FT Markets Data
Two Harbors Investment Corp

TWO Reports First Quarter 2025 Financial Results

Positive Returns Across the Portfolio Drive Quarterly Results

NEW YORK--(BUSINESS WIRE)--Apr. 28, 2025-- TWO (Two Harbors Investment Corp., NYSE: TWO), an MSR-focused real estate investment trust (REIT), today announced its financial results for the quarter ended March 31, 2025.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20250428707484/en/

Quarterly Summary

  • Reported book value of $14.66 per common share, and declared a first quarter common stock dividend of $0.45 per share, representing a 4.4% quarterly economic return on book value.(1)
  • Generated Comprehensive Income of $64.9 million, or $0.62 per weighted average basic common share.
  • Settled $174.9 million in unpaid principal balance (UPB) of MSR through flow-sale acquisitions and recapture. Post quarter-end, committed to purchase $1.7 billion UPB of MSR through two bulk acquisitions.
  • As of March 31, 2025, MSR portfolio had a weighted average gross coupon rate of 3.46% and a 60+ day delinquency rate of 0.85%, compared to 0.69% as of December 31, 2024. For the first quarter of 2025, MSR portfolio experienced a 3-month CPR of 4.2%, compared to 3.9% for the first quarter of 2024.
  • Funded $28.9 million UPB in first lien loans and brokered $36.1 million UPB in second lien loans.

“We delivered a strong first quarter, with both our securities and MSR contributing to positive performance,” said Bill Greenberg, TWO’s President and Chief Executive Officer. “These results are a testament to our thoughtful and intentional portfolio construction with MSR at its core, which is designed to deliver attractive risk-adjusted returns across a variety of market environments. Moreover, our mortgage operating company, RoundPoint, provides additional benefits to our shareholders and allows us to impact our results through our own actions in ways that portfolios without operating platforms cannot. I’m very excited about the opportunities ahead for TWO.”

“Given the uncertain macroeconomic environment that we are currently in, we are focused on keeping our risk exposures low,” stated Nick Letica, TWO’s Chief Investment Officer. “You can see evidence of this in various dimensions across our portfolio at quarter-end, including lower notional mortgage exposure and lower spread exposure. We are also maintaining high levels of excess liquidity, even as the funding markets have remained liquid and well supported. But from dislocation, there is also opportunity. Agency RMBS spreads have widened in response to the pickup in volatility, increasing the levered returns available on that asset, while the low weighted average coupon rate of our MSR should continue to generate stable cashflows.”

________________

(1)

Economic return on book value is defined as the increase (decrease) in common book value from the beginning to the end of the given period, plus dividends declared to common stockholders in the period, divided by common book value as of the beginning of the period.

Operating Performance

The following table summarizes the company’s GAAP and non-GAAP earnings measurements and key metrics for the first quarter of 2025 and fourth quarter of 2024:

Operating Performance (unaudited)

(dollars in thousands, except per common share data)

 

Three Months Ended March 31, 2025

 

Three Months Ended December 31, 2024

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 Income (Loss)

$

64,931

 

 

$

0.62

 

 

16.8

%

 

$

(1,620

)

 

$

(0.03

)

 

(0.4

)%

GAAP Net (Loss) Income

$

(92,241

)

 

$

(0.89

)

 

(23.8

)%

 

$

264,945

 

 

$

2.54

 

 

70.6

%

Earnings Available for Distribution(1)

$

25,092

 

 

$

0.24

 

 

6.5

%

 

$

21,181

 

 

$

0.20

 

 

5.6

%

 

 

 

 

 

 

 

 

 

 

 

 

Operating Metrics

 

 

 

 

 

 

 

 

 

 

 

Dividend per common share

$

0.45

 

 

 

 

 

 

$

0.45

 

 

 

 

 

Annualized dividend yield(2)

 

13.5

%

 

 

 

 

 

 

15.2

%

 

 

 

 

Book value per common share at period end

$

14.66

 

 

 

 

 

 

$

14.47

 

 

 

 

 

Economic return on book value(3)

 

4.4

%

 

 

 

 

 

 

—

%

 

 

 

 

Operating expenses, excluding non-cash LTIP amortization and certain operating expenses(4)

$

40,465

 

 

 

 

 

 

$

39,236

 

 

 

 

 

Operating expenses, excluding non-cash LTIP amortization and certain operating expenses, as a percentage of average equity(4)

 

7.5

%

 

 

 

 

 

 

7.4

%

 

 

 

 

_______________

(1)

Earnings Available for Distribution, or EAD, is a non-GAAP measure. Please see page 11 for a definition of EAD 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)

Economic return on book value is defined as the increase (decrease) in common book value from the beginning to the end of the given period, plus dividends declared to common stockholders in the period, divided by the common book value as of the beginning of the period.

