Two Harbors Investment Corp. Reports Fourth Quarter 2019 Financial Results
Generated 23.6% Total Annual Return on Book Value(1)
NEW YORK--(BUSINESS WIRE)-- Two Harbors Investment Corp. (NYSE: TWO), a leading hybrid mortgage real estate investment trust (REIT) that invests in residential mortgage-backed securities (RMBS), mortgage servicing rights (MSR) and other financial assets, today announced its financial results for the quarter ended December 31, 2019.
Quarterly Summary
- Reported book value of $14.54 per common share, representing a 1.5% total quarterly return on book value.(1)
- Generated Comprehensive Income of $56.8 million, or $0.21 per weighted average basic common share, representing an annualized return on average common equity of 5.7%.
- Added $22.3 billion in unpaid principal balance (UPB) of MSR, through both bulk acquisitions and monthly flow-sale arrangements, bringing total holdings to $175.9 billion UPB.
- Reported Core Earnings, including dollar roll income, of $67.7 million, or $0.25 per weighted average basic common share.(2)
2019 Summary
- Grew book value to $14.54 per common share from $13.11 per common share at December 31, 2018, representing a 23.6% total annual return on book value.(1)
- Generated Comprehensive Income of $826.7 million, or $3.09 per weighted average basic common share, representing an annualized return on average common equity of 21.7%.
- Generated total stockholder return of 28.7% .(3)
- Enhanced financing for MSR through $400 million securitization of 5-year term notes.
“We are quite proud of the returns that we generated in 2019. Notably, we drove a total stockholder return of 28.7%(3) and a return on book value of 23.6%(1) for the year,” stated Thomas Siering, Two Harbors’ President and Chief Executive Officer. “Book value preservation is our primary goal and the foundation for long-term stockholder returns.”
(1) Return on book value is defined as the increase (decrease) in book value per common share from the beginning to the end of the given period, plus dividends declared in the period, divided by the book value as of the beginning of the period.
(2) Core Earnings, including dollar roll income, is a non-GAAP measure. Please see page 11 for a definition of Core Earnings, including dollar roll income, and a reconciliation of GAAP to non-GAAP financial information.
(3) Two Harbors’ total stockholder return is calculated for the period December 31, 2018 through December 31, 2019. Total stockholder return is defined as stock price appreciation including dividends. Source: Bloomberg.
Operating Performance
The following table summarizes the company’s GAAP and non-GAAP earnings measurements and key metrics for the third and fourth quarters of 2019:
|
Two Harbors Investment Corp. Operating Performance (unaudited) |
|||||||||||||||||||||
|
(dollars in thousands, except per common share data) |
|||||||||||||||||||||
|
|
Three Months Ended |
|
Three Months Ended |
||||||||||||||||||
|
Earnings attributable to common stockholders |
Earnings |
|
Per |
|
Annualized |
|
Earnings |
|
Per |
|
Annualized |
||||||||||
|
Comprehensive Income |
$ |
56,850 |
|
|
$ |
0.21 |
|
|
5.7 |
% |
|
$ |
257,585 |
|
|
$ |
0.94 |
|
|
25.7 |
% |
|
GAAP Net Income |
$ |
115,804 |
|
|
$ |
0.42 |
|
|
11.6 |
% |
|
$ |
286,749 |
|
|
$ |
1.05 |
|
|
28.6 |
% |
|
Core Earnings, including dollar roll income(1) |
$ |
67,671 |
|
|
$ |
0.25 |
|
|
6.8 |
% |
|
$ |
64,979 |
|
|
$ |
0.24 |
|
|
6.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Operating Metrics |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Dividend per common share |
$ |
0.40 |
|
|
|
|
|
|
$ |
0.40 |
|
|
|
|
|
||||||
|
Annualized dividend yield(2) |
10.9 |
% |
|
|
|
|
|
12.2 |
% |
|
|
|
|
||||||||
|
Book value per common share at period end |
$ |
14.54 |
|
|
|
|
|
|
$ |
14.72 |
|
|
|
|
|
||||||
|
Return on book value(3) |
1.5 |
% |
|
|
|
|
|
6.7 |
% |
|
|
|
|
||||||||
|
Other operating expenses, excluding non-cash LTIP amortization(4) |
$ |
11,719 |
|
|
|
|
|
|
$ |
11,364 |
|
|
|
|
|
||||||
|
Other operating expenses, excluding non-cash LTIP amortization, as a percentage of average equity(4) |
0.9 |
% |
|
|
|
|
|
0.9 |
% |
|
|
|
|
||||||||
|
________________ |
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“Our results in 2019 highlighted the effectiveness of our MSR portfolio construction, as we dynamically and successfully managed the portfolio through a volatile environment in rates and mortgage spreads,” stated Matt Koeppen, Two Harbors’ Co-Chief Investment Officer. “The actions we took this year were intended to preserve or increase book value, preserve or increase return expectancy, and to reduce risk. We believe that we were very successful in this regard.”
