Two Harbors Investment Corp. reported a significant decline in its financial performance for the second quarter of 2025, with a net loss attributable to common stockholders of $272.3 million, compared to a profit of $44.6 million in the same period of 2024. The company's comprehensive loss for the quarter was $221.8 million, driven by a loss contingency accrual of $199.9 million related to ongoing litigation with PRCM Advisers. This resulted in a decrease in book value per common share to $12.14 from $14.66 at the end of the previous quarter.
The company's total assets increased to $12.96 billion as of June 30, 2025, up from $12.20 billion at the end of 2024. This growth was primarily attributed to an increase in available-for-sale securities, which rose to $8.32 billion from $7.37 billion. However, total stockholders' equity decreased to $1.89 billion from $2.12 billion, reflecting the impact of the loss and the accrual for the litigation. The company also reported a debt-to-equity ratio of 5.4:1.0, indicating a higher level of leverage compared to previous periods.
Operationally, Two Harbors continued to focus on its core competencies in managing mortgage servicing rights (MSR) and Agency residential mortgage-backed securities (RMBS). The company’s MSR portfolio had a fair value of $3.02 billion, with an unpaid principal balance of approximately $198.8 billion across 805,261 loans. The prepayment rate for the MSR portfolio increased to 5.8% during the quarter, consistent with seasonal trends. The company also reported a net servicing income of $156.0 million, down from $171.5 million in the prior year, primarily due to a smaller MSR portfolio and lower float income.
Looking ahead, Two Harbors remains focused on leveraging its operational platform, RoundPoint Mortgage Servicing LLC, to enhance its servicing capabilities and manage risks associated with interest rates and prepayment speeds. The company anticipates that its strategy of pairing MSR with Agency RMBS will continue to provide stability in performance across changing market conditions. However, the ongoing litigation and its financial implications remain a significant concern for the company as it navigates the complexities of the mortgage servicing landscape.
About TWO HARBORS INVESTMENT CORP.
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