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Mar 31, 2024
Two Harbors Q1 2024 Earnings Report
Reported financial results for the quarter ended March 31, 2024, positioned for higher-for-longer rates with growing MSR portfolio and operational platform.
Key Takeaways
Two Harbors Investment Corp. reported a strong first quarter in 2024, characterized by a comprehensive income of $89.4 million and a book value of $15.64 per common share. The company's strategic positioning in MSR is expected to benefit from the current higher-for-longer interest rate environment. They also repurchased 485,609 shares of preferred stock.
Reported book value of $15.64 per common share, with a first quarter common stock dividend of $0.45 per share, representing a 5.8% quarterly economic return on book value.
Generated Comprehensive Income of $89.4 million, or $0.85 per weighted average basic common share.
Repurchased 485,609 shares of preferred stock, lowering the ratio of preferred stock to total equity.
Settled $3.1 billion unpaid principal balance (UPB) of MSR through a bulk purchase and flow-sale acquisitions.
Revenue by Segment
Forward Guidance
Two Harbors is positioned to benefit in an environment where rates are higher for longer.
Positive Outlook
- MSR portfolio represents more than 60% of capital allocation.
- Portfolio is positioned to benefit in an environment where rates are higher for longer.
- Portfolio's prepayment sensitivity remains low, with less than 1% of loans having an economic incentive to refinance.
- Over 85% of loans are at least 250 basis points below current mortgage rates.
- Expect the low duration and low convexity characteristics of MSR to continue to generate attractive cashflows with low spread volatility.
Challenges Ahead
- Market remains subject to periods of high realized rate volatility.
- Likelihood of significant tightening of RMBS spreads seems remote absent a substantial dovish pivot by the Federal Reserve.
- Company's performance is subject to risks described in their 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.”
Historical Earnings Impact
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Avg. Return Before/After Earnings
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