Operating cash flow of $56.6M in 2026Q1 highlights a divergence from the $37.5M in reported FFO, underscoring the difficulty in reconciling GAAP metrics with actual cash-generating capacity.
| Metric | TTM | Dec'25 | Dec'24 | Dec'23 | Dec'22 | Dec'21 | Dec'20 | Dec'19 | Dec'18 | Dec'17 | Dec'16 | Dec'15 | Dec'14 | Dec'13 | Dec'12 | Dec'11 | Dec'10 | Dec'09 | Dec'08 | Dec'07 |
|---|
| Cash from Operations | 33.58M | 88.92M | 201M | 343.51M | 623.4M | 423.51M | 631.6M | 1.06B | 702.87M | 606.78M | 239.68M | -1.94B | -764.15M | -454.67M | 163.13M | 151.64M | 33.11M | -16.24M | 1.76M | 1.39M |
| Operating CF Growth % | 201.02% | -55.76% | -41.49% | -44.9% | 47.2% | -32.95% | -40.23% | 50.33% | 15.84% | 153.16% | 112.38% | -153.45% | -68.07% | -378.71% | 7.58% | 357.94% | 303.9% | -1021.15% | 26.9% | - |
| Operating CF / Revenue % | 4.39% | 14.68% | 23.76% | 53.63% | 4945.28% | -296.35% | -73.22% | 55.65% | 99.26% | 72.35% | 48.06% | -264.58% | -129.16% | -90.87% | 30.27% | 57.24% | 62.01% | -507.19% | 39.69% | 94.24% |
| Net Income | -342.96M | -454.3M | 298.17M | -106.37M | 220.24M | 187.23M | -1.63B | 323.96M | -44.29M | 308.24M | 353.28M | 492.21M | 167.14M | 579.04M | 291.91M | 127.43M | 35.76M | -8.74M | 2.29M | 714.57K |
| Depreciation & Amortization | 5.18M | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 969K | 1.28M | 1.36M | 1.62M | 1.67M | 1.73M | 39K | 0 | 528.48K | 0 | 0 |
| Stock-Based Compensation | 1.25M | 0 | 10.95M | 10.98M | 11.63M | 11.48M | 9.73M | 9.16M | 12.99M | 11.33M | 15.2M | 9M | 15.08M | 511K | 488K | 279K | 214K | 22K | 0 | 0 |
| Other Non-Cash Items | -78.49M | 512.57M | -29.99M | 381.43M | 240.26M | 191.58M | 2.4B | 744.69M | 643.1M | 262.35M | -146.8M | -2.44B | -732.44M | -1.16B | -49.67M | 31.88M | -1.44M | -335.97K | 0 | 0 |
| Working Capital Changes | -17.41M | 30.65M | -78.12M | 57.47M | 151.27M | 33.22M | -143.82M | -21.18M | 91.07M | 23.89M | 16.72M | 3.19M | -215.54M | 120.33M | -81.32M | -7.94M | -1.42M | -7.71M | -531.5K | 674.77K |
| Cash from Investing | 2.9B | 911.61M | 895.28M | -195.78M | -2.75B | 6.31B | 14.9B | -6.08B | 4.79B | -9.48B | -5.82B | 7.99B | -2.7B | 512.76M | -6.91B | -6.33B | -861.38M | -245.3M | 554.15K | -259.82M |
| Acquisitions (Net) | 0 | 0 | -20.98M | 26.8M | 629.81M | 742.15M | 622.41M | 613.66M | -13.55M | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Purchase of Investments | 1.26B | 0 | -2.14B | -4.13B | -10.73B | -2.49B | -8.3B | -24.73B | -12.71B | -18.37B | -21.34B | -1.88B | -8.35B | -5.52B | -12.18B | -8.63B | -1.68B | -503.06M | 0 | 0 |
| Sale of Investments | -194.76M | 0 | 3.12B | 3.34B | 9.02B | 9.51B | 23.64B | 18.73B | 17.99B | 10.35B | 15.76B | 10.14B | 5.74B | 6.71B | 5.38B | 2.64B | 605.68M | 7.46M | 0 | 0 |
| Other Investing | 1.83B | 911.61M | 48.56M | 879.96M | -1.04B | -704.75M | -442.5M | -75.37M | 493.81M | -1.47B | -230.56M | -275.87M | -94.88M | -673.12M | -100.77M | -350.48M | 210.66M | 250.31M | 554.15K | -259.82M |
| Cash from Financing | -2.55B | -756.22M | -1.07B | -479.4M | 1.17B | -7.3B | -14.51B | 5.54B | -5.45B | 9.12B | 5.25B | -6.32B | 3.44B | 146.29M | 7.21B | 6.38B | 966.07M | 284.87M | -511 | 258.89M |
| Dividends Paid | -163.63M | -222.39M | -235.05M | -246.6M | -290.36M | -257.15M | -275.29M | -538.95M | -329.02M | -436.06M | -331.87M | -381.59M | -285.55M | -591.45M | -335.31M | -119.8M | -27.12M | 0 | 0 | 0 |
| Common Dividends | -123.88M | -170.86M | -187.68M | -197.64M | -235.37M | -193.49M | -199.49M | -463.15M | -270.63M | -422.88M | -331.87M | -381.59M | -285.55M | -591.45M | -335.31M | -119.8M | -27.12M | 0 | 0 | 0 |
| Debt Issuance (Net) | 1000K | -1000K | -1000K | 1000K | 1000K | 1000K | -1000K | -1000K | -1000K | -1000K | 1000K | 1000K | 1000K | 1000K | 0 | 0 | 1000K | 1000K | 0 | 0 |
| Share Repurchases | 0 | -1.75M | -11.1M | -21.87M | -51.4M | -274.95M | -1.06M | -19K | -36K | 0 | -61.31M | -115.17M | 0 | -23.89M | 0 | 0 | 0 | -127.03M | 0 | 0 |
| Other Financing | -959.96M | -1.75M | -215.15M | -582.8M | 946.57M | -7.49B | -14B | 6.01B | -5.06B | 11.73B | 4.31B | -7.92B | 682.01M | -266.55M | 6.18B | 5.49B | 0 | 0 | -511 | 1.87M |
| Net Change in Cash | 364.23M | 244.31M | 22.81M | -331.67M | -962.16M | -557.76M | 1.03B | 519.06M | 42.77M | 239.8M | -330.95M | -267.96M | -19.7M | 204.38M | 461.09M | 196.12M | 137.79M | 23.33M | 2.32M | 461.48K |
| Exchange Rate Effect | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Cash at Beginning | 0 | 817.64M | 794.83M | 1.13B | 2.09B | 2.65B | 1.62B | 1.1B | 1.05B | 815.2M | 737.83M | 1.01B | 1.03B | 821.11M | 360.02M | 163.9M | 26.11M | 2.78M | 461.48K | 0 |
