AI Analysis | Feedback

Here are 1-3 brief analogies for Two Harbors Investment (TWO):

• It's like a specialized investment fund, similar to BlackRock or Vanguard, but instead of a broad portfolio, it invests almost exclusively in mortgages, making money from the interest payments on home loans.

• Think of it as a real estate investment company, but unlike firms that own physical properties like Simon Property Group (malls), Two Harbors makes its money by investing in the *mortgage loans* themselves, not the buildings.

• It's similar to a specialized bank, like a niche division of Wells Fargo, but instead of originating mortgages or taking deposits, it primarily invests in existing mortgage loans and earns income from their interest.

AI Analysis | Feedback

• Investment in Agency Residential Mortgage-Backed Securities (RMBS): The company primarily invests in high-quality, government-guaranteed mortgage-backed securities to generate interest income.
• Investment in Mortgage Servicing Rights (MSRs): They acquire and manage mortgage servicing rights, which entitle them to receive servicing fees from underlying mortgage loans.

AI Analysis | Feedback

Two Harbors Investment Corp. (symbol: TWO) operates as a mortgage real estate investment trust (mREIT). As an mREIT, its primary business involves investing in, financing, and managing a portfolio of residential mortgage-backed securities (RMBS) and other mortgage-related assets. It generates revenue primarily from the net interest spread between the income earned on its assets and its financing costs, as well as from gains and losses on its portfolio.

Given this business model, Two Harbors Investment Corp. does not have "customers" in the traditional sense of companies or individuals purchasing a product or service from it. Instead, its operations involve engaging in financial market transactions with various large financial institutions.

However, if we interpret "major customers" as the primary entities with whom Two Harbors conducts its significant business transactions, these would be the large financial institutions that serve as its:

• Trading Counterparties: For the purchase and sale of mortgage-backed securities and other investments.
• Financing Providers: Primarily through repurchase agreements, where these institutions lend funds against Two Harbors' securities.
• Derivative Counterparties: For hedging activities using instruments like interest rate swaps.

Therefore, while not customers in a direct sales context, Two Harbors primarily transacts with other financial companies. Examples of the types of major financial institutions that fulfill these critical counterparty roles in the markets where Two Harbors operates include (this list is illustrative of market participants and not exhaustive of Two Harbors' specific, direct relationships):

• JPMorgan Chase & Co. (symbol: JPM)
• Bank of America Corporation (symbol: BAC)
• Citigroup Inc. (symbol: C)
• Wells Fargo & Company (symbol: WFC)
• The Goldman Sachs Group, Inc. (symbol: GS)

AI Analysis | Feedback

AI Analysis | Feedback

William Greenberg, President and Chief Executive Officer

Mr. Greenberg has served as President and Chief Executive Officer of Two Harbors Investment since June 2020 and as a Director since September 2020. He previously held roles within the company as Chief Investment Officer, Co-Chief Investment Officer, and Co-Deputy Chief Investment Officer. With over 25 years of experience managing portfolios of structured finance assets, Mr. Greenberg's career prior to joining Two Harbors in 2012 includes serving as a Managing Director at UBS AG, where his responsibilities encompassed managing mortgage repurchase liability risk for over $100 billion in RMBS and whole loans, and co-heading trading within the SNB StabFund, managing $40 billion in legacy RMBS, ABS, and CMBS. Before UBS, he was a Managing Director at Natixis NA, co-managing portfolios of RMBS and Agency mortgage servicing rights. He earned a B.S. in Physics from the Massachusetts Institute of Technology and M.S. and Ph.D. degrees in Theoretical Nuclear Physics from the University of Washington.

