TWO-PC 10-K & 10-Q changes, risk factors and insider trading

Our results of operations are materially affected by conditions in the residential mortgage and real estate markets, the financial markets and the economy generally. In past years, concerns about the COVID-19 pandemic, unemployment, the availability and cost of credit, rising government debt levels, inflation, energy costs, global supply chain disruptions, climate change, global economic lethargy, warfare, geopolitical unrest across various regions worldwide, European sovereign debt issues, U.S. budget debates, federal government shutdowns andshutdowns, international trade disputes, the imposition of sanctions orand new or increased tariffs,tariffs have from time to time contributed to increased volatility and uncertainty in the economy and financial markets. Adverse developments with respect to any of these factors may have an impact on new demand for homes and on homeowners’ ability to make their mortgage payments, which may compress home ownership rates and weigh heavily on future home price performance. There is a strong correlation between home price growth rates (or losses) and mortgage loan delinquencies. Any stagnation in or deterioration of the residential mortgage or real estate markets may limit our ability to acquire our target assets on attractive terms or cause us to experience losses related to our assets.

The continued flow of residential mortgage-backed securitiesRMBS from the GSEs is essential to the operation of the mortgage markets in their current form. A number of legislative proposals have been introduced in the past that would phase out or reform the GSEs. It is not possible to predict the scope and nature of the actions that the U.S. government could ultimately take with respect to the GSEs, including in light of recent changes in administration and executive offices of the U.S. government.GSEs. Although any phase out or reform may take several years to implement, if the structure of Fannie Mae or Freddie Mac were altered, or if they were eliminated altogether, the amount and type of Agency RMBS and other mortgage-related assets available for investment would be significantly affected. A reduction in supply of Agency RMBS and other mortgage-related assets would result in increased competition for those assets and likely lead to a significant increase in the price for our target assets. Additionally, market uncertainty with respect to the treatment of the GSEs could have the effect of reducing the actual or perceived quality of, and therefore the market value for, the Agency RMBS that we currently hold in our portfolio.

In addition, as we seek to grow our subservicing business, we will compete with bank and non-bank servicers for third-party subservicing clients. The subservicing market is highly competitive, and we expect to face competition related to the pricing and services we offer. There can be no assurance that we will be able to attract and retain subservicing clients, which may adversely impact our ability to grow our servicing platform and achieve economies of scale.

Finally, asin weconnection seek to expandwith our mortgage loan origination business, we will compete with bank and non-bank originators to provide various residential mortgage loan and real estate services products. The mortgage loan origination market remains highly competitive. There can be no assurance that we will be able to recapture or identify, attract, and fund new or additional mortgage loan originations, which may adversely impact our ability to grow our mortgage loan origination business.

Our ability to purchase and hold assets and execute our business strategy is affected by our ability to secure repurchase agreements and other credit facilities on acceptable terms. We currently have repurchase agreements, revolving credit facilities, a warehouse facilitylines of credit and other credit facilities in place with numerous counterparties, but we can provide no assurance that lenders will continue to provide us with sufficient financing through the repurchase markets or otherwise. In addition, with respect to MSR financing, there can be no assurance that the GSEs will consent to such transactions or consent on terms consistent with prior MSR financing transactions. Because repurchase agreements and similar credit facilities are generally short-term commitments of capital, changing conditions in the financing markets may make it more difficult for us to secure continued financing during times of market stress.

If our warehouse facilitieslines of credit are terminated or reduced, we may be unable to find replacement financing on favorable terms, or at all, which could adversely affect our business, results of operations and financial condition.

To finance our origination activities, we have entered into a warehouse facilityline of credit collateralized by the value of the mortgage loans pledged until they are sold to the GSEs or other third-party investors in the secondary market. Our borrowings are generally repaid with the proceeds we receive from mortgage loan sales. We depend upon one or more lenders to provide warehouse lines of credit for our loans. In the event that any of our warehouse facilitieslines of credit are terminated or not renewed, or if the principal amount that may be drawn under our funding agreements were to decrease significantly, we may be unable to find replacement financing on commercially favorable terms, or at all, which could limit our ability to maintain or grow our originations business.

In connection with certain of our repurchase agreements, warehouse facilities,lines of credit, revolving credit facilities and other credit facilities, we are required to comply with certain financial covenants, the most restrictive of which are disclosed within Part II, Item 7, “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” of this Annual Report on Form 10-K. Compliance with these financial covenants will depend on market factors and the strength of our business and operating results. Failure to comply with our financial covenants could result in an event of default, termination of the lending facility, acceleration of all amounts owing under the lending facility, and may give the counterparty the right to exercise certain other remedies under the lending agreement, including without limitation the sale of the collateral securing the facility at the time of default, unless the counterparty granted a waiver. In addition, we may be subject to cross-default provisions under certain financing facilities that could cause an event of default under such financing facilities to be triggered by events of default under other financing arrangements.

We have elected to not qualify for hedge accounting treatment under Accounting Standards Codification (ASC) 815, Derivatives and Hedging,Hedging or (“ASC 815,815”) for our current derivative instruments. The economics of our derivative hedging transactions are not affected by this election; however, our earnings (losses) for U.S. generally accepted accounting principles,principles or (“U.S. GAAP,GAAP”) purposes may be subject to greater fluctuations from period to period as a result of this accounting treatment for changes in fair value of derivative instruments or for the accounting of the underlying hedged assets or liabilities in our financial statements, as it does not necessarily align with the accounting used for derivative instruments.

We originate residential mortgage loans and may sell them to the GSEs or other third-party investors in the secondary market. There can be no assurance that we will be able to continue to sell our loans into the secondary market at attractive prices, or at all. If we are unable to sell our mortgage loans to the GSEs or other third-party investors, or the prices for such loans decline, our liquidity may be negatively impacted, we may be unable to continue to fund such loans, our revenues and margins on new loan originations could be reduced and our ability to repay our warehouse facilitieslines of credit could be impaired.

