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TWO Two Harbors Investment

Filed: 5 May 21, 4:14pm

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Two Harbors Investment Corp. Reports First Quarter 2021 Financial Results
Hedge Benefits of MSR Result in Stable Performance During Volatile Quarter

NEW YORK, May 5, 2021 - Two Harbors Investment Corp. (NYSE: TWO), an Agency + MSR mortgage real estate investment trust (REIT), today announced its financial results for the quarter ended March 31, 2021.
Quarterly Summary
Reported book value of $7.29 per common share, representing a (2.2)% quarterly return on book value(1)
Generated Comprehensive Income of $(48.5) million, representing an annualized return on average common equity of (9.3)%
Reported Core Earnings of $45.8 million, or $0.17 per weighted average basic common share(2)
Declared a first quarter common stock dividend of $0.17 per share
Continued strength in mortgage servicing rights (MSR) flow-sale program; settled $21.3 billion unpaid principal balance (UPB) of MSR
Closed on an additional $1.1 billion UPB of MSR and executed term sheets on an additional $7.2 billion of UPB of MSR through bulk purchases
Executed on actions to optimize liability and capital structure:
Issued $287.5 million principal amount of 5-year convertible senior notes due 2026
Repurchased and retired $143.7 million principal amount of convertible senior notes due 2022
Completed the redemption of $75 million Series D and $200 million Series E preferred shares
Expanded funding capacity with the closing of a $300 million MSR asset financing facility, of which $225 million is committed


Post Quarter End Update
Executed term sheets on $6.1 billion UPB of MSR through bulk purchases

“With mortgage spreads at historically tight levels, our Agency + MSR strategy, with its lower exposure to mortgage spreads, is especially attractive,” stated Bill Greenberg, Two Harbors’ President and Chief Executive Officer. “As spreads normalize, we expect to increase leverage and deploy excess capital at more attractive levels. In the meantime, we are committed to growing our MSR portfolio and have expanded our funding capacity to execute on that strategy.”


(1) Return on book value is defined as the increase (decrease) in book value per common share from the beginning to the end of the given period, plus dividends declared in the period, divided by book value as of the beginning of the period.
(2) Core Earnings is a non-GAAP measure. Please see page 11 for a definition of Core Earnings and a reconciliation of GAAP to non-GAAP financial information.
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Operating Performance
The following table summarizes the company’s GAAP and non-GAAP earnings measurements and key metrics for the first quarter of 2021 and fourth quarter of 2020:
Two Harbors Investment Corp. Operating Performance (unaudited)








(dollars in thousands, except per common share data)



Three Months Ended
March 31, 2021

Three Months Ended
December 31, 2020
Earnings attributable to common stockholders Earnings

 Per weighted average basic common share

Annualized return on average common equity

 Earnings

 Per weighted average basic common share

Annualized return on average common equity
Comprehensive (Loss) Income$(48,512)

$(0.18)

(9.3)%

$113,481 $0.41 22.1 %
GAAP Net Income$222,941 

$0.81 

42.8 %

$192,220 $0.70 37.4 %
Core Earnings(1)
$45,830 

$0.17 

8.8 %

$82,007 $0.30 15.9 %
Operating Metrics











Dividend per common share$0.17 





$0.17 




Annualized dividend yield(2)
9.3 %10.7 %
Book value per common share at period end$7.29 





$7.63 




Return on book value(3)
(2.2)%5.8 %
Operating expenses, excluding non-cash LTIP amortization and nonrecurring expenses(4)
$11,914 





$14,673 




Operating expenses, excluding non-cash LTIP amortization and nonrecurring expenses, as a percentage of average equity(4)
1.6 %1.9 %
___________
(1)Please see page 11 for a definition of Core Earnings and a reconciliation of GAAP to non-GAAP financial information.
(2)Dividend yield is calculated based on annualizing the dividends declared in the given period, divided by the closing share price as of the end of the period.
(3)Return on book value is defined as the increase (decrease) in book value per common share from the beginning to the end of the given period, plus dividends declared in the period, divided by the book value as of the beginning of the period.
(4)Excludes non-cash equity compensation expense of $1.8 million for the first quarter of 2021 and $2.2 million for the fourth quarter of 2020 and nonrecurring expenses of $2.0 million for the first quarter of 2021 and $1.5 million for the fourth quarter of 2020.



