000146574012/312022Q1FALSE344,143,0907,139,5067,005,01311,57314,2380.010.01100,000,000100,000,00040,050,00040,050,00029,050,00029,050,000726,250726,2500.010.01700,000,000700,000,000344,132,215343,911,324344,132,215343,911,324460,628454,596438,067440,03000P2M10DP1Y3M14DP2M9DP1Y8M11DP5M10DP1Y5M24DP5M3DP1Y6M28D0.06320400.13550140.1355014————————P1YP3YP3YP1YP3Y00014657402022-01-012022-03-310001465740us-gaap:CommonClassAMemberexch:XNYS2022-01-012022-03-310001465740us-gaap:SeriesAPreferredStockMemberexch:XNYS2022-01-012022-03-310001465740exch:XNYSus-gaap:SeriesBPreferredStockMember2022-01-012022-03-310001465740us-gaap:SeriesCPreferredStockMemberexch:XNYS2022-01-012022-03-3100014657402022-05-02xbrli:shares00014657402022-03-31iso4217:USD00014657402021-12-31iso4217:USDxbrli:shares0001465740us-gaap:VariableInterestEntityPrimaryBeneficiaryMemberus-gaap:AssetsTotalMember2022-03-310001465740us-gaap:VariableInterestEntityPrimaryBeneficiaryMemberus-gaap:AssetsTotalMember2021-12-310001465740us-gaap:LiabilitiesTotalMemberus-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-03-310001465740us-gaap:LiabilitiesTotalMemberus-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-12-3100014657402021-01-012021-03-310001465740us-gaap:PreferredStockMember2020-12-310001465740us-gaap:CommonStockMember2020-12-310001465740us-gaap:AdditionalPaidInCapitalMember2020-12-310001465740us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2020-12-310001465740us-gaap:RetainedEarningsMember2020-12-310001465740us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2020-12-3100014657402020-12-310001465740us-gaap:RetainedEarningsMember2021-01-012021-03-310001465740us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2021-01-012021-03-310001465740us-gaap:PreferredStockMember2021-01-012021-03-310001465740us-gaap:CommonStockMember2021-01-012021-03-310001465740us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001465740us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2021-01-012021-03-310001465740us-gaap:PreferredStockMember2021-03-310001465740us-gaap:CommonStockMember2021-03-310001465740us-gaap:AdditionalPaidInCapitalMember2021-03-310001465740us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2021-03-310001465740us-gaap:RetainedEarningsMember2021-03-310001465740us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2021-03-3100014657402021-03-310001465740us-gaap:PreferredStockMember2021-12-310001465740us-gaap:CommonStockMember2021-12-310001465740us-gaap:AdditionalPaidInCapitalMember2021-12-310001465740us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2021-12-310001465740us-gaap:RetainedEarningsMember2021-12-310001465740us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2021-12-310001465740us-gaap:RetainedEarningsMember2022-01-012022-03-310001465740us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2022-01-012022-03-310001465740us-gaap:CommonStockMember2022-01-012022-03-310001465740us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310001465740us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2022-01-012022-03-310001465740us-gaap:PreferredStockMember2022-03-310001465740us-gaap:CommonStockMember2022-03-310001465740us-gaap:AdditionalPaidInCapitalMember2022-03-310001465740us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2022-03-310001465740us-gaap:RetainedEarningsMember2022-03-310001465740us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2022-03-310001465740us-gaap:NotesReceivableMemberus-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-03-310001465740us-gaap:NotesReceivableMemberus-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-12-310001465740two:RestrictedCashAndCashEquivalentsMemberus-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-03-310001465740two:RestrictedCashAndCashEquivalentsMemberus-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-12-310001465740us-gaap:AccruedIncomeReceivableMemberus-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-03-310001465740us-gaap:AccruedIncomeReceivableMemberus-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-12-310001465740us-gaap:OtherAssetsMemberus-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-03-310001465740us-gaap:OtherAssetsMemberus-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-12-310001465740us-gaap:MediumTermNotesMemberus-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-03-310001465740us-gaap:MediumTermNotesMemberus-