Two Harbors Investment (NYSE: TWO) reported Q1 EPS of $0.25, $0.04 worse than the analyst estimate of $0.29. Revenue for the quarter came in at $67.62 million versus the consensus estimate of $62.66 million.

Quarterly Summary

• Experienced unprecedented market conditions stemming from the global COVID-19 pandemic. As a result, we took decisive action to reduce portfolio risk and amass a strong defensive liquidity position.
• Sold substantially all of our non-Agency securities, eliminating the risk of continued outsized margin calls and ongoing funding concerns associated with the significant spread widening on these assets.
• Focused on the safety and well-being of our people by implementing mandatory work-from-home measures across all three of our offices.
• Reported book value of $6.96 per common share.
• Incurred a Comprehensive Loss of $(2.1) billion, or $(7.63) per weighted average basic common share, representing an annualized return on average common equity of (225.2)%.
• Reported Core Earnings of $67.6 million, or $0.25 per weighted average basic common share.(1)

Post Quarter-End Business Update

• Announced non-renewal of management agreement and transition to self-management effective September 19, 2020. Expect benefits to stockholders to include: (1) substantial annual cost savings of approximately $42 million or $0.15 per common share; (2) further alignment of interests of management and stockholders; (3) enhanced returns on any future capital growth; and (4) potential for attracting new institutional investors.
• In advanced discussions with two major banks regarding servicing advance facilities, which are expected to be finalized in the next 30-60 days, subject to customary closing conditions and GSE approvals.
• Paid interim dividend of $0.05 per common share and all first quarter preferred dividends; will continue to evaluate our quarterly dividends based on evolving market conditions.

“The global COVID-19 health pandemic led to unprecedented market conditions in the first quarter. As a result, we focused on raising our excess liquidity and de-risking our portfolio,” stated Thomas Siering, Two Harbors’ President and Chief Executive Officer. “During the quarter, we made every margin call and at March 31st had a strong liquidity position with $1.2 billion in unrestricted cash. Going forward, while we can’t predict how this global pandemic will play out, we are making every effort to best position our company for events outside of our control. Despite all of the uncertainty, we believe that we can withstand future volatility and ultimately, on the other side of this crisis, once again drive long-term stockholder value.”

For earnings history and earnings-related data on Two Harbors Investment (TWO) click here.