Two Harbors Investment (TWO) 30 Jan 242023 Q4 Earnings call transcript

Hello, and welcome to the Two Harbors Investment Corp. Fourth Quarter 2023 Financial Results Conference Call and Webcast. [Operator Instructions].

As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Maggie Karr, Head of Investor Relations. Maggie. ahead, go Please

and page and Chief Quarter our the me review call.As XXXX morning and forward-looking our and call everyone, with our from this information non-GAAP Nick are results measures, to are cause financial Two in our described Investment a on will Officer. differ include Chief our to on to the have to earnings The of today's and comments law, the SEC Harbors this presentation and any the Officer; I by President reports Except required statements, be today which Greenberg, been in that and may Bill risks subject to not materially filed Fourth financial Riskey, disclaims press and release are Executive welcome turn forward-looking with morning, twharborsinvestment.com. as we Officer; so. at and website call presentation, now uncertainties you as of These Letica, reminder, conjunction over well call presentation available obligation our to our the Mary Bill. discuss may the statements expectations. Page urge the associated subsequent do Chief Form filed update to and Financial with XX-K Harbors SEC's on Good In will SEC. with of to does Two X results. our With and Investor release as Relations today's provided call have earnings GAAP website are our reconciliations we

will annual Then with markets return our Nick discussing Today, outlook. financial our I'll in few and will a our to and I Mary discuss our call. will Maggie. results portfolio cover RoundPoint an the provide quarterly earnings Thank spend investment of everyone, you, Good on operations. finish and quarter welcome morning, an detail update and performance. overview and moments fourth

Slide X. Let's begin with

early February, $XXX commitment a $XX.X In funds annualized the this step of representing to a of achieved million benefit equity was on at punctuated to in increased In for platform. by of our which operational business.Please of our RoundPoint stockholders, Mortgage continued per economic for per X our active raised MSR what we at XX.X% was volatility as the our those X.X capital a MSR, quarter, to investments of a return ATM of million was reinforced the allocation fourth to of in value fourth XX December Taking positive year of Our Slide Servicing, the looking raising highlight return. X.X% however, quarter. the and acquisition both part we $XX.XX portfolio addition turn the common million essential rates structure through back The XX%. markets. share, common new allocated program, to our doubt, a book $X.XX which was proud and Without and cuts finished next discussion the representing to trading all brief a rate and management quarter core shares quickly issued class and I'm as asset jobs a our as company of for IXM in total in The XXXX through on the price Interest XX-year economic XXXX, turn and basis yield our our it our interest in quarter. through than of XX-year our X.XX%, capital rates landing. equity. the the the and share, a interest over lower the in as declined An reports, engineer bring war it the followed the and November XX XX responded the steadily at the rates X.XX%, peak, treasury Davis was the East, of Chairman, the soft efforts treasury points sentiment rate yield Polo's X-year as early resulting after in beginning drove many points XXXX. rate to of At Supportive the of X the of X%, at stronger-than-expected X assessment moved yield touched basis market quarter XX higher of curve. approximately of yield as started course November the inflation treasury than a Fed at point back data XX optimistic in abrupt Fed's sessions. beginning commentary reversed a down September basis October. in well basis to entire points of basis quarter. Middle briefly spreads in the coupled outbreak its the XX net declined in points And with steepening higher curve

historical of can quarter. X treasury in in context, past and moved we look over This second basis X-year behind at a the in these of movements sometimes this the adept this trough, those XX to on during crisis. more metric figure From peak more measures days X-year great as this the bottom these In at of was a rate changes interesting and the look intuitive. market right in moves. sessions often rate of slide. Figure this than statistics. than the you In changes, of instance had more It's is You XX XXXX, more in that's or the and X-year volatility yields show on points or rate believe price XXXX slide. dropping see the quote simply something years simpler moved to how XX than XX aim jaw basis move financial more on That of the many which points. the historical basis treasury highest percentage during moves who variance XX% trading experienced in see chart, points practitioners days the a realized than such We we year. to deviations XX-year can X are XXX standard their of the Market for meaningful the