(4)

Excludes non-cash equity compensation expense of $6.5 million for the first quarter of 2025 and $1.6 million for the fourth quarter of 2024 and certain operating expenses of $106 thousand for the first quarter of 2025 and $39 thousand for the fourth quarter of 2024. Certain operating expenses predominantly consists of expenses incurred in connection with the company’s ongoing litigation with PRCM Advisers LLC.

Portfolio Summary

As of March 31, 2025, the company’s portfolio was comprised of $11.6 billion of Agency RMBS, MSR and other investment securities as well as their associated notional debt hedges. Additionally, the company held $3.0 billion bond equivalent value of net long to-be-announced securities (TBAs).

The following tables summarize the company’s investment portfolio as of March 31, 2025 and December 31, 2024:

Investment Portfolio

(dollars in thousands)

 

Portfolio Composition

 

As of March 31, 2025

 

As of December 31, 2024

 

 

(unaudited)

 

(unaudited)

Agency RMBS

 

$

8,627,708

 

74.4

%

 

$

7,376,965

 

71.1

%

Mortgage servicing rights(1)

 

 

2,959,773

 

25.6

%

 

 

2,994,271

 

28.9

%

Other

 

 

3,613

 

—

%

 

 

3,734

 

—

%

Aggregate Portfolio

 

 

11,591,094

 

 

 

 

10,374,970

 

 

Net TBA position(2)

 

 

3,001,064

 

 

 

 

4,468,904

 

 

Total Portfolio

 

$

14,592,158

 

 

 

$

14,843,874

 

 

________________

(1)

Based on the prior month-end’s principal balance of the loans underlying the company’s MSR, increased for current month purchases.

(2)

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.

Portfolio Metrics Specific to Agency RMBS

 

As of March 31, 2025

 

As of December 31, 2024

 

 

(unaudited)

 

(unaudited)

Weighted average cost basis(1)

 

$

101.50

 

 

$

101.17

 

Weighted average experienced three-month CPR

 

 

7.0

%

 

 

7.5

%

Gross weighted average coupon rate

 

 

6.1

%

 

 

5.7

%

Weighted average loan age (months)

 

 

28

 

 

 

36

 

______________

(1)

Weighted average cost basis includes Agency principal and interest RMBS only and utilizes carrying value for weighting purposes.

Portfolio Metrics Specific to MSR(1)

 

As of March 31, 2025

 

As of December 31, 2024

(dollars in thousands)

 

(unaudited)

 

(unaudited)

Unpaid principal balance

 

$

196,773,345

 

 

$

200,317,008

 

Gross coupon rate

 

 

3.5

%

 

 

3.5

%

Current loan size

 

$

330

 

 

$

331

 

Original FICO(2)

 

 

760

 

 

 

760

 

Original LTV

 

 

72

%

 

 

72

%

60+ day delinquencies

 

 

0.8

%

 

 

0.9

%

Net servicing fee

 

25.3 basis points

 

 

25.3 basis points

 

 

 

 

 

 

 

 

Three Months Ended
March 31, 2025

 

Three Months Ended
December 31, 2024

 

 

(unaudited)

 

(unaudited)

Fair value (losses) gains

 

$

(36,221

)

 

$

82,520

 

Servicing income

 

$

146,870

 

 

$

157,475

 

Servicing costs

 

$

3,302

 

 

$

3,965

 

Change in servicing reserves

 

$

(105

)

 

$

610

 

________________

(1)

Metrics exclude residential mortgage loans in securitization trusts for which the company is the named servicing administrator. Portfolio metrics, other than UPB, represent averages weighted by UPB.

(2)

FICO represents a mortgage industry accepted credit score of a borrower.

