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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, 2021
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
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 3, 2021, there were 313,883,161 shares of outstanding common stock, par value $0.01 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,
2021
December 31,
2020
ASSETS(unaudited)
Available-for-sale securities, at fair value (amortized cost $7,547,709 and $14,043,175, respectively; allowance for credit losses $17,765 and $22,528, respectively)
$7,840,046 $14,650,922 
Mortgage servicing rights, at fair value2,020,106 1,596,153 
Cash and cash equivalents1,281,230 1,384,764 
Restricted cash866,547 1,261,667 
Accrued interest receivable31,571 47,174 
Due from counterparties85,177 146,433 
Derivative assets, at fair value60,376 95,937 
Reverse repurchase agreements70,000 91,525 
Other assets247,059 241,346 
Total Assets (1)
$12,502,112 $19,515,921 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Repurchase agreements$8,350,622 $15,143,898 
Revolving credit facilities533,519 283,830 
Term notes payable396,183 395,609 
Convertible senior notes423,742 286,183 
Derivative liabilities, at fair value14,208 11,058 
Due to counterparties119,472 135,838 
Dividends payable60,507 65,480 
Accrued interest payable17,956 21,666 
Commitments and contingencies (see Note 15)
  
Other liabilities101,848 83,433 
Total Liabilities (1)
10,018,057 16,426,995 
Stockholders’ Equity:
Preferred stock, par value $0.01 per share; 100,000,000 shares authorized and 29,050,000 and 40,050,000 shares issued and outstanding, respectively ($726,250 and $1,001,250 liquidation preference, respectively)
702,550 977,501 
Common stock, par value $0.01 per share; 700,000,000 shares authorized and 273,718,311 and 273,703,882 shares issued and outstanding, respectively
2,737 2,737 
Additional paid-in capital5,170,387 5,163,794 
Accumulated other comprehensive income307,249 641,601 
Cumulative earnings1,147,953 1,025,756 
Cumulative distributions to stockholders(4,846,821)(4,722,463)
Total Stockholders’ Equity2,484,055 3,088,926 
Total Liabilities and Stockholders’ Equity$12,502,112 $19,515,921 
____________________
(1)The condensed consolidated balance sheets include assets and liabilities of consolidated variable interest entities, or VIEs. At June 30, 2021 and December 31, 2020, assets of the VIEs totaled $448,077 and $496,810, and liabilities of the VIEs totaled $441,435 and $477,270, 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 (LOSS) INCOME (unaudited)
(in thousands, except share data)
Three Months EndedSix Months Ended
June 30,June 30,
2021202020212020
Interest income:
Available-for-sale securities$43,092 $105,730 $98,744 $354,414 
Other351 1,597 808 8,420 
Total interest income43,443 107,327 99,552 362,834 
Interest expense:
Repurchase agreements6,981 50,811 15,451 203,416 
Revolving credit facilities7,075 2,826 11,770 6,357 
Term notes payable3,225 3,553 6,436 8,357 
Convertible senior notes7,126 4,769 13,476 9,545 
Federal Home Loan Bank advances 155  1,747 
Total interest expense24,407 62,114 47,133 229,422 
Net interest income19,036 45,213 52,419 133,412 
Other (loss) income:
(Loss) gain on investment securities
(41,519)53,492 91,349 (1,028,115)
Servicing income112,816 112,891 219,935 243,688 
(Loss) gain on servicing asset
(268,051)(238,791)59,387 (825,456)
Gain (loss) on interest rate swap and swaption agreements
24,648 (46,922)9,049 (297,518)
Gain (loss) on other derivative instruments
51,312 76,606 (224,699)(56,862)
Other income (loss)41 66 (5,701)864 
Total other (loss) income(120,753)(42,658)149,320 (1,963,399)
Expenses:
Management fees 11,429  25,979 
Servicing expenses18,680 23,947 43,627 43,852 
Compensation and benefits11,259 8,127 19,447 16,404 
Other operating expenses7,218 5,711 14,705 12,512 
Restructuring charges 145,069  145,788 
Total expenses37,157 194,283 77,779 244,535 
(Loss) income before income taxes
(138,874)(191,728)123,960 (2,074,522)
(Benefit from) provision for income taxes(20,914)(18,164)1,763 (31,302)
Net (loss) income(117,960)(173,564)122,197 (2,043,220)
Dividends on preferred stock13,747 18,951 30,963 37,901 
Net (loss) income attributable to common stockholders
$(131,707)$(192,515)$91,234 $(2,081,121)
Basic (loss) earnings per weighted average common share
$(0.48)$(0.70)$0.33 $(7.61)
Diluted (loss) earnings per weighted average common share
$(0.48)$(0.70)$0.32 $(7.61)
Dividends declared per common share$0.17 $0.19 $0.34 $0.19 
Weighted average number of shares of common stock:
Basic
273,718,561 273,604,079 273,714,684 273,498,347 
Diluted
273,718,561 273,604,079 305,999,203 273,498,347 

