Two Harbors Investment Corp · NYSE:TWO
Two Harbors Investment — Investor Presentation (November 2011)
18 slides from Two Harbors Investment's investor presentation, Nov 9, 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 Fauna yoda ARMs $239 Mezzanine 251 s 20-Yeu Fed riot ay $995, Las 10s and 110s! 251 Otter Fired $559 HEC? tog 1SYeu Fined $786 WN Agency Bonds $5.38 (1%) [ENN Non-Agency Bonds $1.38 (19%) 18) Repectveyir ide Ds
Slide 7: Security Selection Drives Performance
Security Selection Drives Performance Portfolio Com position’ Q3-2011 Agency Book Post-2006: Presium &-10 cnmanecm 4% 18% ALLY’ overLoan *% ‘ume Prepayment % Peotected ae o% Seasoned 10% pose2006: Discount 3% Q3-2011 Non-Agency Book Sub-Poime 18% ‘ue ad at on de ew of September 0, 20. Seo costenord
Slide 8: 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 9: Non-Agency Discount Bond Example
Non-Agency Discount Bond Example T 2006-3 2A4! Discount Subprime Senior Bond - HE. Collateral Summary = Senior Bond backed by Subprime = Vintage: 2005 and 2006 Collateral HEAT 2006-3 24), ~ Pays sequentially, after the A3 is fully paid, expected to bein early 2014 = 60+ days delinquent: 33% = “Clean
Slide 10: Sophisticated Risk Management Approach
Sophisticated Risk Management Approach = Portfolio reflects low interest rate exposure of 4.3% = 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 i
Slide 11: Attractive Returns With Lower Risk
Attractive Returns With Lower Risk Superior asset selection and risk management drive returns while taking on less tisk. .. With Lower Leverage Attractive & Comparable Dividend Yield! TWO Q3-2011 Dividend Viek! 18.1% TWO Sepmember 30, 2011 RMBS Levenger 44. a Dim TET 80x = 78x 50% 60x 10.0% 40x 50%
Slide 12: 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 13: Appendix
VA Appendix
Slide 14: 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 15: 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 (SK) Cost 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% 1
Slide 16: 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 17: 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 18: 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
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