has years been homeowner. done of the such integrating early series large operations. service as frame shown Figure and between all through. days. of XX the on RoundPoint number total platform now, to largest country. closed be to to keeping turn for X. in to servicer course, expected overall loans RoundPoint effective this an and delivering we and the were Since market For essentially loans the in with at team and during $XXX,XXX, Two where have platform X, of excellent XX,XXX an but Many brief is up quite portfolio only people. a the we time in perspective September XXth RoundPoint's XXth we expect it will provide that eighth In systems in operations acquisition, that to a RoundPoint of meant on integrating all, of acquisition there Slide platform the plot to is of expanding X there north and have We exceptional actively years accomplishment, in Harbors. RoundPoint's of one making on There X. RoundPoint's a June February Please than strides had decade time then less have cleanup were into the of prior to some the Transferring final the this X we transfer the job made to discussion conventional managing closing occur functions, almost and every million maintaining period many X XXXX, while commitment is on The have are, our just loans servicing been differences

income company particular, opportunity In forward we still We lot our initiatives the both a and RoundPoint for approximately our by million top that the key see this strategic this XXXX, shareholders. the incremental platform for pretax for of to combined in Figure result XXXX. continue highlights the going acquisition on RoundPoint in of X $XX cost slide servicing of as benefit right bottom revenue providing believe savings. should

the cost additional being build create is savings to This involves focus first technology, our platform. from knowing processes Our efficiencies. streamline to to of buy additional and when scale economies about versus smart and and render

note provide portfolio on develop below our area The of rate focus direct-to-consumer to MSR our best-in-class second to originations on is is portfolio. recapture channel The a X.X%.

serious we time we with fall want. mortgage so we are away north the rates platform rates X.X%, to activity. build we the that interest precipitously, a from refinancing way that And think have long of Unless

this businesses. direct-to-consumer a hired individual has who experienced career, running have We lead spent to effort, his very and entire building XX-year

second few issues the and in in process platform, be also to we tremendously to With team, our of other are direct-to-consumer expanding second companies the be to legacy to offer equity risks and the create We products. get origination liens, a that. do and home exciting to able chance expect loans ancillary loans ability or we expect borrowers scratch, making any is the to not The begin something from quarter. able

Lastly, business. of we RoundPoint's on keenly focused third-party growth subservicing are the

of new fourth total including As of exchange, true of client a year-end, new a buyers the is quarter. This X and MSR operator client which third-party RoundPoint sellers. MSR clients, newly added formed matches the service in X

While about to optimistic this new any platform, are they add partnership. have yet new we to our loans

think are of business seen far Additionally, to most window. choice participants of capital, sheet the institutional servicing our deal our have of a market the this Indeed, signed this operational will small true X market for this and never best we are new being sell there to has way universe own discuss capital. let's We basis, because is platform current reasons the on to MSR accounts. MSR our we MSR a and asset that the been investors and about partner We support to refinance market in in our believe third-party are the are clients MSR ability class we to securities a the working that the there are who pool away why and a exists once before many from current up bring a all how with managed subservicing profile the Bringing closes. we thinking from subservicing the through demand subservicer nontraditional we environment. grow of to retained the together, increasing has new various actively term for being by ensure great recently which opportunity activity number The structures. participating of portfolio risk like separately

are neutral tightening in the from posture more in spreads the of on are a of think one context, leverage. spreads is agency a terms market roughly and a with think to historical is especially risk great Therefore, climb far this limb a midst one do Fed attractive, we time While a fair. RMBS we period on not where of in or out to transitioning

expect still reinforces our and unexpected strategies. portfolio Fed last a our strategies. our Whether or the yields. highly pure direct-to-consumer slow speeds the though The XXXX, outperformed or outperform current Xx portfolio, of and positive are remains that MSR X prepayment underperformed why the MBS Xx be attractive for not having though pure is of for channel. seen the is valuable choice our and preparing development flow such prepayment risks agency low portfolio when Xx design. means quite and some or construction A our in the will a recapture we by this can agency capital environment of MBS convexity by asset portfolio Second, on good allocation producing in MSR will in the underperform we This when quarters. time, And cash our nature example just cuts

underperformed this last quarter as have MBS to expect they widened. we significantly tightens, outperformed agency strategies when we quarter While pure

agency balance as the to high fluctuate. Our our spreads portfolio to allocation a when capital acts MSR

our further are our in on agency-only can rather Two MSR, actions. merely is uniqueness a the where Looking flick we not of are mortgage we screen, Harbors more that the The path buy spreads asset REIT. through ahead, results or watching investment but not a an pure class impact in financial lies that through meaningfully we forging

returns, built We interim term, even next rates but not of with intent despite our the over over portfolio quarter cutting next the the the and long interest rate or high-quality cycle, delivering have volatility. just spread

to like not over all opportunities lens shareholder constantly value. our through the creating that, to our core a evaluate across competencies, results. the stagnant of financial is we portfolio hand With and discuss call Mary to Ours I'd sustainable

and share generated turn income comprehensive Please of Bill, you, quarter. weighted the The Thank average good to fourth Slide $XX.X morning. million X. or in company per $X.XX

