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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: September 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) 453-4100
(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 November 3, 2020, there were 273,699,768 shares of outstanding common stock, par value $0.01 per share, issued and outstanding.




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

i



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TWO HARBORS INVESTMENT CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
September 30,
2020
December 31,
2019
ASSETS(unaudited)
Available-for-sale securities, at fair value (amortized cost $15,879,431; allowance for credit losses $25,495)
$16,574,321 $31,406,328 
Mortgage servicing rights, at fair value1,257,503 1,909,444 
Cash and cash equivalents1,615,074 558,136 
Restricted cash596,951 1,058,690 
Accrued interest receivable50,140 92,634 
Due from counterparties118,819 318,963 
Derivative assets, at fair value97,889 188,051 
Reverse repurchase agreements82,410 220,000 
Other assets194,543 169,376 
Total Assets (1)
$20,587,650 $35,921,622 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Repurchase agreements$16,376,696 $29,147,463 
Federal Home Loan Bank advances 210,000 
Revolving credit facilities274,830 300,000 
Term notes payable395,328 394,502 
Convertible senior notes285,843 284,954 
Derivative liabilities, at fair value3,551 6,740 
Due to counterparties109,200 259,447 
Dividends payable57,268 128,125 
Accrued interest payable12,304 149,626 
Commitments and contingencies (see Note 16)  
Other liabilities52,958 70,299 
Total Liabilities (1)
17,567,978 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 273,694,411 and 272,935,731 shares issued and outstanding, respectively
2,737 2,729 
Additional paid-in capital5,161,491 5,154,764 
Accumulated other comprehensive income720,340 689,400 
Cumulative earnings814,585 2,655,891 
Cumulative distributions to stockholders(4,656,982)(4,509,819)
Total Stockholders’ Equity3,019,672 4,970,466 
Total Liabilities and Stockholders’ Equity$20,587,650 $35,921,622 
____________________
(1)The condensed consolidated balance sheets include assets and liabilities of consolidated variable interest entities, or VIEs. At September 30, 2020 and December 31, 2019, assets of the VIEs totaled $430,725 and $395,008, and liabilities of the VIEs totaled $430,725 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.
1



TWO HARBORS INVESTMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)
(in thousands, except share data)
Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Interest income:
Available-for-sale securities$89,200 $242,023 $443,614 $731,716 
Other516 7,717 8,936 24,536 
Total interest income89,716 249,740 452,550 756,252 
Interest expense:
Repurchase agreements18,652 176,450 222,068 501,361 
Federal Home Loan Bank advances 391 1,747 10,406 
Revolving credit facilities2,391 3,964 8,748 15,316 
Term notes payable3,321 5,475 11,678 5,706 
Convertible senior notes4,821 4,797 14,366 14,256 
Total interest expense29,185 191,077 258,607 547,045 
Net interest income60,531 58,663 193,943 209,207 
Other-than-temporary impairments:
Total other-than-temporary impairment losses
 (5,950) (11,004)
Other income (loss):
(Loss) gain on investment securities
(9,107)248,828 (1,037,222)251,977 
Servicing income99,114 126,025 342,802 373,922 
Loss on servicing asset
(112,763)(234,514)(938,219)(675,920)
Gain (loss) on interest rate swap, cap and swaption agreements
1,401 70,620 (296,117)(101,414)
Gain on other derivative instruments
65,596 85,856 8,734 270,798 
Other income84 495 948 277 
Total other income (loss)44,325 297,310 (1,919,074)119,640 
Expenses:
Management fees5,759 16,839 31,738 42,556 
Servicing expenses26,197 17,696 70,049 54,354 
Other operating expenses18,976 13,344 47,892 42,913 
Restructuring charges(139,788) 6,000  
Total expenses(88,856)47,879 155,679 139,823 
Income (loss) before income taxes
193,712 302,144 (1,880,810)178,020 
Benefit from income taxes(8,202)(3,556)(39,504)(11,188)
Net income (loss)201,914 305,700 (1,841,306)189,208 
Dividends on preferred stock18,950 18,951 56,851 56,851 
Net income (loss) attributable to common stockholders
$182,964 $286,749 $(1,898,157)$132,357 
Basic earnings (loss) per weighted average common share
$0.67 $1.05 $(6.94)$0.50 
Diluted earnings (loss) per weighted average common share
$0.64 $1.00 $(6.94)$0.50 
Dividends declared per common share$0.14 $0.40 $0.33 $1.27 
Weighted average number of shares of common stock:
Basic
273,705,785 272,897,575 273,567,998 266,114,772 
Diluted
291,876,935 291,053,718 273,567,998 266,114,772 
The accompanying notes are an integral part of these condensed consolidated financial statements.
2