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-12-310001465740us-gaap:RevolvingCreditFacilityMemberus-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-03-310001465740us-gaap:RevolvingCreditFacilityMemberus-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-12-310001465740us-gaap:VariableInterestEntityPrimaryBeneficiaryMemberus-gaap:AccruedLiabilitiesMember2022-03-310001465740us-gaap:VariableInterestEntityPrimaryBeneficiaryMemberus-gaap:AccruedLiabilitiesMember2021-12-310001465740us-gaap:VariableInterestEntityPrimaryBeneficiaryMemberus-gaap:OtherLiabilitiesMember2022-03-310001465740us-gaap:VariableInterestEntityPrimaryBeneficiaryMemberus-gaap:OtherLiabilitiesMember2021-12-310001465740us-gaap:FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember2022-03-310001465740us-gaap:FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember2021-12-310001465740us-gaap:FederalHomeLoanMortgageCorporationCertificatesAndObligationsFHLMCMember2022-03-310001465740us-gaap:FederalHomeLoanMortgageCorporationCertificatesAndObligationsFHLMCMember2021-12-310001465740us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember2022-03-310001465740us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember2021-12-310001465740us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember2022-03-310001465740us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember2021-12-310001465740us-gaap:AssetPledgedAsCollateralMember2022-03-310001465740us-gaap:AssetPledgedAsCollateralMember2021-12-310001465740us-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember2022-03-310001465740us-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember2021-12-310001465740us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMemberus-gaap:FixedIncomeSecuritiesMember2022-03-310001465740us-gaap:InterestOnlyStripMemberus-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2022-03-310001465740us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2022-03-310001465740us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMemberus-gaap:FixedIncomeSecuritiesMember2021-12-310001465740us-gaap:InterestOnlyStripMemberus-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2021-12-310001465740us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2021-12-310001465740us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2020-01-010001465740us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember2020-01-0100014657402020-01-010001465740us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2022-01-012022-03-310001465740us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember2022-01-012022-03-310001465740us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2021-01-012021-03-310001465740us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember2021-01-012021-03-310001465740us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2021-03-310001465740us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember2021-03-31two:numberOfPositions0001465740us-gaap:MeasurementInputConstantPrepaymentRateMember2022-03-31xbrli:pure0001465740us-gaap:MeasurementInputConstantPrepaymentRateMember2021-12-310001465740two:MeasurementInputDelinquencyMember2022-03-310001465740two:MeasurementInputDelinquencyMember2021-12-310001465740us-gaap:MeasurementInputDiscountRateMember2022-03-310001465740us-gaap:MeasurementInputDiscountRateMember2021-12-310001465740two:MeasurementInputPerLoanAnnualCosttoServiceMember2022-03-310001465740two:MeasurementInputPerLoanAnnualCosttoServiceMember2021-12-310001465740us-gaap:AssetPledgedAsCollateralMemberus-gaap:LineOfCreditMember2022-03-310001465740us-gaap:AssetPledgedAsCollateralMemberus-gaap:LineOfCreditMember2021-12-310001465740us-gaap:ServicingContractsMember2022-03-31two:loan0001465740us-gaap:ServicingContractsMember2021-12-310001465740us-gaap:ResidentialMortgageMember2022-03-310001465740us-gaap:ResidentialMortgageMember2021-12-310001465740us-gaap:OtherAssetsMember2022-03-310001465740us-gaap:OtherAssetsMember2021-12-310001465740two:RestrictedCashandCashEquivalentsHeldforSecuritiesTradingActivityMember2022-03-310001465740two:RestrictedCashandCashEquivalentsHeldforSecuritiesTradingActivityMember2021-12-310001465740two:RestrictedCashandCashEquivalentsHeldforDerivativesTradingActivityMember2022-03-310001465740two:RestrictedCashandCashEquivalentsHeldforDerivativesTradingActivityMember2021-12-310001465740two:RestrictedCashAndCashEquivalentsHeldForServicingActivitiesMember2022-03-310001465740two:RestrictedCashAndCashEquivalentsHeldForServicingActivitiesMember2021-12-310001465740two:RestrictedCashandCashEquivalentsPledgedasRestrictedCollateralforBorrowingsMember2022-03-310001465740two:RestrictedCashandCashEquivalentsPledgedasRestrictedCollateralforBorrowingsMember2021-12-310001465740two:RestrictedCashandCashEquivalentsHeldbyCounterpartiesMember2022-03-310001465740two:RestrictedCashandCashEquivalentsHeldbyCounterpartiesMember2021-12-310001465740two:RestrictedCashandCashEquivalentsforLeaseMember2022-03-310001465740two:RestrictedCashandCashEquivalentsforLeaseMember2021-12-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMembertwo:InverseInterestOnlySecuritiesMember2022-03-310001465740two:InverseInterestOnlySecuritiesMemberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2022-03-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMemberus-gaap:InterestRateSwapMember2022-03-310001465740us-gaap:InterestRateSwapMemberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2022-03-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMemberus-gaap:InterestRateSwaptionMember2022-03-310001465740us-gaap:DerivativeFinancialInstrumentsLiabilitiesMemberus-gaap:InterestRateSwaptionMember2022-03-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMemberus-gaap:ForwardContractsMember2022-03-310001465740us-gaap:ForwardContractsMemberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2022-03-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMemberus-gaap:FutureMember2022-03-310001465740us-gaap:FutureMemberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2022-03-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMemberus-gaap:ExchangeTradedOptionsMember2022-03-310001465740us-gaap:ExchangeTradedOptionsMemberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2022-03-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMember2022-03-310001465740us-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2022-03-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMembertwo:InverseInterestOnlySecuritiesMember2021-12-310001465740two:InverseInterestOnlySecuritiesMemberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2021-12-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMemberus-gaap:InterestRateSwapMember2021-12-310001465740us-gaap:InterestRateSwapMemberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2021-12-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMemberus-gaap:InterestRateSwaptionMember2021-12-310001465740us-gaap:DerivativeFinancialInstrumentsLiabilitiesMemberus-gaap:InterestRateSwaptionMember2021-12-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMemberus-gaap:ForwardContractsMember2021-12-310001465740us-gaap:ForwardContractsMemberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2021-12-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMemberus-gaap:FutureMember2021-12-310001465740us-gaap:FutureMemberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2021-12-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMember2021-12-310001465740us-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2021-12-310001465740us-gaap:ForwardContractsMemberus-gaap:GainLossOnDerivativeInstrumentsMember2022-01-012022-03-310001465740us-gaap:ForwardContractsMemberus-gaap:GainLossOnDerivativeInstrumentsMember2021-01-012021-03-310001465740us-gaap:FutureMemberus-gaap:GainLossOnDerivativeInstrumentsMember2022-01-012022-03-310001465740us-gaap:FutureMemberus-gaap:GainLossOnDerivativeInstrumentsMember2021-01-012021-03-310001465740us-gaap:ExchangeTradedOptionsMemberus-gaap:GainLossOnDerivativeInstrumentsMember2022-01-012022-03-310001465740us-gaap:ExchangeTradedOptionsMemberus-gaap:GainLossOnDerivativeInstrumentsMember2021-01-012021-03-310001465740us-gaap:LongMemberus-gaap:InterestRateSwapMembertwo:GainLossonInterestRateSwapandSwaptionAgreementsMember2022-01-012022-03-310001465740us-gaap:LongMemberus-gaap:InterestRateSwapMembertwo:GainLossonInterestRateSwapandSwaptionAgreementsMember2021-01-012021-03-310001465740us-gaap:ShortMemberus-gaap:InterestRateSwapMembertwo:GainLossonInterestRateSwapandSwaptionAgreementsMember2022-01-012022-03-310001465740us-gaap:ShortMemberus-gaap:InterestRateSwapMembertwo:GainLossonInterestRateSwapandSwaptionAgreementsMember2021-01-012021-03-310001465740us-gaap:InterestRateSwaptionMembertwo:GainLossonInterestRateSwapandSwaptionAgreementsMember2022-01-012