“We are very satisfied with our performance this quarter, as our active portfolio management resulted in positive total return despite market trends that were the opposite of those that prevailed through the first three quarters,” stated Bill Greenberg, Two Harbors’ Co-Chief Investment Officer. “Our Rates and Credit strategies complement each other and each have contributed to our success.”
Portfolio Summary
The company’s portfolio is comprised of a Rates strategy and a Credit strategy. The Rates strategy consisted of $29.8 billion of Agency RMBS, Agency Derivatives and MSR as well as their associated notional hedges as of December 31, 2019. Additionally, the company held $7.7 billion bond equivalent value of net long to-be-announced securities (TBAs) as part of the Rates strategy. The Credit strategy consisted of $3.6 billion of non-Agency securities, as well as their associated notional hedges as of December 31, 2019.
The following tables summarize the company’s investment portfolio as of December 31, 2019 and September 30, 2019:
|
Two Harbors Investment Corp. Portfolio |
||||||||||||
|
(dollars in thousands) |
||||||||||||
|
|
||||||||||||
|
Portfolio Composition |
|
As of December 31, 2019 |
|
As of September 30, 2019 |
||||||||
|
|
|
(unaudited) |
|
(unaudited) |
||||||||
|
Rates Strategy |
|
|
|
|
|
|
|
|
||||
|
Agency |
|
|
|
|
|
|
|
|
||||
|
Fixed Rate |
|
$ |
27,763,471 |
|
|
83.2% |
|
$ |
24,750,521 |
|
|
82.4% |
|
Other Agency(1) |
|
83,509 |
|
|
0.2% |
|
91,554 |
|
|
0.3% |
||
|
Total Agency |
|
27,846,980 |
|
|
83.4% |
|
24,842,075 |
|
|
82.7% |
||
|
Mortgage servicing rights |
|
1,909,444 |
|
|
5.7% |
|
1,651,556 |
|
|
5.5% |
||
|
Credit Strategy |
|
|
|
|
|
|
|
|
||||
|
Non-Agency |
|
|
|
|
|
|
|
|
||||
|
Senior |
|
3,073,098 |
|
|
9.2% |
|
2,990,274 |
|
|
10.0% |
||
|
Mezzanine |
|
480,765 |
|
|
1.5% |
|
483,009 |
|
|
1.6% |
||
|
Other |
|
74,410 |
|
|
0.2% |
|
79,092 |
|
|
0.3% |
||
|
Total Non-Agency |
|
3,628,273 |
|
|
10.9% |
|
3,552,375 |
|
|
11.9% |
||
|
Aggregate Portfolio |
|
33,384,697 |
|
|
|
|
30,046,006 |
|
|
|
||
|
Net TBA position(2) |
|
7,656,187 |
|
|
|
|
10,264,428 |
|
|
|
||
|
Total Portfolio |
|
$ |
41,040,884 |
|
|
|
|
$ |
40,310,434 |
|
|
|
|
Portfolio Metrics |
|
Three Months Ended |
|
Three Months Ended |
|
|
|
(unaudited) |
|
(unaudited) |
|
Annualized portfolio yield during the quarter(3) |
|
3.54% |
|
3.67% |
|
Rates Strategy |
|
|
|
|
|
Agency RMBS, Agency Derivatives and mortgage servicing rights |
|
3.20% |
|
3.47% |
|
Credit Strategy |
|
|
|
|
|
Non-Agency securities |
|
6.29% |
|
5.26% |
|
|
|
|
|
|
|
Annualized cost of funds on average borrowing balance during the quarter(4) |
|
2.35% |
|
2.51% |
|
Annualized net yield for aggregate portfolio during the quarter |
|
1.19% |
|
1.16% |
|
________________ |
||||
|
Portfolio Metrics Specific to RMBS and Agency Derivatives |
|
As of December 31, 2019 |
|
As of September 30, 2019 |
||||
|
|
|
(unaudited) |
|
(unaudited) |
||||
|
Weighted average cost basis of principal and interest securities |
|
|
|
|
||||
|
Agency(5) |
|
$ |
103.96 |
|
|
$ |
104.23 |
|
|
Non-Agency(6) |
|
$ |
63.86 |
|
|
$ |
63.63 |
|
|
Weighted average three month CPR |
|
|
|
|
||||
|
Agency |
|
14.3 |
% |
|
13.4 |
% |
||
|
Non-Agency |
|
6.4 |
% |
|
5.9 |
% |
||
|
Fixed-rate investments as a percentage of aggregate RMBS and Agency Derivatives portfolio |
|
89.1 |
% |
|
88.2 |
% |
||
|
Adjustable-rate investments as a percentage of aggregate RMBS and Agency Derivatives portfolio |
