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Two Harbors Investment (NYSE:TWO) posted on Monday a sequential increase in Q1 earnings, swinging to a profit from a loss, as the company saw its book value climb during the three-month period.
Q1 EPS available for distribution of $0.05 advances from -$0.11 in the previous quarter.
The mortgage REIT said its portfolio of mortgage servicing rights, which accounts for over 60% of its capital allocation, is poised to benefit from the current higher-for-longer rate environment.
“Our portfolio’s prepayment sensitivity remains low, with less than 1% of loans having an economic incentive to refinance and over 85% of loans at least 250 basis points below current mortgage rates,” said President and CEO Bill Greenberg. “We expect the low duration and low convexity characteristics of MSR to continue to generate attractive cashflows with low spread volatility.”
Q1 interest income fell to $117.8M from $122.4M in Q4 2023 and edged up from $116.6M a year before. Net interest expense of $42.2M compared with $45.7M in Q4 2023 and $25.9M in Q1 2023.
Net servicing income of $159.2M slid from $159.2M in the prior quarter and rose from $125.0M a year ago.
Total expenses advanced to $47.6M from $45.3M in Q4 2023 and $24.6M in Q1 2023.
Book value per common share was $15.64 at March 31, 2024, representing a 5.8% quarterly economic return on book value, up from $15.21 at Dec. 31, 2023.
Conference call on April 30 at 9:00 a.m. ET.