William Dellal, Chief Financial Officer

Mr. Dellal is the Chief Financial Officer of Two Harbors Investment. He most recently served as Head of Monetization Strategy and Operations of Pagaya Technologies Ltd. from January to July 2024. Prior to that, Mr. Dellal held several executive positions at Caliber Home Loans, Inc., including President from 2021 to 2022 and Chief Financial Officer from 2016 to 2021. From 2009 to 2016, he was a Managing Director and Head of Capital Markets at CitiMortgage, Inc. Mr. Dellal holds a B.A. from Swarthmore College and a Ph.D. from the Massachusetts Institute of Technology. Although a transition plan was announced in November 2024 for a new CFO to take over in May 2025, a subsequent announcement in April 2025 confirmed that Mr. Dellal would remain in his role as Chief Financial Officer, reversing the earlier decision.

Nicholas Letica, Chief Investment Officer

Mr. Letica serves as the Chief Investment Officer, a position he has held since joining Two Harbors in 2022. Before joining the firm, he was a Managing Director at TD Securities from 2018 to 2022, where he was Co-Head of Securitized Products Sales and Trading and led the securitized trading business. From 2014 to 2018, Mr. Letica was a Managing Director and Senior Portfolio Manager at Cello Capital Management, managing hedge fund portfolios focused on mortgage-backed securities. He also previously worked as a Managing Director in sales for Citigroup Global Markets in their Global Securitized Markets division.

Robert Rush, Chief Risk Officer

Mr. Rush has been the Chief Risk Officer for Two Harbors Investment since 2014, having joined the company as a Managing Director in 2013. Prior to his tenure at Two Harbors, he held various roles at UBS AG in New York. In 2013, he served as a Managing Director and Director of Risk Strategy for UBS's Non-Core and Legacy Group, which managed the firm's exit from capital-inefficient businesses. From 2009 to 2012, he was the Head of Risk Analytics for the StabFund Investment Management Group, focusing on analytics and interest rate risk for a multi-billion dollar portfolio of loans and mortgage-backed securities.

Sheila Lichty, Vice President and Treasurer

Ms. Lichty holds the title of Vice President and Treasurer at Two Harbors Investment, a role she assumed in 2018 after serving as Assistant Treasurer. Her professional experience includes working as a Senior Controller for CBRE, Inc. from 2010 to 2013, where she oversaw cash management and banking relations. From 2004 to 2010, she held various positions at GMAC-Rescap, with her most recent role being a Director in the Treasury group. Ms. Lichty began her career at Wells Fargo Bank, where she worked in various capacities from 1998 to 2004. She earned an M.B.A. with a concentration in Finance and a B.A. in Business Administration Finance from the University of St. Thomas.

AI Analysis | Feedback

Key Risks to Two Harbors Investment Corp.

1. Market Risks (Interest Rate and Prepayment Risks): The company's financial results are highly sensitive to fluctuations in interest rates and changes in mortgage prepayment rates. As an investor primarily in mortgage-backed securities (MBS) and mortgage servicing rights (MSRs), rising interest rates can diminish the value of its MBS portfolio, while falling interest rates can accelerate mortgage prepayments, negatively impacting the value of its MSRs. Two Harbors actively employs hedging strategies to mitigate these inherent market risks.

2. Reliance on Borrower Data Accuracy: Two Harbors faces significant business risks due to its dependence on the accuracy and completeness of information provided by mortgage loan borrowers. Misrepresentations in borrower data, whether intentional or negligent, can lead to substantial financial losses if not detected before loan funding. Such discrepancies may render loans unsalable or subject to repurchase, potentially impacting the company's business operations and financial stability.

3. Earnings Volatility and Dividend Sustainability: The company is exposed to earnings volatility and risks related to the sustainability of its dividend, particularly amidst challenging interest rate environments and ongoing litigation. Recent financial results have shown a negative payout ratio, suggesting that the dividend may be funded by non-operational sources, which could be a precarious strategy if liquidity tightens.

AI Analysis | Feedback

AI Analysis | Feedback

Two Harbors Investment Corp. (symbol: TWO) primarily focuses on investing in, financing, and managing residential mortgage-backed securities (RMBS) and mortgage servicing rights (MSRs) within the United States.