Under certain market conditions, TBA dollar roll transactions may result in negative carry income whereby the Agency RMBS purchased for a forward settlement date under TBA contract are priced at a premium to Agency RMBS for settlement in the current month. Under such conditions, it may be uneconomical to roll our TBA positions prior to the settlement date, and we may have to take physical delivery of the underlying securities and settle our obligations for cash. We may not have sufficient funds or alternative financing sources available to settle such obligations. In addition, pursuant to the margin provisions established by the Mortgage-Backed Securities Division,Division or MBSD,(“MBSD”), of the Fixed Income Clearing Corporation,Corporation or FICC,(“FICC”), we are subject to margin calls on our TBA contracts. Further, our prime brokerage agreements may require us to post additional margin above the levels established by the MBSD. Any failure to procure adequate financing to settle our obligations or meet margin calls under our TBA contracts could result in defaults or force us to sell assets under adverse market conditions or through foreclosure and adversely affect our results of operations and financial condition.

Certain provisions of the Maryland General Corporation Law,Law or MGCL,(“MGCL”), may have the effect of deterring a third party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of such shares. We are subject to the “business combination” provisions of the MGCL that, subject to limitations, prohibit certain business combinations between our Company and an “interested stockholder” (as defined under the MGCL) or an affiliate thereof for five years after the most recent date on which the stockholder becomes an interested stockholder. In addition, the “unsolicited takeover” provisions of the MGCL (Title 3, Subtitle 8 of the MGCL) permit our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement takeover defenses, some of which we do not currently have. These provisions may have the effect of inhibiting a third party from making an acquisition proposal for our Company or of delaying, deferring or preventing a change in control of our Company.

We may issue additional shares of our common stock in public offerings, private placements as well as through equity awards to our directors, officers and employees pursuant to our 2021 Equity Incentive Plan. Additionally, shares of our common stock have also been reserved for issuance in connection with the potential conversion of our 6.25% convertible senior notes due January 2026 and our Series A, Series B and Series C preferred stock. We cannot predict the effect, if any, of future issuances or sales of our common stock on the market price of our common stock. We also cannot predict the amounts and timing of equity awards to be issued pursuant to our equity incentive plans, nor can we predict the amount and timing of any conversions of our convertible senior notes due January 2026 or our Series A, Series B and Series C preferred stock into shares of our common stock. Any stock offerings, awards or conversions resulting in the issuance of substantial amounts of common stock, or the perception that such awards or conversions could occur, may adversely affect the market price for our common stock.

In the future, we may again elect to raise capital through the issuance of convertible or non-convertible debt or common or preferred equity securities. Upon liquidation, holders of our debt securities and preferred stock, if any, and lenders with respect to other borrowings will be entitled to our available assets prior to the holders of our common stock. Convertible debt and convertible preferred stock may have anti-dilution provisions which are unfavorable to our common stockholders. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future offerings reducing the market price of our common stock and diluting the value of their holdings.

We operate in a manner that will enable us to qualify as a REIT and have elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2009. We have not requested and do not intend to request a ruling from the Internal Revenue Service,Service or IRS,(“IRS”) that we qualify as a REIT. The U.S. federal income tax laws governing REITs and the assets they hold are complex, and judicial and administrative interpretations of the U.S. federal income tax laws governing REIT qualification are limited. To continue to qualify as a REIT, we must meet, on an ongoing basis, various tests regarding the nature of our assets and income, the ownership of our outstanding shares, and the amount of our distributions. Moreover, new legislation, court decisions, administrative guidance or actions by federal agencies or others to modify or re-characterize our assets may make it more difficult or impossible for us to qualify as a REIT. Thus, while we intend to operate so that we qualify as a REIT, no assurance can be given that we will so qualify for any particular year.

In order to continue to qualify as a REIT, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and designated real estate assets, including certain mortgage loans and shares in other REITs. Subject to certain exceptions, our ownership of securities, other than government securities and securities that constitute real estate assets, generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our total assets, other than government securities and securities that constitute real estate assets, can consist of the securities of any one issuer, no more than 20% (25% beginning January 1, 2026) of the value of our total assets can be represented by securities of one or more TRSs, and no more than 25% of the value of our total assets can consist of debt of “publicly offered” REITs that is not secured by real property or interests in real property. If we fail to comply with these requirements at the end of any calendar quarter, we must generally correct such failure within 30 days after the end of such calendar quarter to avoid losing our REIT qualification. As a result, we may be required to liquidate otherwise profitable assets prematurely, which could reduce our return on assets, which could adversely affect our results of operations and financial condition.

If (i) all or a portion of our assets are subject to the rules relating to taxable mortgage pools, (ii) we are a “pension held REIT,” (iii) a tax exempt stockholder has incurred debt to purchase or hold our common stock, or (iv) we purchase residual REMIC interests that generate “excess inclusion income,” then a portion of the distributions to and, in the case of a stockholder described in clause (iii), gains realized on the sale of common stock by such tax exempt stockholder may be subject to U.S. federal income tax as unrelated business taxable income under the Internal Revenue Code.

The REIT provisions of the Internal Revenue Code may limit our ability to hedge our assets and liabilities. Any income from a hedging transaction will not constitute gross income for purposes of the 75% or 95% gross income test if we properly identify the transaction as specified in applicable Treasury Regulations and we enter into such transaction (i) in the normal course of our business primarily to manage risk of interest rate or price changes or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, to acquire or carry real estate assets or (ii) primarily to manage risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the 75% or 95% gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of both of these gross income tests. As a result of these rules, we intend to limit our use of advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of our hedging activities.

A REIT may own up to 100% of the stock of one or more TRSs. A TRS may earn income that would not be qualifying REIT income if earned directly by the parent REIT. Both the TRS and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 20% (25% beginning January 1, 2026) of the value of a REIT’s total assets may consist of stock or securities of one or more TRSs. The value of our interests in and thus the amount of assets held in a TRS may also be restricted by our need to qualify for an exclusion from regulation as an investment company under the Investment Company Act.

We are a Maryland corporation that invests in, finances and manages MSR and Agency RMBS, and, through our operational platform, RoundPoint Mortgage Servicing LLC, or RoundPoint, we are one of the largest servicers of conventional loans in the country. We are structured as an internally-managed REIT and our common stock is listed on the NYSE under the symbol “TWO.” We seek to leverage our core competencies of understanding and managing interest rate and prepayment risk to invest in our portfolio of MSR and Agency RMBS. Our objective is to deliver more stable performance, relative to RMBS portfolios without MSR, across changing market environments, and we are acutely focused on creating sustainable stockholder value over the long term.

