Company Overview - Two Harbors Investment Corporation specializes in agency residential mortgage-backed securities (RMBS), which constitute 62% of its balance sheet, and mortgage servicing rights (MSR), making up 23% of its asset base [6][31] - As of March 31, 2024, the company has a portfolio valued at $14.7 billion [7] Performance and Returns - The Series B 7.625% preferred shares have significantly outperformed the iShares Preferred and Income Securities ETF (PFF) in 2024, delivering a low double-digit total return compared to the mid-single-digit return of the benchmark ETF [6][33] - The Series B shares offer an approximate 8.27% dividend yield and a capital appreciation potential of 8.46% to par value, which is higher than the Series A shares [30][33] Dividend Coverage - In Q1 2024, the company paid $11.8 million in cumulative preferred dividends, representing only 5.8% of its $203.6 million net income before preferred distributions [26] - The company has maintained strong preferred dividend coverage over the past few years, with coverage ratios of 2.35 times based on equity market capitalization of $1.46 billion [31] Leverage and Debt Ratios - The company has leveraged its common equity 8.25 times, with an economic debt-to-equity ratio of 6.0 when accounting for agency-to-be-announced securities [19][30] - The preferred shares are well-covered by shareholders' equity adjusted for preferred shares, standing at $1.6 billion [31] Interest Rate and Mortgage Spread Exposure - The company is well-hedged against interest rate exposure, with a potential portfolio impact of only -0.2% to -0.3% from a 0.25% move in rates [27] - A 5.3% increase in mortgage spreads could negatively affect the portfolio by 5.3% [27] Outlook on Monetary Policy - The Federal Reserve is projected to lower rates to 3.75-4.00% by July 2025, which would likely enhance the value of RMBS held by the company [36] - The company expects to benefit from lower interest rates through reduced rates on its repurchase agreements, which are tied to the secured overnight financing rate (SOFR) [39]

Two Harbors Investment Corp. (NYSE:TWO) Q1 2024 Earnings Conference Call April 30, 2024 9:00 AM ET Company Participants Maggie Karr - Head of IR William Greenberg - President and CEO Mary Riskey - CFO Nicholas Letica - CIO Conference Call Participants Doug Harter - UBS Trevor Cranston - JMP Securities Bose George - KBW Jason Weaver - Jones Trading Rick Shane - JPMorgan Eric Hagen - BTIG Operator Good morning. My name is Jennifer and I will be your conference facilitator. At this time, I'd like to welcome ev ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended: March 31, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-34506 TWO HARBORS INVESTMENT CORP. (Exact Name of Registrant as Specified in Its Charter) Maryland 27-0312904 (State or Other Jurisdiction of Incorporation or Organization) ...

Two Harbors Investment Corp. Reports First Quarter 2024 Financial Results Positioned for Higher-for-Longer Rates with Growing MSR Portfolio and Operational Platform NEW YORK, April 29, 2024 - Two Harbors Investment Corp. (NYSE: TWO), an MSR + Agency RMBS real estate investment trust (REIT), today announced its financial results for the quarter ended March 31, 2024. Quarterly Summary "Stronger than expected economic data and sticky inflation readings pushed interest rates higher in the quarter, though the co ...