022-03-310001465740us-gaap:InterestRateSwaptionMembertwo:GainLossonInterestRateSwapandSwaptionAgreementsMember2021-01-012021-03-310001465740two:InverseInterestOnlySecuritiesMemberus-gaap:GainLossOnDerivativeInstrumentsMember2022-01-012022-03-310001465740two:InverseInterestOnlySecuritiesMemberus-gaap:GainLossOnDerivativeInstrumentsMember2021-01-012021-03-310001465740us-gaap:InterestRateContractMember2022-01-012022-03-310001465740us-gaap:InterestRateContractMember2021-01-012021-03-310001465740us-gaap:InterestRateContractMembertwo:NetLongPositionMember2022-01-012022-03-310001465740us-gaap:InterestRateContractMembertwo:NetLongPositionMember2021-01-012021-03-310001465740two:InverseInterestOnlySecuritiesMembertwo:NetLongPositionMember2021-12-310001465740two:InverseInterestOnlySecuritiesMember2022-01-012022-03-310001465740two:InverseInterestOnlySecuritiesMembertwo:NetLongPositionMember2022-03-310001465740two:InverseInterestOnlySecuritiesMembertwo:NetLongPositionMember2022-01-012022-03-310001465740us-gaap:InterestRateSwapMembertwo:NetLongPositionMember2021-12-310001465740us-gaap:InterestRateSwapMember2022-01-012022-03-310001465740us-gaap:InterestRateSwapMembertwo:NetLongPositionMember2022-03-310001465740us-gaap:InterestRateSwapMembertwo:NetLongPositionMember2022-01-012022-03-310001465740two:NetShortPositionMemberus-gaap:InterestRateSwaptionMember2021-12-310001465740us-gaap:InterestRateSwaptionMember2022-01-012022-03-310001465740two:NetShortPositionMemberus-gaap:InterestRateSwaptionMember2022-03-310001465740two:NetShortPositionMemberus-gaap:InterestRateSwaptionMember2022-01-012022-03-310001465740us-gaap:ForwardContractsMembertwo:NetLongPositionMember2021-12-310001465740us-gaap:ForwardContractsMember2022-01-012022-03-310001465740us-gaap:ForwardContractsMembertwo:NetLongPositionMember2022-03-310001465740us-gaap:ForwardContractsMembertwo:NetLongPositionMember2022-01-012022-03-310001465740two:NetShortPositionMemberus-gaap:FutureMember2021-12-310001465740us-gaap:FutureMember2022-01-012022-03-310001465740two:NetShortPositionMemberus-gaap:FutureMember2022-03-310001465740two:NetShortPositionMemberus-gaap:FutureMember2022-01-012022-03-310001465740us-gaap:ExchangeTradedOptionsMembertwo:NetLongPositionMember2021-12-310001465740us-gaap:ExchangeTradedOptionsMember2022-01-012022-03-310001465740us-gaap:ExchangeTradedOptionsMembertwo:NetLongPositionMember2022-03-310001465740us-gaap:ExchangeTradedOptionsMembertwo:NetLongPositionMember2022-01-012022-03-310001465740two:InverseInterestOnlySecuritiesMembertwo:NetLongPositionMember2020-12-310001465740two:InverseInterestOnlySecuritiesMember2021-01-012021-03-310001465740two:InverseInterestOnlySecuritiesMembertwo:NetLongPositionMember2021-03-310001465740two:InverseInterestOnlySecuritiesMembertwo:NetLongPositionMember2021-01-012021-03-310001465740us-gaap:InterestRateSwapMembertwo:NetLongPositionMember2020-12-310001465740us-gaap:InterestRateSwapMember2021-01-012021-03-310001465740us-gaap:InterestRateSwapMembertwo:NetLongPositionMember2021-03-310001465740us-gaap:InterestRateSwapMembertwo:NetLongPositionMember2021-01-012021-03-310001465740two:NetLongPositionMemberus-gaap:InterestRateSwaptionMember2020-12-310001465740us-gaap:InterestRateSwaptionMember2021-01-012021-03-310001465740two:NetLongPositionMemberus-gaap:InterestRateSwaptionMember2021-03-310001465740two:NetLongPositionMemberus-gaap:InterestRateSwaptionMember2021-01-012021-03-310001465740us-gaap:ForwardContractsMembertwo:NetLongPositionMember2020-12-310001465740us-gaap:ForwardContractsMember2021-01-012021-03-310001465740us-gaap:ForwardContractsMembertwo:NetLongPositionMember2021-03-310001465740us-gaap:ForwardContractsMembertwo:NetLongPositionMember2021-01-012021-03-310001465740two:NetShortPositionMemberus-gaap:FutureMember2020-12-310001465740us-gaap:FutureMember2021-01-012021-03-310001465740us-gaap:FutureMembertwo:NetLongPositionMember2021-03-310001465740us-gaap:FutureMembertwo:NetLongPositionMember2021-01-012021-03-310001465740us-gaap:InterestOnlyStripMember2022-03-310001465740us-gaap:InterestOnlyStripMember2021-12-310001465740us-gaap:LongMemberus-gaap:ForwardContractsMember2022-03-310001465740us-gaap:LongMemberus-gaap:DerivativeFinancialInstrumentsAssetsMemberus-gaap:ForwardContractsMember2022-03-310001465740us-gaap:LongMemberus-gaap:ForwardContractsMemberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2022-03-310001465740us-gaap:ForwardContractsMemberus-gaap:ShortMember2022-03-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMemberus-gaap:ShortMemberus-gaap:ForwardContractsMember2022-03-310001465740us-gaap:ShortMemberus-gaap:ForwardContractsMemberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2022-03-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMemberus-gaap:ForwardContractsMembertwo:NetLongPositionMember2022-03-310001465740us-gaap:ForwardContractsMemberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMembertwo:NetLongPositionMember2022-03-310001465740us-gaap:LongMemberus-gaap:ForwardContractsMember2021-12-310001465740us-gaap:LongMemberus-gaap:DerivativeFinancialInstrumentsAssetsMemberus-gaap:ForwardContractsMember2021-12-310001465740us-gaap:LongMemberus-gaap:ForwardContractsMemberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2021-12-310001465740us-gaap:ForwardContractsMemberus-gaap:ShortMember2021-12-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMemberus-gaap:ShortMemberus-gaap:ForwardContractsMember2021-12-310001465740us-gaap:ShortMemberus-gaap:ForwardContractsMemberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMember2021-12-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMemberus-gaap:ForwardContractsMembertwo:NetLongPositionMember2021-12-310001465740us-gaap:ForwardContractsMemberus-gaap:DerivativeFinancialInstrumentsLiabilitiesMembertwo:NetLongPositionMember2021-12-310001465740two:NetShortPositionMemberus-gaap:FutureMemberus-gaap:BondFutureMember2022-03-310001465740us-gaap:FutureMemberus-gaap:BondFutureMember2022-03-310001465740us-gaap:FutureMemberus-gaap:BondFutureMember2022-01-012022-03-310001465740us-gaap:FutureMembertwo:NetLongPositionMemberus-gaap:BondFutureMember2021-12-310001465740us-gaap:FutureMemberus-gaap:BondFutureMember2021-12-310001465740us-gaap:FutureMemberus-gaap:BondFutureMember2021-01-012021-12-310001465740two:NetShortPositionMemberus-gaap:FutureMemberus-gaap:EurodollarFutureMembertwo:DerivativeMaturityWithinOneYearFromBalanceSheetDateMember2022-03-310001465740us-gaap:FutureMemberus-gaap:EurodollarFutureMembertwo:DerivativeMaturityWithinOneYearFromBalanceSheetDateMember2022-03-310001465740us-gaap:FutureMemberus-gaap:EurodollarFutureMembertwo:DerivativeMaturityWithinOneYearFromBalanceSheetDateMember2022-01-012022-03-310001465740two:NetShortPositionMemberus-gaap:FutureMemberus-gaap:EurodollarFutureMembertwo:DerivativeMaturityWithinOneYearFromBalanceSheetDateMember2021-12-310001465740us-gaap:FutureMemberus-gaap:EurodollarFutureMembertwo:DerivativeMaturityWithinOneYearFromBalanceSheetDateMember2021-12-310001465740us-gaap:FutureMemberus-gaap:EurodollarFutureMembertwo:DerivativeMaturityWithinOneYearFromBalanceSheetDateMember2021-01-012021-12-310001465740two:NetShortPositionMemberus-gaap:FutureMemberus-gaap:EurodollarFutureMembertwo:DerivativeMaturityOverOneAndWithinTwoYearsFromBalanceSheetDateMember2022-03-310001465740us-gaap:FutureMemberus-gaap:EurodollarFutureMembertwo:DerivativeMaturityOverOneAndWithinTwoYearsFromBalanceSheetDateMember2022-03-310001465740us-gaap:FutureMemberus-gaap:EurodollarFutureMembertwo:DerivativeMaturityOverOneAndWithinTwoYearsFromBalanceSheetDateMember2022-01-012022-03-310001465740two:NetShortPositionMemberus-gaap:FutureMemberus-gaap:EurodollarFutureMembertwo:DerivativeMaturityOverOneAndWithinTwoYearsFromBalanceSheetDateMember2021-12-310001465740us-gaap:FutureMemberus-gaap:EurodollarFutureMembertwo:DerivativeMaturityOverOneAndWithinTwoYearsFromBalanceSheetDateMember2021-12-310001465740us-gaap:FutureMemberus-gaap:EurodollarFutureMembertwo:DerivativeMaturityOverOneAndWithinTwoYearsFromBalanceSheetDateMember2021-01-012021-12-310001465740two:NetShortPositionMemberus-gaap:FutureMembertwo:DerivativeMaturityOverTwoAndWithinThreeYearsFromBalanceSheetDateMemberus-gaap:EurodollarFutureMember2022-03-310001465740us-gaap:FutureMembertwo:DerivativeMaturityOverTwoAndWithinThreeYearsFromBalanceSheetDateMemberus-gaap:EurodollarFutureMember2022-03-310001465740us-gaap:FutureMembertwo:DerivativeMaturityOverTwoAndWithinThreeYearsFromBalanceSheetDateMemberus-gaap:EurodollarFutureMember2022-01-012022-03-310001465740two:NetShortPositionMemberus-gaap:FutureMembertwo:DerivativeMaturityOverTwoAndWithinThreeYearsFromBalanceSheetDateMemberus-gaap:EurodollarFutureMember2021-12-310001465740us-gaap:FutureMembertwo:DerivativeMaturityOverTwoAndWithinThreeYearsFromBalanceSheetDateMemberus-gaap:EurodollarFutureMember2