One of our wholly owned subsidiaries, TH MSR Holdings LLC (formerly Matrix Financial Services Corporation)Holdings, holds the requisite approvals from Fannie Mae and Freddie Mac to own and manage MSR, which represent a contractual right to control the servicing of a mortgage loan, the obligation to service the loan in accordance with applicable laws and requirements and the right to collect a fee for the performance of servicing activities, such as collecting principal and interest from a borrower and distributing those payments to the owner of the loan. TH MSR Holdings acquires MSR from third-party originators through flow and bulk purchases, as well as through the recapture of MSR on loans in its MSR portfolio that refinance. Beginning in 2024, TH MSR Holdings also acquires MSR on loans originated by its wholly owned subsidiary, RoundPoint, through purchases and recapture of MSR. TH MSR Holdings does not directly service mortgage loans; instead, it engages its wholly owned subsidiary, RoundPoint,RoundPoint to handle substantially all servicing functions for the mortgage loans underlying ourits MSR. Our MSR business leverages our core competencies in prepayment and interest rate risk analytics, and the MSR assets may provide offsetting risks to our Agency RMBS, hedging both interest rate and mortgage spread risk.

RoundPoint has approvals from Fannie Mae andMae, Freddie Mac and, beginning in the third quarter of 2025, Ginnie Mae to service residential mortgage loans,loans. andRoundPoint services originated or purchased mortgage loans held-for-sale, mortgage loans underlying TH MSR Holdings’ MSRMSR, asand wellmortgage asloans underlying MSR owned by third parties. Late in the second quarter of 2024, RoundPoint began operating its in-house, direct-to-consumer originations platform, which was established primarily to benefit our MSR portfolio through the retention or recapture of existing borrowers by providing them with competitive refinance and purchase mortgage options. The originations platform also originates loansboth first and second mortgages for new borrowers that do not currently have a mortgage loan serviced by RoundPoint and brokers second lien loans to our existing borrowers. For our own MSR portfolio, adding new or recaptured MSR through our origination platform is intended to hedge faster than expected MSR prepayment speeds in a refinance environment, and requires less capital relative to acquiring MSR through flow and bulk purchases from third-party originators. In addition, origination activities are generally counter-cyclical to MSR; MSR fair value tends to move opposite to origination volume. For example, the value of MSR typically increases in periods marked by low origination activity and vice versa. Thus, origination activities provide supplementary sources of profitability to our stockholders while also hedging our MSR.

We seek to deploy moderate leverage as part of our investment strategy. We generally finance our Agency RMBS through short- and long-term borrowings structured as repurchase agreements. We also finance our MSR through revolving credit facilities,facilities and repurchase agreements and convertible senior notes.agreements. Additionally, we finance our origination of mortgage loans through repurchase agreements and warehouse facilities.lines of credit. We have also issued unsecured debt, namely senior notes and convertible senior notes, the funds from which have been and may be used to purchase our target assets and/or for other general corporate purposes. Our convertible senior notes of $261.9 million in unpaid principal balance (“UPB”) were repaid in full on their January 15, 2026 maturity date.

We have elected to be treated as a REIT for U.S. federal income tax purposes. To qualify as a REIT we are required to meet certain investment and operating tests and annual distribution requirements. We generally will not be subject to U.S. federal income taxes on our taxable income to the extent that we annually distribute all of our net taxable income to stockholders, do not participate in prohibited transactions and maintain our intended qualification as a REIT. However, certain activities that we may perform may cause us to earn income which will not be qualifying income for REIT purposes. We have designated certain of our subsidiaries as taxable REIT subsidiaries, or TRSs,TRSs as defined in the Internal Revenue Code, to engage in such activities. We also operate our business in a manner that will permit us to maintain our exemption from registration under the Investment Company Act of 1940, as amended, or the 1940 Act. Certain of our subsidiaries have obtained the requisite licenses and approvals to own and manage MSR and to originate and directly service residential mortgage loans.

Our net interest income includes income from our securities portfolio, including the amortization of purchase premiums and accretion of purchase discounts, and mortgage loans held-for-sale. Net interest income,income (expense), as well as our servicing income, net of servicing costs, will fluctuate primarily as a result of changes in market interest rates, our financing costs and prepayment speeds on our assets. Interest rates, financing costs and prepayment rates vary according to the type of investment, conditions in the financial markets, competition and other factors, none of which can be predicted with any certainty.

A significant portion of our assets and liabilities are reported at fair value and, therefore, our consolidated balance sheets and statements of comprehensive income (loss) income are significantly affected by fluctuations in market prices. At December 31, 2024,2025, approximately 85.0%83.2% of our total assets, or $10.4$9.0 billion, consisted of financial instruments recorded at fair value. See Note 12 - Fair Value to the consolidated financial statements, included in this Annual Report on Form 10-K, for descriptions of valuation methodologies used to measure material assets and liabilities at fair value and details of the valuation models, key inputs to those models and significant assumptions utilized. Although we execute various hedging strategies to mitigate our exposure to changes in fair value, we cannot fully eliminate our exposure to volatility caused by fluctuations in market prices.

Any temporary change in the fair value of our AFS securities, excluding certain AFS securities for which we have elected the fair value option, is recorded as a component of accumulated other comprehensive loss and does not impact our reported income (loss) for U.S. GAAP purposes,purposes or (“GAAP net income (loss)”). However, changes in the provision for credit losses on AFS securities are recognized immediately in GAAP net income (loss). Our GAAP net income (loss) is also affected by fluctuations in market prices on the remainder of our financial assets and liabilities recorded at fair value, including interest rate swap and swaption agreements and certain other derivative instruments (i.e., Agency to-be-announced securities, or TBAs, options on TBAs, futures, options on futures, inverse interest-only securities, interest rate lock commitments and forward loan sale commitments), which are accounted for as derivative trading instruments under U.S. GAAP, fair value option elected AFS securities, MSR and mortgage loans held-for-sale.

We estimate the fair value of our MSR using a discounted cash flow model, which incorporates both observable and unobservable market data, including principal balance, note rate, geographical location, loan-to-value (LTV) ratios, FICO and other loan characteristics, along with servicing fee, ancillary income, earnings rates on escrow balances and recapture rates. Significant unobservable inputs include prepayment speeds; option adjusted spread,spread or OAS,(“OAS”), which represents the incremental spread added to the risk-free rate to reflect the effects of any embedded options and other risk inherent in MSR; and cost to service. We obtain third-party valuations, industry surveys and other available market data quarterly to assess the reasonableness of the the significant unobservable inputs used in the cash flow model, as well as fair value calculated by the cash flow model, subject to internally-established hierarchy and override procedures.

