Two Harbors Investment Corp · NYSE:TWO

Two Harbors Investment — Q4 2011 Earnings Presentation

16 slides from Two Harbors Investment's earnings presentation, Feb 7, 2012

1. Slide 1: Two Harbors Investment Corp. Fourth Quarter 2011 Investor Presentation

   Two Harbors Investment Corp. Fourth Quarter 2011 Investor Presentation

2. Slide 2: Safe Harbor Statement

   1 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 an

3. Slide 3: Two Harbors is Well-Positioned

   2 Two Harbors is Well-Positioned NYSE-listed hybrid mortgage REIT investing in residential mortgage and housing sectors ▪ Total shareholder return since inception of 43.4%1 ▪ Thirteen-fold increase in portfolio since inception to $6.4 billion ▪ Security selection and credit analysis driven by experi

4. Slide 4: Supply and Opportunity

   3 Supply and Opportunity Source: Two Harbors estimates and the Federal Reserve. $0 $400 $800 $1,200 2012 2014 2016 2018 2020 US D $B GSE - FNMA and FHLMC Projected GSE Portfolio Run-off Macro Trends  Continued “supply” will likely keep Agency spreads attractive. ― Fannie Mae and Freddie Mac are man

5. Slide 5: Two Harbors' Competitive Advantages

   Two Harbors’ Competitive Advantages Core Strengths  Capture Benefits of Hybrid Model: We seek out opportunities in Agency and non-Agency RMBS and believe this diversification allows us to better mitigate risks, including volatility in interest rates, prepayments, and credit risk.  Opportunistic: W

6. Slide 6: Fluid Asset Allocation Drives Performance

   Fluid Asset Allocation Drives Performance Annualized Yields by Portfolio3 5 (1) Includes interest-only securities (“IOs”) and inverse interest-only securities (“IIOs” or “Agency Derivatives”) of $155 million as of December 31, 2011. (2) Home Equity Conversion Mortgage (or “HECM”) are loans that allo

7. Slide 7: Security Selection is Paramount

   6 Security Selection is Paramount (1) All figures and data on this slide are as of December 31, 2011. (2) Securities collateralized by loans with greater than or equal to 80% loan-to-value ratio. (3) Securities collateralized by loans of less than or equal to $175K, but more than $85K. (4) Securitie

8. Slide 8: Sophisticated Risk Management Approach

   Sophisticated Risk Management Approach Hedging Funding and Liquidity  Portfolio reflects low interest rate exposure  Swaps/swaptions complement IO strategy  Optional protection still in place – reduced premium at risk 7  Long-dated repos and non-Agency facility provide stability  Maturities ove

9. Slide 9: Attractive Returns With Lower Risk

   8 Attractive Returns With Lower Risk Attractive & Comparable Dividend Yield1… … With Lower Leverage2… … Less Interest Rate Exposure 3 … … And Less Prepayment Risk 4 4.2x 7.0x 4.4x 7.2x – 2.0x 4.0x 6.0x 8.0x 8.0% 21.0% 6.3% 17.4% 5.0% 11.0% 5.0% 16.9% – 10.0% 20.0% 30.0% 17.3% 15.8% – 5.0% 10.0% 15.0

10. Slide 10: Contact Information

    9 For further information, please contact: Christine Battist Investor Relations Two Harbors Investment Corp. 612.629.2507 Christine.Battist@twoharborsinvestment.com Contact Information Anh Huynh Investor Relations Two Harbors Investment Corp. 212.364.3221 Anh.Huynh@twoharborsinvestment.com

11. Slide 11: Appendix

    Appendix

12. Slide 12: Agency Securities as of December 31, 2011

    11 (1) Market value of IOs of $84 million and Agency Derivatives of $155 million as of December 31, 2011. Agency Securities as of December 31, 2011 Par Value ($K) Market Value ($K) % of Agency Portfolio Amortized Cost Basis ($K) Weighted Average Coupon Weighted Average Age (Months) 30-Year Mortgages

13. Slide 13: Non-Agency Securities as of December 31, 2011

    Senior Bonds Mezzanine Bonds Total P&I Bonds Portfolio Characteristics Carrying Value ($K) $932,867 $262,633 $1,195,500 % of Non-Agency Portfolio 78.0% 22.0% 100.0% Average Purchase Price $55.05 $58.19 $55.74 Average Coupon 2.3% 1.3% 2.0% Collateral Attributes Average Loan Age (months) 65 83 69 Aver

14. Slide 14: Subprime Senior Bond - HEAT 2006-3 2A4

     Pays sequentially after the A3 is fully paid, expected to be in early 2014  Receives protection from credit losses from the subordinate bonds and ongoing excess interest  Pays a coupon of LIBOR + 0.31%  Wells Fargo & SPS as servicers A3 38.4%-100% $31M Current Face 1.1 Yr WAL1 Discount Subprime

15. Slide 15: Investment Team

    14 William Roth − Also serves as Fixed Income Portfolio Manager for Pine River − 31 years in mortgage securities market, including at Salomon Brothers and Citi; Managing Director in proprietary trading group managing MBS and ABS portfolios Investment Team Brad Farrell − Most recently served as Two H

16. Slide 16: Overview of Pine River Capital Management

    15 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  Founded June 2002 with offices in New York, London, Beijing, Hong Kong, San Francisco and

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