Company: TWO-PC
Filing Date: 2025-10-28
Form Type: 10-Q
Source: 0001465740-25-000152
Chunk: 25

Company: TWO HARBORS INVESTMENT CORP.
Filing Date: 2025-10-28
Form: 10-Q
Item: Item 1
Chunk 25
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, the Company might elect, at times, not to enter into certain hedging arrangements in order to maintain compliance with REIT requirements.Balance Sheet PresentationIn accordance with ASC 815, the Company records derivative financial instruments on its consolidated balance sheets as assets or liabilities at fair value. Changes in fair value are accounted for depending on the use of the derivative instruments and whether they are designated or qualify as hedge instruments. Due to the volatility of the interest rate and credit markets and difficulty in effectively matching pricing or cash flows, the Company has not designated any current derivatives as hedging instruments.The following tables present the gross fair value and notional amounts of the Company’s derivative financial instruments treated as trading derivatives as of September 30, 2025 and December 31, 2024:September 30, 2025Derivative AssetsDerivative Liabilities(in thousands)Fair ValueNotionalFair ValueNotionalInverse interest-only securities$133,313 $2,181,910 $— $— Interest rate swap agreements— — — 24,881,904 TBAs1,050 (693,371)(7,720)5,101,000 Futures, net— (5,048,200)— — Interest rate lock commitments1,068 63,129 — — Total$135,431 $(3,496,532)$(7,720)$29,982,904 December 31, 2024Derivative AssetsDerivative Liabilities(in thousands)Fair ValueNotionalFair ValueNotionalInverse interest-only securities$9,058 $135,310 $— $— Interest rate swap agreements— 16,594,467 — — TBAs732 (34,000)(24,883)4,531,800 Futures, net— (3,973,400)— — Interest rate lock commitments151 15,727 (13)2,613 Forward mortgage loan sale commitments173 19,030 (1)1,343 Total$10,114 $12,757,134 $(24,897)$4,535,756 Comprehensive (Loss) Income Statement PresentationThe Company has not applied hedge accounting to its current derivative portfolio held to mitigate interest rate risk and credit risk. As a result, the Company is subject to volatility in its earnings due to movement in the unrealized gains and losses associated with its derivative instruments.

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