The preparation of financial statements in accordance with U.S. GAAP requires us to make certain judgments and assumptions, based on information available at the time of our preparation of the financial statements, in determining accounting estimates used in preparation of the statements. Accounting estimates are considered critical if the estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made and if different estimates reasonably could have been used in the reporting period or changes in the accounting estimate are reasonably likely to occur from period to period that would have a material impact on our financial condition, results of operations or cash flows. Our significant accounting policies are described in Note 2 to the consolidated financial statements, included under Part II, Item 8 of this Annual Report on Form 10-K. Our most critical accounting policies involve our fair valuation of AFS securities, MSR and derivative instruments.

The methods used by us to estimate fair value for AFS securities, MSR and derivative instruments may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we believe that our valuation methods are appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. We use prices obtained from third-party pricing vendors or broker quotes deemed indicative of market activity and current as of the measurement date, which in periods of market dislocation, may have reduced transparency. For more information on our fair value measurements, see Note 12 to the consolidated financial statements, included under Part II, Item 8 of this Annual Report on Form 10-K. Additionally, the key economic assumptions and sensitivity of the fair value of MSR to immediate adverse changes in these assumptions are presented in Note 6 to the consolidated financial statements, included under Part II, Item 8 of this Annual Report on Form 10-K.

Our portfolio is subject to market risks, primarily interest rate risk and prepayment risk. We pair our MSR and interest-only Agency RMBS portfolio with a portion of our Agency pool portfolio to offset risk. During periods of decreasing interest rates with rising prepayment speeds, the market value of our Agency pools generally increases and the market value of our interest-only securities and MSR generally decreases. The inverse relationship occurs when interest rates rise and prepayments fall. Prepayment rates for the MSR portfolio declinedincreased to 4.9%6.4% over the fourththree quartermonths ofended 2024,December 31, 2025, which is consistent with the universe of mortgage loans with similar coupon rates.rates, Housing turnover rates tend to be slower in the fall and winter monthsprimarily due to schoollower schedules,mortgage holidays and colder weather.rates. In addition to changes in interest rates, changes in home price performance, key employment metrics and government programs, among other macroeconomic factors, can affect prepayment speeds. We believe our active portfolio management approach, including our asset selection process, positions us to respond to a variety of market scenarios. Although we are unable to predict future interest rate movements, our strategy of pairing MSR with Agency RMBS, with a focus on managing various associated risks, including interest rate, prepayment, credit, mortgage spread and financing risk, is intended to generate stable performance, relative to RMBS portfolios without MSR, with a low level of sensitivity to changes in the yield curve, prepayments and interest rate cycles.

The following table provides the three-month average conditional prepayment rate (“CPR”) experienced by our Agency RMBS and MSR during the three months ended December 31, 2024,2025, and the four immediately preceding quarters:

Our Agency RMBS are primarily collateralized by pools of fixed-rate mortgage loans. Our Agency portfolio also includes securities with implicit prepayment protection, including lower loan balances (securities collateralized by loans of less than $300,000$400,000 in initial principal balance), higher LTVs (securities collateralized by loans with LTVs greater than or equal to 80%), certain geographic concentrations, loans secured by investor-owned properties and lower FICO scores.scores.We also hold pools backed by Agency multi-family mortgage loans and hybrid adjustable-rate mortgage loans. Our overall allocation of Agency RMBS and holdings of pools with specific characteristics are viewed in the context of our aggregate portfolio strategy, including MSR and related derivative hedging instruments. Additionally, the selection of securities with certain attributes is driven by the perceived relative value of the securities, which factors in the opportunities in the marketplace, the cost of financing and the cost of hedging interest rate, prepayment, credit and other portfolio risks. Accordingly, our Agency RMBS capital allocation reflects management’s flexible approach to investing in the marketplace.

As of December 31, 2024,2025, we had entered into repurchase agreements with 3634 counterparties, 1918 of which had outstanding balances. In addition, we held short- and long-term borrowings under revolving credit facilities, warehouse facilitieslines of credit, and unsecured borrowings under senior notes and convertible senior notes. As of December 31, 2024,2025, the debt-to-equity ratio funding our Agency and non-Agency investment securities, MSR and related servicing advances and mortgage loans held-for-sale, which includes unsecured borrowings under senior notes and convertible senior notes, was 4.34.8:1.0.

As of December 31, 2024,2025, we held $504.6$842.3 million in cash and cash equivalents, approximately $5.4$6.5 million of unpledged Agency RMBS and $3.4$3.3 million of unpledged non-Agency securities. As a result, we had an overall estimated unused borrowing capacity on our unpledged securities of approximately $6.5$8.0 million. As of December 31, 2024,2025, we held approximately $5.2$4.3 million of unpledged MSR and $22.9$7.0 million of unpledged servicing advances. Overall, on December 31, 2024,2025, we had $70.1$102.1 million unused committed and $795.0$950.0 million unused uncommitted borrowing capacity on MSR financing facilities, and $59.7$78.5 million in unused committed borrowing capacity on servicing advance financing facilities. As of December 31, 2024,2025, allwe held approximately $0.3 million of ourunpledged mortgage loans were pledged for financing and we had $30.9$25.6 million unused committed borrowing capacity on our warehouse facilities.line of credit and $45.9 million unused uncommitted borrowing capacity on our loan repurchase agreement. Generally, unused borrowing capacity may be the result of our election not to utilize certain financing, as well as delays in the timing in which funding is provided, insufficient collateral or the inability to meet lenders’ eligibility requirements for specific types of asset classes.

Interest income decreased fromto $122.4$89.9 million and $480.4$412.0 million for the three and twelve months ended December 31, 2023,2025 respectively, tofrom $103.8 million and $450.2 million for the same periods in 20242024, primarily due to a decrease in Agency RMBS portfolio sizesize, decreased usage of effectively borrowed U.S. Treasury securities under reverse repurchase agreement transactions, and lower averageoverall cashrates balancesearned heldon throughoutbank theand periods.margin account balances.

Interest expense decreased fromto $168.1$105.4 million and $643.2$490.9 million for the three and twelve months ended December 31, 20232025, torespectively, from $138.7 million and $607.8 million for the same periods in 20242024, primarily due to lowerdecreases borrowingin balancesaverage borrowings outstanding on boththe AFSlower securitiesAgency RMBS and MSR,MSR partiallyportfolios, offsetas bywell increasesas inthe lower overall interest ratesrate throughout the first half of 2024.environment.