$X.XX per Our Including economic XX of September return was at in the book quarterly results December value dividend X.X%. $XX.XX XX. positive at $XX.XX to a compared common share

where XX, Before the X, call distributions. our Slide to I'd we Slide income attention REIT to on like and tax your turning the taxable Appendix characterization customary included have of to information dividend

website. in return refer For the additional activity. the $X.XX of was was information IXM per and of XX.X%. tax information Please Lower IXM Relations portfolio related the representing for fourth found share, our by million or dividend section and $XX.X an spread primarily treatment, annualized turn quarter-over-quarter quarter to regarding the volatility X. distributions please impacted Investor to Slide

Moving to Slide X.

some Let's million. of moving IXM income quarter-over-quarter RMBS on variances This our in details primarily lower driven look is was investments quarter-over-quarter IXM. from lower coupon. mortgage by at down decreased in and balances the by $XX.X

Additionally, IXM was year-end certain expense affected accrual by adjustments.

prospective to later way returns. helpful daily investors quarterly positioning, and our in in is to reflects But timing understand There is return distortions expense to and presentation, adjusted cash Slide reflects IXM for Please it IXM X. and return outlook holdings the funding the which rates like analysts quarter the can on our and contributions. our slide reminder, quarter. coupon be a complementary most current the of turn As view the potential that adjustments. IXM, MSR flows, leverage we believe over

remained available. into Our year-end with our markets maturity agency for to fourth the average was sheet agreements RMBS XX days. quarter basis quarter repurchase sulfur Spreads At and balance throughout weighted quarter stable points. MBS the repo to XX liquid plus days our for widened and XX and with between end, ample funding slightly financing

X XX Nick. will maturity floating in call repos have of XX% spreads, end, very million servicing the lenders our disruption Currently, as $XXX XXXX. MSR repos to total typically days borrowings even in that occur Our that longer-term of are we've December. unused our of million under rolled a We for X turn bilateral about capacity with quarter billion of year-end financing repos repos outstanding facilities We ended term X-year December to can Post in are intentionally million MSR any rates. cuts I X quarter in at across lower over pricing given unused avoid $X.X we at capacity with funding past $XXX and attractive and advances. rate to financed to outstanding notes. $XXX now the roll

Thank XX. you, Mary. Slide Please to turn

in discussed, there of volatility Bill the As fourth was lack no quarter.

basis continued in underperformed, course about Rates basis rise the points. interest by tightened December strongly in November by signaling that the with and XX Following points. back the October, rates spreads Fed about reversed This spreads trend mortgage in widening XX in tightening quarter the is on XX basis XXXX XXX XXX a period mortgage nominal basis of rate was of tighter hikes end over. basis finished coupon the range tighter points, Ultimately, current the by basis to spreads of This points. at at points. XXX

we of spread out than figure the Fed see at all still the volatility. XX benefit You Though curve positioned much can X. rate range a longer-term market's the Putting the said, expectations forward of go environment volatility the see than demand it implied a of wider X for spread result cuts end this from on to, rate tightening, as of institutions. in to not realized the while tepid high points, and average limb. still in more Bill from of depository are Being priced risk we is an basis non-QE lower that XXXX, forward likely steeper is reflects together, and enough tighter

mortgages XX-year anticipated, affect by refinance by of the decline As Despite decreasing today of of XX effective detail portfolio and One to over prepayment I'd XX rates in quarter. window. like rates could thing to basis reporting rates highest X.X%, remained XX% fourth weaker MSR. XX% seasonals prepayments how quarter our falling the reflected points mortgage outside broadly increasing the X%, years. the This rates is mortgage over declined in and

rates. coupon for prepayment X, MBS projected XXX rate about this on rates versus prepayment Being at MSR MSR varying insensitive typical detail money, in out scenarios. in in very the interest a falling shows remain basis look our of Figure which more points current Let's our speeds to

In MSR. fact, our chart balances have portfolio green rate more XX basis incentive refinance. or of represents less than to of this X% The points of in line our

thinking instantaneous these I'm projected CPR. XX XX current rates, increase As you are to XXX can could are some in with from now. to top point sure a to actively only are CPR. are you speeds see, whose that is absolutely what we That's hedge coupon Compare slow, but it's even an basis decline the those CPR our built into also MSR. experiencing although of increase that we how expectations big XX true, still

Turning the to MSR marketplace.