|
10.9 |
% |
|
11.8 |
% |
||
|
______________ |
||||||||
|
Portfolio Metrics Specific to MSR(1) |
|
As of December 31, 2019 |
|
As of September 30, 2019 |
||||
|
(dollars in thousands) |
|
(unaudited) |
|
(unaudited) |
||||
|
|
|
|
|
|
||||
|
Unpaid principal balance |
|
$ |
175,882,142 |
|
|
$ |
165,332,533 |
|
|
Fair market value |
|
$ |
1,909,444 |
|
|
$ |
1,651,556 |
|
|
Gross weighted average coupon |
|
|
4.1 |
% |
|
|
4.1 |
% |
|
Weighted average original FICO score(2) |
|
754 |
|
752 |
||||
|
Weighted average original LTV |
|
|
75 |
% |
|
|
75 |
% |
|
60+ day delinquencies |
|
|
0.3 |
% |
|
|
0.3 |
% |
|
Net servicing spread |
|
27.0 basis points |
|
26.5 basis points |
||||
|
|
|
|
|
|
||||
|
|
|
Three Months Ended |
|
Three Months Ended |
||||
|
|
|
(unaudited) |
|
(unaudited) |
||||
|
Fair value losses |
|
$ |
(21,739 |
) |
|
$ |
(234,514 |
) |
|
Servicing income |
|
$ |
127,690 |
|
|
$ |
126,025 |
|
|
Servicing expenses |
|
$ |
20,149 |
|
|
$ |
17,962 |
|
|
Change in servicing reserves |
|
$ |
72 |
|
|
$ |
(300 |
) |
|
________________ |
||||||||
|
Other Investments and Risk Management Metrics |
|
As of December 31, 2019 |
|
As of September 30, 2019 |
||||
|
(dollars in thousands) |
|
(unaudited) |
|
(unaudited) |
||||
|
Net long TBA notional amount(3) |
|
$ |
7,427,000 |
|
|
$ |
9,863,000 |
|
|
Interest rate swaps and caps notional, utilized to economically hedge interest rate exposure (or duration) |
|
$ |
39,702,470 |
|
|
$ |
41,833,495 |
|
|
Swaptions net notional, utilized as macroeconomic hedges |
|
1,257,000 |
|
|
1,750,000 |
|
||
|
Total interest rate swaps, caps and swaptions notional |
|
$ |
40,959,470 |
|
|
$ |
43,583,495 |
|
|
________________ |
||||||||
Financing Summary
The following tables summarize the company’s financing metrics and outstanding repurchase agreements, FHLB advances, revolving credit facilities, term notes and convertible senior notes as of December 31, 2019 and September 30, 2019:
|
December 31, 2019 |
|
Balance |
|
Weighted |
|
Weighted |
|
Number of |
|||
|
(dollars in thousands, unaudited) |
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
Repurchase agreements collateralized by RMBS |
|
$ |
28,884,848 |
|
|
2.12% |
|
2.44 |
|
|
|
|
Repurchase agreements collateralized by MSR |
|
262,615 |
|
|
3.51% |
|
11.05 |
|
|
|
|
|
Total repurchase agreements |
|
29,147,463 |
|
|
2.14% |
|
2.52 |
|
|
24 |
|
|
FHLB advances collateralized by RMBS(4) |
|
210,000 |
|
|
2.00% |
|
42.56 |
|
|
1 |
|
|
Revolving credit facilities collateralized by MSR |
|
300,000 |
|
|
4.26% |
|
14.37 |
|
|
1 |
|
|
Term notes payable collateralized by MSR |
|
394,502 |
|
|
4.59% |
|
53.85 |
|
|
n/a |
|
|
Unsecured convertible senior notes |
|
284,954 |
|
|
6.25% |
|
24.53 |
|
|
n/a |
|
|
Total borrowings |
|
$ |
30,336,919 |
|
|
|
|
|
|
|
|
|
________________ |
|||||||||||
|
September 30, 2019 |
|
Balance |
|
Weighted |
|
Weighted |
|
Number of |
|||
|
(dollars in thousands, unaudited) |
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
Repurchase agreements collateralized by RMBS |
|
$ |
25,304,275 |
|
|
2.46% |
|
2.54 |
|
|
|
|
Repurchase agreements collateralized by MSR |
|
262,861 |
|
|
3.77% |
|
14.07 |
|
|
|
|
|
Total repurchase agreements |
|
25,567,136 |
|
|
2.47% |
|
2.65 |
|
|
25 |
|
|
FHLB advances collateralized by RMBS(1) |
|
50,000 |
|
|
2.99% |
|
180.66 |
|
|
1 |
|
|
Revolving credit facilities collateralized by MSR |
|
300,000 |
|
|
4.52% |