“We grew the MSR portfolio despite high refinance rates, demonstrating the strength of our platform,” stated Matt Koeppen, Two Harbors’ Chief Investment Officer. “The MSR market remains healthy and performance should be well-supported in a higher rate environment. We expect to continue to source new servicing through flow and bulk channels at attractive levels.”




Portfolio Summary
The company’s portfolio was comprised of $13.6 billion of Agency residential mortgage-backed securities (RMBS), Agency Derivatives and MSR as well as their associated notional hedges as of March 31, 2021. Additionally, the company held $5.0 billion bond equivalent value of net long to-be-announced securities (TBAs).



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The following tables summarize the company’s investment portfolio as of March 31, 2021 and December 31, 2020:
Two Harbors Investment Corp. Portfolio
(dollars in thousands)

Portfolio CompositionAs of March 31, 2021As of December 31, 2020
(unaudited)(unaudited)
Agency
Fixed Rate$11,453,989 84.1 %$14,627,097 89.7 %
Other Agency(1)
64,011 0.4 %72,411 0.4 %
Total Agency11,518,000 84.5 %14,699,508 90.1 %
Mortgage servicing rights(2)
2,091,761 15.4 %1,596,153 9.8 %
Other9,219 0.1 %13,031 0.1 %
Aggregate Portfolio$13,618,980 $16,308,692 
Net TBA position(3)
5,024,5755,481,479
Total Portfolio$18,643,555 $21,790,171 
Portfolio MetricsThree Months Ended
March 31, 2021
Three Months Ended
December 31, 2020
(unaudited)(unaudited)
Annualized portfolio yield during the quarter(4)
2.25 %2.26 %
Annualized cost of funds on average borrowing balance during the quarter(5)
0.60 %0.50 %
Annualized net yield for aggregate portfolio during the quarter1.65 %1.76 %
________________
(1)Other Agency includes hybrid ARMs and Agency derivatives.
(2)Based on the loans underlying the MSR reported by subservicers on a month lag, adjusted for current month purchases.
(3)Represents bond equivalent value of TBA position. Bond equivalent value is defined as notional amount multiplied by market price. Accounted for as derivative instruments in accordance with GAAP.
(4)Includes interest income on RMBS and servicing income net of servicing expenses and amortization on MSR.
(5)Cost of funds includes interest spread income/expense associated with the portfolio's interest rate swaps.

Portfolio Metrics Specific to RMBS and Agency DerivativesAs of March 31, 2021As of December 31, 2020
(unaudited)(unaudited)
Weighted average cost basis of Agency principal and interest securities(6)
$104.90 $104.95 
Weighted average three month CPR on Agency RMBS30.8 %27.0 %
Fixed-rate investments as a percentage of aggregate RMBS and Agency Derivatives portfolio99.4 %99.4 %
Adjustable-rate investments as a percentage of aggregate RMBS and Agency Derivatives portfolio0.6 %0.6 %
______________
(6) Weighted average cost basis includes RMBS principal and interest securities only. Average purchase price utilized carrying value for weighting purposes.

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Portfolio Metrics Specific to MSR(1)
As of March 31, 2021As of December 31, 2020
(dollars in thousands)(unaudited)(unaudited)
Unpaid principal balance$179,014,244 $177,861,483 
Gross weighted average coupon3.6 %3.7 %
Weighted average original FICO score(2)
757756
Weighted average original LTV73 %74 %
60+ day delinquencies2.9 %3.2 %
Net servicing fee26.5 basis points26.8 basis points
Three Months Ended
March 31, 2021
Three Months Ended
December 31, 2020
(unaudited)(unaudited)
Fair value gains$327,438 $2,522 
Servicing income$107,119 $100,549 
Servicing expenses$24,221 $22,595 
Change in servicing reserves$661 $1,591 
________________
Note: The company does not directly service mortgage loans, but instead contracts with appropriately licensed subservicers to handle substantially all servicing functions in the name of the subservicer for the loans underlying the company’s MSR.
(1) Metrics exclude residential mortgage loans in securitization trusts for which the company is the named servicing administrator.
(2) FICO represents a mortgage industry accepted credit score of a borrower.
Other Investments and Risk Management MetricsAs of March 31, 2021As of December 31, 2020
(dollars in thousands)(unaudited)(unaudited)
Net long TBA notional amount(3)
$4,800,000 $5,197,000 
Interest rate swaps notional, utilized to economically hedge interest rate exposure (or duration)15,221,59712,646,341
Swaptions net notional, utilized as macroeconomic hedges— 3,750,000 
Total interest rate swaps and swaptions notional$15,221,597 $16,396,341 
________________
(3) Accounted for as derivative instruments in accordance with GAAP.


