Company: TWO-PC
Filing Date: 2025-10-28
Form Type: 10-Q
Source: 0001465740-25-000152
Chunk: 266

Company: TWO HARBORS INVESTMENT CORP.
Filing Date: 2025-10-28
Form: 10-Q
Item: Item 8
Chunk 266
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(1)Certain operating expenses predominantly consists of expenses incurred in connection with the Company’s litigation with PRCM Advisers, as discussed within Note 14 to the consolidated financial statements, included under Part I, Item 1 of this Quarterly Report on Form 10-Q. 

The increase in total operating expenses during the three and nine months ended September 30, 2025, as compared to the same periods in 2024, was primarily driven by higher expenses incurred in connection with the resolution of the Company’s litigation with PRCM Advisers, as well as slightly higher compensation and benefits and other operating expenses. The increase in our annualized operating expense ratios was primarily driven by the lower average equity balances in the denominator as a result of comprehensive losses incurred and dividends declared during the three and nine months ended September 30, 2025. 

Litigation Settlement Expense

During the three and nine months ended September 30, 2025, we recognized litigation settlement expense of $175.1 million and $375.0 million, respectively, which was recorded in connection with the resolution of our litigation with PRCM Advisers. For further details regarding the litigation settlement recognized, refer to Note 14 - Commitments and Contingencies to the consolidated financial statements, included in this Quarterly Report on Form 10-Q.

Income Taxes

During the three and nine months ended September 30, 2025, we recognized a provision for income taxes of $1.2 million and $3.3 million, respectively, which was primarily due to net income from MSR servicing and mortgage loan origination activities, partially offset by net losses recognized on MSR and operating expenses incurred in our TRSs. During the three and nine months ended September 30, 2024, we recognized a benefit from income taxes of $10.5 million and a provision for income taxes of $15.7 million, respectively. The benefit recognized for the three months ended September 30, 2024 was primarily due to net losses recognized on MSR and operating expenses incurred, offset by net income from MSR servicing and mortgage loan origination activities in our TRSs. The provision recognized during the nine months ended September 30, 2024 was primarily due to net income from MSR servicing and mortgage loan origination activities, offset by net losses recognized on MSR and operating expenses incurred in our TRSs.

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Other Comprehensive Income

The following table provides