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What changed in TWO HARBORS INVESTMENT CORP.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of TWO HARBORS INVESTMENT CORP.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+334 added−312 removedSource: 10-K (2026-02-17) vs 10-K (2025-02-18)

Top changes in TWO HARBORS INVESTMENT CORP.'s 2025 10-K

334 paragraphs added · 312 removed · 239 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

29 edited+5 added−3 removed94 unchanged
Biggest changeOur target asset classes are as follows: Agency RMBS Agency RMBS, meaning RMBS whose principal and interest payments are guaranteed by a U.S. government agency, such as the Government National Mortgage Association (or Ginnie Mae), or a U.S. government sponsored enterprise, or GSE, such as the Federal National Mortgage Association (or Fannie Mae) or the Federal Home Loan Mortgage Corporation (or Freddie Mac), collateralized by fixed rate mortgage loans, adjustable-rate mortgage (or ARM) loans or hybrid mortgage loans, or derivatives thereof, including: • mortgage pass-through certificates; • collateralized mortgage obligations; • uniform mortgage-backed securities; • Freddie Mac gold certificates; • Fannie Mae certificates; • Ginnie Mae certificates; • “to-be-announced” forward contracts, or TBAs, which are pools of mortgages with specific investment terms to be issued by Ginnie Mae, Fannie Mae or Freddie Mac at a future date; and • interest-only and inverse interest-only securities.
Biggest changeOur target asset classes are as follows: Agency RMBS Agency RMBS, meaning RMBS whose principal and interest payments are guaranteed by a U.S. government agency, such as Ginnie Mae, or a GSE, such as Fannie Mae or Freddie Mac, collateralized by fixed rate mortgage loans, adjustable-rate mortgage (“ARM”) loans or hybrid mortgage loans, or derivatives thereof, including: • mortgage pass-through certificates; • collateralized mortgage obligations; • uniform mortgage-backed securities; • Freddie Mac gold certificates; • Fannie Mae certificates; • Ginnie Mae certificates; • “to-be-announced” forward contracts (“TBAs”), which are pools of mortgages with specific investment terms to be issued by Ginnie Mae, Fannie Mae or Freddie Mac at a future date; and • interest-only and inverse interest-only securities.
Section 3(a)(1)(A) of the 1940 Act defines an investment company as any issuer that “is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities.” Section 3(a)(1)(C) of the 1940 Act also defines an investment company as any issuer that “is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.” Excluded from the term “investment securities,” among other things, are U.S. government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exclusion from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act.
Section 3(a)(1)(A) of the 1940 Act defines an investment company as any issuer that “is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities.” Section 3(a)(1)(C) of the 1940 Act also defines an investment company as any issuer that “is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.” Excluded from the term “investment securities,” among other things, are U.S. government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exclusion from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act.
Where we own the right to service loans, we recognize the MSR assets in our consolidated financial statements. We primarily generate recurring revenue through contractual servicing fees and interest income on custodial deposits.
Where we own the right to service loans, we recognize the MSR assets in our consolidated financial statements. We primarily generate recurring revenue through contractual servicing fees and interest/float income on custodial deposits.
The Dodd-Frank Act also created the Consumer Financial Protection Bureau, or the CFPB, which has broad rulemaking authority with respect to many of the federal consumer protection laws applicable to the mortgage industry. In addition to its rulemaking authority, the CFPB has supervision, examination and enforcement authority over consumer financial products and services by certain non-depository institutions, including our Company.
The Dodd-Frank Act also created the Consumer Financial Protection Bureau (the “CFPB”), which has broad rulemaking authority with respect to many of the federal consumer protection laws applicable to the mortgage industry. In addition to its rulemaking authority, the CFPB has supervision, examination and enforcement authority over consumer financial products and services by certain non-depository institutions, including our Company.
Our qualification as a REIT depends upon our ability to meet on a continuing basis, through actual investment and operating results, various complex requirements under the Internal Revenue Code relating to, among other things, the sources of our gross income, the composition and value of our assets, our distribution levels and the diversity of ownership of our shares.
Our qualification as a REIT depends upon our ability to meet on a continuing basis, through actual investment and operating results, various complex requirements under the Code relating to, among other things, the sources of our gross income, the composition and value of our assets, our distribution levels and the diversity of ownership of our shares.
TH MSR Holdings acquires MSR from third-party originators through flow and bulk purchases, as well as through the recapture of MSR on loans in its MSR portfolio that refinance. Beginning in 2024, TH MSR Holdings also acquires MSR on loans originated by its subsidiary, RoundPoint, through purchases and recapture of MSR.
TH MSR Holdings acquires MSR from third-party originators through flow and bulk purchases, as well as through the recapture of MSR on loans in its MSR portfolio that refinance. Beginning in 2024, TH MSR Holdings also acquires MSR on loans originated by its wholly owned subsidiary, RoundPoint, through purchases and recapture of MSR.
The amount of leverage we deploy for particular investments in our target assets depends upon a variety of factors, including without limitation: general economic, political and financial market conditions; the anticipated liquidity and price volatility of our assets; the gap between the duration of assets and liabilities, including hedges; the availability and cost of financing our assets; our opinion of the credit worthiness of financing counterparties; the health of the U.S. residential mortgage and housing markets; our outlook for the level, slope and volatility of interest rates; the credit quality of the loans underlying our target assets; the rating assigned to securities; and our outlook for asset spreads relative to the Secured Overnight Financing Rate, or SOFR, curve, the Overnight Index Swap Rate, or OIS, the U.S. federal funds rate, and other benchmark rate curves.
The amount of leverage we deploy for particular investments in our target assets depends upon a variety of factors, including without limitation: general economic, political and financial market conditions; the anticipated liquidity and price volatility of our assets; the gap between the duration of assets and liabilities, including hedges; the availability and cost of financing our assets; our opinion of the credit worthiness of financing counterparties; the health of the U.S. residential mortgage and housing markets; our outlook for the level, slope and volatility of interest rates; the credit quality of the loans underlying our target assets; the rating assigned to securities; and our outlook for asset spreads relative to the Secured Overnight Financing Rate (“SOFR”) curve, the Overnight Index Swap Rate (“OIS”), the U.S. federal funds rate, and other benchmark rate curves.
We have three repurchase facilities in place that are secured by VFNs issued by MSR Issuer Trust which are collateralized by portions of our MSR portfolio. 3 Table of Contents To finance origination activities, we may enter into warehouse facilities collateralized by the value of the mortgage loans pledged for a period of up to 90 days or until they are sold to the GSEs or other third-party investors in the secondary market, typically within 60 days of origination.
We have three repurchase facilities in place that are secured by VFNs issued by MSR Issuer Trust which are collateralized by portions of our MSR portfolio. 3 Table of Contents To finance origination activities, we may enter into repurchase agreements and warehouse lines of credit collateralized by the value of the mortgage loans pledged for a period of up to 90 days or until they are sold to the GSEs or other third-party investors in the secondary market, typically within 60 days of origination.
One of our wholly owned subsidiaries, TH MSR Holdings LLC (formerly Matrix Financial Services Corporation), holds the requisite approvals from Fannie Mae and Freddie Mac to own and manage MSR, which represent a contractual right to control the servicing of a mortgage loan, the obligation to service the loan in accordance with applicable laws and requirements and the right to collect a fee for the performance of servicing activities, such as collecting principal and interest from a borrower and distributing those payments to the owner of the loan.
One of our wholly owned subsidiaries, TH MSR Holdings LLC, holds the requisite approvals from Fannie Mae and Freddie Mac to own and manage MSR, which represent a contractual right to control the servicing of a mortgage loan, the obligation to service the loan in accordance with applicable laws and requirements and the right to collect a fee for the performance of servicing activities, such as collecting principal and interest from a borrower and distributing those payments to the owner of the loan.
To help manage the adverse impact of interest rate changes on the value of our portfolio as well as our cash flows, we may, at times, enter into various forward contracts, including short securities, TBAs, options, futures, swaps, caps, credit default swaps and total return swaps.
To help manage the adverse impact of interest rate changes on the value of our portfolio as well as our cash flows, we may, at times, enter into various forward contracts, including short securities, TBAs, options, futures, swaps, caps, credit default swaps, total return swaps and forward mortgage loan sale commitments.
We believe that we are organized in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code, and we conduct our operations in a manner which will enable us to continue to meet the requirements for qualification and taxation as a REIT.
We believe that we are organized in conformity with the requirements for qualification and taxation as a REIT under the Code, and we conduct our operations in a manner that will enable us to continue to meet the requirements for qualification and taxation as a REIT.
We have designated certain of our subsidiaries as taxable REIT subsidiaries, or TRSs, as defined in the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, to engage in such activities, and we may form additional TRSs in the future.
We have designated certain of our subsidiaries as taxable REIT subsidiaries (“TRSs”) as defined in the Internal Revenue Code of 1986, as amended (the “Code”), to engage in such activities, and we may form additional TRSs in the future.
In return, MSR Issuer Trust may issue term notes to qualified institutional buyers and variable funding notes, or VFNs, to one of the subsidiaries, in each case secured on a pari passu basis.
In return, MSR Issuer Trust may issue term notes to qualified institutional buyers and variable funding notes (“VFNs”) to one of the subsidiaries, in each case secured on a pari passu basis.
We are committed to attracting and retaining the industry’s top talent by providing competitive wages and benefits and cultivating a workplace environment in which all of our employees can thrive and contribute. As of December 31, 2024, we had 477 full time equivalent employees.
We are committed to attracting and retaining the industry’s top talent by providing competitive wages and benefits and cultivating a workplace environment in which all of our employees can thrive and contribute. As of December 31, 2025, we had 486 full time equivalent employees.
We also operate our business in a manner that will permit us to maintain our exemption from registration under the Investment Company Act of 1940, as amended, or the 1940 Act.
We also operate our business in a manner that will permit us to maintain our exemption from registration under the Investment Company Act of 1940, as amended (the “1940 Act”).
We are structured as an internally-managed real estate investment trust, or REIT, and our common stock is listed on the New York Stock Exchange, or NYSE, under the symbol “TWO.” The terms “Two Harbors,” “we,” “our,” “us” and the “Company” refer to Two Harbors Investment Corp. and its subsidiaries as a consolidated entity.
We are structured as an internally-managed real estate investment trust (“REIT”) and our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “TWO.” The terms “Two Harbors,” “we,” “our,” “us” and the “Company” refer to Two Harbors Investment Corp. and its subsidiaries as a consolidated entity.
Lenders generally advance approximately 60% to 70% of the market value of the MSR financed ( i.e. , a haircut of 30% to 40%) and 80% to 95% of the value of servicing advances financed ( i.e., a haircut of 5% to 20%), depending on the type of advance ( e.g. , corporate, escrow).
Lenders generally advance approximately 60% to 70% of the market value of the MSR financed ( i.e. , a haircut of 30% to 40%) and 82% to 95% of the value of servicing advances financed ( i.e., a haircut of 5% to 18%), depending on the type of advance ( e.g. , corporate, escrow).
In executing on our current interest rate risk management strategy, we have entered into TBAs, interest rate swap and swaption agreements, futures and options on futures. In addition, because MSR are negative duration assets, they may provide a hedge to interest rate exposure on our Agency RMBS portfolio.
In executing on our current interest rate risk management strategy, we have entered into TBAs, interest rate swap and swaption agreements, futures, options on futures, interest rate lock commitments (“IRLCs”), and forward mortgage loan sale commitments. In addition, because MSR are negative duration assets, they may provide a hedge to interest rate exposure on our Agency RMBS portfolio.
At December 31, 2024, we had $7.8 billion of outstanding balances under repurchase agreements with 19 counterparties, with a maximum net exposure (the difference between the amount loaned to us, including interest payable, and the value of the assets pledged by us as collateral, including accrued interest receivable on such assets) to any single lender of $202.1 million, or 9.5% of stockholders’ equity.
At December 31, 2025, we had $7.3 billion of outstanding balances under repurchase agreements with 18 counterparties, with a maximum net exposure (the difference between the amount loaned to us, including interest payable, and the value of the assets pledged by us as collateral, including accrued interest receivable on such assets) to any single lender of $56.1 million, or 3.1% of stockholders’ equity.
An increase in the competition for sources of funding could adversely affect the availability and cost of financing, and thereby adversely affect our financial results. 7 Table of Contents As we grow our subservicing business, we will also compete with bank and non-bank servicers for third-party subservicing clients.
An increase in the competition for sources of funding could adversely affect the availability and cost of financing, and thereby adversely affect our financial results. In connection with our subservicing business, we also compete with bank and non-bank servicers for third-party subservicing clients.
In the current economic climate, lenders under warehouse facilities generally advance approximately 80% to 100% of the unpaid principal balance, or UPB, of the mortgage loans financed. A significant decrease in the advance rate or an increase in the haircut could result in us having to sell assets in order to meet additional margin requirements by the lender.
In the current economic climate, lenders generally advance approximately 80% to 100% of the unpaid principal balance (“UPB”) of the mortgage loans financed, depending on product type. A significant decrease in the advance rate or an increase in the haircut could result in us having to sell assets in order to meet additional margin requirements by the lender.
Item 1. Business Overview Two Harbors Investment Corp. is a Maryland corporation founded in 2009 that invests in, finances and manages mortgage servicing rights, or MSR, and Agency residential mortgage-backed securities, or Agency RMBS, and, through our operational platform, RoundPoint Mortgage Servicing LLC, or RoundPoint, we are one of the largest servicers of conventional loans in the country.
Item 1. Business Overview Two Harbors Investment Corp. is a Maryland corporation founded in 2009 that invests in, finances and manages mortgage servicing rights (“MSR”) and Agency residential mortgage-backed securities (“RMBS”) and, through its operational platform, RoundPoint Mortgage Servicing LLC (“RoundPoint”), is one of the largest servicers of conventional loans in the country.
The originations platform also originates loans for new borrowers who do not currently have a mortgage loan serviced by RoundPoint and brokers second lien loans to borrowers.
The originations platform also originates both first and second mortgages for new borrowers that do not currently have a mortgage loan serviced by RoundPoint and brokers second lien loans to our existing borrowers.
For our MSR third-party subservicing clients, we believe we can successfully compete because we offer experience and expertise in MSR investing, with institutional quality controls and a strong compliance focus, and we are well-capitalized to withstand today’s evolving risks and to invest in necessary infrastructure to support our business.
For our MSR third-party subservicing clients, we believe we can successfully compete because we offer experience and expertise in MSR investing, with institutional quality controls and a strong compliance focus, and we are well-capitalized to withstand today’s evolving risks and to invest in necessary infrastructure to support our business. 7 Table of Contents Available Information Our website can be found at www.twoinv.com .
Under warehouse facility financing arrangements, if the value of the collateral decreases, the lender could require us to provide additional cash collateral to re-establish the ratio of value of the collateral to the amount of borrowing ( i.e. , a margin call).
If the value of the mortgage loans pledged as collateral decreases, the respective lender could require us to provide additional cash collateral to re-establish the ratio of value of the collateral to the amount of borrowing ( i.e. , a margin call).
On occasion, we may receive requests from U.S. federal and state agencies for records, documents and information regarding our policies, procedures and practices regarding our business activities. We incur significant ongoing costs to comply with these regulations.
On occasion, we may receive requests from U.S. federal and state agencies for records, documents and information regarding our policies, procedures and practices regarding our business activities. We incur significant ongoing costs to comply with these regulations. REIT Qualification We elected to be taxed as a REIT under the Code, commencing with our taxable period ended December 31, 2009.
TH MSR Holdings does not directly service mortgage loans; instead, it engages RoundPoint to handle substantially all servicing functions for the mortgage loans underlying our MSR. RoundPoint also services mortgage loans underlying MSR owned by third parties. RoundPoint has approvals from Fannie Mae and Freddie Mac to service residential mortgage loans.
TH MSR Holdings does not directly service mortgage loans; instead, it engages RoundPoint to handle substantially all servicing functions for the mortgage loans underlying its MSR. RoundPoint also services mortgage loans underlying MSR owned by third parties, as well as originated or purchased mortgage loans held-for-sale.
Our MSR business leverages our core competencies in prepayment and interest rate risk analytics and the MSR assets may provide offsetting risks to our Agency RMBS, hedging both interest rate and mortgage spread risk.
RoundPoint has approvals from Fannie Mae, Freddie Mac and, beginning in the third quarter of 2025, Ginnie Mae, to service residential mortgage loans. Our MSR business leverages our core competencies in prepayment and interest rate risk analytics and the MSR assets may provide offsetting risks to our Agency RMBS, hedging both interest rate and mortgage spread risk.
These rules generally focus on consumer protection and include, among others, rules promulgated under the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, and the Gramm-Leach-Bliley Financial Modernization Act of 1999, or the Gramm-Leach-Bliley Act.
These rules generally focus on consumer protection and include, among others, rules promulgated under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), and the Gramm-Leach-Bliley Financial Modernization Act of 1999 (the “Gramm-Leach-Bliley Act”). We are also required to maintain qualifications, registrations and licenses in certain states in order to own and service certain of our assets.
Removed
REIT Qualification We elected to be taxed as a REIT under the Internal Revenue Code, commencing with our taxable period ended December 31, 2009.
Added
Agency refers to a U.S. government sponsored enterprise (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae”), or the Federal Home Loan Mortgage Corporation (“Freddie Mac”), or a U.S. government agency such as the Government National Mortgage Association (“Ginnie Mae”).
Removed
We are also required to maintain qualifications, registrations and licenses in certain states in order to own and service certain of our assets.
Added
On December 17, 2025, we, along with UWM, jointly announced that we entered into a definitive agreement for UWM to acquire all of the outstanding shares of our common stock in an all-stock transaction.
Removed
Our inability to attract subservicing clients may adversely impact our ability to grow our servicing platform, which could in turn result in an inability to achieve economies of scale, reduce costs and adversely affect our financial results. Available Information Our website can be found at www.twoinv.com .
Added
In connection with the proposed Merger, Company common stockholders will exchange each share of Company common stock for 2.3328 shares of newly issued UWM Class A common stock (“UWM Common Stock”) and cash payable in lieu of fractional shares.
Added
In addition, Company preferred stockholders will exchange each share of 8.125% Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, 7.625% Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock and 7.25% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock for one share of newly issued UWM Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (collectively, “UWM Preferred Stock” and together with the UWM Common Stock, “UWM Stock”), respectively.
Added
The Merger is expected to close in the second quarter of 2026, subject to our common stockholders’ approval and the satisfaction of other closing conditions, including customary regulatory approvals.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

71 edited+47 added−20 removed204 unchanged
Biggest changeWe intend to conduct the operations of Two Harbors and its subsidiaries so that they do not come within the definition of an investment company, either because less than 40% of the value of their total assets on an unconsolidated basis will consist of “investment securities” or because they meet certain other exceptions or exemptions set forth in the 1940 Act based on the nature of their business purpose and activities. 10 Table of Contents Certain of our subsidiaries may rely upon the exemption set forth in Section 3(c)(5)(C) of the 1940 Act, which is available for entities “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” This exemption generally means that at least 55% of each such subsidiary’s portfolio must be comprised of qualifying assets and at least 80% of its portfolio must be comprised of qualifying assets and real estate-related assets under the 1940 Act.
Biggest changeCertain of our subsidiaries may rely upon the exemption set forth in Section 3(c)(5)(C) of the 1940 Act, which is available for entities “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” This exemption generally means that at least 55% of each such subsidiary’s portfolio must be comprised of qualifying assets and at least 80% of its portfolio must be comprised of qualifying assets and real estate-related assets under the 1940 Act.
In past years, concerns about the COVID-19 pandemic, unemployment, the availability and cost of credit, rising government debt levels, inflation, energy costs, global supply chain disruptions, climate change, global economic lethargy, warfare, geopolitical unrest across various regions worldwide, European sovereign debt issues, U.S. budget debates, federal government shutdowns and international trade disputes, the imposition of sanctions or new or increased tariffs, have from time to time contributed to increased volatility and uncertainty in the economy and financial markets.