Financial Performance - For the year ended December 31, 2023, cash flows from operating activities increased cash balances by approximately $343.5 million, primarily driven by financial results for the year[278]. - Cash flows from investing activities decreased cash balances by approximately $195.8 million, mainly due to purchases of Agency RMBS, MSR, and derivative instruments[278]. - Cash flows from financing activities decreased cash balances by approximately $479.4 million, primarily due to repayment of U.S. Treasury securities and payment of dividends[278]. - The company reported a net loss of $(106,371) compared to a net income of $220,239 in 2022, marking a substantial downturn[324]. - The company experienced a comprehensive loss of $(4,089) compared to $(244,818) in 2022, indicating a reduced loss in comprehensive income[324]. - The company reported revenue of $806.9 million, a decrease from $889.2 million in 2022[406]. Asset Management - The company holds $3.1 billion in mortgage servicing rights (MSR) reported at fair value, with significant unobservable market data inputs affecting valuation[314]. - The fair value of MSR is subject to fluctuations based on prepayment speeds and market conditions, impacting the overall asset valuation[299]. - Total assets decreased to $13,138,800 from $13,466,160, a decline of approximately 2.4% year-over-year[321]. - Total assets acquired from RoundPoint amounted to $80.3 million, while total liabilities assumed were $63.2 million, resulting in net assets of $17.1 million[401]. Interest Rate Risk - An increase in short-term interest rates could reduce the spread between returns on assets and borrowing costs, adversely affecting profitability[91]. - Rising interest rates could decrease the availability of target assets, adversely impacting the company's ability to generate income and pay dividends[118]. - The company anticipates that changes in interest rates could significantly impact net interest income and portfolio value, with sensitivity analyses conducted for +/- 25 and +/- 50 basis points[290]. - Interest income increased to $480,364, up 62.3% from $295,540 in 2022, while interest expense surged to $643,225, up 148.5% from $258,395[324]. Acquisition and Integration - The company acquired RoundPoint Mortgage Servicing LLC, enhancing its operational capabilities and expected to generate cost savings[336]. - RoundPoint became a consolidated wholly owned subsidiary of the Company effective September 30, 2023, after satisfying customary closing conditions and receiving regulatory approvals[349]. - Goodwill from the acquisition was calculated at $27.5 million, primarily due to expected synergies and benefits from combining operations[402]. - The Company recognized acquisition-related costs of $1.3 million and $0.8 million for the years ended December 31, 2023 and 2022, respectively[403]. Compliance and Regulatory Risks - Compliance with GSEs' guidelines is critical for the company's ability to own and manage MSR and service mortgage loans[101]. - The company is subject to risks associated with the use of third-party service providers, which could negatively impact financial condition and results of operations[99]. - The company may face risks related to its qualification as a REIT, including potential tax liabilities if it fails to meet certain requirements[134][135]. - The company is required to make servicing advances that may not be recoverable, which could adversely impact liquidity and financial condition[120]. Shareholder Dynamics - The company has ownership limits in its charter that restrict the ability of individuals to purchase shares beyond specified thresholds, potentially impacting control dynamics[123]. - The company has not established a minimum distribution payment level and cannot assure stockholders of its ability to pay distributions in the future[131]. - Future issuances of common stock may depress the market price and dilute existing stockholders' interests[128][129]. - The market price of the company's common stock may be highly volatile, influenced by various factors including changes in financial estimates by analysts and general economic conditions[132][133]. Risk Management - The company is highly dependent on information technology, and any system failures or security breaches could disrupt operations and adversely affect financial results[92]. - The company’s risk management processes include both portfolio-wide and asset-specific measures to manage credit quality, interest rates, and liquidity[277]. - The company actively manages its portfolio and continuously adjusts the size and composition of its asset and hedge portfolio to mitigate interest rate risk[294]. - The company employs interest rate risk management techniques to mitigate the influence of interest rate changes on asset values, including the use of derivatives[280]. Financial Liabilities - The company has issued and outstanding $271.9 million aggregate principal amount of 6.25% convertible senior notes due January 2026[90]. - The company may incur losses if a counterparty to a repurchase agreement defaults on its obligation to resell the underlying security[87]. - The company is subject to a 100% excise tax on certain non-arm's-length transactions between a TRS and its parent REIT, emphasizing the importance of compliance with TRS regulations[146]. - The company’s convertible senior notes are carried at their unpaid principal balance, net of any unamortized deferred issuance costs[378].

Two Harbors Investment Corp. (NYSE:TWO) Q4 2023 Earnings Conference Call January 30, 2024 9:00 AM ET Company Participants Maggie Karr - Head of Investor Relations William Greenberg - President and Chief Executive Officer Mary Riskey - Vice President and Chief Financial Officer Nicholas Letica - Vice President and Chief Investment Officer Conference Call Participants Douglas Harter - UBS Trevor Cranston - JMP Securities Eric Hagen - BTIG Kenneth Lee - RBC Capital Markets Bose George - Keefe, Bruyette & Woods ...

An MSR + Agency REIT JANUARY 30, 2024 FORWARD-LOOKING STATEMENTS This presentation may include industry and market data obtained through research, surveys, and studies conducted by third parties and industry publications. We have not independently verified any such market and industry data from third-party sources. This presentation is provided for discussion purposes only and may not be relied upon as legal or investment advice, nor is it intended to be inclusive of all the risks and uncertainties that sho ...

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Two Harbors Investment Corp. (NYSE:TWO) Q3 2023 Earnings Conference Call October 31, 2023 10:00 AM ET Company Participants Maggie Karr - Head of Investor Relations William Greenberg - President and Chief Executive Officer Mary Riskey - Vice President and Chief Financial Officer Nicholas Letica - Vice President and Chief Investment Officer Conference Call Participants Bose George - Keefe, Bruyette, & Woods, Inc. Trevor Cranston - JMP Securities LLC Arren Cyganovich - Citi Eric Hagen - BTIG Operator Greetings ...

