Two Harbors Investment (TWO) - 2024 Q4 - Annual Results

Financial Performance - Reported book value of $14.47 per common share, with a fourth quarter common stock dividend of$ 0.45 per share, resulting in a flat quarterly economic return on book value[5] - Incurred a comprehensive loss of $(1.6) million, or$ (0.03) per weighted average basic common share, for the fourth quarter of 2024[5] - Generated a total economic return on book value of 7.0% for the year 2024[5] - Net income attributable to common stockholders for Q4 2024 was $264,945 thousand, a turnaround from a loss of$ (444,693) thousand in Q4 2023, with basic earnings per share at $2.54 compared to$ (4.56) in the prior year[33] - Comprehensive income attributable to common stockholders for Q4 2024 was $(1,620) thousand, a decrease from$ 38,886 thousand in Q4 2023, while the year-end comprehensive income was $107,581 thousand compared to a loss of$ (49,723) thousand in 2023[33] Mortgage Servicing Rights - Settled $9.2 billion in unpaid principal balance (UPB) of mortgage servicing rights (MSR), comprising 28,093 loans, through acquisitions and recapture[5] - The MSR portfolio had a 3-month CPR of 4.93%, a weighted average gross coupon rate of 3.46%, and a 60+ day delinquency rate of 0.90%[5] - The company reported a mortgage servicing rights fair value of$ 2,994,271 thousand as of December 31, 2024, down from $3,052,016 thousand in 2023[32] Capital Management - The company actively managed its capital structure by repurchasing 485,609 shares of preferred stock and$ 10.0 million principal amount of convertible senior notes due 2026[5] - Total borrowings as of December 31, 2024, amounted to $9.09 billion, with a weighted average borrowing rate of 5.15%[16] - Total borrowings decreased from$ 15,171,186 thousand as of September 30, 2024, to $13,849,914 thousand as of December 31, 2024, representing a reduction of approximately 8.7%[17] - The debt-to-equity ratio improved from 4.6:1.0 in Q3 2024 to 4.3:1.0 in Q4 2024, indicating a stronger equity position relative to debt[17] - The annualized cost of financing decreased from 6.17% in Q3 2024 to 5.79% in Q4 2024, reflecting improved financing conditions[17] Asset and Liability Management - Total assets decreased from$ 13,138,800 thousand in 2023 to $12,204,319 thousand in 2024, a reduction of about 7.1%[32] - The total liabilities decreased from$ 10,935,410 thousand in 2023 to $10,081,810 thousand in 2024, a decline of approximately 7.8%[32] - The fair value of available-for-sale securities decreased from$ 8,327,149 thousand in 2023 to $7,371,711 thousand in 2024, a decline of approximately 11.5%[32] - Cash and cash equivalents decreased from$ 729,732 thousand in 2023 to $504,613 thousand in 2024, a decline of approximately 30.9%[32] Income and Expenses - Net interest income for Q4 2024 was$ (34,894) thousand, a decrease from $(45,679) thousand in Q4 2023, while net interest expense for the year ended 2024 was$ (157,654) thousand compared to $(162,861) thousand in 2023[33] - Net servicing income for Q4 2024 was$ 162,993 thousand, slightly down from $166,580 thousand in Q4 2023, with total servicing income for the year at$ 661,579 thousand, up from $590,289 thousand in 2023[33] - Total other income for Q4 2024 was$ 220,387 thousand, a significant recovery from a loss of $(538,104) thousand in Q4 2023, while the year-end total other income was$ 6,823 thousand compared to a loss of $(395,643) thousand in 2023[33] - Dividends declared per common share remained stable at$ 0.45 for both Q4 2024 and Q4 2023, with total dividends for the year at $1.80, down from$ 1.95 in 2023[33] - Interest income for Q4 2024 was $103,774 thousand, down from$ 122,401 thousand in Q4 2023, while total interest income for the year was $450,152 thousand compared to$ 480,364 thousand in 2023[35] - Interest expense for Q4 2024 was $138,668 thousand, a decrease from$ 168,080 thousand in Q4 2023, with total interest expense for the year at $607,806 thousand compared to$ 643,225 thousand in 2023[35] Future Outlook - The company will host a conference call on January 30, 2025, to discuss its fourth quarter 2024 financial results[23] - Earnings available for distribution to common stockholders for Q4 2024 was $21,181 thousand, an increase from$ 13,186 thousand in Q3 2024, with earnings per share available for distribution at $0.20 compared to$ 0.13[37] - The company reported a significant unrealized loss on available-for-sale securities of $(266,565) thousand in Q4 2024, contrasting with a gain of$ 483,579 thousand in Q4 2023[37] Portfolio Overview - Total portfolio value as of December 31, 2024, was $14.84 billion, down from$ 16.45 billion as of September 30, 2024[10] - The weighted average cost basis for Agency RMBS was $101.17 as of December 31, 2024, compared to$ 101.39 as of September 30, 2024[12] - The company launched a direct-to-consumer recapture originations platform, funding $64.3 million UPB in first lien loans and brokering$ 40.2 million UPB in second lien loans[5]