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Yahoo
19 hours ago
- Business
- Yahoo
Two Harbors Investment Corp (TWO) Q2 2025 Earnings Call Highlights: Navigating Challenges with ...
Total Economic Return: Negative 14.5% including loss contingency accrual; minus 1.4% excluding the accrual. Book Value: Decreased to $12.14 per share. Comprehensive Loss: $221.8 million or $2.13 per share including accrual; $21.9 million or $0.21 per share excluding accrual. Net Interest and Servicing Income: Increased by $3.1 million. Loss Contingency Accrual: $199.9 million or $1.92 per share related to litigation. First Lien Originations: Funded $48 million UPB, a 68% increase from the first quarter. Second Liens: Brokered $44 million UPB in the quarter. MSR Portfolio: Purchased $6.4 billion UPB of MSR through three bulk purchases. Economic Debt-to-Equity: Increased to 7 times. Agency RMBS Portfolio: $14.4 billion including $11.4 billion in settled positions and $3 billion in TBAs. Unused MSR Asset Financing Capacity: $837 million. Senior Notes Issuance: $115 million aggregate principal amount of 9.375% senior notes due 2030. Warning! GuruFocus has detected 4 Warning Signs with TWO. Release Date: July 29, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Positive Points Two Harbors Investment Corp (NYSE:TWO) experienced a significant recovery in the performance of Agency RMBS spreads as the macro environment improved. The company maintained a disciplined approach to risk, keeping interest rate and spread exposures low, and utilized leverage judiciously. Two Harbors Investment Corp (NYSE:TWO) increased its first lien originations by 68% quarter-over-quarter, outpacing the national trend. The company is investing in AI technologies to increase efficiencies, reduce costs, and improve customer experiences. Two Harbors Investment Corp (NYSE:TWO) has a strong platform and experienced team, positioning it well to navigate changing market cycles and create long-term value. Negative Points The company reported a total economic return of negative 14.5% for the second quarter, including a significant loss contingency accrual. Two Harbors Investment Corp (NYSE:TWO) faced a comprehensive loss of $221.8 million in the quarter, impacted by unfavorable market movements on MSR, swaps, TBAs, and futures. The company's leverage increased to 7 times, partly due to the litigation reserve, which may affect future portfolio actions. The ongoing litigation from the termination of the management agreement with PRCM Advisers in 2020 remains unresolved, with no trial date set. The MSR market supply has declined by about 30% year-over-year, potentially limiting opportunities for bulk purchases. Q & A Highlights Q: Your leverage increased this quarter due to the litigation reserve. Is this the new level of leverage we should expect, or are there more portfolio actions to adjust it? A: Nicholas Letica, Chief Investment Officer, explained that the leverage of 7 times is within their historical range of 5% to 8%. They increased leverage due to attractive market conditions and feel comfortable with the current level. The leverage might adjust based on market opportunities and capital base. Q: Can you provide an update on economic return performance so far in July? A: William Greenberg, President and CEO, stated that quarter-to-date through last Friday, they were up about 1.5% in economic return on the new book value. Q: What are the main differences between the expected returns on slide 15 and the EAD metric? A: William Greenberg explained that EAD is based on historical purchase yields, while the return outlook reflects forward-looking mark-to-market yields at current prices. The expected returns account for potential fluctuations in prepayments, funding spreads, and leverage. Q: Could you comment on your risk appetite and any changes in rate or spread exposure? A: Nicholas Letica noted that their rate exposure is virtually unchanged quarter-over-quarter, and spread risk is also stable. They find mortgage spreads attractive and are comfortable with their current risk levels, given the low spread volatility and supportive market conditions. Q: Can you discuss your financing strategy and the shift from repo to unsecured financing this quarter? A: William Dellal, CFO, explained that the issuance of the unsecured baby bond was to prefinance the maturity of convertible notes and some warehouse lines. This change is part of their strategy to manage upcoming maturities. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Wire
2 days ago
- Business
- Business Wire
TWO Reports Second Quarter 2025 Financial Results
NEW YORK--(BUSINESS WIRE)--TWO (Two Harbors Investment Corp., NYSE: TWO), an MSR-focused real estate investment trust (REIT), today announced its financial results for the quarter ended June 30, 2025. 'Given the strength of our platform and the depth of expertise across our team, we are confident in our ability to navigate through changing market cycles, creating long-term value for our stockholders, customers, and business partners.' Share Quarterly Summary Reported book value of $12.14 per common share, and declared a second quarter common stock dividend of $0.39 per share, representing a (14.5)% quarterly economic return on book value. For the first six months of 2025, generated a (10.3)% total economic return on book value. (1) Incurred a Comprehensive Loss of $(221.8) million, or $(2.13) per weighted average basic common share. Recorded a contingency liability and related expense of $199.9 million, or $1.92 per weighted average basic common share, related to the company's ongoing litigation with PRCM Advisers LLC. (2) Excluding the loss contingency accrual recognized during the quarter: Generated a (1.4)% quarterly economic return on book value. For the first six months of 2025, generated a 2.9% total economic return on book value. (1) Incurred a Comprehensive Loss of $(21.9) million, or $(0.21) per weighted average basic common share. Issued $115.0 million aggregate principal amount of 9.375% Senior Notes due 2030 through an underwritten offering for net proceeds of $110.8 million. Settled $6.6 billion in unpaid principal balance (UPB) of MSR through two bulk purchases, flow-sale acquisitions and recapture. As of June 30, 2025, MSR portfolio had a weighted average gross coupon rate of 3.53% and a 60+ day delinquency rate of 0.82%, compared to 0.85% as of March 31, 2025. For the second quarter of 2025, MSR portfolio experienced a 3-month CPR of 5.8%, compared to 5.3% for the second quarter of 2024. Funded $48.6 million UPB in first lien loans and brokered $44.0 million UPB in second lien loans. 'The combination of our investment portfolio and operating company allows us to be dynamic and responsive as opportunities emerge across the mortgage finance space,' said Bill Greenberg, TWO's President and Chief Executive Officer. 'Given the strength of our platform and the depth of expertise across our team, we are confident in our ability to navigate through changing market cycles, creating long-term value for our stockholders, customers, and business partners.' ________________ (1) Economic return on book value is defined as the increase (decrease) in common book value from the beginning to the end of the given period, plus dividends declared to common stockholders in the period, divided by common book value as of the beginning of the period. (2) The contingency liability is reflective of the $139.8 million termination fee that the Company believes would have been payable to PRCM Advisers for termination on the basis of unfair compensation pursuant to Section 13(a)(ii) of the Management Agreement, plus applicable pre-judgment interest on such amount accrued at the statutory rate of 9% through June 30, 2025. Estimated loss contingencies are required to be recorded under ASC 450, Contingencies, when a company determines a contingency liability is both probable and estimable. Expand 'Fixed-income and equity markets proved resilient in the second quarter,' stated Nick Letica, TWO's Chief Investment Officer. 'While we will continue to be mindful of the many sources of volatility that can impact our portfolio, we believe there is also opportunity in this environment. Spreads for Agency RMBS remain historically wide, and offer good relative value to other high quality spread assets. Our core strategy of low coupon MSR paired with Agency RMBS is well positioned to benefit from both stable prepayments and wide Agency RMBS spreads.' Operating Performance The following table summarizes the company's GAAP and non-GAAP earnings measurements and key metrics for the second quarter of 2025 and first quarter of 2025: _______________ (1) Earnings Available for Distribution, or EAD, is a non-GAAP measure. Please see page 11 for a definition of EAD and a reconciliation of GAAP to non-GAAP financial information. (2) Dividend yield is calculated based on annualizing the dividends declared in the given period, divided by the closing share price as of the end of the period. (3) Economic return on book value is defined as the increase (decrease) in common book value from the beginning to the end of the given period, plus dividends declared to common stockholders in the period, divided by the common book value as of the beginning of the period. (4) Excludes non-cash equity compensation expense of $1.9 million for the second quarter of 2025 and $6.5 million for the first quarter of 2025 and certain operating expenses of $2.8 million for the second quarter of 2025 and $0.1 million for the first quarter of 2025. Certain operating expenses predominantly consists of expenses incurred in connection with the company's ongoing litigation with PRCM Advisers LLC. Expand Portfolio Summary As of June 30, 2025, the company's portfolio was comprised of $11.4 billion of Agency RMBS, MSR and other investment securities as well as their associated notional debt hedges. Additionally, the company held $3.0 billion bond equivalent value of net long to-be-announced securities (TBAs). The following tables summarize the company's investment portfolio as of June 30, 2025 and March 31, 2025: ________________ (1) Based on the prior month-end's principal balance of the loans underlying the company's MSR, increased for current month purchases. (2) Represents bond equivalent value of TBA position. Bond equivalent value is defined as notional amount multiplied by market price. Accounted for as derivative instruments in accordance with GAAP. Expand ______________ (1) Weighted average cost basis includes Agency principal and interest RMBS only and utilizes carrying value for weighting purposes. Expand Portfolio Metrics Specific to MSR (1) As of June 30, 2025 As of March 31, 2025 (dollars in thousands) (unaudited) (unaudited) Unpaid principal balance $ 198,822,611 $ 196,773,345 Gross coupon rate 3.5 % 3.5 % Current loan size $ 330 $ 330 Original FICO (2) 760 760 Original LTV 73 % 72 % 60+ day delinquencies 0.8 % 0.8 % Net servicing fee 25.4 basis points 25.3 basis points Three Months Ended June 30, 2025 Three Months Ended March 31, 2025 (unaudited) (unaudited) Fair value losses $ (35,902 ) $ (36,221 ) Servicing income $ 147,961 $ 146,870 Servicing costs $ 2,322 $ 3,302 Change in servicing reserves $ 64 $ (105 ) Expand ________________ (1) Metrics exclude residential mortgage loans in securitization trusts for which the company is the named servicing administrator. Portfolio metrics, other than UPB, represent