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents Two Harbors Investment Corp.'s unaudited condensed consolidated financial statements, including balance sheets, comprehensive loss, equity, and cash flows, with detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2023, total assets increased to **$13.92 billion** and liabilities to **$11.80 billion**, while stockholders' equity slightly decreased to **$2.12 billion** Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2023 (unaudited) | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$13,916,729** | **$13,466,160** | | Available-for-sale securities, at fair value | $8,830,726 | $7,778,734 | | Mortgage servicing rights, at fair value | $3,213,113 | $2,984,937 | | Cash and cash equivalents | $644,184 | $683,479 | | **Total Liabilities** | **$11,799,501** | **$11,282,635** | | Repurchase agreements | $9,113,270 | $8,603,011 | | Revolving credit facilities | $1,410,671 | $1,118,831 | | **Total Stockholders' Equity** | **$2,117,228** | **$2,183,525** | [Condensed Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) For Q3 2023, net income attributable to common stockholders was **$294.1 million**, or **$2.81 per diluted share**, but a **$350.9 million** unrealized loss on available-for-sale securities resulted in a **$56.8 million** comprehensive loss Key Performance Indicators (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Interest (Expense) Income | $(49,486) | $11,038 | $(117,182) | $53,469 | | Total Other Income | $446,547 | $329,537 | $649,629 | $661,350 | | Net Income Attributable to Common Stockholders | $294,077 | $263,865 | $292,688 | $449,220 | | Diluted EPS | $2.81 | $2.78 | $2.91 | $4.80 | | Comprehensive Loss Attributable to Common Stockholders | $(56,845) | $(287,808) | $(88,609) | $(438,509) | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity decreased from **$2.18 billion** at year-end 2022 to **$2.12 billion** as of September 30, 2023, primarily due to comprehensive loss and dividends, partially offset by common stock issuance Change in Stockholders' Equity (Nine Months Ended Sep 30, 2023, in thousands) | Description | Amount | | :--- | :--- | | Balance, December 31, 2022 | $2,183,525 | | Net Income | $326,829 | | Other Comprehensive Loss | $(381,297) | | Issuance of common stock, net | $177,729 | | Repurchase of common stock | $(7,056) | | Repurchase and retirement of preferred stock | $(9,966) | | Common dividends declared | $(145,501) | | Preferred dividends declared | $(36,595) | | Balance, September 30, 2023 | $2,117,228 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2023, net cash provided by operating activities was **$233.8 million**, while investing activities used **$973.3 million**, and financing activities provided **$657.9 million**, resulting in an **$81.5 million** net decrease in cash Cash Flow Summary (Nine Months Ended, in thousands) | Cash Flow Category | Sep 30, 2023 | Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $233,770 | $387,421 | | Net cash used in investing activities | $(973,253) | $(3,633,478) | | Net cash provided by financing activities | $657,939 | $2,732,403 | | **Net decrease in cash, cash equivalents and restricted cash** | **$(81,544)** | **$(513,654)** | [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's accounting policies and activities, including the **$44.7 million** RoundPoint acquisition, portfolio composition of Agency RMBS and MSR, derivative usage, financing, and equity structure - The company invests in Agency residential mortgage-backed securities (Agency RMBS) and mortgage servicing rights (MSR)[29](index=29&type=chunk) - On **September 30, 2023**, the company closed its acquisition of RoundPoint Mortgage Servicing LLC from Freedom Mortgage Corporation. The provisional purchase price was **$44.7 million**, creating **$27.7 million** in goodwill[31](index=31&type=chunk)[47](index=47&type=chunk)[49](index=49&type=chunk) - The company uses various derivative instruments, including TBAs, interest rate swaps, and futures, to mitigate interest rate risk. These are not designated as accounting hedges, leading to earnings volatility[93](index=93&type=chunk)[95](index=95&type=chunk) - During the nine months ended September 30, 2023, the company repurchased **593,453 common shares** for **$7.1 million** and various series of preferred stock for a total cost of **$10.0 million**[199](index=199&type=chunk)[206](index=206&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's strategy of pairing Agency RMBS with MSR, noting Q3 2023's higher interest rates, wider mortgage spreads, and the RoundPoint acquisition, while maintaining moderate leverage - The company's objective is to provide attractive risk-adjusted total returns by investing in Agency RMBS and MSR, deploying moderate leverage[235](index=235&type=chunk)[239](index=239&type=chunk) - The acquisition of RoundPoint Mortgage Servicing LLC closed on **September 30, 2023**, with a provisional purchase price of **$44.7 million**. This move is intended to bring servicing in-house, reduce costs, and provide greater control over the MSR portfolio[237](index=237&type=chunk) - Market conditions in **Q3 2023** saw rising interest rates and wider mortgage spreads. The 10-year Treasury yield rose **73 bps** to **4.57%**. Despite challenges, management believes the combination of wide spreads and slow prepayment rates presents an attractive return potential for its paired RMBS and MSR strategy[257](index=257&type=chunk)[258](index=258&type=chunk)[264](index=264&type=chunk) Key