Financial Instruments and Assets - As of March 31, 2025, approximately 84.8% of the company's total assets, or $11.6 billion, consisted of financial instruments recorded at fair value[221] - At March 31, 2025, 21.7% of the company's total assets were classified as Level 3 fair value assets, indicating significant judgment in valuation[228] - The carrying value of the investment portfolio as of March 31, 2025, was $11,591,094 thousand, up from $10,374,970 thousand as of December 31, 2024[238] - The total carrying value of the Agency RMBS portfolio was $8,627,708 thousand as of March 31, 2025, an increase from $7,376,965 thousand as of December 31, 2024[241] - The company held $11.6 billion in available-for-sale securities, mortgage servicing rights, mortgage loans held-for-sale, and derivative assets at fair value as of March 31, 2025[288] - Available-for-sale securities at fair value rose to $8.607 billion as of March 31, 2025, compared to $7.372 billion as of December 31, 2024[274] Interest Rates and Income - The company's net interest income is influenced by changes in market interest rates, financing costs, and prepayment speeds on its assets[220] - Interest rates for 2-year and 10-year U.S. Treasury notes decreased by 36 basis points to 3.88% and 4.21%, respectively, compared to year-end 2024[231] - Net interest income decreased from $117.8 million in Q1 2024 to $111.4 million in Q1 2025, primarily due to a decrease in the Agency RMBS portfolio size and lower average cash balances[250] - Interest expense decreased from $160.0 million in Q1 2024 to $131.7 million in Q1 2025, attributed to lower interest rates and reduced borrowing balances[251] - The average net asset yield for interest-earning assets was 5.1% for Q1 2025, down from 5.3% in Q1 2024, reflecting changes in the interest rate environment[252] - The interest rate sensitivity table indicates that a +25 bps change in interest rates would result in a decrease of $1,055,000 in annualized net interest income, representing a -0.7% change[320] - A +50 bps change in interest rates would lead to a decrease of $2,226,000 in annualized net interest income, representing a -1.5% change[320] Mortgage Servicing Rights (MSR) - The company's MSR business leverages core competencies in prepayment and interest rate risk analytics, providing offsetting risks to its Agency RMBS[213] - The MSR portfolio experienced an aggregate speed of 4.2% CPR for Q1 2025, down 0.7 percentage points compared to Q4 2024[235] - The MSR market remains well supported with limited bulk acquisition opportunities, indicating a stable market environment[235] - As of March 31, 2025, the fair market value of the Mortgage Servicing Rights (MSR) was $3.0 billion[277] - The MSR portfolio included 794,466 loans with an unpaid principal balance of approximately $196.8 billion[278] - The weighted average coupon rate for the total MSR portfolio was 3.5%[278] - An increase in prepayment rates on the mortgage loans underlying MSR would likely result in a decline in the value of MSR, cutting short the anticipated life of the servicing income stream[327] Financial Performance - Comprehensive income attributable to common stockholders for the three months ended March 31, 2025, was $64.9 million, compared to $89.4 million for the same period in 2024, indicating a decline of approximately 27.5%[248] - The net (loss) income attributable to common stockholders for the three months ended March 31, 2025, was $(92.2) million, compared to $192.4 million in the same period of 2024[249] - Other comprehensive income increased to $157.172 million in Q1 2025 from $(103.078) million in Q1 2024, driven by unrealized gains on available-for-sale securities[273] - The book value per common share increased to $14.66 at March 31, 2025, up from $14.47 at December 31, 2024, driven by unrealized gains on AFS securities and net servicing income[248] Leverage and Debt - The debt-to-equity ratio as of March 31, 2025, was 5.1:1.0, indicating a significant leverage position in funding investment securities and mortgage loans[245] - The debt-to-equity ratio increased from 4.3:1.0 to 5.1:1.0 during the three months ended March 31, 2025, primarily due to increased financing on Agency RMBS[288] - Total borrowings as of March 31, 2025, amounted to $10,942,563, with a weighted average borrowing rate of 4.99%[280] - Total outstanding debt as of March 31, 2025, was $10.9 billion, with significant amounts maturing within 30 days[302] - Total indebtedness to tangible net worth was 5.3:1.0 as of March 31, 2025, below the covenant limit of 8.0:1.0[298] Cash Flow and Liquidity - Cash and cash equivalents available to support operations amounted to $573.9 million as of March 31, 2025[288] - For the three months ended March 31, 2025, cash flows from operating activities increased cash balances by approximately $111.9 million, primarily driven by financial results for the quarter[304] - Cash flows from investing activities decreased cash balances by approximately $2.0 billion, primarily due to net purchases of AFS securities and MSR, and an increase in amounts due from counterparties[304] - Cash flows from financing activities increased cash balances by approximately $1.8 billion, primarily driven by increases in repurchase agreement and warehouse facility financing[304] Market Conditions and Risks - Forward-looking statements indicate potential risks including changes in interest rates, prepayment rates, and economic conditions that could affect actual results[218] - The Fed revised lower real GDP growth expectations for 2025 from 2.1% to 1.7% and increased the core personal consumption expenditures index from 2.5% to 2.8%[232] - The implementation of tariffs is expected to further depress home sales, impacting the housing market negatively[234] - Liquidity risk is associated with financing long-maturity assets with shorter-term borrowings, which may not always be matched[332] - A sudden decrease in asset value could lead to increased lender margin calls, adversely affecting liquidity[333] - The portfolio construction of MSR and RMBS may lead to variation margin calls in certain market scenarios[333] Investment Strategy - The company aims to maintain moderate leverage through financing strategies including repurchase agreements and revolving credit facilities[216] - The company plans to maintain muted portfolio leverage and risk levels until there is more clarity on the economic outlook[237] - The investment strategy aims to maintain low to moderate credit loss risk, particularly on mortgage loans held-for-sale[334] - The company believes it can reinvest proceeds from scheduled principal payments and prepayments at acceptable yields, although no assurances can be given regarding market conditions[326]