averages weighted by UPB. (2) FICO represents a mortgage industry accepted credit score of a borrower. Expand ________________ (1) Accounted for as derivative instruments in accordance with GAAP. Expand Financing Summary The following tables summarize the company's financing metrics and outstanding repurchase agreements, revolving credit facilities, warehouse lines of credit, senior notes and convertible senior notes as of June 30, 2025 and March 31, 2025: June 30, 2025 Balance Weighted Average Borrowing Rate Weighted Average Months to Maturity Number of Distinct Counterparties (dollars in thousands, unaudited) Repurchase agreements collateralized by securities $ 7,992,622 4.48 % 1.96 18 Repurchase agreements collateralized by MSR 790,000 7.39 % 10.54 3 Total repurchase agreements 8,782,622 4.74 % 2.73 19 Revolving credit facilities collateralized by MSR and related servicing advance obligations 1,011,871 7.36 % 19.96 3 Warehouse lines of credit collateralized by mortgage loans 9,275 6.31 % 2.47 1 Unsecured senior notes 110,867 9.38 % 61.55 n/a Unsecured convertible senior notes 260,944 6.25 % 6.54 n/a Total borrowings $ 10,175,579 Expand March 31, 2025 Balance Weighted Average Borrowing Rate Weighted Average Months to Maturity Number of Distinct Counterparties (dollars in thousands, unaudited) Repurchase agreements collateralized by securities $ 8,970,830 4.50 % 2.23 18 Repurchase agreements collateralized by MSR 770,000 7.38 % 13.88 3 Total repurchase agreements 9,740,830 4.73 % 3.16 19 Revolving credit facilities collateralized by MSR and related servicing advance obligations 933,171 7.45 % 15.91 3 Warehouse lines of credit collateralized by mortgage loans 7,971 6.36 % 2.50 1 Unsecured senior notes — — % — n/a Unsecured convertible senior notes 260,591 6.25 % 9.53 n/a Total borrowings $ 10,942,563 Expand Borrowings by Collateral Type As of June 30, 2025 As of March 31, 2025 (dollars in thousands) (unaudited) (unaudited) Agency RMBS $ 7,992,427 $ 8,970,635 Mortgage servicing rights and related servicing advance obligations 1,801,871 1,703,171 Other - secured 9,470 8,166 Other - unsecured (1) 371,811 260,591 Total 10,175,579 10,942,563 TBA cost basis 3,009,819 3,001,672 Net payable (receivable) for unsettled RMBS 108,474 (643,896 ) Total, including TBAs and net payable (receivable) for unsettled RMBS $ 13,293,872 $ 13,300,339 Debt-to-equity ratio at period-end (2) 5.4 :1.0 5.1 :1.0 Economic debt-to-equity ratio at period-end (3) 7.0 :1.0 6.2 :1.0 Cost of Financing by Collateral Type (4) Three Months Ended June 30, 2025 Three Months Ended March 31, 2025 (unaudited) (unaudited) Agency RMBS 4.54 % 4.62 % Mortgage servicing rights and related servicing advance obligations (5) 7.87 % 7.81 % Other - secured 6.68 % 6.93 % Other - unsecured (1)(5) 7.44 % 6.84 % Annualized cost of financing 5.18 % 5.27 % Interest rate swaps (6) (0.20 )% (0.18 )% U.S. Treasury futures (7) (0.10 )% (0.04 )% TBAs (8) 2.65 % 2.89 % Annualized cost of financing, including swaps, U.S. Treasury futures and TBAs 4.43 % 4.49 % Expand ____________________ (1) Unsecured borrowings under senior notes and convertible senior notes. (2) Defined as total borrowings to fund Agency and non-Agency investment securities, MSR and related servicing advances and mortgage loans held-for-sale, divided by total equity. (3) Defined as total borrowings to fund Agency and non-Agency investment securities, MSR and related servicing advances and mortgage loans held-for-sale, plus the implied debt on net TBA cost basis and net payable (receivable) for unsettled RMBS, divided by total equity. (4) Excludes any repurchase agreements collateralized by U.S. Treasuries. (5) Includes amortization of debt issuance costs. (6) The cost of financing on interest rate swaps held to mitigate interest rate risk associated with the company's outstanding borrowings includes interest spread income/expense and amortization of upfront payments made or received upon entering into interest rate swap agreements and is calculated using average borrowings balance as the denominator. (7) The cost of financing on U.S. Treasury futures held to mitigate interest rate risk associated with the company's outstanding borrowings is calculated using average borrowings balance as the denominator. U.S. Treasury futures income is the economic equivalent to holding and financing a relevant cheapest-to-deliver U.S. Treasury note or bond using short-term repurchase agreements. (8) The implied financing benefit/cost of dollar roll income on TBAs is calculated using the average cost basis of TBAs as the denominator. TBA dollar roll income is the non-GAAP economic equivalent to holding and financing Agency RMBS using short-term repurchase agreements. TBAs are accounted for as derivative instruments in accordance with GAAP. Expand Conference Call TWO will host a conference call on July 29, 2025 at 9:00 a.m. ET to discuss its second quarter 2025 financial results and related information. To participate in the teleconference, please call toll-free (888) 394-8218 approximately 10 minutes prior to the above start time and provide the Conference Code 3889089. The conference call will also be webcast live and accessible online in the News & Events section of the company's website at For those unable to attend, a replay of the webcast will be available on the company's website approximately four hours after the live call ends. About TWO Two Harbors Investment Corp., or TWO, a Maryland corporation, is a real estate investment trust that invests in mortgage servicing rights, residential mortgage-backed securities, and other financial assets. TWO is headquartered in St. Louis Park, MN. Forward-Looking Statements This release includes 'forward-looking statements' within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events. Words such as 'expect,' 'target,' 'assume,' 'estimate,' 'project,' 'budget,' 'forecast,' 'anticipate,' 'intend,' 'plan,' 'may,' 'will,' 'could,' 'should,' 'believe,' 'predicts,' 'potential,' 'continue,' and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results, including, among other things, those described in our Annual Report on Form 10-K for the year ended December 31, 2024, and any subsequent Quarterly Reports on Form 10-Q, under the caption 'Risk Factors.' Factors that could cause actual results to differ include, but are not limited to: the state of credit markets and general economic conditions; changes in interest rates and the market value of our assets; changes in prepayment rates of mortgages underlying our target assets; the rates of default or decreased recovery on the mortgages underlying our target assets; declines in home prices; our ability to establish, adjust and maintain appropriate hedges for the risks in our portfolio; the availability and cost of our target assets; the availability and cost of financing; changes in the competitive landscape within our industry; our ability to effectively execute and to realize the benefits of strategic transactions and initiatives we have pursued or may in the future pursue; our decision to terminate our management agreement with PRCM Advisers LLC and the ongoing litigation related to such termination; our ability to manage various operational risks and costs associated with our business, including the risks associated with operating a mortgage loan servicer and originator; interruptions in or impairments to our communications and information technology systems; our ability to acquire MSR and to maintain our MSR portfolio; our exposure to legal and regulatory claims; legislative and regulatory actions affecting our business; our ability to maintain our REIT qualification; and limitations imposed on our business due to our REIT status and our exempt status under the Investment Company Act of 1940. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. TWO does not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Additional information concerning these and other risk factors is contained in TWO's most recent filings with the Securities and Exchange Commission (SEC). All subsequent written and oral forward-looking statements concerning TWO or matters attributable to TWO or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. Non-GAAP Financial Measures In addition to disclosing financial results calculated in accordance with United States generally accepted accounting principles (GAAP), this press release and the accompanying investor presentation present non-GAAP financial measures, such as earnings available for distribution and related per basic common share measures. The non-GAAP financial measures presented by the company provide supplemental information to assist investors in analyzing the company's results of operations and help facilitate comparisons to industry peers. However, because these measures are not calculated in accordance with GAAP, they should not be considered a substitute for, or superior to, the financial measures calculated in accordance with GAAP. The company's GAAP financial results and the reconciliations from these results should be carefully evaluated. See the GAAP to non-GAAP reconciliation table on page 11 of this release. Additional Information Stockholders of TWO and other interested persons may find additional information regarding the company at at the Securities and Exchange Commission's internet site at or by directing requests to: TWO, Attn: Investor Relations, 1601 Utica Avenue South, Suite 900, St. Louis Park, MN, 55416, (612) 453-4100. TWO HARBORS INVESTMENT CORP. (dollars in thousands, except share data) Certain prior period amounts have been reclassified to conform to the current period presentation Three Months Ended Six Months Ended June 30, June 30, 2025 2024 2025 2024 (unaudited) (unaudited) Net interest expense: Interest income $ 117,082 $ 115,953 $ 228,464 $ 233,736 Interest expense 135,205 154,207 266,919 314,207 Net interest expense (18,123 ) (38,254 ) (38,455 ) (80,471 ) Net servicing income: Servicing income 158,354 176,015 315,213 342,348 Servicing costs 2,386 4,475 5,583 11,594 Net servicing income 155,968 171,540 309,630 330,754 Other (loss) income: Loss on investment securities (32,830 ) (22,437 ) (65,559 ) (33,412 ) Loss on servicing asset (35,902 ) (22,857 ) (72,123 ) (11,845 ) (Loss) gain on interest rate swap and swaption agreements (52,950 ) 22,012 (151,738 ) 120,522 (Loss) gain on other derivative instruments (31,257 ) (750 ) (29,809 ) 46,849 Gain (loss) on mortgage loans held-for-sale 883 — 1,552 (3 ) Other income 1,038 226 1,799 226 Total other (loss) income (151,018 ) (23,806 ) (315,878 ) 122,337 Expenses: Compensation and benefits 21,469 21,244 48,058 47,773 Other operating expenses 21,307 17,699 41,812 38,751 Loss contingency accrual 199,935 — 199,935 — Total expenses 242,711 38,943 289,805 86,524 (Loss) income before income taxes (255,884 ) 70,537 (334,508 ) 286,096 Provision for income taxes 1,661 14,201 2,092 26,172 Net (loss) income (257,545 ) 56,336 (336,600 ) 259,924 Dividends on preferred stock (13,239 ) (11,784 ) (26,425 ) (23,568 ) Gain on repurchase and retirement of preferred stock — — — 644 Net (loss) income attributable to common stockholders $ (270,784 ) $ 44,552 $ (363,025 ) $ 237,000 Basic (loss) earnings per weighted average common share $ (2.62 ) $ 0.43 $ (3.51 ) $ 2.27 Diluted (loss) earnings per weighted average common share $ (2.62 ) $ 0.43 $ (3.51 ) $ 2.16 Comprehensive (loss) income: Net (loss) income $ (259,041 ) $ 56,336 $ (338,096 ) $ 259,924 Other comprehensive income (loss): Unrealized gain (loss) on available-for-sale securities 50,473 (44,073 ) 207,645 (147,151 ) Other comprehensive income (loss) 50,473 (44,073 ) 207,645 (147,151 ) Comprehensive (loss) income (208,568 ) 12,263 (130,451 ) 112,773 Dividends on preferred stock (13,239 ) (11,784 ) (26,425 ) (23,568 ) Gain on repurchase and retirement of preferred stock — — — 644 Comprehensive (loss) income attributable to common stockholders $ (221,807 ) $ 479 $ (156,876 ) $ 89,849 Expand TWO HARBORS INVESTMENT CORP. (dollars in thousands, except share data) Three Months Ended Six Months Ended June 30, June 30, 2025 2024 2025 2024 (unaudited) (unaudited) Interest income: Available-for-sale securities $ 108,842 $ 99,211 $ 209,260 $ 199,816 Mortgage loans held-for-sale 145 3 198 4 Other 8,095 16,739 19,006 33,916 Total interest income 117,082 115,953 228,464 233,736 Interest expense: Repurchase agreements 110,288 113,714 217,366 232,430 Revolving credit facilities 20,343 29,906 40,469 60,153 Warehouse lines of credit 129 — 184 — Term notes payable — 6,008 — 12,426 Senior notes 1,496 — 1,496 — Convertible senior notes 4,445 4,579 8,900 9,198 Total interest expense 136,701 154,207 268,415 314,207 Net interest expense $ (19,619 ) $ (38,254 ) $ (39,951 ) $ (80,471 ) Expand TWO HARBORS INVESTMENT CORP. (dollars in thousands, except share data) Certain prior period amounts have been reclassified to conform to the current period presentation Three Months Ended June 30, 2025 March 31, 2025 (unaudited) (unaudited) Reconciliation of comprehensive (loss) income to Earnings Available for Distribution: Comprehensive (loss) income attributable to common stockholders $ (221,807 ) $ 64,931 Adjustment for other comprehensive income attributable to common stockholders: Unrealized gain on available-for-sale securities (50,473 ) (157,172 ) Net loss attributable to common stockholders $ (272,280 ) $ (92,241 ) Adjustments to exclude reported realized and unrealized (gains) losses: Realized loss on securities 32,599 33,661 Unrealized loss (gain) on securities 347 (1,026 ) (Reversal of) provision for credit losses (116 ) 94 Realized and unrealized loss on mortgage servicing rights 35,902 36,221 Realized loss (gain) on termination or expiration of interest rate swaps and swaptions 30,298 (26,587 ) Unrealized loss on interest rate swaps and swaptions 29,034 131,350 Realized and unrealized loss (gain) on other derivative instruments 32,606 (1,329 ) Other adjustments: MSR amortization (1) (73,983 ) (70,303 ) TBA dollar roll income (losses) (2) 6,181 8,178 U.S. Treasury futures income (3) 3,358 1,272 Change in servicing reserves 64 (105 ) Non-cash equity compensation expense 1,932 6,523 Certain operating expenses (4) 2,754 106 Loss contingency accrual 199,935 — Net provision for (benefit from) income taxes on non-EAD 914 (722 ) Earnings available for distribution to common stockholders (5) $ 29,545 $ 25,092 Weighted average basic common shares 104,084,326 103,976,437 Expand _____________ (1) MSR amortization refers to the portion of change in fair value of MSR primarily attributed to the realization of expected cash flows (runoff) of the portfolio, which is deemed a non-GAAP measure due to the company's decision to account for MSR at fair value. (2) TBA dollar roll income is the economic equivalent to holding and financing Agency RMBS using short-term repurchase agreements. (3) U.S. Treasury futures income is the economic equivalent to holding and financing a relevant cheapest-to-deliver U.S. Treasury note or bond using short-term repurchase agreements. (4) Certain operating expenses predominantly consists of expenses incurred in connection with the company's ongoing litigation with PRCM Advisers LLC. (5) EAD is a non-GAAP measure that we define as comprehensive (loss) income attributable to common stockholders, excluding realized and unrealized gains and losses on the aggregate investment portfolio, gains and losses on repurchases of preferred stock, provision for (reversal of) credit losses, reserve expense for representation and warranty obligations on MSR, non-cash compensation expense related to restricted common stock, certain operating expenses and loss contingency accrual. As defined, EAD includes net interest income, accrual and settlement of interest on derivatives, dollar roll income on TBAs, U.S. Treasury futures income, servicing income, net of estimated amortization on MSR and certain cash related operating expenses. EAD provides supplemental information to assist investors in analyzing the company's results of operations and helps facilitate comparisons to industry peers. EAD is one of several measures our board of directors considers to determine the amount of dividends to declare on our common stock and should not be considered an indication of our taxable income or as a proxy for the amount of dividends we may declare. Expand
Business Wire
3 days ago
- Business
- Business Wire
Rithm Capital Corp. Announces Second Quarter 2025 Results
NEW YORK--(BUSINESS WIRE)--Rithm Capital Corp. (NYSE: RITM; 'Rithm Capital,' 'Rithm' or the 'Company') today reported the following information for the second quarter ended June 30, 2025. 'Rithm's second-quarter results reflect our commitment to sustained performance' said Michael Nierenberg, Chief Executive Officer and President of Rithm. 'Our diversified platform continues to deliver steady growth across our core operating businesses, including asset management, origination and servicing. We remain focused on delivering long-term value for our investors and shareholders as we expand our asset management capabilities, guided by a disciplined investment approach, positioned to seize compelling opportunities.' Financial Highlights: GAAP net income of $283.9 million, or $0.53 per diluted common share (1) Earnings available for distribution of $291.1 million, or $0.54 per diluted common share (1)(2) Common dividend of $132.6 million, or $0.25 per common share Book value per common share of $12.71(1) Q2 2025 Q1 2025 Summary Operating Results: GAAP Net Income per Diluted Common Share(1) $ 0.53 $ 0.07 GAAP Net Income (in millions) $ 283.9 $ 36.5 Non-GAAP Results: Earnings Available for Distribution per Diluted Common Share(1)(2) $ 0.54 $ 0.52 Earnings Available for Distribution(2) (in millions) $ 291.1 $ 275.3 Common Dividend: Common Dividend per Share $ 0.25 $ 0.25 Common Dividend (in millions) $ 132.6 $ 132.5 Expand Business Highlights: Origination & Servicing: Newrez LLC ('Newrez'), Rithm Capital's multichannel mortgage origination and servicing platform, posted pre-tax income of $275.1 million in Q2'25, excluding the mortgage servicing rights ('MSRs') mark-to-market gain and related hedge impact of $29.9 million, down from $270.1 million in Q1'25, excluding the MSR mark-to-market loss and related hedge impact of $(180.1) million. Newrez generated a 19% pre-tax return on equity ('ROE') on $5.8 billion of equity (3)(4) . Total servicing unpaid principal balance ('UPB') reached $864 billion, an increase of 7% YoY, which includes $271 billion UPB of third-party servicing, an increase of 22% YoY. Origination funded production volume was $16.3 billion in Q2'25, an increase of 12% YoY. Investment Portfolio: Rithm Capital completed a non-qualified mortgage securitization in the quarter totaling $504 million in UPB. Invested $2.2 billion in residential mortgage assets in the quarter, including non-qualified residential mortgage loans, residential transition loans and residential mortgage-backed securities. Residential Transitional Lending: Rithm Capital's residential transitional lending platform, Genesis Capital LLC ('Genesis Capital'), recorded pre-tax income of $26.9 million in Q2'25, excluding portfolio mark-to-market loss of $(1.8) million, and Q2'25 origination volume of $1.2 billion, an increase of 49% YoY, and a record level for any quarter. Genesis Capital continued to expand its sponsor base, growing sponsors to 195, a 30% increase YoY. Asset Management: Rithm Capital's alternative asset manager, Sculptor Capital Management Inc. ('Sculptor Capital'), grew to approximately $36 billion of assets under management ('AUM') (5) as of June 30, 2025, including gross fundraising inflows of $1.7 billion across the Sculptor platform during the quarter. Sculptor Capital also continued its active presence in the collateralized loan obligation markets with $525 million of activity in Q2'25. As previously announced, Sculptor Capital held the final closing for Sculptor's Tactical Credit Fund on April 1, 2025, bringing total fund AUM to $900 million (5) . Subsequent to the end of Q2'25, Rithm Capital announced that it had entered into a strategic partnership with a large institutional investor to fund the acquisition of $500 million of residential transition loans, with the potential to upsize the partnership to $1.5 billion in fundings. (1) Per diluted common share calculations for both GAAP Net Income and Earnings Available for Distribution are based on 537,347,700 and 530,599,555 weighted average diluted shares for the quarters ended June 30, 2025 and March 31, 2025, respectively. Per share calculations of Book Value are based on 530,292,171 common shares outstanding as of June 30, 2025. (2) Earnings Available for Distribution is a non-GAAP financial measure. For a reconciliation of Earnings Available for Distribution to GAAP Net Income, as well as an explanation of this measure, please refer to the section entitled Non-GAAP Financial Measures and Reconciliation to GAAP Net Income below. (3) Excludes full MSR mark-to-market and related hedge impact of $29.9 million. (4) ROE is calculated based on annualized pre-tax income, excluding MSR mark-to-market and related hedge adjustment, divided by the average Origination and Servicing segment ending equity for the respective period. (5) AUM is estimated and refers to the assets for which Sculptor provides investment management, advisory or certain other investment-related services. This is generally equal to the sum of (i) net asset value of the open-ended funds or gross asset value of Real Estate funds, (ii) uncalled capital commitments, (iii) par value of collateralized loan obligations. AUM includes amounts that are not subject to management fees, incentive income or other amounts earned on AUM. AUM also includes amounts that are invested in other Sculptor funds/vehicles. Our calculation of AUM may differ from the calculations of other asset managers, and as a result, may not be comparable to similar measures presented by other asset managers. Our calculations of AUM are not based on any definition set forth in the governing documents of the investment funds and are not calculated pursuant to any regulatory definitions. Expand ADDITIONAL INFORMATION For additional information that management believes to be useful for investors, please refer to the latest presentation posted on the Investors - News section of the Company's website, Information on, or accessible through, our website is not a part of, and is not incorporated into, this press release. EARNINGS CONFERENCE CALL Rithm Capital's management will host a conference call on Monday, July 28, 2025 at 8:00 A.M. Eastern Time. A copy of the earnings release will be posted to the Investors - News section of Rithm Capital's website, The conference call may be accessed by dialing 1-833-974-2382 (from within the U.S.) or 1-412-317-5787 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference 'Rithm Capital Second Quarter 2025 Earnings Call.' In addition, participants are encouraged to pre-register for the conference call at A simultaneous webcast of the conference call will be available to the public on a listen-only basis at Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast. A telephonic replay of the conference call will also be available two hours following the call's completion through 11:59 P.M. Eastern Time on Monday, August 4, 2025 by dialing 1-877-344-7529 (from within the U.S.) or 1-412-317-0088 (from outside of the U.S.); please reference access code '5582814'. Rithm Capital Corp. and Subsidiaries Consolidated Statements of Operations (Unaudited) ($ in thousands, except share and per share data) Three Months Ended June 30, 2025 March 31, 2025 Revenues Servicing fee revenue, net and interest income from MSRs and MSR financing receivables $ 574,817 $ 570,801 Change in fair value of MSRs and MSR financing receivables, net of economic hedges (includes realization of cash flows of $(176,680) and $(146,891), respectively) (155,005 ) (333,378 ) Servicing revenue, net 419,812 237,423 Interest income 478,455 441,260 Gain on originated residential mortgage loans, held-for-sale, net 169,698 159,789 Other revenues 54,066 50,773 Asset management revenues 95,008 87,672 1,217,039 976,917 Expenses Interest expense and warehouse line fees 417,868 419,054 General and administrative 239,575 237,546 Compensation and benefits 294,407 271,467 951,850 928,067 Other Income (Loss) Realized and unrealized gains (losses), net 22,741 (1,143 ) Other income (loss), net 18,478 9,073 41,219 7,930 Income before Income Taxes 306,408 56,780 Income tax expense (benefit) (11,598 ) (23,930 ) Net Income 318,006 80,710 Noncontrolling interests in income of consolidated subsidiaries 3,169 1,086 Redeemable noncontrolling interests in income of consolidated subsidiaries 3,120 813 Net Income Attributable to Rithm Capital Corp. 311,717 78,811 Change in redemption value of redeemable noncontrolling interests — 15,611 Dividends on preferred stock 27,818 26,677 Net Income Attributable to Common Stockholders $ 283,899 $ 36,523 Net Income per Share of Common Stock Basic $ 0.54 $ 0.07 Diluted $ 0.53 $ 0.07 Weighted Average Number of Shares of Common Stock Outstanding Basic 530,171,540 524,104,842 Diluted 537,347,700 530,599,555 Dividends Declared per Share of Common Stock $ 0.25 $ 0.25 Expand Rithm Capital Corp. and Subsidiaries Consolidated Balance Sheets ($ in thousands, except share data) June 30, 2025 (Unaudited) March 31, 2025 (Unaudited) Assets Mortgage servicing rights and mortgage servicing rights financing receivables, at fair value $ 10,360,063 $ 10,133,041 Government and government-backed securities ($8,844,111 and $11,023,935 at fair value, respectively) 8,868,879 11,048,701 Residential mortgage loans, held-for-sale ($4,126,335 and $3,092,102 at fair value, respectively) 4,187,301 3,156,350 Residential mortgage loans, held-for-investment, at fair value 343,333 354,003 Consumer loans, held-for-investment, at fair value 465,231 554,168 Residential transition loans, at fair value 2,497,764 2,335,218 Residential mortgage loans subject to repurchase 2,264,600 2,432,605 Single-family rental properties 1,002,261 1,011,986 Cash and cash equivalents 1,600,948 1,493,834 Restricted cash 485,402 511,698 Servicer advances receivable 2,713,742 2,874,515 Other assets ($2,606,841 and $2,422,538 at fair value, respectively) 4,660,827 4,450,923 Assets of consolidated CFEs(A): Investments, at fair value and other assets 4,865,602 4,972,801 Total Assets $ 44,315,953 $ 45,329,843 Liabilities and Equity Liabilities Secured financing agreements $ 15,897,778 $ 16,791,234 Secured notes and bonds payable ($160,433 and $169,035 at fair value, respectively) 9,764,857 10,025,948 Residential mortgage loan repurchase liability 2,264,600 2,432,605 Unsecured notes, net of issuance costs 1,414,497 1,207,594 Dividends payable 160,967 157,405 Accrued expenses and other liabilities ($464,143 and $538,985 at fair value, respectively) 2,361,386 2,343,010 Liabilities of consolidated CFEs(A): Notes payable, at fair value and other liabilities 4,131,696 4,230,793 Total Liabilities 35,995,781 37,188,589 Commitments and Contingencies Redeemable Noncontrolling Interests of Consolidated Subsidiaries 260,963 256,414 Stockholders' Equity Preferred stock, $0.01 par value, 100,000,000 shares authorized, 49,964,122 and 49,964,122 issued and outstanding, $1,249,104 and $1,249,104 aggregate liquidation preference, respectively 1,207,254 1,207,254 Common stock, $0.01 par value, 2,000,000,000 shares authorized, 530,292,171 and 530,122,477 issued and outstanding, respectively 5,303 5,301 Additional paid-in capital 6,652,587 6,635,226 Accumulated deficit 18,399 (129,934 ) Accumulated other comprehensive income 64,840 58,277 Stockholders' Equity in Rithm Capital Corp. 7,948,383 7,776,124 Noncontrolling interests in equity of consolidated subsidiaries 110,826 108,716 Total Stockholders' Equity 8,059,209 7,884,840 Total Liabilities and Equity $ 44,315,953 $ 45,329,843 (A) Includes assets and liabilities of certain consolidated variable interest entities ('VIEs') that meet the definition of collateralized financing entities ('CFEs'). These assets can only be used to settle obligations and liabilities of such VIEs for which creditors do not have recourse to Rithm Capital Corp. Expand NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP NET INCOME The Company has four primary variables that impact its performance: (i) net interest margin on assets held within the investment portfolio; (ii) realized and unrealized gains or losses on assets held within the investment portfolio and operating companies, including any impairment or reserve for expected credit losses; (iii) income from the Company's operating company investments; and (iv) the Company's operating expenses and taxes. 'Earnings available for distribution' is a non-GAAP financial measure of the Company's operating performance, which is used by management to evaluate the Company's performance, excluding: (i) net realized and unrealized gains and losses on certain assets and liabilities; (ii) net other income and losses; (iii) non-capitalized transaction-related expenses; and (iv) deferred taxes. The Company's definition of earnings available for distribution excludes certain realized and unrealized losses, which although they represent a part of the Company's recurring operations, are subject to significant variability and are generally limited to a potential indicator of future economic performance. Within net other income and losses, management primarily excludes (i) equity-based compensation expenses, (ii) non-cash deferred interest expense and (iii) amortization expense related to intangible assets, as management does not consider this non-cash activity to be a component of earnings available for distribution. With regard to non-capitalized transaction-related expenses, management does not view these costs as part of the Company's core operations, as they are considered by management to be similar to realized losses incurred at acquisition. Non-capitalized transaction related expenses generally relate to legal and valuation service costs, as well as other professional service fees, incurred when the Company acquires certain investments, as well as costs associated with the acquisition and integration of acquired businesses. Management also excludes deferred taxes because the Company believes deferred taxes are not representative of current operations. Management believes that the adjustments to compute 'earnings available for distribution' specified above allow investors and analysts to readily identify and track the operating performance of the assets that form the core of the Company's activity, assist in comparing the core operating results between periods and enable investors to evaluate the Company's current core performance using the same financial measure that management uses to operate the business. Management also utilizes earnings available for distribution as a financial measure in its decision-making process relating to improvements to the underlying fundamental operations of the Company's investments, as well as the allocation of resources between those investments, and management also relies on earnings available for distribution as an indicator of the results of such decisions. Earnings available for distribution excludes certain recurring items, such as gains and losses (including impairment and reserves as well as derivative activities) and non-capitalized transaction-related expenses, because they are not considered by management to be part of the Company's core operations for the reasons described herein. As such, earnings available for distribution is not intended to reflect all of the Company's activity and should be considered as only one of the factors used by management in assessing the Company's performance, along with GAAP net income which is inclusive of all of the Company's activities. The Company views earnings available for distribution as a consistent financial measure of its portfolio's ability to generate income for distribution to common stockholders. Earnings available for distribution does not represent and should not be considered as a substitute for, or superior to, net income or as a substitute for, or superior to, cash flows from operating activities, each as determined in accordance with GAAP, and the Company's calculation of this financial measure may not be comparable to similarly entitled financial measures reported by other companies. Furthermore, to maintain qualification as a REIT, U.S. federal income tax law generally requires that the Company distribute at least 90% of its REIT taxable income annually, determined without regard to the deduction for dividends paid and excluding net capital gains. Because the Company views earnings available for distribution as a consistent financial measure of its ability to generate income for distribution to common stockholders, earnings available for distribution is one metric, but not the exclusive metric, that the Company's board of directors uses to determine the amount, if any, and the payment date of dividends on common stock. However, earnings available for distribution should not be considered as an indication of the Company's taxable income, a guaranty of its ability to pay dividends or as a proxy for the amount of dividends it may pay, as earnings available for distribution excludes certain items that impact its cash needs. Reconciliation of Non-GAAP Measure to the Respective GAAP Measure The table below provides a reconciliation of earnings available for distribution to the most directly comparable GAAP financial measure (dollars in thousands, except share and per share data): Three Months Ended June 30, 2025 March 31, 2025 Net income (loss) attributable to common stockholders - GAAP $ 283,899 $ 36,523 Adjustments: Realized and unrealized (gains) losses, net, including MSR change in valuation inputs and assumptions (16,931 ) 203,764 Other (income) loss, net 35,493 70,142 Non-capitalized transaction-related expenses (reimbursements) 2,536 6,131 Deferred taxes (13,854 ) (41,295 ) Earnings available for distribution - Non-GAAP $ 291,143 $ 275,265 Net income (loss) per diluted share $ 0.53 $ 0.07 Earnings available for distribution per diluted share $ 0.54 $ 0.52 Weighted average number of shares of common stock