Two Harbors Investment Corp. has recently released its 10-Q report, providing an in-depth look at its financial condition and operational results. The company, incorporated in 2009 and headquartered in Saint Louis Park, Minnesota, is a real estate investment trust (REIT) that invests in, finances, and manages mortgage servicing rights (MSRs), agency residential mortgage-backed securities (RMBS), and other financial assets through RoundPoint in the United States.
The report reveals that the company's net interest income, including income from its securities portfolio and mortgage loans held-for-sale, fluctuates primarily due to changes in market interest rates, financing costs, and prepayment speeds on its assets. At March 31, 2025, approximately 84.8% of Two Harbors' total assets, or $11.6 billion, consisted of financial instruments recorded at fair value. The company seeks to leverage its core competencies in understanding and managing interest rate and prepayment risk to invest in its portfolio of MSR and Agency RMBS.
One of its wholly owned subsidiaries, TH MSR Holdings LLC, holds the necessary approvals from Fannie Mae and Freddie Mac to own and manage MSR. The company's objective is to deliver stable performance relative to RMBS portfolios without MSR across changing market environments, with a focus on creating sustainable stockholder value over the long term.
Two Harbors' Agency RMBS portfolio is primarily comprised of fixed-rate mortgage-backed securities backed by single-family and multi-family mortgage loans, with the majority of the portfolio comprised of whole pool certificates. The company seeks to deploy moderate leverage as part of its investment strategy, generally financing its Agency RMBS through short* and long-term borrowings structured as repurchase agreements.
The report also highlights the company's efforts to maintain its REIT qualification for U.S. federal income tax purposes, as well as its exposure to various risks, including changes in interest rates, prepayment rates of mortgages, and the state of the credit markets and general economic conditions.
Additionally, the report discusses the fair value measurement of Two Harbors' assets and liabilities, stating that a significant portion of its assets and liabilities are reported at fair value, significantly affecting its consolidated balance sheets and statements of comprehensive income. The company utilizes bid-side pricing for its Agency RMBS and estimates the fair value of its MSR using a discounted cash flow model, incorporating both observable and unobservable market data.
The 10-Q report provides detailed insights into Two Harbors Investment Corp.'s financial condition, risk factors, and strategies, shedding light on its operations and performance in the current market environment. Following these announcements, the company's shares moved 3.2%, and are now trading at a price of $12.39. For more information, read the company's full 10-Q submission here.
