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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, 2022
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.)
1601 Utica Avenue South, Suite 900 
St. Louis Park,Minnesota55416
(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 2, 2022, there were 344,441,136 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

i

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TWO HARBORS INVESTMENT CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30,
2022
December 31,
2021
ASSETS(unaudited)
Available-for-sale securities, at fair value (amortized cost $8,969,612 and $7,005,013, respectively; allowance for credit losses $9,663 and $14,238, respectively)
$8,789,437 $7,161,703 
Mortgage servicing rights, at fair value3,226,191 2,191,578 
Cash and cash equivalents511,889 1,153,856 
Restricted cash627,725 934,814 
Accrued interest receivable30,254 26,266 
Due from counterparties186,156 168,449 
Derivative assets, at fair value29,330 80,134 
Reverse repurchase agreements158,971 134,682 
Other assets177,497 262,823 
Total Assets (1)
$13,737,450 $12,114,305 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Repurchase agreements$7,958,247 $7,656,445 
Revolving credit facilities825,761 420,761 
Term notes payable397,383 396,776 
Convertible senior notes281,711 424,827 
Derivative liabilities, at fair value110,764 53,658 
Due to counterparties1,460,561 196,627 
Dividends payable72,591 72,412 
Accrued interest payable21,826 18,382 
Commitments and contingencies (see Note 15)
  
Other liabilities124,982 130,464 
Total Liabilities (1)
11,253,826 9,370,352 
Stockholders’ Equity:
Preferred stock, par value $0.01 per share; 100,000,000 shares authorized and 29,050,000 shares issued and outstanding ($726,250 liquidation preference)
702,550 702,550 
Common stock, par value $0.01 per share; 700,000,000 shares authorized and 344,433,109 and 343,911,324 shares issued and outstanding, respectively
3,444 3,439 
Additional paid-in capital5,633,201 5,625,179 
Accumulated other comprehensive (loss) income(149,710)186,346 
Cumulative earnings1,425,833 1,212,983 
Cumulative distributions to stockholders(5,131,694)(4,986,544)
Total Stockholders’ Equity2,483,624 2,743,953 
Total Liabilities and Stockholders’ Equity$13,737,450 $12,114,305 
____________________
(1)The condensed consolidated balance sheets include assets and liabilities of consolidated variable interest entities, or VIEs. At June 30, 2022 and December 31, 2021, assets of the VIEs totaled $449,853 and $454,596, and liabilities of the VIEs totaled $444,934 and $440,030, 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 (unaudited)
(in thousands, except share data)
Three Months EndedSix Months Ended
June 30,June 30,
2022202120222021
Interest income:
Available-for-sale securities$55,399 $43,092 $100,046 $98,744 
Other1,604 351 1,803 808 
Total interest income57,003 43,443 101,849 99,552 
Interest expense:
Repurchase agreements19,269 6,981 27,612 15,451 
Revolving credit facilities9,106 7,075 14,782 11,770 
Term notes payable3,925 3,225 7,181 6,436 
Convertible senior notes4,801 7,126 9,843 13,476 
Total interest expense37,101 24,407 59,418 47,133 
Net interest income19,902 19,036 42,431 52,419 
Other (loss) income:
(Loss) gain on investment securities
(197,719)(41,519)(250,061)91,349 
Servicing income157,526 112,816 294,152 219,935 
Gain (loss) on servicing asset
85,557 (268,051)496,181 59,387 
Gain (loss) on interest rate swap and swaption agreements
32,734 24,648 (5,307)9,049 
(Loss) gain on other derivative instruments
(101,273)51,312 (203,035)(224,699)
Other (loss) income(73)41 (117)(5,701)
Total other (loss) income(23,248)(120,753)331,813 149,320 
Expenses:
Servicing expenses22,991 18,680 47,695 43,627 
Compensation and benefits11,019 11,259 23,212 19,447 
Other operating expenses9,152 7,218 15,777 14,705 
Total expenses43,162 37,157 86,684 77,779 
(Loss) income before income taxes
(46,508)(138,874)287,560 123,960 
Provision for (benefit from) income taxes25,912 (20,914)74,710 1,763 
Net (loss) income(72,420)(117,960)212,850 122,197 
Dividends on preferred stock13,748 13,747 27,495 30,963 
Net (loss) income attributable to common stockholders
$(86,168)$(131,707)$185,355 $91,234 
Basic (loss) earnings per weighted average common share
$(0.25)$(0.48)$0.54 $0.33 
Diluted (loss) earnings per weighted average common share
$(0.25)$(0.48)$0.51 $0.32 
Dividends declared per common share$0.17 $0.17 $0.34 $0.34 
Weighted average number of shares of common stock:
Basic
344,277,723 273,718,561 344,138,889 273,714,684 
Diluted
344,277,723 273,718,561 384,341,891 305,999,203 

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 (unaudited), continued
(in thousands, except share data)
Three Months EndedSix Months Ended
June 30,June 30,
2022202120222021
Comprehensive loss:
Net (loss) income$(72,420)$(117,960)$212,850 $122,197 
Other comprehensive loss, net of tax:
Unrealized loss on available-for-sale securities
(4,211)(62,899)(336,056)(334,352)
Other comprehensive loss
(4,211)(62,899)(336,056)(334,352)
Comprehensive loss
(76,631)(180,859)(123,206)(212,155)
Dividends on preferred stock13,748 13,747 27,495 30,963 
Comprehensive loss attributable to common stockholders
$(90,379)$(194,606)$(150,701)$(243,118)

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, 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 
Balance, December 31, 2021$702,550 $3,439 $5,625,179 $186,346 $1,212,983 $(4,986,544)$2,743,953 
Net income— — — — 285,270 — 285,270 
Other comprehensive loss before reclassifications, net of tax
— — — (323,490)— — (323,490)
Amounts reclassified from accumulated other comprehensive income, net of tax
— — — (8,355)— — (8,355)
Other comprehensive loss, net of tax
— — — (331,845)— — (331,845)
Issuance of common stock, net of offering costs
—  323 — — — 323 
Preferred dividends declared
— — — — — (13,747)(13,747)
Common dividends declared
— — — — — (58,811)(58,811)
Non-cash equity award compensation
— 2 4,159 — — — 4,161 
Balance, March 31, 2022702,550 3,441 5,629,661 (145,499)1,498,253 (5,059,102)2,629,304 
Net loss— — — — (72,420)— (72,420)
Other comprehensive loss before reclassifications, net of tax
— — — (141,843)— — (141,843)
Amounts reclassified from accumulated other comprehensive income, net of tax
— — — 137,632 — — 137,632 
Other comprehensive loss, net of tax
— — — (4,211)— — (4,211)
Issuance of common stock, net of offering costs
—  82 — — — 82 
Preferred dividends declared
— — — — — (13,748)(13,748)
Common dividends declared
— — — — — (58,844)(58,844)
Non-cash equity award compensation
— 3 3,458 — — — 3,461 
Balance, June 30, 2022$702,550 $3,444 $5,633,201 $(149,710)$1,425,833 $(5,131,694)$2,483,624 

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,
20222021
Cash Flows From Operating Activities:
Net income$212,850 $122,197 
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of premiums and discounts on investment securities, net
55,287 134,581 
Amortization of deferred debt issuance costs on term notes payable and convertible senior notes
1,265 1,321 
Provision for credit losses on investment securities1,651 6,257 
Realized and unrealized losses (gains) on investment securities248,410 (97,606)
Gain on servicing asset(496,181)(59,387)
Realized and unrealized loss (gain) on interest rate swaps and swaptions300 (5,001)
Unrealized (gains) losses on other derivative instruments(92,309)27,063 
Equity based compensation7,622 6,401 
Net change in assets and liabilities:
(Increase) decrease in accrued interest receivable(3,988)15,603 
Decrease in deferred income taxes, net74,710 3,534 
Increase (decrease) in accrued interest payable3,444 (3,710)
Change in other operating assets and liabilities, net5,134 (832)
Net cash provided by operating activities18,195 150,421 
Cash Flows From Investing Activities:
Purchases of available-for-sale securities(7,295,928)(152,743)
Proceeds from sales of available-for-sale securities4,339,148 4,600,545 
Principal payments on available-for-sale securities687,642 1,985,490 
Purchases of mortgage servicing rights, net of purchase price adjustments(538,432)(364,566)
Short sales (purchases) of derivative instruments, net39,895 (1,232)
Proceeds from sales and settlement (payments for termination and settlement) of derivative instruments, net
160,024 17,881 
Payments for reverse repurchase agreements(1,135,374)(480,344)
Proceeds from reverse repurchase agreements
1,111,085 501,869 
Increase in due to counterparties, net1,246,227 44,890 
Change in other investing assets and liabilities, net 10,000 
Net cash (used in) provided by investing activities$(1,385,713)$6,161,790 

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,
20222021
Cash Flows From Financing Activities:
Proceeds from repurchase agreements$17,611,046 $19,730,790 
Principal payments on repurchase agreements(17,309,244)(26,524,066)
Proceeds from revolving credit facilities410,000