outstanding, diluted 537,347,700 530,599,555 Expand SEGMENT INFORMATION ($ in thousands) Second Quarter Ended June 30, 2025 Origination and Servicing Investment Portfolio Residential Transitional Lending Asset Management Corporate Category Total Servicing fee revenue, net and interest income from MSRs and MSR financing receivables $ 574,817 $ — $ — $ — $ — $ 574,817 Change in fair value of MSRs and MSR financing receivables, net of economic hedges (includes realization of cash flows of $(176,680)) (155,005 ) — — — — (155,005 ) Servicing revenue, net 419,812 — — — — 419,812 Interest income 309,940 82,143 75,405 7,841 3,126 478,455 Gain on originated residential mortgage loans, held-for-sale, net 168,438 1,260 — — — 169,698 Other revenues 27,439 26,627 — — — 54,066 Asset management revenues — — — 95,008 — 95,008 Total Revenues 925,629 110,030 75,405 102,849 3,126 1,217,039 Interest expense and warehouse line fees 283,616 69,904 33,620 8,710 22,018 417,868 Other segment expenses 146,989 22,162 5,234 26,487 14,909 215,781 Compensation and benefits 190,169 1,004 15,308 67,401 20,525 294,407 Depreciation and amortization 6,281 7,849 2,289 7,348 27 23,794 Total Operating Expenses 627,055 100,919 56,451 109,946 57,479 951,850 Realized and unrealized gains (losses), net — 16,177 6,809 416 (661 ) 22,741 Other income (loss), net 6,435 8,841 (713 ) 5,124 (1,209 ) 18,478 Total Other Income (Loss) 6,435 25,018 6,096 5,540 (1,870 ) 41,219 Income (Loss) before Income Taxes 305,009 34,129 25,050 (1,557 ) (56,223 ) 306,408 Income tax expense (benefit) (11,647 ) (1,507 ) 330 1,226 — (11,598 ) Net Income (Loss) 316,656 35,636 24,720 (2,783 ) (56,223 ) 318,006 Noncontrolling interests in income (loss) of consolidated subsidiaries 981 1,533 — 655 — 3,169 Redeemable noncontrolling interests in income of consolidated subsidiaries — — — 561 2,559 3,120 Net Income (Loss) Attributable to Rithm Capital Corp. 315,675 34,103 24,720 (3,999 ) (58,782 ) 311,717 Dividends on preferred stock — — — — 27,818 27,818 Net Income (Loss) Attributable to Common Stockholders $ 315,675 $ 34,103 $ 24,720 $ (3,999 ) $ (86,600 ) $ 283,899 Total Assets $ 28,608,834 $ 8,858,316 $ 3,787,813 $ 2,470,718 $ 590,272 $ 44,315,953 Stockholders' Equity in Rithm Capital Corp. $ 5,822,508 $ 1,551,666 $ 820,746 $ 895,407 $ (1,141,944 ) $ 7,948,383 Expand First Quarter Ended March 31, 2025 Origination and Servicing Investment Portfolio Residential Transitional Lending Asset Management Corporate Category Total Servicing fee revenue, net and interest income from MSRs and MSR financing receivables $ 570,801 $ — $ — $ — $ — $ 570,801 Change in fair value of MSRs and MSR financing receivables, net of economic hedges (includes realization of cash flows of $(146,891)) (333,378 ) — — — — (333,378 ) Servicing revenue, net 237,423 — — — — 237,423 Interest income 292,561 71,790 66,508 9,413 988 441,260 Gain on originated residential mortgage loans, held-for-sale, net 151,494 8,295 — — — 159,789 Other revenues 25,738 25,035 — — — 50,773 Asset management revenues — — — 87,672 — 87,672 Total Revenues 707,216 105,120 66,508 97,085 988 976,917 Interest expense and warehouse line fees 292,948 59,636 31,701 14,089 20,680 419,054 Other segment expenses 143,767 22,992 4,831 31,591 9,797 212,978 Compensation and benefits 172,702 1,162 14,391 65,330 17,882 271,467 Depreciation and amortization 7,659 7,954 1,567 7,384 4 24,568 Total Operating Expenses 617,076 91,744 52,490 118,394 48,363 928,067 Realized and unrealized gains (losses), net — 3,094 2,043 (6,280 ) — (1,143 ) Other income (loss), net (118 ) 1,489 (141 ) 7,838 5 9,073 Total Other Income (Loss) (118 ) 4,583 1,902 1,558 5 7,930 Income (Loss) before Income Taxes 90,022 17,959 15,920 (19,751 ) (47,370 ) 56,780 Income tax expense (benefit) (56,694 ) (8,512 ) (1,090 ) 42,366 — (23,930 ) Net Income (Loss) 146,716 26,471 17,010 (62,117 ) (47,370 ) 80,710 Noncontrolling interests in income (loss) of consolidated subsidiaries 354 728 — 4 — 1,086 Redeemable noncontrolling interest in income of consolidated subsidiary — — — 3 810 813 Net Income (Loss) Attributable to Rithm Capital Corp. 146,362 25,743 17,010 (62,124 ) (48,180 ) 78,811 Change in redemption value of redeemable noncontrolling interest — — — — 15,611 15,611 Dividends on preferred stock — — — — 26,677 26,677 Net Income (Loss) Attributable to Common Stockholders $ 146,362 $ 25,743 $ 17,010 $ (62,124 ) $ (90,468 ) $ 36,523 Total Assets $ 30,126,396 $ 8,567,949 $ 3,667,080 $ 2,440,527 $ 527,891 $ 45,329,843 Stockholders' Equity in Rithm Capital Corp. $ 5,516,331 $ 1,527,528 $ 845,627 $ 876,217 $ (989,579 ) $ 7,776,124 Expand CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain information in this press release constitutes 'forward-looking statements' within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not historical facts. They represent management's current expectations regarding future events and are subject to a number of trends and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those described in the forward-looking statements. Accordingly, you should not place undue reliance on any forward-looking statements contained herein. For a discussion of some of the risks and important factors that could affect such forward-looking statements, see the sections entitled 'Cautionary Statement Regarding Forward Looking Statements,' 'Risk Factors' and 'Management's Discussion and Analysis of Financial Condition and Results of Operations' in the Company's most recent annual and quarterly reports and other filings filed with the U.S. Securities and Exchange Commission, which are available on the Company's website ( New risks and uncertainties emerge from time to time, and it is not possible for Rithm Capital to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Forward-looking statements contained herein speak only as of the date of this press release, and Rithm Capital expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Rithm Capital's expectations with regard thereto or change in events, conditions or circumstances on which any statement is based. ABOUT RITHM CAPITAL Rithm Capital Corp. is a global, multi-dimensional asset manager with significant experience managing credit and real estate assets. The firm combines deep institutional expertise with an entrepreneurial culture that drives innovation and disciplined growth across multiple market segments. Rithm's integrated investment platform spans residential and commercial lending, MSRs and structured credit. Through subsidiaries such as Newrez, Genesis Capital and Sculptor Capital Management, Rithm has established a unique owner-operator model, capable of sourcing, financing and actively managing debt and equity investments, to drive value for shareholders and fund investors.
Hamilton Spectator
6 days ago
- Business
- Hamilton Spectator
Will Southwest Middlesex Say Yes to Wind Turbines?
SOUTHWEST MIDDLESEX – A recent presentation by Venfor Inc. proposing the construction of 17 wind turbines within the municipality has ignited a strong public backlash, as residents raise concerns over environmental impacts, long-term land use, and community transparency. On July 16, representatives from Venfor Inc. appeared before council to present their plan to participate in Ontario's Long-Term 2 (LT2) electricity procurement process. The company seeks municipal approval in the form of a Municipal Support Resolution (MSR), a requirement for its bid submission to the Independent Electricity System Operator (IESO) this fall. Peter Budd, a founding shareholder of Venfor Inc., emphasized the urgency of Ontario's energy shortage. 'We know we are short of electricity in Ontario,' Budd told council. 'We are importing. The demand is going to double by 2050.' He positioned the project as an opportunity for the municipality to secure new revenue streams through a Community Benefits Agreement, estimating $300,000 annually for every 100 megawatts of energy generated. Each proposed turbine would produce 6.1 megawatts, with the current configuration surpassing 100 megawatts. The company claims to have signed option and lease agreements with 17 landowners and offered $30,000 per year to each for hosting a turbine, potentially over 20 to 30 years. Deputy Mayor Mike Sholdice raised questions about the turbine count and compensation, while Councillor Ed Myers expressed concerns about groundwater contamination, citing 'horror stories in other municipalities.' Budd assured that a full hydrogeological study would be conducted, referencing lessons learned from past issues in Chatham-Kent. Despite these assurances, residents have voiced overwhelming opposition. A Facebook post by Deputy Mayor Sholdice requesting feedback on the proposal garnered over 100 public comments within days, with the vast majority opposing the project. Residents cited concerns about noise pollution, aesthetics, health impacts, and damage to wildlife and farmland. 'Wind turbines ruin the landscape and take away any sense of peace that comes with country living,' wrote one resident. Others questioned the lifespan and reliability of the technology, warning that 'they start severely degrading around 10–15 years' despite being marketed for 20–30 years of use. Water safety emerged as a particularly emotional flashpoint. One commenter claimed, 'This was our well water immediately after they started pile driving the H beams into the ground,' accompanied by a photo of visibly contaminated water. 'They hammered 100-foot steel beams into the aquifer… and the vibrations never let the sediment settle,' another added. These stories have prompted fears of long-term environmental degradation and public health risks. In response, a petition titled Say No to Wind Turbines in Southwest Middlesex was launched online and has begun collecting signatures from residents opposing the project. The sentiment shared among many is that while renewable energy is necessary, this particular development may impose too great a cost on the local community. The presentation also noted that Venfor intends to include First Nations equity partnerships and comply with all provincial regulations, including an Agricultural Impact Assessment and Environmental Review. However, some residents remained unconvinced, with several noting that Venfor is primarily a development firm and may sell the project once permits and agreements are secured. 'Venfor is not the company seeing the project through to decommissioning,' one commenter wrote. 'They won't be the ones honouring the original terms.' Mayor Allan Mayhew thanked the delegation and confirmed that council would deliberate further. 'The proposal cannot proceed without municipal support,' he said. Council is expected to make a decision by mid-October to meet the IESO's deadline. For now, the community remains sharply divided. While some landowners see financial incentive, many residents are calling for more public meetings and transparency before any resolution is passed. As one citizen wrote: 'If council votes yes, they should put them in their own backyard first and tell us how it works out.' Error! Sorry, there was an error processing your request. There was a problem with the recaptcha. Please try again. You may unsubscribe at any time. By signing up, you agree to our terms of use and privacy policy . This site is protected by reCAPTCHA and the Google privacy policy and terms of service apply. Want more of the latest from us? Sign up for more at our newsletter page .
