TWO Reports Fourth Quarter 2024 Financial Results
Two Harbors Investment Corp. (TWO) reported its Q4 2024 financial results, highlighting its MSR-focused strategy. The company reported a book value of $14.47 per common share and declared a Q4 dividend of $0.45 per share. TWO incurred a Comprehensive Loss of $(1.6) million, or $(0.03) per share.
Key operational highlights include settling $2.5 billion in unpaid principal balance (UPB) of MSR through bulk and flow-sale acquisitions, maintaining a portfolio with 4.93% CPR and 0.90% delinquency rate. For the full year 2024, TWO declared dividends of $1.80 per common share and generated a 7.0% total economic return on book value.
The company's portfolio comprised $10.4 billion of Agency RMBS, MSR, and other investment securities, plus $4.4 billion in net long TBA securities. Management noted decreased mortgage spread volatility and expects slow prepayment rates in 2025, viewing this as positive for their MSR-centric strategy.
Two Harbors Investment Corp. (TWO) ha riportato i risultati finanziari del quarto trimestre 2024, evidenziando la sua strategia incentrata sugli MSR. La società ha registrato un valore contabile di 14,47 USD per azione ordinaria e ha dichiarato un dividendo del quarto trimestre di 0,45 USD per azione. TWO ha subito una perdita complessiva di 1,6 milioni di dollari, ovvero 0,03 USD per azione.
Le principali evidenze operative includono la liquidazione di 2,5 miliardi di dollari di saldo di capitale non pagato (UPB) di MSR attraverso acquisizioni in bulk e flow-sale, mantenendo un portafoglio con un tasso di prepagmento del 4,93% e un tasso di insolvenza dello 0,90%. Per l'intero anno 2024, TWO ha dichiarato dividendi di 1,80 USD per azione ordinaria e ha generato un ritorno economico totale del 7,0% sul valore contabile.
Il portafoglio della società comprendeva 10,4 miliardi di dollari in Agency RMBS, MSR e altri titoli di investimento, più 4,4 miliardi di dollari in titoli TBA netti long. La direzione ha notato una riduzione della volatilità degli spread sui mutui e prevede tassi di prepagmento lenti nel 2025, vedendo questo come positivo per la loro strategia incentrata sugli MSR.
Two Harbors Investment Corp. (TWO) reportó sus resultados financieros del cuarto trimestre de 2024, destacando su estrategia centrada en MSR. La empresa reportó un valor contable de $14.47 por acción ordinaria y declaró un dividendo del cuarto trimestre de $0.45 por acción. TWO incurrió en una pérdida integral de $(1.6) millones, o $(0.03) por acción.
Los aspectos operativos clave incluyen la liquidación de $2.5 mil millones en saldo de capital no pagado (UPB) de MSR a través de adquisiciones en bloque y flujo, manteniendo un portafolio con un CPR del 4.93% y una tasa de morosidad del 0.90%. Para el año completo 2024, TWO declaró dividendos de $1.80 por acción ordinaria y generó un retorno económico total del 7.0% sobre el valor contable.
El portafolio de la empresa estaba compuesto por $10.4 mil millones en Agency RMBS, MSR y otros valores de inversión, además de $4.4 mil millones en valores TBA netos largos. La dirección notó una disminución en la volatilidad del spread hipotecario y espera tasas de prepago lentas en 2025, considerándolo positivo para su estrategia centrada en MSR.
투 하버스 투자 공사 (TWO)는 2024년 4분기 재무 결과를 발표하며 MSR 중심의 전략을 강조했습니다. 이 회사는 주당 14.47 달러의 장부가치를 보고했으며, 4분기 주당 0.45 달러의 배당금을 선언했습니다. TWO는 총 손실로 $(1.6) 백만, 즉 주당 $(0.03) 손실을 입었습니다.
주요 운영 하이라이트로는 대량 및 흐름 판매 인수를 통해 25억 달러의 미지급 원금 잔액(UPB)을 정산했으며, 4.93% CPR 및 0.90% 연체율을 유지하는 포트폴리오를 보유하고 있습니다. 2024년 전체 연도에 대해 TWO는 주당 1.80 달러의 배당금을 선언했으며, 장부가치에 대한 총 경제적 수익률이 7.0%를 기록했습니다.
회사의 포트폴리오는 104억 달러의 기관 RMBS, MSR 및 기타 투자 증권으로 구성되어 있으며, 44억 달러의 순 롱 TBA 증권도 포함되어 있습니다. 경영진은 모기지 스프레드 변동성이 감소했다고 언급했으며, 2025년에 느린 조기 상환율을 예상하고 있으며, 이는 MSR 중심 전략에 긍정적이라고 생각하고 있습니다.
Two Harbors Investment Corp. (TWO) a rapporté ses résultats financiers du quatrième trimestre 2024, mettant en avant sa stratégie axée sur les MSR. La société a annoncé une valeur comptable de 14,47 USD par action ordinaire et a déclaré un dividende du quatrième trimestre de 0,45 USD par action. TWO a enregistré une perte globale de 1,6 million de dollars, soit 0,03 USD par action.