|
17.39 |
|
|
1 |
|
|
Term notes payable collateralized by MSR |
|
394,235 |
|
|
4.82% |
|
56.88 |
|
|
n/a |
|
|
Unsecured convertible senior notes |
|
284,635 |
|
|
6.25% |
|
27.53 |
|
|
n/a |
|
|
Total borrowings |
|
$ |
26,596,006 |
|
|
|
|
|
|
|
|
|
________________ |
|||||||||||
|
Borrowings by Collateral Type |
|
As of December 31, 2019 |
|
As of September 30, 2019 |
||||
|
(dollars in thousands) |
|
(unaudited) |
|
(unaudited) |
||||
|
Collateral type: |
|
|
|
|
||||
|
Agency RMBS and Agency Derivatives |
|
$ |
27,563,240 |
|
|
$ |
24,133,606 |
|
|
Mortgage servicing rights |
|
957,117 |
|
|
957,096 |
|
||
|
Non-Agency securities |
|
1,531,608 |
|
|
1,220,669 |
|
||
|
Other(2) |
|
284,954 |
|
|
284,635 |
|
||
|
Total/Annualized cost of funds on average borrowings during the quarter |
|
$ |
30,336,919 |
|
|
$ |
26,596,006 |
|
|
|
|
|
|
|
||||
|
Debt-to-equity ratio at period-end(3) |
|
6.1 |
:1.0 |
|
5.3 |
:1.0 |
||
|
Economic debt-to-equity ratio at period-end(4) |
|
7.5 |
:1.0 |
|
7.2 |
:1.0 |
||
|
|
|
|
|
|
||||
|
Cost of Funds Metrics |
|
Three Months Ended |
|
Three Months Ended |
||||
|
|
|
(unaudited) |
|
(unaudited) |
||||
|
Annualized cost of funds on average borrowings during the quarter: |
|
2.4 |
% |
|
2.8 |
% |
||
|
Agency RMBS and Agency Derivatives |
|
2.2 |
% |
|
2.6 |
% |
||
|
Mortgage servicing rights(5) |
|
5.0 |
% |
|
5.2 |
% |
||
|
Non-Agency securities |
|
3.0 |
% |
|
3.5 |
% |
||
|
Other(2)(5) |
|
6.8 |
% |
|
6.7 |
% |
||
|
____________________ |
||||||||
Dividends and Taxable Income
The company declared dividends totaling $483.6 million for the 2019 taxable year. The company is required to distribute at least 90% of its taxable income to maintain its REIT status, and must distribute 100% of its taxable income to avoid federal income tax. The company distributed 94.7% of its 2019 taxable income to stockholders during 2019, and intends to distribute the remaining 5.3% during the 2020 calendar year. In addition, the tax characterization of each cash distribution made during 2019 will be treated as ordinary income to stockholders.
Conference Call
Two Harbors Investment Corp. will host a conference call on February 6, 2020 at 9:00 a.m. EST to discuss fourth quarter 2019 financial results and related information. To participate in the teleconference, please call toll-free (866) 548-4713, conference code 5688261, approximately 10 minutes prior to the above start time. You may also listen to the teleconference live via the Internet on the company’s website at www.twoharborsinvestment.com in the Investor Relations section under the Events and Presentations link. For those unable to attend, a telephone playback will be available beginning at 12:00 p.m. EST on February 6, 2020, through 12:00 a.m. EST on March 7, 2020. The playback can be accessed by calling (888) 203-1112 , conference code 5688261. The call will also be archived on the company’s website in the Investor Relations section under the Events and Presentations link.
Two Harbors Investment Corp.
Two Harbors Investment Corp., a Maryland corporation, is a real estate investment trust that invests in residential mortgage-backed securities, mortgage servicing rights and other financial assets. Two Harbors is headquartered in New York, New York, and is externally managed and advised by PRCM Advisers LLC, a wholly owned subsidiary of Pine River Capital Management L.P. Additional information is available at www.twoharborsinvestment.com.