TWO HARBORS INVESTMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited), continued
(in thousands, except share data)
Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Comprehensive income (loss):
Net income (loss)$201,914 $305,700 $(1,841,306)$189,208 
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on available-for-sale securities
36,216 (29,164)30,940 637,537 
Other comprehensive income (loss)
36,216 (29,164)30,940 637,537 
Comprehensive income (loss)
238,130 276,536 (1,810,366)826,745 
Dividends on preferred stock18,950 18,951 56,851 56,851 
Comprehensive income (loss) attributable to common stockholders
$219,180 $257,585 $(1,867,217)$769,894 
The accompanying notes are an integral part of these condensed consolidated financial statements.

3



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, 2019977,501 2,729 5,149,175 777,518 2,215,437 (4,253,586)4,868,774 
Net income— — — — 305,700 — 305,700 
Other comprehensive income before reclassifications, net of tax
— — — 191,676 — — 191,676 
Amounts reclassified from accumulated other comprehensive income, net of tax
— — — (220,840)— — (220,840)
Other comprehensive loss, net of tax
— — — (29,164)— — (29,164)
Issuance of common stock, net of offering costs
—  217 — — — 217 
Repurchase of common stock
—  (19)— — — (19)
Preferred dividends declared
— — — — — (18,951)(18,951)
Common dividends declared
— — — — — (109,158)(109,158)
Non-cash equity award compensation
—  2,181 — — — 2,181 
Balance, September 30, 2019$977,501 $2,729 $5,151,554 $748,354 $2,521,137 $(4,381,695)$5,019,580 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4



TWO HARBORS INVESTMENT CORP. 
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited), continued
(in thousands)
Preferred StockCommon Stock Par ValueAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Cumulative EarningsCumulative Distributions to StockholdersTotal Stockholders’ Equity
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
— — — 234,926 — — 234,926 
Amounts reclassified from accumulated other comprehensive income, net of tax
— — — (432,996)— — (432,996)
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 (4,509,819)2,904,133 
Net loss— — — — (173,564)— (173,564)
Other comprehensive income before reclassifications, net of tax
— — — 231,099 — — 231,099 
Amounts reclassified from accumulated other comprehensive income, net of tax
— — — (38,305)— — (38,305)
Other comprehensive income, net of tax
— — — 192,794 — — 192,794 
Issuance of common stock, net of offering costs
—  95 — — — 95 
Preferred dividends declared
— — — — — (37,901)(37,901)
Common dividends declared
— — — — — (51,936)(51,936)
Non-cash equity award compensation
— 2 2,313 — — — 2,315 
Balance, June 30, 2020977,501 2,737 5,158,559 684,124 612,671 (4,599,656)2,835,936 
Net income— — — — 201,914 — 201,914 
Other comprehensive income before reclassifications, net of tax
— — — 36,216 — — 36,216 
Amounts reclassified from accumulated other comprehensive income, net of tax
— — —  — —  
Other comprehensive income, net of tax
— — — 36,216 — — 36,216 
Issuance of common stock, net of offering costs
—  75 — — — 75 
Preferred dividends declared
— — — — — (18,950)(18,950)
Common dividends declared
— — — — — (38,376)(38,376)
Non-cash equity award compensation
—  2,857 — — — 2,857 
Balance, September 30, 2020$977,501 $