Core Earnings are defined by the Company as net income excluding both realized and unrealized gains (losses) on the sale or termination of securities, including underlying linked transactions and derivatives. As defined, Core Earnings include the net interest earned on these transactions, including credit derivatives, linked transactions, inverse Agency securities, interest rate derivatives or any other investment activity that may earn net interest. One of the objectives of the Company is to generate net income from net interest margin on the portfolio and management uses Core Earnings to measure this objective.
A reconciliation of GAAP net income to Core Earnings for the three months and year ended December 31, 2012, the three months ended December 31, 2011 and for the period from March 7, 2011 to December 31, 2011 is set forth below:
|Three Months Ended||Three Months Ended||Year Ended||March 7, 2011 to|
|December 31, 2012||December 31, 2011||December 31, 2012||December 31, 2011|
|Net Income available to common stockholders||$||14,500,412||$||5,769,472||$||130,798,907||$||18,970,696|
|Net realized gain/(loss)||(15,450,117||)||589,747||(29,537,240||)||(3,701,392||)|
|Gain/(loss) on linked transactions, net||(6,522,386||)||1,013,291||(20,014,654||)||808,564|
|Net interest income on linked transactions||3,303,415||554,729||10,164,849||900,638|
|Unrealized gain/(loss) on derivative instruments, net||(2,706,607||)||(70,663||)||24,086,526||6,491,430|
|Unrealized gain/(loss) on real estate securities, net||26,683,774||(1,346,237||)||(52,071,455||)||(11,040,692||)|
|Core Earnings, per Diluted Share||$||0.85||$||0.65||$||3.48||$||2.09|
(1) Per share figures are calculated using a denominator of all outstanding common shares including all shares granted to our Manager and our independent directors under our equity incentive plans as of quarter end. Net book value uses stockholders’ equity less net proceeds of the Company’s 8.25% Series A and 8.00% Series B Cumulative Redeemable Preferred Stock as the numerator.