Forward-Looking Statements
This presentation 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, 2018, 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; the occurrence, extent and timing of credit losses within our portfolio; the concentration of credit risks we are exposed to; 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 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 successfully operate our seller-servicer subsidiary and oversee our subservicers; the impact of any deficiencies in the servicing or foreclosure practices of third parties and related delays in the foreclosure process; our exposure to legal and regulatory claims; legislative and regulatory actions affecting our business; the impact of new or modified government mortgage refinance or principal reduction programs; 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 Harbors 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 Harbors’ most recent filings with the Securities and Exchange Commission (SEC). All subsequent written and oral forward-looking statements concerning Two Harbors or matters attributable to Two Harbors 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 United States generally accepted accounting principles (GAAP), this press release and the accompanying investor presentation present non-GAAP financial measures, such as Core Earnings, including dollar roll income and Core Earnings per basic common share, including dollar roll income, that exclude certain items. The non-GAAP financial measures presented by the company provide supplemental information to assist investors in analyzing the company’s results of operations and help facilitate comparisons to industry peers. However, because these measures are not calculated in accordance with GAAP, they should not be considered a substitute for, or superior to, the financial measures calculated in accordance with GAAP. The company’s GAAP financial results and the reconciliations from these results should be carefully evaluated. See the GAAP to non-GAAP reconciliation table on page 12 of this release.
Additional Information
Stockholders of Two Harbors and other interested persons may find additional information regarding the company at the SEC’s Internet site at www.sec.gov or by directing requests to: Two Harbors Investment Corp., Attn: Investor Relations, 575 Lexington Avenue, Suite 2930, New York, NY 10022, telephone (612) 629-2500.
|
TWO HARBORS INVESTMENT CORP. |
|||||||
|
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||||
|
(dollars in thousands, except share data) |
|||||||
|
|
December 31, |
|
December 31, |
||||
|
|
(unaudited) |
|
|
||||
|
ASSETS |
|
|
|
||||
|
Available-for-sale securities, at fair value |
$ |
31,406,328 |
|
|
$ |
25,552,604 |
|
|
Mortgage servicing rights, at fair value |
1,909,444 |
|
|
1,993,440 |
|
||
|
Cash and cash equivalents |
558,136 |
|
|
409,758 |
|
||
|
Restricted cash |
1,058,690 |
|
|
688,006 |
|
||
|
Accrued interest receivable |
92,634 |
|
|
86,589 |
|
||
|
Due from counterparties |
318,963 |
|
|
154,626 |
|
||
|
Derivative assets, at fair value |
188,051 |
|
|
319,981 |
|
||
|
Reverse repurchase agreements |
220,000 |
|
|
761,815 |
|
||
|
Other assets |
169,376 |
|
|
165,660 |
|
||
|
Total Assets |
$ |
35,921,622 |
|
|
$ |
30,132,479 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
||||
|
Liabilities |
|
|
|
||||
|
Repurchase agreements |
$ |
29,147,463 |
|
|
$ |
23,133,476 |
|
|
Federal Home Loan Bank advances |
210,000 |
|
|
865,024 |
|
||
|
Revolving credit facilities |
300,000 |
|
|
310,000 |
|
||
|
Term notes payable |
394,502 |
|
|
— |
|
||
|
Convertible senior notes |
