Two Harbors Investment (TWO) Q4 2025 earnings summary

Executive summary

• Announced a definitive merger agreement with United Wholesale Mortgage/UWM Holdings Corporation, doubling the MSR portfolio to a pro forma $400 billion and creating a leading mortgage platform with enhanced scale and strategic alignment; the all-stock transaction values shares at a 21% premium and is expected to close in Q2 2026.

• Book value per share increased to $11.13 at quarter-end, with comprehensive income per share of $0.48 and a quarterly economic return on book value of 3.9%.

• The merger leverages strengths in capital markets, asset management, and servicing, positioning the combined company for accelerated growth and improved shareholder outcomes.

• Investment portfolio outperformed hedges, with a total economic return of +3.9% for Q4 2025.

• Common stock dividend declared at $0.34 per share, with an investment portfolio totaling $13.2 billion.

Financial highlights

• Book value per share rose from $11.04 to $11.13 sequentially, with a 3.9% economic return on book value.

• Q4 comprehensive income was $50.4 million, or $0.48 per share, driven by positive mark-to-market gains and lower financing costs.

• Dividend of $0.34 per share paid in Q4; annual dividends declared totaled $1.52 per common share.

• Portfolio yield was 5.89% and average financing cost was 4.41%, resulting in a net spread of 1.48% on the total portfolio.

• Total economic return for Q4 was +3.9%; for the full year, -12.6%, but +12.1% excluding a litigation settlement expense.

Outlook and guidance

• The merger is expected to drive significant benefits from increased scale and strategic alignment, positioning the combined company for accelerated growth and meaningful upside for shareholders.

• Static return projection for the portfolio is 6.9%-11.1% before leverage, and 5.8%-11.1% on common equity after leverage.

• Return potential has declined quarter-over-quarter due to RMBS spread tightening and asset sales.

• Continued GSE buying and policy support may keep spreads tight and support mortgage activity in 2026.

• The transaction is subject to stockholder and regulatory approvals, with closing anticipated in Q2 2026.