In past years, concerns about the COVID-19 pandemic, unemployment, the availability and cost of credit, rising government debt levels, inflation, energy costs, global supply chain disruptions, climate change, global economic lethargy, warfare, geopolitical unrest across various regions worldwide, European sovereign debt issues, U.S. budget debates, federal government shutdowns, international trade disputes, the imposition of sanctions and new or increased tariffs have from time to time contributed to increased volatility and uncertainty in the economy and financial markets.
If (i) all or a portion of our assets are subject to the rules relating to taxable mortgage pools, (ii) we are a “pension held REIT,” (iii) a tax exempt stockholder has incurred debt to purchase or hold our common stock, or (iv) we purchase residual REMIC interests that generate “excess inclusion income,” then a portion of the distributions to and, in the case of a stockholder described in clause (iii), gains realized on the sale of common stock by such tax exempt stockholder may be subject to U.S. federal income tax as unrelated business taxable income under the Internal Revenue Code.
If (i) all or a portion of our assets are subject to the rules relating to taxable mortgage pools, (ii) we are a “pension held REIT,” (iii) a tax exempt stockholder has incurred debt to purchase or hold our common stock, or (iv) we purchase residual REMIC interests that generate “excess inclusion income,” then a portion of the distributions to and, in the case of a stockholder described in clause (iii), gains realized on the sale of common stock by such tax exempt stockholder may be subject to U.S. federal income tax as unrelated business taxable income under the Code.
Any stagnation in or deterioration of the residential mortgage or real estate markets may limit our ability to acquire our target assets on attractive terms or cause us to experience losses related to our assets. 8 Table of Contents Our business model depends in part upon the continuing viability of Fannie Mae and Freddie Mac, or similar institutions, and any changes to their structure or creditworthiness could have an adverse impact on us.
Any stagnation in or deterioration of the residential mortgage or real estate markets may limit our ability to acquire our target assets on attractive terms or cause us to experience losses related to our assets. 9 Table of Contents Our business model depends in part upon the continuing viability of Fannie Mae and Freddie Mac, or similar institutions, and any changes to their structure or creditworthiness could have an adverse impact on us.
Certain provisions of the Maryland General Corporation Law, or MGCL, may have the effect of deterring a third party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of such shares.
Certain provisions of the Maryland General Corporation Law (“MGCL”), may have the effect of deterring a third party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of such shares.
The value of our interests in and thus the amount of assets held in a TRS may also be restricted by our need to qualify for an exclusion from regulation as an investment company under the Investment Company Act. Any domestic TRS we own will pay U.S. federal, state and local income tax at regular corporate rates.
The value of our interests in and thus the amount of assets held in a TRS may also be restricted by our need to qualify for an exclusion from regulation as an investment company under the Investment Company Act. 23 Table of Contents Any domestic TRS we own will pay U.S. federal, state and local income tax at regular corporate rates.
Any failure to achieve the anticipated benefits of our originations platform could adversely affect our business, results of operations and financial condition. We use leverage in executing our business strategy, which may adversely affect the return on our assets and may reduce cash available for distribution to our stockholders, as well as increase losses when economic conditions are unfavorable.
Any failure to achieve the anticipated benefits of our originations platform could adversely affect our business, results of operations and financial condition. 12 Table of Contents We use leverage in executing our business strategy, which may adversely affect the return on our assets and may reduce cash available for distribution to our stockholders, as well as increase losses when economic conditions are unfavorable.
In the event that any of our warehouse facilities are terminated or not renewed, or if the principal amount that may be drawn under our funding agreements were to decrease significantly, we may be unable to find replacement financing on commercially favorable terms, or at all, which could limit our ability to maintain or grow our originations business.
In the event that any of our warehouse lines of credit are terminated or not renewed, or if the principal amount that may be drawn under our funding agreements were to decrease significantly, we may be unable to find replacement financing on commercially favorable terms, or at all, which could limit our ability to maintain or grow our originations business.
In connection with certain of our repurchase agreements, warehouse facilities, revolving credit facilities and other credit facilities, we are required to comply with certain financial covenants, the most restrictive of which are disclosed within Item 7, “ Management’s Discussion and Analysis of Financial Conditions and Results of Operations ” of this Annual Report on Form 10-K.
In connection with certain of our repurchase agreements, warehouse lines of credit, revolving credit facilities and other credit facilities, we are required to comply with certain financial covenants, the most restrictive of which are disclosed within Part II, Item 7, “ Management’s Discussion and Analysis of Financial Conditions and Results of Operations ” of this Annual Report on Form 10-K.
Item 1A. Risk Factors The following is a summary of the significant risk factors known to us that we believe could have a material adverse effect on our business, financial condition and results of operations.
Risk Factors The following is a summary of the significant risk factors known to us that we believe could have a material adverse effect on our business, financial condition and results of operations.
Any significant increase in required servicing advances, material delays in our receipt of advance reimbursements or the ineligibility of advances for reimbursement could have an adverse impact on our financial condition and cash flows. Risks Related to Our Organization and Structure Certain provisions of Maryland law could inhibit changes in control.
Any significant increase in required servicing advances, material delays in our receipt of advance reimbursements or the ineligibility of advances for reimbursement could have an adverse impact on our financial condition and cash flows. 19 Table of Contents Risks Related to Our Organization and Structure Certain provisions of Maryland law could inhibit changes in control.
To finance our origination activities, we have entered into a warehouse facility collateralized by the value of the mortgage loans pledged until they are sold to the GSEs or other third-party investors in the secondary market. Our borrowings are generally repaid with the proceeds we receive from mortgage loan sales.
To finance our origination activities, we have entered into a warehouse line of credit collateralized by the value of the mortgage loans pledged until they are sold to the GSEs or other third-party investors in the secondary market. Our borrowings are generally repaid with the proceeds we receive from mortgage loan sales.
Additional rules and regulations implemented by the CFPB and state regulators, as well as any changes to existing rules, could lead to changes in the way we conduct our business and increased costs of compliance. 9 Table of Contents We operate in a highly competitive market and we may not be able to compete successfully.
Additional rules and regulations implemented by the CFPB and state regulators, as well as any changes to existing rules, could lead to changes in the way we conduct our business and increased costs of compliance. We operate in a highly competitive market and we may not be able to compete successfully. We operate in a highly competitive market.
We have not requested and do not intend to request a ruling from the Internal Revenue Service, or IRS, that we qualify as a REIT. The U.S. federal income tax laws governing REITs and the assets they hold are complex, and judicial and administrative interpretations of the U.S. federal income tax laws governing REIT qualification are limited.
We have not requested and do not intend to request a ruling from the Internal Revenue Service (“IRS”) that we qualify as a REIT. The U.S. federal income tax laws governing REITs and the assets they hold are complex, and judicial and administrative interpretations of the U.S. federal income tax laws governing REIT qualification are limited.
Furthermore, if we fail to maintain our qualification as a REIT, we no longer would be required to distribute substantially all of our net taxable income to stockholders. 21 Table of Contents Complying with REIT requirements may cause us to forego otherwise attractive investment opportunities or financing or hedging strategies.
Furthermore, if we fail to maintain our qualification as a REIT, we no longer would be required to distribute substantially all of our net taxable income to stockholders. Complying with REIT requirements may cause us to forego otherwise attractive investment opportunities or financing or hedging strategies.
As part of these indemnification obligations, we may be obligated to fund the defense costs incurred by our directors and officers. Our amended and restated bylaws designate certain Maryland courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders.
As part of these indemnification obligations, we may be obligated to fund the defense costs incurred by our directors and officers. 20 Table of Contents Our amended and restated bylaws designate certain Maryland courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders.
Any stock offerings, awards or conversions resulting in the issuance of substantial amounts of common stock, or the perception that such awards or conversions could occur, may adversely affect the market price for our common stock. 20 Table of Contents Any future offerings of our securities could dilute our existing stockholders and may rank senior for purposes of dividend and liquidating distributions.
Any stock offerings, awards or conversions resulting in the issuance of substantial amounts of common stock, or the perception that such awards or conversions could occur, may adversely affect the market price for our common stock. Any future offerings of our securities could dilute our existing stockholders and may rank senior for purposes of dividend and liquidating distributions.
We currently have repurchase agreements, revolving credit facilities, a warehouse facility and other credit facilities in place with numerous counterparties, but we can provide no assurance that lenders will continue to provide us with sufficient financing through the repurchase markets or otherwise.
We currently have repurchase agreements, revolving credit facilities, a warehouse lines of credit and other credit facilities in place with numerous counterparties, but we can provide no assurance that lenders will continue to provide us with sufficient financing through the repurchase markets or otherwise.
If these GSEs fail to honor their guarantees, the value of any Agency RMBS guaranteed by the GSEs that we hold would decline. The continued flow of residential mortgage-backed securities from the GSEs is essential to the operation of the mortgage markets in their current form.
If these GSEs fail to honor their guarantees, the value of any Agency RMBS guaranteed by the GSEs that we hold would decline. The continued flow of RMBS from the GSEs is essential to the operation of the mortgage markets in their current form.
We may be adversely affected if our determinations regarding the fair value of these assets are materially higher than the values that we ultimately realize upon their disposal. Changes in mortgage prepayment rates may adversely affect the value of our assets.
We may be adversely affected if our determinations regarding the fair value of these assets are materially higher than the values that we ultimately realize upon their disposal. 17 Table of Contents Changes in mortgage prepayment rates may adversely affect the value of our assets.
In addition, in general, no more than 5% of the value of our total assets, other than government securities and securities that constitute real estate assets, can consist of the securities of any one issuer, no more than 20% of the value of our total assets can be represented by securities of one or more TRSs, and no more than 25% of the value of our total assets can consist of debt of “publicly offered” REITs that is not secured by real property or interests in real property.
In addition, in general, no more than 5% of the value of our total assets, other than government securities and securities that constitute real estate assets, can consist of the securities of any one issuer, no more than 20% (25% beginning January 1, 2026) of the value of our total assets can be represented by securities of one or more TRSs, and no more than 25% of the value of our total assets can consist of debt of “publicly offered” REITs that is not secured by real property or interests in real property.
If we are unable to sell our mortgage loans to the GSEs or other third-party investors, or the prices for such loans decline, our liquidity may be negatively impacted, we may be unable to continue to fund such loans, our revenues and margins on new loan originations could be reduced and our ability to repay our warehouse facilities could be impaired.
If we are unable to sell our mortgage loans to the GSEs or other third-party investors, or the prices for such loans decline, our liquidity may be negatively impacted, we may be unable to continue to fund such loans, our revenues and margins on new loan originations could be reduced and our ability to repay our warehouse lines of credit could be impaired.
We have elected to not qualify for hedge accounting treatment under Accounting Standards Codification (ASC) 815, Derivatives and Hedging, or ASC 815, for our current derivative instruments. The economics of our derivative hedging transactions are not affected by this election; however, our earnings (losses) for U.S. generally accepted accounting principles, or U.S.
We have elected to not qualify for hedge accounting treatment under Accounting Standards Codification (ASC) 815, Derivatives and Hedging (“ASC 815”) for our current derivative instruments. The economics of our derivative hedging transactions are not affected by this election; however, our earnings (losses) for U.S. generally accepted accounting principles (“ U.S.
This could increase the cost of our hedging activities. The failure of our Agency RMBS that are subject to a repurchase agreement to qualify as real estate assets would adversely affect our ability to qualify as a REIT.
This could increase the cost of our hedging activities. 22 Table of Contents The failure of our Agency RMBS that are subject to a repurchase agreement to qualify as real estate assets would adversely affect our ability to qualify as a REIT.
In addition, pursuant to the margin provisions established by the Mortgage-Backed Securities Division, or MBSD, of the Fixed Income Clearing Corporation, or FICC, we are subject to margin calls on our TBA contracts. Further, our prime brokerage agreements may require us to post additional margin above the levels established by the MBSD.
In addition, pursuant to the margin provisions established by the Mortgage-Backed Securities Division (“MBSD”), of the Fixed Income Clearing Corporation (“FICC”), we are subject to margin calls on our TBA contracts. Further, our prime brokerage agreements may require us to post additional margin above the levels established by the MBSD.
Complying with REIT requirements may limit our ability to hedge effectively. The REIT provisions of the Internal Revenue Code may limit our ability to hedge our assets and liabilities.
Complying with REIT requirements may limit our ability to hedge effectively. The REIT provisions of the Code may limit our ability to hedge our assets and liabilities.
If the prepayment rate is significantly greater than expected, the fair value of the MSR could decline and we may be required to record a non-cash charge, which would have a negative impact on our financial results.
Changes in prepayment rates may also significantly affect the value of MSR. If the prepayment rate is significantly greater than expected, the fair value of the MSR could decline and we may be required to record a non-cash charge, which would have a negative impact on our financial results.
A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 20% of the value of a REIT’s total assets may consist of stock or securities of one or more TRSs.
A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 20% (25% beginning January 1, 2026) of the value of a REIT’s total assets may consist of stock or securities of one or more TRSs.
Finally, as we seek to expand our mortgage loan origination business, we will compete with bank and non-bank originators to provide various residential mortgage loan and real estate services products. The mortgage loan origination market remains highly competitive.
Finally, in connection with our mortgage loan origination business, we will compete with bank and non-bank originators to provide various residential mortgage loan and real estate services products. The mortgage loan origination market remains highly competitive.
A number of legislative proposals have been introduced in the past that would phase out or reform the GSEs. It is not possible to predict the scope and nature of the actions that the U.S. government could ultimately take with respect to the GSEs, including in light of recent changes in administration and executive offices of the U.S. government.
A number of legislative proposals have been introduced in the past that would phase out or reform the GSEs. It is not possible to predict the scope and nature of the actions that the U.S. government could ultimately take with respect to the GSEs.
We also cannot predict the amounts and timing of equity awards to be issued pursuant to our equity incentive plans, nor can we predict the amount and timing of any conversions of our convertible senior notes due January 2026 or our Series A, Series B and Series C preferred stock into shares of our common stock.
We also cannot predict the amounts and timing of equity awards to be issued pursuant to our equity incentive plans, nor can we predict the amount and timing of any conversions of our Series A, Series B and Series C preferred stock into shares of our common stock.
We are from time to time the target of attempted cyber threats. We continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact.
We continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact.
If an adjustable-rate security is prepaid prior to or soon after the time of adjustment to a fully-indexed rate, we will have held that security while it was least profitable and lost the opportunity to receive interest at the fully indexed rate over the remainder of its expected life. • If we are unable to acquire new Agency RMBS similar to the prepaid security, our financial condition, results of operations and cash flows could suffer. 17 Table of Contents Changes in prepayment rates may also significantly affect the value of MSR.
If an adjustable-rate security is prepaid prior to or soon after the time of adjustment to a fully-indexed rate, we will have held that security while it was least profitable and lost the opportunity to receive interest at the fully indexed rate over the remainder of its expected life. • If we are unable to acquire new Agency RMBS similar to the prepaid security, our financial condition, results of operations and cash flows could suffer.
We operate in a highly competitive market. Our profitability depends, in large part, on our ability to acquire a sufficient supply of our target assets at favorable prices.
Our profitability depends, in large part, on our ability to acquire a sufficient supply of our target assets at favorable prices.
Our taxable income may substantially exceed our net income as determined by U.S. GAAP or differences in timing between the recognition of taxable income and the actual receipt of cash may occur in which case we may have taxable income in excess of cash flow from our operating activities.
GAAP or differences in timing between the recognition of taxable income and the actual receipt of cash may occur in which case we may have taxable income in excess of cash flow from our operating activities.
GAAP, purposes may be subject to greater fluctuations from period to period as a result of this accounting treatment for changes in fair value of derivative instruments or for the accounting of the underlying hedged assets or liabilities in our financial statements, as it does not necessarily align with the accounting used for derivative instruments.
GAAP”) purposes may be subject to greater fluctuations from period to period as a result of this accounting treatment for changes in fair value of derivative instruments or for the accounting of the underlying hedged assets or liabilities in our financial statements, as it does not necessarily align with the accounting used for derivative instruments. 15 Table of Contents We are subject to risks associated with the use of third-party service providers.
Rising interest rates generally reduce the demand for mortgage loans due to the higher cost of borrowing. A reduction in the volume of mortgage loans originated may affect the volume of certain target assets available to us, which could adversely affect our ability to acquire assets that satisfy our investment and business objectives.
A reduction in the volume of mortgage loans originated may affect the volume of certain target assets available to us, which could adversely affect our ability to acquire assets that satisfy our investment and business objectives.
We are subject to risks associated with the use of third-party service providers. We have engaged numerous third parties to provide us with financial, technology and other services to support our servicing and originations operations, as well as for general corporate purposes.
We have engaged numerous third parties to provide us with financial, technology and other services to support our servicing and originations operations, as well as for general corporate purposes.
Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings.
Convertible debt and convertible preferred stock may have anti-dilution provisions which are unfavorable to our common stockholders. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings.
Additionally, the loan originator or other parties from whom we acquired the MSR may be insolvent or otherwise unable to honor their respective indemnification or repurchase obligations for breaches of representation and warranties. Legal matters related to the termination of our Management Agreement with PRCM Advisers may adversely affect our business, results of operations, and/or financial condition.
Additionally, the loan originator or other parties from whom we acquired the MSR may be insolvent or otherwise unable to honor their respective indemnification or repurchase obligations for breaches of representation and warranties. Risks Related to Our Assets Declines in the market values of our assets may adversely affect our results of operations and financial condition.
We expect each of our subsidiaries relying on Section 3(c)(5)(C) to invest at least 55% of its assets in whole pool Agency RMBS and other interests in real estate that constitute qualifying assets in accordance with SEC staff guidance and an additional 25% of its assets in either qualifying assets and other types of real estate related assets that do not constitute qualifying assets.
We expect each of our subsidiaries relying on Section 3(c)(5)(C) to invest at least 55% of its assets in whole pool Agency RMBS and other interests in real estate that constitute qualifying assets in accordance with SEC staff guidance and an additional 25% of its assets in either qualifying assets and other types of real estate related assets that do not constitute qualifying assets. 11 Table of Contents As a result of the foregoing restrictions, we may be limited in our ability to make or dispose of certain investments.
In the event of our insolvency or bankruptcy, certain repurchase agreements may qualify for special treatment under the U.S. Bankruptcy Code, the effect of which, among other things, would be to allow the lender under the applicable repurchase agreement to avoid the automatic stay provisions of the U.S. Bankruptcy Code and to foreclose on the collateral agreement without delay.
Bankruptcy Code, the effect of which, among other things, would be to allow the lender under the applicable repurchase agreement to avoid the automatic stay provisions of the U.S. Bankruptcy Code and to foreclose on the collateral agreement without delay.
There can be no assurance that we will be able to attract and retain subservicing clients, which may adversely impact our ability to grow our servicing platform and achieve economies of scale.
The subservicing market is highly competitive, and we expect to face competition related to the pricing and services we offer. There can be no assurance that we will be able to attract and retain subservicing clients, which may adversely impact our ability to grow our servicing platform and achieve economies of scale.
The recovery process against a prior servicer can be prolonged and amounts ultimately recovered from prior servicers may differ from our estimated recoveries recorded based on the prior servicer’s interpretation of responsibility for loss, which could lead to our realization of additional losses.
The recovery process against a prior servicer can be prolonged and amounts ultimately recovered from prior servicers may differ from our estimated recoveries recorded based on the prior servicer’s interpretation of responsibility for loss, which could lead to our realization of additional losses. 16 Table of Contents Our servicing and origination activities expose us to risk of litigation, which may materially and adversely affect our business and financial condition.
Competition for our target assets may lead to the price of such assets increasing and their availability decreasing, which may limit our ability to generate desired returns, reduce our earnings and, in turn, decrease the cash available for distribution to our stockholders.