An MSR-Focused REIT First Quarter 2025 Earnings Call Presentation April 29, 2025 Safe Harbor Statement FORWARD-LOOKING STATEMENTS This presentation of Two Harbors Investment Corp., or TWO, includes "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions ...

Group 1 - Two Harbors Investments reported a revenue of $-20.33 million for the quarter ended March 2025, representing a decline of 51.8% compared to the same period last year [1] - The company's earnings per share (EPS) for the quarter was $0.24, an increase from $0.05 in the year-ago quarter [1]

Financial Performance - Generated comprehensive income of $64.9 million, or $0.62 per weighted average basic common share, compared to a loss of $1.6 million in the previous quarter[5] - The company reported a net loss attributable to common stockholders of $(92,241) thousand in Q1 2025, a decline from net income of $192,448 thousand in Q1 2024[31] - Comprehensive income attributable to common stockholders was $64,931 thousand in Q1 2025, down from $89,370 thousand in Q1 2024[31] - Basic loss per share was $(0.89) in Q1 2025, compared to earnings of $1.85 per share in Q1 2024[31] - Net interest income decreased to $(20,332) thousand in Q1 2025 from $(42,217) thousand in Q1 2024, reflecting a significant improvement[31] - Total interest income fell to $111,382 thousand in Q1 2025, down 5.9% from $117,783 thousand in Q1 2024[33] - Net servicing income decreased slightly to $153,662 thousand in Q1 2025 compared to $159,214 thousand in Q1 2024[31] - The unrealized loss on available-for-sale securities was $(157,172) thousand in Q1 2025, compared to an unrealized gain of $(103,078) thousand in Q1 2024[36] - Earnings available for distribution to common stockholders increased to $25,092 thousand in Q1 2025 from $21,181 thousand in Q4 2024[36] - The company’s total expenses remained relatively stable at $47,094 thousand in Q1 2025, compared to $47,581 thousand in Q1 2024[31] Balance Sheet and Assets - Reported book value of $14.66 per common share, with a declared dividend of $0.45 per share, resulting in a 4.4% quarterly economic return on book value[4] - The company's total portfolio was valued at $14.59 billion, with $11.6 billion in Agency RMBS, MSR, and other investment securities[8] - The Agency RMBS portfolio comprised $8.63 billion, representing 74.4% of the total portfolio, with a weighted average coupon rate of 6.1%[9] - Available-for-sale securities at fair value increased to $8,606,870 thousand as of March 31, 2025, compared to $7,371,711 thousand as of December 31, 2024, a growth of 16.7%[30] - Total assets grew to $13,683,313 thousand as of March 31, 2025, from $12,204,319 thousand as of December 31, 2024, reflecting an increase of 12.1%[30] - Total liabilities increased to $11,536,524 thousand as of March 31, 2025, from $10,081,810 thousand as of December 31, 2024, a rise of 14.4%[30] - The company reported a cumulative earnings of $1,569,730 thousand as of March 31, 2025, down from $1,648,785 thousand as of December 31, 2024[30] - The cash and cash equivalents increased to $573,882 thousand as of March 31, 2025, compared to $504,613 thousand as of December 31, 2024, an increase of 13.7%[30] Borrowings and Leverage - Total borrowings increased to $10.94 billion, with a weighted average borrowing rate of 4.73%[15] - Total borrowings increased to $10,942,563 thousand as of March 31, 2025, from $9,087,489 thousand