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: Incurred a loss of $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: Entered into a new merger agreement with CrossCountry Mortgage (CCM), increasing the cash consideration to $11.30 per share from the previous $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 and brokered $38 million in second liens, with an additional $57 million in the pipeline.
• MSR Activity: High demand for MSR with servicing transfers topping $93 billion, although below prior quarters.

3. Forward Guidance and Outlook:

• Portfolio Returns: Estimated static return on common equity projected between 7.3% to 12.9%, translating to a quarterly return per share of $0.19 to $0.34.
• Market Conditions: Anticipated continued geopolitical tensions affecting market sentiment and economic outlook, but positive technical factors in the RMBS market could support returns.

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

• Market Volatility: The outbreak of conflict in the Middle East negatively impacted risk assets, including RMBS, leading to wider spreads and deteriorating performance.
• Economic Uncertainty: Mixed economic indicators and rising inflation forecasts have led to a more uncertain outlook, with the Federal Reserve maintaining rates.
• Declining Metrics: The company experienced a decrease in servicing fee collections and net interest income, alongside a decline in book value.

5. Notable Q&A Insights:

• Book Value Performance Breakdown: The hedged MSR strategy performed well, while the hedged securities portfolio faced challenges due to increased volatility and hedging costs.
• Merger Status: The merger with UWM is effectively terminated, with the focus now on completing the transaction with CCM, which still allows for competing bids until the shareholder vote on May 19.
• Financing for Merger: Specifics regarding the financing package for the merger were not disclosed, but the merger agreement details were referenced for further information.

Overall, while TWO-PC is navigating a challenging economic environment with declining financial metrics, strategic initiatives such as the merger with CCM and ongoing developments in their DTC platform provide a framework for potential recovery and growth.