Two Harbors Investment (US:TWO)2026-02-02 21:15Financial Performance - TWO reported a comprehensive income of $50.4 million, or $0.48 per weighted average basic common share for Q4 2025[6]. - The company declared a fourth quarter common stock dividend of $0.34 per share, representing a 3.9% quarterly economic return on book value[6]. - TWO's book value per common share was reported at $11.13, with a total stockholder return of 2.8% for the period from December 31, 2024, to December 31, 2025[6][5]. - The company experienced a (12.6)% economic return on book value, which improved to 12.1% when excluding a $375 million settlement expense related to litigation[6][8]. - The company reported a comprehensive income of $63,471 thousand for the three months ended December 31, 2025, compared to $10,164 thousand in the same period of 2024[42]. - Net income attributable to common stockholders turned negative at $(1,325) thousand for the three months ended December 31, 2025, compared to a profit of $264,945 thousand in the same period of 2024[42]. - Total interest income for the three months ended December 31, 2025, was $89,919,000, a decrease from $103,774,000 for the same period in 2024, representing a decline of approximately 13.3%[44]. - Total interest expense for the three months ended December 31, 2025, was $105,408,000, down from $138,668,000 in the prior year, reflecting a decrease of about 23.9%[44]. - Net interest expense for the three months ended December 31, 2025, was $(15,489,000), compared to $(34,894,000) for the same period in 2024, indicating an improvement of approximately 55.6%[44]. - Earnings available for distribution to common stockholders for the three months ended December 31, 2025, was $27,435,000, compared to $37,154,000 in the prior quarter, showing a decrease of about 26.2%[46]. - Earnings available for distribution per weighted average basic common share was $0.26 for the three months ended December 31, 2025, down from $0.36 in the previous quarter, a decline of approximately 27.8%[46]. - The company reported a realized loss on securities of $15,018,000 for the three months ended December 31, 2025[46]. - The unrealized gain on available-for-sale securities was $(51,754,000) for the three months ended December 31, 2025, compared to $(61,038,000) in the previous quarter[46]. Assets and Liabilities - Total assets decreased from $12,204,319 thousand as of December 31, 2024, to $10,859,217 thousand as of December 31, 2025, representing a decline of approximately 11.0%[41]. - Total liabilities decreased from $10,081,810 thousand in 2024 to $9,071,290 thousand in 2025, a reduction of approximately 10.0%[41]. - Cash and cash equivalents increased from $504,613 thousand in 2024 to $842,319 thousand in 2025, an increase of approximately 67.0%[41]. - The allowance for credit losses decreased from $2,866 thousand in 2024 to $1,609 thousand in 2025, a reduction of about 43.9%[41]. Borrowings and Financing - As of December 31, 2025, total borrowings amounted to $8,557,182, an increase from $8,430,709 as of September 30, 2025, representing a growth of 1.5%[22]. - The weighted average borrowing rate for total repurchase agreements was 4.36% as of December 31, 2025, compared to 4.61% as of September 30, 2025, indicating a decrease of 0.25 percentage points[22]. - The debt-to-equity ratio at period-end was 4.8:1.0 as of December 31, 2025, consistent with the previous quarter[22]. - The annualized cost of financing decreased to 5.04% for the three months ended December 31, 2025, down from 5.38% for the three months ended September 30, 2025[22]. - The company reported a total of $6,601,446 in repurchase agreements collateralized by securities as of December 31, 2025, an increase from $6,363,146 as of September 30, 2025[22]. Mortgage Servicing Rights and Acquisitions - The company added $399.1 million in unpaid principal balance (UPB) of mortgage servicing rights (MSR) through flow-sale acquisitions and recapture, and sold $9.6 billion MSR UPB on a subservicing-retained basis[6]. - As of December 31, 2025, the MSR portfolio had a weighted average gross coupon rate of 3.55% and a 60+ day delinquency rate of 0.87%[6]. - The company maintains a focus on acquiring mortgage servicing rights and managing its portfolio effectively[31]. Merger and Future Plans - TWO entered into a definitive merger agreement with UWM Holdings Corporation, where TWO stockholders will receive a fixed exchange ratio of 2.3328 shares of UWMC Class A Common Stock for each share of TWO common stock, representing an $11.94 per share value[6]. - The transaction with UWMC is expected to close in Q2 2026, subject to stockholder approval and regulatory conditions[6]. - The company has plans for a proposed transaction with UWMC, which includes expectations for future performance and synergies[30]. - The company is in the process of a proposed merger with UWMC, which has resulted in certain operating expenses related to transaction costs[48]. Risks and Conference Call - The company is exposed to various risks, including changes in credit markets and economic conditions, which could impact future performance[31]. - The company will host a conference call on February 3, 2026, to discuss its fourth quarter 2025 financial results[28].