Company: TWO-PC
Filing Date: 2025-07-29
Form Type: 10-Q
Source: 0001465740-25-000140
Chunk: 265

Company: TWO HARBORS INVESTMENT CORP.
Filing Date: 2025-07-29
Form: 10-Q
Item: Item 8
Chunk 265
---
, 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 On Servicing Asset

The following table presents the components of loss on servicing asset for the three and six months ended June 30, 2025 and 2024:

Three Months EndedSix Months EndedJune 30,June 30,(in thousands)2025202420252024Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model$27,357 $40,173 $43,373 $99,953 Changes in fair value due to realization of cash flows (runoff)(63,251)(62,990)(115,488)(111,758)Losses on sales(8)(40)(8)(40)Loss on servicing asset$(35,902)$(22,857)$(72,123)$(11,845)

The increase in loss on servicing asset for the three and six months ended June 30, 2025, as compared to the same periods in 2024, was driven by lower favorable change in valuation 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 the lower interest rate environment.

58

(Loss) Gain 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 six months ended June 30, 2025 and 2024:

Three Months EndedSix Months EndedJune 30,June 30,(in thousands)2025202420252024Net