as of December 31, 2024, representing an increase of 20.4%[16] - The debt-to-equity ratio at period-end rose to 5.1:1.0 from 4.3:1.0, indicating increased leverage[16] - The annualized cost of financing decreased to 5.27% for the three months ended March 31, 2025, down from 5.79% for the previous quarter[16] Mortgage Servicing Rights (MSR) - Settled $174.9 million in unpaid principal balance (UPB) of mortgage servicing rights (MSR) and committed to purchase $1.7 billion UPB of MSR through two bulk acquisitions post quarter-end[4] - As of March 31, 2025, the MSR portfolio had a weighted average gross coupon rate of 3.46% and a 60+ day delinquency rate of 0.85%, up from 0.69% as of December 31, 2024[4] - The company reported a net servicing fee of 25.3 basis points for the MSR portfolio, with 60+ day delinquencies at 0.8%[12] Company Overview and Future Plans - The company is a real estate investment trust focused on mortgage servicing rights and residential mortgage-backed securities[23] - The company plans to host a conference call on April 29, 2025, to discuss its first quarter 2025 financial results[22] - The company maintained high levels of excess liquidity while keeping risk exposures low amid a volatile macroeconomic environment[3]

Core Insights - T2 Metals Corp. has completed its winter core drilling program at the Sherridon copper-gold project, achieving a total of 1,120 meters drilled in four holes [1][4] - The drilling program has allowed T2 Metals to fulfill expenditure milestones to achieve 90% ownership of the Sherridon project under an Option Agreement with Halo Resources Ltd [3][4] - The project is characterized by high-grade volcanogenic massive sulphide (VMS) deposits and has a significant mining history, with multiple copper-rich occurrences [4] Drilling Program Details - The winter 2025 drilling program utilized frozen ground for easier access and reduced environmental impact, focusing on new near-surface areas away from historical resources [1][2] - The program tested combined geophysical (VTEM) and geochemical targets, with three holes exploring new areas [2] - Previous drilling in 2023 and 2024 intersected high-grade copper and gold, with notable results including 6.49 meters at 1.82% Cu and 0.74 g/t Au [4] Ownership and Financial Aspects - Completion of the drilling program fulfills the requirements for T2 Metals to own 90% of the Sherridon project, with no further expenditure commitments under the Option Agreement [3] - Halo Resources Ltd has the option to fund pro-rata or convert to a 1.5% net smelter royalty, which T2 Metals can purchase for C$2,000,000 at any time [3] Support and Collaboration - The winter drilling program was supported by the Kiciwapa Cree First Nation and co-funded by the Manitoba Mineral Development Fund [5]

Core Insights - The article focuses on Two Harbors Investment Corp. (TWO) and its three exchange-traded preferred stocks, aiming to identify which preferred stock offers the best value [1]. Group 1 - The article discusses the features of the investment service Trade With Beta, which includes frequent picks for mispriced preferred stocks and baby bonds, weekly reviews of over 1200 equities, IPO previews, hedging strategies, and an actively managed portfolio [1]. - The author has a beneficial long position in the shares of TWO.PR.A, indicating a personal investment interest in this specific preferred stock [1].