Other Investments and Risk Management Metrics

 

As of March 31, 2025

 

As of December 31, 2024

(dollars in thousands)

 

(unaudited)

 

(unaudited)

Net long TBA notional(1)

 

$

3,070,552

 

 

$

4,497,800

 

Futures notional

 

$

(2,930,590

)

 

$

(3,973,400

)

Interest rate swaps notional

 

$

14,755,568

 

 

$

16,594,467

 

________________

(1)

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, warehouse facilities and convertible senior notes as of March 31, 2025 and December 31, 2024:

March 31, 2025

 

Balance

 

Weighted
Average
Borrowing Rate

 

Weighted
Average Months
to Maturity

 

Number of
Distinct
Counterparties

(dollars in thousands, unaudited)

 

 

 

 

 

 

 

 

Repurchase agreements collateralized by securities

 

$

8,970,830

 

4.50

%

 

2.23

 

18

Repurchase agreements collateralized by MSR

 

 

770,000

 

7.38

%

 

13.88

 

3

Total repurchase agreements

 

 

9,740,830

 

4.73

%

 

3.16

 

19

Revolving credit facilities collateralized by MSR and related servicing advance obligations

 

 

933,171

 

7.45

%

 

15.91

 

3

Warehouse facilities collateralized by mortgage loans

 

 

7,971

 

6.36

%

 

2.50

 

1

Unsecured convertible senior notes

 

 

260,591

 

6.25

%

 

9.53

 

n/a

Total borrowings

 

$

10,942,563

 

 

 

 

 

 

December 31, 2024

 

Balance

 

Weighted
Average
Borrowing Rate

 

Weighted
Average Months
to Maturity

 

Number of
Distinct
Counterparties

(dollars in thousands, unaudited)

 

 

 

 

 

 

 

 

Repurchase agreements collateralized by securities

 

$

7,050,057

 

4.90

%

 

1.60

 

18

Repurchase agreements collateralized by MSR

 

 

755,000

 

7.44

%

 

17.10

 

3

Total repurchase agreements

 

 

7,805,057

 

5.15

%

 

3.10

 

19

Revolving credit facilities collateralized by MSR and related servicing advance obligations

 

 

1,020,171

 

7.56

%

 

18.84

 

3

Warehouse facilities collateralized by mortgage loans

 

 

2,032

 

6.64

%

 

2.86

 

1

Unsecured convertible senior notes

 

 

260,229

 

6.25

%

 

12.49

 

n/a

Total borrowings

 

$

9,087,489

 

 

 

 

 

 

Borrowings by Collateral Type

 

As of March 31, 2025

 

As of December 31, 2024

(dollars in thousands)

 

(unaudited)

 

(unaudited)

Agency RMBS

 

$

8,970,635

 

 

$

7,049,850

 

Mortgage servicing rights and related servicing advance obligations

 

 

1,703,171

 

 

 

1,775,171

 

Other - secured

 

 

8,166

 

 

 

2,239

 

Other - unsecured(1)

 

 

260,591

 

 

 

260,229

 

Total

 

 

10,942,563

 

 

 

9,087,489

 

TBA cost basis

 

 

3,001,672

 

 

 

4,493,055

 

Net payable (receivable) for unsettled RMBS

 

 

(643,896

)

 

 

269,370

 

Total, including TBAs and net payable (receivable) for unsettled RMBS

 

$

13,300,339

 

 

$

13,849,914

 

 

 

 

 

 

Debt-to-equity ratio at period-end(2)

 

5.1 :1.0

 

4.3 :1.0

Economic debt-to-equity ratio at period-end(3)

 

6.2 :1.0

 

6.5 :1.0

 

 

 

 

 

Cost of Financing by Collateral Type(4)

 

Three Months Ended
March 31, 2025

 

Three Months Ended
December 31, 2024

 

 

(unaudited)

 

(unaudited)

Agency RMBS

 

 

4.62

%

 

 

5.14

%

Mortgage servicing rights and related servicing advance obligations(5)

 

 

7.81

%

 

 

8.34

%

Other - secured

 

 

6.93

%

 

 

8.13

%

Other - unsecured(1)(5)

 

 

6.84

%

 

 

6.93

%

Annualized cost of financing

 

 

5.27

%

 

 

5.79

%

Interest rate swaps(6)

 

 

(0.18

)%

 

 

(0.34

)%

U.S. Treasury futures(7)

 

 

(0.04

)%

 

 

(0.17

)%

TBAs(8)

 

 

2.89

%

 

 

3.67

%

Annualized cost of financing, including swaps, U.S.Treasury futures and TBAs

 

 

4.49

%

 

 

4.58

%

____________________

(1)

Unsecured convertible senior notes.

(2)

Defined as total borrowings to fund Agency and non-Agency investment securities, MSR and related servicing advances and mortgage loans held-for-sale, divided by total equity.