Competition for our target assets may lead to the price of such assets increasing and their availability decreasing, which may limit our ability to generate desired returns, reduce our earnings and, in turn, decrease the cash available for distribution to our stockholders. 10 Table of Contents In addition, we compete with bank and non-bank servicers for third-party subservicing clients.
Government and regulatory scrutiny of the measures taken by companies to protect against cybersecurity attacks has resulted in heightened cybersecurity requirements and additional regulatory oversight.
Government and regulatory scrutiny of the measures taken by companies to protect against cybersecurity attacks has resulted in heightened cybersecurity requirements and additional regulatory oversight. Any of the foregoing issues may adversely impact our results of operations and financial condition.
Risks Related To Our Assets Declines in the market values of our assets may adversely affect our results of operations and financial condition. A substantial portion of our assets are classified for accounting purposes as “available-for-sale.” Changes in the market values of those assets will be directly charged or credited to stockholders’ equity.
A substantial portion of our assets are classified for accounting purposes as “available-for-sale.” Changes in the market values of those assets will be directly charged or credited to stockholders’ equity. As a result, a decline in values may result in connection with factors that are out of our control and adversely affect our book value.
This difference (or discount) is referred to as the “price drop.” The price drop is the economic equivalent of net interest carry income on the underlying Agency RMBS over the roll period (interest income less implied financing cost) and is commonly referred to as a “dollar roll income.” Consequently, dollar roll transactions and such forward purchase of Agency RMBS represent a form of financing and increase our “at-risk” leverage.
This difference (or discount) is referred to as the “price drop.” The price drop is the economic equivalent of net interest carry income on the underlying Agency RMBS over the roll period (interest income less implied financing cost) and is commonly referred to as a “dollar roll income.” Consequently, dollar roll transactions and such forward purchase of Agency RMBS represent a form of financing and increase our “at-risk” leverage. 18 Table of Contents Under certain market conditions, TBA dollar roll transactions may result in negative carry income whereby the Agency RMBS purchased for a forward settlement date under TBA contract are priced at a premium to Agency RMBS for settlement in the current month.
As a result, our board may establish a series of shares of common or preferred stock that could delay or prevent a transaction or a change in control that might be in the best interests of stockholders. 19 Table of Contents In addition, our charter contains restrictions limiting the ownership and transfer of shares of our common stock and other outstanding shares of capital stock.
As a result, our board may establish a series of shares of common or preferred stock that could delay or prevent a transaction or a change in control that might be in the best interests of stockholders.
Our lenders also may revise their eligibility requirements for the types of assets they are willing to finance or the terms of such financings, based on, among other factors, the regulatory environment and their management of perceived risk. 12 Table of Contents Changes in the financing markets could adversely affect the marketability of the assets in which we invest, and this could negatively affect the value of our assets.
Our lenders also may revise their eligibility requirements for the types of assets they are willing to finance or the terms of such financings, based on, among other factors, the regulatory environment and their management of perceived risk.
Although we monitor the portfolios of our subsidiaries that may rely on the Section 3(c)(5)(C) exemption periodically, there can be no assurance that such subsidiaries will be able to maintain this exemption.
To the extent the SEC publishes new or different guidance with respect to these matters, we may be required to adjust our strategy accordingly. Although we monitor the portfolios of our subsidiaries that may rely on the Section 3(c)(5)(C) exemption periodically, there can be no assurance that such subsidiaries will be able to maintain this exemption.
We originate residential mortgage loans and may sell them to the GSEs or other third-party investors in the secondary market. There can be no assurance that we will be able to continue to sell our loans into the secondary market at attractive prices, or at all.
There can be no assurance that we will be able to continue to sell our loans into the secondary market at attractive prices, or at all.
As a result, a decline in values may result in connection with factors that are out of our control and adversely affect our book value. Moreover, if the decline in value of an available-for-sale security is other than temporary, such decline will reduce our earnings. In addition, some of the assets in our portfolio are not publicly traded.
Moreover, if the decline in value of an available-for-sale security is other than temporary, such decline will reduce our earnings. In addition, some of the assets in our portfolio are not publicly traded. The fair value of securities and other assets that are not publicly traded may not be readily determinable.
We engage in transactions intended to hedge against various risks to our portfolio, including the exposure to changes in interest rates. The extent of our hedging activity varies in scope based on, among other things, the level and volatility of interest rates, the type of assets held and other market conditions.
The extent of our hedging activity varies in scope based on, among other things, the level and volatility of interest rates, the type of assets held and other market conditions.
The market price of our common stock may be influenced by many factors, including without limitation: changes in financial estimates by analysts; fluctuations in our results of operations or financial condition or the results of operations or financial condition of companies perceived to be similar to us; general economic and financial and real estate market conditions; changes in market valuations of similar companies; monetary policy and regulatory developments in the U.S.; and additions or departures of key personnel.
The market price of our common stock may be influenced by many factors, including without limitation: changes in financial estimates by analysts; fluctuations in our results of operations or financial condition or the results of operations or financial condition of companies perceived to be similar to us; general economic and financial and real estate market conditions; changes in market valuations of similar companies; monetary policy and regulatory developments in the U.S.; and additions or departures of key personnel. 21 Table of Contents Tax Risks Our failure to qualify as a REIT would subject us to U.S. federal income tax and potentially increased state and local taxes, which would reduce the amount of our income available for distribution to our stockholders.
The fair value of securities and other assets that are not publicly traded may not be readily determinable. We value these assets quarterly at fair value, as determined in accordance with ASC 820, Fair Value Measurements and Disclosures , which may include unobservable inputs.
We value these assets quarterly at fair value, as determined in accordance with ASC 820, Fair Value Measurements and Disclosures , which may include unobservable inputs.
In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any calendar year are less than a minimum amount specified under U.S. federal income tax law. 22 Table of Contents We intend to distribute our net income to stockholders in a manner intended to satisfy the 90% distribution requirement and to avoid both corporate income tax and the 4% nondeductible excise tax.
In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any calendar year are less than a minimum amount specified under U.S. federal income tax law.
An increase in our borrowing costs relative to the interest that we receive on our leveraged assets may adversely affect our profitability. As our repurchase agreements and other short-term borrowings mature, we must enter into new borrowings, find other sources of liquidity or sell assets.
As our repurchase agreements and other short-term borrowings mature, we must enter into new borrowings, find other sources of liquidity or sell assets. An increase in short-term interest rates at the time that we seek to enter into new borrowings would reduce the spread between the returns on our assets and the cost of our borrowings.
There can be no assurance that we will be successful in entering into such replacement repurchase agreements on the same terms as the repurchase agreements that were terminated or at all. 13 Table of Contents Our rights under our repurchase agreements are subject to the effects of bankruptcy laws in the event of the bankruptcy or insolvency of us or our lenders under the repurchase agreements.
There can be no assurance that we will be successful in entering into such replacement repurchase agreements on the same terms as the repurchase agreements that were terminated or at all.
In addition, the implementation of more restrictive or operationally intensive guidance may increase the costs associated with owning and managing MSR, our ability to finance MSR and our ability to generate revenue from servicing mortgage loans. 15 Table of Contents If our ability to sell loans in the secondary market is impaired, it could affect our volume and margins and we may not be able to continue to originate mortgage loans.
In addition, the implementation of more restrictive or operationally intensive guidance may increase the costs associated with owning and managing MSR, our ability to finance MSR and our ability to generate revenue from servicing mortgage loans.
As such, the applicable investor may have direct recourse to us for such origination and/or prior servicing issues depending upon the terms and conditions approved by such investor in connection with our purchase of the related MSR. 16 Table of Contents In connection with our prior securitization transactions and with the sales of our MSR and other assets from time to time, we may have been or may be required to make certain disclosures, representations and warranties to the purchasers of the assets regarding certain characteristics of those assets.
In connection with our prior securitization transactions and with the sales of our MSR and other assets from time to time, we may have been or may be required to make certain disclosures, representations and warranties to the purchasers of the assets regarding certain characteristics of those assets.
Upon liquidation, holders of our debt securities and preferred stock, if any, and lenders with respect to other borrowings will be entitled to our available assets prior to the holders of our common stock. Convertible debt and convertible preferred stock may have anti-dilution provisions which are unfavorable to our common stockholders.
In the future, we may elect to raise capital through the issuance of convertible or non-convertible debt or common or preferred equity securities. Upon liquidation, holders of our debt securities and preferred stock, if any, and lenders with respect to other borrowings will be entitled to our available assets prior to the holders of our common stock.
To the extent that we use leverage to finance assets that later become illiquid, we may lose that leverage if the financing counterparty determines that the collateral is no longer sufficient to secure the financing, or the counterparty could reduce the amount of money that it is willing to lend against the asset. 11 Table of Contents We may not be able to grow or realize the benefits of our direct-to-consumer loan origination platform, which could adversely impact our business, results of operations and financial condition.
To the extent that we use leverage to finance assets that later become illiquid, we may lose that leverage if the financing counterparty determines that the collateral is no longer sufficient to secure the financing, or the counterparty could reduce the amount of money that it is willing to lend against the asset.
While we regularly assess our exposure to different counterparties, the performance and financial strength of specific institutions are subject to rapid change, the timing and extent of which cannot be known.
While we regularly assess our exposure to different counterparties, the performance and financial strength of specific institutions are subject to rapid change, the timing and extent of which cannot be known. 14 Table of Contents An increase in our borrowing costs relative to the interest that we receive on our leveraged assets may adversely affect our profitability.
Any of the foregoing issues may adversely impact our results of operations and financial condition. 14 Table of Contents We enter into hedging transactions that expose us to contingent liabilities in the future, which may adversely affect our financial results or cash available for distribution to stockholders.
We enter into hedging transactions that expose us to contingent liabilities in the future, which may adversely affect our financial results or cash available for distribution to stockholders. We engage in transactions intended to hedge against various risks to our portfolio, including the exposure to changes in interest rates.
If our warehouse facilities are terminated or reduced, we may be unable to find replacement financing on favorable terms, or at all, which could adversely affect our business, results of operations and financial condition.
To the extent that the number of or net exposure under our lending arrangements may become concentrated with one or more lenders, the adverse impacts of defaults or terminations by such lenders may be significantly greater. 13 Table of Contents If our warehouse lines of credit are terminated or reduced, we may be unable to find replacement financing on favorable terms, or at all, which could adversely affect our business, results of operations and financial condition.
Additionally, shares of our common stock have also been reserved for issuance in connection with the conversion of our 6.25% convertible senior notes due January 2026 and our Series A, Series B and Series C preferred stock.
Additionally, shares of our common stock have also been reserved for issuance in connection with the potential conversion of our Series A, Series B and Series C preferred stock. We cannot predict the effect, if any, of future issuances or sales of our common stock on the market price of our common stock.
In the ordinary course of our business, we store sensitive data, including our proprietary business information and that of our business partners, and non-public personally identifiable information of mortgage borrowers, on our networks. The secure maintenance and transmission of this information is critical to our operations. Computer malware, viruses, ransomware and phishing attacks remain widespread and are increasingly sophisticated.
The secure maintenance and transmission of this information is critical to our operations. Computer malware, viruses, ransomware and phishing attacks remain widespread and are increasingly sophisticated. We are from time to time the target of attempted cyber threats.
We are highly dependent on information technology, and system failures or security breaches could disrupt our business. Our business is highly dependent on information technology and our ability to process, record and monitor many complex transactions and large amounts of data efficiently and accurately.
Our business is highly dependent on information technology and our ability to process, record and monitor many complex transactions and large amounts of data efficiently and accurately. In the ordinary course of our business, we store sensitive data, including our proprietary business information and that of our business partners, and non-public personally identifiable information of mortgage borrowers, on our networks.
We endeavor to hedge our exposure to changes in interest rates, but there can be no assurances that our hedges will be successful, or that we will be able to enter into or maintain such hedges. 18 Table of Contents An increase in interest rates may cause a decrease in the availability of certain of our target assets, which could adversely affect our ability to acquire target assets that satisfy our investment objectives and to generate income and pay dividends.
An increase in interest rates may cause a decrease in the availability of certain of our target assets, which could adversely affect our ability to acquire target assets that satisfy our investment objectives and to generate income and pay dividends. Rising interest rates generally reduce the demand for mortgage loans due to the higher cost of borrowing.
An increase in short-term interest rates at the time that we seek to enter into new borrowings would reduce the spread between the returns on our assets and the cost of our borrowings. This would adversely affect the returns on our assets, which might reduce earnings and, in turn, cash available for distribution to stockholders.
This would adversely affect the returns on our assets, which might reduce earnings and, in turn, cash available for distribution to stockholders. We are highly dependent on information technology, and system failures or security breaches could disrupt our business.
Removed
In addition, as we seek to grow our subservicing business, we will compete with bank and non-bank servicers for third-party subservicing clients. The subservicing market is highly competitive, and we expect to face competition related to the pricing and services we offer.
Added
Item 1A. Risk Factors Risk Factors Summary The following summary highlights some of the principal risks that we believe could have a material adverse effect on our business, financial condition and results of operations. This summary is not complete and the risks summarized below are not the only risks we face.
Removed
As a result of the foregoing restrictions, we may be limited in our ability to make or dispose of certain investments. To the extent the SEC publishes new or different guidance with respect to these matters, we may be required to adjust our strategy accordingly.
Added
These risks are discussed more fully further below in this section entitled “Risk Factors” in Item 1A of this Annual Report on Form 10-K.
Removed
To the extent that the number of or net exposure under our lending arrangements may become concentrated with one or more lenders, the adverse impacts of defaults or terminations by such lenders may be significantly greater.
Added
These risks include, but are not limited to, the following: Risks Related to Our Business and Operations • Difficult conditions in the residential mortgage and real estate markets, the financial markets and the economy generally may adversely impact our business, results of operations and financial condition. • Our business model depends in part upon the continuing viability of Fannie Mae and Freddie Mac, or similar institutions, and any changes to their structure or creditworthiness could have an adverse impact on us. • Federal and state regulation of the mortgage industry is complex and constantly evolving, and changes to applicable rules, regulations and guidance may adversely impact our business. • Our business could suffer if we fail to attract and retain a skilled management team and workforce. • Loss of our 1940 Act exemptions would adversely affect us, the market price of shares of our common stock and our ability to distribute dividends, and could result in the termination of certain of our financing or other agreements. • The lack of liquidity of our assets may adversely affect our business, including our ability to value, finance and sell our assets. • We may not be able to grow or realize the benefits of our direct-to-consumer loan origination platform, which could adversely impact our business, results of operations and financial condition. • We use leverage in executing our business strategy, which may adversely affect the return on our assets and may reduce cash available for distribution to our stockholders, as well as increase losses when economic conditions are unfavorable. • We depend on repurchase agreements and other credit facilities to execute our business plan and any limitation on our ability to access funding through these sources could have a material adverse effect on our business, results of operations and financial condition. • If our warehouse lines of credit are terminated or reduced, we may be unable to find replacement financing on favorable terms, or at all, which could adversely affect our business, results of operations and financial condition. • Our inability to meet certain financial covenants related to our repurchase agreements, revolving credit facilities or other credit facilities could adversely affect our financial condition, results of operations and cash flows. • If a counterparty to a repurchase agreement defaults on its obligation to resell the underlying security back to us at the end of the repurchase agreement term, or if we default on our obligations under the repurchase agreement, we may incur losses. 8 Table of Contents • We are highly dependent on information technology, and system failures or security breaches could disrupt our business. • We enter into hedging transactions that expose us to contingent liabilities in the future, which may adversely affect our financial results or cash available for distribution to stockholders. • Our ability to own and manage MSR and service mortgage loans is subject to terms and conditions established by the GSEs, which are subject to change. • If our ability to sell loans in the secondary market is impaired, it could affect our volume and margins and we may not be able to continue to originate mortgage loans. • We are directly subject to risks associated with mortgage servicing, including risks related to previous mortgage loan servicers.
Removed
We may not have the ability to raise funds necessary to pay principal amounts owed upon maturity of our outstanding convertible senior notes or to purchase such notes upon a fundamental change. We have issued and have outstanding $261.9 million aggregate principal amount of 6.25% convertible senior notes due January 2026.
Added
Risks Related to Our Assets • Declines in the market values of our assets may adversely affect our results of operations and financial condition. • Changes in mortgage prepayment rates may adversely affect the value of our assets. • Our delayed delivery transactions, including TBAs, subject us to certain risks, including price risks and counterparty risks. • Increases in interest rates could adversely affect the value of our assets and cause our interest expense to increase. • An increase in interest rates may cause a decrease in the availability of certain of our target assets, which could adversely affect our ability to acquire target assets that satisfy our investment objectives and to generate income and pay dividends. • The value of our Agency RMBS and MSR may be adversely affected by deficiencies in servicing and foreclosure practices, as well as related delays in the foreclosure process.
Removed
To the extent these notes are not converted into common stock by the noteholders prior to their maturity date, we will be obligated to repay the principal amount of all outstanding notes upon maturity.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeBy way of example, these measures include the following: • industry standard targeted controls and security frameworks, including the National Institute of Standards and Technology (NIST), to protect our environment, including antivirus, antimalware, multi-factor authentication, complex and regularly changed passwords, patch management, email security and firewalls to protect our assets and our ability to maintain operations; • use of technologies to help detect, identify and manage risks within our environments, including endpoint detect and response, security information and event management and vulnerability management; • a formal cybersecurity incident response plan designed to respond to security incidents in a systematic and complete manner, and involves senior executives, external technical, legal and other resources, including an incident response retainer with our third-party security operations center; • regularly monitoring and assessing our cybersecurity programs using external parties including a third-party 24/7 security operations center and by conducting periodic cyber maturity and risk assessments, penetration tests and other targeted controls assessments; • central systems backup processes and associated disaster recovery plans; • membership in an information sharing and analysis center and other industry groups so that we may stay informed about challenges specific to the financial services industry and contribute to the overall cybersecurity community; and • employee training and awareness programs addressing cybersecurity and data privacy challenges we face in our industry.
Biggest changeBy way of example, these measures include the following: • industry standard targeted controls and security frameworks, including the National Institute of Standards and Technology (NIST), to protect our environment, including antivirus, antimalware, multi-factor authentication, complex and regularly changed passwords, patch management, email security and firewalls to protect our assets and our ability to maintain operations; • use of technologies to help detect, identify and manage risks within our environments, including endpoint detect and response, security information and event management and vulnerability management; • a formal cybersecurity incident response plan designed to respond to security incidents in a systematic and complete manner, and involves senior executives, external technical, legal and other resources, including an incident response retainer with our third-party security operations center; • regularly monitoring and assessing our cybersecurity programs using external parties including a third-party 24/7 security operations center and by conducting periodic cyber maturity and risk assessments, penetration tests and other targeted controls assessments; • central systems backup processes and associated disaster recovery plans; • membership in an information sharing and analysis center and other industry groups so that we may stay informed about challenges specific to the financial services industry and contribute to the overall cybersecurity community; and • employee training and awareness programs addressing cybersecurity and data privacy challenges we face in our industry. 26 Table of Contents Our board of directors is responsible for overseeing matters relating to our information technology and cybersecurity risk exposures and the steps our Company takes to monitor and mitigate these risks.
For additional information on these risks, see Item 1A, “ Risk Factors ” of this Annual Report on Form 10-K. We recognize the importance of protecting our information and our information technology systems, and assessing, identifying and managing cybersecurity-related risks have been integrated into our risk management processes.
For additional information on these risks, see Part I, Item 1A, “ Risk Factors ” of this Annual Report on Form 10-K. We recognize the importance of protecting our information and our information technology systems, and assessing, identifying and managing cybersecurity-related risks have been integrated into our risk management processes.
Our board of directors is responsible for overseeing matters relating to our information technology and cybersecurity risk exposures and the steps our Company takes to monitor and mitigate these risks. The board is briefed semi-annually or as needed by senior management and the Chief Information Security Officer, or CISO, on cybersecurity matters, or more frequently as the circumstances require.
