Company: TWO-PC
Filing Date: 2025-04-29
Form Type: 10-Q
Source: 0001465740-25-000104
Chunk: 85

Company: TWO HARBORS INVESTMENT CORP.
Filing Date: 2025-04-29
Form: 10-Q
Item: Item 1
Chunk 85
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ings:Convertible senior notes260,474 4,455 6.8 %268,831 4,619 6.9 %Other— 6 Total interest expense/cost of funds$9,995,726 $131,714 5.3 %$10,153,275 $160,000 6.3 %Net interest expense/spread$(20,332)(0.2)%$(42,217)(1.0)%

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(1)Average asset balance represents average amortized cost on AFS securities and average unpaid principal balance on mortgage loans held-for-sale and reverse repurchase agreements.

(2)Yields on Agency Derivatives not shown as interest income is included in 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.

The increase in yields on AFS securities for the three months ended March 31, 2025, as compared to the same period in December 31, 2024 was driven by net purchases of higher coupon AFS securities with lower unamortized premiums. The decrease in cost of funds associated with the financing of AFS securities for the three months ended March 31, 2025, as compared to the same period in 2024, was due to declining interest rates.

The decrease in yields on reverse repurchase agreements for the three months ended March 31, 2025, as compared to the same period in 2024, was due to declining interest rates. 

The decrease in cost of funds associated with the financing of MSR assets and related servicing advance obligations for the three months ended March 31, 2025, as compared to the same period in 2024, was primarily due to declining interest rates, as well as a greater portion of our MSR financing from repurchase agreements versus revolving credit facilities. Our repurchase agreements, on average, carry lower floating rate spreads than our revolving credit facilities. We have one revolving credit facility in place to finance our servicing advance obligations, which are included in other assets on our consolidated balance sheets.

49

Late in the second quarter of 2024, RoundPoint began operating its in-house, direct-to-consumer originations platform. 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, which were not pledged for any form of financing.