Two Harbors Investment Stock Earnings Reports

Key points for investors:

- Strategic transaction: The Board unanimously agreed to terminate the prior UWM deal and execute a new all-cash merger agreement with CrossCountry Mortgage (CCM). CCM amended the deal to increase consideration to $11.30 per share (from $10.80). The transaction is expected to close in H2 2026, is not subject to a financing condition, and the Board recommends shareholders vote in favor at a special meeting on May 19, 2026.

- Q1 financial performance: Two Harbors reported a total economic return of -2.0% for Q1 2026. Book value declined to $10.57 per share from $11.13 at year-end (including the $0.34 common dividend). The company recorded a comprehensive loss of $24.7 million ($0.24 per share).

- Portfolio performance split: The MSR (mortgage servicing rights) / hedged MSR strategy performed well in the quarter and was a positive contributor; hedged agency RMBS/securities underperformed (mark-to-market losses) driven by higher rates, wider spreads and increased volatility tied in part to the Middle East conflict.

- Portfolio and risk metrics: Total portfolio was ~$11.9 billion (including $3.0B in TBAs). Economic debt-to-equity was 6.4x; sensitivity to a 25 bps spread tightening decreased to ~3.2%. Interest rate risk was kept low amid elevated macro volatility.

- Liquidity and balance sheet: Company ended the quarter with over $500 million of cash. Convertible notes ($261.9M) were repaid in full in January. RMBS funding markets remained available (repo spreads ~SOFR +15–18 bps). Unused MSR asset financing capacity was ~$977M; servicing advance facility had $81M available.

- MSR business and origination: DTC platform funded $92M of first/second liens in Q1 with $57M pipeline; brokered $38M in second liens. MSR flow and recapture added $152M UPB in Q1. MSR prepayment speeds remained below management projections (helpful tailwind); MSR price multiple rose slightly to 5.9x.

- Forward-looking return expectations and risks: Management estimates ~65% of capital allocated to servicing with static return projection of 11–14% (securities 11–15%); aggregated static portfolio return before leverage estimated 8–11.4%, with prospective common equity static return range ~7.3–12.9% (quarterly static return per share $0.19–$0.34). Primary near-term risks are elevated interest-rate volatility and geopolitical developments in the Middle East; technical support for RMBS from GSE buys and potential regulatory (Basel III) changes could be supportive for demand.

- Capital actions and dividends: Management intends to continue paying regular quarterly dividends prior to close (but not stub dividends), consistent with past practice.