Les principaux points opérationnels comprennent le règlement de 2,5 milliards de dollars de solde de capital impayé (UPB) des MSR par le biais d'acquisitions en bloc et via des ventes de flux, tout en maintenant un portefeuille avec un CPR de 4,93 % et un taux de défaut de 0,90 %. Pour l'année entière 2024, TWO a déclaré des dividendes de 1,80 USD par action ordinaire et a généré un retour économique total de 7,0 % sur la valeur comptable.
Le portefeuille de la société comprenait 10,4 milliards de dollars de RMBS d'agence, de MSR et d'autres titres d'investissement, ainsi que 4,4 milliards de dollars de titres TBA nets longs. La direction a noté une diminution de la volatilité des spreads hypothécaires et s'attend à des taux de remboursement lents en 2025, considérant cela comme positif pour leur stratégie axée sur les MSR.
Two Harbors Investment Corp. (TWO) hat seine finanziellen Ergebnisse für das vierte Quartal 2024 veröffentlicht und dabei seine MSR-orientierte Strategie hervorgehoben. Das Unternehmen berichtete von einem Buchwert von 14,47 USD pro Stammaktie und erklärte eine Ausschüttung im vierten Quartal von 0,45 USD pro Aktie. TWO erlitt einen umfassenden Verlust von $(1,6) Millionen oder $(0,03) pro Aktie.
Wichtige betriebliche Höhepunkte sind die Abwicklung von 2,5 Milliarden USD ausstehendem Kapitalbetrag (UPB) von MSR durch Groß- und Flussverkaufsakquisitionen und die Aufrechterhaltung eines Portfolios mit 4,93% CPR und einer 0,90% Rückstandquote. Für das gesamte Jahr 2024 erklärte TWO Dividenden von 1,80 USD pro Stammaktie und erzielte eine Gesamtrendite von 7,0% auf den Buchwert.
Das Portfolio des Unternehmens umfasste 10,4 Milliarden USD an Agency RMBS, MSR und anderen Finanzanlagen sowie 4,4 Milliarden USD an Netto-Long-TBA-Wertpapieren. Das Management stellte eine verringerte Volatilität der Hypotheken-Spreads fest und erwartet langsame Vorlaufzeiten im Jahr 2025, was sie als positiv für ihre MSR-zentrierte Strategie betrachten.
- Declared stable quarterly dividend of $0.45 per share
- Generated 7.0% total economic return on book value for 2024
- Low delinquency rate of 0.90% in MSR portfolio
- Settled $9.2 billion in UPB of MSR throughout 2024
- Successfully launched direct-to-consumer recapture originations platform
- Incurred Comprehensive Loss of $(1.6) million in Q4 2024
- Book value decreased from $14.93 to $14.47 per share quarter-over-quarter
- Operating expenses increased from 6.7% to 7.4% of average equity QoQ
Insights
TWO's Q4 2024 results demonstrate the resilience of its MSR-focused strategy in a challenging market environment. The 7.0% annual economic return highlights the portfolio's stability, while the maintained
Several key metrics warrant attention: The MSR portfolio's 4.93% CPR and
The company's balance sheet management shows prudence with a reduced debt-to-equity ratio of 4.3:1.0, down from 4.6:1.0 in Q3. The economic debt-to-equity ratio of 6.5:1.0 reflects a conservative leverage profile that provides flexibility for opportunistic investments.
Portfolio composition shifts are noteworthy, with Agency RMBS representing
The decrease in borrowing costs from
Hedged MSR Strategy Drives High-Quality Returns in Dynamic Market
Quarterly Summary
-
Reported book value of
$14.47 $0.45 -
Incurred Comprehensive Loss of
$(1.6) million $(0.03) -
Settled
$2.5 billion -
MSR portfolio had 3-month CPR of
4.93% , weighted average gross coupon rate of3.46% , and 60+ day delinquency rate of0.90% . -
Funded
$42.0 million $32.8 million
Annual Summary
-
Declared dividends of
$1.80 -
Generated 2024 total economic return on book value of
7.0% .(1) -
Settled
$9.2 billion -
Launched direct-to-consumer recapture originations platform, funding
$64.3 million $40.2 million -
Actively managed capital structure through repurchase of 485,609 shares(2) of preferred stock and
$10.0 million
“Our 2024 results highlight the benefits of our hedged MSR strategy,” said Bill Greenberg, TWO’s President and CEO. “With two-thirds of our capital allocated to low coupon MSR, our portfolio generated stable and positive cashflows, despite large fluctuations in short-term interest rates. Additionally, our ongoing enhancements at RoundPoint uniquely position us to shape our return profile beyond just owning traditional Agency securities.”