The board is briefed semi-annually or as needed by senior management and the Chief Information Security Officer (“CISO”), on cybersecurity matters, or more frequently as the circumstances require.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Removed
Item 3. Legal Proceedings From time to time, we may be involved in various legal and regulatory matters that arise in the ordinary course of business. As previously disclosed, on July 15, 2020, we provided PRCM Advisers with a notice of termination of the Management Agreement for “cause” in accordance with Section 15(a) of the Management Agreement.
Added
Item 3. Legal Proceedings On August 20, 2025, we entered into a Settlement Agreement and Release (the “Settlement Agreement”), resolving all claims in our litigation with PRCM Advisers LLC, Pine River Capital Management L.P., and Pine River Domestic Management L.P. (collectively, “Pine River”).
Removed
We terminated the Management Agreement for “cause” on the basis of certain material breaches and certain events of gross negligence on the part of PRCM Advisers in the performance of its duties under the Management Agreement.
Added
Pursuant to the terms of the Settlement Agreement, we agreed to make a cash payment of $375 million to Pine River, which was paid in September 2025. Pine River has since caused to be dismissed with prejudice all claims alleged in the federal court action. The state court action was previously dismissed without prejudice.
Removed
On July 21, 2020, PRCM Advisers filed a complaint against us in the United States District Court for the Southern District of New York, or the Court. Subsequently, Pine River Domestic Management L.P. and Pine River Capital Management L.P. were added as plaintiffs to the matter.
Added
Pine River also relinquished ownership or any other interest it may hold in any and all intellectual property that Pine River licensed, conveyed, or otherwise provided to us or that was developed by or for us, whether pursuant to the terms of the management agreement between the parties or otherwise.
Removed
As amended, the complaint, or the Federal Complaint, alleges, among other things, the misappropriation of trade secrets in violation of both the Defend Trade Secrets Act and New York common law, breach of contract, breach of the implied covenant of good faith and fair dealing, unfair competition and business practices, unjust enrichment, conversion, and tortious interference with contract.
Added
We and Pine River have agreed to unconditionally and irrevocably release and discharge each other and our respective representatives from and against any and all claims alleged in the lawsuits. From time to time we may be involved in various legal claims and/or administrative proceedings that arise in the ordinary course of our business.
Removed
The Federal Complaint seeks, among other things, an order enjoining us from making any use of or disclosing PRCM Advisers’ trade secret, proprietary, or confidential information; damages in an amount to be determined at a hearing and/or trial; disgorgement of our wrongfully obtained profits; and fees and costs incurred by the plaintiffs in pursuing the action.
Added
As of the date of this filing, we are not party to any litigation or legal proceedings or, to the best of our knowledge, any threatened litigation or legal proceedings, which, in our opinion, individually or in the aggregate, would have a material adverse effect on our results of operations or financial condition.
Removed
We have filed our answer to the Federal Complaint and made counterclaims against PRCM Advisers and Pine River Capital Management L.P. On May 5, 2022, the plaintiffs filed a motion for judgment on the pleadings, seeking judgment in their favor on all but one of our counterclaims and on one of our affirmative defenses.
Removed
We opposed the motion for judgment on the pleadings. On August 10, 2023, the motion for judgment on the pleadings was granted in part and denied in part. The discovery period has ended. On November 8, 2023, the Company and the plaintiffs filed motions for summary judgment, seeking judgment in their favor on the pending claims and counterclaims.
Removed
Each party opposed the other party’s motion for summary judgment. The motions for summary judgment are fully briefed. Our board of directors believes the Federal Complaint is without merit and that we fully complied with the terms of the Management Agreement. Item 4. Mine Safety Disclosures None. 25 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur common share repurchase program allows for the repurchase of up to an aggregate of 9,375,000 shares of the Company’s common stock.
Biggest changeThe preferred share repurchase program does not have an expiration date. We did not repurchase preferred shares during the three months ended December 31, 2025. Our common share repurchase program allows for the repurchase of up to an aggregate of 9,375,000 shares of the Company’s common stock.
We have paid full cumulative dividends on all classes of our preferred stock from the respective dates of issuance through December 31, 2024. We intend to continue to pay quarterly dividends on our common stock and to distribute to our common stockholders as dividends 100% of our REIT taxable income, on an annual basis.
We have paid full cumulative dividends on all classes of our preferred stock from the respective dates of issuance through December 31, 2025. We intend to continue to pay quarterly dividends on our common stock and to distribute to our common stockholders as dividends 100% of our REIT taxable income, on an annual basis.
Securities Authorized for Issuance under Equity Compensation Plans Our 2021 Equity Incentive Plan, or the Equity Incentive Plan, was adopted by our board of directors and approved by our stockholders for the purpose of enabling us to provide equity compensation to attract and retain qualified directors, officers, advisers, consultants and other personnel.
Securities Authorized for Issuance under Equity Compensation Plans Our 2021 Equity Incentive Plan (the “Equity Incentive Plan”) was adopted by our board of directors and approved by our stockholders for the purpose of enabling us to provide equity compensation to attract and retain qualified directors, officers, advisers, consultants and other personnel.
See Item 1A, “ Risk Factors ” and Item 7, “ Management’s Discussion and Analysis of Financial Conditions and Results of Operations ” of this Annual Report on Form 10-K for information regarding the sources of funds used for dividends and for a discussion of factors, if any, which may adversely affect our ability to pay dividends in 2025 and thereafter.
See Part I, Item 1A, “ Risk Factors ” and Part II, Item 7, “ Management’s Discussion and Analysis of Financial Conditions and Results of Operations ” of this Annual Report on Form 10-K for information regarding the sources of funds used for dividends and for a discussion of factors, if any, which may adversely affect our ability to pay dividends in 2026 and thereafter.
For a detailed description of the Equity Incentive Plan, see Note 20 - Equity Incentive Plans of the consolidated financial statements included under Item 8 of this Annual Report on Form 10-K.
For a detailed description of the Equity Incentive Plan, see Note 16 - Equity Incentive Plans of the consolidated financial statements included under Part II, Item 8 of this Annual Report on Form 10-K.
The Equity Incentive Plan is administered by the compensation committee of our board of directors and permits the grants of restricted common stock, restricted stock units, or RSUs, performance-based awards (including performance share units, or PSUs), phantom shares, dividend equivalent rights and other equity-based awards.
The Equity Incentive Plan is administered by the compensation committee of our board of directors and permits the grants of restricted common stock, restricted stock units (“RSUs”), performance-based awards (including performance share units (“PSUs”)), phantom shares, dividend equivalent rights and other equity-based awards.
The following table presents certain information about the Equity Incentive Plan as of December 31, 2024: December 31, 2024 Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column of this table) Equity compensation plans approved by stockholders (1) — $ — 3,546,040 Equity compensation plans not approved by stockholders — — — Total — $ — 3,546,040 ___________________ (1) For a detailed description of the Equity Incentive Plan, see Note 20 - Equity Incentive Plans of the consolidated financial statements included under Item 8 of this Annual Report on Form 10-K. 26 Table of Contents Performance Graph The following graph compares a stockholder’s cumulative total return, assuming $100 invested at December 31, 2019, with all reinvestment of dividends, as if such amounts had been invested in: (i) our common stock; (ii) the stocks included in the Standard and Poor’s 500 Stock Index, or S&P 500; (iii) the stocks included in the Russell 2000 Index; and (iv) the stocks included in the FTSE Nareit Mortgage REITs Index.
The following table presents certain information about the Equity Incentive Plan as of December 31, 2025: December 31, 2025 Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column of this table) Equity compensation plans approved by stockholders (1) — $ — 2,290,644 Equity compensation plans not approved by stockholders — — — Total — $ — 2,290,644 ___________________ (1) For a detailed description of the Equity Incentive Plan, see Note 16 - Equity Incentive Plans of the consolidated financial statements included under Part II, Item 8 of this Annual Report on Form 10-K. 28 Table of Contents Performance Graph The following graph compares a stockholder’s cumulative total return, assuming $100 invested at December 31, 2020, with all reinvestment of dividends, as if such amounts had been invested in: (i) our common stock; (ii) the stocks included in the Standard and Poor’s 500 Stock Index (“S&P 500”); (iii) the stocks included in the Russell 2000 Index; and (iv) the stocks included in the FTSE Nareit Mortgage REITs Index.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the NYSE under the symbol “TWO.” As of February 12, 2025, 104,022,011 shares of common stock were issued and outstanding.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the NYSE under the symbol “TWO.” As of February 11, 2026, 105,043,188 shares of common stock were issued and outstanding.
Holders As of February 12, 2025, there were 466 registered holders and approximately 93,446 beneficial owners of our common stock. Dividends We have historically paid dividends on our common stock.
Holders As of February 11, 2026, there were 436 registered holders and approximately 88,919 beneficial owners of our common stock. Dividends We have historically paid dividends on our common stock.
COMPARISON OF CUMULATIVE TOTAL RETURN Among Two Harbors Investment Corp., S&P 500, Russell 2000 Index and FTSE Nareit Mortgage REITs Index December 31, Index 2019 2020 2021 2022 2023 2024 Two Harbors Investment Corp. $ 100.00 $ 47.80 $ 47.83 $ 36.68 $ 37.59 $ 36.62 S&P 500 $ 100.00 $ 96.91 $ 152.34 $ 124.73 $ 157.48 $ 196.85 Russell 2000 Index $ 100.00 $ 119.93 $ 137.67 $ 109.50 $ 127.98 $ 142.73 FTSE Nareit Mortgage REITs Index $ 100.00 $ 81.38 $ 94.05 $ 69.27 $ 74.52 $ 79.96 27 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers Our preferred share repurchase program allows for the repurchase of up to an aggregate of 5,000,000 shares of the Company’s preferred stock, which includes the 8.125% Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, 7.625% Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock and 7.25% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock.
COMPARISON OF CUMULATIVE TOTAL RETURN Among Two Harbors Investment Corp., S&P 500, Russell 2000 Index and FTSE Nareit Mortgage REITs Index December 31, Index 2020 2021 2022 2023 2024 2025 Two Harbors Investment Corp. $ 100.00 $ 100.07 $ 76.74 $ 78.65 $ 76.61 $ 78.73 S&P 500 $ 100.00 $ 128.68 $ 105.36 $ 133.03 $ 166.28 $ 195.98 Russell 2000 Index $ 100.00 $ 114.78 $ 91.30 $ 106.71 $ 119.00 $ 134.23 FTSE Nareit Mortgage REITs Index $ 100.00 $ 115.56 $ 85.11 $ 98.04 $ 98.25 $ 114.13 29 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers Our preferred share repurchase program allows for the repurchase of up to an aggregate of 5,000,000 shares of the Company’s preferred stock, which includes the 8.125% Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, 7.625% Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock and 7.25% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock.
The common share repurchase program does not have an expiration date. As of December 31, 2024, we had repurchased 3,637,028 common shares under the program for a total cost of $208.5 million. We did not repurchase common shares during the three months ended December 31, 2024. Item 6. [Reserved]
The common share repurchase program does not have an expiration date. We did not repurchase common shares during the three months ended December 31, 2025. Item 6. [Reserved]
Removed
Beginning with this Annual Report on Form 10-K, the Bloomberg REIT Mortgage Index has been excluded from this graph, as this benchmark was discontinued during the year ended December 31, 2024.
Removed
The Russell 2000 Index and the FTSE Nareit Mortgage REITs Index have been included as we believe the companies included in these indices are comparable to the Company’s size, business and operations.
Removed
The preferred share repurchase program does not have an expiration date. As of December 31, 2024, we had repurchased an aggregate of 4,179,183 preferred shares under the program for a total cost of $77.3 million. We did not repurchase preferred shares during the three months ended December 31, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following tables summarize certain characteristics of the loans underlying our MSR by gross weighted average coupon rate types and ranges at December 31, 2024 and December 31, 2023: December 31, 2024 (dollars in thousands) Number of Loans Unpaid Principal Balance Weighted Average Gross Coupon Rate Weighted Average Current Loan Size Weighted Average Loan Age (months) Weighted Average Original FICO Weighted Average Original LTV 60+ Day Delinquencies 3-Month CPR Net Servicing Fee (bps) 30-Year Fixed: ≤ 3.25% 290,943 $ 89,430,478 2.8 % $ 364 47 768 71.0 % 0.5 % 3.7 % 25.1 > 3.25 - 3.75% 139,660 35,290,037 3.4 % 321 59 753 74.1 % 1.0 % 4.8 % 25.2 > 3.75 - 4.25% 100,224 20,301,195 3.9 % 267 81 752 75.8 % 1.2 % 5.6 % 25.5 > 4.25 - 4.75% 56,071 10,101,522 4.4 % 259 80 739 77.3 % 2.0 % 5.9 % 25.3 > 4.75 - 5.25% 39,434 9,206,486 5.0 % 353 49 746 78.9 % 1.9 % 5.5 % 25.2 > 5.25% 53,606 16,587,910 6.0 % 409 26 750 80.1 % 2.0 % 9.0 % 26.8 679,938 180,917,628 3.6 % 342 53 759 73.7 % 1.0 % 4.8 % 25.3 15-Year Fixed: ≤ 2.25% 22,006 5,269,938 2.0 % 284 44 777 59.1 % 0.2 % 3.7 % 25.0 > 2.25 - 2.75% 36,840 7,071,915 2.4 % 238 47 772 58.8 % 0.3 % 4.9 % 25.0 > 2.75 - 3.25% 31,403 3,793,169 2.9 % 176 71 765 61.4 % 0.3 % 7.4 % 25.3 > 3.25 - 3.75% 17,399 1,525,985 3.4 % 137 85 755 64.0 % 0.4 % 9.2 % 25.4 > 3.75 - 4.25% 8,149 619,730 3.9 % 131 80 741 65.3 % 0.7 % 8.2 % 25.3 > 4.25% 5,848 689,057 4.9 % 227 41 741 65.6 % 1.3 % 10.7 % 27.0 121,645 18,969,794 2.6 % 226 55 769 60.3 % 0.3 % 5.8 % 25.2 Total ARMs 1,508 429,587 4.4 % 374 55 762 71.9 % 1.4 % 14.6 % 25.4 Total 803,091 $ 200,317,009 3.5 % $ 331 53 760 72.4 % 0.9 % 4.9 % 25.3 44 Table of Contents December 31, 2023 (dollars in thousands) Number of Loans Unpaid Principal Balance Weighted Average Gross Coupon Rate Weighted Average Current Loan Size Weighted Average Loan Age (months) Weighted Average Original FICO Weighted Average Original LTV 60+ Day Delinquencies 3-Month CPR Net Servicing Fee (bps) 30-Year Fixed: ≤ 3.25% 300,020 $ 94,894,696 2.8 % $ 374 35 768 70.9 % 0.4 % 2.9 % 25.1 > 3.25 - 3.75% 146,125 37,950,849 3.4 % 329 48 753 74.1 % 0.8 % 3.9 % 25.2 > 3.75 - 4.25% 106,188 22,115,548 3.9 % 274 70 751 75.7 % 1.1 % 4.8 % 25.5 > 4.25 - 4.75% 59,731 10,989,253 4.4 % 262 69 739 77.3 % 2.0 % 5.4 % 25.3 > 4.75 - 5.25% 41,155 9,621,267 4.9 % 355 38 746 78.7 % 1.6 % 4.4 % 25.2 > 5.25% 62,101 17,412,054 6.0 % 382 19 745 80.2 % 1.3 % 5.0 % 26.4 715,320 192,983,667 3.5 % 347 42 758 73.7 % 0.8 % 3.7 % 25.3 15-Year Fixed: ≤ 2.25% 22,725 5,921,063 2.0 % 307 32 777 59.1 % 0.2 % 2.9 % 25.0 > 2.25 - 2.75% 38,338 8,012,105 2.4 % 258 36 772 58.8 % 0.2 % 3.6 % 25.0 > 2.75 - 3.25% 34,192 4,585,258 2.9 % 190 62 766 61.8 % 0.3 % 5.7 % 25.3 > 3.25 - 3.75% 19,514 1,915,441 3.4 % 149 75 756 64.0 % 0.6 % 7.0 % 25.4 > 3.75 - 4.25% 9,125 761,588 3.9 % 139 71 741 65.2 % 1.0 % 8.1 % 25.3 > 4.25% 6,546 793,853 5.0 % 227 32 742 65.3 % 0.9 % 8.5 % 27.9 130,440 21,989,308 2.6 % 242 45 769 60.3 % 0.3 % 4.5 % 25.2 Total ARMs 2,504 674,197 4.5 % 358 56 761 70.6 % 0.9 % 12.8 % 25.4 Total 848,264 $ 215,647,172 3.5 % $ 336 42 759 72.3 % 0.7 % 3.8 % 25.3 Financing Our borrowings consist primarily of repurchase agreements, revolving credit facilities, warehouse facilities and convertible senior notes.
Biggest changeThe following tables summarize certain characteristics of the loans underlying our MSR by gross weighted average coupon rate types and ranges at December 31, 2025 and December 31, 2024: December 31, 2025 (dollars in thousands) Number of Loans Unpaid Principal Balance Weighted Average Gross Coupon Rate Weighted Average Current Loan Size Weighted Average Loan Age (months) Weighted Average Original FICO Weighted Average Original LTV 60+ Day Delinquencies 3-Month CPR Net Servicing Fee (bps) 30-Year Fixed: ≤ 3.25% 248,086 $ 73,206,447 2.8 % $ 350 59 768 71.5 % 0.5 % 3.9 % 25.0 > 3.25 - 3.75% 115,500 27,959,862 3.4 % 310 73 753 74.0 % 0.9 % 5.4 % 25.1 > 3.75 - 4.25% 77,384 14,414,797 3.9 % 247 101 752 75.2 % 1.2 % 5.8 % 25.3 > 4.25 - 4.75% 46,149 7,766,586 4.4 % 242 98 739 77.1 % 1.8 % 6.3 % 25.2 > 4.75 - 5.25% 32,883 7,472,391 5.0 % 347 62 748 79.0 % 1.9 % 6.6 % 25.2 > 5.25% 56,820 17,505,641 6.2 % 411 31 750 79.8 % 1.8 % 16.9 % 27.0 576,822 148,325,724 3.6 % 334 65 759 74.0 % 0.9 % 6.3 % 25.3 15-Year Fixed: ≤ 2.25% 17,461 3,747,145 2.0 % 257 56 776 60.0 % 0.2 % 4.3 % 25.0 > 2.25 - 2.75% 30,400 5,290,853 2.4 % 217 60 772 59.5 % 0.2 % 5.4 % 25.0 > 2.75 - 3.25% 24,800 2,536,704 2.9 % 154 84 765 61.7 % 0.3 % 7.3 % 25.2 > 3.25 - 3.75% 13,113 917,584 3.4 % 112 102 755 64.1 % 0.5 % 10.4 % 25.2 > 3.75 - 4.25% 5,927 367,989 3.9 % 109 98 739 65.7 % 0.8 % 9.7 % 25.4 > 4.25% 5,164 746,060 5.3 % 292 37 750 64.3 % 1.2 % 21.6 % 27.5 96,865 13,606,335 2.7 % 211 66 769 60.8 % 0.3 % 6.9 % 25.2 Total ARMs 1,528 518,428 5.2 % 452 44 766 71.9 % 0.4 % 30.9 % 25.2 Total 675,215 $ 162,450,487 3.6 % $ 324 65 760 72.9 % 0.9 % 6.4 % 25.3 December 31, 2024 (dollars in thousands) Number of Loans Unpaid Principal Balance Weighted Average Gross Coupon Rate Weighted Average Current Loan Size Weighted Average Loan Age (months) Weighted Average Original FICO Weighted Average Original LTV 60+ Day Delinquencies 3-Month CPR Net Servicing Fee (bps) 30-Year Fixed: ≤ 3.25% 290,943 $ 89,430,478 2.8 % $ 364 47 768 71.0 % 0.5 % 3.7 % 25.1 > 3.25 - 3.75% 139,660 35,290,037 3.4 % 321 59 753 74.1 % 1.0 % 4.8 % 25.2 > 3.75 - 4.25% 100,224 20,301,195 3.9 % 267 81 752 75.8 % 1.2 % 5.6 % 25.5 > 4.25 - 4.75% 56,071 10,101,522 4.4 % 259 80 739 77.3 % 2.0 % 5.9 % 25.3 > 4.75 - 5.25% 39,434 9,206,486 5.0 % 353 49 746 78.9 % 1.9 % 5.5 % 25.2 > 5.25% 53,606 16,587,910 6.0 % 409 26 750 80.1 % 2.0 % 9.0 % 26.8 679,938 180,917,628 3.6 % 342 53 759 73.7 % 1.0 % 4.8 % 25.3 15-Year Fixed: ≤ 2.25% 22,006 5,269,938 2.0 % 284 44 777 59.1 % 0.2 % 3.7 % 25.0 > 2.25 - 2.75% 36,840 7,071,915 2.4 % 238 47 772 58.8 % 0.3 % 4.9 % 25.0 > 2.75 - 3.25% 31,403 3,793,169 2.9 % 176 71 765 61.4 % 0.3 % 7.4 % 25.3 > 3.25 - 3.75% 17,399 1,525,985 3.4 % 137 85 755 64.0 % 0.4 % 9.2 % 25.4 > 3.75 - 4.25% 8,149 619,730 3.9 % 131 80 741 65.3 % 0.7 % 8.2 % 25.3 > 4.25% 5,848 689,057 4.9 % 227 41 741 65.6 % 1.3 % 10.7 % 27.0 121,645 18,969,794 2.6 % 226 55 769 60.3 % 0.3 % 5.8 % 25.2 Total ARMs 1,508 429,587 4.4 % 374 55 762 71.9 % 1.4 % 14.6 % 25.4 Total 803,091 $ 200,317,009 3.5 % $ 331 53 760 72.4 % 0.9 % 4.9 % 25.3 47 Table of Contents Financing Our borrowings consist primarily of repurchase agreements, revolving credit facilities, warehouse lines of credit, senior notes and convertible senior notes.