(2)Yields on Agency Derivatives not shown as the related interest income is included in (loss) gain on other derivative instruments in the consolidated statements of comprehensive income (loss). income.

The increase in yields on AFS securities for the three and twelve months ended December 31, 2024,2025, as compared to the same periods in 20232024, was driven by net purchasessales of higherlower coupon AFS securitiessecurities, withwhich lowerwas unamortizedpartially premiums.offset by slightly higher premium amortization. The decrease in cost of funds associated with the financing of AFS securities for the three and twelve months ended December 31, 2024,2025, as compared to the same periodperiods in 2023,2024, was due to decliningthe lower interest rates.rate The increase in cost of funds associated with the financing of AFS securities for the year ended December 31, 2024, as compared to the same period in 2023, was due to rising interest rates throughout the first half of 2024.environment.

The decrease in cost of funds associated with the financing of MSR assets and related servicing advance obligations for the three and twelve months ended December 31, 2024,2025, as compared to the same periodperiods in 2023,2024, was primarily due to decliningthe lower interest rates, as well as a greater portion of our MSR financing from repurchase agreements versus revolving credit facilities. Our repurchase agreements, on average, carry lower floating rate spreads than our revolving credit facilities. The increase in cost of funds associated with the financing of MSR assets and related servicing advance obligations for the year ended December 31, 2024, as compared to the same period in 2023, was the result of rising interest rates throughout the first half of 2024.environment. We have one revolving credit facility in place to finance our servicing advance obligations, which are included in other assets on our consolidated balance sheets.

The decrease in total servicing income for the three and twelve months ended December 31, 2024,2025, as compared to the same periodperiods in 2023,2024, was primarily due to lower servicing fee income on a smaller MSR portfolio as a result of salesrun-off and runoff,sales, as well as lower float income due to the lower interest rate environment, partially offset by higher ancillary and other fee income asfrom aRoundPoint’s resultsubservicing of themortgage acquisitionloans on behalf of RoundPoint.third-party The decrease in total servicing income for the year ended December 31, 2024, as compared to the same period in 2023, was primarily due lower servicing fee income on a smaller MSR portfolio as a result of sales and runoff, partially offset by higher float income as a result of the higher interest rate environment and higher ancillary and other fee income as a result of the acquisition of RoundPoint.clients.

PriorAs topreviously discussed, RoundPoint handles substantially all servicing functions for the acquisition of RoundPoint, we did not directly service mortgage loans; instead,underlying our MSR. For the remaining portion of our serviced mortgage assets, we contractedcontract with appropriately licensed third-party subservicers to handle substantially allthe servicing functions in the name of the subservicersubservicer. for the mortgage loans underlying our MSR. TheseAll third-party subservicing costs and other servicing expenses directly related to our MSR portfolio are included within the servicing costs line item on our consolidated statements of comprehensive income (loss). Post-acquisition,income. allAll servicing-related general and administrative expenses incurred by RoundPoint as an operating company are included within the compensation and benefits and other operating expenses line itemitems on our consolidated statements of comprehensive income (loss). income. The decrease in servicing costs during the three and twelve months ended December 31, 2024,2025, as compared to the same periodsperiod in 2023,2024, was the result of lower non-recoverable advances and change in servicing reserves. The decrease in servicing costs during the year ended December 31, 2025, as compared to the same period in 2024, was the result of lower third-party deboarding and subservicing fees due to the acquisition of RoundPoint.incurred.

Gain (Loss) Gain On Servicing Asset

The following table presents the components of gain (loss) gain on servicing asset for the three and twelve months ended December 31, 20242025 and 20232024:

Gain (Loss) On Other Derivative Instruments

The following table providessummarizes athe summarycomponents of the total net gainsgain (lossesloss) recognized on other derivative instruments we hold for purposes of both hedging and non-hedging activities, principally TBAs, futures, options on futures, and inverse interest-only securitiesrecognized during the three and twelve months ended December 31, 20242025 and 20232024:

Operating Expenses

The following table presents the components of operating expenses for the three and twelve months ended December 31, 20242025 and 20232024:

(1)CertainFor the time period prior to the resolution of the Company’s litigation with PRCM Advisers in the third quarter of 2025, certain operating expenses predominantly consists of expenses incurred in connection with the Company’s ongoing litigation with PRCM Advisers,litigation, as discussed within Note 1814 to the consolidated financial statements, included under Part II, Item 18 of this Annual Report on Form 10-K. ItBeginning alsoin includesthe fourth quarter of 2025, certain operating expenses consists of transaction expenses incurred in connection with the Company’sproposed acquisitionmerger ofwith RoundPoint.UWM.

Except as set forth below,in our Quarterly Report on Form 10-Q for the period ended March 31, 2026, or the Q1 Form 10-Q, there have been no material changes to the risk factors set forth under the heading “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2025.2025, The risk factors presented below amend and supplementor the risk factors in our Annual Report on Form 10-K and should otherwise be read in conjunction with all of the risk factors disclosed in our Annual Report on Form 10-K. The materialization of any risks and uncertainties identified in our Forward-Looking Statements contained in this Quarterly Report on Form 10-Q, together with those previously disclosed in the AnnualForm Report10-K, onthe Q1 Form 10-K10-Q or those that are presently unforeseen could result in significant adverse effects on our financial condition, results of operations, and cash flows. See Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Forward-Looking Statements” in this Quarterly Report on Form 10-Q.

We are a Maryland corporation that invests in, finances and manages mortgage servicing rights (“MSR”) and Agency residential mortgage-backed securities (“RMBS”), and, through our operational platform, RoundPoint Mortgage Servicing LLC (“RoundPoint”), we are one of the largest servicers of conventional loans in the country. Agency refers to a U.S. government sponsored enterprise (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae”), or the Federal Home Loan Mortgage Corporation (“Freddie Mac”), or a U.S. government agency such as the Government National Mortgage Association (“Ginnie Mae”). We are structured as an internally-managed real estate investment trust (“REIT”) and our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “TWO.” We seek to leverage our core competencies of understanding and managing interest rate and prepayment risk to invest in our portfolio of MSR and Agency RMBS. Our objective is to deliver more stable performance, relative to RMBS portfolios without MSR, across changing market environments, and we are acutely focused on creating sustainable stockholder value over the long term.environments.

