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TWO Two Harbors Investment

Two Harbors Investment Corp. is a Maryland corporation focused on investing, financing and managing residential mortgage-backed securities (RMBS) and related investments. Its objective is to provide attractive risk-adjusted returns to its stockholders over the long term, primarily through dividends and secondarily through capital appreciation. The Company selectively acquires and manages an investment portfolio of its target assets, which is constructed to generate attractive returns through market cycles. The Company focuses on security selection and implement a relative value investment approach across various sectors within the mortgage market. Its target assets include the following: Agency RMBS (which includes inverse interest-only Agency securities classified as Agency Derivatives for purposes of U.S. GAAP), meaning RMBS whose principal and interest payments are guaranteed by the Government National Mortgage Association (or Ginnie Mae), the Federal National Mortgage Association (or Fannie Mae), or the Federal Home Loan Mortgage Corporation (or Freddie Mac); Mortgage servicing rights (MSR); and Other financial assets comprising approximately 5% to 10% of the portfolio.

Company profile

Ticker
TWO, TWO-PC, TWO-PB, TWO-PA
Exchange
CEO
Thomas Siering
Employees
Location
Fiscal year end
SEC CIK
Subsidiaries
Agate Bay Residential Mortgage Securities LLC • Area RE Partners Columbus LLC • Capitol Acquisition Corp. • CYS/Area LP • CYS Condo GP LLC • CYS Investments LLC • Eiger Holdings Company LLC • Eiger Partnership LLC • Matrix Financial Services Corporation • North Shore Assets LLC ...
IRS number
270312904

TWO stock data

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Calendar

5 Aug 21
19 Oct 21
31 Dec 21
Quarter (USD)
Jun 21 Mar 21 Dec 20 Sep 20
Revenue
Cost of revenue
Operating income
Operating margin
Net income
Net profit margin
Cash on hand
Change in cash
Diluted EPS
Annual (USD)
Dec 20 Dec 19 Dec 18 Dec 17
Revenue
Cost of revenue
Operating income
Operating margin
Net income
Net profit margin
Cash on hand
Change in cash
Diluted EPS

Financial data from company earnings reports.

Cash burn rate (estimated) Burn method: Change in cash Burn method: Operating income/loss Burn method: FCF (opex + capex)
Last Q Avg 4Q Last Q Avg 4Q Last Q Avg 4Q
Cash on hand (at last report) 2.15B 2.15B 2.15B 2.15B 2.15B 2.15B
Cash burn (monthly) (positive/no burn) (positive/no burn) 46.29M (positive/no burn) (positive/no burn) (positive/no burn)
Cash used (since last report) n/a n/a 168.8M n/a n/a n/a
Cash remaining n/a n/a 1.98B n/a n/a n/a
Runway (months of cash) n/a n/a 42.8 n/a n/a n/a

Beta Read what these cash burn values mean

Date Owner Security Transaction Code Indirect 10b5-1 $Price #Shares $Value #Remaining
12 Aug 21 Matthew Koeppen Common stock, par value $0.01 per share Sell Dispose S No No 6.4551 84,913 548.12K 33,500
11 Aug 21 Matthew Koeppen Common stock, par value $0.01 per share Sell Dispose S No No 6.4417 110,000 708.59K 118,413
10 Aug 21 Matthew Koeppen Common stock, par value $0.01 per share Sell Dispose S No No 6.4267 100,000 642.67K 228,413
21 May 21 Kasnet Stephen G Common Stock Payment of exercise Dispose F No No 0 10,500 0 160,462
21 May 21 Spencer Abraham Common stock, par value $0.01 per share Payment of exercise Dispose F No No 0 9,262 0 60,148
21 May 21 James J Bender Common stock, par value $0.01 per share Payment of exercise Dispose F No No 0 9,262 0 58,288
19 May 21 William Ross Greenberg Common stock, par value $0.01 per share Grant Acquire A No No 0 209,790 0 387,962

Data for the last complete 13F reporting period. To see the most recent changes to ownership, click the ownership history button above.

