Company: TWO-PC
Filing Date: 2025-04-29
Form Type: 10-Q
Source: 0001465740-25-000104
Chunk: 126

Company: TWO HARBORS INVESTMENT CORP.
Filing Date: 2025-04-29
Form: 10-Q
Item: Item 8
Chunk 126
---
 in money market funds on an overnight basis.The Company is required to maintain certain cash balances with counterparties for securities and derivatives trading activity, servicing activities and collateral for the Company’s borrowings in restricted accounts. The Company has also placed cash in a restricted account pursuant to a letter of credit on an office space lease.The following table presents the Company’s restricted cash balances as of March 31, 2025 and December 31, 2024:(in thousands)March 31,2025December 31, 2024Restricted cash balances held by trading counterparties:For securities trading activity$700 $950 For derivatives trading activity302 43,398 For servicing activities64,286 49,900 As restricted collateral for borrowings58,489 218,715 Total restricted cash balances held by trading counterparties123,777 312,963 Restricted cash balance pursuant to letter of credit on office lease66 65 Total$123,843 $313,028 The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Company’s consolidated balance sheets as of March 31, 2025 and December 31, 2024 that sum to the total of the same such amounts shown in the consolidated statements of cash flows:(in thousands)March 31,2025December 31, 2024Cash and cash equivalents$573,882 $504,613 Restricted cash123,843 313,028 Total cash, cash equivalents and restricted cash$697,725 $817,641 

Note 9. Derivative Instruments and Hedging Activities

The Company enters into a variety of derivative and non-derivative instruments in connection with its risk management activities. The primary objective for executing these derivative and non-derivative instruments is to mitigate the Company’s economic exposure to future events that are outside its control, principally cash flow volatility associated with interest rate risk (including associated prepayment risk). Specifically, the Company enters into derivative and non-derivative instruments to economically hedge interest rate risk or “duration mismatch (or gap)” by adjusting the duration of its floating-rate borrowings into fixed-rate borrowings to more closely match the duration of its assets. This particularly applies to floating-rate borrowing agreements with maturities or interest rate resets of less than six months. Typically, the interest receivable terms (e.g., Overnight Index Swap Rate, or OIS, or Secured Overnight Financing Rate, or SOFR) of certain derivatives match the terms