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Two Harbors Investment Corp. Reports First Quarter 2014 Financial Results

Two Harbors Investment Corp. (NYSE: TWO), a real estate investment trust that invests in residential mortgage-backed securities (RMBS), residential mortgage loans, mortgage servicing rights (MSR) and other financial assets, today announced its financial results for the quarter ended March 31, 2014.

  • Book value was $10.71 per diluted common share, representing a 3.9% (1) return on book value, after accounting for a dividend of $0.26 per share.
  • Delivered Comprehensive Income of $152.6 million, a return on average equity of 15.7%, or $0.42 per diluted weighted average common share.
  • Reported Core Earnings of $88.2 million, or $0.24 per diluted weighted average common share.
  • Generated an aggregate portfolio yield of 4.6% for the quarter ended March 31, 2014, compared to an aggregate yield of 4.3% for the quarter ended December 31, 2013.

“We delivered strong first quarter results, demonstrating our ability to generate alpha in a variety of interest rate environments,” stated Thomas Siering, Two Harbors’ President and Chief Executive Officer. “Two Harbors generated comprehensive income of $152.6 million for the period, representing a 15.7% return on average equity.”

(1) Return on book value for the quarter ended March 31, 2014 is defined as the increase in book value per diluted share, from December 31, 2013 to March 31, 2014 of $0.15, plus the dividend declared of $0.26 per share, divided by December 31, 2013 diluted book value of $10.56 per share.

Operating Performance

The following table summarizes the company’s GAAP and non-GAAP earnings measurements and key metrics for the first quarter of 2014:
Two Harbors Operating Performance      
(dollars in thousands, except per share data) Q1-2014
Per diluted return on
weighted average

Earnings   share   equity
Core Earnings (1) $ 88,203 $ 0.24 9.1

GAAP Net Loss $ (29,145 ) $ (0.08 ) (3.0 )%
Comprehensive Income $ 152,590 $ 0.42 15.7


Operating Metrics
Dividend per common share $0.26
Book value per diluted share at period end $10.71
Other operating expenses as a percentage of average equity 1.5 %

(1) Core Earnings is a non-GAAP measure that the company defines as net income, excluding impairment losses, gains or losses on sales of securities and termination of interest rate swaps, unrealized gains or losses on the aggregate portfolio, certain non-recurring gains and losses related to discontinued operations and amortization of business combination intangible assets, and certain non-recurring upfront costs related to securitization transactions. As defined, Core Earnings includes interest income associated with the company’s inverse interest-only securities (Agency Derivatives), premium income or loss on credit default swaps, and servicing income, net of estimated amortization on mortgage servicing rights. Core Earnings is provided for purposes of comparability to other peer issuers. Please see page 12 of this press release for a reconciliation of GAAP to non-GAAP financial information.

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