We obtain third-party valuations, industry surveys and other available market data quarterly to assess the reasonableness of the the significant unobservable inputs used in the cash flow model, as well as fair value calculated by the cash flow model, subject to internally-established hierarchy and override procedures.
We obtain third-party valuations, industry surveys and other available market data quarterly to assess the reasonableness of the significant unobservable inputs used in the cash flow model, as well as fair value calculated by the cash flow model, subject to internally-established hierarchy and override procedures.
Swaps and swaptions are used for purposes of hedging our interest rate exposure, and therefore, their unrealized valuation gains and losses (excluding the reversal of unrealized gains and losses to realized gains and losses upon termination, maturation or option expiration) generally offset a portion of the unrealized losses and gains recognized on our Agency RMBS AFS portfolio, which are recorded either directly to stockholders’ equity through other comprehensive (loss) income or to loss on investment securities, in the case of certain AFS securities for which we have elected the fair value option.
Swaps and swaptions are used for purposes of hedging our interest rate exposure, and therefore, their unrealized valuation gains and losses (excluding the reversal of unrealized gains and losses to realized gains and losses upon termination, maturation or option expiration) generally offset a portion of the unrealized losses and gains recognized on our Agency RMBS AFS portfolio, which are recorded either directly to stockholders’ equity through other comprehensive income (loss) or to loss on investment securities, in the case of certain AFS securities for which we have elected the fair value option.
Additionally, we reclassify unrealized gains and losses on AFS securities in accumulated other comprehensive loss to net income (loss) upon the recognition of any realized gains and losses on sales as individual securities are sold.
Additionally, we reclassify unrealized gains and losses on AFS securities in accumulated other comprehensive loss to net (loss) income upon the recognition of any realized gains and losses on sales as individual securities are sold.
We also hold $3.7 million in tranches of mortgage-backed and asset-backed P&I and interest-only non-Agency securities. All of our P&I Agency RMBS AFS are Fannie Mae or Freddie Mac mortgage pass-through certificates or collateralized mortgage obligations, or Ginnie Mae mortgage pass-through certificates, which are backed by the guarantee of the U.S. government.
We also hold $3.3 million in tranches of mortgage-backed and asset-backed P&I and interest-only non-Agency securities. All of our P&I Agency RMBS AFS are Fannie Mae or Freddie Mac mortgage pass-through certificates or collateralized mortgage obligations, or Ginnie Mae mortgage pass-through certificates, which are backed by the guarantee of the U.S. government.
Net interest income, as well as our servicing income, net of servicing costs, will fluctuate primarily as a result of changes in market interest rates, our financing costs and prepayment speeds on our assets.
Net interest income (expense), as well as our servicing income, net of servicing costs, will fluctuate primarily as a result of changes in market interest rates, our financing costs and prepayment speeds on our assets.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K. This section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K. This section of this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024.
We believe the current degree of leverage within our portfolio helps ensure that we have access to unused borrowing capacity, thus supporting our liquidity and the strength of our balance sheet. 46 Table of Contents The following table provides a summary of our borrowings under repurchase agreements (excluding those collateralized by U.S.
We believe the current degree of leverage within our portfolio helps ensure that we have access to unused borrowing capacity, thus supporting our liquidity and the strength of our balance sheet. The following table provides a summary of our borrowings under repurchase agreements (excluding those collateralized by U.S.
The change in fair value of interest rate swaps and swaptions during the three and twelve months ended December 31, 2024 and 2023 was a result of changes to floating interest rates (OIS or SOFR), the swap curve and corresponding counterparty borrowing rates.
The change in fair value of interest rate swaps and swaptions during the three and twelve months ended December 31, 2025 and 2024 was a result of changes to floating interest rates (OIS or SOFR), the swap curve and corresponding counterparty borrowing rates.
(4) These repurchase facilities are secured by the related VFNs issued by TH MSR Issuer Trust and collateralized by portions of our MSR portfolio. 50 Table of Contents We are subject to a variety of financial covenants under our lending agreements.
(4) These repurchase facilities are secured by the related VFNs issued by TH MSR Issuer Trust and collateralized by portions of our MSR portfolio. 52 Table of Contents We are subject to a variety of financial covenants under our lending agreements.
Recently Issued Accounting Standards Refer to Note 2 - Basis of Presentation and Significant Accounting Policies of the notes to the consolidated financial statements included in Item 8 of this Form 10-K. Inflation Our assets and liabilities are financial in nature.
Recently Issued Accounting Standards Refer to Note 2 - Basis of Presentation and Significant Accounting Policies of the notes to the consolidated financial statements included in Part II, Item 8 of this Form 10-K. Inflation Our assets and liabilities are financial in nature.
TH MSR Holdings acquires MSR from third-party originators through flow and bulk purchases, as well as through the recapture of MSR on loans in its MSR portfolio that refinance. Beginning in 2024, TH MSR Holdings also acquires MSR on loans originated by its subsidiary, RoundPoint, through purchases and recapture of MSR.
TH MSR Holdings acquires MSR from third-party originators through flow and bulk purchases, as well as through the recapture of MSR on loans in its MSR portfolio that refinance. Beginning in 2024, TH MSR Holdings also acquires MSR on loans originated by its wholly owned subsidiary, RoundPoint, through purchases and recapture of MSR.
Our GAAP net income (loss) is also affected by fluctuations in market prices on the remainder of our financial assets and liabilities recorded at fair value, including interest rate swap and swaption agreements and certain other derivative instruments ( i.e. , Agency to-be-announced securities, or TBAs, options on TBAs, futures, options on futures, inverse interest-only securities, interest rate lock commitments and forward loan sale commitments), which are accounted for as derivative trading instruments under U.S.
Our GAAP net income (loss) is also affected by fluctuations in market prices on the remainder of our financial assets and liabilities recorded at fair value, including interest rate swap and swaption agreements and certain other derivative instruments ( i.e. , Agency TBAs, options on TBAs, futures, options on futures, inverse interest-only securities, interest rate lock commitments and forward loan sale commitments), which are accounted for as derivative trading instruments under U.S.
(2) Represents unused capacity amounts to which commitment fees are charged. (3) The revolving period of this facility ceases on March 8, 2026, at which time the facility starts a 12-month amortization period.
(2) Represents unused capacity amounts to which commitment fees are charged. (3) The revolving period of this facility ceases on March 8, 2028, at which time the facility starts a 12-month amortization period.
Accordingly, we monitor our compliance with both the 55% Test and the 80% Tests of the 1940 Act in order to maintain our exempt status. As of December 31, 2024, we determined that we maintained compliance with both the 55% Test and the 80% Test requirements.
Accordingly, we monitor our compliance with both the 55% Test and the 80% Tests of the 1940 Act in order to maintain our exempt status. As of December 31, 2025, we determined that we maintained compliance with both the 55% Test and the 80% Test requirements.
The majority of our Agency RMBS portfolio is comprised of whole pool certificates. We seek to deploy moderate leverage as part of our investment strategy. We generally finance our Agency RMBS through short- and long-term borrowings structured as repurchase agreements. We also finance our MSR through revolving credit facilities, repurchase agreements and convertible senior notes.
The majority of our Agency RMBS portfolio is comprised of whole pool certificates. We seek to deploy moderate leverage as part of our investment strategy. We generally finance our Agency RMBS through short- and long-term borrowings structured as repurchase agreements. We also finance our MSR through revolving credit facilities and repurchase agreements.
Income Taxes During the three and twelve months ended December 31, 2024, we recognized a provision for income taxes of $30.9 million and $46.6 million, respectively.
During the three and twelve months ended December 31, 2024, we recognized a provision from income taxes of $30.9 million and $46.6 million, respectively.
GAAP to taxable income timing differences than if the portfolio were accounted for as trading instruments. Dividends For the year ended December 31, 2024, we declared cash dividends totaling $1.80 per common share. As a REIT, we are required to distribute at least 90% of our taxable income to stockholders, subject to certain distribution requirements.
GAAP to taxable income timing differences than if the portfolio were accounted for as trading instruments. Dividends For the year ended December 31, 2025, we declared cash dividends totaling $1.52 per common share. As a REIT, we are required to distribute at least 90% of our taxable income to stockholders, subject to certain distribution requirements.
During the three and twelve months ended December 31, 2024, our economic debt-to-equity ratio funding our Agency and non-Agency investment securities, MSR and related servicing advances and mortgage loans held-for-sale, which includes unsecured borrowings under convertible senior notes, implied debt on net TBA cost basis and net payable (receivable) for unsettled RMBS, decreased from 7.0:1.0 to 6.5:1.0 and increased from 6.0:1.0 to 6.5:1.0, respectively. 49 Table of Contents As of December 31, 2024, we held approximately $5.4 million of unpledged Agency RMBS and $3.4 million of unpledged non-Agency securities.
During the three and twelve months ended December 31, 2025, our economic debt-to-equity ratio funding our Agency and non-Agency investment securities, MSR and related servicing advances and mortgage loans held-for-sale, which includes unsecured borrowings under senior notes and convertible senior notes, implied debt on net TBA cost basis and net payable (receivable) for unsettled RMBS, decreased from 7.2:1.0 to 7.0:1.0 and increased from 6.5:1.0 to 7.0:1.0, respectively. 51 Table of Contents As of December 31, 2025, we held approximately $6.5 million of unpledged Agency RMBS and $3.3 million of unpledged non-Agency securities.
Significant unobservable inputs include prepayment speeds; option adjusted spread, or OAS, which represents the incremental spread added to the risk-free rate to reflect the effects of any embedded options and other risk inherent in MSR; and cost to service.
Significant unobservable inputs include prepayment speeds; option adjusted spread (“OAS”), which represents the incremental spread added to the risk-free rate to reflect the effects of any embedded options and other risk inherent in MSR; and cost to service.
We calculate that at least 75% of our assets were qualified REIT assets, as defined in the Internal Revenue Code for the year ended December 31, 2024. We also calculate that our revenue qualified for the 75% source of income test and for the 95% source of income test rules for the year ended December 31, 2024.
We calculate that at least 75% of our assets were qualified REIT assets, as defined in the Code for the year ended December 31, 2025. We also calculate that our revenue qualified for the 75% source of income test and for the 95% source of income test rules for the year ended December 31, 2025.
Additionally, we frequently perform shock analyses against various market events to monitor the adequacy of our excess liquidity. During the year ended December 31, 2024, we did not experience any material issues accessing our funding sources. We expect ongoing sources of financing to be primarily repurchase agreements, revolving credit facilities, warehouse facilities, convertible notes and similar financing arrangements.
Additionally, we frequently perform shock analyses against various market events to monitor the adequacy of our excess liquidity. During the year ended December 31, 2025, we did not experience any material issues accessing our funding sources. We expect ongoing sources of financing to be primarily repurchase agreements, revolving credit facilities, warehouse lines of credit, senior notes and similar financing arrangements.
As of December 31, 2024, the debt-to-equity ratio funding our Agency and non-Agency investment securities, MSR and related servicing advances and mortgage loans held-for-sale, which includes unsecured borrowings under convertible senior notes, was 4.3:1.0.
As of December 31, 2025, the debt-to-equity ratio funding our Agency and non-Agency investment securities, MSR and related servicing advances and mortgage loans held-for-sale, which includes unsecured borrowings under senior notes and convertible senior notes, was 4.8:1.0.
One of our wholly owned subsidiaries, TH MSR Holdings LLC (formerly Matrix Financial Services Corporation) holds the requisite approvals from Fannie Mae and Freddie Mac to own and manage MSR, which represent a contractual right to control the servicing of a mortgage loan, the obligation to service the loan in accordance with applicable laws and requirements and the right to collect a fee for the performance of servicing activities, such as collecting principal and interest from a borrower and distributing those payments to the owner of the loan.
One of our wholly owned subsidiaries, TH MSR Holdings, holds the requisite approvals from Fannie Mae and Freddie Mac to own and manage MSR, which represent a contractual right to control the servicing of a mortgage loan, the obligation to service the loan in accordance with applicable laws and requirements and the right to collect a fee for the performance of servicing activities, such as collecting principal and interest from a borrower and distributing those payments to the owner of the loan.
Accordingly, there is no assurance that our estimates of fair value are indicative of the amounts that would be realized on the ultimate sale or exchange of these assets. At December 31, 2024, 24.6% of our total assets were classified as Level 3 fair value assets. Critical Accounting Estimates The preparation of financial statements in accordance with U.S.
Accordingly, there is no assurance that our estimates of fair value are indicative of the amounts that would be realized on the ultimate sale or exchange of these assets. At December 31, 2025, 22.3% of our total assets were classified as Level 3 fair value assets. Critical Accounting Estimates The preparation of financial statements in accordance with U.S.
However, certain activities that we may perform may cause us to earn income which will not be qualifying income for REIT purposes. We have designated certain of our subsidiaries as taxable REIT subsidiaries, or TRSs, as defined in the Internal Revenue Code, to engage in such activities.
However, certain activities that we may perform may cause us to earn income which will not be qualifying income for REIT purposes. We have designated certain of our subsidiaries as TRSs as defined in the Code, to engage in such activities.
As of December 31, 2024, we had master repurchase agreements in place with 36 counterparties (lenders), the majority of which are U.S. domiciled financial institutions, and we continue to evaluate additional counterparties to manage and optimize counterparty risk.
As of December 31, 2025, we had master repurchase agreements in place with 34 counterparties (lenders), the majority of which are U.S. domiciled financial institutions, and we continue to evaluate additional counterparties to manage and optimize counterparty risk.
We also operate our business in a manner that will permit us to maintain our exemption from registration under the Investment Company Act of 1940, as amended, or the 1940 Act. Certain of our subsidiaries have obtained the requisite licenses and approvals to own and manage MSR and to originate and directly service residential mortgage loans.
We also operate our business in a manner that will permit us to maintain our exemption from registration under the 1940 Act. Certain of our subsidiaries have obtained the requisite licenses and approvals to own and manage MSR and to originate and directly service residential mortgage loans.
General We are a Maryland corporation that invests in, finances and manages MSR and Agency RMBS, and, through our operational platform, RoundPoint Mortgage Servicing LLC, or RoundPoint, we are one of the largest servicers of conventional loans in the country.
General We are a Maryland corporation that invests in, finances and manages MSR and Agency RMBS, and, through our operational platform, RoundPoint, we are one of the largest servicers of conventional loans in the country.
The originations platform also originates loans for new borrowers that do not currently have a mortgage loan serviced by RoundPoint and brokers second lien loans to our borrowers.
The originations platform also originates both first and second mortgages for new borrowers that do not currently have a mortgage loan serviced by RoundPoint and brokers second lien loans to our existing borrowers.
However, changes in the provision for credit losses on AFS securities are recognized immediately in GAAP net income (loss).
GAAP purposes (“GAAP net income (loss)”). However, changes in the provision for credit losses on AFS securities are recognized immediately in GAAP net income (loss).
We believe our broker and banking counterparties are well-capitalized organizations, and we attempt to manage our cash balances across these organizations to reduce our exposure to any single counterparty. As of December 31, 2024, we had entered into repurchase agreements with 36 counterparties, 19 of which had outstanding balances.
We believe our broker and banking counterparties are well-capitalized organizations, and we attempt to manage our cash balances across these organizations to reduce our exposure to any single counterparty. As of December 31, 2025, we had entered into repurchase agreements with 34 counterparties, 18 of which had outstanding balances.
Consequently, we met the REIT income and asset tests. We also met all REIT requirements regarding the ownership of our common stock and the distribution of our net income. Therefore, for the year ended December 31, 2024, we believe that we qualified as a REIT under the Internal Revenue Code. 52 Table of Contents
Consequently, we met the REIT income and asset tests. We also met all REIT requirements regarding the ownership of our common stock and the distribution of our net income. Therefore, for the year ended December 31, 2025, we believe that we qualified as a REIT under the Code. 54 Table of Contents
TH MSR Holdings does not directly service mortgage loans; instead, it engages its wholly owned subsidiary, RoundPoint, to handle substantially all servicing functions for the mortgage loans underlying our MSR.
TH MSR Holdings does not directly service mortgage loans; instead, it engages RoundPoint to handle substantially all servicing functions for the mortgage loans underlying its MSR.
Gain On Mortgage Loans Held-For-Sale The following table provides a summary of the total net realized and unrealized gains (losses) recognized on mortgage loans held-for-sale and the related derivative instruments used to manage exposure to market risks primarily associated with fluctuations in interest rate risks related to our origination pipeline during the three and twelve months ended December 31, 2024 and 2023: Three Months Ended Year Ended (in thousands) December 31, December 31, 2024 2023 2024 2023 Mortgage loans held-for-sale $ 768 $ — $ 1,185 $ — Interest rate lock commitments (341) — 137 — Forward mortgage loan sale commitments 131 — 160 — Gain on mortgage loans held-for-sale $ 558 $ — $ 1,482 $ — Late in the second quarter of 2024, RoundPoint began operating its in-house, direct-to-consumer originations platform.
Gain On Mortgage Loans Held-For-Sale The following table provides a summary of the total net realized and unrealized gains (losses) recognized on mortgage loans held-for-sale and the related derivative instruments used to manage exposure to market risks primarily associated with fluctuations in interest rate risks related to our origination pipeline during the three and twelve months ended December 31, 2025 and 2024: Three Months Ended Year Ended December 31, December 31, (in thousands) 2025 2024 2025 2024 Mortgage loans held-for-sale $ 2,040 $ 768 $ 4,646 $ 1,185 TBAs (296) — (541) — Interest rate lock commitments (187) (341) 743 137 Forward mortgage loan sale commitments — 131 (143) 160 Gain on mortgage loans held-for-sale $ 1,557 $ 558 $ 4,705 $ 1,482 Late in the second quarter of 2024, RoundPoint began operating its in-house, direct-to-consumer originations platform.
