenses | 5,859 | 6,353 | |||||||||
Net income (loss) | \\$ | 56,210 | \\$ | 61,331 | |||||||
Dividends on preferred stock | (5,203 | ) | (5,203 | ) | |||||||
Net income (loss) available to common stockholders | \\$ | 51,007 | \\$ | 56,128 | |||||||
Net income (loss) per common share basic & diluted | \\$ | 0.34 | \\$ | 0.37 |
Core Earnings
"Core Earnings" represents a non-GAAP financial measure and is defined as net income (loss) available to common stockholders excluding net realized gain (loss) on investments, net unrealized gain (loss) on investments, net realized and unrealized gain (loss) on derivative instruments, and net unrealized gain (loss) on FHLBC Advances. Management uses Core Earnings to evaluate the effective yield of the portfolio after operating expenses. The Company believes that providing users of the Company's financial information with such measures, in addition to the related GAAP measures, gives investors greater transparency and insight into the information used by the Company's management in its financial and operational decision-making.
The primary limitation associated with Core Earnings as a measure of the Company's financial performance over any period is that it excludes the effects of net realized and unrealized gain (loss) on investments and derivative instruments, and net unrealized gain (loss) on FHLBC Advances. In addition, the Company's presentation of Core Earnings may not be comparable to similarly-titled measures of other companies, which may use different calculations. As a result, Core Earnings should not be considered as a substitute for the Company's GAAP net income (loss), as a measure of our financial performance or any measure of our liquidity under GAAP.
The following table reconciles Net income to Core Earnings, a non-GAAP measure, and summarizes Core Earning plus Drop Income for the periods presented.
Three Months Ended | |||||||||||
(dollars in thousands, except per share data) | June 30, 2016 | March 31, 2016 | |||||||||
Net income (loss) available to common stockholders | \\$ | 51,007 | \\$ | 56,128 | |||||||
Net realized (gain) loss on investments | (36,359 | ) | (1,202 | ) | |||||||
Net unrealized (gain) loss on investments | (28,915 | ) | (162,286 | ) | |||||||
Net realized and unrealized (gain) loss on derivative instruments | 44,535 | 140,524 | |||||||||
Net unrealized (gain) loss on FHLBC Advances | 448 | 851 | |||||||||
Core Earnings | \\$ | 30,716 | \\$ | 34,015 | |||||||
Core Earnings per average share | \\$ | 0.20 | \\$ | 0.22 | |||||||
Drop Income | \\$ | 7,996 | \\$ | 6,315 | |||||||
Core Earnings plus Drop Income | \\$ | 38,712 | \\$ | 40,330 | |||||||
Core Earnings plus Drop Income per average share | \\$ | 0.26 | \\$ | 0.27 |
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