Two Harbors Investment Corp · NYSE:TWO
Two Harbors Investment — Investor Presentation (January 2010)
22 slides from Two Harbors Investment's investor presentation, Jan 12, 2010
Slide 1: Two Harbors Investment Corp. January 2010 Investor Presentation
Two Harbors Investment Corp. January 2010 Investor Presentation
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation may include “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, consequently, inve
Slide 3: Key Highlights
Two Harbors Investment Corp. (NYSE Amex: TWO; TWO.WS) completed its merger transaction with Capitol Acquisition Corp. on October 28, 2009. Two Harbors commenced operations as a REIT investing in residential mortgage- backed securities on October 29, 2009. The transaction generated approximately $124
Slide 4: Two Harbors' Business Overview
Value-driven investing philosophy coupled with a holistic approach which evaluates securities across all subsets of the non-Agency and Agency RMBS universe. Dynamic portfolio in which the asset allocation evolves with changing market opportunities. Portfolio construction emphasizes diversification a
Slide 5: Executive Team with Deep Securities Experience
Executive Team with Deep Securities Experience Chief Executive Officer Steve Kuhn Also serves as Partner - Head of Fixed Income Trading at Pine River. Goldman Sachs Portfolio Manager from 2002 to 2007. 17 years investing in and trading mortgage backed securities and other fixed income securities for
Slide 6: Overview of Pine River Capital Management
Experienced, Cohesive Team: Six partners together for average of 15 years. Average 19 years hedge fund experience. 67 employees, 24 investment professionals. 2 No senior management turnover. Historically low attrition. Overview of Pine River Capital Management Founded June 2002 with offices in New Y
Slide 7: Pine River Offers Extensive MBS Expertise
Pine River Offers Extensive MBS Expertise Trading Team: 3 Traders / 2 Analysts 2 Trader A - Formerly Goldman Sachs Asset Management, risk management. Trader B - Formerly UBS Securities, member of top mortgage sales team. Trader C - Formerly Citi, member of proprietary trading group. Analyst A - Form
Slide 8: Market Opportunity
Market Opportunity Traditional providers of capital have left the market. Fannie Mae & Freddie Mac, historically the overseers of relative value and effectively the world’s two largest mortgage “hedge funds”, cannot participate in the current price discrepancies. The capital bases of traditional mar
Slide 9: Market Opportunity
Option Arm Super Senior Alt - A - 30 Year Fixed Prime - 30 Year Fixed Dec-09 Aug-09 May-09 Feb-09 Oct-08 Jul-08 Apr-08 Jan-08 100 90 80 70 60 50 40 30 Non-Agency securities are trading at low prices. Significant opportunities in both non-Agency and Agency securities. Source: Amherst Securities. Note
Slide 10: Non-Agency Discount Example
Non-Agency Discount Example Super Senior Bond backed by Fixed Rate Alt-A collateral (AHM 2005-2 5A4A): First 17.5% of loss is absorbed by credit support bonds. Pays a coupon of 5.38%. Last Cash Flow Sequential – ~9yr wal. Collateral: 2005 production, Fixed Rate, 55mos loan age. 706 FICO, 69% LTV. SU
Slide 11: Prepayment Cycle Creates Pricing Opportunities
2009 July 2003 Incentive to Prepay in bps 70 60 50 40 30 20 10 0 Source: Source: Merrill Lynch Fixed Income Strategy and J.P. Morgan Securities Inc. (all data as of July 2009). Capacity constraints of mortgage originators. Significant declines in homeowners’ equity reduces borrowers’ ability to acce
Slide 12: Asset Portfolio as of December 8, 2009
December 8, 2009 $512 - $19 $25 $68 $400 Total Target Assets 1 ($M) $488 - $16 $25 $37 $410 Total Assets Purchased ($M) $124 Aggregate Capital for Investment ($M) 100% 0 - 10% 10 - 20% 15 - 25% 25 - 30% 30 - 35% Target Allocation (%) - 100% $6 Cash 2 95% $124 100% 100% 50% 10% Assumed Haircut (%) $1
Slide 13: Agency and Non-Agency Portfolio Detail
10-15% - - $62 Total Non-Agency - Weighted Average Price ($) $38.9 $55.3 Weighted Average Price ($) - $104.9 $104.6 Weighted Average Price ($) 10-15% Estimated Yield Range 1 (%) 12-20% 8-12% Estimated Yield Range 1 (%) 2.60-3.00% 2.25-2.50% 4.00-4.30% Estimated Yield Range 1 (%) Weighted Average Cou
Slide 14: Agency Bond Profile
Bonds with explicit prepayment protection or seasoned bonds represent approximately 83% of portfolio. We believe seasoned bonds reflect refinancing burnout and subsequently less prepayment risk. Average reset is 21 months for Hybrid ARMs. Total IO exposure of ~$35M 1 Agency Pools: Premium over Par $
Slide 15: Non-Agency Bond Profile
Non-Agency Bond Profile 67% of non-Agency bonds have floating rate coupons which should realize benefits in the event of rising interest rates. Prepayment Upside - Total Discount to Par: ~$67M Senior Bonds $28M Mezzanine Bonds $39M Portfolio by Seasoning Senior Mezz Total Pre-2002 2% 0% 2% 2002-2005
Slide 16: Financing, Duration and Leverage Profile
Financing $383 $205 $113 $65 Amount ($M) 0.34% 0.40% 0.27% 0.28% Weighted Average Rate (%) 90+ days Within 30 days 30 – 90 days Total 3 Repurchase Agreements 1 Financing, Duration and Leverage Profile Leverage 3.1x $124 $383 Amount ($M) Debt-to-Equity Debt 2 Equity Leverage As of December 8, 2009. T
Slide 17: Appendix
Appendix
Slide 18: Board of Directors
Board of Directors Brian Taylor, Chairman. Mr. Taylor is the Chief Executive Officer and Chief Investment Officer of Pine River. Mr. Taylor founded Pine River in 2002 and is responsible for management of the business and oversight of its funds. Prior to Pine River’s inception, Mr. Taylor was with EB
Slide 19: Board of Directors Continued
Board of Directors Continued… Stephen G. Kasnet, Independent Director and Audit Committee Chair. Stephen is a Director and Chairman of the Board of Columbia Laboratories, Inc. (NASDAQ: CBRX). He has been President and Chief Executive Officer of Raymond Property Company LLC since 2007. From 2000 to 2
Slide 20: Executive Team
Executive Team Thomas Siering, Chief Executive & Director. Mr. Siering also serves as Partner—Head of Fundamental Strategies at Pine River. Prior to joining Pine River as a Partner in 2006, Tom was head of the Value Investment Group at EBF & Associates in Minnetonka, MN. He joined EBF in 1989 and wa
Slide 21: Executive Team Continued
Executive Team Continued… Brad Farrell, Controller. Prior to joining Pine River in September 2009, Brad was Vice President, Director, External Reporting for GMAC ResCap, responsible for external reporting initiatives within the corporate function of GMAC ResCap from 2007 to 2009. From 2002 to 2007 h
Slide 22: Contact Information
Contact Information For further information, please contact: Anh Huynh Investor Relations Two Harbors Investment Corp. 612.238.3348 Anh.Huynh@twoharborsinvestment.com 22
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