TWO — Two Harbors Investment Corp.

TWO 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 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 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 entered a new merger agreement with CrossCountry Mortgage (CCM) at $11.30 per share, up from the initial $10.80. The merger is expected to close in the second half of 2026.
• DTC Platform Progress: Funded $92 million in first and second liens, with an additional $57 million in the pipeline.
• MSR Market Activity: High demand for MSR continued with servicing transfers totaling $93 billion UPB, though below prior quarters.

3. Forward Guidance and Outlook:

• Portfolio Returns: Estimated static returns for the portfolio are projected between 8% to 11.4% before leverage, with common equity returns expected between 7.3% to 12.9%.
• Market Conditions: Outlook remains cautious due to geopolitical tensions and economic volatility, particularly from the Middle East conflict. The company anticipates a balanced performance profile for RMBS, supported by favorable supply-demand dynamics.

4. Bad News, Challenges, or Points of Concern:

• Market Volatility: The onset of geopolitical tensions negatively impacted risk asset performance, leading to wider spreads for RMBS.
• Economic Uncertainty: Mixed economic indicators, including a rise in unemployment to 4.4%, and increased inflation concerns have created a challenging environment.
• Declining Metrics: The comprehensive loss and decrease in book value reflect ongoing pressures in the market, particularly in the RMBS sector.

5. Notable Q&A Insights:

• Book Value Breakdown: The hedged MSR strategy performed well, while the hedged securities part of the portfolio faced challenges due to increased volatility.
• Merger Status: The merger with UWM is effectively terminated, with focus now on completing the transaction with CCM, which is subject to a shareholder vote on May 19.
• Financing of Merger: Details regarding the financing package for the merger were not disclosed, but the agreement is structured to minimize risks related to market conditions at the time of closing.

Overall, TWO's first quarter of 2026 reflects a mix of strategic advancements, particularly with the merger, alongside challenges posed by market volatility and economic uncertainty.