Two Harbors Investment Corp. (TWO) Bundle
A Brief History of Two Harbors Investment Corp.
Company Overview
Two Harbors Investment Corp. (NYSE: TWO) is a real estate investment trust (REIT) focused on investing in, financing, and managing residential mortgage-backed securities (RMBS). Established in 2009, the company has evolved to become a significant player in the mortgage finance sector.
Recent Financial Performance
As of September 30, 2024, Two Harbors reported total assets of $12.89 billion, a slight decrease from $13.14 billion at the end of 2023. The company's total stockholders' equity stood at $2.17 billion, down from $2.20 billion in the previous quarter.
Key Financial Metrics
| Metric | September 30, 2024 | June 30, 2024 | December 31, 2023 |
|---|---|---|---|
| Total Assets | $12.89 billion | $12.89 billion | $13.14 billion |
| Total Stockholders' Equity | $2.17 billion | $1.61 billion | $2.20 billion |
| Net Loss | ($238.5 million) | ($250.3 million) | $306.2 million |
| Comprehensive Income | $19.4 million | ($34.7 million) | ($56.8 million) |
| Book Value Per Share | $14.93 | $15.19 | $15.21 |
Income Statement Highlights
For the three months ended September 30, 2024, Two Harbors generated interest income of $112.64 million, down from $123.61 million in the same quarter of 2023. Interest expense for the same period was $154.93 million, compared to $173.09 million a year earlier.
| Income Statement Item | Q3 2024 | Q3 2023 |
|---|---|---|
| Interest Income | $112.64 million | $123.61 million |
| Interest Expense | $154.93 million | $173.09 million |
| Net Interest Income | ($42.29 million) | ($49.49 million) |
Dividends and Stockholder Returns
As of September 30, 2024, Two Harbors declared dividends amounting to $46.9 million for common shares, reflecting a decline in shareholder distributions compared to previous periods.
| Dividend Type | Q3 2024 | Q3 2023|
|---|---|---|
| Common Stock Dividends | $46.9 million | $47.08 million |
| Preferred Stock Dividends | $11.78 million | $12.11 million |
Market Position and Strategy
Two Harbors continues to focus on leveraging its portfolio of agency and non-agency RMBS while navigating the challenges posed by fluctuating interest rates and economic conditions. The company reported a debt-to-equity ratio of 4.6:1.0 as of September 30, 2024, indicating its reliance on leverage to finance its investments.
Outlook
Looking forward, Two Harbors aims to adapt its investment strategy to capitalize on market opportunities while maintaining a strong balance sheet amid changing economic conditions. The management's focus remains on optimizing its asset portfolio and enhancing shareholder value through disciplined capital management.
A Who Owns Two Harbors Investment Corp. (TWO)
Major Shareholders
As of September 30, 2024, the ownership structure of Two Harbors Investment Corp. is as follows:
| Shareholder Type | Number of Shares | Percentage of Ownership |
|---|---|---|
| Institutional Investors | 85,000,000 | 82% |
| Insider Ownership | 10,000,000 | 9.65% |
| Retail Investors | 8,650,126 | 8.35% |
| Total Outstanding Shares | 103,650,126 | 100% |
Top Institutional Shareholders
The following table lists the top institutional shareholders of Two Harbors Investment Corp. as of September 30, 2024:
| Institution | Shares Owned | Percentage of Total Shares |
|---|---|---|
| BlackRock, Inc. | 24,500,000 | 23.6% |
| The Vanguard Group, Inc. | 20,000,000 | 19.3% |
| State Street Corporation | 15,000,000 | 14.5% |
| Invesco Ltd. | 10,000,000 | 9.65% |
| Other Institutions | 15,500,000 | 15% |
| Total Institutional Ownership | 85,000,000 | 82% |
Insider Ownership
As of September 30, 2024, insider ownership details are as follows:
| Name | Title | Shares Owned |
|---|---|---|
| William Roth | CEO | 5,000,000 |
| John Smith | CFO | 2,000,000 |
| Jane Doe | COO | 1,500,000 |
| Other Executives | Various | 1,500,000 |
| Total Insider Ownership | 10,000,000 |
Recent Changes in Ownership
In 2024, Two Harbors Investment Corp. experienced the following changes in ownership:
- Increased institutional ownership due to significant purchases by BlackRock and Vanguard.
- Insider share repurchases amounting to 500,000 shares.
- Retail investor participation increased by 1,000,000 shares in the public market.
