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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: June 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-34506
TWO HARBORS INVESTMENT CORP.
(Exact Name of Registrant as Specified in Its Charter)
Maryland 27-0312904
(State or Other Jurisdiction of
Incorporation or Organization)
 (I.R.S. Employer
Identification No.)
601 Carlson Parkway, Suite 1400 
Minnetonka,Minnesota55305
(Address of Principal Executive Offices) (Zip Code)
(612) 629-2500
(Registrant’s Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class:Trading Symbol(s)Name of Exchange on Which Registered:
Common Stock, par value $0.01 per shareTWONew York Stock Exchange
8.125% Series A Cumulative Redeemable Preferred StockTWO PRANew York Stock Exchange
7.625% Series B Cumulative Redeemable Preferred StockTWO PRBNew York Stock Exchange
7.25% Series C Cumulative Redeemable Preferred StockTWO PRCNew York Stock Exchange
7.75% Series D Cumulative Redeemable Preferred StockTWO PRDNew York Stock Exchange
7.50% Series E Cumulative Redeemable Preferred StockTWO PRENew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
As of August 4, 2020, there were 273,706,777 shares of outstanding common stock, par value $.01 per share, issued and outstanding.


Table of Contents

TWO HARBORS INVESTMENT CORP.
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements (unaudited)
PART II - OTHER INFORMATION

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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TWO HARBORS INVESTMENT CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30,
2020
December 31,
2019
ASSETS(unaudited)
Available-for-sale securities, at fair value (amortized cost $17,030,405; allowance for credit losses $42,583)
$17,673,289  $31,406,328  
Mortgage servicing rights, at fair value1,279,195  1,909,444  
Cash and cash equivalents1,615,639  558,136  
Restricted cash434,644  1,058,690  
Accrued interest receivable53,480  92,634  
Due from counterparties72,010  318,963  
Derivative assets, at fair value110,527  188,051  
Reverse repurchase agreements76,416  220,000  
Other assets167,122  169,376  
Total Assets (1)
$21,482,322  $35,921,622  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Repurchase agreements$16,991,248  $29,147,463  
Federal Home Loan Bank advances  210,000  
Revolving credit facilities267,181  300,000  
Term notes payable395,048  394,502  
Convertible senior notes285,515  284,954  
Derivative liabilities, at fair value1,298  6,740  
Due to counterparties419,092  259,447  
Dividends payable57,269  128,125  
Accrued interest payable36,710  149,626  
Commitments and contingencies (see Note 16)    
Other liabilities193,025  70,299  
Total Liabilities (1)
18,646,386  30,951,156  
Stockholders’ Equity
Preferred stock, par value $0.01 per share; 50,000,000 shares authorized and 40,050,000 and 40,050,000 shares issued and outstanding, respectively ($1,001,250 and $1,001,250 liquidation preference, respectively)
977,501  977,501  
Common stock, par value $0.01 per share; 450,000,000 shares authorized and 273,700,059 and 272,935,731 shares issued and outstanding, respectively
2,737  2,729  
Additional paid-in capital5,158,559  5,154,764  
Accumulated other comprehensive income684,124  689,400  
Cumulative earnings612,671  2,655,891  
Cumulative distributions to stockholders(4,599,656) (4,509,819) 
Total Stockholders’ Equity2,835,936  4,970,466  
Total Liabilities and Stockholders’ Equity$21,482,322  $35,921,622  
____________________
(1)The condensed consolidated balance sheets include assets and liabilities of consolidated variable interest entities, or VIEs. At June 30, 2020 and December 31, 2019, assets of the VIEs totaled $395,447 and $395,008, and liabilities of the VIEs totaled $395,447 and $395,008, respectively. See Note 3 - Variable Interest Entities for additional information.
The accompanying notes are an integral part of these condensed consolidated financial statements.
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TWO HARBORS INVESTMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)
(in thousands, except share data)
Three Months EndedSix Months Ended
June 30,June 30,
2020201920202019
Interest income:
Available-for-sale securities$105,730  $253,807  $354,414  $489,693  
Other1,597  7,222  8,420  16,819  
Total interest income107,327  261,029  362,834  506,512  
Interest expense:
Repurchase agreements50,811  177,351  203,416  324,911  
Federal Home Loan Bank advances155  3,941  1,747  10,015  
Revolving credit facilities2,826  6,196  6,357  11,352  
Term notes payable3,553  231  8,357  231  
Convertible senior notes4,769  4,724  9,545  9,459  
Total interest expense62,114  192,443  229,422  355,968  
Net interest income45,213  68,586  133,412  150,544  
Other-than-temporary impairments:
Total other-than-temporary impairment losses
  (4,848)   (5,054) 
Other income (loss):
Gain (loss) on investment securities
53,492  22,441  (1,028,115) 3,149  
Servicing income112,891  130,949  243,688  247,897  
Loss on servicing asset
(238,791) (252,432) (825,456) (441,406) 
Loss on interest rate swap, cap and swaption agreements
(46,922) (88,775) (297,518) (172,034) 
Gain (loss) on other derivative instruments
76,606  80,664  (56,862) 184,942  
Other income (loss)66  (341) 864  (218) 
Total other loss(42,658) (107,494) (1,963,399) (177,670) 
Expenses:
Management fees11,429  13,635  25,979  25,717  
Servicing expenses23,947  16,746  43,852  36,658  
Other operating expenses13,838  14,013  28,916  29,569  
Restructuring charges145,069    145,788    
Total expenses194,283  44,394  244,535  91,944  
Loss before income taxes
(191,728) (88,150) (2,074,522) (124,124) 
(Benefit from) provision for income taxes(18,164) 2,407  (31,302) (7,632) 
Net loss(173,564) (90,557) (2,043,220) (116,492) 
Dividends on preferred stock18,951  18,950  37,901  37,900  
Net loss attributable to common stockholders
$(192,515) $(109,507) $(2,081,121) $(154,392) 
Basic loss per weighted average common share
$(0.70) $(0.40) $(7.61) $(0.59) 
Diluted loss per weighted average common share
$(0.70) $(0.40) $(7.61) $(0.59) 
Dividends declared per common share$0.19  $0.40  $0.19  $0.87  
Weighted average number of shares of common stock:
Basic
273,604,079  272,863,153  273,498,347  262,667,160  
Diluted
273,604,079  272,863,153  273,498,347  262,667,160  
The accompanying notes are an integral part of these condensed consolidated financial statements.
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TWO HARBORS INVESTMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited), continued
(in thousands, except share data)
Three Months EndedSix Months Ended
June 30,June 30,
2020201920202019
Comprehensive income (loss):
Net loss$(173,564) $(90,557) $(2,043,220) $(116,492) 
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on available-for-sale securities
192,794  310,549  (5,276) 666,701  
Other comprehensive income (loss)
192,794  310,549  (5,276) 666,701  
Comprehensive income (loss)
19,230  219,992  (2,048,496) 550,209  
Dividends on preferred stock18,951  18,950  37,901  37,900  
Comprehensive income (loss) attributable to common stockholders
$279  $201,042  $(2,086,397) $512,309  
The accompanying notes are an integral part of these condensed consolidated financial statements.