Financing Summary
The following tables summarize the company’s financing metrics and outstanding repurchase agreements, revolving credit facilities, term notes and convertible senior notes as of March 31, 2021 and December 31, 2020:
March 31, 2021BalanceWeighted Average Borrowing RateWeighted Average Months to MaturityNumber of Distinct Counterparties
(dollars in thousands, unaudited)
Repurchase agreements collateralized by RMBS$11,676,062 0.24 %3.29 19
Revolving credit facilities collateralized by MSR and related servicing advance obligations443,458 3.70 %10.39 
Term notes payable collateralized by MSR

395,891 

2.91 %

38.86 

n/a
Unsecured convertible senior notes423,337 6.25 %41.31 n/a
Total borrowings$12,938,748 
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December 31, 2020

Balance

Weighted Average Borrowing Rate

Weighted Average Months to Maturity

Number of Distinct Counterparties
(dollars in thousands, unaudited)
















Repurchase agreements collateralized by RMBS

$15,143,898 

0.28 %

1.91 

20 
Revolving credit facilities collateralized by MSR and related servicing advance obligations

283,830 

2.95 %12.89 

Term notes payable collateralized by MSR395,609 2.95 %41.82 n/a
Unsecured convertible senior notes

286,183 

6.25 %

12.53 

n/a
Total borrowings

$16,109,520 







Borrowings by Collateral TypeAs of March 31, 2021As of December 31, 2020
(dollars in thousands)(unaudited)(unaudited)
Collateral type:
Agency RMBS and Agency Derivatives$11,674,486 $15,141,999 
Mortgage servicing rights and related servicing advance obligations839,349 679,439 
Other - secured1,576 1,899 
Other - unsecured(1)
423,337 286,183 
Total$12,938,748 $16,109,520 
Debt-to-equity ratio at period-end(2)
4.8 :1.05.2 :1.0
Economic debt-to-equity ratio at period-end(3)
6.4 :1.06.8 :1.0
Cost of Funds MetricsThree Months Ended
March 31, 2021
Three Months Ended
December 31, 2020
(unaudited)(unaudited)
Annualized cost of funds on average borrowings during the quarter:0.6 %0.6 %
Agency RMBS and Agency Derivatives0.3 %0.3 %
Mortgage servicing rights and related servicing advance obligations(4)
3.9 %3.9 %
Other - secured2.1 %2.4 %
Other - unsecured(1)(4)
6.8 %6.8 %
____________________
(1)Unsecured convertible senior notes.
(2)Defined as total borrowings to fund RMBS, MSR and Agency Derivatives, divided by total equity.
(3)Defined as total borrowings to fund RMBS, MSR and Agency Derivatives, plus the implied debt on net TBA positions, divided by total equity.
(4)Includes amortization of debt issuance costs.


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Conference Call
Two Harbors Investment Corp. will host a conference call on May 6, 2021 at 9:00 a.m. EDT to discuss first quarter 2021 financial results and related information. To participate in the teleconference, please call toll-free 800-263-0877, conference code 5273239, approximately 10 minutes prior to the above start time. You may also listen to the teleconference live via the Internet on the company’s website at www.twoharborsinvestment.com in the Investors section under the Events and Presentations link. For those unable to attend, a telephone playback will be available beginning at 12:00 p.m. EDT on May 6, 2021, through 12:00 a.m. EDT on June 5, 2021. The playback can be accessed by calling 888-203-1112, conference code 5273239. The call will also be archived on the company’s website in the Investors section under the Events and Presentations link.