The addressable markets for their main products and services in the U.S. are as follows:

• Mortgage-Backed Securities (MBS) Market (U.S.): The U.S. Mortgage-Backed Securities market was estimated at approximately $14.37 trillion in 2024. This market is projected to reach an estimated $15.55 trillion in 2025 and grow to $22.43 trillion by 2030. The market currently has over $11 trillion in outstanding securities.
• Residential Mortgage Market (U.S. - Outstanding Balances): The total outstanding residential mortgage debt in the U.S. was approximately $11.92 trillion as of the fourth quarter of 2022. More recently, the balances outstanding of the Residential Mortgages industry in the United States reached a value of approximately $12.85 trillion in 2023.

AI Analysis | Feedback

• Expansion of Mortgage Servicing Rights (MSR) Subservicing Business: Two Harbors is actively growing its subservicing operations through its RoundPoint Mortgage Servicing LLC platform. The company has recently expanded its subservicing business by selling $30 billion in unpaid principal balance (UPB) of MSR to a new subservicing client and is targeting an expansion of its sub-servicing business to approximately $40 billion UPB. This strategic focus aims to increase servicing income.

• Growth in Direct-to-Consumer Originations and Recapture Efforts: The company's President and CEO, Bill Greenberg, has highlighted the robust growth in their direct-to-consumer originations platform and the increasing effectiveness of their recapture efforts. These initiatives are crucial for generating new mortgage servicing rights and retaining existing customers, thereby contributing to higher servicing fees and overall revenue.

• Strategic Investments in MSR and Residential Mortgage-Backed Securities (RMBS) Markets: Two Harbors plans to capitalize on opportunities within the MSR and RMBS markets to further drive growth in its servicing and originations businesses, particularly now that certain litigation settlements provide a "clean slate." This indicates a proactive approach to leveraging their core investment areas for revenue generation.

• Technological Investments for Operational Efficiency and Enhanced Customer Experience: Two Harbors is investing significantly in AI technologies to improve operational efficiencies, reduce costs, and create superior homeowner experiences. While not a direct revenue driver, these improvements can lead to better customer retention and satisfaction, potentially attracting new customers and supporting sustained revenue growth by reducing churn and operating expenses.

• Favorable Interest Rate Environment from Potential Federal Reserve Rate Cuts: The company anticipates possible Federal Reserve rate cuts of 50-75 basis points in 2025, which could positively impact its future financial performance. For an MSR-focused REIT, a stable or declining interest rate environment can generally enhance the value of MSRs due to slower prepayment speeds, leading to improved portfolio returns.

AI Analysis | Feedback

Share Repurchases

• In 2024, Two Harbors Investment Corp. repurchased 485,609 shares of preferred stock and $10.0 million principal amount of convertible senior notes.
• As of December 31, 2023, the company had repurchased 3,637,028 common shares for a total cost of $208.5 million under an authorized program for up to 9,375,000 shares.
• As of December 31, 2023, 3,693,574 preferred shares were repurchased under an authorized program, with 1,306,426 shares remaining authorized for repurchase.

Share Issuance

• In the first quarter of 2025, common shares outstanding increased by 344,775 shares.

Outbound Investments

• In 2024, Two Harbors settled $9.2 billion in unpaid principal balance (UPB) of Mortgage Servicing Rights (MSR), totaling 28,093 loans, through bulk and flow-sale acquisitions and recapture.
• In the first quarter of 2025, the company settled $174.9 million in UPB of MSR through flow-sale acquisitions and recapture, and committed to purchase an additional $1.7 billion UPB of MSR post-quarter.
• During the second quarter of 2025, Two Harbors settled $6.6 billion in UPB of MSR through two bulk purchases, flow-sale acquisitions and recapture, and funded $48.6 million in first lien loans while brokering $44.0 million in second lien loans. In the third quarter of 2025, the company funded $49.8 million UPB in loans and brokered an additional $60.1 million UPB in second lien loans.

Capital Expenditures

• In the second quarter of 2025, Two Harbors made significant expenditures for automation and artificial intelligence (AI), primarily expensed rather than capitalized, focusing on contact center and customer service processes.