62.0% owned by funds/institutions
13F holders
Current Prev Q Change
Total holders 242 248 -2.4%
Opened positions 39 35 +11.4%
Closed positions 45 34 +32.4%
Increased positions 78 91 -14.3%
Reduced positions 72 80 -10.0%
13F shares
Current Prev Q Change
Total value 1.47B 1.19B +24.1%
Total shares 194.66M 161.71M +20.4%
Total puts 2.25M 3.5M -35.8%
Total calls 4.17M 3.92M +6.2%
Total put/call ratio 0.5 0.9 -39.5%
Largest owners
Shares Value Change
BLK Blackrock 49.56M $374.66M +75.8%
Vanguard 28.96M $218.91M +14.8%
WFC Wells Fargo & Co. 10.09M $76.29M +2.7%
Massachusetts Financial Services 9.25M $69.97M +1.6%
STT State Street 9.18M $70.97M +60.7%
GS Goldman Sachs 7.49M $56.63M -17.6%
Brandywine Global Investment Management 5.48M $41.46M -17.8%
Two Sigma Investments 5.41M $40.86M -1.1%
Geode Capital Management 4.46M $33.75M +3.5%
Two Sigma Advisers 4.41M $33.3M +10.4%
Largest transactions
Shares Bought/sold Change
BLK Blackrock 49.56M +21.36M +75.8%
Vanguard 28.96M +3.73M +14.8%
STT State Street 9.18M +3.47M +60.7%
Amundi Pioneer Asset Management 0 -2.51M EXIT
Amundi 2.07M +2.07M NEW
Advisors Capital Management 1.99M +1.99M NEW
Renaissance Technologies 474.06K -1.98M -80.7%
PFG Principal Financial Group Inc - Registered Shares 1.92M +1.9M +6839.7%
MS Morgan Stanley 2.79M +1.68M +151.0%
GS Goldman Sachs 7.49M -1.6M -17.6%