Two Harbors Investment Corp.
Two Harbors Investment Corp., a Maryland corporation, is an internally managed real estate investment trust that invests in residential mortgage-backed securities, mortgage servicing rights and other financial assets. Two Harbors is headquartered in Minnetonka, MN. Additional information is available at www.twoharborsinvestment.com.

Forward-Looking Statements
This presentation includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “target,” “assume,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believe,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results, including, among other things, those described in our Annual Report on Form 10-K for the year ended December 31, 2020, and any subsequent Quarterly Reports on Form 10-Q, under the caption “Risk Factors.” Factors that could cause actual results to differ include, but are not limited to: the state of credit markets and general economic conditions; the ongoing impact of the COVID-19 pandemic, and the actions taken by federal and state governmental authorities and GSEs in response, on the U.S. economy, financial markets and our target assets; changes in interest rates and the market value of our assets; changes in prepayment rates of mortgages underlying our target assets; the rates of default or decreased recovery on the mortgages underlying our target assets; declines in home prices; our ability to establish, adjust and maintain appropriate hedges for the risks in our portfolio; the availability and cost of our target assets; the availability and cost of financing; changes in the competitive landscape within our industry; our ability to effectively execute and to realize the benefits of strategic transactions and initiatives we have pursued or may in the future pursue; our decision to terminate our management agreement with PRCM Advisers LLC and the ongoing litigation with PRCM Advisers related to such termination; our ability to manage various operational risks and costs associated with our business; interruptions in or impairments to our communications and information technology systems; our ability to acquire (MSR) and successfully operate our seller-servicer subsidiary and oversee our subservicers; the impact of any deficiencies in the servicing or foreclosure practices of third parties and related delays in the foreclosure process; our exposure to legal and regulatory claims; legislative and regulatory actions affecting our business; the impact of new or modified government mortgage refinance or principal reduction programs; our ability to maintain our REIT qualification; and limitations imposed on our business due to our REIT status and our exempt status under the Investment Company Act of 1940.
Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Two Harbors does not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Additional information concerning these and other risk factors is contained in Two Harbors’ most recent filings with the Securities and Exchange Commission (SEC). All subsequent written and oral forward-looking statements concerning Two Harbors or matters attributable to Two Harbors or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.


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Non-GAAP Financial Measures
In addition to disclosing financial results calculated in accordance with United States generally accepted accounting principles (GAAP), this press release and the accompanying investor presentation present non-GAAP financial measures, such as Core Earnings and Core Earnings per basic common share that exclude certain items. The non-GAAP financial measures presented by the company provide supplemental information to assist investors in analyzing the company’s results of operations and help facilitate comparisons to industry peers. However, because these measures are not calculated in accordance with GAAP, they should not be considered a substitute for, or superior to, the financial measures calculated in accordance with GAAP. The company’s GAAP financial results and the reconciliations from these results should be carefully evaluated. See the GAAP to non-GAAP reconciliation table on page 11 of this release.

Additional Information
Stockholders of Two Harbors and other interested persons may find additional information regarding the company at the SEC’s Internet site at www.sec.gov or by directing requests to: Two Harbors Investment Corp., Attn: Investor Relations, 601 Carlson Parkway, Suite 1400, Minnetonka, MN, 55305, telephone (612) 453-4100.

Contact
Paulina Sims, Senior Director, Investor Relations, Two Harbors Investment Corp., (612)-446-5431, Paulina.Sims@twoharborsinvestment.com

