Two Harbors Investment Corp. (TWO) reported fourth-quarter core earnings of $83.1 million, or $0.23 per share, compared to $82.8 million, or $0.23 per share for the quarter ended Sept. 30, 2014.
This missed analyst projected earnings per share expectations by $0.01.
“We believe the growth of our mortgage loan conduit and MSR businesses in 2014, as well as our intent to further diversify into commercial mortgage loans, will enable us to continue to generate stockholder return and build franchise value in the years ahead,” said Thomas Siering, Two Harbors president and CEO.
“We also delivered a 15.0% total return on book value in 2014, a result we are proud of considering the interest rate volatility within the year,” said Siering.
The investment firm experienced a strong year last year. After a record-setting fourth quarter, which saw more prime jumbo residential mortgage-backed securitizations brought to market than during any quarter since the financial crisis began, Two Harbors also brought 2015’s first prime jumbo RMBS.
Two Harbors is currently prepping the year’s first prime jumbo RMBS, a $279.5 million offering from Two Harbors’ Agate Bay Mortgage Trust series.
The company’s aggregate portfolio is principally comprised of RMBS available-for-sale securities, inverse interest-only securities, MSR, residential mortgage loans held-for-sale and net economic interests in consolidated securitization trusts. As of Dec. 31, 2014, the total value of the company’s portfolio was $16.0 billion.
The company also noted the following in its earnings release:
- Net realized gains on RMBS, trading securities and mortgage loans held-for-sale of $30.4 million, net of tax;
- Unrealized gains on trading securities and mortgage loans held-for-sale of $4.0 million, net of tax;
- Other-than-temporary impairment loss of $0.2 million, net of tax;
- Net losses of $8.5 million, net of tax, related to swap and swaption terminations and expirations;
- Net unrealized losses of $103.2 million, net of tax, associated with its interest rate swaps and swaptions economically hedging its investment portfolio, repurchase agreements and Federal Home Loan Bank of Des Moines (FHLB) advances;
- Net realized and unrealized losses on other derivative instruments of approximately $6.0 million, net of tax;
- Net realized and unrealized losses on consolidated financing securitizations of $2.1 million, net of tax; and
- A net decrease in fair value of $49.2 million(2) on MSR, net of tax.
