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Jun 30, 2025
Two Harbors Q2 2025 Earnings Report
Two Harbors reported a substantial GAAP net loss in Q2 2025, driven primarily by a large litigation-related expense, although core earnings remained positive.
Key Takeaways
Despite a GAAP net loss of $272.3 million largely due to a $199.9 million litigation accrual, Two Harbors delivered $29.5 million in core earnings and maintained strong MSR servicing income. The book value per share declined significantly, and economic return on book value was negative.
Reported GAAP net loss of $272.3 million or $(2.62) per share due to a litigation-related expense.
Earnings available for distribution (non-GAAP) were $29.5 million or $0.28 per share.
Book value per common share declined to $12.14.
MSR servicing income remained strong at $147.96 million, while fair value losses on MSR totaled $35.9 million.
Revenue by Segment
Forward Guidance
TWO emphasized confidence in navigating market volatility with its MSR and Agency RMBS strategy, while acknowledging challenges due to litigation and macroeconomic uncertainty.
Positive Outlook
- Strong servicing income from MSR portfolio
- Core earnings (EAD) remained positive at $0.28 per share
- Agency RMBS spreads remain historically wide offering opportunity
- MSR portfolio experienced low delinquency and steady CPR
- Raised $110.8 million from senior note issuance to strengthen liquidity
Challenges Ahead
- Significant litigation accrual of $199.9 million impacted net results
- GAAP net loss of $272.3 million in the quarter
- Book value per share declined to $12.14
- Negative economic return on book value at -14.5%
Historical Earnings Impact
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Avg. Return Before/After Earnings
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