Two Harbors Investment Corp · NYSE:TWO
Two Harbors Investment — Q4 2018 Earnings Presentation
15 slides from Two Harbors Investment's earnings presentation, Mar 14, 2019
Slide 1: A Leading Residential Hybrid Mortgage REIT: Fourth Quarter 2018 Investor Presentation
T WO HA RBORS IN V E ST ME NT C ORP. A Leading Residential Hybrid Mortgage REIT Fourth Quarter 2018 Investor Presentation 1
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: Two Harbors Investment Corp. Overview
Two Harbors Investment Corp. Overview(1) LEADING RESIDENTIAL HYBRID MORTGAGE REIT $3.5 billion $4.3 billion $27.6 billion hybrid portfolio comprised of Rates market capitalization(2) total stockholders’ equity and Credit strategies(3) 176% 2.6% 25% lower book value volatility compared to total stock
Slide 4: Substantial Total Stockholder Return Outperformance
Substantial Total Stockholder Return Outperformance • Outperformed peer group by over 50% since our inception • Delivered total stockholder return of 176% during that time(1) ― Bloomberg REIT Mortgage Index total stockholder return of 125% over the same period of time(2) 220.0% 190.0% 176% 160.0% 13
Slide 5: Book Value Stability Since Inception
Book Value Stability Since Inception • We have grown our book value by 2.6% since our inception in 2009(1)(2) • Peer average over same time period was (32.8%)(1)(3) • 25% lower book value volatility since inception compared to mortgage REIT average(4) BOOK VALUE GROWTH(1)(3) BOOK VALUE OUTPERFORMANC
Slide 6: Fourth Quarter 2018 Portfolio Composition
Fourth Quarter 2018 Portfolio Composition PORTFOLIO COMPOSITION(1) CAPITAL ALLOCATION $27.6 BILLION PORTFOLIO AS OF DECEMBER 31, 2018 July 31, 2018 - March 31, Acquisition of December 31, 2018 CYS 2018 Non-Agency $3.9b Rates 69 % 77 % 74 % MSR $2.0b Agency 50 % 59 % 50 % MSR 19 % 18 % 24 % Agency $2
Slide 7: Portfolio Highlights and Opportunities for 2019
Portfolio Highlights and Opportunities for 2019 ATTRACTIVE INVESTMENT OPPORTUNIT Y IN 2019 AS A RESULT OF SPREAD WIDENING IN 2018 RATES STRATEGY • Wider spreads creates attractive opportunity to invest capital in Agency RMBS • Acquired $36.1 billion UPB of MSR in the fourth quarter 2018; grew portfo
Slide 8: Portfolio Highlights and Opportunities for 2019: Hedging
Portfolio Highlights and Opportunities for 2019 • Active management of risk positioning with goal of maintaining low exposures to rates and spreads HEDGING ACROSS THE CURVE Book value exposure to changes in rates(1) Net interest income exposure to changes in rates(2) +25 basis points (0.1 %) +25 bas
Slide 9: a all
a all _ is ae ST ee ee ——— theta i — Fen Te as } — b me — The as TWO HARBORS —— —— > = =
Slide 10: Rates: Agency RMBS Metrics
Rates: Agency RMBS Metrics AGENCY PORTFOLIO YIELDS AND METRICS AGENCY PORTFOLIO COMPOSITION Hybrid ARMs and Realized Q3- At September Realized Q4- At December IO & Inverse IO Other Portfolio Yield 2018 30, 2018 2018 31, 2018 30-Year Fixed 1.1% 5% & above 1.3% Agency yield 3.1% 3.4% 3.3% 3.5% 6.7% Re
Slide 11: Rates: Agency RMBS Portfolio and Net TBA Position
Rates: Agency RMBS Agency RMBS Portfolio and Net TBA Position $ in millions - as of December 31, 2018 % Prepay Amortized Weighted Weighted Average Age MBS Coupon Par Value Market Value Protected(1) Cost Basis Average Coupon (Months) 30-Year Fixed 3.0%-3.5% $234 $235 100.0% $236 3.5% 19 4.0% 8,641 8,
Slide 12: Rates: Mortgage Servicing Rights
Rates: Mortgage Servicing Rights(1) As of September 30, 2018 As of December 31, 2018 Fair value ($M) $1,664.0 $1,993.4 Unpaid principal balance ($M) $131,114.5 $163,102.3 Weighted average coupon 4.1 % 4.1 % Original FICO score(2) 751 752 Original LTV 74 % 75 % 60+ day delinquencies 0.4 % 0.3 % Net s
Slide 13: Credit: Non-Agency Securities Metrics
Credit: Non-Agency Securities Metrics NON-AGENCY PORTFOLIO YIELDS AND METRICS LEGACY NON-AGENCY PORTFOLIO COMPOSITION At Realized Q3- September Realized Q4- At December Portfolio Yield 2018 30, 2018 2018 31, 2018 Non-Agency: Loan Type September 30, 2018 December 31, 2018 Non-Agency yield 7.4% 7.2% 7
Slide 14: Credit: Legacy Non-Agency Securities
Credit: Legacy Non-Agency Securities As of December 31, 2018 Senior Bonds Mezzanine Bonds Total P&I Portfolio characteristics: Carrying value ($M) $2,842.7 $799.9 3,642.6 % of non-Agency portfolio 78.0 % 22.0 % 100.0 % Average purchase price(1) $60.72 $65.96 $61.87 Average coupon 3.4 % 3.2 % 3.3 % W
Slide 15: Slide 15
Two Harbors Investment — Q4 2018 Earnings Presentation on 6ix