“Mortgage spread volatility has significantly decreased, enhancing our portfolio’s return outlook,” stated Nick Letica, TWO’s Chief Investment Officer. “Mortgage rates are well above
________________
(1) |
Economic return on book value is defined as the increase (decrease) in common book value from the beginning to the end of the given period, plus dividends declared to common stockholders in the period, divided by common book value as of the beginning of the period. |
|
(2) |
Includes 35,047 Series A, 280,060 Series B and 170,502 Series C preferred shares for the year ended December 31, 2024. |
Operating Performance
The following table summarizes the company’s GAAP and non-GAAP earnings measurements and key metrics for the fourth quarter of 2024 and third quarter of 2024:
Operating Performance (unaudited) |
|||||||||||||||||||||
(dollars in thousands, except per common share data) |
|||||||||||||||||||||
|
Three Months Ended December 31, 2024 |
|
Three Months Ended September 30, 2024 |
||||||||||||||||||
Earnings attributable to common stockholders |
Earnings |
|
Per
|
|
Annualized
|
|
Earnings |
|
Per
|
|
Annualized
|
||||||||||
Comprehensive (Loss) Income |
$ |
(1,620 |
) |
|
$ |
(0.03 |
) |
|
(0.4 |
)% |
|
$ |
19,352 |
|
|
$ |
0.18 |
|
|
4.9 |
% |
GAAP Net Income (Loss) |
$ |
264,945 |
|
|
$ |
2.54 |
|
|
70.6 |
% |
|
$ |
(250,269 |
) |
|
$ |
(2.42 |
) |
|
(63.1 |
)% |
Earnings Available for Distribution(1) |
$ |
21,181 |
|
|
$ |
0.20 |
|
|
5.6 |
% |
|
$ |
13,186 |
|
|
$ |
0.13 |
|
|
3.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating Metrics |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Dividend per common share |
$ |
0.45 |
|
|
|
|
|
|
$ |
0.45 |
|
|
|
|
|
||||||
Annualized dividend yield(2) |
|
15.2 |
% |
|
|
|
|
|
|
13.0 |
% |
|
|
|
|
||||||
Book value per common share at period end |
$ |
14.47 |
|
|
|
|
|
|
$ |
14.93 |
|
|
|
|
|
||||||
Economic return on book value(3) |
|
— |
% |
|
|
|
|
|
|
1.3 |
% |
|
|
|
|
||||||
Operating expenses, excluding non-cash LTIP amortization and certain operating expenses(4) |
$ |
39,236 |
|
|
|
|
|
|
$ |
36,874 |
|
|
|
|
|
||||||
Operating expenses, excluding non-cash LTIP amortization and certain operating expenses, as a percentage of average equity(4) |
|
7.4 |
% |
|
|
|
|
|
|
6.7 |
% |
|
|
|
|
||||||
_______________
(1) |
Earnings Available for Distribution, or EAD, is a non-GAAP measure. Please see page 11 for a definition of EAD and a reconciliation of GAAP to non-GAAP financial information. |
|
(2) |
Dividend yield is calculated based on annualizing the dividends declared in the given period, divided by the closing share price as of the end of the period. |
|
(3) |
Economic return on book value is defined as the increase (decrease) in common book value from the beginning to the end of the given period, plus dividends declared to common stockholders in the period, divided by the common book value as of the beginning of the period. |
|
(4) |
Excludes non-cash equity compensation expense of |
Portfolio Summary
As of December 31, 2024, the company’s portfolio was comprised of
The following tables summarize the company’s investment portfolio as of December 31, 2024 and September 30, 2024:
Investment Portfolio |
||||||||||||
(dollars in thousands) |
||||||||||||
|
||||||||||||
Portfolio Composition |
|
As of December 31, 2024 |
|
As of September 30, 2024 |
||||||||
|
|
(unaudited) |
|
(unaudited) |
||||||||
Agency RMBS |
|
$ |
7,376,965 |
|
71.1 |
% |
|
$ |
8,514,041 |
|
74.7 |
% |
Mortgage servicing rights(1) |
|
|
2,994,271 |
|
28.9 |
% |
|
|
2,884,304 |
|
25.3 |
% |
Other |
|
|
3,734 |
|
— |
% |
|
|
3,859 |
|
— |
% |
Aggregate Portfolio |
|
|
10,374,970 |
|
|
|
|
11,402,204 |
|
|
||
Net TBA position(2) |
|
|
4,468,904 |
|
|
|
|
5,043,877 |
|
|
||
Total Portfolio |
|
$ |
14,843,874 |
|
|
|
$ |
16,446,081 |
|
|
||
________________
(1) |
Based on the prior month-end’s principal balance of the loans underlying the company’s MSR, increased for current month purchases. |
|
(2) |
Represents bond equivalent value of TBA position. Bond equivalent value is defined as notional amount multiplied by market price. Accounted for as derivative instruments in accordance with GAAP. |
Portfolio Metrics Specific to Agency RMBS |
|
As of December 31, 2024 |
|
As of September 30, 2024 |
||||
|
|
(unaudited) |
|
(unaudited) |
||||
Weighted average cost basis(1) |
|
$ |
101.17 |
|
|
$ |
101.39 |
|
Weighted average experienced three-month CPR |
|
|
7.5 |
% |
|
|
7.2 |
% |
Gross weighted average coupon rate |
|
|
5.7 |
% |
|
|
5.8 |
% |
Weighted average loan age (months) |
|
|
36 |
|
|
|
32 |
|
______________
(1) |
Weighted average cost basis includes Agency principal and interest RMBS only and utilizes carrying value for weighting purposes. |
