Two Harbors Investment Corp.

Two Harbors Investment Corp. (TWO) reported a significant net loss of -$454.3 million for FY 2025, driven primarily by a $375.0 million litigation settlement expense, alongside losses on investment securities (-$96.2M), servicing assets (-$242.2M), and derivative instruments (-$91.5M). Net interest expense stood at -$78.9M, with interest income of $412.0M offset by higher interest expense of $490.9M. Net servicing income provided a bright spot at $614.0M from $626.7M servicing income minus $12.7M costs. Total expenses reached $560.5M, including $95.3M compensation and $90.2M other operating costs. After $52.8M preferred dividends and $8.9M tax provision, net loss attributable to common stockholders was -$507.1M, or -$5 per basic and diluted share. Balance sheet showed total assets of $10.86B, with $6.51B available-for-sale securities and $2.42B mortgage servicing rights, funded by $9.07B liabilities including $7.26B repurchase agreements. Equity was $1.79B. Cash flows generated $88.9M from operations and $911.6M from investing, but used $756.2M in financing, netting a $244.3M increase in cash and restricted cash to $1.13B. Comprehensive loss to common stockholders was -$186.7M after $320.4M unrealized gains on securities. Investors should note high leverage and litigation impact on performance.

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