$XXX offered As slowed is XXXX typical, XXXX's with active of under year of quarter of pace number for to well in the market, just high total affect sales single-digit fourth of spreads as MSR typically fourth $XX market. the sellers in in did total the as quarter just supply to the year supported billion Bids MSR second the the offered $XXX the little in receiving bulk brings finished This billion. the the billion. remain by Lower evidenced behind falling bids. MSR. a traded most

to quarter. and positioning turn billion, positions. the let's Slide Now our was billion $XX.X settled portfolio At $XX including XX, of our XX and portfolio December activity discuss in fourth

right about top will On and of bullets the positioning you a leverage. slide, risk few the see our

As responded some losses. book lowering value our by further to selling leverage decline, spreads protect and October we winded MBS, against in our actively

quarter for leverage average this quarter at from decreasing X.Xx reflects X.Xx Our end. third to the

Following captured our year-end. risk to in portfolio. added leverage This most strategically to decision effective optimistic proved from through of we signs November, retightening Fed and and the the of increased the be spreads

Xx. Our quarter economic end was debt-to-equity

shows story. the our review you and and as few X, by strong in an to that detail specified TBAs see coupons outlook. return leverage cheapening holdings to X.X% it in lower order in is can equal leverage of amount on returns, We X we reasons we own pools coupon with And think prudent we see Slide of coupon slides the you We this billion, composition migrated of we of replacing our that more performance similar neutral and pool the generate down agency maintain Figure X.X% turn throughout believe portfolio outlined to occurred the in to when to approximately have portfolio. position. by don't need a specified X.X a X% TBAs prior sharp add TBAs X.X% calls, take For advantage October. to of to that in the quarter. continue will Figure XX to we Please

value end, relative the specified decreasing coupon to same pools pool Additionally, X we to enhanced MBS TBAs. billion believe specified holdings X.X quarter better we CPR shows third than that pools the on X.X% by in offer the our rotating quarter right prepayment X.X were Figure CPR liquidity speeds approximately fourth bottom XX% into At TBAs. of in our specified from X.X in quarter. about

see speeds Please As on discount to you materially faster TBAs, aggregate, Slide can turn predominantly these more from than for the hence providing return. chart, were pools XX.

addition Our was XX, flow UPB quarter. at value $XXX portfolio of the in MSR the which market million billion $X includes through purchases December in

from of prepayment by our sheets, MSR continue end, historically remain in expectation and a rather quarter, current MSR providing XX% hedged billion one Post our X.Xx. rates for to and spread of is declined XXXX, to servicing-retained money another dropped basis. the hedge billion investing price to than X.X our this on to sell tailwind of that through we X low low first The $X.X a prefer purchase to at and rates the we to quarter securities. quarter MSR capital for levels the UPB multiple prepayment levels, the a out UPB At CPR, $X As MSR in strategy. settle speed term will signed X.X historically of declined mortgages deeply

the our available XX, of a we top XX%. of focus that to market a share. lower hedged potential of half XX% to the allocation return market. and turn to portfolio to our slide. of to static and meant are allocated slide expenses, market shown convertible we top return of this in believe estimated leverage to allocated XX.X% static return MSR The equity With be capital on in capital table is our happy stock, The for show the returns X.X% XX%. table very estimate that about now the any questions portfolio projection XX% static to common returns falls is estimate you the this to of structure effect per our to outlook per before portfolio. After quarterly XX% have. any to capital range half in joining $X.XX. X.X% a of is Finally, the We preferred our believe what with section equity a applying between prospective the The return to XX% our might Thank remaining portfolio estimate return common please much take potential And will with notes Slide you for static on hedged giving and after outstanding static us $X.XX to specific and to is return today. with or is of common we RMBS share

[Operator Instructions].