On March 27, 2026, we entered into a definitive agreement (the “Original CCM Merger Agreement”) for CrossCountry Intermediate Holdco, LLC (“CCM”) to acquire all of the outstanding shares of our common stock in an all-cash transaction (the “CCM Merger”). On April 28, 2026, we and CCM entered into an amendment to the Original CCM Merger Agreement (the “Amendment” and, the Original CCM Merger Agreement, as amended by the Amendment, the “Amended CCM Merger Agreement”). The Amendment, among other things, provides that, at the effective time of the CCM Merger, each outstanding share of our common stock will be converted into the right to receive an amount in cash equal to $11.30 per share, an increase from the $10.80 per share consideration under the Original CCM Merger Agreement. Subject to the terms and conditions of the Amended CCM Merger Agreement, at the effective time, each outstanding share of our 8.125% Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, 7.625% Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock and 7.25% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (collectively, the “Preferred Stock”), will remain issued and outstanding. Promptly after the effectiveEffective time,Time, the surviving company will deliver a notice of redemption to its preferred stockholders, in accordance with our Articles of Amendment and Restatement, and the Articles Supplementary thereto, and itsour Amended and Restated Bylaws. Following the effectiveEffective time,Time, when required in connection with the redemption of the Preferred Stock, CCM, on our behalf, will irrevocably set aside and deposit, separate and apart from its other funds, in trust for the benefit of our preferred stockholders, cash in immediately available funds in the amount of $25.00 per outstanding share of Preferred Stock, plus any accumulated and unpaid dividends thereon (whether or not authorized or declared) to, but not including, the redemption date (the “Preferred Stock Redemption Amount”). On the redemption date set forth in the notice of redemption, each share of Preferred Stock will be redeemed for an amount in cash equal to the Preferred Stock Redemption Amount. The CCM Merger is expected to close in the second half of 2026, subject to approval of our common stockholders and the satisfaction of other closing conditions, including customary regulatory approvals.

As previously disclosed, on December 17, 2025, we entered into a definitive agreement and plan of merger (the “UWM Merger Agreement”) with UWM Holdings Corporation (“UWM”). Following the determination that we had received a “Company Superior Proposal,” as defined in the UWM Merger Agreement, from CCM, and after considering UWM’s proposed revisions to the UWM Merger Agreement in consultation with our financial advisors and outside legal counsel, on March 27, 2026, prior to entering into the Original CCM Merger Agreement, we delivered to UWM a written notice terminating the UWM Merger Agreement. In connection with the termination of the UWM Merger Agreement, CCM, on our behalf, paid UWM a termination fee of $25.4 million in cash as required by the terms of the UWM Merger Agreement (the “UWM Termination Fee”). For the threesix months ended MarchJune 31,30, 2026, we incurred the UWM Termination Fee of $25.4 million; however this amount was economically and contractually offset through the corresponding payment made by CCM, and accordingly, the UWM Termination Fee did not result in a net impact to our consolidated financial statements.

On March 27, 2026, we entered into the Original CCM Merger Agreement, as amended by the First Amendment onand Aprilthe 28,Second 2026,Amendment, pursuant to which we will merge with and into a merger subsidiary of CCM, with the merger subsidiaryus continuing as a wholly owned subsidiary of CCM. The forward-looking statements in this Quarterly Report on Form 10-Q, other than the statements regarding the proposedpending CCM Merger, do not assume the consummation of the proposedpending CCM Merger unless specifically stated otherwise.

A significant portion of our assets and liabilities are reported at fair value and, therefore, our consolidated balance sheets and statements of comprehensive income (loss) income are significantly affected by fluctuations in market prices. At MarchJune 31,30, 2026, approximately 85.2%85.0% of our total assets, or $9.0$7.5 billion, consisted of financial instruments recorded at fair value. See Note 11 - Fair Value to the consolidated financial statements, included in this Quarterly Report on Form 10-Q, for descriptions of valuation methodologies used to measure material assets and liabilities at fair value and details of the valuation models, key inputs to those models and significant assumptions utilized. Although we execute various hedging strategies to mitigate our exposure to changes in fair value, we cannot fully eliminate our exposure to volatility caused by fluctuations in market prices.

Considerable judgment is used in forming conclusions and estimating inputs to our Level 3 fair value measurements. Level 3 inputs such as interest rate movements, prepayments speeds, credit losses and discount rates are inherently difficult to estimate. Changes to these inputs can have a significant effect on fair value measurements. Accordingly, there is no assurance that our estimates of fair value are indicative of the amounts that would be realized on the ultimate sale or exchange of these assets. At MarchJune 31,30, 2026, 22.6%26.5% of our total assets were classified as Level 3 fair value assets.

ActivityThe andMSR market continued to be well supported, with demand foroutstripping supply. Across the MSR in the first quarter remained high, withmarket, servicing transfers in the firstsecond quarter ofcontinued 2026 topping an estimated $93 billion UPB, outpacingat the firstsame quarterpace ofas 2025seen (approximatelyin $662025. billion), though below the fourth quarter of 2025 (approximately $154 billion). We continue to see mostMost of the supply cominghas come from non-bank originators with a broader array of buyer types including other non-bank originators, banks and REITs. PricingGiven the demand, pricing for bulk and flow channels was stabletightened in the firstsecond quarter. Given the increase in mortgage rates and wider spreads for RMBS in the first quarter, servicingServicing multiples generally increased.increased, owing to higher rates across the yield curve, including short rates which increase the float value of MSR. Delinquency rates for GSE servicing continued to remain low.

RMBS funding markets remained stable and available during the quarter. WithSpreads extra cash moving into the market,for repurchase agreement spreads tightened fromin the fourthsecond quarter of 2025 to around 1312 to 2015 bps to SOFR in the firstSecured quarterOvernight ofFinancing 2026.Rate (“SOFR”).

Our portfolio is subject to market risks, primarily interest rate risk and prepayment risk. We pair our MSR and interest-only Agency RMBS portfolio with a portion of our Agency pool portfolio to offset risk. During periods of decreasing interest rates with rising prepayment speeds, the market value of our Agency pools generally increases and the market value of our interest-only securities and MSR generally decreases. The inverse relationship occurs when interest rates rise and prepayments fall. Prepayment rates for the MSR portfolio decreased to 5.6% over the three months ended March 31, 2026, which is consistent with the universe of mortgage loans with similar coupon rates, primarily due to mortgage rates rising towards the end of the quarter. In addition to changes in interest rates, changes in home price performance, key employment metrics and government programs, among other macroeconomic factors, can affect prepayment speeds. We believe our active portfolio management approach, including our asset selection process, positions us to respond to a variety of market scenarios. Although we are unable to predict future interest rate movements, our strategy of pairing MSR with Agency RMBS, with a focus on managing various associated risks, including interest rate, prepayment, credit, mortgage spread and financing risk, is intended to generate stable performance, relative to RMBS portfolios without MSR, with a low level of sensitivity to changes in the yield curve, prepayments and interest rate cycles.