Business Wire
23-07-2025
- Business
- Business Wire
Annaly Capital Management, Inc. Reports 2nd Quarter 2025 Results
NEW YORK--(BUSINESS WIRE)--Annaly Capital Management, Inc. (NYSE: NLY) ("Annaly" or the "Company") today announced its financial results for the quarter ended June 30, 2025. Financial Highlights GAAP net income of $0.03 per average common share for the quarter Earnings available for distribution ("EAD") of $0.73 per average common share for the quarter Economic return of 0.7% for the second quarter; 3.7% economic return for the first half of the year Book value per common share of $18.45 GAAP leverage of 7.1x, up from 6.8x in the prior quarter; economic leverage of 5.8x, up from 5.7x in the prior quarter Common stock cash dividend of $0.70 per share for the second quarter Business Highlights Investment and Strategy Total portfolio of $89.5 billion, including $79.5 billion in highly liquid Agency portfolio (1) Annaly's Agency portfolio increased by 6%, representing 62% of dedicated capital (2), with accretive capital raised deployed into both specified pools and TBAs across 4.5% through 6.0% coupon securities Hedge portfolio remained defensively positioned with 92% hedge ratio; added hedges to correspond with assets purchased throughout the quarter and to manage upward pressure on long-end Treasury yields while maintaining a balanced mix of swaps and Treasuries at the long end of the yield curve Annaly's Residential Credit portfolio relatively unchanged at $6.6 billion (1) driven by record quarterly securitization issuance; correspondent channel activity remained strong with lock volume and total funded volume in line with the prior quarter at $5.3 billion and $3.7 billion, respectively Annaly's MSR portfolio unchanged at $3.3 billion in market value, representing 19% of dedicated capital (2) Financing and Capital $7.4 billion of total assets available for financing (3), including cash and unencumbered Agency MBS of $4.7 billion Annaly Residential Credit Group priced seven securitizations totaling a record $3.6 billion during the second quarter Annaly remained the largest non-bank issuer and the second largest issuer overall of Prime Jumbo and Expanded Credit MBS year-to-date (4) Since the end of the first quarter, Annaly's Residential Credit and MSR businesses increased financing capacity by $500 million through new and expanded credit facilities; total warehouse capacity across both Annaly's Residential Credit and MSR businesses of $6.2 billion, including $2.6 billion of committed capacity Average GAAP cost of interest-bearing liabilities of 4.76%, down 1 basis point quarter-over-quarter, and average economic cost of interest-bearing liabilities of 3.94%, up 6 basis points quarter-over-quarter Raised $761 million of accretive common equity through the Company's at-the-market sales program during the quarter (5) Corporate Governance Appointed Thomas Hamilton as Independent Chair of the Board of Directors following the 2025 Annual Meeting of Stockholders in May "Despite significant intra-quarter volatility across financial markets, Annaly delivered its seventh consecutive quarter with a positive economic return, underscoring the benefits of holding our Agency, Residential Credit and MSR strategies together on balance sheet," stated Chief Executive Officer & Co-Chief Investment Officer David Finkelstein. "Our Agency portfolio grew by nearly $5 billion as we were able to deploy accretive capital raised into the sector. Residential Credit experienced another record quarter of origination and securitization activity as Onslow Bay furthers its leadership across the non-Agency market. Meanwhile, our MSR portfolio continued to generate substantial cash flow while we expand our flow, subservicing and recapture partners. Looking forward, we remain encouraged by opportunities across our three investment strategies and believe our diversified housing finance portfolio can continue to generate industry leading risk-adjusted returns." (1) Total portfolio represents Annaly's investments that are on-balance sheet as well as investments that are off-balance sheet in which Annaly has economic exposure. Agency assets include TBA purchase contracts (market value) of $7.8 billion. Residential Credit assets exclude assets transferred or pledged to securitization vehicles of $27.0 billion, include $2.7 billion of retained securities that are eliminated in consolidation and are shown net of participations issued totaling $1.6 billion. MSR assets include unsettled MSR commitments of $21 million. MSR commitments represent the market value of deals where Annaly has executed a letter of intent. There can be no assurance whether these deals will close or when they will close. (2) Capital allocation for each of the investment strategies is calculated as the difference between each investment strategy's allocated assets, which include TBA purchase contracts, and liabilities. (3) Comprised of $5.9bn of unencumbered assets, which represents Annaly's excess liquidity and defined as assets that have not been pledged or securitized (generally including cash and cash equivalents, Agency MBS, CRT, Non-Agency MBS, residential mortgage loans, MSR, reverse repurchase agreements, other unencumbered financial assets and capital stock), and $1.5bn of fair value of collateral pledged for future advances. (4) Issuer ranking data from Inside Nonconforming Markets from 2024 to Q2 2025 (July 11, 2025 issue). Used with permission. Expand Financial Performance The following table summarizes certain key performance indicators as of and for the quarters ended June 30, 2025, March 31, 2025 and June 30, 2024: * Represents a non-GAAP financial measure. Please refer to the "Non-GAAP Financial Measures" section for additional information. (1) Net of dividends on preferred stock. (2) Annualized GAAP return on average equity annualizes realized and unrealized gains and (losses) which may not be indicative of full year performance, unannualized GAAP return on average equity is 0.45%, 1.01%, and (0.08%) for the quarters ended June 30, 2025, March 31, 2025, and June 30, 2024, respectively. (3) GAAP leverage is computed as the sum of repurchase agreements, other secured financing, debt issued by securitization vehicles, participations issued, and U.S. Treasury securities sold, not yet purchased divided by total equity. Economic leverage is computed as the sum of recourse debt, cost basis of to-be-announced ("TBA") derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements, other secured financing, and US Treasury securities, sold, not yet purchased. Debt issued by securitization vehicles and participations issued are non-recourse to the Company and are excluded from economic leverage. (4) Net interest margin represents interest income less interest expense divided by average Interest Earning Assets. Net interest margin does not include net interest component of interest rate swaps. Net interest margin (excluding PAA) represents the sum of interest income (excluding PAA) plus TBA dollar roll income and less economic interest expense divided by the sum of average Interest Earning Assets plus average outstanding TBA contract balances. PAA represents the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to the Company's Agency mortgage-backed securities. (5) Average yield on interest earning assets represents annualized interest income divided by average interest earning assets. Average interest earning assets reflects the average amortized cost of our investments during the period. Average yield on interest earning assets (excluding PAA) is calculated using annualized interest income (excluding PAA). (6) Average GAAP cost of interest bearing liabilities represents annualized interest expense divided by average interest bearing liabilities. Average interest bearing liabilities reflects the average balances during the period. Average economic cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities. Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company's Consolidated Statements of Comprehensive Income (Loss). Net interest on variation margin related to interest rate swaps is included in the Net interest component of interest rate swaps in the Company's Consolidated Statements of Comprehensive Income (Loss). Expand Other Information This news release and our public documents to which we refer contain or incorporate by reference certain forward-looking statements which are based on various assumptions (some of which are beyond our control) and may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as "may," "will," "believe," "expect," "anticipate," "continue," or similar terms or variations on those terms or the negative of those terms. Such statements include those relating to the Company's future performance, macro outlook, the interest rate and credit environments, tax reform and future opportunities. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, changes in interest rates; changes in the yield curve; changes in prepayment rates; the availability of mortgage-backed securities ("MBS") and other securities for purchase; the availability of financing and, if available, the terms of any financing; changes in the market value of the Company's assets; changes in business conditions and the general economy; the Company's ability to grow its residential credit business; the Company's ability to grow its mortgage servicing rights business; credit risks related to the Company's investments in credit risk transfer securities and residential mortgage-backed securities and related residential mortgage credit assets; risks related to investments in mortgage servicing rights; the Company's ability to consummate any contemplated investment opportunities; changes in government regulations or policy affecting the Company's business; the Company's ability to maintain its qualification as a REIT for U.S. federal income tax purposes; the Company's ability to maintain its exemption from registration under the Investment Company Act of 1940; and operational risks or risk management failures by us or critical third parties, including cybersecurity incidents. For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements, except as required by law. Annaly is a leading diversified capital manager with investment strategies across mortgage finance. Annaly's principal business objective is to generate net income for distribution to its stockholders and to optimize its returns through prudent management of its diversified investment strategies. Annaly is internally managed and has elected to be taxed as a real estate investment trust, or REIT, for federal income tax purposes. Additional information on the company can be found at We use our website ( and LinkedIn account ( as channels of distribution of company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about Annaly when you enroll your email address by visiting the "News & Insights" section of our website, then clicking on "Subscribe" and completing the email notification form. Our website, any alerts and social media channels are not incorporated by reference into, and are not a part of, this document. The Company prepares an investor presentation and financial supplement for the benefit of its shareholders. Please refer to the investor presentation for definitions of both GAAP and non-GAAP measures used in this news release. Both the Second Quarter 2025 Investor Presentation and the Second Quarter 2025 Financial Supplement can be found at the Company's website ( in the "Investors" section under "Investor Presentations." Conference Call The Company will hold the second quarter 2025 earnings conference call on July 24, 2025 at 9:00 a.m. Eastern Time. Participants are encouraged to pre-register for the conference call to receive a unique PIN to gain immediate access to the call and bypass the live operator. Pre-registration may be completed by accessing the pre-registration link found on the homepage or "Investors" section of the Company's website at or by using the following link: Pre-registration may be completed at any time, including up to and after the call start time. For participants who would like to join the call but have not pre-registered, access is available by dialing 844-735-3317 within the U.S., or 412-317-5703 internationally, and requesting the "Annaly Earnings Call." There will also be an audio webcast of the call on A replay of the call will be available for one week following the conference call. The replay number is 877-344-7529 for domestic calls and 412-317-0088 for international calls and the conference passcode is 3172987. If you would like to be added to the e-mail distribution list, please visit click on News & Insights, then select Subscribe and complete the email notification form. Expand (1) Derived from the audited consolidated financial statements at December 31, 2024. (2) 6.95% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock - Includes 28,800,000 shares authorized, issued and outstanding. 6.50% Series G Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock - Includes 17,000,000 shares authorized, issued and outstanding. 