Company: TWO-PC
Filing Date: 2025-04-29
Form Type: 10-Q
Source: 0001465740-25-000104
Chunk: 87

Company: TWO HARBORS INVESTMENT CORP.
Filing Date: 2025-04-29
Form: 10-Q
Item: Item 1
Chunk 87
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 loss on investment securities for the three months ended March 31, 2025 and 2024:

Three Months EndedMarch 31,(in thousands)20252024Proceeds from sales$1,329,584 $333,082 Amortized cost of securities sold(1,363,060)(343,245)Total realized losses on sales(33,476)(10,163)Provision for credit losses(94)(80)Other841 (732)Loss on investment securities$(32,729)$(10,975)

50

In the ordinary course of our business, we make investment decisions and allocate capital in accordance with our views on the changing risk/reward dynamics in the market and in our portfolio. We do not expect to sell assets on a frequent basis, but may sell assets to reallocate capital into new assets that we believe have higher risk-adjusted returns.

We use a discounted cash flow method to estimate and recognize an allowance for credit losses on AFS securities. Subsequent adverse or favorable changes in expected cash flows are recognized immediately in earnings as a provision for or reversal of provision for credit losses (within loss on investment securities).

The majority of the “other” component of loss on investment securities is related to changes in unrealized gains (losses) on certain AFS securities for which we have elected the fair value option. Fluctuations in this line item are primarily driven by the reclassification of unrealized gains and losses to realized gains and losses upon sale, as well as changes in fair value assumptions.

(Loss) Gain On Servicing Asset

The following table presents the components of (loss) gain on servicing asset for the three months ended March 31, 2025 and 2024:

Three Months EndedMarch 31,(in thousands)20252024Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model$16,016 $59,780 Changes in fair value due to realization of cash flows (runoff)(52,237)(48,768)(Loss) gain on servicing asset$(36,221)$11,012 

The decrease in gain on servicing asset for the three months ended March 31, 2025, as compared to the same period in March 31, 2024, was driven by lower favorable change in valuation inputs and assumptions used in the fair valuation of MSR, primarily due to a lower average portfolio balance, and slightly higher portfolio run-off as a result of declining interest rates.

(Loss) Gain