TWO-PB Q1 2026 Earnings Call Summary

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: Decreased due to lower float earnings and servicing fee collections.
Cash Position: Ended the quarter with over $500 million in cash, with $977 million in unused MSR asset financing capacity.

Merger Agreement: TWO entered into a new merger agreement with CrossCountry Mortgage (CCM), increasing the cash consideration to $11.30 per share from $10.80. This merger 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. An additional $57 million is in the pipeline.
MSR Portfolio: Added $152 million UPB of MSR through flow sale and recapture channels, with low delinquencies under 1%.

Economic Environment: The outlook remains uncertain due to geopolitical tensions and inflation concerns. The Federal Reserve's interest rate expectations have shifted, with no cuts anticipated for 2026.
Return Projections: Estimated static returns for the portfolio are between 8% to 11.4%, with common equity returns projected at 7.3% to 12.9%.
Housing Market: Anticipated single-digit annualized home price increases, though housing affordability may decline due to rising mortgage rates.

Market Volatility: The outbreak of conflict in the Middle East negatively impacted risk assets, leading to wider spreads for RMBS and a deterioration in performance.
Economic Uncertainty: Mixed economic indicators, including a rise in unemployment to 4.4%, complicate the outlook for growth and inflation.
Performance Discrepancies: The hedged securities strategy underperformed compared to the hedged MSR strategy, indicating potential vulnerabilities in the portfolio.

Book Value Performance: The performance breakdown indicated that the hedged MSR strategy performed well, while the hedged securities strategy faced challenges due to increased volatility.
Merger Status: The merger with UWM is effectively terminated, and the focus is on finalizing the agreement with CCM, with a shareholder vote scheduled for May 19.
Financing for Merger: Specific details regarding the financing package for the merger were not disclosed, but it was emphasized that all relevant information is available in the publicly filed merger agreement.

This summary encapsulates the key points from the earnings call, highlighting both the achievements and the challenges faced by TWO-PB in Q1 2026.

TWO-PB — Two Harbors Investment Corp.