6.75% Series I Preferred Stock - Includes 17,700,000 shares authorized, issued and outstanding. (3) Includes 1,468,250,000 shares authorized. Includes 642,076,127 shares issued and outstanding at June 30, 2025, 602,338,286 shares issued and outstanding at March 31, 2025, 578,357,118 shares issued and outstanding at December 31, 2024, 558,047,743 at September 30, 2024, and 501,018,415 shares issued and outstanding at June 30, 2024. Expand ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (dollars in thousands, except per share data) (Unaudited) For the quarters ended June 30, 2025 March 31, 2025 December 31, 2024 September 30, 2024 September 30, 2024 Net interest income Interest income $ 1,418,893 $ 1,317,108 $ 1,338,880 $ 1,229,341 $ 1,177,325 Interest expense 1,145,693 1,097,137 1,151,592 1,215,940 1,123,767 Net interest income 273,200 219,971 187,288 13,401 53,558 Net servicing income Servicing and related income 141,670 140,435 127,224 122,583 120,515 Servicing and related expense 14,571 14,113 11,648 12,988 12,617 Net servicing income 127,099 126,322 115,576 109,595 107,898 Other income (loss) Net gains (losses) on investments and other 83,503 810,812 (2,010,426 ) 1,723,713 (568,745 ) Net gains (losses) on derivatives (388,785 ) (977,867 ) 2,215,680 (1,754,010 ) 430,487 Other, net 15,812 7,398 19,339 27,438 24,791 Total other income (loss) (289,470 ) (159,657 ) 224,593 (2,859 ) (113,467 ) General and administrative expenses Compensation expense 36,583 37,297 33,955 34,453 33,274 Other general and administrative expenses 13,435 10,767 10,019 9,468 11,617 Total general and administrative expenses 50,018 48,064 43,974 43,921 44,891 Income (loss) before income taxes 60,811 138,572 483,483 76,216 3,098 Income taxes 440 8,267 10,407 (6,135 ) 11,931 Net income (loss) 60,371 130,305 473,076 82,351 (8,833 ) Net income (loss) attributable to noncontrolling interests 3,272 6,081 (8,976 ) 15,906 650 Net income (loss) attributable to Annaly 57,099 124,224 482,052 66,445 (9,483 ) Dividends on preferred stock 37,260 37,157 38,704 41,628 37,158 Net income (loss) available (related) to common stockholders $ 19,839 $ 87,067 $ 443,348 $ 24,817 $ (46,641 ) Net income (loss) per share available (related) to common stockholders Basic $ 0.03 $ 0.15 $ 0.78 $ 0.05 $ (0.09 ) Diluted $ 0.03 $ 0.15 $ 0.78 $ 0.05 $ (0.09 ) Weighted average number of common shares outstanding Basic 620,208,712 587,149,704 569,201,592 515,729,658 500,950,563 Diluted 621,103,218 588,420,998 570,651,985 516,832,152 500,950,563 Other comprehensive income (loss) Net income (loss) $ 60,371 $ 130,305 $ 473,076 $ 82,351 $ (8,833 ) Unrealized gains (losses) on available-for-sale securities 33,559 164,877 (337,121 ) 428,955 (54,243 ) Reclassification adjustment for net (gains) losses included in net income (loss) 13,797 65,403 31,642 15,769 179,234 Other comprehensive income (loss) 47,356 230,280 (305,479 ) 444,724 124,991 Comprehensive income (loss) 107,727 360,585 167,597 527,075 116,158 Comprehensive income (loss) attributable to noncontrolling interests 3,272 6,081 (8,976 ) 15,906 650 Comprehensive income (loss) attributable to Annaly 104,455 354,504 176,573 511,169 115,508 Dividends on preferred stock 37,260 37,157 38,704 41,628 37,158 Comprehensive income (loss) attributable to common stockholders $ 67,195 $ 317,347 $ 137,869 $ 469,541 $ 78,350 Expand For the six months ended June 30, 2025 June 30, 2024 (unaudited) (unaudited) Net interest income Interest income $ 2,736,001 $ 2,271,813 Interest expense 2,242,830 2,224,706 Net interest income 493,171 47,107 Net servicing income Servicing and related income 282,105 235,599 Servicing and related expense 28,684 24,833 Net servicing income 253,421 210,766 Other income (loss) Net gains (losses) on investments and other 894,315 (1,562,872 ) Net gains (losses) on derivatives (1,366,652 ) 1,807,631 Other, net 23,210 48,158 Total other income (loss) (449,127 ) 292,917 General and administrative expenses Compensation expense 73,880 61,995 Other general and administrative expenses 24,202 21,466 Total general and administrative expenses 98,082 83,461 Income (loss) before income taxes 199,383 467,329 Income taxes 8,707 10,988 Net income (loss) 190,676 456,341 Net income (loss) attributable to noncontrolling interests 9,353 2,932 Net income (loss) attributable to Annaly 181,323 453,409 Dividends on preferred stock 74,417 74,219 Net income (loss) available (related) to common stockholders $ 106,906 $ 379,190 Net income (loss) per share available (related) to common stockholders Basic $ 0.18 $ 0.76 Diluted $ 0.18 $ 0.76 Weighted average number of common shares outstanding Basic 603,770,531 500,781,701 Diluted 604,882,295 501,415,515 Other comprehensive income (loss) Net income (loss) $ 190,676 $ 456,341 Unrealized gains (losses) on available-for-sale securities 198,436 (336,112 ) Reclassification adjustment for net (gains) losses included in net income (loss) 79,200 514,585 Other comprehensive income (loss) 277,636 178,473 Comprehensive income (loss) 468,312 634,814 Comprehensive income (loss) attributable to noncontrolling interests 9,353 2,932 Comprehensive income (loss) attributable to Annaly 458,959 631,882 Dividends on preferred stock 74,417 74,219 Comprehensive income (loss) attributable to common stockholders $ 384,542 $ 557,663 Expand Key Financial Data The following table presents key metrics of the Company's portfolio, liabilities and hedging positions, and performance as of and for the quarters ended June 30, 2025, March 31, 2025 and June 30, 2024: June 30, 2025 March 31, 2025 June 30, 2024 Portfolio related metrics Fixed-rate Residential Securities as a percentage of total Residential Securities 99 % 99 % 98 % Adjustable-rate and floating-rate Residential Securities as a percentage of total Residential Securities 1 % 1 % 2 % Weighted average experienced CPR for the period 8.7 % 7.1 % 7.4 % Weighted average projected long-term CPR at period-end 9.1 % 9.5 % 8.5 % Liabilities and hedging metrics Weighted average days to maturity on repurchase agreements outstanding at period-end 49 50 36 Hedge ratio (1) 92 % 95 % 98 % Weighted average pay rate on interest rate swaps at period-end (2) 3.14 % 2.98 % 3.13 % Weighted average receive rate on interest rate swaps at period-end (2) 4.47 % 4.43 % 5.30 % Weighted average net rate on interest rate swaps at period-end (2) (1.33 %) (1.45 %) (2.17 %) GAAP leverage at period-end (3) 7.1:1 6.8:1 7.1:1 GAAP capital ratio at period-end (4) 12.0 % 12.4 % 12.0 % Performance related metrics Book value per common share $ 18.45 $ 19.02 $ 19.25 GAAP net income per average common share (5) $ 0.03 $ 0.15 $ (0.09 ) Annualized GAAP return on average equity (6) 1.82 % 4.04 % (0.31 %) Net interest margin (7) 1.04 % 0.87 % 0.24 % Average yield on interest earning assets (8) 5.42 % 5.18 % 5.17 % Average GAAP cost of interest bearing liabilities (9) 4.76 % 4.77 % 5.43 % Net interest spread 0.66 % 0.41 % (0.26 %) Dividend declared per common share $ 0.70 $ 0.70 $ 0.65 Annualized dividend yield (10) 14.88 % 13.79 % 13.64 % Non-GAAP metrics * Earnings available for distribution per average common share (5) $ 0.73 $ 0.72 $ 0.68 Annualized EAD return on average equity (excluding PAA) 14.86 % 14.43 % 13.36 % Economic leverage at period-end (3) 5.8:1 5.7:1 5.8:1 Economic capital ratio at period end (4) 14.3 % 14.8 % 14.4 % Net interest margin (excluding PAA) (7) 1.71 % 1.69 % 1.58 % Average yield on interest earning assets (excluding PAA) (8) 5.41 % 5.23 % 5.14 % Average economic cost of interest bearing liabilities (9) 3.94 % 3.88 % 3.90 % Net interest spread (excluding PAA) 1.47 % 1.35 % 1.24 % Expand * Represents a non-GAAP financial measure. Please refer to the "Non-GAAP Financial Measures" section for additional information. (1) Measures total notional balances of interest rate swaps, interest rate swaptions (excluding receiver swaptions), futures and U.S. Treasury securities sold, not yet purchased, relative to repurchase agreements, other secured financing, cost basis of TBA derivatives outstanding and net forward purchases (sales) of investments; excludes MSR and the effects of term financing, both of which serve to reduce interest rate risk. Additionally, the hedge ratio does not take into consideration differences in duration between assets and liabilities. (2) Excludes forward starting swaps. (3) GAAP leverage is computed as the sum of repurchase agreements, other secured financing, debt issued by securitization vehicles, participations issued, and U.S. Treasury securities sold, not yet purchased divided by total equity. Economic leverage is computed as the sum of recourse debt, cost basis of to-be-announced ("TBA") derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements, other secured financing, and U.S. Treasury securities sold, not yet purchased. Debt issued by securitization vehicles and participations issued are non-recourse to the Company and are excluded from economic leverage. (4) GAAP capital ratio is computed as total equity divided by total assets. Economic capital ratio is computed as total equity divided by total economic assets. Total economic assets include the implied market value of TBA derivatives and are net of debt issued by securitization vehicles and participations issued. (5) Net of dividends on preferred stock. (6) Annualized GAAP return on average equity annualizes realized and unrealized gains and (losses) which may not be indicative of full year performance, unannualized GAAP return on average equity is 0.45%, 1.01% and (0.08%) for the quarters ended June 30, 2025, March 31, 2025, and June 30, 2024, respectively. (7) Net interest margin represents interest income less interest expense divided by average interest earning assets. Net interest margin does not include net interest component of interest rate swaps. Net interest margin (excluding PAA) represents the sum of interest income (excluding PAA) plus TBA dollar roll income less economic interest expense divided by the sum of average interest earning assets plus average TBA contract balances. (8) Average yield on interest earning assets represents annualized interest income divided by average interest earning assets. Average interest earning assets reflects the average amortized cost of our investments during the period. Average yield on interest earning assets (excluding PAA) is calculated using annualized interest income (excluding PAA). (9) Average GAAP cost of interest bearing liabilities represents annualized interest expense divided by average interest bearing liabilities. Average interest bearing liabilities reflects the average balances during the period. Average economic cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities. Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company's Consolidated Statements of Comprehensive Income (Loss). Net interest on variation margin related to interest rate swaps is included in the Net interest component of interest rate swaps in the Company's Consolidated Statements of Comprehensive Income (Loss). (10) Based on the closing price of the Company's common stock of $18.82, $20.31 and $19.06 at June 30, 2025, March 31, 2025 and June 30, 2024, respectively. Expand The following table contains additional information on our investment portfolio as of the dates presented: Non-GAAP Financial Measures To supplement its consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles ("GAAP"), the Company provides the following non-GAAP measures: earnings available for distribution ("EAD"); earnings available for distribution attributable to common stockholders; earnings available for distribution per average common share; annualized EAD return on average equity; economic leverage; economic capital ratio; interest income (excluding PAA); economic interest expense; economic net interest income (excluding PAA); average yield on interest earning assets (excluding PAA); average economic cost of interest bearing liabilities; net interest margin (excluding PAA); and net interest spread (excluding PAA). These measures should not be considered a substitute for, or superior to, financial measures computed in accordance with GAAP. While intended to offer a fuller understanding of the Company's results and operations, non-GAAP financial measures also have limitations. For example, the Company may calculate its non-GAAP metrics, such as earnings available for distribution, or the PAA, differently than its peers making comparative analysis difficult. Additionally, in the case of non-GAAP measures that exclude the PAA, the amount of amortization expense excluding the PAA is not necessarily representative of the amount of future periodic amortization nor is it indicative of the term over which the Company will amortize the remaining unamortized premium. Changes to actual and estimated prepayments will impact the timing and amount of premium amortization and, as such, both GAAP and non-GAAP results. These non-GAAP measures provide additional detail to enhance investor understanding of the Company's period-over-period operating performance and business trends, as well as for assessing the Company's performance versus that of industry peers. Additional information pertaining to the Company's use of these non-GAAP financial measures, including discussion of how each such measure may be useful to investors, and reconciliations to their most directly comparable GAAP results are provided below. Earnings available for distribution, earnings available for distribution attributable to common stockholders, earnings available for distribution per average common share and annualized EAD return on average equity The Company's principal business objective is to generate net income for distribution to its stockholders and to preserve capital through prudent selection of investments and continuous management of its portfolio. The Company generates net income by earning a net