Financial Metrics | Metric | September 30, 2023 | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | :--- | | Book Value Per Common Share | $15.36 | $16.39 | $17.72 | | Debt-to-Equity Ratio | 5.2:1.0 | 5.0:1.0 | 4.4:1.0 | | Economic Debt-to-Equity Ratio | 6.3:1.0 | 6.4:1.0 | 6.3:1.0 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=68&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks including interest rate, prepayment, market value, and liquidity risks, which are managed through derivatives and non-derivative instruments, with sensitivity analysis performed - The company's primary market risks are interest rate risk, prepayment risk, market value risk, liquidity risk, and credit risk[337](index=337&type=chunk)[356](index=356&type=chunk)[359](index=359&type=chunk)[362](index=362&type=chunk)[364](index=364&type=chunk) - To manage interest rate risk, the company uses derivatives (TBAs, swaps, futures) and non-derivatives (MSR) to hedge its portfolio and adjust the duration of its floating-rate borrowings[341](index=341&type=chunk) Interest Rate Sensitivity Analysis (as of Sep 30, 2023) | Change in Interest Rates | -50 bps | -25 bps | +25 bps | +50 bps | | :--- | :--- | :--- | :--- | :--- | | **Change in Annualized Net Interest Income** | +$11.1M (+7.4%) | +$5.5M (+3.7%) | -$5.6M (-3.7%) | -$11.1M (-7.4%) | | **Change in Total Net Assets (% of common equity)** | -2.8% | -0.9% | 0.0% | -0.7% | - Prepayment risk impacts both Agency RMBS (through premium amortization) and MSR (by shortening the servicing income stream). An increase in prepayment rates generally reduces the value of MSR[356](index=356&type=chunk)[358](index=358&type=chunk) [Item 4. Controls and Procedures](index=71&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of **September 30, 2023**, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of **September 30, 2023**[365](index=365&type=chunk) - No changes occurred during the quarter ended **September 30, 2023**, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[366](index=366&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=72&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ongoing litigation with its former external manager, PRCM Advisers, following a 'for cause' termination, with counterclaims filed and an uncertain outcome - The company is in a legal dispute with its former manager, PRCM Advisers, following a 'for cause' termination of the management agreement in **July 2020**[368](index=368&type=chunk) - The complaint by PRCM Advisers includes allegations of trade secret misappropriation and breach of contract. The company believes the complaint is without merit and has filed counterclaims[368](index=368&type=chunk) [Item 1A. Risk Factors](index=72&type=section&id=Item%201A.%20Risk%20Factors) This section introduces new risk factors related to the RoundPoint Mortgage Servicing LLC acquisition, including the potential failure to realize expected benefits and exposure to new in-house mortgage servicing operational risks - The company may fail to realize the expected benefits of the RoundPoint acquisition, or realization may take longer than anticipated[370](index=370&type=chunk) - The acquisition exposes the company to new and more direct risks associated with in-house mortgage servicing, including compliance with laws and GSE guidelines, impacts of delinquencies, and IT system failures[372](index=372&type=chunk) - Future expansion into new products or services through RoundPoint could expose the company to new or increased risks[373](index=373&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=73&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company provides an update on its share repurchase programs, noting no repurchases of common or preferred stock during the three months ended **September 30, 2023** - The company did not repurchase any common or preferred shares during the three months ended **September 30, 2023**[374](index=374&type=chunk)[375](index=375&type=chunk) Cumulative Share Repurchase Program Status (as of Sep 30, 2023) | Security Type | Shares Repurchased | Total Cost | | :--- | :--- | :--- | | Preferred Stock | 3,471,768 | $61.4 million | | Common Stock | 3,637,028 | $208.5 million | [Item 3. Defaults Upon Senior Securities](index=73&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the period - None[376](index=376&type=chunk) [Item 4. Mine Safety Disclosures](index=73&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - None[377](index=377&type=chunk) [Item 5. Other Information](index=73&type=section&id=Item%205.%20Other%20Information) During the third quarter of 2023, certain directors and executive officers, including Chief Legal Officer Rebecca Sandberg and Chairman Stephen Kasnet, adopted or terminated Rule 10b5-1 trading plans - On **August 3, 2023**, Chief Legal Officer Rebecca Sandberg adopted a Rule 10b5-1 plan to sell shares to cover tax liabilities from future equity vesting[379](index=379&type=chunk) - On **August 10, 2023**, Chairman Stephen Kasnet adopted a Rule 10b5-1 plan to sell **40%** of shares vesting from future equity compensation[380](index=380&type=chunk) [Item 6. Exhibits](index=74&type=section&id=Item%206.%20Exhibits) This section provides a list of all exhibits filed with the Quarterly Report on Form 10-Q, including certifications by the CEO and CFO, and the financial statements formatted in Inline XBRL - A list of exhibits filed with the Form 10-Q is provided[383](index=383&type=chunk)