TWO - Two Harbors Investment Q3 earnings miss as wider mortgage spreads weigh

Two Harbors Investment ( NYSE: TWO ) Q3 earnings on Tuesday fell short of the average Wall Street consensus and decreased from a year ago as wider mortgage spreads negatively impacted the mortgage REITs book value.

Still, TWO shares gained 1.2% in extended trading.

“With the 30-year mortgage rate 400 basis points higher than a year ago at around 7%, and with the economy softening, we expect prepayment speeds to be below those from previous discount environments," said Nick Letica, Two Harbors’ chief investment officer.  “We are well-positioned to benefit from slower speeds with our portfolio of low coupon MSR and high coupon RMBS.”

Q3 earnings available for distribution of $0.64, missing the $0.79 consensus, fell from $0.87 in the second quarter ended June 30.

Book value of $16.42 per common share represented a -16.2% economic return on book value. That compares with $20.41 in Q2, representing a -4.7% economic return on book value.

Total portfolio stood at $16.56B as of September 30 versus $18.44B as of June 30.

Average portfolio yield of 4.61% rose from 4.39% in Q2, and average cost of financing was 2.84% vs. 1.69% in Q2, resulting in a net spread of 1.77% in Q3 vs. 2.70% in Q2.

Total interest income of $94.39M climbed from $36.04M in Q3 2021.

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

Earlier, Two Harbors Investment Non-GAAP EPS of $0.64 misses by $0.15, net interest income of $11.04M .

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