Two Harbors Investment Corp · NYSE:TWO
Two Harbors Investment — Q2 2025 Earnings Presentation
35 slides from Two Harbors Investment's earnings presentation, Jul 29, 2025
Slide 1: An MSR-Focused REIT: Second Quarter Earnings Call Presentation
An MSR-Focused REIT Second Quarter Earnings Call Presentation July 29, 2025
Slide 2: Safe Harbor Statement
Safe Harbor Statement FORWARD-LOOKING STATEMENTS This presentation of Two Harbors Investment Corp., or TWO, includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ from exp
Slide 3: Quarterly Financials Overview
Quarterly Financials Overview Comprehensive Economic Return Loss per Share on Book Value(1) Book Value $(2.13) (14.5)% per Share Economic Return $12.14 Loss Contingency Accrual on Book Value, Excluding Loss per Share(2) Contingency Accrual(1)(2) $(1.92) (1.4)% Common Stock Investment Quarter-End Eco
Slide 4: Markets Overview
Markets Overview MARKETS RESILIENT DESPITE INFLATION AND POLITICAL PRESSURES • Volatility was heightened, reacting to the uncertainty of fluctuating tariff and trade policies; the 10-year U.S. Treasury yield swung from a low of 3.85% in early April, to 4.62% in late May, before settling at 4.23% at
Slide 5: RoundPoint Operations Update
RoundPoint Operations Update TWO + RoundPoint Cost Efficiencies Additional Income Hedges Portfolio Focused on additional operational Subservicing, direct-to-consumer Protects value of TWO’s MSR portfolio Benefits efficiencies to deliver lower cost-to- originations, and ancillary products when intere
Slide 6: Technology Drives Efficiencies and Experience
Technology Drives Efficiencies and Experience Leveraging AI technologies to be more efficient and enhance homeowner experience • Initial focus on implementing AI within the contact center space: • Currently using AI for call analysis, helping us detect and more effectively respond to trending issues
Slide 7: Book Value Summary
Book Value Summary Represents Comprehensive Loss of ($ in millions, except per share data) $(221.8) million, or $(2.13) per common share (14.5)% Comprehensive Loss of $(21.9) million, or quarterly economic return $(0.21) per common share, excluding loss on book value(1) contingency accrual(1) (1.4)%
Slide 8: Comprehensive Income (Loss) Summary
Comprehensive Income (Loss) Summary Increase in net interest expense ($ in millions, except per share data) and servicing income driven by an increase in the Agency RMBS portfolio and higher float income, partially offset by lower servicing fee income due to runoff and slightly higher financing cost
Slide 9: Financing Profile
Financing Profile BALANCE SHEET AS OF JUNE 30, 2025 AGENCY RMBS • $8.0 billion of outstanding repurchase agreements with 18 counterparties • Weighted average days to maturity of 60 days 2021 2022 2023 2024 2025 Average Repo Rate - SOFR (1) 40 Agency RMBS repurchase Agency RMBS $8.4 billion agreement
Slide 10: Portfolio Composition and Risk Positioning
Portfolio Composition and Risk Positioning I. PORTFOLIO COMPOSITION(1) II. INTEREST RATE EXPOSURE(4) At June 30, 2025, $14.4 billion portfolio —% Change in common Includes $11.4 billion settled positions book value 30 8.0x (0.5)% 7.0x 7.0x (0.6)% (0.6)% 6.5x (0.7)% (0.8)% 25 6.2x (1.0)% Market Value
Slide 11: Agency RMBS Investment Landscape
Agency RMBS Investment Landscape SPREAD WIDENING POSITIVE FOR PERFORMANCE OF AGENCY RMBS • Agency RMBS spreads net widened over the quarter, though recovered much of the underperformance experienced early in the quarter • Nominal and option-adjusted spreads (OAS) to swaps are historically attractive
Slide 12: Agency RMBS Portfolio