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 (LOSS) INCOME (unaudited), continued
(in thousands, except share data)
Three Months EndedSix Months Ended
June 30,June 30,
2021202020212020
Comprehensive (loss) income:
Net (loss) income$(117,960)$(173,564)$122,197 $(2,043,220)
Other comprehensive (loss) income, net of tax:
Unrealized (loss) gain on available-for-sale securities
(62,899)192,794 (334,352)(5,276)
Other comprehensive (loss) income
(62,899)192,794 (334,352)(5,276)
Comprehensive (loss) income
(180,859)19,230 (212,155)(2,048,496)
Dividends on preferred stock13,747 18,951 30,963 37,901 
Comprehensive (loss) income attributable to common stockholders
$(194,606)$279 $(243,118)$(2,086,397)

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, 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)
Preferred dividends declared
— — — — —   
Common dividends declared
— — — — —   
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, 2020$977,501 $2,737 $5,158,559 $684,124 $612,671 $(4,599,656)$2,835,936 
Balance, December 31, 2020$977,501 $2,737 $5,163,794 $641,601 $1,025,756 $(4,722,463)$3,088,926 
Net income— — — — 240,157 — 240,157 
Other comprehensive loss before reclassifications, net of tax
— — — (202,888)— — (202,888)
Amounts reclassified from accumulated other comprehensive income, net of tax
— — — (68,565)— — (68,565)
Other comprehensive loss, net of tax
— — — (271,453)— — (271,453)
Redemption of preferred stock(274,951)— — — — — (274,951)
Issuance of common stock, net of offering costs
—  99 — — — 99 
Preferred dividends declared
— — — — — (17,216)(17,216)
Common dividends declared
— — — — — (46,636)(46,636)
Non-cash equity award compensation
—  1,790 — — — 1,790 
Balance, March 31, 2021702,550 2,737 5,165,683 370,148 1,265,913 (4,786,315)2,720,716 
Net loss— — — — (117,960)— (117,960)
Other comprehensive loss before reclassifications, net of tax
— — — (57,799)— — (57,799)
Amounts reclassified from accumulated other comprehensive income, net of tax
— — — (5,100)— — (5,100)
Other comprehensive loss, net of tax
— — — (62,899)— — (62,899)
Issuance of common stock, net of offering costs
—  93 — — — 93 
Preferred dividends declared
— — — — — (13,747)(13,747)
Common dividends declared
— — — — — (46,759)(46,759)
Non-cash equity award compensation
—  4,611 — — — 4,611 
Balance, June 30, 2021$702,550 $2,737 $5,170,387 $307,249 $1,147,953 $(4,846,821)$2,484,055 
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 CASH FLOWS (unaudited)
(in thousands)
Six Months Ended
June 30,
20212020
Cash Flows From Operating Activities:
Net income (loss)$122,197 $(2,043,220)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of premiums and discounts on investment securities, net
134,581 102,562 
Amortization of deferred debt issuance costs on term notes payable and convertible senior notes
1,321 1,107 
Provision for credit losses on investment securities6,257 46,831 
Realized and unrealized (gains) losses on investment securities(97,606)981,284 
(Gain) loss on servicing asset(59,387)825,456 
Realized and unrealized (gain) loss on interest rate swaps and swaptions(5,001)228,571 
Unrealized loss (gain) on other derivative instruments27,063 (43,542)
Equity based compensation6,401 4,630 
Net change in assets and liabilities:
Decrease in accrued interest receivable15,603 39,154 
Decrease (increase) in deferred income taxes, net3,534 (50,265)
Decrease in accrued interest payable(3,710)(112,916)
Change in other operating assets and liabilities, net(832)172,721 
Net cash provided by operating activities150,421 152,373 
Cash Flows From Investing Activities:
Purchases of available-for-sale securities(152,743)(6,433,561)
Proceeds from sales of available-for-sale securities4,600,545 16,969,870 
Principal payments on available-for-sale securities1,985,490 2,059,816 
Purchases of trading securities (1,052,500)
Proceeds from sales of trading securities 1,053,477 
Purchases of mortgage servicing rights, net of purchase price adjustments(364,566)(193,393)
(Payments for) proceeds from sales of mortgage servicing rights, net (1,814)
(Purchases) short sales of derivative instruments, net(1,232)(19,042)
Proceeds from sales and settlement (payments for termination and settlement) of derivative instruments, net
17,881 (93,905)
Payments for reverse repurchase agreements(480,344)(1,802,388)
Proceeds from reverse repurchase agreements
501,869 1,945,972 
Increase in due to counterparties, net44,890 406,598 
Change in other investing assets and liabilities, net10,000 2,508 
Net cash provided by investing activities$6,161,790 $12,841,638 

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 CASH FLOWS (unaudited), continued
(in thousands)
Six Months Ended
June 30,
20212020
Cash Flows From Financing Activities:
Proceeds from repurchase agreements$19,730,790 $58,261,313 
Principal payments on repurchase agreements(26,524,066)(70,417,528)
Proceeds from revolving credit facilities261,500 83,000 
Principal payments on revolving credit facilities(11,811)(115,819)
Proceeds from convertible senior notes279,930  
Repurchase of convertible senior notes(143,118) 
Proceeds from Federal Home Loan Bank advances 585,000 
Principal payments on Federal Home Loan Bank advances (795,000)
Redemption of preferred stock(274,951) 
Proceeds from issuance of common stock, net of offering costs192 237 
Repurchase of common stock (1,064)
Dividends paid on preferred stock(36,165)(37,901)
Dividends paid on common stock(93,166)