(3)

Defined as total borrowings to fund Agency and non-Agency investment securities, MSR and related servicing advances and mortgage loans held-for-sale, plus the implied debt on net TBA cost basis and net payable (receivable) for unsettled RMBS, divided by total equity.

(4)

Excludes any repurchase agreements collateralized by U.S. Treasuries.

(5)

Includes amortization of debt issuance costs.

(6)

The cost of financing on interest rate swaps held to mitigate interest rate risk associated with the company’s outstanding borrowings includes interest spread income/expense and amortization of upfront payments made or received upon entering into interest rate swap agreements and is calculated using average borrowings balance as the denominator.

(7)

The cost of financing on U.S.Treasury futures held to mitigate interest rate risk associated with the company’s outstanding borrowings is calculated using average borrowings balance as the denominator. U.S.Treasury futures income is the economic equivalent to holding and financing a relevant cheapest-to-deliver U.S.Treasury note or bond using short-term repurchase agreements.

(8)

The implied financing benefit/cost of dollar roll income on TBAs is calculated using the average cost basis of TBAs as the denominator. TBA dollar roll income is the non-GAAP economic equivalent to holding and financing Agency RMBS using short-term repurchase agreements. TBAs are accounted for as derivative instruments in accordance with GAAP.

Conference Call

TWO will host a conference call on April 29, 2025 at 9:00 a.m. ET to discuss its first quarter 2025 financial results and related information. To participate in the teleconference, please call toll-free (888) 394-8218 approximately 10 minutes prior to the above start time and provide the Conference Code 5182687. The conference call will also be webcast live and accessible online in the News & Events section of the company’s website at www.twoinv.com. For those unable to attend, a replay of the webcast will be available on the company’s website approximately four hours after the live call ends.

About TWO

Two Harbors Investment Corp., or TWO, a Maryland corporation, is a real estate investment trust that invests in mortgage servicing rights, residential mortgage-backed securities, and other financial assets. TWO is headquartered in St. Louis Park, MN.

Forward-Looking Statements

This release 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, 2024, 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; 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 related to such termination; our ability to manage various operational risks and costs associated with our business, including the risks associated with operating a mortgage loan servicer and originator; interruptions in or impairments to our communications and information technology systems; our ability to acquire MSR and to maintain our MSR portfolio; our exposure to legal and regulatory claims; legislative and regulatory actions affecting our business; 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 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’s most recent filings with the Securities and Exchange Commission (SEC). All subsequent written and oral forward-looking statements concerning TWO or matters attributable to TWO or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.

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 earnings available for distribution and related per basic common share measures. 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 and other interested persons may find additional information regarding the company at www.twoinv.com, at the Securities and Exchange Commission’s internet site at www.sec.gov or by directing requests to: TWO, Attn: Investor Relations, 1601 Utica Avenue South, Suite 900, St. Louis Park, MN, 55416, (612) 453-4100.

TWO HARBORS INVESTMENT CORP.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share data)

 

March 31,
2025

 

December 31,
2024

 

(unaudited)

 

 

ASSETS

 

 

 

Available-for-sale securities, at fair value (amortized cost $8,773,987 and $7,697,027, respectively; allowance for credit losses $2,680 and $2,866, respectively)

$

8,606,870

 

 

$

7,371,711

 

Mortgage servicing rights, at fair value

 

2,959,773

 

 

 

2,994,271

 

Mortgage loans held-for-sale

 

8,406

 

 

 

2,334

 

Cash and cash equivalents

 

573,882

 

 

 

504,613

 

Restricted cash

 

123,843

 

 

 

313,028

 

Accrued interest receivable

 

39,277

 

 

 

33,331

 

Due from counterparties

 

920,391

 

 

 

386,464

 

Derivative assets, at fair value

 

27,550

 

 

 

10,114

 

Reverse repurchase agreements

 

227,818

 

 

 

355,975

 

Other assets

 

195,503

 

 

 

232,478

 

Total Assets

$

13,683,313

 

 

$

12,204,319

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Liabilities:

 

 

 

Repurchase agreements

$

9,740,830

 

 

$

7,805,057

 

Revolving credit facilities

 

933,171

 

 

 

1,020,171

 

Warehouse facilities

 

7,971

 

 

 

2,032

 

Convertible senior notes

 

260,591

 

 

 

260,229

 