284,954 |
|
|
283,856 |
|
||
|
Derivative liabilities, at fair value |
6,740 |
|
|
820,590 |
|
||
|
Due to counterparties |
259,447 |
|
|
130,210 |
|
||
|
Dividends payable |
128,125 |
|
|
135,551 |
|
||
|
Accrued interest payable |
149,626 |
|
|
160,005 |
|
||
|
Other liabilities |
70,299 |
|
|
39,278 |
|
||
|
Total Liabilities |
30,951,156 |
|
|
25,877,990 |
|
||
|
Stockholders’ Equity |
|
|
|
||||
|
Preferred stock, par value $0.01 per share; 50,000,000 shares authorized and 40,050,000 and 40,050,000 shares issued and outstanding, respectively ($1,001,250 and $1,001,250 liquidation preference, respectively) |
977,501 |
|
|
977,501 |
|
||
|
Common stock, par value $0.01 per share; 450,000,000 shares authorized and 272,935,731 and 248,085,721 shares issued and outstanding, respectively |
2,729 |
|
|
2,481 |
|
||
|
Additional paid-in capital |
5,154,764 |
|
|
4,809,616 |
|
||
|
Accumulated other comprehensive income |
689,400 |
|
|
110,817 |
|
||
|
Cumulative earnings |
2,655,891 |
|
|
2,332,371 |
|
||
|
Cumulative distributions to stockholders |
(4,509,819 |
) |
|
(3,978,297 |
) |
||
|
Total Stockholders’ Equity |
4,970,466 |
|
|
4,254,489 |
|
||
|
Total Liabilities and Stockholders’ Equity |
$ |
35,921,622 |
|
|
$ |
30,132,479 |
|
|
TWO HARBORS INVESTMENT CORP. |
|||||||||||||||
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
|||||||||||||||
|
(dollars in thousands) |
|||||||||||||||
|
Certain prior period amounts have been reclassified to conform to the current period presentation |
|||||||||||||||
|
|
Three Months Ended |
|
Year Ended |
||||||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
|
|
(unaudited) |
|
(unaudited) |
||||||||||||
|
Interest income: |
|
|
|
|
|
||||||||||
|
Available-for-sale securities |
$ |
230,567 |
|
|
$ |
242,535 |
|
|
$ |
962,283 |
|
|
$ |
847,325 |
|
|
Other |
|
7,871 |
|
|
|
9,420 |
|
|
|
32,407 |
|
|
|
22,707 |
|
|
Total interest income |
|
238,438 |
|
|
|
251,955 |
|
|
|
994,690 |
|
|
|
870,032 |
|
|
Interest expense: |
|
|
|
|
|
|
|
||||||||
|
Repurchase agreements |
|
152,919 |
|
|
|
146,702 |
|
|
|
654,280 |
|
|
|
469,437 |
|
|
Federal Home Loan Bank advances |
|
514 |
|
|
|
5,762 |
|
|
|
10,920 |
|
|
|
20,417 |
|
|
Revolving credit facilities |
|
4,038 |
|
|
|
5,044 |
|
|
|
19,354 |
|
|
|
10,820 |
|
|
Term notes payable |
|
5,002 |
|
|
— |
|
|
|
10,708 |
|
|
— |
|
||
|
Convertible senior notes |
|
4,811 |
|
|
|
4,793 |
|
|
|
19,067 |
|
|
|
18,997 |
|
|
Total interest expense |
|
167,284 |
|
|
|
162,301 |
|
|
|
714,329 |
|
|
|
519,671 |
|
|
Net interest income |
|
71,154 |
|
|
|
89,654 |
|
|
|
280,361 |
|
|
|
350,361 |
|
|
Other-than-temporary impairment losses |
|
(3,308 |
) |
|
|
(107 |
) |
|
|
(14,312 |
) |
|
|
(470 |
) |
|
Other income (loss): |
|
|
|
|
|
|
|
||||||||
|
Gain (loss) on investment securities |
|
28,141 |
|
|
|
(245,763 |
) |
|
|
280,118 |
|
|
|
(341,312 |
) |
|
Servicing income |
|
127,690 |
|
|
|
104,623 |
|
|
|
501,612 |
|
|
|
343,096 |
|
|
Loss on servicing asset |
|
(21,739 |
) |
|
|
(171,284 |
) |
|
|
(697,659 |
) |
|
|
(69,033 |
) |
|
(Loss) gain on interest rate swap, cap and swaption agreements |
|
(6,875 |
) |
|
|
(239,492 |
) |
|
|
(108,289 |
) |
|
|
16,043 |
|
|
(Loss) gain on other derivative instruments |
|
(10,800 |
) |
|
|
(39,122 |
) |
|
|
259,998 |
|
|
|
(54,857 |
) |
|
Other income |
|
60 |
|
|
|
342 |
|
|
|
337 |
|
|
|
3,037 |
|
|
Total other income (loss) |
|
116,477 |
|
|
|
(590,696 |
) |
|
|
236,117 |
|
|
|
(103,026 |
) |
|
Expenses: |
|
|
|
|
|
|
|
||||||||
|
Management fees |
|
17,546 |
|
|
|
12,152 |
|
|
|
60,102 |
|
|
|
30,272 |
|
|
Servicing expenses |
|
20,253 |