Portfolio Metrics Specific to MSR(1) |
|
As of December 31, 2024 |
|
As of September 30, 2024 |
||||
(dollars in thousands) |
|
(unaudited) |
|
(unaudited) |
||||
Unpaid principal balance |
|
$ |
200,317,008 |
|
|
$ |
202,052,184 |
|
Gross coupon rate |
|
|
3.5 |
% |
|
|
3.4 |
% |
Current loan size |
|
$ |
331 |
|
|
$ |
333 |
|
Original FICO(2) |
|
|
760 |
|
|
|
760 |
|
Original LTV |
|
|
72 |
% |
|
|
71 |
% |
60+ day delinquencies |
|
|
0.9 |
% |
|
|
0.8 |
% |
Net servicing fee |
|
25.3 basis points |
|
25.3 basis points |
||||
|
|
|
|
|
||||
|
|
Three Months Ended
|
|
Three Months Ended
|
||||
|
|
(unaudited) |
|
(unaudited) |
||||
Fair value gains (losses) |
|
$ |
82,520 |
|
|
$ |
(133,349 |
) |
Servicing income |
|
$ |
153,686 |
|
|
$ |
161,608 |
|
Servicing costs |
|
$ |
3,965 |
|
|
$ |
4,401 |
|
Change in servicing reserves |
|
$ |
610 |
|
|
$ |
(501 |
) |
________________
(1) |
Metrics exclude residential mortgage loans in securitization trusts for which the company is the named servicing administrator. Portfolio metrics, other than UPB, represent averages weighted by UPB. |
|
(2) |
FICO represents a mortgage industry accepted credit score of a borrower. |
Other Investments and Risk Management Metrics |
|
As of December 31, 2024 |
|
As of September 30, 2024 |
||||
(dollars in thousands) |
|
(unaudited) |
|
(unaudited) |
||||
Net long TBA notional(1) |
|
$ |
4,497,800 |
|
|
$ |
5,064,000 |
|
Futures notional |
|
$ |
(3,973,400 |
) |
|
$ |
(3,693,900 |
) |
Interest rate swaps notional |
|
$ |
16,594,467 |
|
|
$ |
14,197,205 |
|
________________
(1) |
Accounted for as derivative instruments in accordance with GAAP. |
Financing Summary
The following tables summarize the company’s financing metrics and outstanding repurchase agreements, revolving credit facilities, warehouse facilities and convertible senior notes as of December 31, 2024 and September 30, 2024:
December 31, 2024 |
|
Balance |
|
Weighted
|
|
Weighted
|
|
Number of
|
||
(dollars in thousands, unaudited) |
|
|
|
|
|
|
|
|
||
Repurchase agreements collateralized by securities |
|
$ |
7,050,057 |
|
4.90 |
% |
|
1.60 |
|
18 |
Repurchase agreements collateralized by MSR |
|
|
755,000 |
|
7.44 |
% |
|
17.10 |
|
3 |
Total repurchase agreements |
|
|
7,805,057 |
|
5.15 |
% |
|
3.10 |
|
19 |
Revolving credit facilities collateralized by MSR and related servicing advance obligations |
|
|
1,020,171 |
|
7.56 |
% |
|
18.84 |
|
6 |
Warehouse facilities collateralized by mortgage loans |
|
|
2,032 |
|
6.64 |
% |
|
2.86 |
|
1 |
Unsecured convertible senior notes |
|
|
260,229 |
|
6.25 |
% |
|
12.49 |
|
n/a |
Total borrowings |
|
$ |
9,087,489 |
|
|
|
|
|
|
|
September 30, 2024 |
|
Balance |
|
Weighted
|
|
Weighted
|
|
Number of
|
||
(dollars in thousands, unaudited) |
|
|
|
|
|
|
|
|
||
Repurchase agreements collateralized by securities |
|
$ |
8,113,400 |
|
5.20 |
% |
|
2.55 |
|
18 |
Repurchase agreements collateralized by MSR |
|
|
650,000 |
|
7.99 |
% |
|
19.69 |
|
1 |
Total repurchase agreements |
|
|
8,763,400 |
|
5.40 |
% |
|
3.83 |
|
19 |
Revolving credit facilities collateralized by MSR and related servicing advance obligations |
|
|
999,171 |
|
8.11 |
% |
|
21.40 |
|
3 |
Warehouse facilities collateralized by mortgage loans |
|
|
3,017 |
|
7.34 |
% |
|
2.86 |
|
1 |
Unsecured convertible senior notes |
|
|
259,815 |
|
6.25 |
% |
|
15.52 |
|
n/a |
Total borrowings |
|
$ |
10,025,403 |
|
|
|
|
|
|
|
Borrowings by Collateral Type |
|
As of December 31, 2024 |
|
As of September 30, 2024 |
||||
(dollars in thousands) |
|
(unaudited) |
|
(unaudited) |
||||
Agency RMBS |
|
$ |
7,049,850 |
|
|
$ |
8,113,193 |
|
Mortgage servicing rights and related servicing advance obligations |
|
|
1,775,171 |
|
|
|
1,649,171 |
|
Other - secured |
|
|
2,239 |
|
|
|
3,224 |
|
Other - unsecured(1) |
|
|
260,229 |
|
|
|
259,815 |
|
Total |
|
|
9,087,489 |
|
|
|
10,025,403 |
|
TBA cost basis |
|
|
4,493,055 |
|
|
|
5,060,417 |
|
Net payable (receivable) for unsettled RMBS |
|
|
269,370 |
|
|
|
85,366 |
|
Total, including TBAs and net payable (receivable) for unsettled RMBS |
|
$ |
13,849,914 |
|
|
$ |
15,171,186 |
|
|
|
|
|
|
||||
Debt-to-equity ratio at period-end(2) |
|
4.3 :1.0 |
|
4.6 :1.0 |
||||
Economic debt-to-equity ratio at period-end(3) |
|
6.5 :1.0 |
|
7.0 :1.0 |
||||
|
|
|
|
|
||||
Cost of Financing by Collateral Type(4) |
|
Three Months Ended
|
|
Three Months Ended
|
||||
|
|
(unaudited) |
|
(unaudited) |
||||
Agency RMBS |
|
|
5.14 |
% |
|
|
5.53 |
% |
Mortgage servicing rights and related servicing advance obligations(5) |
|
|
8.34 |
% |
|
|
8.93 |
% |
Other - secured |
|
|
5.80 |
% |
|
|
5.61 |
% |
Other - unsecured(1)(5) |
|
|
6.93 |
% |
|
|
6.92 |
% |
Annualized cost of financing |
|
|
5.79 |
% |
|
|
6.17 |
% |
