TWO Reports Fourth Quarter 2025 Financial Results

Core Insights - TWO Harbors Investment Corp. (TWO) reported its financial results for the quarter ending December 31, 2025, highlighting a strategic merger with UWMC that will significantly expand its mortgage servicing rights (MSR) portfolio to a pro-forma $400 billion [4][5][20] - The company experienced a comprehensive income of $50.4 million, or $0.48 per weighted average basic common share, and declared a fourth-quarter common stock dividend of $0.34 per share, reflecting a 3.9% quarterly economic return on book value [5][8] - The merger is expected to close in the second quarter of 2026, pending stockholder approval and regulatory conditions [5][19] Quarterly Summary - TWO's portfolio as of December 31, 2025, included $9.0 billion in Agency RMBS, MSR, and other investment securities, with a weighted average gross coupon rate of 3.55% and a 60+ day delinquency rate of 0.87% [8][9] - The company added $399.1 million in unpaid principal balance (UPB) of MSR through acquisitions and recapture, while selling $9.6 billion in MSR UPB on a subservicing-retained basis [5][8] - Economic return on book value for the quarter was reported at 3.9%, with a total stockholder return of 2.8% [5][8] Annual Summary - The company generated a comprehensive income of $50.4 million for the fourth quarter, compared to a net loss of $1.3 million in the previous quarter [5][8] - The reported book value per common share was $11.13, with a declared annualized dividend yield of 13.0% [5][8] - Excluding a $375 million settlement expense, the economic return on book value would have been 12.1% [5][8] Post Quarter-End Update - TWO fully repaid convertible senior notes amounting to $261.9 million on their maturity date of January 15, 2026 [3][5] - The merger with UWMC is anticipated to create significant growth opportunities and shareholder value [4][5] Portfolio Summary - As of December 31, 2025, the investment portfolio comprised $9.0 billion in Agency RMBS and MSR, with a net long TBA position valued at $4.2 billion [8][9] - The weighted average loan age in the Agency RMBS portfolio was 26 months, with a gross weighted average coupon rate of 6.1% [8][9] Financing Summary - Total borrowings as of December 31, 2025, amounted to $8.56 billion, with a debt-to-equity ratio of 4.8:1 [14][16] - The weighted average borrowing rate for repurchase agreements collateralized by securities was 4.13% [14][16]