| Cash at End | 0 | 1.06B | 817.64M | 794.83M | 1.13B | 2.09B | 2.65B | 1.62B | 1.1B | 1.05B | 406.88M | 737.83M | 1.01B | 1.03B | 821.11M | 360.02M | 163.9M | 26.1M | 2.78M | 461.48K |
| Free Cash Flow | -66.47M | 88.92M | 86.88M | 30.87M | -6.41M | -318.64M | 9.2M | 442.97M | -273.52M | 122.52M | -78.03M | -2.06B | -829.85M | -953.7M | 163.13M | 151.64M | 33.11M | -16.24M | 1.76M | 1.39M |
| FCF Growth % | -127.02% | 2.34% | 181.42% | 581.77% | 97.99% | -3564.64% | -97.92% | 261.95% | -323.25% | 257.02% | 96.21% | -148.29% | 12.99% | -684.61% | 7.58% | 357.94% | 303.9% | -1021.15% | 26.9% | - |
| FCF / Revenue % | -8.69% | 14.68% | 10.27% | 4.82% | -50.83% | 222.97% | -1.07% | 23.33% | -38.63% | 14.61% | -15.65% | -281.47% | -140.27% | -190.6% | 30.27% | 57.24% | 62.01% | -507.19% | 39.69% | 94.24% |
MSR valuation and basis risk
According to the provided financial data, Two Harbors' FFO of $37.5M in 2026Q1 represents a significant departure from the $56.6M in reported operating cash flow, highlighting the inherent difficulty in reconciling GAAP-based cash metrics with the non-cash mark-to-market adjustments typical of mortgage REITs.
The wide variance between FFO and operating cash flow suggests that GAAP metrics are heavily influenced by non-cash items, such as unrealized gains or losses on the MSR portfolio. Investors should monitor this conversion gap closely, as it indicates that reported operating cash flow may not be a reliable proxy for the actual recurring earnings power of the underlying mortgage assets.
As reported in historical financial statements, the extreme swings in net income, ranging from a $433.2M loss in 2023Q4 to a $276.7M gain in 2024Q4, demonstrate that GAAP net income is a poor indicator of Two Harbors' actual cash-generating capacity due to heavy mark-to-market distortion.
The reliance on fair value accounting for MSRs and hedging instruments creates significant noise that masks the underlying economic performance of the portfolio. This volatility warrants further investigation into the company's EAD or AFD metrics, which likely provide a more accurate, albeit non-GAAP, view of the cash flow available to shareholders.
Based on the reported figures, Two Harbors' capital expenditure has fluctuated wildly, including a $91.4M outflow in 2025Q3 followed by a $91.4M inflow in 2025Q2, suggesting that the company's investment activity is highly reactive to market conditions rather than following a predictable maintenance schedule.
These erratic swings in capital deployment appear to reflect the opportunistic nature of MSR acquisitions and portfolio rebalancing rather than standard property maintenance. Such volatility in capital usage makes it difficult to forecast long-term free cash flow, as the company's cash position is frequently impacted by large, non-recurring asset-level transactions.
As evidenced by the inconsistent reporting of FFO and the absence of clear AFFO data, the cash flow statement appears to hide the true economic cost of maintaining the servicing platform and managing the interest rate hedge book, which may be understating the company's actual cash obligations.
The lack of transparent AFFO reporting prevents a clear assessment of dividend coverage, leaving investors to rely on potentially misleading GAAP figures. The company's reliance on complex, Level 3 MSR valuations suggests that management has significant discretion over reported earnings, which may obscure the true cash-on-cash return of the servicing business.
Quick answers to the most common questions about buying TWO stock.
Two Harbors Investment Corp. (TWO) generated $88.9M in net cash from operating activities in 2025. This reflects the cash generated directly from core business operations.
Two Harbors Investment Corp. (TWO) generated $88.9M in free cash flow in 2025. Free cash flow is the cash left over after capital expenditures, which can be used to pay dividends, repurchase shares, or pay down debt.
Two Harbors Investment Corp. (TWO) spent $0.0M on capital expenditures in 2025. CapEx represents the cash invested in physical assets like property, plant, and equipment to maintain or grow the business.
In 2025, Two Harbors Investment Corp. (TWO) returned $222.4M to shareholders via cash dividends and spent $1.8M on share repurchases. This shows the company's commitment to returning capital to its equity investors.