Two Harbors Investment (TWO) Q1 2026 earnings summary

Executive summary

• Announced an amended merger agreement with CrossCountry Mortgage (CCM), increasing cash consideration to $11.30 per share, and terminating the prior UWM agreement; merger expected to close in the second half of 2026, pending shareholder and regulatory approvals.

• Book value per share declined to $10.57 from $11.13 at year-end 2025.

• Comprehensive loss for Q1 2026 was $24.7 million, or $0.24 per share, with a negative 2.0% economic return on book value.

• Declared a $0.34 per share common stock dividend for the quarter; regular dividends to continue until merger closing.

• The board unanimously recommends shareholders vote in favor of the CCM transaction, citing certainty of cash and strategic benefits.

Financial highlights

• Investment portfolio totaled $11.9 billion at quarter-end, including $8.9 billion in settled positions and $3 billion in TBAs.

• Net interest and servicing income declined due to lower float earnings, MSR sales, and lower servicing fee collections, partially offset by lower financing rates.

• Comprehensive loss attributable to common stockholders was $24.7 million, while GAAP net income was $19.5 million, or $0.18 per share.

• Dividend yield remained strong at 13.0% for Q1 2026.

• Ended the quarter with over $500 million in cash and repaid $261.9 million in Convertible Senior Notes at maturity.

Outlook and guidance

• CCM merger expected to close in H2 2026, enhancing integration of origination and servicing platforms.

• Static return estimate for the portfolio is 8%-11.4% before leverage; after leverage, projected static return on common equity is 7.3%-12.9%, or $0.19-$0.34 per share quarterly.

• Geopolitical tensions, interest rate volatility, and inflation uncertainty remain key risks for the outlook.

• RMBS and MSR markets expected to remain well-supported, with attractive risk-adjusted returns.

• Widening spreads by quarter-end improved portfolio return potential.