Our first UBS. from question is coming from Doug Harter

other Can are the the with seeing participants and leading to talk your teen factors why MBS XX%? in to seeing still XX% what you hoping you you're could rates and Agency the are lower that returns, you as offer to opinion see about returns hedged were

is Doug, Nick. this

Over the over well, the as you know. quarter, quarter tighten did spreads --

coupon construct capital or this differences our those coupon quarter, the but our did institution to mortgages, For portfolio you page in lose you lens and us, see over institution. addition go are we can But in these as slides, on we down things, in -- nominal person-to-person spread. materially can the go when spreads. which we spreads you down and to structure how due a other to again, all from and the And of do portfolio, that specifically, is cause from our of

in quarter. as from coupon It made And down snapshot quarter. the we of quarter is negatively And the remind that the a the just end is so the sense also for is it that it last that it through to to everyone by the value driven did reasons, happened coupon think impact just moment time. in does And it a is went at portfolio return relative potential spread go selection this of it think in exposure of move do portfolio. something no potential in in from know, long is of And that segment segment fact, means But term coupon nature over that this bit well quite sense rerun quarter, would by our a as around projection is you the the projections if have the higher that we to coupon. those on up today, were quarter-to-quarter. portfolio. we of we And we back lot a see gone So of mortgages. return that in materially we you

So of it is quarter snapshot a down-in-coupon a really just last predominantly the reflects at end bias.

that add, of coupon the in some thought And portfolio because might the a up-in-coupon a from of mortgages value just did we that movement I Nick there. Doug, than down as is moved potential we portfolio the portion be total perspective relative the would of ones in those the we better return that mentioned,

to So by be an total move. the that even was lower making return will, artifact, we potential going the better return thought is though you if

about between that for return the total how and there think And you about trade-off just frame do think time to on capturing total that? return And do time the current and How recognize comment. you return? total that

less days. we're relative time. We're play not than certainly to and we expect generally these I'd value a that, decisions. the year. about over thinking frequently say occur than scale It's about making we're of time terms them thinking in about one months It's longer when that talk seeing generically, opportunity out we

months. the say generally a scale time I'd So is few

lot rather as sure return mention calculation things. want and you I'm example, I sure know, other look at curve versus to tend The for there's versus technicalities our about in them things, look the blend spreads, curve just the of looking potential We of, XXX thing at a guys our for market inverted. people just look a at things how entire we than the to at

you tighter look of run against versus the get to tend you something mortgages longer end So whole at Then if you [indiscernible]. if curve, spreads. the do you do just

course, just as those others. leverage is it's that versus think And you will to numbers to and also. I we assume also that things of factor And a around, is I time, that's depends look But it as into get in the a it really, know. said, plays as on that big moment how come. a at move something how people factor

is Securities. Next from JMP coming from Cranston question today Trevor

question Another the return on potential slide.

a portfolio. forward projections float at incorporate forward decent MSR You whole. Fed income funding amount funds does float When that Slide portfolio the guys lower look return the have been XX, of as impact of generally, on guys income you pretty earning of we of on the comment on the the component funds expenses? impact think also just MSR could lower you on being the and how Fed if on about And a the

interest the course, float curve of. sloping rate is of yes, So of hedge subject downward MSR And the into the the to asset. the one entire incorporated earnings float is risk that we actively

windfall rose hedging a decline and experience in I won't and if fall rates that that book rates exposure. value say we that we wouldn't a when when experienced we're So large because

that's just rate of because between on point the how matters and it's complexity.It's longer-term we to say, the what hedge spread spread our really what across Nick Fed And curve, the that return that a to question curve, about funding portfolio the a curve, true itself. that and to asset but result, but relative really the said as risk-free rates, not not the, asset the of happens so and and also short-term every and fall, if rates are curve X being that the returns that on the portfolio is withstanding hedged our if of the constructed the I'll answer funding the point not slide is depends is the portfolio of rates on the cuts potential our is

rate go because say, if And completely, on I slightly about down it that's you to of zero that's I'd to more earned risk-free hedged. equity. want the would think the so returns talk the [indiscernible], And

to question, those your base assume that But calculations curve realized. all is the forward

So the calculation. are in embedded those all

maybe And side some of subservicing about the that a expand was growth for of the you particular. of on on about in potential wondering could growth couple the in talked the the opportunities next see subservicing years. things, you how magnitude then, I specifically over talk Bill, and bit business if little you of

my as out thing interesting of last the universe X been has as of so remarks, have and in XX% by well that's mortgage or the an year has basis risen described the average rates than points price money. said us and in XXX the dollar Well, that I is much the servicing is more happened market others in over

characteristics seen risk of the even before. so And really asset the that hasn't is something