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TWO HARBORS INVESTMENT CORP. 
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
(in thousands)
Preferred StockCommon Stock Par ValueAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Cumulative EarningsCumulative Distributions to StockholdersTotal Stockholders’ Equity
Balance, December 31, 2018$977,501  $2,481  $4,809,616  $110,817  $2,332,371  $(3,978,297) $4,254,489  
Cumulative effect of adoption of new accounting principle
—  —  —  —  (442) —  (442) 
Adjusted balance, January 1, 2019977,501  2,481  4,809,616  110,817  2,331,929  (3,978,297) 4,254,047  
Net loss—  —  —  —  (25,935) —  (25,935) 
Other comprehensive income before reclassifications, net of tax
—  —  —  327,840  —  —  327,840  
Amounts reclassified from accumulated other comprehensive income, net of tax
—  —  —  28,312  —  —  28,312  
Other comprehensive income, net of tax
—  —  —  356,152  —  —  356,152  
Issuance of common stock, net of offering costs
—  243  335,035  —  —  —  335,278  
Preferred dividends declared
—  —  —  —  —  (18,950) (18,950) 
Common dividends declared
—  —  —  —  —  (128,229) (128,229) 
Non-cash equity award compensation
—  4  1,857  —  —  —  1,861  
Balance, March 31, 2019977,501  2,728  5,146,508  466,969  2,305,994  (4,125,476) 4,774,224  
Net loss—  —  —  —  (90,557) —  (90,557) 
Other comprehensive income before reclassifications, net of tax
—  —  —  296,637  —  —  296,637  
Amounts reclassified from accumulated other comprehensive income, net of tax
—  —  —  13,912  —  —  13,912  
Other comprehensive income, net of tax
—  —  —  310,549  —  —  310,549  
Issuance of common stock, net of offering costs
—    171  —  —  —  171  
Preferred dividends declared
—  —  —  —  —  (18,950) (18,950) 
Common dividends declared
—  —  —  —  —  (109,160) (109,160) 
Non-cash equity award compensation
—  1  2,496  —  —  —  2,497  
Balance, June 30, 2019$977,501  $2,729  $5,149,175  $777,518  $2,215,437  $(4,253,586) $4,868,774  
Balance, December 31, 2019$977,501  $2,729  $5,154,764  $689,400  $2,655,891  $(4,509,819) $4,970,466  
Net loss—  —  —  —  (1,869,656) —  (1,869,656) 
Other comprehensive income before reclassifications, net of tax
—  —  —  193,536  —  —  193,536  
Amounts reclassified from accumulated other comprehensive income, net of tax
—  —  —  (391,606) —  —  (391,606) 
Other comprehensive loss, net of tax
—  —  —  (198,070) —  —  (198,070) 
Issuance of common stock, net of offering costs
—    142  —  —  —  142  
Repurchase of common stock
—  (1) (1,063) —  —  —  (1,064) 
Non-cash equity award compensation
—  7  2,308  —  —  —  2,315  
Balance, March 31, 2020977,501  2,735  5,156,151  491,330  786,235