Fair Value Measurement A significant portion of our assets and liabilities are reported at fair value and, therefore, our consolidated balance sheets and statements of comprehensive income (loss) are significantly affected by fluctuations in market prices. At December 31, 2024, approximately 85.0% of our total assets, or $10.4 billion, consisted of financial instruments recorded at fair value.
Fair Value Measurement A significant portion of our assets and liabilities are reported at fair value and, therefore, our consolidated balance sheets and statements of comprehensive (loss) income are significantly affected by fluctuations in market prices. At December 31, 2025, approximately 83.2% of our total assets, or $9.0 billion, consisted of financial instruments recorded at fair value.
The cash movements can be summarized by the following: • Cash flows from operating activities. For the year ended December 31, 2024, operating activities increased our cash balances by approximately $201.0 million, primarily driven by our financial results for the year. • Cash flows from investing activities .
The cash movements can be summarized by the following: • Cash flows from operating activities. For the year ended December 31, 2025, operating activities increased our cash balances by approximately $88.9 million, primarily driven by our financial results for the year. • Cash flows from investing activities .
As of December 31, 2024, we held $504.6 million in cash and cash equivalents, approximately $5.4 million of unpledged Agency RMBS and $3.4 million of unpledged non-Agency securities. As a result, we had an overall estimated unused borrowing capacity on our unpledged securities of approximately $6.5 million.
As of December 31, 2025, we held $842.3 million in cash and cash equivalents, approximately $6.5 million of unpledged Agency RMBS and $3.3 million of unpledged non-Agency securities. As a result, we had an overall estimated unused borrowing capacity on our unpledged securities of approximately $8.0 million.
Warehouse facilities are collateralized by our pledge of mortgage loans for a period of up to 90 days or until they are sold to the GSEs or other third-party investors in the secondary market, typically within 60 days of origination. Substantially all of our funded mortgage loans held-for-sale are currently pledged as collateral for warehouse facilities.
Substantially all of our funded mortgage loans held-for-sale are currently pledged as collateral for repurchase agreements and warehouse lines of credit for a period of up to 90 days or until they are sold to the GSEs or other third-party investors in the secondary market, typically within 60 days of origination.
As of December 31, 2024, we held $504.6 million in cash and cash equivalents available to support our operations; $10.4 billion of AFS securities, MSR, mortgage loans held-for-sale and derivative assets held at fair value; and $9.1 billion of outstanding debt in the form of repurchase agreements, borrowings under revolving credit facilities and warehouse facilities and convertible senior notes.
As of December 31, 2025, we held $842.3 million in cash and cash equivalents available to support our operations; $9.0 billion of AFS securities, MSR, mortgage loans held-for-sale and derivative assets held at fair value; and $8.6 billion of outstanding debt in the form of repurchase agreements and borrowings under revolving credit facilities, warehouse lines of credit, senior notes and convertible senior notes.
These third-party subservicing costs and other servicing expenses directly related to our MSR portfolio are included within the servicing costs line item on our consolidated statements of comprehensive income (loss). Post-acquisition, all servicing-related expenses incurred by RoundPoint are included within the other operating expenses line item on our consolidated statements of comprehensive income (loss).
All third-party subservicing costs and other servicing expenses directly related to our MSR portfolio are included within the servicing costs line item on our consolidated statements of comprehensive (loss) income. All servicing-related general and administrative expenses incurred by RoundPoint are included within the compensation and benefits and other operating expenses line items on our consolidated statements of comprehensive (loss) income.
The following table provides the three-month average CPR experienced by our Agency RMBS and MSR during the three months ended December 31, 2024, and the four immediately preceding quarters: Three Months Ended December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 Agency RMBS 7.5 % 7.2 % 7.3 % 4.8 % 5.2 % Mortgage servicing rights 4.9 % 5.3 % 5.3 % 3.9 % 3.8 % Our Agency RMBS are primarily collateralized by pools of fixed-rate mortgage loans.
The following table provides the three-month average conditional prepayment rate (“CPR”) experienced by our Agency RMBS and MSR during the three months ended December 31, 2025, and the four immediately preceding quarters: Three Months Ended December 31, 2025 September 30, 2025 June 30, 2025 March 31, 2025 December 31, 2024 Agency RMBS 7.9 % 8.0 % 8.4 % 7.0 % 7.5 % Mortgage servicing rights 6.4 % 6.0 % 5.8 % 4.2 % 4.9 % Our Agency RMBS are primarily collateralized by fixed-rate mortgage loans.
We also have one revolving credit facility that provides long-term financing for our servicing advances and one warehouse facility that provides short-term financing for our mortgage loans held-for-sale.
We also have one revolving credit facility that provides long-term financing for our servicing advances, and one master repurchase agreement and one warehouse line of credit that provide short-term financing for our mortgage loans held-for-sale.
Our Agency portfolio also includes securities with implicit prepayment protection, including lower loan balances (securities collateralized by loans of less than $300,000 in initial principal balance), higher LTVs (securities collateralized by loans with LTVs greater than or equal to 80%), certain geographic concentrations, loans secured by investor-owned properties and lower FICO scores.
Our Agency portfolio also includes securities with implicit prepayment protection, including lower loan balances (securities collateralized by loans of less than $400,000 in initial principal balance), higher LTVs (securities collateralized by loans with LTVs greater than or equal to 80%), certain geographic concentrations, loans secured by investor-owned properties and lower FICO scores.We also hold pools backed by Agency multi-family mortgage loans and hybrid adjustable-rate mortgage loans.
GAAP, fair value option elected AFS securities, MSR and mortgage loans held-for-sale. We have numerous internal controls in place to help ensure the appropriateness of fair value measurements.
GAAP, fair value option elected AFS securities, MSR and mortgage loans held-for-sale. We have numerous internal controls in place to help ensure the appropriateness of fair value measurements. Significant fair value measures are subject to detailed analytics and management review and approval.
The methods used by us to estimate fair value for AFS securities, MSR and derivative instruments may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.
Our most critical accounting policies involve our fair valuation of AFS securities, MSR and derivative instruments. 32 Table of Contents The methods used by us to estimate fair value for AFS securities, MSR and derivative instruments may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.
The provision recognized during the year ended December 31, 2023 was primarily due to net income from MSR servicing activities, partially offset by net losses recognized on MSR and operating expenses in our TRSs. 42 Table of Contents Other Comprehensive (Loss) Income The following table provides a summary of the components of other comprehensive (loss) income during the three and twelve months ended December 31, 2024 and 2023: Three Months Ended Year Ended (in thousands) December 31, December 31, 2024 2023 2024 2023 Unrealized (losses) gains on available-for-sale securities $ (255,412) $ 405,935 $ (150,672) $ (38,584) Realized (gains) losses on sales of available-for-sale securities reclassified to loss on investment securities (11,153) 77,644 6,577 140,866 Other comprehensive (loss) income $ (266,565) $ 483,579 $ (144,095) $ 102,282 With our accounting treatment for AFS securities, unrealized fluctuations in the market values of AFS securities, excluding certain AFS securities for which we have elected the fair value option and securities with an allowance for credit losses, are recorded directly to stockholders’ equity through other comprehensive (loss) income.
The provision recognized during the year ended December 31, 2024 was primarily due to net income from MSR servicing and mortgage loan origination activities, partially offset by operating expenses incurred in our TRSs. 44 Table of Contents Other Comprehensive Income (Loss) The following table provides a summary of the components of other comprehensive income (loss) during the three and twelve months ended December 31, 2025 and 2024: Three Months Ended Year Ended December 31, December 31, (in thousands) 2025 2024 2025 2024 Unrealized gains (losses) on available-for-sale securities $ 37,011 $ (255,412) $ 234,130 $ (150,672) Realized losses (gains) on sales of available-for-sale securities reclassified to loss on investment securities 14,743 (11,153) 86,307 6,577 Other comprehensive income (loss) $ 51,754 $ (266,565) $ 320,437 $ (144,095) With our accounting treatment for AFS securities, unrealized fluctuations in the market values of AFS securities, excluding certain AFS securities for which we have elected the fair value option and securities with an allowance for credit losses, are recorded directly to stockholders’ equity through other comprehensive income (loss).
Our MSR business leverages our core competencies in prepayment and interest rate risk analytics, and the MSR assets may provide offsetting risks to our Agency RMBS, hedging both interest rate and mortgage spread risk. 28 Table of Contents RoundPoint has approvals from Fannie Mae and Freddie Mac to service residential mortgage loans, and services mortgage loans underlying TH MSR Holdings’ MSR as well as MSR owned by third parties.
Our MSR business leverages our core competencies in prepayment and interest rate risk analytics, and the MSR assets may provide offsetting risks to our Agency RMBS, hedging both interest rate and mortgage spread risk. 30 Table of Contents RoundPoint has approvals from Fannie Mae, Freddie Mac and, beginning in the third quarter of 2025, Ginnie Mae to service residential mortgage loans.
The following table provides the carrying value of our investment portfolio by asset type: (dollars in thousands) December 31, 2024 December 31, 2023 Agency RMBS $ 7,376,965 71.1 % $ 8,335,245 73.2 % Mortgage servicing rights 2,994,271 28.9 % 3,052,016 26.8 % Other 3,734 — % 4,150 — % Total $ 10,374,970 $ 11,391,411 Prepayment speeds and volatility due to interest rates Our portfolio is subject to market risks, primarily interest rate risk and prepayment risk.
The following table provides the carrying value of our investment portfolio by asset type: (dollars in thousands) December 31, 2025 December 31, 2024 Agency RMBS $ 6,579,141 73.1 % $ 7,376,965 71.1 % Mortgage servicing rights 2,421,910 26.9 % 2,994,271 28.9 % Other 3,259 — % 3,734 — % Total $ 9,004,310 $ 10,374,970 33 Table of Contents Prepayment speeds and volatility due to interest rates Our portfolio is subject to market risks, primarily interest rate risk and prepayment risk.
The following represent the most restrictive financial covenants across our lending agreements as of December 31, 2024: • Total indebtedness to tangible net worth must be less than 8.0:1.0. As of December 31, 2024, our total indebtedness to tangible net worth, as defined, was 4.7:1.0. • Cash liquidity must be greater than $200.0 million.
The following represent the most restrictive financial covenants across our lending agreements as of December 31, 2025: • Total indebtedness to tangible net worth must be less than 8.0:1.0.
(2) Yields on Agency Derivatives not shown as interest income is included in (loss) gain on other derivative instruments in the consolidated statements of comprehensive income (loss). (3) Yields on mortgage servicing rights and advances not shown as these assets do not earn interest. (4) U.S. Treasury securities effectively borrowed under reverse repurchase agreements.
(2) Yields on Agency Derivatives not shown as the related interest income is included in (loss) gain on derivative instruments in the consolidated statements of comprehensive (loss) income. (3) Yields on mortgage servicing rights and advances not shown as these assets do not earn interest.
The following table summarizes assets at carrying values that were pledged or restricted as collateral for the future payment obligations of repurchase agreements, revolving credit facilities, warehouse facilities, term notes payable and derivative instruments at December 31, 2024 and December 31, 2023: (in thousands) December 31, 2024 December 31, 2023 Available-for-sale securities, at fair value $ 7,097,561 $ 8,126,028 Mortgage servicing rights, at fair value 2,989,106 3,047,890 Mortgage loans held-for-sale, at fair value 2,059 — Restricted cash 218,715 12,575 Due from counterparties 25,231 36,420 Derivative assets, at fair value 5,031 11,877 Other assets 118,686 79,749 Total $ 10,456,389 $ 11,314,539 Although we generally intend to hold our target assets as long-term investments, we may sell certain of our assets in order to manage our interest rate risk and liquidity needs, to meet other operating objectives and to adapt to market conditions.
The following table summarizes assets at carrying values that were pledged or restricted as collateral for the future payment obligations of repurchase agreements, revolving credit facilities and warehouse lines of credit at December 31, 2025 and December 31, 2024: (in thousands) December 31, 2025 December 31, 2024 Available-for-sale securities, at fair value $ 6,505,374 $ 7,097,561 Mortgage servicing rights, at fair value 2,417,593 2,989,106 Mortgage loans held-for-sale, at fair value 13,350 2,059 Restricted cash 108,723 218,715 Due from counterparties 206,514 25,231 Derivative assets, at fair value 67,227 5,031 Other assets 100,133 118,686 Total $ 9,418,914 $ 10,456,389 Although we generally intend to hold our target assets as long-term investments, we may sell certain of our assets in order to manage our interest rate risk and liquidity needs, to meet other operating objectives and to adapt to market conditions.
For the year ended December 31, 2024, our board of directors elected to distribute all of our REIT taxable income for the year. Temporary differences between GAAP net income (loss) and taxable income can generate deterioration in book value on a permanent and temporary basis as taxable income is distributed that has not been earned for U.S. GAAP purposes.
For the year ended December 31, 2025, the REIT generated a taxable loss and therefore, no distribution was required. Temporary differences between GAAP net income (loss) and taxable income can generate deterioration in book value on a permanent and temporary basis as taxable income is distributed that has not been earned for U.S. GAAP purposes.
The decrease in cost of funds associated with the financing of AFS securities for the three months ended December 31, 2024, as compared to the same period in 2023, was due to declining interest rates.
The decrease in cost of funds associated with the financing of AFS securities for the three and twelve months ended December 31, 2025, as compared to the same periods in 2024, was due to the lower interest rate environment.
Because many of our assets are financed with repurchase agreements, revolving credit facilities and warehouse facilities, a significant portion of the proceeds from sales of our assets (if any), prepayments and scheduled amortization are used to repay balances under these financing sources. 51 Table of Contents The following table provides the maturities of our repurchase agreements, revolving credit facilities, warehouse facilities, term notes payable and convertible senior notes as of December 31, 2024 and December 31, 2023: (in thousands) December 31, 2024 December 31, 2023 Within 30 days $ 2,377,824 $ 2,833,162 30 to 59 days 2,316,237 1,918,818 60 to 89 days 1,307,145 2,059,438 90 to 119 days 759,177 994,789 120 to 364 days 366,706 833,571 One to three years 1,960,400 1,273,453 Total $ 9,087,489 $ 9,913,231 For the year ended December 31, 2024, our restricted and unrestricted cash balance increased approximately $22.8 million to $817.6 million at December 31, 2024.
Because many of our assets are financed with repurchase agreements, revolving credit facilities and warehouse lines of credit, a significant portion of the proceeds from sales of our assets (if any), prepayments and scheduled amortization are used to repay balances under these financing sources. 53 Table of Contents The following table provides the maturities of our repurchase agreements, revolving credit facilities, warehouse lines of credit, senior notes and convertible senior notes as of December 31, 2025 and December 31, 2024: (in thousands) December 31, 2025 December 31, 2024 Within 30 days $ 2,512,817 $ 2,377,824 30 to 59 days 1,745,355 2,316,237 60 to 89 days 1,702,483 1,307,145 90 to 119 days 916,101 759,177 120 to 364 days 721,500 366,706 One to three years 567,731 1,960,400 Three to five years 391,195 — Total $ 8,557,182 $ 9,087,489 For the year ended December 31, 2025, our restricted and unrestricted cash balance increased approximately $244.3 million to $1.1 billion at December 31, 2025.
As of December 31, 2024, we held approximately $5.2 million of unpledged MSR and $22.9 million of unpledged servicing advances. Overall, on December 31, 2024, we had $70.1 million unused committed and $795.0 million unused uncommitted borrowing capacity on MSR financing facilities, and $59.7 million in unused committed borrowing capacity on servicing advance financing facilities.
As of December 31, 2025, we held approximately $4.3 million of unpledged MSR and $7.0 million of unpledged servicing advances. Overall, on December 31, 2025, we had $102.1 million unused committed and $950.0 million unused uncommitted borrowing capacity on MSR financing facilities, and $78.5 million in unused committed borrowing capacity on servicing advance financing facilities.
The increase in yields on AFS securities for the three and twelve months ended December 31, 2024, as compared to the same periods in 2023 was driven by net purchases of higher coupon AFS securities with lower unamortized premiums.
The increase in yields on AFS securities for the three and twelve months ended December 31, 2025, as compared to the same periods in 2024, was driven by net sales of lower coupon AFS securities, which was partially offset by slightly higher premium amortization.
As of December 31, 2024 and December 31, 2023, our MSR had a fair market value of $3.0 billion and $3.1 billion, respectively. As of December 31, 2024 and December 31, 2023, our MSR portfolio included MSR on 803,091 and 848,264 loans with an unpaid principal balance of approximately $200.3 billion and $215.6 billion, respectively.
As of December 31, 2025 and December 31, 2024, our MSR had a fair market value of $2.4 billion and $3.0 billion, respectively. 46 Table of Contents As of December 31, 2025 and December 31, 2024, our MSR portfolio included MSR on 675,215 and 803,091 loans with an unpaid principal balance of approximately $162.5 billion and $200.3 billion, respectively.
Repurchase agreements and revolving credit facilities are collateralized by our pledge of AFS securities, derivative instruments, MSR, servicing advances and certain cash balances. Substantially all of our Agency RMBS are currently pledged as collateral for repurchase agreements.
Repurchase agreements, revolving credit facilities and warehouse lines of credit are collateralized by our pledge of AFS securities, derivative instruments, MSR, mortgage loans held-for-sale, servicing advances and certain cash balances, while senior notes and convertible senior notes are considered unsecured corporate debt. Substantially all of our Agency RMBS are currently pledged as collateral for repurchase agreements.
Overall, on December 31, 2024, we had $70.1 million unused committed and $795.0 million unused uncommitted borrowing capacity on MSR financing facilities, and $59.7 million in unused committed borrowing capacity on servicing advance financing facilities.
Overall, on December 31, 2025, we had $102.1 million unused committed and $950.0 million unused uncommitted borrowing capacity on MSR financing facilities, and $78.5 million in unused committed borrowing capacity on servicing advance financing facilities.
Our significant accounting policies are described in Note 2 to the consolidated financial statements, included under Item 8 of this Annual Report on Form 10-K. Our most critical accounting policies involve our fair valuation of AFS securities, MSR and derivative instruments.
Our significant accounting policies are described in Note 2 to the consolidated financial statements, included under Part II, Item 8 of this Annual Report on Form 10-K.
The decrease in yields on reverse repurchase agreements for the three months ended December 31, 2024, as compared to the same period in 2023, was due to declining interest rates.
The decrease in yields on reverse repurchase agreements for the three and twelve months ended December 31, 2025, as compared to the same periods in 2024, was due to the lower interest rate environment.
Prior to the launch of originations, our mortgage loans held-for-sale consisted of a small number of loans purchased from the collateral underlying our MSR. 41 Table of Contents Expenses The following table presents the components of expenses for the three and twelve months ended December 31, 2024 and 2023: Three Months Ended Year Ended December 31, December 31, (dollars in thousands) 2024 2023 2024 2023 Compensation and benefits: Non-cash equity compensation expenses $ 1,610 $ 1,613 $ 10,946 $ 10,976 All other compensation and benefits 20,190 19,684 78,807 41,889 Total compensation and benefits $ 21,800 $ 21,297 $ 89,753 $ 52,865 Other operating expenses: Certain operating expenses (1) $ 39 $ 3,408 $ 714 $ 26,356 All other operating expenses 19,046 20,551 75,527 35,957 Total other operating expenses $ 19,085 $ 23,959 $ 76,241 $ 62,313 Annualized operating expense ratio 7.7 % 8.6 % 7.6 % 5.2 % Annualized operating expense ratio, excluding non-cash equity compensation and certain operating expenses (1) 7.4 % 7.6 % 7.0 % 3.5 % ____________________ (1) Certain operating expenses predominantly consists of expenses incurred in connection with the Company’s ongoing litigation with PRCM Advisers, as discussed within Note 18 to the consolidated financial statements, included under Item 1 of this Annual Report on Form 10-K.