Derivative liabilities, at fair value

 

3,097

 

 

 

24,897

 

Due to counterparties

 

289,457

 

 

 

648,643

 

Dividends payable

 

60,402

 

 

 

58,725

 

Accrued interest payable

 

75,354

 

 

 

85,994

 

Other liabilities

 

165,651

 

 

 

176,062

 

Total Liabilities

 

11,536,524

 

 

 

10,081,810

 

Stockholders’ Equity:

 

 

 

Preferred stock, par value $0.01 per share; 100,000,000 shares authorized and 24,870,817 shares issued and outstanding ($621,770 liquidation preference)

 

601,467

 

 

 

601,467

 

Common stock, par value $0.01 per share; 175,000,000 shares authorized and 104,025,096 and 103,680,321 shares issued and outstanding, respectively

 

1,040

 

 

 

1,037

 

Additional paid-in capital

 

5,943,211

 

 

 

5,936,609

 

Accumulated other comprehensive loss

 

(163,352

)

 

 

(320,524

)

Cumulative earnings

 

1,569,730

 

 

 

1,648,785

 

Cumulative distributions to stockholders

 

(5,805,307

)

 

 

(5,744,865

)

Total Stockholders’ Equity

 

2,146,789

 

 

 

2,122,509

 

Total Liabilities and Stockholders’ Equity

$

13,683,313

 

 

$

12,204,319

 

TWO HARBORS INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(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,

 

 

2025

 

 

 

2024

 

 

(unaudited)

Net interest income (expense):

 

Interest income

$

111,382

 

 

$

117,783

 

Interest expense

 

131,714

 

 

 

160,000

 

Net interest expense

 

(20,332

)

 

 

(42,217

)

Net servicing income:

 

 

 

Servicing income

 

156,859

 

 

 

166,333

 

Servicing costs

 

3,197

 

 

 

7,119

 

Net servicing income

 

153,662

 

 

 

159,214

 

Other (loss) income:

 

 

 

Loss on investment securities

 

(32,729

)

 

 

(10,975

)

(Loss) gain on servicing asset

 

(36,221

)

 

 

11,012

 

(Loss) gain on interest rate swap and swaption agreements

 

(98,788

)

 

 

98,510

 

Gain on other derivative instruments

 

1,448

 

 

 

47,599

 

Gain (loss) on mortgage loans held-for-sale

 

669

 

 

 

(3

)

Other income

 

761

 

 

 

—

 

Total other (loss) income

 

(164,860

)

 

 

146,143

 

Expenses:

 

 

 

Compensation and benefits

 

26,589

 

 

 

26,529

 

Other operating expenses

 

20,505

 

 

 

21,052

 

Total expenses

 

47,094

 

 

 

47,581

 

(Loss) income before income taxes

 

(78,624

)

 

 

215,559

 

Provision for income taxes

 

431

 

 

 

11,971

 

Net (loss) income

 

(79,055

)

 

 

203,588

 

Dividends on preferred stock

 

(13,186

)

 

 

(11,784

)

Gain on repurchase and retirement of preferred stock

 

—

 

 

 

644

 

Net (loss) income attributable to common stockholders

$

(92,241

)

 

$

192,448

 

Basic (loss) earnings per weighted average common share

$

(0.89

)

 

$

1.85

 

Diluted (loss) earnings per weighted average common share

$

(0.89

)

 

$

1.73

 

Comprehensive income:

 

 

 

Net (loss) income

$

(79,055

)

 

$

203,588

 

Other comprehensive income (loss):

 

 

 

Unrealized gain (loss) on available-for-sale securities

 

157,172

 

 

 

(103,078

)

Other comprehensive income (loss)

 

157,172

 

 

 

(103,078

)

Comprehensive income

 

78,117

 

 

 

100,510

 

Dividends on preferred stock

 

(13,186

)

 

 

(11,784

)

Gain on repurchase and retirement of preferred stock

 

—

 

 

 

644

 

Comprehensive income attributable to common stockholders

$

64,931

 

 

$

89,370

 

TWO HARBORS INVESTMENT CORP.