|
|
|
18,610 |
|
|
|
74,607 |
|
|
|
61,136 |
|
|
Other operating expenses |
|
14,142 |
|
|
|
15,943 |
|
|
|
57,055 |
|
|
|
62,983 |
|
|
Acquisition transaction costs |
— |
|
|
— |
|
|
— |
|
|
|
86,703 |
|
|||
|
Restructuring charges |
— |
|
|
— |
|
|
— |
|
|
|
8,238 |
|
|||
|
Total expenses |
|
51,941 |
|
|
|
46,705 |
|
|
|
191,764 |
|
|
|
249,332 |
|
|
Income (loss) before income taxes |
|
132,382 |
|
|
|
(547,854 |
) |
|
|
310,402 |
|
|
|
(2,467 |
) |
|
(Benefit from) provision for income taxes |
|
(2,372 |
) |
|
|
6,681 |
|
|
|
(13,560 |
) |
|
|
41,823 |
|
|
Net income (loss) |
|
134,754 |
|
|
|
(554,535 |
) |
|
|
323,962 |
|
|
|
(44,290 |
) |
|
Dividends on preferred stock |
|
18,950 |
|
|
|
18,950 |
|
|
|
75,801 |
|
|
|
65,395 |
|
|
Net income (loss) attributable to common stockholders |
$ |
115,804 |
|
|
$ |
(573,485 |
) |
|
$ |
248,161 |
|
|
$ |
(109,685 |
) |
|
Basic earnings (loss) per weighted average common share |
$ |
0.42 |
|
|
$ |
(2.31 |
) |
|
$ |
0.93 |
|
|
$ |
(0.53 |
) |
|
Diluted earnings (loss) per weighted average common share |
$ |
0.41 |
|
|
$ |
(2.31 |
) |
|
$ |
0.93 |
|
|
$ |
(0.53 |
) |
|
Dividends declared per common share |
$ |
0.40 |
|
|
$ |
0.47 |
|
|
$ |
1.67 |
|
|
$ |
1.88 |
|
|
Weighted average number of shares of common stock: |
|
|
|
|
|
|
|
||||||||
|
Basic |
|
272,906,815 |
|
|
|
248,081,168 |
|
|
|
267,826,739 |
|
|
|
206,020,502 |
|
|
Diluted |
|
291,070,864 |
|
|
|
248,081,168 |
|
|
|
267,826,739 |
|
|
|
206,020,502 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
TWO HARBORS INVESTMENT CORP. |
|||||||||||||||
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS), CONTINUED |
|||||||||||||||
|
(dollars in thousands) |
|||||||||||||||
|
Certain prior period amounts have been reclassified to conform to the current period presentation |
|||||||||||||||
|
|
Three Months Ended |
|
Year Ended |
||||||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
|
|
(unaudited) |
|
(unaudited) |
||||||||||||
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
||||||||
|
Net income (loss) |
$ |
134,754 |
|
|
$ |
(554,535 |
) |
|
$ |
323,962 |
|
|
$ |
(44,290 |
) |
|
Other comprehensive (loss) income, net of tax: |
|
|
|
|
|
|
|
||||||||
|
Unrealized (loss) gain on available-for-sale securities |
|
(58,954 |
) |
|
|
265,546 |
|
|
|
578,583 |
|
|
|
(233,914 |
) |
|
Other comprehensive (loss) income |
|
(58,954 |
) |
|
|
265,546 |
|
|
|
578,583 |
|
|
|
(233,914 |
) |
|
Comprehensive income (loss) |
|
75,800 |
|
|
|
(288,989 |
) |
|
|
902,545 |
|
|
|
(278,204 |
) |
|
Dividends on preferred stock |
|
18,950 |
|
|
|
18,950 |
|
|
|
75,801 |
|
|
|
65,395 |
|
|
Comprehensive income (loss) attributable to common stockholders |
$ |
56,850 |
|
|
$ |
(307,939 |
) |
|
$ |
826,744 |
|
|
$ |
(343,599 |
) |
|
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 |
|
Three Months Ended |
||||
|
|
2019 |
|
2019 |
||||
|
|
(unaudited) |
|
(unaudited) |
||||
|
Reconciliation of Comprehensive income to Core Earnings: |
|
|
|
||||
|
Comprehensive income attributable to common stockholders |
$ |
56,850 |
|
|
$ |
257,585 |
|
|
Adjustment for other comprehensive loss attributable to common stockholders: |
|
|
|
||||
|
Unrealized loss on available-for-sale securities attributable to common stockholders |
58,954 |
|
|
29,164 |
|
||
|
Net income attributable to common stockholders |
$ |
115,804 |
|
|
$ |
286,749 |
|
|
|
|
|
|
||||
|
Adjustments for non-Core Earnings: |
|
|
|
||||
|
Other-than-temporary impairments and loss recovery adjustments |
2,198 |
|
|
7,275 |
|
||
|
Realized gains on securities |
(27,615 |
) |
|
(250,267 |
) |
||
|
Unrealized (gain) loss on securities |