Interest rate swaps(6) |
|
|
(0.34 |
)% |
|
|
(0.46 |
)% |
|
|
|
(0.17 |
)% |
|
|
(0.14 |
)% |
TBAs(8) |
|
|
3.67 |
% |
|
|
3.56 |
% |
Annualized cost of financing, including swaps, |
|
|
4.58 |
% |
|
|
4.73 |
% |
____________________
(1) |
Unsecured convertible senior notes. |
|
(2) |
Defined as total borrowings to fund Agency and non-Agency investment securities, MSR and related servicing advances and mortgage loans held-for-sale, divided by total equity. |
|
(3) |
Defined as total borrowings to fund Agency and non-Agency investment securities, MSR and related servicing advances and mortgage loans held-for-sale, plus the implied debt on net TBA cost basis and net payable (receivable) for unsettled RMBS, divided by total equity. |
|
(4) |
Excludes any repurchase agreements collateralized by |
|
(5) |
Includes amortization of debt issuance costs. |
|
(6) |
The cost of financing on interest rate swaps held to mitigate interest rate risk associated with the company’s outstanding borrowings includes interest spread income/expense and amortization of upfront payments made or received upon entering into interest rate swap agreements and is calculated using average borrowings balance as the denominator. |
|
(7) |
The cost of financing on |
|
(8) |
The implied financing benefit/cost of dollar roll income on TBAs is calculated using the average cost basis of TBAs as the denominator. TBA dollar roll income is the non-GAAP economic equivalent to holding and financing Agency RMBS using short-term repurchase agreements. TBAs are accounted for as derivative instruments in accordance with GAAP. |
Conference Call
TWO will host a conference call on January 30, 2025 at 9:00 a.m. ET to discuss its fourth quarter 2024 financial results and related information. To participate in the teleconference, please call toll-free (888) 394-8218 approximately 10 minutes prior to the above start time and provide the Conference Code 1186961. The conference call will also be webcast live and accessible online in the News & Events section of the company’s website at www.twoinv.com. For those unable to attend, a replay of the webcast will be available on the company’s website approximately four hours after the live call ends.
About TWO
Two Harbors Investment Corp., or TWO, a
Forward-Looking Statements
This release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “target,” “assume,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believe,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results, including, among other things, those described in our Annual Report on Form 10-K for the year ended December 31, 2023, and any subsequent Quarterly Reports on Form 10-Q, under the caption “Risk Factors.” Factors that could cause actual results to differ include, but are not limited to: the state of credit markets and general economic conditions; changes in interest rates and the market value of our assets; changes in prepayment rates of mortgages underlying our target assets; the rates of default or decreased recovery on the mortgages underlying our target assets; declines in home prices; our ability to establish, adjust and maintain appropriate hedges for the risks in our portfolio; the availability and cost of our target assets; the availability and cost of financing; changes in the competitive landscape within our industry; our ability to effectively execute and to realize the benefits of strategic transactions and initiatives we have pursued or may in the future pursue; our ability to recognize the benefits of our acquisition of RoundPoint Mortgage Servicing LLC and to manage the risks associated with operating a mortgage loan servicer and originator; our decision to terminate our management agreement with PRCM Advisers LLC and the ongoing litigation related to such termination; our ability to manage various operational risks and costs associated with our business; interruptions in or impairments to our communications and information technology systems; our ability to acquire MSR and to maintain our MSR portfolio; our exposure to legal and regulatory claims; legislative and regulatory actions affecting our business; our ability to maintain our REIT qualification; and limitations imposed on our business due to our REIT status and our exempt status under the Investment Company Act of 1940.
Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. TWO does not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Additional information concerning these and other risk factors is contained in TWO’s most recent filings with the Securities and Exchange Commission (SEC). All subsequent written and oral forward-looking statements concerning TWO or matters attributable to TWO or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.
