Two Harbors Investment Corp · NYSE:TWO
Two Harbors Investment — Corporate Update (August 2014)
11 slides from Two Harbors Investment's corporate update, Aug 6, 2014
Slide 1: Two Harbors Subprime Bond Case Study
August 6 , 2014 Two Harbors│Subprime Bond Case Study
Slide 2: Safe Harbor Statement
Safe Harbor Statement FORWARD-LOOKING STATEMENTS This presentation 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,
Slide 3: Subprime Bond Overview
Subprime Bond Overview 3 M A R K E T C H A R ACT E R IST I C S • Subprime sector since the crisis has functioned like a distressed market • Legacy subprime bonds have been purchased at a significant discount to par due to the credit sensitivities of the security – Became deeply discounted as borrowe
Slide 4: Two Harbors Subprime Bond Portfolio
Two Harbors Subprime Bond Portfolio S U BP R I M E H O L D I N GS (1 ) • Approximately 80% of non-Agency RMBS portfolio • Carrying value of $2.4 billion • Face value of $3.5 billion • Average purchase price $47.50 • Average coupon of 1.3% – Approximately 87% of subprime holdings have floating rate(2
Slide 5: Bond and Collateral Characteristics at Issuance
Bond and Col la tera l Character i s t i cs at Issuance Home Equity Asset Trust (HEAT) 2006-3 at Issuance(1) • Senior bonds pay sequentially; A1 through A4 – Backed by group 2 collateral • Senior bonds initially AAA rated • Receives protection from credit losses from the subordinate bonds and ongoin
Slide 6: HEAT 2006-3 at Two Harbors Acquisition in 2011
HEAT 2006-3 at Two Harbors Acquisition in 2011 D E A L S U M M A RY (1 ) • A1 and A2 were paid off • A3 was receiving principal payments • A4 downgraded to “C” rating C O L L AT E RAL S U M M A RY (2 ) • 60+ day delinquencies 32% • 6-month severities 71% • Credit enhancement 37% – Not including exce
Slide 7: HEAT 2006-3 2A4 Price Path – 4/1/2011 to 6/30/2014
HEAT 2006-3 2A4 Price Path – 4/1/2011 to 6/30/2014 7 (1) Source: Bloomberg 4/15/11 - Bond acquired by Two Harbors at $62.41 6/26/14 - Bond sold by Two Harbors at $97.50
Slide 8: HEAT 2006-3 at Two Harbors Sale in 2014
HEAT 2006-3 at Two Harbors Sale in 2014 8 S eni o r B o n d s A1, A2 & A3 Paid off A4 44%-100%(1) $65.0M Face Value S ub B o n d s SUBORDINATE BONDS Absorb the first 44% of losses, after depletion of ongoing excess spread. D E A L S U M M A RY (1 ) • A1, A2 and A3 were paid off • A4 had been upgrade
Slide 9: Outlook for Subprime Bond Portfolio
Outlook for Subprime Bond Portfolio W E BE L I E V E U P S I D E P OT E N T I AL R E M A I N S I N O U R S U BP R I M E P O RT FO L I O • Conservative prepay/default assumptions • Higher prepayment behavior and potential servicing actions could provide value in the future ‒ Refinancing due to low in
Slide 10: Contact Information
Contact Information 10 FO R F U RT H E R I N FO R M AT IO N, P L E A S E C O N TAC T: July Hugen Director of Investor Relations Two Harbors Investment Corp. 612.629.2514 July.Hugen@twoharborsinvestment.com Investor Relations Two Harbors Investment Corp. 612.629.2500 investors@twoharborsinvestment.co
Slide 11: Two Harbors Investment Corp.
TWO HARBORS Investment Corp.
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