Company: TWO-PC
Filing Date: 2025-07-29
Form Type: 10-Q
Source: 0001465740-25-000140
Chunk: 25

Company: TWO HARBORS INVESTMENT CORP.
Filing Date: 2025-07-29
Form: 10-Q
Item: Item 2
Chunk 25
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RCM Advisers, as well as slightly higher compensation and benefits and other operating expenses. The increase in our annualized operating expense ratios was primarily driven by the lower average equity balances in the denominator as a result of comprehensive losses incurred and dividends declared during the three and six months ended June 30, 2025. 

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Loss Contingency Accrual

As discussed within Note 14 to the consolidated financial statements, included under Item 1 of this Quarterly Report on Form 10-Q, we recorded a loss contingency accrual of $199.9 million for both the three and six months ended June 30, 2025 in connection with our ongoing litigation with PRCM Advisers. This amount is reflective of the $139.8 million termination fee that the Company believes would have been payable to PRCM Advisers for termination on the basis of unfair compensation pursuant to the Management Agreement, plus applicable pre-judgment interest on such termination fee that has accrued through June 30, 2025.

Income Taxes

During the three and six months ended June 30, 2025, we recognized a provision for income taxes of $1.7 million and $2.1 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. During the three and six months ended June 30, 2024, we recognized a provision for income taxes of $14.2 million and $26.2 million, respectively, which was primarily due to net income from MSR servicing activities and net gains recognized on MSR, partially offset by operating expenses incurred in our TRSs.

Other Comprehensive Income (Loss)

The following table provides a summary of the components of other comprehensive income (loss) during the three and six months ended June 30, 2025 and 2024:

Three Months EndedSix Months EndedJune 30,June 30,(in thousands)2025202420252024Unrealized gains (losses) on available-for-sale securities$33,113 $(53,466)$143,333 $(163,124)Realized losses on sales of available-for-sale securities reclassified to loss on investment securities17,360 9,393 64,312 15,973 Other comprehensive income (loss)$50,473 $(44,073)$207,645 $(147,151)

With our accounting treatment for AFS securities, unreal