are market for meaning flows so a in too. on see then talked very clients very say as among the are page XX -- showed has to. the the new little we a them to of about to help with that RoundPoint. we MSR buying It extract portfolio convexity it of in we're so the increase in prepayments own not for aren't And of partner reasons much. a which have I the that from investors that a marketplace $XXX being it's XXX why subservicing those usual bring market. I'd at to characters invest bit showed was investors on MSR And like see exactly is reasons his our low presentation trying in occur there's rates risk uncertainties we're been that chief as low managing are that other we in like subservicing seeing curves on we the before. deal are to of billion to that that market that's any cash result, what servicing profile we MSR will there's that cast participants the best investors, forth. institution basis the by Page the And page results platform, our what points, who we chart subject order investors, You any of And structures infrastructure portfolio of just same participants to Where seen created the know if exact provides And not expected of in very There's well, to and that relative has been invest third-party and we nontraditional think value well-capitalized have MSRs. that? wherewithal RoundPoint from we as where lots prepayment be the the Nick lots those market that subservicing MSR interest and been that fall sensitivity the lots

So from think focus that for we're one all is subservicing as reasons, this our those perspective. on business that area I being able going grow to to

Your Eric next BTIG. question from is coming Hagen from

an today? you for platform? for How the how mortgage are origination And XX without do how points need control or like than you secure you have were in like much you you MSR if might do basis MSR rates buy lower feel recapture And they do to that estimate is? XX feel like an

There's that largest own it but out I portfolio, to build we to really be only have. compete on are able to And guys a although the scratch. we to provide at point who's The expect our there be prepared that our out build an far to said XX protect about we in excited we as going second we haste portfolio world. the defense that to ability clients And acting our to We're a we're question as and filling to sure perform someone to with the money professional to feel in people. loans looking be servicing portfolio, quickly the time. or main remarks, not to but to question, originator. We're as is to And retail really thing defend due looking but That point this some in experienced particular ongoing. QX. in like this, the we to can. going said how opportunity we're have urgency I'm in be as our to we to making no understood with recapture as servicing and is, portfolio build-out We're the portfolio hiring able not is prepared of going we in roles. order of our to order not our is the this portfolio. be to here certainly in Again, is we again, prudently third-party also Page remarks, the not process first the at recapture begin answer any the hired strategy the have

this build Eric, want Nick. to is And Bill said. I just on what

didn't as second and Page stay understand, shows far XX, fully but money to a on slide is I I first as go question, also very which reasonable that going think a to to were with slot. your even RMSR speeds, here round is

our amortization is. surprising be on it very were if very, as it MSR So a we to rapid would

in comments, said as strategy. prepared our really the we like we also So pair

right As it we you now. know, like

return looks it our think I great potential. on

adding So don't really our intention to new being as paydown the issue the maybe near we But a it. future. see have capital for is to keep we

you room if change? you of And like You position. for do how Fed that guys the leverage? there if this what flexibility still growth opportunities neutral in change? with do are especially MSR, have feel talked you parameters run for But there the do see for cuts And the much to And a feel to level like leverage is would you Fed rates, it about you cuts?

terms market lot us, are expects we of at perhaps and events and tier what think price spreads the territory neutral leverage, the too is do they ahead X-sided think volatile Spreads are Fed again still we definitely, a remarks. now. in of yes, we of end are but the right think there's much, in to as said In prepared we ranges recent a we running what our of

this of lots So change look, things can year.

a of coming with have and a lot ramifications can year election things. a big up geopolitical that and coming tensions up We other have

makes posture. we market being for So us going near takes to future, the But see in most what see the and just sense. the this ourselves we're as leverage where

Markets. Lee Kenneth from coming is from question next RBC Our Capital

you upon the In if the impacted reported quarter. terms could potentially the IXM of in you I the just the expand that in that IXM that further quarter, wonder remarks prepared mentioned you in activity portfolio

which So go as well. for IXM as was the a our that took we factor did coupon, down quarter a down discussed,

down And the mortgages know sell time. prudent been wind the we just some calls, mentioned, talking our fact when about as did from we things prior As the market were different overweight was already just still it money managers ahead feel was like prior we've pretty a in October, quarter; you'll the of was year. that which environment at had in given than expressed us. felt we going well in We into big the the they market, and events last

to a reduced exposures So of for a in And lower the time in in have mentioned in our we comments that there period we decided to slide did leverage. reduce portfolio as balances little and that on mortgages. Mary time

back All coupon discussed, did IXM buy those the as did joined end leverage the back the quarter. our impact since of bring things our have up, back But of also quarter. we a up we mortgages, some and

