Two Harbors Investment Corp. Announces Sale of Portfolio of Non-Agency Securities

Two Harbors Investment Corp. (NYSE: TWO) (the Company), a leading hybrid mortgage real estate investment trust (REIT), today announced that in an effort to prudently manage our portfolio through unprecedented market volatility and preserve long-term stockholder value, the Company has sold substantially all of its portfolio of non-Agency securities, subject to customary settlement procedures.

We believe the benefits of this sale include:

  • Reducing the balances under our repurchase facilities by approximately $2.0 billion.
  • Eliminating the risk of margin calls associated with the non-Agency residential mortgage-backed securities (RMBS) portfolio, which have been unusually significant in size in this volatile market environment.
  • Removing the potential risk of not being able to roll the funding on non-Agency RMBS as they become due.

After giving effect to the sale, our portfolio consists primarily of Agency RMBS and mortgage servicing rights. We estimate that:

  • Our economic debt-to-equity is approximately 7.5x. The nominal increase in economic debt-to-equity is a result of non-Agency securities requiring less leverage than Agency RMBS. We continue to be focused on carefully managing our leverage.
  • Our book value is down approximately 55% quarter to date.
  • Our liquidity position will remain strong and, given the significant reduction in our margin call risk, we will continue to be in a position to meet margin calls in the ordinary course.
  • Our Agency and MSR portfolio is approximately $20 billion.

In these unprecedented times, we remain acutely focused on managing our portfolio and risk positioning to benefit our stockholders over the long-term, stated Thomas Siering, Two Harbors President and Chief Executive Officer. The sale of substantially all of our non-Agencies demonstrates how we can actively respond to changing economic conditions to reduce risk in our portfolio. We have the expertise in place in mortgage credit should the opportunity come about to again be active in that market. Today, however, we feel confident in the opportunities in pairing Agency RMBS and mortgage servicing rights, particularly as spreads tighten in response to the Feds actions this week.

Forward Looking Statements

This press release 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, consequently, readers should not rely on these forward-looking statements as predictions of future events. Words such as expect, target, assume, estimate, project, budget, forecast, anticipate, intend, plan, may, will, could, should, believe, predicts, potential, continue, and similar expressions are intended to identify such forward-looking statements. These forward looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results.

Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Two Harbors does not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Additional information concerning these and other risk factors is contained in Two Harbors most recent filings with the Securities and Exchange Commission. All subsequent written and oral forward looking statements concerning Two Harbors or matters attributable to Two Harbors or any person.

Two Harbors Investment Corp.

Two Harbors Investment Corp., a Maryland corporation, is a real estate investment trust that invests in residential mortgage-backed securities, mortgage servicing rights and other financial assets. Two Harbors is headquartered in New York, New York, and is externally managed and advised by PRCM Advisers LLC, a wholly owned subsidiary of Pine River Capital Management L.P. Additional information is available at www.twoharborsinvestment.com.

Additional Information

Stockholders of Two Harbors and other interested persons may find additional information regarding the company at the Securities and Exchange Commissions Internet site at www.sec.gov or by directing requests to: Two Harbors Investment Corp., 575 Lexington Avenue, Suite 2930, New York, NY 10022, telephone 612-629-2500.

Investors: Margaret F. Karr, Investor Relations, Two Harbors Investment Corp., 212-364-3663, [email protected]