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Two Harbors Investment Corp. Reports Fourth Quarter 2012 Financial Results

The company reported Comprehensive Income of $185.4 million, or $0.63 per diluted weighted average common share outstanding, for the quarter ended December 31, 2012, as compared to $524.4 million, or $1.94 per diluted weighted average common share outstanding, for the quarter ended September 30, 2012. The company records unrealized fair value gains and losses for RMBS securities, classified as available-for-sale, as Other Comprehensive Income in the Statement of Stockholders' Equity. On a Comprehensive Income basis, the company recognized an annualized return on average equity of 21.6% and 70.2% for the quarters ended December 31, 2012 and September 30, 2012, respectively.

Other Key Metrics

Two Harbors declared a quarterly dividend of $0.55 per common share for the quarter ended December 31, 2012. The dividend was intended to distribute the remaining REIT taxable income earned during 2012, which included taxable income derived from Two Harbors' contribution of its single-family residential portfolio to Silver Bay and realized gains on the company's RMBS portfolio. The total dividends declared for the year ended December 31, 2012 were $1.71 per common share.

The company's book value per diluted share, after taking into account the fourth quarter 2012 dividend of $0.55, was $11.54 as of December 31, 2012, compared to $11.44 as of September 30, 2012.

Other operating expenses for the fourth quarter 2012 were approximately $6.3 million, or 0.7% of average equity, compared to approximately $4.0 million, or 0.5% of average equity, for the third quarter 2012. Other operating expenses exclude real estate related expenses associated with the company's portfolio of single-family residential properties. The single-family real estate operations of the company are reflected as discontinued operations in the company's financial statements.

Portfolio Summary

For the quarter ended December 31, 2012, the annualized yield on average RMBS securities and Agency Derivatives was 4.0% and the annualized cost of funds on the average borrowings, which includes net interest rate spread expense on interest rate swaps, was 1.1%. This resulted in a net interest rate spread of 2.9%, which compares to 3.1% in the prior quarter.

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