Company: TWO-PC
Filing Date: 2025-10-28
Form Type: 10-Q
Source: 0001465740-25-000152
Chunk: 91

Company: TWO HARBORS INVESTMENT CORP.
Filing Date: 2025-10-28
Form: 10-Q
Item: Item 1
Chunk 91
---
 a result of the lower interest rate environment.

Gain (Loss) On Interest Rate Swap And Swaption Agreements

The following table summarizes the net interest spread and gains and losses associated with our interest rate swap and swaption positions recognized during the three and nine months ended September 30, 2025 and 2024:

Three Months EndedNine Months EndedSeptember 30,September 30,(in thousands)2025202420252024Net interest spread$8,127 $17,059 $20,484 $46,369 Early termination, agreement maturation and option expiration losses(701)(86,310)(4,413)(70,032)Change in unrealized loss on interest rate swap and swaption agreements(3,124)(103,012)(163,507)(28,078)Gain (loss) on interest rate swap and swaption agreements$4,302 $(172,263)$(147,436)$(51,741)

59

Net interest spread recognized for the accrual and/or settlement of the net interest income associated with our interest rate swaps results from receiving either a floating interest rate (OIS or SOFR) or a fixed interest rate and paying either a fixed interest rate or a floating interest rate (OIS or SOFR) on positions held to economically hedge/mitigate portfolio interest rate exposure (or duration) risk. We may elect to terminate certain swaps and swaptions to align with our investment portfolio, agreements may mature or options may expire resulting in full settlement of our net interest spread asset/liability and the recognition of realized gains and losses, including early termination penalties. The change in fair value of interest rate swaps and swaptions during the three and nine months ended September 30, 2025 and 2024 was a result of changes to floating interest rates (OIS or SOFR), the swap curve and corresponding counterparty borrowing rates. Swaps and swaptions are used for purposes of hedging our interest rate exposure, and therefore, their unrealized valuation gains and losses (excluding the reversal of unrealized gains and losses to realized gains and losses upon termination, maturation or option expiration) generally offset a portion of the unrealized losses and gains recognized on our Agency RMBS AFS portfolio, which are recorded either directly to stockholders’ equity through other comprehensive income or to (loss) gain on investment securities, in the case of certain AFS securities for which we have elected the fair value option.

Gain (Loss) On Other Derivative Instruments