Two Harbors Investment Corp · NYSE:TWO
Two Harbors Investment — Q2 2011 Earnings Presentation
14 slides from Two Harbors Investment's earnings presentation, Aug 3, 2011
Slide 1: 2011 Second Quarter Earnings Call
Two Harbors Investment Corp. 2011 Second Quarter Earnings Call
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: Second Quarter 2011 Highlights
Second Quarter 2011 Highlights = Reported Adjusted GAAP Earnings! of $0.47 per diluted weighted share, representing an 18.7% return on average equity on an annualized basis. = Increased Core Earnings 28.1% on a sequential quarter basis to $0.41 per diluted weighted share. = Declareda dividend of $0.
Slide 4: Financial Summary
Financial Summary acial Highlights = Core Earnings! increased by $16.6 million on a sequential basis to §31.4 million, or $0.41 per weighted average share. Increase is primarily attributed to strong Agency net spreads, inclusive of IOs, in addition to HEE higher average investment base. ammo Qa2no Q
Slide 5: Operating Performance
Operating Performance Comprehensive Income Book Value qez010 Qa2010 Qezo0 QL211 Qzz0tt ‘= Compatenive Icom (FS) —S~ Compatonine Iacane ROAEC4) 1K je Mae Ih 149% PEGG G e210 am QHD QUI Qzra0li mE Diifend per Stare © —~Tiifond Yaad (1) LBL Gm Qa20 QLIMN QL gem Book Vales per Stee 40% u% gem gaz §«Qtam
Slide 6: Market and Portfolio Summary
Market and Portfolio Summary Market Highlights Rates declined on slower economy = European/ Greece situation added to market unease = Non-Agencysector cheapened as Maiden Lane II created uncertainty etree Bank of America/Countrywide settlement proposal boosted bonds at quarter end SEDI SEER NERA QER
Slide 7: RMBS Portfolio Composition
RMBS Portfolio Composition Portfolio Com position As of June 30, 2011 Agency: Vintage & Prepayment Protection 202201 $4.68 RMBS Portfolio Lower loan balances? 32% 26% $ Millions GNMA HECM pools % 16% Hybrid ARMs 2006 & subsequent vintages ~ Discount 26% 16% Mezzaning 7 9550 guar 30-Yess Fed Seasoned
Slide 8: Key Portfolio Metrics
Key Portfolio Metrics = Continue to realize low and stable CPRs = Maintained low interest rate exposure = Debt-to-equity is moderate, slightly higher quarter- = 40% of notional in interest rate swaptions provide over-quarter due to higher allocation to Agencies optional protection = Targeted debt-to
Slide 9: Market & Portfolio Update
Market & Portfolio Update = Economic and RMBS Market Update — Slower US. economic growth and European banking system issues continue to create uncertainty — Long rates roughly 50 basis points lower since second quarter-end — RMBS market stable; Sub-Prime market offering attractive yielding assets =
Slide 10: Appendix
Appendix 10
Slide 11: Operating Performance
Operating Performance ‘Operating Pesformance Core Realized = Umeatied «= QUIOML Core Realized Umeatied 2-201 (Guin, except forperstae ators) Ramings Gains ‘MIM Financials Ramings Gains MIM. Financials Insevestincone 4 a9 be 199 aoa as aos Inevestexpene 2s a . 2s 39 z 2 a9 Netintrestinsooe m4 : : m4
Slide 12: Change in Stockholders' Equity
Change in Stockholders’ Equity QL-2011 Book Q2-2011 Book Change in Stockholders’ Equity Q1-2011 Value per Share 22011 Value per Share (larnilions, except for per share amounts) BookValue (diluted basis)! BookValue (diluted basis) Beginning stockholdees’ equity $ sea § omg Cn) 9.20 [Net proceeds from
Slide 13: Portfolio Metrics
Portfolio Metrics Portfolio Yields and Metrics Agency RMBS CPR At At Realized Mar.31, Realized Jun, 30, Portfolio Yield 12011 20 2-201 2001 sane 250% | Ananvalived yield? 52% aH 54% 48% 0% 150% 0 39% 2 4m 4 Agenoy Nom-Ageney 9% 2 38% E 50% oon | Cost of finanving? 14% 14% 13% 3% qe gaz Qt Qi2e zat N
Slide 14: Financing and Hedging Strategy
Financing and Hedging Strategy Interest Rate Swaps' June 30, 2011 Notional Average «Average == Average Swaps Amounts FixedPay Recewe = Matuty Manustios 6K Rate Rate (ean) 2012 25,000 o.868 0.30% 148 2013 825,000 o.s94% 0.296% 178 aot 928,000 141% 0.283% 290 201s 45,000 1.890% 0.292% 392 2016 190,000
Two Harbors Investment — Q2 2011 Earnings Presentation on 6ix