Two Harbors Investment Corp · NYSE:TWO
Two Harbors Investment — Q2 2017 Earnings Presentation
21 slides from Two Harbors Investment's earnings presentation, Sep 19, 2017
Slide 1: Second Quarter 2017 Investor Presentation
Second 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 REAL ESTATE INVESTMENT TRUST 3 1) Except as otherwise indicated in this presentation, reported data is as of or for the period ended June 30, 2017. 2) Includes Agency and non-Agency RMBS, inverse-interest only securities (Agency Deriv
Slide 4: Strategic Overview
Strategic Overview 4 …through attractive investment opportunities in target assets… …and a sophisticated approach to risk management POSITIONED TO DELIVER STRONG RETURNS AND PROTECT BOOK VALUE THROUGH A VARIETY OF RATE ENVIRONMENTS Committed to maximizing stockholder returns…
Slide 5: Book Value Stability
8.5% TWO Co. A Co. B Co. C Co. D Co. E Co. F Co. G Co. H Book Value Stability 5 • Since inception, book value has grown by 8.5%; peer median over same time period is (23.0%)(1) 1) Book value growth measured from December 31, 2009 through June 30, 2017. Companies A-H represent comparable mortgage REI
Slide 6: Delivering Results
-20.0% 10.0% 40.0% 70.0% 100.0% 130.0% 160.0% 190.0% 10/29/2009 10/29/2010 10/29/2011 10/29/2012 10/29/2013 10/29/2014 10/29/2015 10/29/2016 TWO BBG REIT MTG Index Delivering Results 6 1) Two Harbors’ total stockholder return is calculated for the period October 29, 2009 through June 30, 2017. Total
Slide 7: Attractive Returns With Lower Risk
…LESS INTEREST RATE R ISK (3 ) . . . Attractive Returns With Lower Risk 7 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 …AN
Slide 8: Portfolio Composition
HISTORICAL CAPITAL ALLOCATION PORTFOLIO COMPOSITION(1) Portfolio Composition 8 $19.5 BILLION PORTFOLIO AS OF JUNE 30, 2017 (1) For additional detail on the portfolio, see Appendix slides 12-17. (2) Commercial consists of the consolidated financial results of Granite Point and its subsidiaries, which
Slide 9: Rates Update
Rates Update 9 PORTFOLIO SUMMARY DELIVERING RESULTS THROUGH VARIETY OF RATE ENVIRONMENTS • Pairing MSR with Agency RMBS results in a portfolio that has higher return potential with lower mortgage spread risk and lower overall leverage – Mitigates impact to book value in spread widening scenario • Ut
Slide 10: Credit Update
Credit Update 10 • Home prices continue to improve; CoreLogic Home Price Index up 6.7% on a rolling 12-month basis(1) – Supported by affordability, low housing supply and strong demand • Believe future performance will continue to be strong, driven by increasing prepayments, lower delinquencies, def
Slide 11: Appendix
a —— Appendix rent Corp. TWO HARBORS Ir
Slide 12: Rates: Agency RMBS Metrics
Rates: Agency RMBS Metrics 12 AGENCY PORTFOLIO YIELDS AND METRICS AGENCY RMBS CPR(1) (1) Agency weighted average 3-month Constant Prepayment Rate (CPR) includes IIOs (or Agency Derivatives). (2) Weighted average cost basis includes RMBS principal and interest securities only. Average purchase price
Slide 13: Rates: Agency RMBS
Rates: Agency RMBS 13 As of June 30, 2017 Par Value ($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% $4,343 $4,477 74.8 % $4,538 3.5 % 10 4.0-4.5% 8,097 8,674 92.9 % 8,670 4.2 % 21 ≥ 5.0% 491 548 84.2
Slide 14: Rates: Mortgage Servicing Rights
Rates: Mortgage Servicing Rights(1) 14 As of March 31, 2017 As of June 30, 2017 Fair value ($M) $747.6 $898.0 Unpaid principal balance ($M) $68,128.0 $84,814.2 Weighted average coupon 3.9 % 3.9 % Original FICO score(2) 755 754 Original LTV 73 % 73 % 60+ day delinquencies 0.2 % 0.2 % Net servicing sp
Slide 15: Credit: Non-Agency MBS Metrics
Credit: Non-Agency MBS Metrics 15 NON-AGENCY PORTFOLIO COMPOSITION NON-AGENCY PORTFOLIO YIELDS AND METRICS (1) Weighted average cost basis includes MBS principal and interest securities only. Average purchase price utilized carrying value for weighting purposes. If current face were utilized for wei
Slide 16: Credit: Non-Agency MBS
Credit: Non-Agency MBS 16 As of June 30, 2017 Senior Bonds Mezzanine Bonds Total P&I Portfolio characteristics: Carrying value ($M) $1,418.4 $832.2 $2,250.6 % of non-Agency portfolio 63.0 % 37.0 % 100.0 % Average purchase price(1) $57.23 $66.12 $60.52 Average coupon 2.9 % 2.2 % 2.6 % Weighted averag
Slide 17: Granite Point's Commercial Real Estate Portfolio
Granite Point’s Commercial Real Estate Portfolio(1) (1) Due to the company’s controlling ownership interest in Granite Point, the company consolidates Granite Point on its financial statements and reflects noncontrolling interest for the portion of equity and comprehensive income not attributable to
Slide 18: Financing
Financing 18 (1) Weighted average of 2.9 years to maturity. (2) Includes FHLB advances of $2.4 billion with original maturities of 20 years. (3) Excludes FHLB membership and activity stock totaling $134.8 million. (4) Revolving credit facilities over-collateralized due to operational considerations.
Slide 19: Interest Rate Swaps
Maturities Notional Amounts ($B)(1) Average Fixed Pay Rate(2) Average Receive Rate(2) Average Maturity Years(2) Payers 2017 $1.5 0.771 % 1.220 % 0.3 2018 4.3 1.155 % 1.223 % 1.0 2019 0.4 1.283 % 1.165 % 1.9 2020 1.2 1.463 % 1.209 % 3.3 2021 and after 4.5 1.699 % 1.235 % 5.6 $11.9 1.322 % 1.224 % 2.7
Slide 20: Interest Rate Swaptions
Interest Rate Swaptions 20 Option Underlying Swap Swaption Expiration Cost ($M) Fair Value ($M) Average Months to Expiration Notional Amount ($M) Average Pay Rate Average Receive Rate Average Term (Years) Purchase Contracts: Payer <6 Months $43.7 $7.7 2.9 $5,025 2.35 % 3M LIBOR 6.2 Total Payer $43.7
Slide 21: Two Harbors Investment Corp.
TWO HARBORS. Investment Corp.
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