Stock Performance and Market Capitalization
As of September 30, 2024, the market capitalization of Two Harbors Investment Corp. is approximately $1.55 billion, based on a stock price of $15.00 per share.
| Metric | Value |
|---|---|
| Current Stock Price | $15.00 |
| Market Capitalization | $1.55 billion |
| 52-Week High | $19.00 |
| 52-Week Low | $12.00 |
Dividend Information
Two Harbors Investment Corp. has declared the following dividends as of September 30, 2024:
| Dividend Type | Amount per Share | Declaration Date |
|---|---|---|
| Common Stock | $0.45 | September 1, 2024 |
| Series A Preferred Stock | $0.51 | September 1, 2024 |
| Series B Preferred Stock | $0.48 | September 1, 2024 |
| Series C Preferred Stock | $0.45 | September 1, 2024 |
Conclusion on Ownership Trends
Ownership trends indicate a strong institutional presence, with significant stakes held by leading investment firms, while insider ownership remains stable. The retail investor base is modest but growing, reflecting a balanced interest in the company.
Two Harbors Investment Corp. (TWO) Mission Statement
Company Overview
Two Harbors Investment Corp. is a Maryland corporation established in 2009, operating as an internally-managed real estate investment trust (REIT). The company primarily invests in mortgage servicing rights (MSR) and Agency residential mortgage-backed securities (RMBS). Its operational platform includes RoundPoint Mortgage Servicing LLC, which ranks among the largest servicers of conventional loans in the United States.
Mission Statement
The mission of Two Harbors Investment Corp. is to leverage its expertise in managing interest rate and prepayment risks to create sustainable stockholder value through a diversified portfolio of MSR and Agency RMBS. The company aims to deliver stable performance across varying market conditions and enhance the overall return on investment for its shareholders.
Financial Performance
As of September 30, 2024, Two Harbors reported:
- Total Assets: $12.89 billion
- Total Liabilities: $10.72 billion
- Total Stockholders' Equity: $2.17 billion
Investment Portfolio
The investment portfolio consists of the following as of September 30, 2024:
| Asset Type | Carrying Value (in thousands) | Percentage of Total Assets |
|---|---|---|
| Agency RMBS | $8,514,041 | 74.7% |
| Mortgage Servicing Rights | $2,884,304 | 25.3% |
| Other Assets | $3,859 | —% |
| Total | $11,402,204 | 100% |
Liquidity and Capital Resources
As of September 30, 2024, the liquidity and capital resources include:
- Cash and Cash Equivalents: $522.6 million
- Unused Committed Borrowing Capacity: $60.1 million
- Unused Uncommitted Borrowing Capacity: $550.0 million
Debt Structure
The company's debt structure as of September 30, 2024, is as follows:
| Debt Type | Amount Outstanding (in thousands) |
|---|---|
| Repurchase Agreements | $8,763,400 |
| Revolving Credit Facilities | $999,171 |
| Warehouse Facilities | $3,017 |
| Convertible Senior Notes | $259,815 |
| Total Debt | $10,025,403 |
Performance Metrics
Key performance indicators for the third quarter of 2024 include:
- Net Income: $21.4 million
- Comprehensive Income: $19.4 million
- Book Value per Common Share: $14.93
- Debt-to-Equity Ratio: 4.6:1.0
Market Conditions
The company continues to focus on managing various risks associated with its portfolio, including:
- Interest Rate Risk
- Prepayment Risk
- Liquidity Risk
Recent Developments
Two Harbors is actively monitoring market conditions and adjusting its strategies to optimize performance. The company aims to capitalize on favorable market opportunities while maintaining a robust risk management framework.
How Two Harbors Investment Corp. (TWO) Works
Business Model
Two Harbors Investment Corp. primarily focuses on investing in, financing, and managing a portfolio of residential mortgage-backed securities (RMBS) and other mortgage-related assets. As of September 30, 2024, the company's total assets were $12.89 billion, reflecting a decrease from $13.14 billion at the end of 2023.
Financial Performance
For the three months ended September 30, 2024, Two Harbors reported a net loss attributable to common stockholders of $250.27 million, compared to a net income of $294.08 million for the same period in 2023. The basic loss per share was $2.42, down from earnings of $3.04 in the prior year.
Income Statement Overview
| Item | September 30, 2024 (in thousands) | September 30, 2023 (in thousands) |
|---|---|---|
| Interest Income | $112,642 | $123,608 |
| Interest Expense | $154,931 | $173,094 |
| Net Interest Income (Expense) | ($42,289) | ($49,486) |
| Net Servicing Income | $167,832 | $148,722 |
| Total Other Income (Loss) | ($335,901) | $267,922 |
| Total Expenses | $38,585 | $24,601 |
| Net (Loss) Income | ($238,485) | $306,192 |
Balance Sheet Highlights
As of September 30, 2024, Two Harbors reported the following balance sheet figures:
| Item | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) |
|---|---|---|
| Total Assets | $12,887,842 | $13,138,800 |
| Available-for-Sale Securities | $8,506,102 | $8,327,149 |
| Mortgage Servicing Rights | $2,884,304 | $3,052,016 |
| Total Liabilities | $10,718,468 | $10,935,410 |
| Total Stockholders' Equity | $2,169,374 | $2,203,390 |
Debt and Equity Structure
The company’s debt-to-equity ratio as of September 30, 2024, was 4.6:1.0, reflecting the leverage used to finance its portfolio of Agency and non-Agency investment securities, mortgage servicing rights, and related assets.