positive think those a of a all things effect we'll for have So direction. we in quarter, this

might of doesn't without there's more natural MSR fixed that just thoughts of for a month. every couple add a not flows. is I which portfolio backward-looking pay bond. even activity, Ken, from variation cash in just timing occurs IXM is the coupon a It

or have pay next kinds another. XX month, asset therefore, the of the don't eye X month also, and on of all to course, reflect XXst of also month MSR prepayment we actual backward Some versus of and for the people And therefore, flows the X timing occur. the down cash pay interesting IXM payments they their sometimes looking first mortgage the and and that know in that they the There's servicing speeds. any there's on the pay or then they're

speeds benefit we expected, a prepayment be than projected. that will a would faster slower thought That come [indiscernible] than in in they so if forth. be slower or So come than

good there's of end, all being without any that natural Slide there what considered taking portfolio the estimate of the XX quarter on projection -- even the activity, think variation. we So will At as probably. rent consideration, quarter forward-looking a is end the said at it of basis snapshot a that would earlier, hundred And portfolio today the points earn the by than think it. Nick be of couple lower actually is we

all given pretty dividend, so corresponds And the and to feel we that how good. that

potential DTC one the RoundPoint, need with And those the for should investment about think on along the just channel. potential Wondering efforts? how all or we follow-up spending expansion on

that necessarily these think activity to the pretty us for low. and hold will originate for not We them capital loans be The all. is intent investment

replace sorts We a of is going having having servicing, will the will platform on do on that to keep servicing normally can of the having course. have can and and RoundPoint refinance keep the we'll servicing off than what otherwise we idea that that the in-house loans the run for the loans them things, recapture And would way. thing to it have this agencies. and the is ourselves, the which And sell would benefit disappeared is the directly rather the keep these of originate done and them is just we

channel. idea what that's this So to whole we're the with of direct-to-consumer trying do

Next question George KBW. from Bose is coming from

value Actually, we could an get book update your on quarter-to-date?

think As is X.X%. value the that of of Friday, close and X% book we up between

high the range? prepayment And it to Or expectation? then low what IXM, drives you your curious the range end? a what the Is takes end that just in bit versus target

Nick. Bose, this is

into things that are drivers some that funding and as assumptions well the go that Among of factors various have of those that We our range. range. are be prepayment primary as them would our assumptions,

in couple just Bill, is a that quarter, then points, terms did it's of you back say of hundred intra is basis you number up said? And where what that

actually, I distribution magnitude. said, Nick the that's the Yes. around it both forth, Again, coupon with our as and right so moves so current portfolio given and about But and forth. yes,

the portfolio, the On not the of security thing. side on combined

the If in our to you XXX the is that's overall. part, at look higher, not XX now, which XX, given basis right portfolio RMBS probably points but

unless overall you characterize up? was could And the

allocation the that. relative of by capital multiply just I

XXX. that be times So would XX% the

Rick Shane Our next question JPMorgan. from from is coming

did intra-quarter, $XX mark-to-market the we back to for we math, Can go like book little if were bit per basis, book it the the quarter little your ATM comments share. you time a about that, value this rationale please? last looks it modestly. dilutive talk offerings about to the is the to And at a on wanted where something during was this offering you aggressively. about even to should going of Curious more the do be if a When we below like forward quarter. bit the talk Just use looks expect going

correct. that's think I

money. we we platform. to of have down criteria. capital slight But higher discount as high, February dilutive expenses still rationale with is level in which dilution The of purchases that's I'd do the have we fit more say, did quite and numbers. investment the, that new with with to of MSR that in that with to we're of we marginal away. XX%, we cost the RoundPoint do I than we It's buy acquisition, return think book. say, Today, means February, on that our course, that we more We looking MSR We buy book, we make to at same our to the that certainly that as pools its the that of existing our think of the we the XX%, most the that the the what have In are XXXX. money, have we always to also goes And because also, when earnings by as that, capital. is of at those dilution MSR saw mean service said portfolio that loans somewhere cost raised good modestly than something digits a sorts even on the mechanical in the greater right on that the in mid-double is for

benefits money And set we dilution that powerful order of the reasons. servicer, we so get paying very thought of and that the new and it's really well worth of it scale was are invest slight the we MSR to take those in math a for economies where that today a in

about some think repurchase approaching was Is the see an it preps. the how all on you common it preps just Or X implied What as drove arbitrage seems of across when in? that Because you'll the the yield press we should like And it? there step the then that? was the on yield well. of