The following table provides the three-month average CPR experienced by our Agency RMBS and MSR during the three months ended MarchJune 31,30, 2026, and the four immediately preceding quarters:

Our Agency RMBS are primarily collateralized by fixed-rate mortgage loans. Our Agency portfolio also includes securities with implicit prepayment protection, including lower loan balances (securities collateralized by loans of less than $400,000 in initial principal balance), higher LTVs (securities collateralized by loans with LTVs greater than or equal to 80%), certain geographic concentrations, loans secured by investor-owned properties and lower FICO scores.Wescores. We also hold pools backed by Agency multi-family mortgage loans and hybrid adjustable-rate mortgage loans. Our overall allocation of Agency RMBS and holdings of pools with specific characteristics are viewed in the context of our aggregate portfolio strategy, including MSR and related derivative hedging instruments. Additionally, the selection of securities with certain attributes is driven by the perceived relative value of the securities, which factors in the opportunities in the marketplace, the cost of financing and the cost of hedging interest rate, prepayment, credit and other portfolio risks. Accordingly, our Agency RMBS capital allocation reflects management’s flexible approach to investing in the marketplace.

Our MSR portfolio offers attractive spreads and has many risk reducing characteristics when paired with our Agency RMBS portfolio. The following table summarizes activity related to the UPB of loans underlying our MSR portfolio for the three months ended MarchJune 31,30, 2026, and the four immediately preceding quarters:

As of MarchJune 31,30, 2026, we had entered into repurchase agreements with 21 counterparties, 18 of which had outstanding balances. In addition, we held short- and long-term borrowings under revolving credit facilities, warehouse lines of credit, and unsecured borrowings under senior notes. As of MarchJune 31,30, 2026, the debt-to-equity ratio funding our Agency and non-Agency investment securities, MSR and related servicing advances and mortgage loans held-for-sale, which includes unsecured borrowings under senior notes, was 4.83.8:1.0.

As of MarchJune 31,30, 2026, we held $476.3$642.7 million in cash and cash equivalents, approximately $7.3$5.7 million of unpledged Agency RMBS and $3.1$3.0 million of unpledged non-Agency securities. As a result, we had an overall estimated unused borrowing capacity on our unpledged securities of approximately $8.2$7.1 million. As of MarchJune 31,30, 2026, we held approximately $1.6$2.1 million of unpledged MSR and $7.4$3.4 million of unpledged servicing advances. Overall, on MarchJune 31,30, 2026, we had $102.1$152.1 million unused committed and $875.0 million unused uncommitted borrowing capacity on MSR financing facilities, and $81.0$85.1 million in unused committed borrowing capacity on servicing advance financing facilities. As of MarchJune 31,30, 2026, we held approximately $0.4$0.5 million of unpledged mortgage loans and had $22.3$30.7 million unused committed borrowing capacity on our warehouse line of credit and $44.8$42.5 million unused uncommitted borrowing capacity on our loan repurchase agreement. Generally, unused borrowing capacity may be the result of our election not to utilize certain financing, as well as delays in the timing in which funding is provided, insufficient collateral or the inability to meet lenders’ eligibility requirements for specific types of asset classes.

Our total serviced mortgage assets consist of mortgage loans underlying our MSR assets, off-balance sheet mortgage loans owned by third parties and subserviced by us, off-balance sheet mortgage loans owned by third parties for which we act as servicing administrator (subserviced by appropriately licensed third-party subservicers), and originated or purchased mortgage loans held-for-sale at period-end. The following table presents the number of loans and unpaid principal balance of the mortgage assets for which we manage the servicing as of MarchJune 31,30, 2026 and December 31, 2025:

Our book value per common share for U.S. GAAP purposes was $10.68 at June 30, 2026, an increase from $10.57 per common share at March 31, 2026, and a decrease from $11.13 per common share at December 31, 2025. The declinerise in book value for the three months ended MarchJune 31,30, 2026 was primarily driven by servicing income, partially offset by MSR portfolio runoff, as well as dividends declared. The decline in book value for the six months ended June 30, 2026 was primarily driven by net mark-to-market losses recognized on investment securities and MSR,MSR portfolio runoff, as well as dividends declared, partially offset by servicing income. Our comprehensive lossincome attributable to common stockholders was $24.7$47.9 million and $23.2 million for the three and six months ended MarchJune 31,30, 2026, respectively, as compared to comprehensive incomeloss attributable to common stockholders of $64.9$221.8 million and $156.9 million for the three and six months ended MarchJune 31,30, 2025.2025, respectively.

The following table presents the components of our comprehensive income (loss) income for the three and six months ended MarchJune 31,30, 2026 and 2025:

Interest income decreased to $88.7$83.5 million and $172.2 million for the three and six months ended MarchJune 31,30, 20262026, respectively, from $111.4$117.1 million and $228.5 million for the same periodperiods in 2025, primarily due to a decrease in Agency RMBS portfolio size.

Interest expense decreased to $95.2$89.6 million and $184.7 million for the three and six months ended MarchJune 31,30, 20262026, respectively, from $131.7$136.7 million and $268.4 million for the same periodperiods in 2025, primarily due to decreases in average borrowings outstanding on the Agency RMBS and MSR portfolios, as well as the lower overall interest rate environment.

The following tabletables presentspresent the components of interest income and average net asset yield earned by asset type, the components of interest expense and average cost of funds on borrowings incurred by collateral type, and net interest income and average net interest spread for the three and six months ended MarchJune 31,30, 2026 and 2025:

(2)Yields on Agency Derivatives not shown as the related interest income is included in gain (loss) on derivative instruments in the consolidated statements of comprehensive income (loss) income..