(526 |
) |
|
1,439 |
|
||
|
Realized and unrealized (gain) loss on mortgage servicing rights |
(51,387 |
) |
|
161,214 |
|
||
|
Realized loss (gain) on termination or expiration of swaps, caps and swaptions |
1,495 |
|
|
(75,409 |
) |
||
|
Unrealized losses on interest rate swaps, caps and swaptions |
10,148 |
|
|
23,940 |
|
||
|
Loss (gain) on other derivative instruments |
19,833 |
|
|
(85,916 |
) |
||
|
Other loss (income) |
73 |
|
|
(114 |
) |
||
|
Change in servicing reserves |
72 |
|
|
(300 |
) |
||
|
Non-cash equity compensation expense |
2,423 |
|
|
1,980 |
|
||
|
Net benefit from income taxes on non-Core Earnings |
(4,847 |
) |
|
(5,612 |
) |
||
|
Core Earnings attributable to common stockholders, including dollar roll income(1) |
$ |
67,671 |
|
|
$ |
64,979 |
|
|
|
|
|
|
||||
|
Weighted average basic common shares |
272,906,815 |
|
|
272,897,575 |
|
||
|
Core Earnings, including dollar roll income, attributable to common stockholders per weighted average basic common share |
$ |
0.25 |
|
|
$ |
0.24 |
|
|
_____________ |
|||||||
|
TWO HARBORS INVESTMENT CORP. |
|||||||||||||||||||
|
SUMMARY OF QUARTERLY CORE EARNINGS |
|||||||||||||||||||
|
(dollars in millions, except per share data) |
|||||||||||||||||||
|
Certain prior period amounts have been reclassified to conform to the current period presentation |
|||||||||||||||||||
|
|
|||||||||||||||||||
|
|
Three Months Ended |
||||||||||||||||||
|
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
||||||||||
|
|
(unaudited) |
||||||||||||||||||
|
Net Interest Income: |
|
|
|
|
|
|
|
|
|
||||||||||
|
Interest income |
$ |
237.3 |
|
|
$ |
251.1 |
|
|
$ |
269.1 |
|
|
$ |
245.5 |
|
|
$ |
252.0 |
|
|
Interest expense |
167.3 |
|
|
191.1 |
|
|
192.4 |
|
|
163.5 |
|
|
162.3 |
|
|||||
|
Net interest income |
70.0 |
|
|
60.0 |
|
|
76.7 |
|
|
82.0 |
|
|
89.7 |
|
|||||
|
Other income: |
|
|
|
|
|
|
|
|
|
||||||||||
|
Servicing income, net of amortization(1) |
54.6 |
|
|
52.7 |
|
|
52.7 |
|
|
52.5 |
|
|
46.9 |
|
|||||
|
Interest spread on interest rate swaps and caps |
4.8 |
|
|
19.1 |
|
|
22.9 |
|
|
23.7 |
|
|
15.3 |
|
|||||
|
Gain on other derivative instruments |
9.0 |
|
|
— |
|
|
16.7 |
|
|
28.7 |
|
|
29.8 |
|
|||||
|
Other income |
0.1 |
|
|
0.4 |
|
|
0.5 |
|
|
0.5 |
|
|
0.6 |
|
|||||
|
Total other income |
68.5 |
|
|
72.2 |
|
|
92.8 |
|
|
105.4 |
|
|
92.6 |
|
|||||
|
Expenses |
49.4 |
|
|
46.2 |
|
|
42.9 |
|
|
45.2 |
|
|
42.3 |
|
|||||
|
Core Earnings, including dollar roll income before income taxes |
89.1 |
|
|
86.0 |
|
|
126.6 |
|
|
142.2 |
|
|
140.0 |
|
|||||
|
Income tax expense |
2.5 |
|
|
2.0 |
|
|
1.6 |
|
|
0.6 |
|
|
0.3 |
|
|||||
|
Core Earnings, including dollar roll income |
86.6 |
|
|
84.0 |
|
|
125.0 |
|
|
141.6 |
|
|
139.7 |
|
|||||
|
Dividends on preferred stock |
18.9 |
|
|
19.0 |
|
|
19.0 |
|
|
18.9 |
|
|
19.0 |
|
|||||
|
Core Earnings attributable to common stockholders, including dollar roll income(2) |
$ |
67.7 |
|
|
$ |
65.0 |
|
|
$ |
106.0 |
|
|
$ |
122.7 |
|
|
$ |
120.7 |
|
|
Weighted average basic Core EPS, including dollar roll income |
$ |
0.25 |
|
|
$ |
0.24 |
|
|
$ |
0.39 |
|
|
$ |
0.49 |
|
|
$ |
0.49 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Core earnings return on average common equity, including dollar roll income |
6.8 |
% |
|
6.5 |
% |
|
11.1 |
% |
|
14.3 |
% |
|
13.8 |
% |
|||||
|
________________ |
|||||||||||||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20200205005845/en/
Margaret Karr, Investor Relations, Two Harbors Investment Corp., (212) 364-3663 or margaret.field@twoharborsinvestment.com
Source: Two Harbors Investment Corp.
Released February 5, 2020