Non-GAAP Financial Measures
In addition to disclosing financial results calculated in accordance with
Additional Information
Stockholders of TWO and other interested persons may find additional information regarding the company at www.twoinv.com, at the Securities and Exchange Commission’s internet site at www.sec.gov or by directing requests to: TWO, Attn: Investor Relations, 1601 Utica Avenue South, Suite 900,
# # #
TWO HARBORS INVESTMENT CORP. |
|||||||
CONSOLIDATED BALANCE SHEETS |
|||||||
(dollars in thousands, except share data) |
|||||||
|
December 31,
|
|
December 31,
|
||||
|
(unaudited) |
|
|
||||
ASSETS |
|
|
|
||||
Available-for-sale securities, at fair value (amortized cost |
$ |
7,371,711 |
|
|
$ |
8,327,149 |
|
Mortgage servicing rights, at fair value |
|
2,994,271 |
|
|
|
3,052,016 |
|
Mortgage loans held-for-sale |
|
2,334 |
|
|
|
332 |
|
Cash and cash equivalents |
|
504,613 |
|
|
|
729,732 |
|
Restricted cash |
|
313,028 |
|
|
|
65,101 |
|
Accrued interest receivable |
|
33,331 |
|
|
|
35,339 |
|
Due from counterparties |
|
386,464 |
|
|
|
323,224 |
|
Derivative assets, at fair value |
|
10,114 |
|
|
|
85,291 |
|
Reverse repurchase agreements |
|
355,975 |
|
|
|
284,091 |
|
Other assets |
|
232,478 |
|
|
|
236,525 |
|
Total Assets |
$ |
12,204,319 |
|
|
$ |
13,138,800 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
||||
Liabilities: |
|
|
|
||||
Repurchase agreements |
$ |
7,805,057 |
|
|
$ |
8,020,207 |
|
Revolving credit facilities |
|
1,020,171 |
|
|
|
1,329,171 |
|
Warehouse facilities |
|
2,032 |
|
|
|
— |
|
Term notes payable |
|
— |
|
|
|
295,271 |
|
Convertible senior notes |
|
260,229 |
|
|
|
268,582 |
|
Derivative liabilities, at fair value |
|
24,897 |
|
|
|
21,506 |
|
Due to counterparties |
|
648,643 |
|
|
|
574,735 |
|
Dividends payable |
|
58,725 |
|
|
|
58,731 |
|
Accrued interest payable |
|
85,994 |
|
|
|
141,773 |
|
Other liabilities |
|
176,062 |
|
|
|
225,434 |
|
Total Liabilities |
|
10,081,810 |
|
|
|
10,935,410 |
|
Stockholders’ Equity: |
|
|
|
||||
Preferred stock, par value |
|
601,467 |
|
|
|
613,213 |
|
Common stock, par value |
|
1,037 |
|
|
|
1,032 |
|
Additional paid-in capital |
|
5,936,609 |
|
|
|
5,925,424 |
|
Accumulated other comprehensive loss |
|
(320,524 |
) |
|
|
(176,429 |
) |
Cumulative earnings |
|
1,648,785 |
|
|
|
1,349,973 |
|
Cumulative distributions to stockholders |
|
(5,744,865 |
) |
|
|
(5,509,823 |
) |
Total Stockholders’ Equity |
|
2,122,509 |
|
|
|
2,203,390 |
|
Total Liabilities and Stockholders’ Equity |
$ |
12,204,319 |
|
|
$ |
13,138,800 |
|
TWO HARBORS INVESTMENT CORP. |
|||||||||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
|||||||||||||||
(dollars in thousands, except share data) |
|||||||||||||||
Certain prior period amounts have been reclassified to conform to the current period presentation |
|||||||||||||||
|
Three Months Ended |
|
Year Ended |
||||||||||||
|
December 31, |
|
December 31, |
||||||||||||
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
(unaudited) |
|
(unaudited) |
||||||||||||
Net interest income (expense): |
|
|
|
|
|
||||||||||
Interest income |
$ |
103,774 |
|
|
$ |
122,401 |
|
|
$ |
450,152 |
|
|
$ |
480,364 |
|
Interest expense |
|
138,668 |
|
|
|
168,080 |
|
|
|
607,806 |
|
|
|
643,225 |
|
Net interest expense |
|
(34,894 |
) |
|
|
(45,679 |
) |
|
|
(157,654 |
) |
|
|
(162,861 |
) |
Net servicing income: |
|
|
|
|
|
|
|
||||||||
Servicing income |
|
167,568 |
|
|
|
178,609 |
|
|
|
681,648 |
|
|
|
685,777 |
|
Servicing costs |
|
4,575 |
|
|
|
12,029 |
|
|
|
20,069 |
|
|
|
95,488 |
|
Net servicing income |
|
162,993 |
|
|
|
166,580 |
|
|
|
661,579 |
|
|
|
590,289 |
|
Other income (loss): |
|
|
|
|
|
|
|
||||||||
Loss on investment securities |
|
(8,009 |
) |
|
|
(82,469 |
) |
|
|
(40,038 |
) |
|
|
(69,970 |
) |
Gain (loss) on servicing asset |
|
82,520 |
|
|
|
(172,589 |
) |
|
|
(62,674 |
) |
|
|
(111,620 |
) |
Gain (loss) on interest rate swap and swaption agreements |
|
