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TWO Reports First Quarter 2025 Financial Results
Positive Returns Across the Portfolio Drive Quarterly Results


NEW YORK, April 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.

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.
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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 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.
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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 CompositionAs of March 31, 2025As 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 %
Other3,613 — %3,734 — %
Aggregate Portfolio11,591,094 10,374,970 
Net TBA position(2)
3,001,0644,468,904
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 RMBSAs of March 31, 2025As of December 31, 2024
(unaudited)
(unaudited)
Weighted average cost basis(1)
$101.50 $101.17 
Weighted average experienced three-month CPR7.0 %7.5 %
Gross weighted average coupon rate6.1 %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, 2025As of December 31, 2024
(dollars in thousands)
(unaudited)
(unaudited)
Unpaid principal balance$196,773,345 $200,317,008 
Gross coupon rate3.5 %3.5 %
Current loan size$330 $331 
Original FICO(2)
760760
Original LTV72 %72 %
60+ day delinquencies0.8 %0.9 %
Net servicing fee25.3 basis points25.3 basis points
Three Months Ended March 31, 2025Three Months Ended December 31, 2024
(unaudited)(unaudited)
Fair value (losses) gains$(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.
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Other Investments and Risk Management Metrics
As of March 31, 2025As 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 MSR770,000 7.38 %13.88 3
Total repurchase agreements9,740,830 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 notes260,591 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 






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Borrowings by Collateral TypeAs of March 31, 2025As of December 31, 2024
(dollars in thousands)(unaudited)(unaudited)
Agency RMBS$8,970,635 $7,049,850 
Mortgage servicing rights and related servicing advance obligations1,703,171 1,775,171 
Other - secured8,166 2,239 
Other - unsecured(1)
260,591 260,229 
Total10,942,563 9,087,489 
TBA cost basis3,001,672 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 :1.04.3 :1.0
Economic debt-to-equity ratio at period-end(3)
6.2 :1.06.5 :1.0
Cost of Financing by Collateral Type(4)
Three Months Ended March 31, 2025Three Months Ended December 31, 2024
(unaudited)(unaudited)
Agency RMBS4.62 %5.14 %
Mortgage servicing rights and related servicing advance obligations(5)
7.81 %8.34 %
Other - secured6.93 %8.13 %
Other - unsecured(1)(5)
6.84 %6.93 %
Annualized cost of financing5.27 %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.

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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.






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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 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.

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

# # #
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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 value2,959,773 2,994,271 
Mortgage loans held-for-sale8,406 2,334 
Cash and cash equivalents573,882 504,613 
Restricted cash123,843 313,028 
Accrued interest receivable39,277 33,331 
Due from counterparties920,391 386,464 
Derivative assets, at fair value27,550 10,114 
Reverse repurchase agreements227,818 355,975 
Other assets195,503 232,478 
Total Assets$13,683,313 $12,204,319 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Repurchase agreements$9,740,830 $7,805,057 
Revolving credit facilities933,171 1,020,171 
Warehouse facilities7,971 2,032 
Convertible senior notes260,591 260,229 
Derivative liabilities, at fair value3,097 24,897 
Due to counterparties289,457 648,643 
Dividends payable60,402 58,725 
Accrued interest payable75,354 85,994 
Other liabilities165,651 176,062 
Total Liabilities11,536,524 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 capital5,943,211 5,936,609 
Accumulated other comprehensive loss(163,352)(320,524)
Cumulative earnings1,569,730 1,648,785 
Cumulative distributions to stockholders(5,805,307)(5,744,865)
Total Stockholders’ Equity2,146,789 2,122,509 
Total Liabilities and Stockholders’ Equity$13,683,313 $12,204,319 
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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,
20252024
(unaudited)
Net interest income (expense):
Interest income$111,382 $117,783 
Interest expense131,714 160,000 
Net interest expense(20,332)(42,217)
Net servicing income:
Servicing income156,859 166,333 
Servicing costs3,197 7,119 
Net servicing income153,662 159,214 
Other (loss) income:
Loss on investment securities(32,729)(10,975)
(Loss) gain on servicing asset(36,221)11,012 
(Loss) gain on interest rate swap and swaption agreements(98,788)98,510 
Gain on other derivative instruments1,448 47,599 
Gain (loss) on mortgage loans held-for-sale669 (3)
Other income761 — 
Total other (loss) income(164,860)146,143 
Expenses:
Compensation and benefits26,589 26,529 
Other operating expenses20,505 21,052 
Total expenses47,094 47,581 
(Loss) income before income taxes(78,624)215,559 
Provision for income taxes431 11,971 
Net (loss) income(79,055)203,588 
Dividends on preferred stock(13,186)(11,784)
Gain on repurchase and retirement of preferred stock— 644 
Net (loss) income attributable to common stockholders$(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 securities157,172 (103,078)
Other comprehensive income (loss)157,172 (103,078)
Comprehensive income78,117 100,510 
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 
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TWO HARBORS INVESTMENT CORP.
INTEREST INCOME AND INTEREST EXPENSE
(dollars in thousands, except share data)
Three Months Ended
March 31,
20252024
(unaudited)
Interest income:
Available-for-sale securities$100,418 $100,605 
Mortgage loans held-for-sale53 1 
Other10,911 17,177 
Total interest income111,382 117,783 
Interest expense:
Repurchase agreements107,078 118,716 
Revolving credit facilities20,126 30,247 
Warehouse facilities55 — 
Term notes payable— 6,418 
Convertible senior notes4,455 4,619 
Total interest expense131,714 160,000 
Net interest expense$(20,332)$(42,217)
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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,
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 securities33,661 7,001 
Unrealized (gain) loss on securities(1,026)725 
Provision for credit losses94 283 
Realized and unrealized loss (gain) on mortgage servicing rights36,221 (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 swaptions131,350 (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.
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twoq12025infographic.jpg
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