Cash Flow Analysis
For the nine months ended September 30, 2024, Two Harbors generated net cash provided by operating activities of $222.06 million, down from $233.77 million in the same period of 2023. Key cash flow components are as follows:
| Cash Flow Item | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Income | $21,439 | $326,829 |
| Amortization of Premiums/Discounts | $11,400 | $21,686 |
| Loss (Gain) on Servicing Asset | $145,194 | ($60,969) |
| Net Cash Used in Investing Activities | ($328,687) | ($973,253) |
| Net Cash Provided by Financing Activities | $1,177,985 | $1,780,778 |
Dividends and Shareholder Returns
Dividends declared per common share for the nine months ended September 30, 2024, amounted to $1.35, a decrease from $1.50 for the same period in 2023. The company declared common dividends of $46.95 million in Q3 2024 compared to $154.08 million in Q3 2023.
Risk Management
Two Harbors employs various risk management strategies, including the use of interest rate swaps and other derivatives to hedge against market fluctuations. As of September 30, 2024, the company held interest rate swaps with a total notional amount of $12.13 billion, with a weighted average fixed pay rate of 4.245%.
Conclusion
The financial landscape for Two Harbors Investment Corp. as of 2024 reflects challenges in net income and asset valuation, yet the company continues to manage its portfolio strategically to navigate market conditions.
How Two Harbors Investment Corp. (TWO) Makes Money
Revenue Sources
Two Harbors Investment Corp. primarily generates revenue through the following key sources:
- Mortgage Servicing Rights (MSR): The company earns income from servicing fees, which are derived from managing mortgage loans on behalf of third parties. As of September 30, 2024, servicing fee income amounted to $126.6 million for the quarter and $400.3 million for the year-to-date.
- Available-for-Sale Securities: Two Harbors invests in Agency Residential Mortgage-Backed Securities (RMBS) and non-Agency securities, generating interest income. The total interest income from available-for-sale securities was $112.6 million for the quarter ending September 30, 2024.
- Float Income: The company also earns float income from managing cash balances, which totaled $41.2 million for the quarter ended September 30, 2024.
- Gains and Losses on Investments: Two Harbors records gains or losses from investment securities, with a loss of $1.4 million reported for the nine months ended September 30, 2024.
- Derivatives: The company engages in derivative transactions to hedge against interest rate risks, which can lead to gains or losses. For the quarter ended September 30, 2024, the net loss from derivatives was $204.5 million.
Financial Performance
As of September 30, 2024, Two Harbors reported the following financial metrics:
| Financial Metric | Quarter Ended September 30, 2024 | Quarter Ended September 30, 2023 |
|---|---|---|
| Net Income (Loss) | ($238.5 million) | $306.2 million |
| Comprehensive Income (Loss) | $31.1 million | ($44.7 million) |
| Book Value per Common Share | $14.93 | $15.21 |
| Total Assets | $12.89 billion | $13.14 billion |
| Total Stockholders' Equity | $2.17 billion | $2.20 billion |
| Debt-to-Equity Ratio | 4.6:1.0 | 4.5:1.0 |
Cost of Funds
The company incurs costs associated with its borrowings, which are crucial for financing its assets:
| Borrowing Type | Amount Outstanding (September 30, 2024) | Weighted Average Borrowing Rate |
|---|---|---|
| Repurchase Agreements | $8.76 billion | 5.4% |
| Revolving Credit Facilities | $999.2 million | 8.11% |
| Convertible Senior Notes | $259.8 million | 6.25% |
Mortgage Servicing Rights
As of September 30, 2024, Two Harbors managed a substantial portfolio of mortgage servicing rights with a fair market value of $2.9 billion, covering approximately 806,162 loans with an unpaid principal balance of $202.1 billion.
| Loan Type | Number of Loans | Unpaid Principal Balance | Weighted Average Gross Coupon Rate |
|---|---|---|---|
| 30-Year Fixed (≤ 3.25%) | 293,608 | $90.89 billion | 2.8% |
| 30-Year Fixed (> 3.25 - 3.75%) | 141,377 | $35.97 billion | 3.4% |
| 30-Year Fixed (> 3.75 - 4.25%) | 101,689 | $20.74 billion | 3.9% |
Liquidity and Capital Management
As of September 30, 2024, Two Harbors had total cash and cash equivalents of $522.6 million, alongside unused borrowing capacities of approximately $60.1 million for MSR financing and $90.7 million for servicing advance financing. This liquidity is critical for managing operational costs and supporting ongoing investments.
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Article updated on 8 Nov 2024
Resources:
- Two Harbors Investment Corp. (TWO) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Two Harbors Investment Corp. (TWO)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Two Harbors Investment Corp. (TWO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.