199,612 |
|
|
|
(139,234 |
) |
|
|
147,871 |
|
|
|
(52,946 |
) |
Loss on other derivative instruments |
|
(55,144 |
) |
|
|
(143,812 |
) |
|
|
(41,017 |
) |
|
|
(166,210 |
) |
Gain on mortgage loans held-for-sale |
|
558 |
|
|
|
— |
|
|
|
1,482 |
|
|
|
— |
|
Other income |
|
850 |
|
|
|
— |
|
|
|
1,199 |
|
|
|
5,103 |
|
Total other income (loss) |
|
220,387 |
|
|
|
(538,104 |
) |
|
|
6,823 |
|
|
|
(395,643 |
) |
Expenses: |
|
|
|
|
|
|
|
||||||||
Compensation and benefits |
|
21,800 |
|
|
|
21,297 |
|
|
|
89,753 |
|
|
|
52,865 |
|
Other operating expenses |
|
19,085 |
|
|
|
23,959 |
|
|
|
76,241 |
|
|
|
62,313 |
|
Total expenses |
|
40,885 |
|
|
|
45,256 |
|
|
|
165,994 |
|
|
|
115,178 |
|
Income (loss) before income taxes |
|
307,601 |
|
|
|
(462,459 |
) |
|
|
344,754 |
|
|
|
(83,393 |
) |
Provision for (benefit from) income taxes |
|
30,872 |
|
|
|
(29,259 |
) |
|
|
46,586 |
|
|
|
22,978 |
|
Net income (loss) |
|
276,729 |
|
|
|
(433,200 |
) |
|
|
298,168 |
|
|
|
(106,371 |
) |
Dividends on preferred stock |
|
(11,784 |
) |
|
|
(12,012 |
) |
|
|
(47,136 |
) |
|
|
(48,607 |
) |
Gain on repurchase and retirement of preferred stock |
|
— |
|
|
|
519 |
|
|
|
644 |
|
|
|
2,973 |
|
Net income (loss) attributable to common stockholders |
$ |
264,945 |
|
|
$ |
(444,693 |
) |
|
$ |
251,676 |
|
|
$ |
(152,005 |
) |
Basic earnings (loss) per weighted average common share |
$ |
2.54 |
|
|
$ |
(4.56 |
) |
|
$ |
2.41 |
|
|
$ |
(1.60 |
) |
Diluted earnings (loss) per weighted average common share |
$ |
2.37 |
|
|
$ |
(4.56 |
) |
|
$ |
2.37 |
|
|
$ |
(1.60 |
) |
Dividends declared per common share |
$ |
0.45 |
|
|
$ |
0.45 |
|
|
$ |
1.80 |
|
|
$ |
1.95 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
||||||||
Net income (loss) |
$ |
276,729 |
|
|
$ |
(433,200 |
) |
|
$ |
298,168 |
|
|
$ |
(106,371 |
) |
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
||||||||
Unrealized (loss) gain on available-for-sale securities |
|
(266,565 |
) |
|
|
483,579 |
|
|
|
(144,095 |
) |
|
|
102,282 |
|
Other comprehensive (loss) income |
|
(266,565 |
) |
|
|
483,579 |
|
|
|
(144,095 |
) |
|
|
102,282 |
|
Comprehensive income (loss) |
|
10,164 |
|
|
|
50,379 |
|
|
|
154,073 |
|
|
|
(4,089 |
) |
Dividends on preferred stock |
|
(11,784 |
) |
|
|
(12,012 |
) |
|
|
(47,136 |
) |
|
|
(48,607 |
) |
Gain on repurchase and retirement of preferred stock |
|
— |
|
|
|
519 |
|
|
|
644 |
|
|
|
2,973 |
|
Comprehensive (loss) income attributable to common stockholders |
$ |
(1,620 |
) |
|
$ |
38,886 |
|
|
$ |
107,581 |
|
|
$ |
(49,723 |
) |
TWO HARBORS INVESTMENT CORP. |
|||||||||||||||
INTEREST INCOME AND INTEREST EXPENSE |
|||||||||||||||
(dollars in thousands, except share data) |
|||||||||||||||
|
|||||||||||||||
|
Three Months Ended |
|
Year Ended |
||||||||||||
|
December 31, |
|
December 31, |
||||||||||||
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
(unaudited) |
|
(unaudited) |
||||||||||||
Interest income: |
|
|
|
|
|
||||||||||
Available-for-sale securities |
$ |
92,644 |
|
|
$ |
103,250 |
|
|
$ |
393,527 |
|
|
$ |
412,310 |
|
Mortgage loans held-for-sale |
|
49 |
|
|
|
2 |
|
|
|
78 |
|
|
|
9 |
|
Other |
|
11,081 |
|
|
|
19,149 |
|
|
|
56,547 |
|
|
|
68,045 |
|
Total interest income |
|
103,774 |
|
|
|
122,401 |
|
|
|
450,152 |
|
|
|
480,364 |
|
Interest expense: |
|
|
|
|
|
|
|
||||||||
Repurchase agreements |
|
112,510 |
|
|
|
123,693 |
|
|
|
468,492 |
|
|
|
474,292 |
|
Revolving credit facilities |
|
21,597 |
|
|
|
33,258 |
|
|
|
108,623 |
|
|
|
121,124 |
|
Warehouse facilities |
|
55 |
|
|
|
— |
|
|
|
66 |
|
|
|
— |
|
Term notes payable |
|
— |
|
|
|
6,478 |
|
|
|
12,426 |
|
|
|
28,994 |
|
Convertible senior notes |
|
4,506 |
|
|
|
4,651 |
|
|
|
18,199 |
|
|
|
18,815 |
|
Total interest expense |
|
138,668 |
|
|
|
168,080 |
|
|
|
607,806 |
|
|
|
643,225 |
|
Net interest expense |
$ |
(34,894 |
) |
|
$ |
(45,679 |
) |
|
$ |
(157,654 |
) |
|
$ |
(162,861 |
) |
TWO HARBORS INVESTMENT CORP. |
|||||||