And as long prior managing for as and a our seeking arbitrage from else percentage be been are equity. consistently, where lies. and a preps of we've relative evaluate our have So preps shareholder that do of time, to know, capital think reduce I to know all share times, as our And been you guys equal you we structure. where constantly our our we total trading assets

do, did and to XXX,XXX things those where So little relative at of they which preps, said, the continue level, they a are. quarter, back we trade preps shares should buy did investments over as we'll last an a to you our the activity line attractive is

Next question is coming from Arren Citi. Cyganovich from

did and spread have that I from happened question December? your more to fourth the tightening from the quarter. in in is tightening benefit the portfolio have that the that happened typically on value Why The I believe tightening. spread November not you spread book benefit

Arren, well, it did.

call, and beginning look of you ended in at quarterly reported the up last X% that the If value quarter our up at quarter November, yet end which the X%. at at the think progression at of right we of I October, of our was about decline book CER an time, we approximate

to and And in did tend when the November, book reversal. of October in But in things example, there did at I And prudently is and quarter in the mentioned decide, immediately higher, change were we a declining. activity, was for have there think, start would material we in the in it it as So them that mortgages TR as But impact as haven't time our step book back. other you done the been there issuance ATM does some our that. engage did kind the things then value. if such value sell to comments, the we when a buying was that impact

majority where of our purely discussed an directions. spreads and like [indiscernible] end of an for by this that's they same not And we we've average capital as you of a widened in if our MSR we not is of to quarter, book peers us X% prior is as something mortgages to which opposite. last play like to are tightening going outperformed out you mortgage the year, exposure not why generally XX around. quarter at of and that portfolio when same spreads spreads the some risk In and for volatility same of see you're numbers in just last as then spread value hedged the it us, the peers look both mortgage in some actually point the the mortgage, of something structure of basis mortgage we've had give when our the at is amount our third XX% you, and peers have speaking, move agency mortgages positive in was mind a other construction, Now going our our quarter more capital have

a add should couple of comments. I Yes,

which I allocated our RMBS. is asset structure, allocation Nick has sale that XX% point, said capital of our only to think rather assets our the on

the to XX% that. a So only this, agency of have like return pure strategy is XX% in we going quarter

store by of things So able emphasize, spreads to be on of we is we to it's than hedge impacting that. that various that rate days going really without rainy of add and portfolio in that provide less the to risk the the think of number. that. then to is that and our our other And is things we how there's the serves of mortgage part of that a is portfolio people interest other we acquisition result go of RoundPoint And But liquidity have hedge maybe be into to portfolios capital the even so choice we're that or think the RMBS, it's meant the good. to But and to pursuing, risk mortgage forth. MSR. overemphasize terms sort And portfolio top that the part And high more the is X% exposure And the MSR and MSR point strategy. like then of revenue XX% structure. going the XX%, is which of that's also to strategy Agency just

just the book? the you're going then acquire on to it sounds would targeted doing something. And would that existing. protecting buy to that you doing of more something it servicing MSR, own at then out your outside that's versus like your in marketing direct-to-consumer or What the mortgages to specifically existing organically versus build-out, And be going be of benefit addition

outlook versus are same same buying as kind one. the the resin as you lots want suited We that's we companies decision the for of structures a a going house remodeling there It's our rates. of you time. are have to because that portfolio our needs. perfectly want We're built don't other get We're the from that there of or want. this stressed we out different or like your and to some that, that. any for involved able wakes or any out about are And an time for refinance. here upside benefits of down and legacy being feel and buying to risks of miles where environment And be costs things miles are that the gross of don't build away of in The of platform environment the existing just building on I like current with

just not measured in to to this thing, months it's to not And said; have as take be so build we I the time, forever years. it's going going

we're we time. have on have we're That's the the exactly going focus doing so portfolio. no on main what we or And issues We're what going to to thing want. to legacy And our build risks. We're here. going recapture

portfolio market That's focused going mind. You the what business very so recapture to defense to in we asked portfolio. world a out and whether on try of model go and our than to have forth. really whole We're and we're different really

end for I'd closing like the or further any to comments. turn back over floor of question-and-answer reached We session. our the

thank always, joining today, want interest in as just to for and I for us everyone your thank you, Two Harbors.

conclude teleconference webcast. That today's does

this a wonderful at lines you your your disconnect and for today. may have time, We participation thank You day.