Two Harbors Investment Corp · NYSE:TWO
Two Harbors Investment — Investor Presentation (March 2014)
12 slides from Two Harbors Investment's investor presentation, Mar 18, 2014
Slide 1: Safe Harbor Statement
Safe Harbor Statement FORWARD-LOOKING STATEMENTS This presentation includes -looking 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, reade
Slide 2: Agency & Non-Agency Mortgage-Backed Securities
Agency & Non-Agency Mortgage-Backed Securities 3 WHAT IS AN AGENCY SECURITY? An Agency residential mortgage-backed security (RMBS) conforms with certain requirements, such as size, documentation and loan-to-value (LTV) ratios, and is backed by Fannie Mae, Freddie Mac or Ginnie Mae. Fannie Mae and Fr
Slide 3: Credit Portfolio Summary
CREDIT PORTFOLIO SUMMARY Portfolio Composition 4 $3.5 billion Credit portfolio includes: Non-Agency RMBS Net economic interest in securitization trusts Prime jumbo residential mortgage loans Credit sensitive loans (CSL) Strong Credit strategy returns drove aggregate portfolio performance in 2013 Sub
Slide 4: Securities Portfolio Characteristics
Non-Agency Securities 5 Portfolio Characteristics Carrying Value ($M) $2,751 Average Purchase Price(2) $53.69 Average Coupon 2.3% Weighted Average Market Price(3) $66.43 Current Performance 60+ Day Delinquencies 31.7% Average Credit Enhancement(4) 11.0% 3-Month CPR(5) 3.8% (1) Excludes non-Agency in
Slide 5: Performance
Non-Agency Performance LEGACY NON-AGENCY RMBS FOCUSED ON AREAS WITH STRONG HOUSING RECOVERY METRICS Non-Agency RMBS have rallied as the housing market has recovered In 2013, the national average housing price appreciation (HPA) was +11.0%(1) Still potential for appreciation: National HPA is 22% high
Slide 6: RMBS Remain Attractive
Non-Agency RMBS Remain Attractive NON-AGENCY RMBS PROVIDE ATTRACTIVE YIELDS COMPARED TO OTHER OPPORTUNITIES IN CREDIT SECTOR 7 MARKET YIELDS(1) (1) Source: Credit Suisse research as of January 31, 2014 0 2 4 6 8 10 2.7 2.7 2.8 4.1 4.5 4.5 4.7 4.8 5.5 5.5 5.5 5.6 5.9 6.0 6.4 6.5 6.8 6.9 8.0 8.0 9.2 9
Slide 7: Outlook: Affordability Remains High
Non-Agency Outlook AFFORDABILIT Y REMAINS HIGH; CHEAPER TO OWN THAN RENT Current mortgage payment-to-income ratio of 18.3% is 25% below the historical mean from 1990 to 2000 of 24.4%(1) Home price vs. rental cost ratio is low; owning a home is cheaper than renting(2) 8 (1) CoreLogic Housing Trend Re
Slide 8: Outlook: Expect Prepayments to Rise
Non-Agency Outlook EXPECT PREPAYMENTS TO RISE Drivers of higher prepayments include: Refinancings due to low interest rates Better economic growth HPA Increasing housing turnover from better mobility as employment metrics improve WE BELIEVE SIGNIFICANT UPSIDE POTENTIAL REMAINS Conservative prepay/de
Slide 9: Appendix
Appendix
Slide 10: RMBS Market
Non-Agency RMBS Market 11 THE NON-AGENCY RMBS MARKET I S GENERALLY COMPRISED OF FOUR SUB-SECTORS: PRIME, SUBPRIME, ALTA AND OPTION ARM. THESE SECTORS REPRESENT A DIVERSE RANGE OF LOAN AND BORROWER CHARACTERISTICS . PRIME LOANS: Borrowers generally have the highest credit worthiness based on a number
Slide 11: RMBS Market (cont.)
Non-Agency RMBS Market (cont.) 12 THE NON-AGENCY RMBS MARKET I S GENERALLY COMPRISED OF FOUR SUB-SECTORS: PRIME, SUBPRIME, ALTA AND OPTION ARM. THESE SECTORS REPRESENT A DIVERSE RANGE OF LOAN AND BORROWER CHARACTERISTICS . ALT- A LOANS: isk profile, such as a higher LTV ratio or incomplete documenta
Slide 12: Two Harbors Investment Corp.
TWO HARBORS Investment Corp. ‘APs Gxt Manon Corry
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