Two Harbors Investment (US:TWO)2025-10-27 20:15Financial Performance - The company reported a comprehensive loss of $(80.2) million, or $(0.77) per weighted average basic common share for Q3 2025[5]. - The net loss attributable to common stockholders for the three months ended September 30, 2025, was $(141,245) thousand, compared to $(250,269) thousand in 2024, showing an improvement of approximately 44%[36]. - Comprehensive loss attributable to common stockholders for the three months ended September 30, 2025, was $(80,207) thousand, a significant decrease from $(221,807) thousand in the previous quarter[40]. - The company reported a basic loss per weighted average common share of $(1.36) for the three months ended September 30, 2025, compared to $(2.42) in the same period of 2024[36]. - For the three months ended September 30, 2025, net interest income was $(23,505) thousand, a decrease from $(42,289) thousand in the same period of 2024[36]. - Total interest income for the nine months ended September 30, 2025, was $322,079 thousand, down from $346,378 thousand in 2024, reflecting a decrease of approximately 7%[38]. - Net servicing income for the three months ended September 30, 2025, was $162,686 thousand, compared to $167,832 thousand in 2024, indicating a decline of about 3%[36]. - Total expenses for the three months ended September 30, 2025, were $219,423 thousand, significantly higher than $38,585 thousand in the same period of 2024, primarily due to litigation settlement expenses of $175,065 thousand[36]. Litigation and Settlement - The company incurred a litigation settlement expense of $175.1 million, or $1.68 per weighted average basic common share, related to a settlement with its former external manager[4]. - Excluding litigation settlement expenses, the company generated a 7.6% quarterly economic return on book value, with a total economic return of 9.3% for the first nine months of 2025[5]. Asset and Equity Management - The company's total assets decreased to $10,866,407 as of September 30, 2025, from $12,204,319 as of December 31, 2024, reflecting a decline of approximately 11.0%[35]. - The total stockholders' equity decreased to $1,771,717 as of September 30, 2025, down from $2,122,509 as of December 31, 2024, representing a decline of about 16.5%[35]. - The mortgage servicing rights at fair value decreased to $2,626,706 as of September 30, 2025, from $2,994,271 as of December 31, 2024, indicating a decline of approximately 12.3%[35]. Borrowings and Financing - As of September 30, 2025, total borrowings amounted to $8,430,709, a decrease from $10,175,579 as of June 30, 2025, representing a reduction of approximately 17.1%[21]. - The weighted average borrowing rate for total repurchase agreements was 4.61% as of September 30, 2025, compared to 4.74% as of June 30, 2025, indicating a slight improvement in financing costs[21]. - The debt-to-equity ratio at period-end improved to 4.8:1.0 as of September 30, 2025, down from 5.4:1.0 at the end of June 2025[21]. - The annualized cost of financing, including swaps, U.S. Treasury futures, and TBAs, was 3.94% for the three months ended September 30, 2025, compared to 4.43% for the three months ended June 30, 2025[21]. Investment Portfolio - The total investment portfolio as of September 30, 2025, was $13.49 billion, with $9.1 billion in Agency RMBS, MSR, and other investment securities[11]. - The MSR portfolio had a weighted average gross coupon rate of 3.58% and a 60+ day delinquency rate of 0.87% as of September 30, 2025, compared to 0.82% as of June 30, 2025[5]. - The company funded $49.8 million UPB in loans and brokered an additional $60.1 million UPB in second lien loans during the quarter[5]. - The net long TBA position increased to $4.4 billion as of September 30, 2025, compared to $3.0 billion as of June 30, 2025[19]. - The company anticipates attractive risk-adjusted returns from its core strategy of low rate MSR paired with Agency RMBS, despite recent spread tightening[6]. Conference and Communication - The company will host a conference call on October 28, 2025, to discuss its third quarter 2025 financial results[27]. - The company reported a total of 16 distinct counterparties for repurchase agreements collateralized by securities as of September 30, 2025[21]. Shareholder Returns - The reported book value was $11.04 per common share, with a declared dividend of $0.34 per share, reflecting a (6.3)% quarterly economic return on book value[5]. - Earnings available for distribution to common stockholders for the three months ended September 30, 2025, were $37,154 thousand, an increase from $29,545 thousand in the previous quarter[40]. - The weighted average basic common shares outstanding for the three months ended September 30, 2025, were 104,144,560, slightly up from 104,084,326 in the previous quarter[40]. - The unrealized gain on available-for-sale securities for the three months ended September 30, 2025, was $61,038 thousand, compared to $269,621 thousand in 2024[36].