Two Harbors Investment Corp · NYSE:TWO
Two Harbors Investment — Q4 2011 Earnings Presentation
17 slides from Two Harbors Investment's earnings presentation, Feb 10, 2012
Slide 1: Two Harbors Investment Corp. Fourth Quarter 2011 Investor Presentation
Two Harbors Investment Corp. Fourth Quarter 2011 Investor Presentation
Slide 2: Safe Harbor Statement
1 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 an
Slide 3: Two Harbors is Well-Positioned
2 Two Harbors is Well-Positioned NYSE-listed hybrid mortgage REIT investing in residential mortgage and housing sectors ▪ Total shareholder return since inception of 43%1 ▪ Thirteen-fold increase in portfolio since inception to $6.4 billion ▪ Security selection and credit analysis driven by experien
Slide 4: Supply and Opportunity
3 Supply and Opportunity Source: Two Harbors estimates and the Federal Reserve. $0 $400 $800 $1,200 2012 2014 2016 2018 2020 US D $B GSE - FNMA and FHLMC Projected GSE Portfolio Run-off Macro Trends Continued “supply” will likely keep Agency spreads attractive. ― Fannie Mae and Freddie Mac are man
Slide 5: TWO's Competitive Advantages Drive Returns
TWO’s Competitive Advantages Drive Returns Core Strengths Capture Benefits of Hybrid Model: We seek out opportunities in Agency and non-Agency RMBS and believe this diversification allows us to better mitigate risks, including volatility in interest rates, prepayments, and credit risk. Opportuni
Slide 6: Fluid Asset Allocation Drives Performance
Fluid Asset Allocation Drives Performance 5 (1) ABX index represents ABX 06-2 AAA. (2) 2011 dividends may not be indicative of future dividend distributions. The company ultimately distributes dividends based on its taxable income per common share, not GAAP earnings. The annualized dividend yield on
Slide 7: Investment Portfolio
Investment Portfolio 6 (1) Includes interest-only securities (“IOs”) and IIOs of $155 million as of December 31, 2011. (2) Home Equity Conversion Mortgage loans (or “HECM”) are loans that allow the homeowner to convert home equity into cash collateralized by the value of their home. Agency Bonds $5.
Slide 8: Security Selection is Paramount
7 Security Selection is Paramount (1) All figures and data on this slide are as of December 31, 2011. (2) Securities collateralized by loans with greater than or equal to 80% loan-to-value ratio. (3) Securities collateralized by loans of less than or equal to $175K, but more than $85K. (4) Securitie
Slide 9: Sophisticated Risk Management Approach
Sophisticated Risk Management Approach Hedging Funding and Liquidity Portfolio reflects low interest rate exposure Swaps/swaptions complement IO strategy Optional protection still in place – reduced premium at risk 8 Long-dated repos and non-Agency facility provide stability Maturities ove
Slide 10: Attractive Returns With Lower Risk
9 Attractive Returns With Lower Risk Attractive & Comparable Dividend Yield1… … With Lower Leverage2… … Less Interest Rate Exposure 3 … … And Less Prepayment Risk 4 4.2x 7.0x 4.4x 7.2x – 2.0x 4.0x 6.0x 8.0x 8.0% 21.0% 6.3% 17.4% 5.0% 11.0% 5.0% 16.9% – 10.0% 20.0% 30.0% 17.3% 15.8% – 5.0% 10.0% 15.0
Slide 11: For further information, please contact
10 For further information, please contact: Christine Battist Investor Relations Two Harbors Investment Corp. 612.629.2507 Christine.Battist@twoharborsinvestment.com Contact Information Anh Huynh Investor Relations Two Harbors Investment Corp. 212.364.3221 Anh.Huynh@twoharborsinvestment.com
Slide 12: Appendix
Appendix
Slide 13: Agency Securities as of December 31, 2011
12 (1) Market value of IOs of $84 million and Agency Derivatives of $155 million as of December 31, 2011. Agency Securities as of December 31, 2011 Par Value ($K) Market Value ($K) % of Agency Portfolio Amortized Cost Basis ($K) Weighted Average Coupon Weighted Average Age (Months) 30-Year Mortgages
Slide 14: Non-Agency Securities as of December 31, 2011
Senior Bonds Mezzanine Bonds Total P&I Bonds Portfolio Characteristics Carrying Value ($K) $932,867 $262,633 $1,195,500 % of Non-Agency Portfolio 78.0% 22.0% 100.0% Average Purchase Price $55.05 $58.19 $55.74 Average Coupon 2.3% 1.3% 2.0% Collateral Attributes Average Loan Age (months) 65 83 69 Aver
Slide 15: Subprime Senior Bond - HEAT 2006-3 2A4
Pays sequentially after the A3 is fully paid, expected to be in early 2014 Receives protection from credit losses from the subordinate bonds and ongoing excess interest Pays a coupon of LIBOR + 0.31% Wells Fargo & SPS as servicers A3 38.4%-100% $31M Current Face 1.1 Yr WAL1 Discount Subprime
Slide 16: Investment Team
15 William Roth − Also serves as Fixed Income Portfolio Manager for Pine River − 31 years in mortgage securities market, including at Salomon Brothers and Citi; Managing Director in proprietary trading group managing MBS and ABS portfolios Investment Team Brad Farrell − Most recently served as Two H
Slide 17: Overview of Pine River Capital Management
16 Overview of Pine River Capital Management Global multi-strategy asset management firm providing comprehensive portfolio management, transparency and liquidity to institutional and high net worth investors Founded June 2002 with offices in New York, London, Beijing, Hong Kong, San Francisco and
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