INTEREST INCOME AND INTEREST EXPENSE

(dollars in thousands, except share data)

 

 

Three Months Ended

 

March 31,

 

 

2025

 

 

 

2024

 

 

(unaudited)

Interest income:

 

Available-for-sale securities

$

100,418

 

 

$

100,605

 

Mortgage loans held-for-sale

 

53

 

 

 

1

 

Other

 

10,911

 

 

 

17,177

 

Total interest income

 

111,382

 

 

 

117,783

 

Interest expense:

 

 

 

Repurchase agreements

 

107,078

 

 

 

118,716

 

Revolving credit facilities

 

20,126

 

 

 

30,247

 

Warehouse facilities

 

55

 

 

 

—

 

Term notes payable

 

—

 

 

 

6,418

 

Convertible senior notes

 

4,455

 

 

 

4,619

 

Total interest expense

 

131,714

 

 

 

160,000

 

Net interest expense

$

(20,332

)

 

$

(42,217

)

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,
2025

 

December 31,
2024

 

(unaudited)

 

(unaudited)

Reconciliation of comprehensive income (loss) to Earnings Available for Distribution:

 

 

 

Comprehensive income (loss) attributable to common stockholders

$

64,931

 

 

$

(1,620

)

Adjustment for other comprehensive (income) loss attributable to common stockholders:

 

 

 

Unrealized (gain) loss on available-for-sale securities

 

(157,172

)

 

 

266,565

 

Net (loss) income attributable to common stockholders

$

(92,241

)

 

$

264,945

 

Adjustments to exclude reported realized and unrealized (gains) losses:

 

 

 

Realized loss on securities

 

33,661

 

 

 

7,001

 

Unrealized (gain) loss on securities

 

(1,026

)

 

 

725

 

Provision for credit losses

 

94

 

 

 

283

 

Realized and unrealized loss (gain) on mortgage servicing rights

 

36,221

 

 

 

(82,520

)

Realized gain on termination or expiration of interest rate swaps and swaptions

 

(26,587

)

 

 

(66,033

)

Unrealized loss (gain) on interest rate swaps and swaptions

 

131,350

 

 

 

(121,421

)

Realized and unrealized (gain) loss on other derivative instruments

 

(1,329

)

 

 

55,241

 

Other realized and unrealized gains

 

—

 

 

 

(46

)

Other adjustments:

 

 

 

MSR amortization(1)

 

(70,303

)

 

 

(80,476

)

TBA dollar roll income (losses)(2)

 

8,178

 

 

 

4,195

 

U.S. Treasury futures income(3)

 

1,272

 

 

 

6,133

 

Change in servicing reserves

 

(105

)

 

 

610

 

Non-cash equity compensation expense

 

6,523

 

 

 

1,610

 

Certain operating expenses(4)

 

106

 

 

 

39

 

Net (benefit from) provision for income taxes on non-EAD

 

(722

)

 

 

30,895

 

Earnings available for distribution to common stockholders(5)

$

25,092

 

 

$

21,181

 

Weighted average basic common shares

 

103,976,437

 

 

 

103,656,321

 

Earnings available for distribution to common stockholders per weighted average basic common share

$

0.24

 

 

$

0.20

 

_____________

(1)

MSR 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, which is deemed a non-GAAP measure due to the company’s decision to account for MSR at fair value.

(2)

TBA dollar roll income is the economic equivalent to holding and financing Agency RMBS using short-term repurchase agreements.

(3)

U.S. Treasury futures income is the economic equivalent to holding and financing a relevant cheapest-to-deliver U.S.Treasury note or bond using short-term repurchase agreements.

(4)

Certain operating expenses predominantly consists of expenses incurred in connection with the company’s ongoing litigation with PRCM Advisers LLC.

(5)

EAD is a non-GAAP measure that we define as comprehensive income (loss) attributable to common stockholders, excluding realized and unrealized gains and losses on the aggregate investment portfolio, gains and losses on repurchases of preferred stock, provision for (reversal of) credit losses, reserve expense for representation and warranty obligations on MSR, non-cash compensation expense related to restricted common stock and certain operating expenses. As defined, EAD includes net interest income, accrual and settlement of interest on derivatives, dollar roll income on TBAs, U.S.Treasury futures income, servicing income, net of estimated amortization on MSR and certain cash related operating expenses. EAD provides supplemental information to assist investors in analyzing the company’s results of operations and helps facilitate comparisons to industry peers. EAD is one of several measures our board of directors considers to determine the amount of dividends to declare on our common stock and should not be considered an indication of our taxable income or as a proxy for the amount of dividends we may declare.

 

Margaret Karr, Head of Investor Relations, TWO, (612)-453-4080, Margaret.Karr@twoinv.com

Source: Two Harbors Investment Corp.