TWO - Two Harbors Investment posts Q4 earnings miss amid spread volatility

Two Harbors Investment ( NYSE: TWO ) Q4 earnings Wednesday fell short of the average Wall Street consensus and slid from the prior quarter as volatility in mortgage spreads remained persistently high.

Still, the mortgage REIT generated a positive book value, as its portfolio benefited "from being positioned in low coupon MSR and higher coupon RMBS,” said President and CEO Bill Greenberg.

Nick Letica, TWO's chief investment officer, sees spread volatility moderating in 2023, "which could result in tighter spreads and be a positive tailwind for mortgage securities," he said.

Q4 earnings available for distribution of $0.26, missing the average analyst estimate of $0.51, dropped from $0.64 for the three months ended Sept. 30, 2022.

Book value came in at $17.72 per share, representing an 11.6% quarterly economic return on book value, up from $16.42 in Q3.

The company's portfolio value totaled $14.68B as of Dec. 31, 2022, compared with $16.56B as of Sept. 30, 2022.

Average portfolio yield of 4.92% rose from 4.61% in Q3, and average cost of financing was 3.95% vs. 2.84% in Q3, resulting in a net spread of 0.97% in Q4 vs. 1.77% in Q3.

Interest income of $99.30M jumped from $33.01M in Q4 2021.

TWO edged higher by 0.2% in after-hours trading.

Conference call on Feb. 9 at 9:00 a.m. ET.

Earlier, Two Harbors Investment GAAP EPS of -$3.04.

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