Agency RMBS Portfolio QUARTERLY HIGHLIGHTS • On aggregate, hedged performance for Agency RMBS was negative in the second quarter, with higher coupons outperforming lower coupons • 4.5% and 5.0% pools, where the majority of our holdings were concentrated throughout the second quarter, outperformed TB
Slide 13: MSR Investment Landscape
MSR Investment Landscape MSR MARKET WELL SUPPORTED AND BENEFITS FROM STEEPER YIELD CURVE • MSR market remains well supported with both bank and non-bank portfolios aggressively bidding for a declining supply • Quarterly bulk volume continues to normalize to pre-COVID levels and is about 30% lower ye
Slide 14: MSR Portfolio
MSR Portfolio QUARTERLY HIGHLIGHTS • Price multiple unchanged quarter-over-quarter at 5.9x • Settled $6.6 billion UPB through three bulk purchases, flow acquisitions and recapture • Weighted average 3-month CPR increased to 5.8% CPR from 4.2% in Q1, due to stronger seasonal factors • 60+ day delinqu
Slide 15: Return Potential and Outlook
Return Potential and Outlook ATTRACTIVE RETURN OPPORTUNITIES FOR UNIQUELY POSITIONED PORTFOLIO PORTFOLIO MARKET VALUE INVESTED CAPITAL As of June 30, 2025 ($ millions) ALLOCATED(1) STATIC RETURN ESTIMATE(2) SERVICING MSR(3) 2,860 RMBS(4) 5,703 Total 8,563 72% 11% - 14% SECURITIES RMBS(4) 4,738 Other
Slide 16: The TWO Advantage
The TWO Advantage Our size, expertise, and investment strategy differentiate us from other mREIT peers and investors in MSR. Market Presence: Financing and Liquidity: Our scale, expertise and We have a strong balance ability to leverage our own sheet and diversified servicer allows us to find financ
Slide 17: Appendix
Appendix
Slide 18: Effective Coupon Positioning
Effective Coupon Positioning I. EFFECTIVE COUPON POSITIONING II. QUARTER-OVER-QUARTER CHANGE IN POSITIONING Combined TBA, Specified Pool and MSR positioning by coupon Specified ZV to SOFR TBA Pools MSR/ Spreads for Agency IO 3.0 TBA Market Notional Par Value Combined Specified Coupon (%) Price(1) ($
Slide 19: Risk Positioning
Risk Positioning Book Value Exposure to Changes in Rates % Change in Common Book Value 2-Year Rate 10-Year Rate (basis points) (basis points) Agency P&I RMBS/TBA MSR/Agency IO RMBS(1) Other(2) Combined (3) -25 0 Bull Steepener 2.8 % 0.8 % (3.1)% 0.5 % (4) 0 -25 Bull Flattener 6.0 % (4.4)% (2.8)% (1.
Slide 20: Markets Overview
Markets Overview I. QUARTERLY MORTGAGE PERFORMANCE(1) II. ACTUAL VS. IMPLIED VOLATILITY(2) III. MORTGAGE SPREAD VOLATILITY(3) IV. TWO MSR SPEEDS AND EXISTING HOME SALES(4) 20
Slide 21: Financial Performance
Financial Performance I. COMPREHENSIVE INCOME (LOSS) II. QUARTERLY ECONOMIC RETURN ON BOOK VALUE(1) $150 10% $64.9 4.4% $0.5 $19.3 —% $0 0% —% 1.3% $(1.6) $-150 -10% $(221.8) (14.5)% $-300 -20% Q2-2024 Q3-2024 Q4-2024 Q1-2025 Q2-2025 Q2-2024 Q3-2024 Q4-2024 Q1-2025 Q2-2025 Comprehensive Income ($ in
Slide 22: Net Interest, Servicing and Mark-to-Market Detail
Net Interest, Servicing and Mark-to-Market Detail ($ in millions, except per share data) Mark-to-Market Unfavorable market movement on MSR, swaps, TBAs and $156.0 $153.6 futures, partially offset by overall positive market movement on Agency RMBS, $124.5 albeit muted $17.7 $(19.6) $(20.3) $(35.9) $(
Slide 23: Q2-2025 Portfolio Yields and Financing Costs
Q2-2025 Portfolio Yields and Financing Costs ($ thousands) Average Amortized Portfolio Asset Type Measure Cost Income(1) Average Yield Available-for-sale securities GAAP $ 8,662,943 $ 108,842 5.03% Mortgage loans held-for-sale GAAP 7,957 145 7.29% Adjustments to include other portfolio items: Mortga
Slide 24: Agency RMBS Portfolio