Financial report summary

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Risks
  • Difficult conditions in the residential mortgage and real estate markets, the financial markets and the economy generally may adversely impact our business, results of operations and financial condition.
  • The COVID-19 pandemic and government actions to mitigate its spread and economic impact could have a material adverse effect on our business, results of operations and financial condition.
  • Our business model depends in part upon the continuing viability of Fannie Mae and Freddie Mac, or similar institutions, and any changes to their structure or creditworthiness could have an adverse impact on us.
  • We operate in a highly regulated environment and may be adversely affected by changes in federal and state laws and regulations.
  • Federal and state regulation of the mortgage industry is complex and constantly evolving, and any further changes to applicable laws and regulations, including those adopted in response to the COVID-19 pandemic, may adversely impact our business.
  • We operate in a highly competitive market and we may not be able to compete successfully.
  • We may change any of our strategies, policies or procedures without stockholder consent.
  • Our risk management policies and procedures may not be effective.
  • Maintaining our exemptions from registration as an investment company under the 1940 Act imposes limits on our operations.
  • Loss of our 1940 Act exemptions would adversely affect us, the market price of shares of our common stock and our ability to distribute dividends, and could result in the termination of certain of our financing or other agreements.
  • The lack of liquidity of our assets may adversely affect our business, including our ability to value, finance and sell our assets.
  • We use leverage in executing our business strategy, which may adversely affect the return on our assets and may reduce cash available for distribution to our stockholders, as well as increase losses when economic conditions are unfavorable.
  • We depend on repurchase agreements and other credit facilities to execute our business plan and any limitation on our ability to access funding through these sources could have a material adverse effect on our results of operations, financial condition and business.
  • Our inability to meet certain financial covenants related to our repurchase agreements, revolving credit facilities or other credit facilities could adversely affect our financial condition, results of operations and cash flows.
  • If a counterparty to a repurchase agreement defaults on its obligation to resell the underlying security back to us at the end of the purchase agreement term, or if we default on our obligations under the repurchase agreement, we may incur losses.
  • Our rights under our repurchase agreements are subject to the effects of bankruptcy laws in the event of the bankruptcy or insolvency of us or our lenders under the repurchase agreements.
  • The impairment or negative performance of other financial institutions could adversely affect us.
  • We may not have the ability to raise funds necessary to pay principal amounts owed upon maturity of our outstanding convertible senior notes or to purchase such notes upon a fundamental change.
  • An increase in our borrowing costs relative to the interest that we receive on our leveraged assets may adversely affect our profitability.
  • We are highly dependent on information technology and security breaches or systems failures could disrupt our business.
  • We enter into hedging transactions that expose us to contingent liabilities in the future, which may adversely affect our financial results or cash available for distribution to stockholders.
  • Our results may experience greater fluctuations due to our decision not to elect hedge accounting treatment on our derivative instruments.
  • We depend on third-party service providers, including mortgage loan servicers, for a variety of services related to our business. We are, therefore, subject to the risks associated with third-party service providers.
  • We may be subject to fines, penalties or other enforcement actions based on the conduct of third-party mortgage loan servicers who service the loans underlying the MSR we acquire or our failure to conduct appropriate oversight of these servicers.
  • Our ability to own and manage MSR is subject to terms and conditions established by the GSEs, which are subject to change.
  • Our securitization activities expose us to risk of litigation, which may materially and adversely affect our business and financial condition.
  • We may be subject to representation and warranty risk in our capacity as an owner of MSR as well as in connection with our prior securitization transactions and our sales of MSR and other assets.
  • Declines in the market values of our assets may adversely affect our results of operations and financial condition.
  • Changes in mortgage prepayment rates may adversely affect the value of our assets.
  • It may be uneconomical to roll our TBA dollar roll transactions or we may be unable to meet margin calls on our TBA contracts, which could negatively affect our financial condition and results of operations.
  • Increases in interest rates could adversely affect the value of our assets and cause our interest expense to increase.
  • An increase in interest rates may cause a decrease in the availability of certain of our target assets, which could adversely affect our ability to acquire target assets that satisfy our investment objectives and to generate income and pay dividends.
  • The value of our Agency RMBS and MSR may be adversely affected by deficiencies in servicing and foreclosure practices, as well as related delays in the foreclosure process.
  • We may not be able to fully realize the expected benefits of our transition to a self-managed company or the ability to realize such benefits may take longer than anticipated.
  • Legal and regulatory matters related to the termination of our Management Agreement with PRCM Advisers may adversely affect our business, results of operations, and/or financial condition.
  • Certain provisions of Maryland law could inhibit changes in control.
  • Our authorized but unissued shares of common and preferred stock and the ownership limitations contained in our charter may prevent a change in control.
  • Our charter contains provisions that make removal of our directors difficult, which could make it difficult for stockholders to effect changes in management.
  • Our rights and stockholders’ rights to take action against directors and officers are limited, which could limit recourse in the event of actions not in the best interests of stockholders.
  • Our amended and restated bylaws designate certain Maryland courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders.
  • Future issuances and sales of shares of our common stock may depress the market price of our common stock or have adverse consequences for our stockholders.
  • Any future offerings of our securities could dilute our existing stockholders and may rank senior for purposes of dividend and liquidating distributions.
  • We have not established a minimum distribution payment level and we cannot assure you of our ability to pay distributions in the future.
  • The market price of our common stock could fluctuate and could cause you to lose a significant part of your investment.
  • Our failure to qualify as a REIT would subject us to U.S. federal income tax and potentially increased state and local taxes, which would reduce the amount of our income available for distribution to our stockholders.
  • Complying with REIT requirements may cause us to forego otherwise attractive investment opportunities or financing or hedging strategies.
  • Complying with REIT requirements may force us to liquidate otherwise profitable assets.
  • Potential characterization of distributions or gain on sale may be treated as unrelated business taxable income to tax exempt investors.
  • Complying with REIT requirements may limit our ability to hedge effectively.
  • The failure of our Agency RMBS that are subject to a repurchase agreement to qualify as real estate assets would adversely affect our ability to qualify as a REIT.
  • REIT distribution requirements could adversely affect our ability to execute our business plan and may require us to incur debt, sell assets or take other actions to make such distributions.
  • Our qualification as a REIT may depend on the accuracy of legal opinions or advice rendered or given or statements by the issuers of assets we acquire, including with respect to the treatment of our TBA securities and transactions for tax purposes.
  • Our ownership of, and relationship with, our TRSs will be restricted and a failure to comply with the restrictions would jeopardize our REIT status and may result in the application of a 100% excise tax.
  • Dividends payable by REITs generally do not qualify for the reduced tax rates on dividend income from regular corporations, which could adversely affect the value of our shares.
Management Discussion
  • Interest income decreased from $107.3 million and $362.8 million for the three and six months ended June 30, 2020 to $43.4 million and $99.6 million for the same periods in 2021 due to sales of both Agency RMBS and non-Agency securities that occurred during the first quarter of 2020, further sales of some higher coupon Agency RMBS and higher amortization recognized on Agency RMBS due to prepayments.
  • Interest expense decreased from $62.1 million and $229.4 million for the three and six months ended June 30, 2020, respectively, to $24.4 million and $47.1 million for the same periods in 2021 due to lower borrowing balances related to the sale of both Agency RMBS and non-Agency securities that occurred during the first quarter of 2020 and a lower interest rate environment.
  • (1)Average asset balance represents average amortized cost on AFS securities and average unpaid principal balance, adjusted for purchase price changes, on other assets.
Content analysis
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