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION |
|||||||
(dollars in thousands, except share data) |
|||||||
Certain prior period amounts have been reclassified to conform to the current period presentation |
|||||||
|
|
|
|
||||
|
Three Months Ended |
||||||
|
December 31,
|
|
September 30,
|
||||
|
(unaudited) |
|
(unaudited) |
||||
Reconciliation of comprehensive (loss) income to Earnings Available for Distribution: |
|
|
|
||||
Comprehensive (loss) income attributable to common stockholders |
$ |
(1,620 |
) |
|
$ |
19,352 |
|
Adjustment for other comprehensive loss (income) attributable to common stockholders: |
|
|
|
||||
Unrealized loss (gain) on available-for-sale securities |
|
266,565 |
|
|
|
(269,621 |
) |
Net income (loss) attributable to common stockholders |
$ |
264,945 |
|
|
$ |
(250,269 |
) |
Adjustments to exclude reported realized and unrealized (gains) losses: |
|
|
|
||||
Realized loss (gain) on securities |
|
7,001 |
|
|
|
(312 |
) |
Unrealized loss (gain) on securities |
|
725 |
|
|
|
(795 |
) |
Provision (reversal of provision) for credit losses |
|
283 |
|
|
|
(276 |
) |
Realized and unrealized (gain) loss on mortgage servicing rights |
|
(82,520 |
) |
|
|
133,349 |
|
Realized (gain) loss on termination or expiration of interest rate swaps and swaptions |
|
(66,033 |
) |
|
|
86,310 |
|
Unrealized (gain) loss on interest rate swaps and swaptions |
|
(121,421 |
) |
|
|
103,012 |
|
Realized and unrealized loss on other derivative instruments |
|
55,241 |
|
|
|
32,821 |
|
Other realized and unrealized gains |
|
(46 |
) |
|
|
— |
|
Other adjustments: |
|
|
|
||||
MSR amortization(1) |
|
(80,476 |
) |
|
|
(83,619 |
) |
TBA dollar roll income (losses)(2) |
|
4,195 |
|
|
|
(1,156 |
) |
|
|
6,133 |
|
|
|
5,247 |
|
Change in servicing reserves |
|
610 |
|
|
|
(501 |
) |
Non-cash equity compensation expense |
|
1,610 |
|
|
|
1,610 |
|
Certain operating expenses(4) |
|
39 |
|
|
|
101 |
|
Net provision for (benefit from) income taxes on non-EAD |
|
30,895 |
|
|
|
(12,336 |
) |
Earnings available for distribution to common stockholders(5) |
$ |
21,181 |
|
|
$ |
13,186 |
|
Weighted average basic common shares |
|
103,656,321 |
|
|
|
103,635,455 |
|
Earnings available for distribution to common stockholders per weighted average basic common share |
$ |
0.20 |
|
|
$ |
0.13 |
|
_____________
(1) |
MSR amortization refers to the portion of change in fair value of MSR primarily attributed to the realization of expected cash flows (runoff) of the portfolio, which is deemed a non-GAAP measure due to the company’s decision to account for MSR at fair value. |
|
(2) |
TBA dollar roll income is the economic equivalent to holding and financing Agency RMBS using short-term repurchase agreements. |
|
(3) |
|
|
(4) |
Certain operating expenses predominantly consists of expenses incurred in connection with the company’s ongoing litigation with PRCM Advisers LLC. |
|
(5) |
EAD is a non-GAAP measure that we define as comprehensive (loss) income attributable to common stockholders, excluding realized and unrealized gains and losses on the aggregate investment portfolio, gains and losses on repurchases of preferred stock, provision for (reversal of) credit losses, reserve expense for representation and warranty obligations on MSR, non-cash compensation expense related to restricted common stock and certain operating expenses. As defined, EAD includes net interest income, accrual and settlement of interest on derivatives, dollar roll income on TBAs, |
View source version on businesswire.com: https://www.businesswire.com/news/home/20250129851431/en/
Margaret Karr, Head of Investor Relations, TWO, (612) 453-4080, Margaret.Karr@twoinv.com
Source: Two Harbors Investment Corp.
FAQ
What was TWO's book value per share in Q4 2024?
How much did TWO pay in dividends for Q4 2024?
What was TWO's comprehensive income/loss for Q4 2024?
What was TWO's total economic return for full-year 2024?
How much MSR did TWO settle in 2024?
