Two Harbors Investment Corp · NYSE:TWO
Two Harbors Investment — Investor Presentation (November 2011)
19 slides from Two Harbors Investment's investor presentation, Nov 28, 2011
Slide 1: Two Harbors Investment Corp. Investor Presentation
Two Harbors Investment Corp. Investor Presentation
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 Secutities Litigation Reform Act of 1995. Actual results may differ from expectations, estimates and projections and
Slide 3: Two Harbors is Well-Positioned
Two Harbors is Well-Positioned = NYSE-listed hybrid mortgage REIT investingin residential mortgage backed securities. — Formed in 2009 to capitalize on the changing mortgagelandscape — Manages §6.6 billion in Agency and non-Agency secutities across all residential sectors — Strong focus on stable bo
Slide 4: Supply and Opportunity
Supply and Opportunity = Continued Agency “supply” will likely keep spreads attractive. — FannieMaeand Freddie Mac are mandated to shrink their portfolios by at least 10% per year UsD $B eiahi = Expected double-digit loss-adjusted yields are available in the non-Agency sector due toweak pricing and
Slide 5: Two Harbors' Competitive Advantages
Two Harbors’ Competitive Advantages Core Strengths Opportunistic September 30, 2010 = Capture Benefits of Hybrid Model: We seek out opportunities in Agency and non-Agency RMBS and believe this diversification allows us to better mitigate tisks, including volatility in interest rates, prepayments, No
Slide 6: Fluid Asset Allocation Drives Performance
Fluid Asset Allocation Drives Performance ‘As of September 30, 2011 $6.6B RMBS Portfolio Gann yoda ARMs $239 Mezzanine 251 s, 20-Yeu Fed se om $995, & 10s and I1Ost 251 Otter Fed $059 HECM? to28 15Yeu Fired $786 WN Agency Bonds $5.38 (1%) [ENN Non-Agency Bonds $1.38 (19%) » Q 18) Repectveyir ide Ds
Slide 7: Minimal Impact to Portfolio From HARP 2.0
Minimal Impact to Portfolio From HARP 2.0 Key Provisions of HARP 2.0 Reduction in loan level pricing adjustments for those with LTV>80 Lenders allowed to solicit HARP-eligible borrowers Extends HARP through December 31, 2013 Loans with LTV>125 can be delivered starting February 1, 2012 TWO Portfolio
Slide 8: Security Selection Drives Performance
Security Selection Drives Performance Portfolio Com position’ Q3-2011 Agency Book Post 2006 Premio £10 Fi OtterLoan NMA HECM Balance Pool 18% 14% Hig tT a ———— Pospayment Proweted e $85K Max Pool ” Seasoned 41% 10% Pest 2006: Discount 3% Q3-2011 Non-Agency Book Option ARM 18% Sub-Poime 18% ® @ ® 6 ‘
Slide 9: Non-Agency Opportunity
Non-Agency Opportunity Cheap Asset Class Relative Price Performance! Im proving Unde ing Performance 60+ Day Sub-Prime Delinquencies? 150% ae, 130% 2h 0% 10% 90% 1% ee, 5% 10% SP gw 3 » © a » ge ad fe wT pt of MT pe wey yw oof —— sPx39% = HYCDE: 174 | ABE:-13% = Technicals outweigh fundamentals = Do
Slide 10: Non-Agency Discount Bond Example
Non-Agency Discount Bond Example Represents actual bond held in Two Harbors’ portfolio as of the filing date of this presentation. Collateral summary and yield analysis scenatios represent the views of Two Harbors and its extemal manager, PRCM Advisers LLC, and are provided for illustration purposes
Slide 11: Sophisticated Risk Management Approach
Sophisticated Risk Management Approach = Portfolio reflects low interest rate exposure = Swaps/swaptions complement IO strategy = Optional protection still in place — reduced premium at risk Swaptions Profile = Swaptions payoff profileallows us to benefit if rates fall, but have protection if rates
Slide 12: Attractive Returns With Lower Risk
Attractive Returns With Lower Risk Superior asset selection and risk management drive returns while taking on less tisk. Attractive & Comparable Dividend Vield!... ... With Lower Leverage”... Dm Box 12% 159% oe 50% 8.08 42x 44x 100% 402 50% 20 ~ 93-2011 7 Qeantt Qozatt Qeantt Qaeoit Peete dan wo Pee
Slide 13: Contact Information
Contact Information For further information, please contact: Christine Battist Investor Relations Two Harbors Investment Corp. 612.629.2507 Anh Huynh Investor Relations Two Harbors Investment Corp. 212,364,322
Slide 14: Appendix
VA Appendix
Slide 15: Evolving Mortgage Landscape Creates Opportunity
Evolving Mortgage Landscape Creates Opportunity = Changes to the mortgage market will create great opportunity Thegovernment’s share of the §11 trillion mortgage market will shrink considerably. The Administration intends for private capital to play the predominant role in housing finance. REITs /Ot
Slide 16: Agency Securities as of September 30, 2011
Agency Securities as of September 30, 2011 MarkerValue % of Agency Amortized Cost Weighted Average Weighted Average Par Value (SK) 6K) Portfolio Basis($K) Coupon Age (Months) 30-Year Moxtgages 54.5% $ 1360528 $ 1,448,336 273% § 1,445,039 42% 8 506.0% 1,087,362 1,187,283 22.3% 1,177,874 54% 25 26.5%
Slide 17: Non-Agency Securities as of September 30, 2011
Non-Agency Securities as of September 30, 2011 Senior Mezzanine Toul P&I Bonds Bonds Bonds Portfolio Characteristics Canrying Value (6M) $995 $261 $1,256 A of Non-Agency Postfolia 12 20.8% 100.0% Avesage Purchase Price $55.06 $58.57 $55.79 Avesage Coupon 22% 13% 2.0% Collateral Ataibutes Avetage Loa
Slide 18: Two Harbors Team with Deep Securities Experience
Two Harbors Team with Deep Securities Experience Investment Team { Co-Chief Investment Officers | | SubstantialRMBS Team | Steven Kuhn William Roth Traders and Analysts ~— Also serves as Partner-Head of Fixed — Also serves as Fixed Income Portfolio — Trading team of eight traders and Income Trading
Slide 19: Overview of Pine River Capital Management
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 m Founded June 2002 with offices in New York, London, Beijing, Hong Kong, San Francisco and Min
Two Harbors Investment — Investor Presentation (November 2011) on 6ix