Agency RMBS Portfolio Weighted Par Value Market Value Weighted Average % Prepay Amortized Cost Basis Gross Weighted Average Age ($ millions) ($ millions) CPR(1) Protected(2) ($ millions) Average Coupon (Months) 30-Year Fixed 3.5% $ — $ — —% —%$ — —% — 4.0% 193 182 8.6 % 100.0 % 200 4.5 % 104 4.5% 1,
Slide 25: Mortgage Servicing Rights Portfolio
Mortgage Servicing Rights Portfolio(1) Unpaid Principal Number of Balance Gross Coupon Current Loan Size Loan Age Original 60+ Day Net Servicing Loans ($ millions) Rate ($ thousands) (months) FICO(2) Original LTV Delinquencies 3-Month CPR Fee (bps) 30-Year Fixed < 3.25% 287,813 $ 86,951 2.8% $ 358 5
Slide 26: Mortgage Servicing Rights UPB Roll-forward
Mortgage Servicing Rights UPB Roll-forward $ millions Q2-2025 Q1-2025 Q4-2024 Q3-2024 Q2-2024 UPB at beginning of period $ 196,773 $ 200,317 $ 202,052 $ 209,390 $ 213,597 Bulk purchases of mortgage servicing rights 6,385 — 2,063 2,573 — Flow purchases of mortgage servicing rights 170 155 376 715 328
Slide 27: Financing
Financing $ millions Repurchase Revolving Credit Warehouse Lines Outstanding Borrowings and Maturities(1) Agreements Facilities of Credit Senior Notes Convertible Notes Total Borrowings Percent (%) Within 30 days $ 2,359.3 $ — $ — $ — $ — $ 2,359.3 23.2 % 30 to 59 days 2,357.3 — 0.8 — — 2,358.1 23.2
Slide 28: Futures
Futures Weighted Average Type & Maturity Notional Amount ($M) Carrying Value ($M)(1) Months to Expiration U.S. Treasury futures 2 year $ (1,839.2) $ — 3.0 5 year (694.0) — 3.0 10 year (475.1) — 2.7 20 year 257.3 — 2.7 Federal Funds futures - 30 day (109.6) — 7.0 Eris SOFR swap futures - 10 year (350
Slide 29: Interest Rate Swaps
Interest Rate Swaps(1) Maturities Notional Amount ($M)(2) Average Fixed Pay Rate(3) Average Receive Rate(3) Average Maturity (Years)(3) Payers ≤ 1 year $ 2,762.0 4.273 % 4.450 % 0.6 > 1 and ≤ 3 years 3,845.3 3.476 % 4.450 % 2.0 > 3 and ≤ 5 years 2,179.4 3.670 % 4.450 % 4.4 > 5 and ≤ 7 years 2,698.0
Slide 30: End Notes
End Notes PAGE 3 - Quarterly Financials Overview 1. Economic return on book value is defined as the increase (decrease) in common book value from the beginning to the end of the given period, plus dividends declared to common stockholders in the period, divided by common book value as of the beginni
Slide 31: End Notes (continued)
End Notes (continued) PAGE 11 - Agency RMBS Investment Landscape 1. Source: J.P. Morgan DataQuery. Data is model-based and represents universal mortgage-backed securities (UMBS) generic TBA spreads as of the dates noted. In 2023, J.P. Morgan updated their model affecting only 2023 data. 2. Spreads p
Slide 32: End Notes (continued)
End Notes (continued) PAGE 18 - Effective Coupon Positioning 1. Represents UMBS TBA market prices as of June 30, 2025. 2. Specified pools include securities with implicit or explicit prepayment protection, including lower loan balances (securities collateralized by loans less than or equal to $300K
Slide 33: End Notes (continued)
End Notes (continued) PAGE 23 - Q2-2025 Portfolio Yields and Financing Costs 1. Includes interest income, net of premium amortization/discount accretion, on Agency and non-Agency investment securities, servicing income, net of estimated amortization and servicing expenses, on MSR, and the implied as
Slide 34: End Notes (continued)
End Notes (continued) PAGE 27 - Financing 1. As of June 30, 2025, outstanding borrowings had a weighted average of 4.6 months to maturity. 2. Repurchase agreements and revolving credit facilities secured by MSR and/or other assets may be over-collateralized due to operational considerations. PAGE 28
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