The increasedecrease in yields on AFS securities for the three months ended MarchJune 31,30, 2026, as compared to the same period in 2025, was driven by net sales of AFS securities with lower couponunamortized AFS securities, which waspremiums, partially offset by slightlythe higherportfolio’s premiumoverall amortization.shift up in coupon. The increase in yields on AFS securities for the six months ended June 30, 2026, as compared to the same period in 2025, was primarily driven by net sales of lower coupon AFS securities. The decrease in cost of funds associated with the financing of AFS securities for the three and six months ended MarchJune 31,30, 2026, as compared to the same periodperiods in 2025, was due to the lower interest rate environment.

The decrease in yields on reverse repurchase agreements for the three and six months ended MarchJune 31,30, 2026, as compared to the same periodperiods in 2025, was due to the lower interest rate environment.

The decrease in cost of funds associated with the financing of MSR assets and related servicing advance obligations for the three and six months ended MarchJune 31,30, 2026, as compared to the same periodperiods in 2025, was primarily due to the lower interest rate environment. We have one revolving credit facility in place to finance our servicing advance obligations, which are included in other assets on our consolidated balance sheets.

The following table presents the components of the yield earned on our AFS securities portfolio as a percentage of our average amortized cost of securities for the three and six months ended MarchJune 31,30, 2026 and 2025:

The following table presents the components of net servicing income for the three and six months ended MarchJune 31,30, 2026 and 2025:

The decrease in total servicing income for the three and six months ended MarchJune 31,30, 2026, as compared to the same periodperiods in 2025, was primarily due to lower servicing fee income on a smaller MSR portfolio as a result of run-off and sales, and lower float income on lower custodial balances as well as a lower interest rate environment.

As previously discussed, RoundPoint handles substantially all servicing functions for the mortgage loans underlying our MSR. For the remaining portion of our serviced mortgage assets, we contract with appropriately licensed third-party subservicers to handle the servicing functions in the name of the subservicer. All third-party subservicing costs and other servicing expenses directly related to our MSR portfolio are included within the servicing costs line item on our consolidated statements of comprehensive income (loss) income.. All servicing-related general and administrative expenses incurred by RoundPoint are included within the compensation and benefits and other operating expenses line items on our consolidated statements of comprehensive income (loss) income.. The decreaseincrease in servicing costs during the three months ended MarchJune 31,30, 2026, as compared to the same period in 2025, was primarily the result of higher non-recoverable advances. The decrease in servicing costs during the six months ended June 30, 2026, as compared to the same period in 2025, was primarily the result of lower interest on escrowescrows, balancespartially andoffset lowerby higher non-recoverable advances.

The following table presents the components of loss on investment securities for the three and six months ended MarchJune 31,30, 2026 and 2025:

The following table presents the components of loss on servicing asset for the three and six months ended MarchJune 31,30, 2026 and 2025:

The increase in loss on servicing asset for the three and six months ended MarchJune 31,30, 2026, as compared to the same periodperiods in 2025, was driven by a less favorable change in valuation assumptions used in the fair valuation of MSR, primarily due to decreasing interest rates with rising prepayment speeds, partially offset by lower portfolio run-off on a lower portfolio balance as a result of sales of MSR.

The following table summarizes the components of gain (loss) on derivative instruments recognized during the three and six months ended MarchJune 31,30, 2026 and 2025:

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 (e.g., Overnight Index Swap 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 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 during the three and six months ended MarchJune 31,30, 2026 and 2025 was a result of changes to floating interest rates (OIS or SOFR), the swap curve and corresponding counterparty borrowing rates. Swaps 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 (loss) income or to loss on investment securities, in the case of certain AFS securities for which we have elected the fair value option.

The following table provides a summary of the total net realized and unrealized gains (losses) recognized on mortgage loans held-for-sale and the related derivative instruments used to manage exposure to market risks primarily associated with fluctuations in interest rate risks related to our origination pipeline during the three and six months ended MarchJune 31,30, 2026 and 2025:

The following table presents the components of operating expenses for the three and six months ended MarchJune 31,30, 2026 and 2025:

(1)Merger-related compensation and other costs consist of expenses incurred in connection with the proposedpending CCM Merger, as well as the terminated UWM Merger.

The increase in total operating expenses during the three and six months ended MarchJune 31,30, 2026, as compared to the same periodperiods in 2025, was primarily driven by expenses incurred in connection with the proposedpending CCM Merger and the terminated UWM Merger, partially offset by lower non-cash equity compensation expensesexpenses, certain litigation-related costs incurred during the three and six months ended June 30, 2025, as well as lower other operating expenses. The increase in our annualized operating expense ratios was also driven by the lower average equity balances in the denominator as a result of the comprehensive losses incurred andduring 2025, as well as dividends declared during 2025 and the threesix months ended MarchJune 31,30, 2026.

During the three and six months ended MarchJune 31,30, 2026 and 2025,2026, we recognized a provision for income taxes of $4.1$6.0 million and $0.4$10.0 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 six months ended June 30, 2025, we recognized a provision for income taxes of $1.7 million and $2.1 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.

The following table provides a summary of the components of other comprehensive (loss) income during the three and six months ended MarchJune 31,30, 2026 and 2025:

The following table presents significant components of our balance sheet as of MarchJune 31,30, 2026 and December 31, 2025:

The table below summarizes certain characteristics of our Agency RMBS AFS at MarchJune 31,30, 2026:

One of our wholly owned subsidiaries, TH MSR Holdings, has approvals from Fannie Mae and Freddie Mac to own and manage MSR, which represent the right to control the servicing of residential mortgage loans. TH MSR Holdings acquires MSR from third-party originators through flow and bulk purchases, as well as through the recapture of MSR on loans in its MSR portfolio that refinance. TH MSR Holdings also acquires MSR on loans originated by its subsidiary, RoundPoint, through purchases and recapture of MSR. As of bothJune March 31,30, 2026 and December 31, 2025, our MSR had a fair market value of $2.3 billion and $2.4 billion.billion, respectively.

As of MarchJune 31,30, 2026, our MSR portfolio included MSR on 665,942655,023 loans with an unpaid principal balance of approximately $158.9$155.1 billion. The following table summarizes certain characteristics of the loans underlying our MSR by gross weighted average coupon rate types and ranges at MarchJune 31,30, 2026:

At MarchJune 31,30, 2026, borrowings under repurchase agreements, revolving credit facilities, warehouse lines of credit and senior notes had the following characteristics:

(1)Includes unsecured borrowings under senior notes due August 2030, paying interest quarterly at a rate of 9.375% per annum on the aggregate principal amount, which was $115.0 million on MarchJune 31,30, 2026.