Company: TWO-PC
Filing Date: 2025-02-18
Form Type: 10-K
Source: 0001465740-25-000083
Chunk: 85

Company: TWO HARBORS INVESTMENT CORP.
Filing Date: 2025-02-18
Form: 10-K
Item: Item 7
Chunk 85
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Total interest expense/cost of funds$10,449,060 $168,080 6.4 %$10,815,118 $643,225 5.9 %Net interest income/spread$(45,679)(1.0)%$(162,861)(0.8)%

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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 (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.

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 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 increase in cost of funds associated with the financing of AFS securities for the year ended December 31, 2024, as compared to the same period in 2023, was due to rising interest rates throughout the first half of 2024.

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 increase in yields on reverse repurchase agreements for the year ended December 31, 2024, as compared to the same period in 2023, was the result of rising interest rates throughout the first half of 2024. However, for the year ended December 31, 2023, these yields were offset by the cost of financing the associated repurchase agreements collateralized by U.S. Treasury securities. We did not hold any repurchase agreements collateralized by U.S. Treasury securities during the three and twelve months ended December 31, 2024 or the three months ended December 31, 2023.

The decrease in cost of funds associated with the financing of MSR assets and related servicing advance obligations for the three months