TWO-PA — Two Harbors Investment Corp.

TWO-PA Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Book Value: Decreased to $10.57 per share from $11.13 per share at the end of Q4 2025.
• Economic Return: Reported a negative economic return of 2.0% for the quarter.
• Comprehensive Loss: $24.7 million, or $0.24 per share.
• Net Interest and Servicing Income: Declined due to lower float earnings rates and servicing fee collections.
• Cash Position: Ended the quarter with over $500 million in cash and $977 million in unused MSR asset financing capacity.

2. Strategic Updates and Business Highlights

• Merger Agreement: TWO has entered into a new merger agreement with CrossCountry Mortgage (CCM), increasing the cash consideration from $10.80 to $11.30 per share. The transaction is expected to close in the second half of 2026.
• DTC Platform Progress: Funded $92 million in first and second liens, maintaining levels from the previous quarter despite rising interest rates.
• MSR Portfolio: Added $152 million UPB of MSR through flow sale and recapture channels, with a price multiple increase to 5.9x.

3. Forward Guidance and Outlook

• Market Conditions: The geopolitical situation in the Middle East is expected to continue influencing market sentiment and economic outlook.
• Return Projections: Estimated static return on common equity is projected to be between 7.3% to 12.9%, with quarterly static returns per share expected between $0.19 to $0.34.
• Housing Market: Anticipated single-digit annualized increases in home prices, with housing turnover expected to trend about 5% higher year-on-year.

4. Bad News, Challenges, or Points of Concern

• Economic Environment: Mixed economic indicators, including a rise in the unemployment rate to 4.4%, and uncertainty regarding inflation and interest rates.
• Performance Decline: The performance of risk assets, including RMBS, deteriorated due to geopolitical tensions, leading to wider spreads and increased volatility.
• Book Value Decline: The decrease in book value and comprehensive loss signals potential headwinds in profitability and market conditions.

5. Notable Q&A Insights

• Book Value Breakdown: The hedged MSR strategy performed well, while the hedged securities portfolio faced challenges due to increased volatility and hedging costs.
• Merger Status: The situation with UWM is effectively concluded with the new merger agreement with CCM, although there remains a shareholder vote scheduled for May 19.
• Financing for Merger: Specifics regarding the financing package for the merger were not disclosed in detail, with references to publicly available merger agreement documents for further information.

This summary encapsulates the key points from the earnings call, highlighting both the financial performance and strategic direction of TWO while addressing challenges and market conditions.