Two Harbors Investment Corp · NYSE:TWO
Two Harbors Investment — Q1 2017 Earnings Presentation
20 slides from Two Harbors Investment's earnings presentation, May 18, 2017
Slide 1: First Quarter 2017 Investor Presentation
First Quarter 2017 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 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 HYBRID MORTGAGE REIT PROVIDING STRONG RISK - ADJUSTED RETURNS 3 1) Except as otherwise indicated in this presentation, reported data is as of or for the period ended March 31, 2017. 2) Includes Agency and non-Agency RMBS, inverse-interest only securi
Slide 4: Delivering Results
-20.0% 10.0% 40.0% 70.0% 100.0% 130.0% 160.0% 190.0% 10/29/2009 11/29/2010 12/29/2011 1/29/2013 2/28/2014 3/31/2015 4/30/2016 TWO BBG REIT MTG Index Delivering Results 4 1) Two Harbors’ total stockholder return is calculated for the period October 29, 2009 through March 31, 2017. Total stockholder r
Slide 5: Strategic Overview
Strategic Overview 5 • Attractive investment opportunities in target assets • More efficient business model • Sophisticated approach to risk management • Opportunistic expansion of capital structure ― Successful issuance of preferred stock offering INCREASING EARNINGS POTENTIAL WHILE MAINTAINING RIS
Slide 6: Diversified Financing Profile
Diversified Financing Profile 6 REPURCHASE AGREEMENTS • Outstanding borrowings of $13.6 billion with 24 active counterparties; 31 total counterparties • Repo markets functioning efficiently for RMBS FEDERAL HOME LOAN BANK OF DES MOINES • Outstanding secured advances of $3.6 billion • Weighted averag
Slide 7: Portfolio Composition
HISTORICAL CAPITAL ALLOCATION PORTFOLIO COMPOSITION(1) Portfolio Composition 7 $20.0 BILLION PORTFOLIO AS OF MARCH 31, 2017 (1) For additional detail on the portfolio, see Appendix slides 14-19. (2) Commercial consists of senior, mezzanine and B-note commercial real estate debt and related instrumen
Slide 8: Portfolio Performance Q1-2017
Portfolio Performance 8 Q1-2017 PERFORMANCE SUMMARY (1) “Legacy” non-Agency RMBS includes non-Agency bonds issued up to and including 2009. “New issue” non-Agency MBS includes bonds issued after 2009. (2) Commercial consists of senior, mezzanine and B-note commercial real estate debt and related ins
Slide 9: Rates Update
Rates Update 9 PORTFOLIO SUMMARY MSR INTEGRAL COMPONENT OF RATES STRATEGY SENSIBLE APPROACH TO RISK MANAGEMENT • Low interest rate exposure • Utilize a combination of hedging tools • MSR is a key component of hedging strategy • Agency RMBS holdings of $15.2 billion – Increase in Agency RMBS from ini
Slide 10: Credit Update
Credit Update 10 • Legacy RMBS prices increased in the first quarter but significant opportunity remains • Home prices continue to improve; CoreLogic Home Price Index up 7.0% on a rolling 12-month basis(1) • Prepayments higher year-over-year – TWO’s 1Q-17 three month CPR of 6.7%, compared to 1Q-16 t
Slide 11: Commercial Real Estate Update
Commercial Real Estate Update 11 PORTFOLIO BY PROPERTY TYPE PORTFOLIO BY GEOGRAPHY (1) Stabilized LTV considers the prospective market value “as stabilized” which reflects the property’s market value as of the time the property is projected to achieve stabilized occupancy. Stabilized occupancy is th
Slide 12: Attractive Returns With Lower Risk
…LESS INTEREST RATE R ISK (3 ) . . . Attractive Returns With Lower Risk 12 AT T R AC T I VE & C O M PA R A BLE D I V I D E ND Y I E L D (1 ) …WITH LOWER LEVERAGE (2 ) . . . SUPERIOR ASSET SELECTION AND RISK MANAGEMENT DRIVE RETURNS WITH LESS RISK TWO Peer Average TWO Peer Average TWO Peer Average …A
Slide 13: Appendix
a —— Appendix rent Corp. TWO HARBORS Ir
Slide 14: Rates: Agency RMBS Metrics
Rates: Agency RMBS Metrics 14 AGENCY PORTFOLIO YIELDS AND METRICS AGENCY RMBS CPR(1) (1) Agency weighted average 3-month Constant Prepayment Rate (CPR) includes IIOs (or Agency Derivatives). (2) Weighted average cost basis includes RMBS principal and interest securities only. Average purchase price
Slide 15: Rates: Agency RMBS
Rates: Agency RMBS 15 As of March 31, 2017 Par Value ($M) Market Value ($M) % Prepay Protected(1) Amortized Cost Basis ($M) Weighted Average Coupon Weighted Average Age (Months) 30-Year fixed 3.0-3.5% $7,005 $7,150 53.2 % $7,244 3.4 % 6 4.0-4.5% 6,542 6,995 96.2 % 7,008 4.2 % 23 ≥ 5.0% 434 487 100.0
Slide 16: Rates: Mortgage Servicing Rights
Rates: Mortgage Servicing Rights(1) 16 As of December 31, 2016 As of March 31, 2017 Fair value ($M) $693.8 $747.6 Unpaid principal balance ($M) $62,828.0 $68,128.0 Weighted average coupon 3.8 % 3.9 % Original FICO score(2) 756 755 Original LTV 73 % 73 % 60+ day delinquencies 0.3 % 0.2 % Net servicin
Slide 17: Credit: Non-Agency MBS Metrics
Credit: Non-Agency MBS Metrics 17 NON-AGENCY PORTFOLIO COMPOSITION NON-AGENCY PORTFOLIO YIELDS AND METRICS (1) Weighted average cost basis includes MBS principal and interest securities only. Average purchase price utilized carrying value for weighting purposes. If current face were utilized for wei
Slide 18: Credit: Non-Agency MBS
Credit: Non-Agency MBS 18 As of March 31, 2017 Senior Bonds Mezzanine Bonds Total P&I Portfolio characteristics: Carrying value ($M) $1,410.6 $784.3 $2,194.9 % of non-Agency portfolio 64.3 % 35.7 % 100.0 % Average purchase price(1) $55.95 $65.84 $59.48 Average coupon 2.8 % 2.1 % 2.5 % Weighted avera
Slide 19: Commercial Real Estate Portfolio
Commercial Real Estate Portfolio (1) Cash coupon does not include origination or exit fees. (2) Yield includes net origination fees and exit fees, but does not include future fundings. (3) Initial LTV considers the original appraisal at the time of origination. (4) Stabilized LTV considers the prosp
Slide 20: Two Harbors Investment Corp.
TWO HARBORS. Investment Corp.
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