# # #
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TWO HARBORS INVESTMENT CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
March 31,
2021
December 31,
2020
(unaudited)
ASSETS
Available-for-sale securities, at fair value (amortized cost $11,067,188 and $14,043,175, respectively; allowance for credit losses $18,170 and $22,528, respectively)$11,473,390 $14,650,922 
Mortgage servicing rights, at fair value2,091,761 1,596,153 
Cash and cash equivalents1,159,306 1,384,764 
Restricted cash812,654 1,261,667 
Accrued interest receivable40,527 47,174 
Due from counterparties60,293 146,433 
Derivative assets, at fair value55,145 95,937 
Reverse repurchase agreements76,000 91,525 
Other assets222,839 241,346 
Total Assets$15,991,915 $19,515,921 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Repurchase agreements$11,676,062 $15,143,898 
Revolving credit facilities443,458 283,830 
Term notes payable395,891 395,609 
Convertible senior notes423,337 286,183 
Derivative liabilities, at fair value16,162 11,058 
Due to counterparties144,270 135,838 
Dividends payable60,384 65,480 
Accrued interest payable11,906 21,666 
Other liabilities99,729 83,433 
Total Liabilities13,271,199 16,426,995 
Stockholders’ Equity:
Preferred stock, par value $0.01 per share; 100,000,000 shares authorized and 29,050,000 and 40,050,000 shares issued and outstanding, respectively ($726,250 and $1,001,250 liquidation preference, respectively)702,550 977,501 
Common stock, par value $0.01 per share; 700,000,000 shares authorized and 273,718,537 and 273,703,882 shares issued and outstanding, respectively2,737 2,737 
Additional paid-in capital5,165,683 5,163,794 
Accumulated other comprehensive income370,148 641,601 
Cumulative earnings1,265,913 1,025,756 
Cumulative distributions to stockholders(4,786,315)(4,722,463)
Total Stockholders’ Equity2,720,716 3,088,926 
Total Liabilities and Stockholders’ Equity$15,991,915 $19,515,921 
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TWO HARBORS INVESTMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(dollars in thousands)
Certain prior period amounts have been reclassified to conform to the current period presentation
Three Months Ended
March 31,
20212020
(unaudited)
Interest income:
Available-for-sale securities$55,652 $248,684 
Other457 6,823 
Total interest income56,109 255,507 
Interest expense:
Repurchase agreements8,470 152,605 
Revolving credit facilities4,695 3,531 
Term notes payable3,211 4,804 
Convertible senior notes6,350 4,776 
Federal Home Loan Bank advances— 1,592 
Total interest expense22,726 167,308 
Net interest income33,383 88,199 
Other income (loss):
Gain (loss) on investment securities132,868 (1,081,607)
Servicing income107,119 130,797 
Gain (loss) on servicing asset327,438 (586,665)
Loss on interest rate swap and swaption agreements(15,599)(250,596)
Loss on other derivative instruments(276,011)(133,468)
Other (loss) income(5,742)798 
Total other income (loss)270,073 (1,920,741)
Expenses:
Management fees— 14,550 
Servicing expenses24,947 19,905 
Compensation and benefits8,188 8,277 
Other operating expenses7,487 6,801 
Restructuring charges— 719 
Total expenses40,622 50,252 
Income (loss) before income taxes262,834 (1,882,794)
Provision for (benefit from) income taxes22,677 (13,138)
Net income (loss)240,157 (1,869,656)
Dividends on preferred stock17,216 18,950 
Net income (loss) attributable to common stockholders$222,941 $(1,888,606)
Basic earnings (loss) per weighted average common share$0.81 $(6.91)
Diluted earnings (loss) per weighted average common share$0.74 $(6.91)
Dividends declared per common share$0.17 $— 
Weighted average number of shares of common stock:
Basic273,710,765 273,392,615 
Diluted311,465,060 273,392,615 
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TWO HARBORS INVESTMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS, CONTINUED
(dollars in thousands)
Certain prior period amounts have been reclassified to conform to the current period presentation
Three Months Ended
March 31,
20212020
(unaudited)
Comprehensive loss:
Net income (loss)$240,157 $(1,869,656)
Other comprehensive loss, net of tax:
Unrealized loss on available-for-sale securities(271,453)(198,070)
Other comprehensive loss(271,453)(198,070)
Comprehensive loss(31,296)(2,067,726)
Dividends on preferred stock17,216 18,950 
Comprehensive loss attributable to common stockholders$(48,512)$(2,086,676)
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TWO HARBORS INVESTMENT CORP.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(dollars in thousands, except share data)
Certain prior period amounts have been reclassified to conform to the current period presentation

Three Months Ended
March 31,
Three Months Ended
December 31,

20212020

(unaudited)(unaudited)
Reconciliation of Comprehensive (loss) income to Core Earnings:


