Two Harbors Investment Corp. (NYSE:TWO) Q3 2018 Earnings Conference Call Transcript

Nov 07, 2018 • 09:00 am ET


Two Harbors Investment Corp. (NYSE:TWO) Q3 2018 Earnings Conference Call Transcript


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Good morning. My name is Sonia, and I will be your conference facilitator. At this time, I would like to welcome everyone to Two Harbors Third Quarter 2018 Financial Results Conference Call. (Operator Instructions) I would now like to turn the call over to Maggie Field with IR for Two Harbors.

Maggie Field

Thank you, Sonia, and good morning, everyone. Thank you for joining our call to discuss Two Harbors' third quarter 2018 financial results. With me on the call this morning are Tom Siering, our President and CEO; Mary Riskey, our Acting CFO; and Bill Roth, our CIO.

After my introductory comments, Tom will provide an overview of our quarterly results, Mary will highlight key items from our financials, and Bill will review our portfolio performance. The press release and financial tables associated with today's call were filed yesterday with the SEC. If you do not have a copy, you may find them on our website or on the SEC's website at In our earnings release and slides, which are now posted in the IR section of our website, we have provided a reconciliation of GAAP to non-GAAP financial measures. We urge you to review this information in conjunction with today's call.

I would also like to mention that this call is being webcast and may be accessed on our website in the same location.

(Forward-Looking Cautionary Statements) I will now turn the call over to Tom.

Tom Siering

Thank you, Maggie, and good morning, everyone. We hope that you had a chance to review our earnings press release and presentation that we issued last night.

Please turn to Slide 3. This quarter was highlighted by strong core earnings and the tremendous progress we made in the redeployment of capital from the CYS acquisition, into both MSR and non-Agencies. Core earnings, including dollar roll income, was $0.48 per basic share in the third quarter, representing a return on average common equity of 12.4%. We are especially pleased with this result in a quarter where we were redeploying capital from the CYS transaction.

Please turn to Slide 4 for an overview of our strategy. We believe that we operate a superior business model through our diversified rates and credit strategies and our sophisticated approach to risk management. Additionally, we maintain a keen focus on optimizing our balance sheet to enhance earnings and stockholder returns. As a result, we believe that we can generate better returns with superior stability in our book value.

Please turn to Slide 5. The objective of our strategy is to make our shareholders more money while keeping an acute focus on risk management and de minimis exposure to changing rates. With this objective in mind, we thoughtfully examine opportunities for growth and innovation in the mortgage REIT space.

In July 2016, we announced that we were discontinuing our mortgage loan conduit program to reduce our operating complexity and costs and to position us to generate stronger returns for our stockholders. Then in 2017, we formed Granite Point Mortgage Trust, creating