Prior to the launch of originations, our mortgage loans held-for-sale consisted of a small number of loans purchased from the collateral underlying our MSR. 43 Table of Contents Operating Expenses The following table presents the components of operating expenses for the three and twelve months ended December 31, 2025 and 2024: Three Months Ended Year Ended December 31, December 31, (dollars in thousands) 2025 2024 2025 2024 Compensation and benefits: Non-cash equity compensation expenses $ 3,352 $ 1,610 $ 13,351 $ 10,946 All other compensation and benefits 22,609 20,190 81,975 78,807 Total compensation and benefits $ 25,961 $ 21,800 $ 95,326 $ 89,753 Other operating expenses: Certain operating expenses (1) $ 4,209 $ 39 $ 11,135 $ 714 All other operating expenses 21,090 19,046 79,027 75,527 Total other operating expenses $ 25,299 $ 19,085 $ 90,162 $ 76,241 Annualized operating expense ratio 11.4 % 7.7 % 9.5 % 7.6 % Annualized operating expense ratio, excluding non-cash equity compensation and certain operating expenses (1) 9.7 % 7.4 % 8.3 % 7.0 % ____________________ (1) For the time period prior to the resolution of the Company’s litigation with PRCM Advisers in the third quarter of 2025, certain operating expenses predominantly consists of expenses incurred in connection with the litigation, as discussed within Note 14 to the consolidated financial statements, included under Part II, Item 8 of this Annual Report on Form 10-K.
As a result, we had an overall estimated unused borrowing capacity on unpledged securities of approximately $6.5 million. As of December 31, 2024, we held approximately $5.2 million of unpledged MSR and $22.9 million of unpledged servicing advances.
As a result, we had an overall estimated unused borrowing capacity on unpledged securities of approximately $8.0 million. As of December 31, 2025, we held approximately $4.3 million of unpledged MSR and $7.0 million of unpledged servicing advances.
The increase in total operating expenses during the year ended December 31, 2024, as compared to the same period in 2023, was driven by the addition of RoundPoint’s compensation, benefits, operating and loan level expenses, partially offset by lower expenses incurred in connection with the Company’s ongoing litigation with PRCM Advisers.
The increase in total operating expenses during the year ended December 31, 2025, as compared to the same period in 2024 was driven by higher expenses incurred in connection with the resolution of the Company’s litigation with PRCM Advisers, expenses incurred in connection with the proposed merger with UWM, and higher compensation and benefits and other operating expenses.
GAAP to Estimated Taxable Income The following tables provide reconciliations of our GAAP net income (loss) to our estimated taxable income (loss) split between our REIT and TRSs for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 (in millions) TRS REIT Consolidated GAAP net income (loss), pre-tax $ 183.6 $ 161.2 $ 344.8 State taxes (10.1) — (10.1) Adjusted GAAP net income (loss), pre-tax 173.5 161.2 334.7 Permanent differences Dividends from TRSs — 96.9 96.9 State deferred tax expense 6.8 — 6.8 Other permanent differences — 6.8 6.8 Temporary differences Net accretion of OID and market discount (68.2) 40.4 (27.8) Net unrealized gains and losses (6.5) (215.1) (221.6) Net realized gains and losses on sales of RMBS — 3.1 3.1 Net realized gains and losses on sales of MSR 11.5 (4.9) 6.6 Credit loss impairment — 0.3 0.3 Other temporary differences (0.1) (6.5) (6.6) Capital loss carryforward deferral — 89.5 89.5 Net operating loss carryforward utilization (71.8) — (71.8) Estimated taxable income 45.2 171.7 216.9 Dividend paid deduction — (171.7) (171.7) Estimated taxable income post-dividend paid deduction $ 45.2 $ — $ 45.2 Year Ended December 31, 2023 (in millions) TRS REIT Consolidated GAAP net income (loss), pre-tax $ 99.0 $ (182.4) $ (83.4) State taxes (2.5) (0.4) (2.9) Adjusted GAAP net income (loss), pre-tax 96.5 (182.8) (86.3) Permanent differences Dividends from TRSs — 65.0 65.0 State deferred tax benefit (2.1) — (2.1) Other permanent differences (0.8) 4.0 3.2 Temporary differences Net accretion of OID and market discount (67.7) 33.5 (34.2) Net unrealized gains and losses 53.2 48.6 101.8 Net realized gains and losses on sales of RMBS — (1.1) (1.1) Net realized gains and losses on sales of MSR 0.2 (27.3) (27.1) Credit loss impairment — (0.5) (0.5) Other temporary differences 4.0 26.3 30.3 Capital loss carryforward deferral — 331.2 331.2 Net operating loss carryforward utilization (66.6) (51.5) (118.1) Estimated taxable income 16.7 245.4 262.1 Dividend paid deduction — (245.4) (245.4) Estimated taxable post-dividend paid deduction $ 16.7 $ — $ 16.7 48 Table of Contents The permanent differences recorded in 2024 and 2023 were primarily due to dividends paid from the Company’s TRSs to the REIT as well as differences related to officer’s compensation deduction limitations, compensation expense related to restricted stock dividends and vesting, the dividends paid deduction for tax, amortization of goodwill for tax, and state taxes, net of federal benefit in the Company’s TRSs.
GAAP to Estimated Taxable Income The following tables provide reconciliations of our GAAP net income (loss) to our estimated taxable income (loss) split between our REIT and TRSs for the years ended December 31, 2025 and 2024: Year Ended December 31, 2025 (in millions) TRS REIT Consolidated GAAP net income (loss), pre-tax $ 55.3 $ (500.7) $ (445.4) State taxes 3.5 — 3.5 Adjusted GAAP net income (loss), pre-tax 58.8 (500.7) (441.9) Permanent differences: State deferred tax benefit (3.1) — (3.1) Other permanent differences 0.1 23.5 23.6 Temporary differences: Net accretion of OID and market discount (64.7) 18.9 (45.8) Net unrealized gains and losses 102.4 183.6 286.0 Net realized gains and losses on sales of RMBS — 0.2 0.2 Net realized gains and losses on sales of MSR (7.9) (23.7) (31.6) Credit loss impairment — (0.1) (0.1) Litigation settlement expense — 293.1 293.1 Other temporary differences (2.0) (11.4) (13.4) Capital loss carryforward utilization — (59.7) (59.7) Estimated taxable income 83.6 (76.3) 7.3 Dividend paid deduction — — — Estimated taxable income post-dividend paid deduction $ 83.6 $ (76.3) $ 7.3 Year Ended December 31, 2024 (in millions) TRS REIT Consolidated GAAP net income (loss), pre-tax $ 183.6 $ 161.2 $ 344.8 State taxes (10.1) — (10.1) Adjusted GAAP net income (loss), pre-tax 173.5 161.2 334.7 Permanent differences: Dividends from TRSs — 96.9 96.9 State deferred tax expense 6.8 — 6.8 Other permanent differences — 6.8 6.8 Temporary differences: Net accretion of OID and market discount (68.2) 40.4 (27.8) Net unrealized gains and losses (6.5) (215.1) (221.6) Net realized gains and losses on sales of RMBS — 3.1 3.1 Net realized gains and losses on sales of MSR 11.5 (4.9) 6.6 Credit loss impairment — 0.3 0.3 Other temporary differences (0.1) (6.5) (6.6) Capital loss carryforward deferral — 89.5 89.5 Net operating loss carryforward utilization (71.8) — (71.8) Estimated taxable income 45.2 171.7 216.9 Dividend paid deduction — (171.7) (171.7) Estimated taxable income post-dividend paid deduction $ 45.2 $ — $ 45.2 50 Table of Contents The permanent differences recorded in 2025 and 2024 included a difference in compensation expense related to the officer’s compensation limitation, dividends paid on unvested and outstanding equity incentive awards, as applicable, non-cash equity compensation expense for tax purposes, amortization of goodwill for tax purposes, and state taxes, net of federal benefit in the Company’s TRSs.
GAAP purposes was $14.47 at December 31, 2024, a decrease from $14.93 per common share at September 30, 2024, and a decrease from $15.21 per common share at December 31, 2023.
GAAP purposes was $11.13 at December 31, 2025, an increase from $11.04 per common share at September 30, 2025, and a decrease from $14.47 per common share at December 31, 2024.
The decrease in servicing costs during the three and twelve months ended December 31, 2024, as compared to the same periods in 2023, was the result of lower third-party subservicing fees due to the acquisition of RoundPoint.
The decrease in servicing costs during the year ended December 31, 2025, as compared to the same period in 2024, was the result of lower third-party deboarding and subservicing fees incurred.
Loss On Investment Securities The following table presents the components of loss on investment securities for the three and twelve months ended December 31, 2024 and 2023: Three Months Ended Year Ended December 31, December 31, (in thousands) 2024 2023 2024 2023 Proceeds from sales $ 1,286,810 $ 978,936 $ 2,183,330 $ 2,673,827 Amortized cost of securities sold (1,293,570) (1,061,837) (2,222,634) (2,792,703) Total realized losses on sales (6,760) (82,901) (39,304) (118,876) (Provision for) reversal of provision for credit losses (284) 328 (259) 545 Other (965) 104 (475) 48,361 Loss on investment securities $ (8,009) $ (82,469) $ (40,038) $ (69,970) 39 Table of Contents In the ordinary course of our business, we make investment decisions and allocate capital in accordance with our views on the changing risk/reward dynamics in the market and in our portfolio.
Loss On Investment Securities The following table presents the components of loss on investment securities for the three and twelve months ended December 31, 2025 and 2024: Three Months Ended Year Ended December 31, December 31, (in thousands) 2025 2024 2025 2024 Proceeds from sales $ 295,059 $ 1,286,810 $ 9,643,404 $ 2,183,330 Amortized cost of securities sold (310,905) (1,293,570) (9,741,773) (2,222,634) Total realized losses on sales (15,846) (6,760) (98,369) (39,304) Reversal of (provision for) credit losses 8 (284) 121 (259) Other 1,406 (965) 2,070 (475) Loss on investment securities $ (14,432) $ (8,009) $ (96,178) $ (40,038) 41 Table of Contents In the ordinary course of our business, we make investment decisions and allocate capital in accordance with our views on the changing risk/reward dynamics in the market and in our portfolio.
We also believe that it gives us the flexibility to manage our portfolio to take advantage of market opportunities. Our principal sources of cash consist of borrowings under repurchase agreements, revolving credit facilities, warehouse facilities, payments of principal and interest we receive on our target assets, cash generated from our operating results, and proceeds from capital market transactions.
Our principal sources of cash consist of borrowings under repurchase agreements, revolving credit facilities, warehouse lines of credit, senior notes, payments of principal and interest we receive on our target assets, cash generated from our operating results, and proceeds from capital market transactions.
The decline in book value for both the three and twelve months ended December 31, 2024 was primarily driven by unrealized losses recognized on AFS securities and dividends declared, partially offset by net servicing income earned.
The rise in book value for the three months ended December 31, 2025 was primarily driven by servicing income and mark-to-market gains recognized on investment securities, partially offset by net mark-to-market losses on MSR and dividends declared.
The tables below summarize certain characteristics of our Agency RMBS AFS at December 31, 2024 and December 31, 2023: December 31, 2024 (dollars in thousands, except purchase price) Principal/ Current Face Net (Discount) Premium Amortized Cost Allowance for Credit Losses Unrealized Gain Unrealized Loss Carrying Value Weighted Average Coupon Rate Weighted Average Purchase Price P&I securities $ 7,600,374 $ 64,627 $ 7,665,001 $ — $ 2,789 $ (321,829) $ 7,345,961 4.93 % $ 101.17 Interest-only securities 462,886 27,747 27,747 (2,386) 473 (3,818) 22,016 2.05 % $ 24.04 Total $ 8,063,260 $ 92,374 $ 7,692,748 $ (2,386) $ 3,262 $ (325,647) $ 7,367,977 December 31, 2023 (dollars in thousands, except purchase price) Principal/ Current Face Net (Discount) Premium Amortized Cost Allowance for Credit Losses Unrealized Gain Unrealized Loss Carrying Value Weighted Average Coupon Rate Weighted Average Purchase Price P&I securities $ 8,421,733 $ 24,239 $ 8,445,972 $ — $ 22,677 $ (196,748) $ 8,271,901 4.65 % $ 100.65 Interest-only securities 840,723 58,567 58,567 (3,619) 907 (4,757) 51,098 2.08 % $ 17.25 Total $ 9,262,456 $ 82,806 $ 8,504,539 $ (3,619) $ 23,584 $ (201,505) $ 8,322,999 43 Table of Contents Mortgage Servicing Rights, at Fair Value One of our wholly owned subsidiaries, TH MSR Holdings, has approvals from Fannie Mae and Freddie Mac to own and manage MSR, which represent the right to control the servicing of residential mortgage loans.
The tables below summarize certain characteristics of our Agency RMBS AFS at December 31, 2025 and December 31, 2024: December 31, 2025 (dollars in thousands, except purchase price) Principal/ Current Face Net (Discount) Premium Amortized Cost Allowance for Credit Losses Unrealized Gain Unrealized Loss Carrying Value Weighted Average Coupon Rate Weighted Average Purchase Price P&I securities $ 6,399,789 $ 93,527 $ 6,493,316 $ — $ 44,091 $ (43,117) $ 6,494,290 5.30 % $ 101.61 Interest-only securities 315,438 18,892 18,892 (1,319) 422 (1,073) 16,922 2.12 % $ 9.40 Total $ 6,715,227 $ 112,419 $ 6,512,208 $ (1,319) $ 44,513 $ (44,190) $ 6,511,212 45 Table of Contents December 31, 2024 (dollars in thousands, except purchase price) Principal/ Current Face Net (Discount) Premium Amortized Cost Allowance for Credit Losses Unrealized Gain Unrealized Loss Carrying Value Weighted Average Coupon Rate Weighted Average Purchase Price P&I securities $ 7,600,374 $ 64,627 $ 7,665,001 $ — $ 2,789 $ (321,829) $ 7,345,961 4.93 % $ 101.17 Interest-only securities 462,886 27,747 27,747 (2,386) 473 (3,818) 22,016 2.05 % $ 24.04 Total $ 8,063,260 $ 92,374 $ 7,692,748 $ (2,386) $ 3,262 $ (325,647) $ 7,367,977 Mortgage Servicing Rights, at Fair Value One of our wholly owned subsidiaries, TH MSR Holdings, has approvals from Fannie Mae and Freddie Mac to own and manage MSR, which represent the right to control the servicing of residential mortgage loans.
For the year ended December 31, 2024, investing activities increased our cash balances by approximately $895.3 million, primarily driven by principal payments received on AFS securities as well as net sales of both AFS securities and derivative instruments, partially offset by net payments for reverse repurchase agreements, the final payment for the acquisition of RoundPoint made in January 2024 and net purchases of MSR. • Cash flows from financing activities.
For the year ended December 31, 2025, investing activities increased our cash balances by approximately $911.6 million, primarily driven by sales of and principal payments on Agency RMBS, sales of MSR and net proceeds from reverse repurchase agreements, partially offset by purchases of Agency RMBS, MSR and net payments on derivative instruments. • Cash flows from financing activities.
A summary of our MSR, servicing advance and warehouse facilities is provided in the table below: (dollars in thousands) December 31, 2024 Expiration Date (1) Amount Outstanding Unused Committed Capacity (2) Unused Uncommitted Capacity Total Capacity Eligible Collateral March 31, 2026 $ 597,731 $ 52,269 $ 250,000 $ 900,000 Mortgage servicing rights March 8, 2027 $ 332,140 $ 17,860 $ 150,000 $ 500,000 Mortgage servicing rights (3) May 22, 2026 $ 530,000 $ — $ 20,000 $ 550,000 Mortgage servicing rights (4) October 26, 2026 $ 150,000 $ — $ 150,000 $ 300,000 Mortgage servicing rights (4) November 21, 2025 $ 75,000 $ — $ 225,000 $ 300,000 Mortgage servicing rights (4) June 14, 2026 $ 90,300 $ 59,700 $ — $ 150,000 Mortgage servicing advances August 19, 2025 $ 2,032 $ 32,968 $ — $ 35,000 Mortgage loans held-for-sale ____________________ (1) The facilities are set to mature on the stated expiration date, unless extended pursuant to their terms.
A summary of our MSR, servicing advance and mortgage loan financing facilities is provided in the table below: (in thousands) December 31, 2025 Expiration Date (1) Amount Outstanding Unused Committed Capacity (2) Unused Uncommitted Capacity Total Capacity Eligible Collateral March 31, 2027 $ 567,731 $ 82,269 $ 250,000 $ 900,000 Mortgage servicing rights March 8, 2029 $ 280,140 $ 19,860 $ 200,000 $ 500,000 Mortgage servicing rights (3) May 22, 2026 $ 375,000 $ — $ 175,000 $ 550,000 Mortgage servicing rights (4) October 26, 2026 $ 160,000 $ — $ 140,000 $ 300,000 Mortgage servicing rights (4) July 30, 2026 $ 115,000 $ — $ 185,000 $ 300,000 Mortgage servicing rights (4) June 14, 2026 $ 71,500 $ 78,500 $ — $ 150,000 Mortgage servicing advances August 18, 2026 $ 9,406 $ 25,594 $ 15,000 $ 50,000 Mortgage loans held-for-sale June 25, 2026 $ 4,095 $ — $ 45,905 $ 50,000 Mortgage loans held-for-sale ____________________ (1) The facilities are set to mature on the stated expiration date, unless extended pursuant to their terms.
Treasuries), revolving credit facilities, warehouse facilities, term notes payable and convertible senior notes, plus implied debt on net TBA cost basis and net payable (receivable) for unsettled RMBS, divided by total equity. Equity The following table provides details of our changes in stockholders’ equity from December 31, 2023 to December 31, 2024.
Treasuries), revolving credit facilities, warehouse lines of credit, senior notes and convertible senior notes, plus implied debt on net TBA cost basis and net payable (receivable) for unsettled RMBS, divided by total equity.
The cost of funds associated with our convertible senior notes for the three and twelve months ended December 31, 2024, as compared to the same periods in 2023, was consistent. 38 Table of Contents The following table presents the components of the yield earned on our AFS securities portfolio as a percentage of our average amortized cost of securities for the three and twelve months ended December 31, 2024 and 2023: Three Months Ended Year Ended December 31, December 31, (in thousands) 2024 2023 2024 2023 Gross yield/stated coupon 5.0 % 4.8 % 5.0 % 4.9 % Net (premium amortization) discount accretion (0.3) % (0.1) % (0.2) % (0.3) % Net yield 4.7 % 4.7 % 4.8 % 4.6 % Net Servicing Income The following table presents the components of net servicing income for the three and twelve months ended December 31, 2024 and 2023: Three Months Ended Year Ended December 31, December 31, (in thousands) 2024 2023 2024 2023 Servicing fee income $ 127,928 $ 139,798 $ 528,206 $ 555,221 Ancillary and other fee income 4,498 2,913 16,718 5,149 Float income 35,142 35,898 136,724 125,407 Total servicing income 167,568 178,609 681,648 685,777 Total servicing costs 4,575 12,029 20,069 95,488 Net servicing income $ 162,993 $ 166,580 $ 661,579 $ 590,289 The decrease in total servicing income for the three months ended December 31, 2024, as compared to the same period in 2023, was primarily due to lower servicing fee income on a smaller MSR portfolio as a result of sales and runoff, partially offset by higher ancillary and other fee income as a result of the acquisition of RoundPoint.
