Two Harbors Investment (TWO) Q2 2024 earnings summary

Executive summary

• Book value per share was $15.19 at June 30, 2024, down from $15.64 at March 31, 2024, with a flat total economic return for the quarter including a $0.45 dividend.

• Comprehensive income for Q2 was $0.5 million ($0.00 per share), while GAAP net income ranged from $44.6 million to $56.3 million ($0.43 per share).

• CFO Mary Riskey is retiring in August, with William Dellal named interim CFO.

• The company remains focused on pairing MSR and Agency RMBS to deliver stable performance and manage interest rate and prepayment risk.

• Launched direct-to-consumer originations platform and completed transfer of all servicing at RoundPoint, now servicing over 900,000 loans.

Financial highlights

• Net servicing income was $172 million, up from Q1 due to higher servicing fee collections and float income.

• Net interest expense was $38 million, favorable to Q1 due to lower borrowing balances and rates.

• Earnings Available for Distribution (EAD) to common stockholders was $17.5 million ($0.17 per share), up from $0.05 per share in Q1 2024.

• Book value per share declined to $15.19 from $15.64 sequentially.

• Dividend yield was 5.8% for Q2 2024, with annualized yield at 13.6%.

Outlook and guidance

• Static return estimate for the portfolio is 10.8%-13.4% before leverage; after leverage, static return on common equity is 12.5%-16.5%.

• Prospective quarterly static return per basic common share is estimated at $0.47–$0.63.

• Optimism for return potential remains, with 60%+ of capital in MSR (13%-16% return potential) and the rest in securities (15%-17%).

• Market expects a September Fed rate cut, with volatility expected to decrease, benefiting RMBS and MSR valuations.

• Plans to offer ancillary and home equity products, including second lien loans, in Q3 2024.