interest spread on its investment portfolio, which is a function of interest income from its investment portfolio less financing, hedging and operating costs. Earnings available for distribution, which is defined as the sum of (a) economic net interest income, (b) TBA dollar roll income, (c) net servicing income less realized amortization of MSR, (d) other income (loss) (excluding amortization of intangibles, non-EAD income allocated to equity method investments and other non-EAD components of other income (loss)), (e) general and administrative expenses (excluding transaction expenses and non-recurring items), and (f) income taxes (excluding the income tax effect of non-EAD income (loss) items) and excludes (g) the premium amortization adjustment ("PAA") representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to the Company's Agency mortgage-backed securities is used by the Company's management and, the Company believes, used by analysts and investors to measure its progress in achieving its principal business objective. The Company seeks to fulfill this objective through a variety of factors including portfolio construction, the degree of market risk exposure and related hedge profile, and the use and forms of leverage, all while operating within the parameters of the Company's capital allocation policy and risk governance framework. The Company believes these non-GAAP measures provide management and investors with additional details regarding the Company's underlying operating results and investment portfolio trends by (i) making adjustments to account for the disparate reporting of changes in fair value where certain instruments are reflected in GAAP net income (loss) while others are reflected in other comprehensive income (loss) and (ii) by excluding certain unrealized, non-cash or episodic components of GAAP net income (loss) in order to provide additional transparency into the operating performance of the Company's portfolio. In addition, EAD serves as a useful indicator for investors in evaluating the Company's performance and ability to pay dividends. Annualized EAD return on average equity, which is calculated by dividing earnings available for distribution over average stockholders' equity, provides investors with additional detail on the earnings available for distribution generated by the Company's invested equity capital. * Represents a non-GAAP financial measure. (1) Includes write-downs or recoveries on investments which are reported in Other, net in the Company's Consolidated Statements of Comprehensive Income (Loss). (2) The adjustment to add back Net (gains) losses on derivatives does not include the net interest component of interest rate swaps which is reflected in earnings available for distribution. The net interest component of interest rate swaps totaled $185.7 million, $191.5 million and $298.4 million for the quarters ended June 30, 2025, March 31, 2025 and June 30, 2024, respectively. (3) The Company excludes non-EAD (income) loss allocated to equity method investments, which represents the unrealized (gains) losses allocated to equity interests in a portfolio of MSR, which is a component of Other, net. (4) Represents costs incurred in connection with securitizations of residential whole loans. (5) TBA dollar roll income represents a component of Net gains (losses) on derivatives. (6) MSR amortization utilizes purchase date cash flow assumptions and actual unpaid principal balances and is calculated as the difference between projected MSR yield income and net servicing income for the period. (7) Annualized GAAP return (loss) on average equity annualizes realized and unrealized gains and (losses) which may not be indicative of full year performance, unannualized GAAP return (loss) on average equity is 0.45%, 1.01%, and (0.08%) for the quarters ended June 30, 2025, March 31, 2025, and June 30, 2024, respectively. Expand From time to time, the Company enters into TBA forward contracts as an alternate means of investing in and financing Agency mortgage-backed securities. A TBA contract is an agreement to purchase or sell, for future delivery, an Agency mortgage-backed security with a specified issuer, term and coupon. A TBA dollar roll represents a transaction where TBA contracts with the same terms but different settlement dates are simultaneously bought and sold. The TBA contract settling in the later month typically prices at a discount to the earlier month contract with the difference in price commonly referred to as the "drop". The drop is a reflection of the expected net interest income from an investment in similar Agency mortgage-backed securities, net of an implied financing cost, that would be foregone as a result of settling the contract in the later month rather than in the earlier month. The drop between the current settlement month price and the forward settlement month price occurs because in the TBA dollar roll market, the party providing the financing is the party that would retain all principal and interest payments accrued during the financing period. Accordingly, TBA dollar roll income generally represents the economic equivalent of the net interest income earned on the underlying Agency mortgage-backed security less an implied financing cost. TBA dollar roll transactions are accounted for under GAAP as a series of derivatives transactions. The fair value of TBA derivatives is based on methods similar to those used to value Agency mortgage-backed securities. The Company records TBA derivatives at fair value on its Consolidated Statements of Financial Condition and recognizes periodic changes in fair value in Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss), which includes both unrealized and realized gains and losses on derivatives. TBA dollar roll income is calculated as the difference in price between two TBA contracts with the same terms but different settlement dates multiplied by the notional amount of the TBA contract. Although accounted for as derivatives, TBA dollar rolls capture the economic equivalent of net interest income, or carry, on the underlying Agency mortgage-backed security (interest income less an implied cost of financing). TBA dollar roll income is reported as a component of Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss). Premium Amortization Expense In accordance with GAAP, the Company amortizes or accretes premiums or discounts into interest income for its Agency mortgage-backed securities, excluding interest-only securities, multifamily and reverse mortgages, taking into account estimates of future principal prepayments in the calculation of the effective yield. The Company recalculates the effective yield as differences between anticipated and actual prepayments occur. Using third-party model and market information to project future cash flows and expected remaining lives of securities, the effective interest rate determined for each security is applied as if it had been in place from the date of the security's acquisition. The amortized cost of the security is then adjusted to the amount that would have existed had the new effective yield been applied since the acquisition date. The adjustment to amortized cost is offset with a charge or credit to interest income. Changes in interest rates and other market factors will impact prepayment speed projections and the amount of premium amortization recognized in any given period. The Company's GAAP metrics include the unadjusted impact of amortization and accretion associated with this method. Certain of the Company's non-GAAP metrics exclude the effect of the PAA, which quantifies the component of premium amortization representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term CPR. The following table illustrates the impact of the PAA on premium amortization expense for the Company's Residential Securities portfolio and residential securities transferred or pledged to securitization vehicles, for the quarters ended June 30, 2025, March 31, 2025 and June 30, 2024: Economic leverage and economic capital ratios The Company uses capital coupled with borrowed funds to invest primarily in real estate related investments, earning the spread between the yield on its assets and the cost of its borrowings and hedging activities. The Company's capital structure is designed to offer an efficient complement of funding sources to generate positive risk-adjusted returns for its stockholders while maintaining appropriate liquidity to support its business and meet the Company's financial obligations under periods of market stress. To maintain its desired capital profile, the Company utilizes a mix of debt and equity funding. Debt funding may include the use of repurchase agreements, loans, securitizations, participations issued, lines of credit, asset backed lending facilities, corporate bond issuance, convertible bonds or other liabilities. Equity capital primarily consists of common and preferred stock. The Company's economic leverage ratio is computed as the sum of recourse debt, cost basis of TBA derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements, other secured financing, and U.S. Treasury securities sold, not yet purchased. Debt issued by securitization vehicles and participations issued are non-recourse to the Company and are excluded from economic leverage. The following table presents a reconciliation of GAAP debt to economic debt for purposes of calculating the Company's economic leverage ratio for the periods presented: * Represents a non-GAAP financial measure. Expand The following table presents a reconciliation of GAAP total assets to economic total assets for purposes of calculating the Company's economic capital ratio for the periods presented: * Represents a non-GAAP financial measure. (1) Included in Derivative assets in the Company's Consolidated Statements of Financial Condition. Expand Interest income (excluding PAA), economic interest expense and economic net interest income (excluding PAA) Interest income (excluding PAA) represents interest income excluding the effect of the PAA, and serves as the basis for deriving average yield on interest earning assets (excluding PAA), net interest spread (excluding PAA) and net interest margin (excluding PAA), which are discussed below. The Company believes this measure provides management and investors with additional detail to enhance their understanding of the Company's operating results and trends by excluding the component of premium amortization expense representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to the Company's Agency mortgage-backed securities (other than interest-only securities, multifamily and reverse mortgages), which can obscure underlying trends in the performance of the portfolio. Economic interest expense includes GAAP interest expense, the net interest component of interest rate swaps (which includes net interest on variation margin related to interest rate swaps) and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company's Consolidated Statements of Comprehensive Income (Loss). The Company uses interest rate swaps to manage its exposure to changing interest rates on its repurchase agreements by economically hedging cash flows associated with these borrowings. Accordingly, adding the net interest component of interest rate swaps to interest expense, as computed in accordance with GAAP, reflects the total contractual interest expense and thus, provides investors with additional information about the cost of the Company's financing strategy. The Company may use market agreed coupon ("MAC") interest rate swaps in which the Company may receive or make a payment at the time of entering into such interest rate swap to compensate for the off-market nature of such interest rate swap. In accordance with GAAP, upfront payments associated with MAC interest rate swaps are not reflected in the net interest component of interest rate swaps in the Company's Consolidated Statements of Comprehensive Income (Loss). Similarly, economic net interest income (excluding PAA), as computed below, provides investors with additional information to enhance their understanding of the net economics of our primary business operations. * Represents a non-GAAP financial measure. (1) Interest on initial margin related to interest rate swaps is reported in Other, net in the Company's Consolidated Statements of Comprehensive Income (Loss). Expand Average yield on interest earning assets (excluding PAA), net interest spread (excluding PAA), net interest margin (excluding PAA) and average economic cost of interest bearing liabilities Net interest spread (excluding PAA), which is the difference between the average yield on interest earning assets (excluding PAA) and the average economic cost of interest bearing liabilities, which represents annualized economic interest expense divided by average interest bearing liabilities, and net interest margin (excluding PAA), which is calculated as the sum of interest income (excluding PAA) plus TBA dollar roll income less economic interest expense divided by the sum of average interest earning assets plus average TBA contract balances, provide management with additional measures of the Company's profitability that management relies upon in monitoring the performance of the business. Disclosure of these measures, which are presented below, provides investors with additional detail regarding how management evaluates the Company's performance. * Represents a non-GAAP financial measure. Expand
