TWO-PC — Two Harbors Investment Corp.

TWO-PC 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: Decreased 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-PC signed a revised merger agreement with CrossCountry Mortgage (CCM), increasing the cash consideration to $11.30 per share from $10.80. The merger is expected to close in the second half of 2026.
• DTC Platform: Funded $92 million in first and second liens, maintaining levels from the previous quarter, with an additional $57 million in the pipeline.
• MSR Activity: High demand for MSR with servicing transfers totaling $93 billion UPB, although below the prior two quarters.

3. Forward Guidance and Outlook

• Market Conditions: Economic growth and inflation forecasts remain uncertain, with the Federal Reserve maintaining rates steady. Expectations for year-end rates rose from 3.06% to 3.57%.
• Portfolio Return Projections: Estimated static returns for the portfolio are between 8% to 11.4%, with potential quarterly returns per share of $0.19 to $0.34.
• Geopolitical Risks: Ongoing tensions in the Middle East are expected to influence market sentiment and economic outlook.

4. Bad News, Challenges, or Points of Concern

• Market Volatility: Increased volatility and geopolitical tensions led to wider spreads for RMBS, negatively impacting performance.
• Economic Indicators: A weaker-than-expected employment report and rising unemployment rate (4.4%) raised concerns about economic stability.
• Performance Discrepancies: The hedged MSR strategy performed well, but the hedged securities portfolio faced challenges due to increased volatility and hedging costs.

5. Notable Q&A Insights

• Book Value Breakdown: The performance of the hedged MSR strategy was positive, while the hedged securities strategy faced headwinds from increased volatility.
• Merger Status: The merger with UWM is considered terminated, and the focus is on completing the transaction with CCM, with a shareholder vote scheduled for May 19.
• Financing for Merger: Details regarding the financing package for the merger were not fully disclosed, with the speaker referring to the publicly filed merger agreement for specifics.

This summary encapsulates the key aspects of the earnings call, highlighting financial performance, strategic initiatives, and potential challenges moving forward.