Core Points - T2 Metals Corp has commenced core drilling at the Sherridon copper-gold project in Manitoba, which is fully funded and includes drilling at the Bob Lake deposit and new regional target areas [1][2] - The winter drilling program will consist of up to five holes, utilizing frozen lakes for access to previously undrilled areas while minimizing environmental impact [2][3] - The drill targets include the main Bob Lake host horizon, the sparsely tested footwall horizon, and a major fold hinge structure to the southeast of the Bob Lake deposit [3] Community and Support - The drilling program has strong support from the local First Nations community, highlighted by an Exploration Agreement with the Kiciwapa Cree Nation and an award for reconciliation efforts received in 2024 [4] - The program also serves as a platform for local training and employment opportunities within the Sherridon community [4] Company Overview - T2 Metals Corp is focused on enhancing shareholder value through exploration and discovery, targeting under-explored areas including Sherridon, Lida, Cora, and Copper Eagle projects [7]

Financial Instruments and Debt - The company has issued $261.9 million in aggregate principal amount of 6.25% convertible senior notes due January 2026, with obligations to repay if not converted[101]. - The company engages in hedging transactions that may expose it to contingent liabilities, potentially affecting financial results and cash available for distribution[105]. - The company employs various interest rate risk management techniques, including entering into derivative and non-derivative instruments to hedge against interest rate changes[291]. - The company enters into interest rate derivative contracts to minimize fluctuations in earnings or market values on certain assets or liabilities, including the loan origination pipeline[381]. - The Company finances investment securities and MSR through repurchase agreements, generally considered short-term debt[386]. - The Company has three repurchase facilities secured by variable funding notes collateralized by portions of its MSR portfolio[422]. Interest Rate Risks - An increase in short-term interest rates could reduce the spread between returns on assets and borrowing costs, adversely affecting profitability[102]. - Rising interest rates may reduce the demand for mortgage loans, adversely affecting the availability of target assets and the company's ability to generate income and pay dividends[130]. - Interest rate sensitivity analyses indicate that changes in interest rates can significantly impact annualized net interest income and portfolio value, with scenarios modeled for +/− 25 and 50 basis points[302]. - The company’s operational efficiency and profitability may be adversely affected by rising interest rates, impacting its loan origination platform[290]. - The company’s interest rate risk management strategy aims to improve risk-adjusted returns and mitigate the impact of changing interest rates on investment values[292]. Cybersecurity and Compliance - The company is highly dependent on information technology, and any security breaches could materially impact financial results and stock price[103]. - The company may incur significant expenses related to cybersecurity measures and compliance with evolving regulations[104]. - Compliance with GSE guidelines is essential for maintaining approval to manage MSR and service mortgage loans; failure could result in termination of status[110]. Mortgage Servicing Rights (MSR) and Assets - The company holds $3.0 billion in mortgage servicing rights (MSR) reported at fair value, with significant unobservable inputs including prepayment speeds and option-adjusted spread[327]. - The fair value of MSR is influenced by changes in interest rates, with an expected increase in fair value in a rising interest rate environment due to decreased prepayment rates[311]. - The company retains the risk of potential credit losses on mortgage loans held-for-sale and loans underlying non-Agency securities, maintaining a low to moderate risk profile[316]. - The estimated fair value of mortgage loans held-for-sale fluctuates primarily due to changes in interest rates, with a decrease expected in a rising rate environment[312]. Financial Performance and Equity - Net income for 2024 was $298,168, a significant recovery from a net loss of $(106,371) in 2023[337]. - Basic earnings per share improved to $2.41 in 2024 from a loss of $(1.60) in 2023[337]. - Stockholders' equity decreased from $2,203,390 in 2023 to $2,122,509 in 2024, a decline of about 3.7%[334]. - The company declared common dividends of $187,906 in 2024, down from $192,220 in 2023[339]. Acquisitions and Goodwill - The company completed the acquisition of RoundPoint Mortgage Servicing LLC, which is expected to enhance its mortgage servicing capabilities[347]. - The total goodwill from the RoundPoint acquisition was calculated at $27.5 million, primarily due to expected synergies and benefits from in-house servicing[415]. - The Company recognized $1.3 million in acquisition-related costs for the year ended December 31, 2023[417]. Regulatory and Legal Risks - The company faces risks from third-party service providers, which could adversely affect business operations and financial condition[108]. - The company may face representation and warranty risk related to the ownership of MSR and prior securitization transactions, which could lead to obligations to repurchase mortgage loans or indemnify investors for losses[116]. - Certain provisions of Maryland law may inhibit changes in control, potentially deterring acquisition proposals[133]. Market Conditions and Valuation - A significant portion of the company's assets are classified as "available-for-sale," and declines in market values could adversely affect stockholders' equity and earnings[119]. - The market price of the company’s common stock may be highly volatile, influenced by changes in financial estimates and general economic conditions[145]. - The company’s qualification as a REIT may depend on the accuracy of legal opinions regarding the treatment of its securities for tax purposes[155].

