Two Harbors Q2 swings to profit as CCM merger nears close

Overview

• U.S. MSR-focused REIT's Q2 comprehensive income rose to $47.9 mln, reversing prior loss

• Earnings available for distribution fell to $0.28 per share from $0.34 in Q1

• Shareholders approved merger with CrossCountry Mortgage; closing expected in August

Outlook

• Company expects merger with CrossCountry Mortgage to close on August 3, 2026

• Company will redeem Series A, B, and C Preferred Stock after merger closing at $25.00 per share plus unpaid dividends

• Company declared a 'stub period' dividend of $0.12196 per share for Q3 2026, subject to merger completion

Result Drivers

• DERIVATIVE GAINS OFFSET LOSSES - Gains on derivative instruments helped offset fair value losses on servicing assets and investment securities

• MERGER-RELATED COSTS - Operating expenses included $13.6 mln in merger-related costs during Q2

• PORTFOLIO ADJUSTMENTS - Co reduced agency RMBS holdings and added $186.5 mln in MSR through acquisitions and recapture

Company press release: ID:nBwv4rvSa

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "hold" and the breakdown of recommendations is no "strong buy" or "buy", 8 "hold" and 1 "sell" or "strong sell"

• The average consensus recommendation for the specialized reits peer group is "buy."

• Wall Street's median 12-month price target for Two Harbors Investment Corp is $12.00, about 1% below its July 27 closing price of $12.12

• The stock recently traded at 11 times the next 12-month earnings vs. a P/E of 10 three months ago

Reuters Recommended Reads

• July 28 - Rithm Capital Q2 profit falls

• July 28 - Redwood Trust Q2 net loss narrows sequentially, mortgage banking production doubles y/y

• July 27 - Canada's First Capital REIT Q2 net income plunges on impairment, credit losses

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(This story was created using Reuters automation and AI based on LSEG and company data. It was checked and edited by a Reuters journalist prior to publication.)