Comprehensive (loss) income attributable to common stockholders$(48,512)$113,481 
Adjustment for other comprehensive loss attributable to common stockholders:

Unrealized loss on available-for-sale securities271,453 78,739 
Net income attributable to common stockholders$222,941 $192,220 


Adjustments for non-Core Earnings:

Realized gain on securities(69,194)(52,082)
Unrealized (gain) loss on securities(62,539)10,210 
(Reversal of) provision for credit losses(1,135)4,509 
Realized and unrealized gain on mortgage servicing rights(390,704)(61,968)
Realized loss on termination or expiration of swaps and swaptions6,350 2,546 
Unrealized loss on interest rate swaps and swaptions10,899 14,096 
Loss (gain) on other derivative instruments294,952 (37,752)
Other loss (income)5,817 (399)
Change in servicing reserves661 1,591 
Non-cash equity compensation expense1,790 2,243 
Other nonrecurring expenses1,971 1,541 
Change in restructuring charges— (294)
Net provision for income taxes on non-Core Earnings24,021 5,546 
Core Earnings attributable to common stockholders(1)
$45,830 $82,007 



Weighted average basic common shares273,710,765 273,699,079 
Core Earnings attributable to common stockholders per weighted average basic common share$0.17 $0.30 
_____________
(1)Core Earnings is a non-U.S. GAAP measure that we define as comprehensive loss attributable to common stockholders, excluding “realized and unrealized gains and losses” (impairment losses, provision for credit losses, realized and unrealized gains and losses on the aggregate portfolio, reserve expense for representation and warranty obligations on MSR, non-cash compensation expense related to restricted common stock, other nonrecurring expenses and restructuring charges). As defined, Core Earnings includes net interest income, accrual and settlement of interest on derivatives, dollar roll income on TBAs, servicing income, net of estimated amortization on MSR, management fees and recurring cash related operating expenses. Dollar roll income is the economic equivalent to holding and financing Agency RMBS using short-term repurchase agreements. Core Earnings provides supplemental information to assist investors in analyzing the Company’s results of operations and helps facilitate comparisons to industry peers.

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TWO HARBORS INVESTMENT CORP.
SUMMARY OF QUARTERLY CORE EARNINGS
(dollars in millions, except per share data)
Certain prior period amounts have been reclassified to conform to the current period presentation


Three Months Ended

March 31,
2021
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020

(unaudited)
Net Interest Income:





Interest income$56.1 $72.5 $89.7 $107.3 $255.5 
Interest expense22.7 22.6 29.2 62.1 167.3 
Net interest income33.4 49.9 60.5 45.2 88.2 
Other income:
Servicing income, net of amortization(1)
43.9 41.1 42.2 51.0 55.2 
Interest spread on interest rate swaps1.7 2.0 0.8 (56.3)(12.6)
Gain on other derivative instruments18.9 43.5 32.9 11.9 5.3 
Other income0.1 0.1 0.1 0.1 0.1 
Total other income64.5 86.7 76.0 6.7 48.0 
Expenses36.2 37.3 43.5 46.8 47.0 
Core Earnings before income taxes61.7 99.3 93.0 5.1 89.2 
Income tax (benefit) expense(1.3)(1.7)(1.5)0.6 2.6 
Core Earnings63.0 101.0 94.5 4.5 86.6 
Dividends on preferred stock17.2 19.0 18.9 19.0 19.0 
Core Earnings attributable to common stockholders(2)
$45.8 $82.0 $75.6 $(14.5)$67.6 
Weighted average basic Core EPS$0.17 $0.30 $0.28 $(0.05)$0.25 
Core earnings return on average common equity8.8 %15.9 %15.7 %(3.1)%7.3 %
________________
(1)Amortization refers to the portion of change in fair value of MSR primarily attributed to the realization of expected cash flows (runoff) of the portfolio. This amortization has been deducted from Core Earnings. Amortization of MSR is deemed a non-GAAP measure due to the company’s decision to account for MSR at fair value.
(2)Please see page 11 for a definition of Core Earnings and a reconciliation of GAAP to non-GAAP financial information.


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