The cost of funds associated with our convertible senior notes for the three and twelve months ended December 31, 2025, as compared to the same periods in 2024, was consistent. 40 Table of Contents The following table presents the components of the yield earned on our AFS securities portfolio as a percentage of our average amortized cost of securities for the three and twelve months ended December 31, 2025 and 2024: Three Months Ended Year Ended December 31, December 31, 2025 2024 2025 2024 Gross yield/stated coupon 5.3 % 5.0 % 5.2 % 5.0 % Net (premium amortization) discount accretion (0.3) % (0.3) % (0.2) % (0.2) % Net yield 5.0 % 4.7 % 5.0 % 4.8 % Net Servicing Income The following table presents the components of net servicing income for the three and twelve months ended December 31, 2025 and 2024: Three Months Ended Year Ended December 31, December 31, (in thousands) 2025 2024 2025 2024 Servicing fee income $ 109,418 $ 127,928 $ 487,347 $ 528,206 Ancillary and other fee income 4,897 4,498 20,469 16,718 Float income 30,747 35,142 118,907 136,724 Total servicing income 145,062 167,568 626,723 681,648 Total servicing costs 3,383 4,575 12,728 20,069 Net servicing income $ 141,679 $ 162,993 $ 613,995 $ 661,579 The decrease in total servicing income for the three and twelve months ended December 31, 2025, as compared to the same periods in 2024, was primarily due to lower servicing fee income on a smaller MSR portfolio as a result of run-off and sales, as well as lower float income due to the lower interest rate environment, partially offset by higher ancillary and other fee income from RoundPoint’s subservicing of mortgage loans on behalf of third-party clients.
Accordingly, our Agency RMBS capital allocation reflects management’s flexible approach to investing in the marketplace. 32 Table of Contents The following tables provide the carrying value of our Agency RMBS portfolio by underlying mortgage loan rate type: December 31, 2024 (dollars in thousands) Principal/ Current Face Carrying Value Weighted Average CPR (1) % Prepayment Protected Gross Weighted Average Coupon Rate Amortized Cost Allowance for Credit Losses Weighted Average Loan Age (months) Agency RMBS AFS: 30-Year Fixed: ≤ 2.5% $ — $ — — % — % — % $ — $ — — 3.0% 220,041 188,239 4.9 % 85.7 % 3.7 % 195,717 — 38 3.5% 109,474 97,261 3.1 % 84.3 % 4.1 % 97,831 — 51 4.0% 585,683 537,910 9.4 % 100.0 % 4.6 % 577,462 — 55 4.5% 2,076,840 1,972,162 7.5 % 100.0 % 5.1 % 2,123,706 — 52 5.0% 1,759,213 1,713,538 6.9 % 100.0 % 5.8 % 1,791,565 — 33 5.5% 1,411,225 1,401,684 6.7 % 99.8 % 6.4 % 1,422,048 — 25 6.0% 499,542 505,297 13.0 % 91.5 % 6.9 % 509,491 — 25 ≥ 6.5% 377,197 388,924 9.7 % 100.0 % 7.5 % 389,382 — 12 7,039,215 6,805,015 7.7 % 98.7 % 5.7 % 7,107,202 — 37 Other P&I 561,159 540,946 0.1 % — % 5.4 % 557,799 — 15 Interest-only 462,886 22,016 10.1 % — % 5.4 % 27,747 (2,386) 172 Agency Derivatives 135,310 8,988 9.9 % — % 6.6 % 14,731 — 235 Total Agency RMBS $ 8,198,570 $ 7,376,965 91.1 % $ 7,707,479 $ (2,386) December 31, 2023 (dollars in thousands) Principal/ Current Face Carrying Value Weighted Average CPR (1) % Prepayment Protected Gross Weighted Average Coupon Rate Amortized Cost Allowance for Credit Losses Weighted Average Loan Age (months) Agency RMBS AFS: 30-Year Fixed: ≤ 2.5% $ 420,720 $ 359,801 3.6 % — % 3.3 % $ 359,188 $ — 30 3.0% 237,874 211,852 2.6 % 85.4 % 3.7 % 210,850 — 26 3.5% 125,647 115,675 2.0 % 84.9 % 4.3 % 113,092 — 22 4.0% 503,451 479,715 5.2 % 100.0 % 4.6 % 508,294 — 49 4.5% 2,331,021 2,281,535 5.2 % 100.0 % 5.1 % 2,384,460 — 40 5.0% 2,084,422 2,078,510 3.6 % 100.0 % 5.8 % 2,125,950 — 21 5.5% 1,358,288 1,370,920 5.4 % 99.8 % 6.4 % 1,371,534 — 18 6.0% 779,560 795,963 6.1 % 99.8 % 6.9 % 799,184 — 17 ≥ 6.5% 8,448 8,853 7.4 % 97.8 % 7.8 % 9,084 — 249 7,849,431 7,702,824 4.7 % 94.7 % 5.5 % 7,881,636 — 28 Other P&I 572,302 569,077 0.8 % — % 5.3 % 564,336 — 9 Interest-only 840,723 51,098 5.3 % — % 4.3 % 58,567 (3,619) 100 Agency Derivatives 163,735 12,246 8.0 % — % 6.7 % 17,814 — 225 Total Agency RMBS $ 9,426,191 $ 8,335,245 87.5 % $ 8,522,353 $ (3,619) ____________________ (1) Weighted average actual one-month CPR released at the beginning of the following month based on RMBS held as of the preceding month-end. 33 Table of Contents Our MSR portfolio offers attractive spreads and has many risk reducing characteristics when paired with our Agency RMBS portfolio.
Accordingly, our Agency RMBS capital allocation reflects management’s flexible approach to investing in the marketplace. 34 Table of Contents The following tables provide the carrying value of our Agency RMBS portfolio by underlying mortgage loan rate type: December 31, 2025 (dollars in thousands) Principal/ Current Face Carrying Value Weighted Average CPR (1) % Prepayment Protected Gross Weighted Average Coupon Rate Amortized Cost Allowance for Credit Losses Weighted Average Loan Age (months) Agency RMBS AFS: 30-Year Fixed: 3.0% $ — $ — — % — % — % $ — $ — — 3.5% — — — % — % — % — — — 4.0% — — — % — % — % — — — 4.5% 1,089,904 1,073,972 8.1 % 100.0 % 5.2 % 1,089,701 — 42 5.0% 1,429,457 1,441,677 8.0 % 100.0 % 5.7 % 1,451,456 — 42 5.5% 786,868 804,095 13.0 % 99.7 % 6.4 % 795,750 — 41 6.0% 1,732,107 1,789,914 9.8 % 82.9 % 6.9 % 1,776,570 — 8 ≥ 6.5% 508,260 532,258 17.0 % 89.8 % 7.3 % 528,440 — 9 5,546,596 5,641,916 10.2 % 93.6 % 6.2 % 5,641,917 — 28 Other P&I 853,193 852,374 0.7 % — % 5.2 % 851,399 — 12 Interest-only 315,438 16,922 6.7 % — % 5.4 % 18,892 (1,319) 184 Agency Derivatives 1,233,247 67,929 16.2 % — % 7.0 % 76,785 — 16 Total Agency RMBS $ 7,948,474 $ 6,579,141 80.3 % $ 6,588,993 $ (1,319) December 31, 2024 (dollars in thousands) Principal/ Current Face Carrying Value Weighted Average CPR (1) % Prepayment Protected Gross Weighted Average Coupon Rate Amortized Cost Allowance for Credit Losses Weighted Average Loan Age (months) Agency RMBS AFS: 30-Year Fixed: 3.0% $ 220,041 $ 188,239 4.9 % 85.7 % 3.7 % $ 195,717 $ — 38 3.5% 109,474 97,261 3.1 % 84.3 % 4.1 % 97,831 — 51 4.0% 585,683 537,910 9.4 % 100.0 % 4.6 % 577,462 — 55 4.5% 2,076,840 1,972,162 7.5 % 100.0 % 5.1 % 2,123,706 — 52 5.0% 1,759,213 1,713,538 6.9 % 100.0 % 5.8 % 1,791,565 — 33 5.5% 1,411,225 1,401,684 6.7 % 99.8 % 6.4 % 1,422,048 — 25 6.0% 499,542 505,297 13.0 % 91.5 % 6.9 % 509,491 — 25 ≥ 6.5% 377,197 388,924 9.7 % 100.0 % 7.5 % 389,382 — 12 7,039,215 6,805,015 7.7 % 98.7 % 5.7 % 7,107,202 — 37 Other P&I 561,159 540,946 0.1 % — % 5.4 % 557,799 — 15 Interest-only 462,886 22,016 10.1 % — % 5.4 % 27,747 (2,386) 172 Agency Derivatives 135,310 8,988 9.9 % — % 6.6 % 14,731 — 235 Total Agency RMBS $ 8,198,570 $ 7,376,965 91.1 % $ 7,707,479 $ (2,386) ____________________ (1) Weighted average actual one-month CPR released at the beginning of the following month based on RMBS held as of the preceding month-end. 35 Table of Contents Our MSR portfolio offers attractive spreads and has many risk reducing characteristics when paired with our Agency RMBS portfolio.
In addition, we held short- and long-term borrowings under revolving credit facilities, warehouse facilities and unsecured convertible senior notes. As of December 31, 2024, the debt-to-equity ratio funding our Agency and non-Agency investment securities, MSR and related servicing advances and mortgage loans held-for-sale, which includes unsecured borrowings under convertible senior notes, was 4.3:1.0.
The debt-to-equity ratio funding our Agency and non-Agency investment securities, MSR and related servicing advances and mortgage loans held-for-sale, which includes unsecured borrowings under senior notes and convertible senior notes, was 4.8:1.0 for the three months ended December 31, 2025, consistent with the prior quarter.
The provision recognized for the year ended December 31, 2024 was primarily due to net income from MSR servicing and mortgage loan origination activities, partially offset by operating expenses incurred in our TRSs.
Income Taxes During the three and twelve months ended December 31, 2025, we recognized a provision for income taxes of $5.6 million and $8.9 million, respectively, which was primarily due to net income from MSR servicing and mortgage loan origination activities, partially offset by net losses recognized on MSR and operating expenses incurred in our TRSs.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeChanges in Interest Rates (dollars in thousands) -50 bps -25 bps +25 bps +50 bps Change in annualized net interest income (1) : $ (24,679) $ (12,412) $ 12,336 $ 24,701 % change in net interest income (1) (16.5) % (8.3) % 8.2 % 16.5 % Change in value of financial position: Available-for-sale securities $ 196,311 $ 100,039 $ (103,369) $ (209,650) As a % of common equity 13.1 % 6.6 % (6.9) % (14.0) % Mortgage servicing rights (2) $ (69,569) $ (31,904) $ 22,362 $ 41,594 As a % of common equity (2) (4.6) % (2.1) % 1.5 % 2.8 % Mortgage loans held-for-sale $ 34 $ 18 $ (20) $ (43) As a % of common equity — % — % — % — % Derivatives, net $ (158,153) $ (75,712) $ 68,949 $ 131,207 As a % of common equity (10.5) % (5.1) % 4.6 % 8.7 % Reverse repurchase agreements $ 74 $ 37 $ (37) $ (74) As a % of common equity — % — % — % — % Repurchase agreements $ (3,989) $ (1,994) $ 1,994 $ 3,989 As a % of common equity (0.3) % (0.1) % 0.2 % 0.3 % Revolving credit facilities $ (235) $ (117) $ 117 $ 234 As a % of common equity — % — % — % — % Warehouse facilities $ (1) $ — $ — $ 1 As a % of common equity — % — % — % — % Convertible senior notes $ (999) $ (498) $ 495 $ 987 As a % of common equity (0.1) % — % — % 0.1 % Total Net Assets $ (36,527) $ (10,131) $ (9,509) $ (31,755) As a % of total assets (0.3) % (0.1) % (0.1) % (0.3) % As a % of common equity (2.4) % (0.7) % (0.6) % (2.1) % ____________________ (1) Amounts include the effect of interest spread from our interest rate swaps and float income from custodial accounts associated with our servicing portfolio, but do not reflect any potential changes to dollar roll income associated with our TBA positions or U.S.
Biggest changeChanges in Interest Rates (dollars in thousands) -50 bps -25 bps +25 bps +50 bps Change in annualized net interest income (1) : $ (1,634) $ (786) $ 665 $ 1,582 % change in net interest income (1) (1.4) % (0.7) % 0.6 % 1.4 % Change in value of financial position: Available-for-sale securities $ 102,016 $ 54,088 $ (60,756) $ (127,902) As a % of common equity 8.7 % 4.6 % (5.2) % (11.0) % Mortgage servicing rights (2) $ (112,494) $ (51,031) $ 44,790 $ 75,443 As a % of common equity (2) (9.6) % (4.4) % 3.8 % 6.5 % Mortgage loans held-for-sale $ 143 $ 77 $ (87) $ (181) As a % of common equity — % — % — % — % Derivatives, net $ (33,928) $ (12,317) $ 2,014 $ (7,508) As a % of common equity (2.9) % (1.0) % 0.2 % (0.6) % Reverse repurchase agreements $ 33 $ 16 $ (16) $ (33) As a % of common equity — % — % — % — % Repurchase agreements $ (4,805) $ (2,403) $ 2,403 $ 4,805 As a % of common equity (0.4) % (0.2) % 0.2 % 0.4 % Revolving credit facilities $ (188) $ (94) $ 94 $ 187 As a % of common equity — % — % — % — % Warehouse lines of credit $ (3) $ (1) $ 1 $ 3 As a % of common equity — % — % — % — % Senior notes $ 1,347 $ 689 $ (716) $ (1,458) As a % of common equity 0.1 % 0.1 % (0.1) % (0.1) % Convertible senior notes $ 999 $ 498 $ (495) $ (986) As a % of common equity 0.1 % — % — % (0.1) % Total Net Assets $ (46,880) $ (10,478) $ (12,768) $ (57,630) As a % of total assets (0.4) % (0.1) % (0.1) % (0.5) % As a % of common equity (4.0) % (0.9) % (1.1) % (4.9) % ____________________ (1) Amounts include the effect of interest spread from our interest rate swaps and float income from custodial accounts associated with our servicing portfolio, but do not reflect any potential changes to dollar roll income associated with our TBA positions or U.S.
In executing on our current interest rate risk management strategy, we have entered into TBAs, interest rate swap and swaption agreements, futures, options on futures, and forward mortgage loan sale commitments. In addition, because MSR are negative duration assets, they may provide a hedge to interest rate exposure on our Agency RMBS portfolio.
In executing on our current interest rate risk management strategy, we have entered into TBAs, interest rate swap and swaption agreements, futures, options on futures, IRLCs and forward mortgage loan sale commitments. In addition, because MSR are negative duration assets, they may provide a hedge to interest rate exposure on our Agency RMBS portfolio.
Liquidity Risk Our liquidity risk is principally associated with our financing of long-maturity assets with shorter-term borrowings in the form of repurchase agreements and borrowings under revolving credit facilities and warehouse facilities.
Liquidity Risk Our liquidity risk is principally associated with our financing of long-maturity assets with shorter-term borrowings in the form of repurchase agreements and borrowings under revolving credit facilities and warehouse lines of credit.
REIT income arising from “clearly identified” hedging transactions that are entered into to manage the risk of interest rate or price changes with respect to borrowings, including gain from the disposition of such hedging transactions, to the extent the hedging transactions hedge indebtedness incurred, or to be incurred, by the REIT to acquire or carry real estate assets, will not be treated as gross income for purposes of either the 75% or the 95% gross income tests.
REIT income arising from “clearly identified” hedging transactions that are entered into to manage the risk of interest rate or price changes with respect to borrowings, including gains from the disposition of such hedging transactions, to the extent the hedging transactions hedge indebtedness incurred, or to be incurred, by the REIT to acquire or carry real estate assets, will not be treated as gross income for purposes of either the 75% or the 95% gross income tests.
Certain assumptions have been made in connection with the calculation of the information set forth in the foregoing interest rate sensitivity table and, as such, there can be no assurance that assumed events will occur or that other events will not occur that would affect the outcomes. The base interest rate scenario assumes interest rates at December 31, 2024.
Certain assumptions have been made in connection with the calculation of the information set forth in the foregoing interest rate sensitivity table and, as such, there can be no assurance that assumed events will occur or that other events will not occur that would affect the outcomes. The base interest rate scenario assumes interest rates at December 31, 2025.
See Item 7, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources ” in this Annual Report on Form 10-K for further information about our liquidity and capital resource management. Credit Risk We believe that our investment strategy will generally keep our risk of credit losses low to moderate.
See Part II, Item 7, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources ” in this Annual Report on Form 10-K for further information about our liquidity and capital resource management. Credit Risk We believe that our investment strategy will generally keep our risk of credit losses low to moderate.
We also treat income and gains from our TBAs as qualifying income for purposes of the 75% gross income test, to the extent set forth in an opinion from Sidley Austin LLP substantially to the effect that, for purposes of the 75% gross income test, any gain recognized by us in connection with the settlement of our TBAs should be treated as gain from the sale or disposition of the underlying Agency RMBS. 53 Table of Contents Interest Rate Effect on Net Interest Income Our operating results depend in large part on differences between the income earned on our assets and our cost of borrowing and hedging activities.
We also treat income and gains from our TBAs as qualifying income for purposes of the 75% gross income test, to the extent set forth in an opinion from Sidley Austin LLP substantially to the effect that, for purposes of the 75% gross income test, any gain recognized by us in connection with the settlement of our TBAs should be treated as a gain from the sale or disposition of the underlying Agency RMBS. 55 Table of Contents Interest Rate Effect on Net Interest Income Our operating results depend in large part on differences between the income earned on our assets and our cost of borrowing and hedging activities.
Judgment is best applied to localized (less than 25 basis points, or bps) interest rate moves. The more an instantaneous interest rate move exceeds 25 bps, the greater the likelihood that accompanying market events are significant enough to warrant reconsideration of interest rate sensitivities.
Judgment is best applied to localized (less than 25 basis points (“bps”)) interest rate moves. The more an instantaneous interest rate move exceeds 25 bps, the greater the likelihood that accompanying market events are significant enough to warrant reconsideration of interest rate sensitivities.
Actual results could differ significantly from those estimated in the foregoing interest rate sensitivity table. 55 Table of Contents Prepayment Risk Prepayment risk is the risk that the principal amount of a mortgage loan will be repaid at a different rate than anticipated.
Actual results could differ significantly from those estimated in the foregoing interest rate sensitivity table. 57 Table of Contents Prepayment Risk Prepayment risk is the risk that the principal amount of a mortgage loan will be repaid at a different rate than anticipated.
All changes in value are measured as the change from the December 31, 2024 financial position. All projected changes in annualized net interest income are measured as the change from the projected annualized net interest income based off current performance returns.
All changes in value are measured as the change from the December 31, 2025 financial position. All projected changes in annualized net interest income are measured as the change from the projected annualized net interest income based off current performance returns.
As with net interest income, the uncertainty associated with the estimate of change in portfolio value is therefore directly related to the size of interest rate move considered. 54 Table of Contents The following interest rate sensitivity table displays the potential impact of instantaneous, parallel changes in interest rates of +/- 25 and +/- 50 bps on annualized net interest income and portfolio value, based on our interest sensitive financial instruments at December 31, 2024.
As with net interest income, the uncertainty associated with the estimate of change in portfolio value is therefore directly related to the size of interest rate move considered. 56 Table of Contents The following interest rate sensitivity table displays the potential impact of instantaneous, parallel changes in interest rates of +/- 25 and +/- 50 bps on annualized net interest income and portfolio value, based on our interest sensitive financial instruments at December 31, 2025.
However, we retain the risk of potential credit losses on our mortgage loans held-for-sale and all of the loans underlying our non-Agency securities. 56 Table of Contents
However, we retain the risk of potential credit losses on our mortgage loans held-for-sale and all of the loans underlying our non-Agency securities. 58 Table of Contents
Additionally, if one or more of our repurchase agreement, revolving credit facility or warehouse facility counterparties chose not to provide ongoing funding, our ability to finance would decline or exist at possibly less favorable terms. As such, we cannot provide assurance that we will always be able to roll over our repurchase agreements, revolving credit facilities and warehouse facilities.
Additionally, if one or more of our repurchase agreement, revolving credit facility or warehouse line of credit counterparties chose not to provide ongoing funding, our ability to finance would decline or exist at possibly less favorable terms.
Added
As such, we cannot provide assurance that we will always be able to roll over our repurchase agreements, revolving credit facilities and warehouse lines of credit.

Other TWOD 10-K year-over-year comparisons