Company: TWO-PC
Filing Date: 2025-10-28
Form Type: 10-Q
Source: 0001465740-25-000152
Chunk: 196

Company: TWO HARBORS INVESTMENT CORP.
Filing Date: 2025-10-28
Form: 10-Q
Item: Item 8
Chunk 196
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December 31,2024Restricted cash balances held by trading counterparties:For securities trading activity$350 $950 For derivatives trading activity50,827 43,398 For servicing activities46,730 49,900 As restricted collateral for borrowings18,414 218,715 Total restricted cash balances held by trading counterparties116,321 312,963 Restricted cash balance pursuant to letter of credit on office lease67 65 Total$116,388 $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 September 30, 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)September 30,2025December 31,2024Cash and cash equivalents$770,533 $504,613 Restricted cash116,388 313,028 Total cash, cash equivalents and restricted cash$886,921 $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 of the underlying debt, resulting in an effective conversion of the rate of the related borrowing agreement from floating to fixed. The objective is to manage the cash flows associated with current and anticipated interest payments on borrowings, as well as the ability to roll or refinance borrowings at the desired amount by adjusting the duration.

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Table of ContentsTWO HARBORS INVESTMENT CORP.Notes to the Consolidated Financial Statements (unaudited)

To help manage the adverse impact of interest