Core Viewpoint - T2 Metals Corp. has reported significant assay results from its Q4 2024 drill program at the Sherridon VMS Project in Manitoba, highlighting high-grade copper, zinc, gold, and silver mineralization, particularly from the Lost Lake prospect [2][6][12]. Group 1: Drill Program Overview - The Q4 2024 drill program consisted of nine holes, with assay results from the final seven holes indicating substantial mineralization in six of them [2][3]. - The drilling aimed to extend known mineralization and explore undrilled downhole EM anomalies across a 5 km trend [3][6]. Group 2: Significant Drill Results - Notable intersections include: - SHN24015: 6.62 m grading 2.09% Cu, 2.41% Zn, 1.0 g/t Au, and 18.5 g/t Ag [4]. - SHN24016: 4.69 m grading 1.61% Cu, 1.20% Zn, 0.4 g/t Au, and 10.6 g/t Ag [4]. - SHN24012DPN: 1.75 m grading 0.38% Cu, 0.24% Zn, 1.1 g/t Au, and 8.2 g/t Ag [4]. - The results confirm the presence of high-grade polymetallic mineralization extending 250 m down plunge from the Lost Lake historical resource [12][10]. Group 3: Future Exploration Plans - A winter drilling program for Q1 2025 is planned, with the company fully funded for this initiative [6][9]. - The company is prioritizing new areas for testing using combined geophysics, geochemistry, and geological interpretation [9][12]. Group 4: Historical Context - The Sherridon area has a significant mining history with five near-surface copper-rich historical mineral resources [6][22]. - Historical mining at the site yielded 7.74 million tonnes at an average grade of 2.46% Cu, 2.84% Zn, 0.6 g/t Au, and 33 g/t Ag between 1931 and 1951 [22].

Core Viewpoint - The article emphasizes the importance of value investing and highlights Two Harbors Investments Corp (TWO) as a strong candidate for value investors due to its favorable valuation metrics and earnings outlook [2][3][6] Valuation Metrics - Two Harbors Investments Corp has a Price-to-Book (P/B) ratio of 0.87, which is attractive compared to the industry average of 0.94 [4] - The P/B ratio for TWO has fluctuated between a high of 0.92 and a low of 0.74 over the past year, with a median of 0.81 [4] - The company also has a Price-to-Cash Flow (P/CF) ratio of 4.19, significantly lower than the industry average of 11.64, indicating potential undervaluation [5] - TWO's P/CF has ranged from a high of 9.69 to a low of -16.47 in the past 12 months, with a median of 4.13 [5] Investment Outlook - The combination of TWO's strong earnings outlook and attractive valuation metrics suggests that it is likely undervalued at the moment, making it a compelling option for value investors [6]