Two Harbors ends run as a profitable company

In what is likely its final report as a publicly traded company, Two Harbors Investment will be going out on a profitable note, with GAAP net income of $49.4 million and comprehensive net income of $47.9 million in the second quarter.

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Its acquisition by CrossCountry Mortgage, following a contentious takeover battle with UWM Holdings, is expected to close on Aug. 3, a press release on the declaration of a stub dividend for the third quarter revealed.

Because of the transaction, Two Harbors did not hold an investor call. The press release did not contain any comments from management.

This makes two consecutive quarters in the black for the real estate investment trust, which also owns RoundPoint, the servicing operation which attracted its suitors. Two Harbors acquired RoundPoint in 2023 from Freedom Mortgage.

In the first quarter, Two Harbors was profitable on a GAAP basis, at $19.5 million. But using the comprehensive metric, it lost $24.7 million.

A year ago, Two Harbors reported a GAAP net loss of $272.3 million and a comprehensive loss of $221.8 million.

Net servicing income was $125.9 million for the second quarter, down from approximately $156 million one year ago.

As of June 30, RoundPoint serviced $155.1 billion and subserviced $40.8 billion.

Between flow acquisitions and recapture, it added $186.5 million to the portfolio in the quarter. But this still didn’t fully offset the reduction in mortgage servicing rights from $158.9 billion at the end of the first quarter.

The MSR portfolio had a weighted average gross coupon rate of 3.54% with a 60-day-plus delinquency rate of 79 basis points. The three-month conditional prepayment rate was 6.3%.

Two Harbors has a small mortgage origination business, which funded $84 million during the period. It also brokered an additional $48.8 million of second-lien loans.

On July 23, Two Harbors declared a stub dividend of nearly 12.2 cents per share, to be paid in addition to the $12 per share cash compensation the CrossCountry agreement calls for.

Earnings were announced after the market closed on Tuesday. The following morning, Two Harbors opened at $12.12 per share.