021-12-310001465740us-gaap:FutureMembertwo:DerivativeMaturityOverTwoAndWithinThreeYearsFromBalanceSheetDateMemberus-gaap:EurodollarFutureMember2021-01-012021-12-310001465740us-gaap:FutureMember2022-03-310001465740us-gaap:FutureMember2021-12-310001465740us-gaap:FutureMember2021-01-012021-12-310001465740us-gaap:ExchangeTradedOptionsMemberus-gaap:BondFutureMember2022-03-310001465740us-gaap:ExchangeTradedOptionsMemberus-gaap:BondFutureMember2022-01-012022-03-310001465740us-gaap:ExchangeTradedOptionsMemberus-gaap:BondFutureMember2021-12-310001465740us-gaap:ExchangeTradedOptionsMemberus-gaap:BondFutureMember2021-01-012021-12-310001465740us-gaap:LongMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityWithinOneYearFromBalanceSheetDateMember2022-03-310001465740us-gaap:LongMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityWithinOneYearFromBalanceSheetDateMember2022-01-012022-03-310001465740us-gaap:LongMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityOverOneAndWithinTwoYearsFromBalanceSheetDateMember2022-03-310001465740us-gaap:LongMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityOverOneAndWithinTwoYearsFromBalanceSheetDateMember2022-01-012022-03-310001465740us-gaap:LongMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityOverTwoAndWithinThreeYearsFromBalanceSheetDateMember2022-03-310001465740us-gaap:LongMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityOverTwoAndWithinThreeYearsFromBalanceSheetDateMember2022-01-012022-03-310001465740us-gaap:LongMembertwo:DerivativeMaturityOverThreeAndWithinFourYearsFromBalanceSheetDateMemberus-gaap:InterestRateSwapMember2022-03-310001465740us-gaap:LongMembertwo:DerivativeMaturityOverThreeAndWithinFourYearsFromBalanceSheetDateMemberus-gaap:InterestRateSwapMember2022-01-012022-03-310001465740two:DerivativeMaturityOverFourYearsFromBalanceSheetDateMemberus-gaap:LongMemberus-gaap:InterestRateSwapMember2022-03-310001465740two:DerivativeMaturityOverFourYearsFromBalanceSheetDateMemberus-gaap:LongMemberus-gaap:InterestRateSwapMember2022-01-012022-03-310001465740us-gaap:LongMemberus-gaap:InterestRateSwapMember2022-03-310001465740us-gaap:LongMemberus-gaap:InterestRateSwapMember2022-01-012022-03-310001465740us-gaap:LongMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityWithinOneYearFromBalanceSheetDateMember2021-12-310001465740us-gaap:LongMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityWithinOneYearFromBalanceSheetDateMember2021-01-012021-12-310001465740us-gaap:LongMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityOverOneAndWithinTwoYearsFromBalanceSheetDateMember2021-12-310001465740us-gaap:LongMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityOverOneAndWithinTwoYearsFromBalanceSheetDateMember2021-01-012021-12-310001465740us-gaap:LongMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityOverTwoAndWithinThreeYearsFromBalanceSheetDateMember2021-12-310001465740us-gaap:LongMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityOverTwoAndWithinThreeYearsFromBalanceSheetDateMember2021-01-012021-12-310001465740us-gaap:LongMembertwo:DerivativeMaturityOverThreeAndWithinFourYearsFromBalanceSheetDateMemberus-gaap:InterestRateSwapMember2021-12-310001465740us-gaap:LongMembertwo:DerivativeMaturityOverThreeAndWithinFourYearsFromBalanceSheetDateMemberus-gaap:InterestRateSwapMember2021-01-012021-12-310001465740two:DerivativeMaturityOverFourYearsFromBalanceSheetDateMemberus-gaap:LongMemberus-gaap:InterestRateSwapMember2021-12-310001465740two:DerivativeMaturityOverFourYearsFromBalanceSheetDateMemberus-gaap:LongMemberus-gaap:InterestRateSwapMember2021-01-012021-12-310001465740us-gaap:LongMemberus-gaap:InterestRateSwapMember2021-12-310001465740us-gaap:LongMemberus-gaap:InterestRateSwapMember2021-01-012021-12-310001465740us-gaap:ShortMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityWithinOneYearFromBalanceSheetDateMember2022-03-310001465740us-gaap:ShortMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityWithinOneYearFromBalanceSheetDateMember2022-01-012022-03-310001465740us-gaap:ShortMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityOverOneAndWithinTwoYearsFromBalanceSheetDateMember2022-03-310001465740us-gaap:ShortMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityOverOneAndWithinTwoYearsFromBalanceSheetDateMember2022-01-012022-03-310001465740us-gaap:ShortMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityOverTwoAndWithinThreeYearsFromBalanceSheetDateMember2022-03-310001465740us-gaap:ShortMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityOverTwoAndWithinThreeYearsFromBalanceSheetDateMember2022-01-012022-03-310001465740us-gaap:ShortMembertwo:DerivativeMaturityOverThreeAndWithinFourYearsFromBalanceSheetDateMemberus-gaap:InterestRateSwapMember2022-03-310001465740us-gaap:ShortMembertwo:DerivativeMaturityOverThreeAndWithinFourYearsFromBalanceSheetDateMemberus-gaap:InterestRateSwapMember2022-01-012022-03-310001465740two:DerivativeMaturityOverFourYearsFromBalanceSheetDateMemberus-gaap:ShortMemberus-gaap:InterestRateSwapMember2022-03-310001465740two:DerivativeMaturityOverFourYearsFromBalanceSheetDateMemberus-gaap:ShortMemberus-gaap:InterestRateSwapMember2022-01-012022-03-310001465740us-gaap:ShortMemberus-gaap:InterestRateSwapMember2022-03-310001465740us-gaap:ShortMemberus-gaap:InterestRateSwapMember2022-01-012022-03-310001465740us-gaap:ShortMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityWithinOneYearFromBalanceSheetDateMember2021-12-310001465740us-gaap:ShortMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityWithinOneYearFromBalanceSheetDateMember2021-01-012021-12-310001465740us-gaap:ShortMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityOverOneAndWithinTwoYearsFromBalanceSheetDateMember2021-12-310001465740us-gaap:ShortMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityOverOneAndWithinTwoYearsFromBalanceSheetDateMember2021-01-012021-12-310001465740us-gaap:ShortMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityOverTwoAndWithinThreeYearsFromBalanceSheetDateMember2021-12-310001465740us-gaap:ShortMemberus-gaap:InterestRateSwapMembertwo:DerivativeMaturityOverTwoAndWithinThreeYearsFromBalanceSheetDateMember2021-01-012021-12-310001465740us-gaap:ShortMembertwo:DerivativeMaturityOverThreeAndWithinFourYearsFromBalanceSheetDateMemberus-gaap:InterestRateSwapMember2021-12-310001465740us-gaap:ShortMembertwo:DerivativeMaturityOverThreeAndWithinFourYearsFromBalanceSheetDateMemberus-gaap:InterestRateSwapMember2021-01-012021-12-310001465740two:DerivativeMaturityOverFourYearsFromBalanceSheetDateMemberus-gaap:ShortMemberus-gaap:InterestRateSwapMember2021-12-310001465740two:DerivativeMaturityOverFourYearsFromBalanceSheetDateMemberus-gaap:ShortMemberus-gaap:InterestRateSwapMember2021-01-012021-12-310001465740us-gaap:ShortMemberus-gaap:InterestRateSwapMember2021-12-310001465740us-gaap:ShortMemberus-gaap:InterestRateSwapMember2021-01-012021-12-310001465740two:LessThanSixMonthsRemainingMaturityMemberus-gaap:LongMemberus-gaap:VariableIncomeInterestRateMemberus-gaap:InterestRateSwaptionMember2022-03-310001465740two:LessThanSixMonthsRemainingMaturityMemberus-gaap:LongMembertwo:UnderlyingSwapMemberus-gaap:VariableIncomeInterestRateMember2022-03-310001465740two:LessThanSixMonthsRemainingMaturityMemberus-gaap:LongMembertwo:UnderlyingSwapMemberus-gaap:VariableIncomeInterestRateMember2022-01-012022-03-310001465740us-gaap:ShortMemberus-gaap:VariableIncomeInterestRateMembertwo:GreaterThanOrEqualToSixMonthsRemainingMaturityMemberus-gaap:InterestRateSwaptionMember2022-03-310001465740us-gaap:ShortMembertwo:UnderlyingSwapMemberus-gaap:VariableIncomeInterestRateMembertwo:GreaterThanOrEqualToSixMonthsRemainingMaturityMember2022-03-310001465740us-gaap:ShortMembertwo:UnderlyingSwapMemberus-gaap:VariableIncomeInterestRateMembertwo:GreaterThanOrEqualToSixMonthsRemainingMaturityMember2022-01-012022-03-310001465740two:LessThanSixMonthsRemainingMaturityMemberus-gaap:FixedIncomeInterestRateMemberus-gaap:ShortMemberus-gaap:InterestRateSwaptionMember2022-03-310001465740two:LessThanSixMonthsRemainingMaturityMemberus-gaap:FixedIncomeInterestRateMemberus-gaap:ShortMembertwo:UnderlyingSwapMember2022-03-310001465740two:LessThanSixMonthsRemainingMaturityMemberus-gaap:FixedIncomeInterestRateMemberus-gaap:ShortMembertwo:UnderlyingSwapMember2022-01-012022-03-310001465740us-gaap:FixedIncomeInterestRateMemberus-gaap:ShortMembertwo:GreaterThanOrEqualToSixMonthsRemainingMaturityMemberus-gaap:InterestRateSwaptionMember2022-03-310001465740us-gaap:FixedIncomeInterestRateMemberus-gaap:ShortMembertwo:UnderlyingSwapMembertwo:GreaterThanOrEqualToSixMonthsRemainingMaturityMember2022-03-310001465740us-gaap:FixedIncomeInterestRateMemberus-gaap:ShortMembertwo:UnderlyingSwapMembertwo:GreaterThanOrEqualToSixMonthsRemainingMaturityMember2022-01-012022-03-310001465740two:LessThanSixMonthsRemainingMaturityMemberus-gaap:LongMemberus-gaap:VariableIncomeInterestRateMemberus-gaap:InterestRateSwaptionMember2021-12-310001465740two:LessThanSixMonthsRemainingMaturityMemberus-gaap:LongMembertwo:UnderlyingSwapMemberus-gaap:VariableIncomeInterestRateMember2021-12-310001465740two:LessThanSixMonthsRemainingMaturityMemberus-gaap:LongMembertwo:UnderlyingSwapMemberus-gaap:VariableIncomeInterestRateMember2021-01-012021-12-310001465740us-gaap:ShortMemberus-gaap:VariableIncomeInterestRateMembertwo:GreaterThanOrEqualToSixMonthsRemainingMaturityMemberus-gaap:InterestRateSwaptionMember2021-12-310001465740us-gaap:ShortMembertwo:UnderlyingSwapMemberus-gaap:VariableIncomeInterestRateMembertwo:GreaterThanOrEqualToSixMonthsRemainingMaturityMember2021-12-310001465740us-gaap:ShortMembertwo:UnderlyingSwapMemberus-gaap:VariableIncomeInterestRateMembertwo:GreaterThanOrEqualToSixMonthsRemainingMaturityMember2021-01-012021-12-310001465740two:LessThanSixMonthsRemainingMaturityMemberus-gaap:FixedIncomeInterestRateMemberus-gaap:ShortMemberus-gaap:InterestRateSwaptionMember2021-12-310001465740two:LessThanSixMonthsRemainingMaturityMemberus-gaap:FixedIncomeInterestRateMemberus-gaap:ShortMembertwo:UnderlyingSwapMember2021-12-310001465740two:LessThanSixMonthsRemainingMaturityMemberus-gaap:FixedIncomeInterestRateMemberus-gaap:ShortMembertwo:UnderlyingSwapMember2021-01-012021-12-310001465740us-gaap:FixedIncomeInterestRateMemberus-gaap:ShortMembertwo:GreaterThanOrEqualToSixMonthsRemainingMaturityMemberus-gaap:InterestRateSwaptionMember2021-12-310001465740us-gaap:FixedIncomeInterestRateMemberus-gaap:ShortMembertwo:UnderlyingSwapMembertwo:GreaterThanOrEqualToSixMonthsRemainingMaturityMember2021-12-310001465740us-gaap:FixedIncomeInterestRateMemberus-gaap:ShortMembertwo:UnderlyingSwapMembertwo:GreaterThanOrEqualToSixMonthsRemainingMaturityMember2021-01-012021-12-310001465740two:LessThanSixMonthsRemainingMaturityMemberus-gaap:LongMemberus-gaap:VariableIncomeInterestRateMemberus-gaap:InterestRateSwaptionMember2022-01-012022-03-310001465740us-gaap:ShortMemberus-gaap:VariableIncomeInterestRateMembertwo:GreaterThanOrEqualToSixMonthsRemainingMaturityMemberus-gaap:InterestRateSwaptionMember2022-01-012022-03-310001465740two:LessThanSixMonthsRemainingMaturityMemberus-gaap:FixedIncomeInterestRateMemberus-gaap:ShortMemberus-gaap:InterestRateSwaptionMember2022-01-012022-03-310001465740us-gaap:FixedIncomeInterestRateMemberus-gaap:ShortMembertwo:GreaterThanOrEqualToSixMonthsRemainingMaturityMemberus-gaap:InterestRateSwaptionMember2022-01-012022-03-310001465740two:LessThanSixMonthsRemainingMaturityMemberus-gaap:LongMemberus-gaap:VariableIncomeInterestRateMemberus-gaap:InterestRateSwaptionMember2021-01-012021-12-310001465740us-gaap:ShortMemberus-gaap:VariableIncomeInterestRateMembertwo:GreaterThanOrEqualToSixMonthsRemainingMaturityMemberus-gaap:InterestRateSwaptionMember2021-01-012021-12-310001465740two:LessThanSixMonthsRemainingMaturityMemberus-gaap:FixedIncomeInterestRateMemberus-gaap:ShortMemberus-gaap:InterestRateSwaptionMember2021-01-012021-12-310001465740us-gaap:FixedIncomeInterestRateMemberus-gaap:ShortMembertwo:GreaterThanOrEqualToSixMonthsRemainingMaturityMemberus-gaap:InterestRateSwaptionMember2021-01-012021-12-310001465740us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2022-03-310001465740us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2022-03-310001465740us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2022-03-310001465740us-gaap:FairValueMeasurementsRecurringMember2022-03-310001465740us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2021-12-310001465740us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-12-310001465740us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2021-12-310001465740us-gaap:FairValueMeasurementsRecurringMember2021-12-310001465740us-gaap:AvailableforsaleSecuritiesMember2021-12-310001465740us-gaap:ServicingContractsMember2021-12-310001465740us-gaap:AvailableforsaleSecuritiesMember2022-01-012022-03-310001465740us-gaap:ServicingContractsMember2022-01-012022-03-310001465740us-gaap:AvailableforsaleSecuritiesMember2022-03-310001465740us-gaap:ServicingContractsMember2022-03-310001465740us-gaap:MeasurementInputConstantPrepaymentRateMembersrt:MinimumMember2022-03-310001465740srt:MaximumMemberus-gaap:MeasurementInputConstantPrepaymentRateMember2022-03-310001465740two:MeasurementInputDelinquencyMembersrt:MinimumMember2022-03-310001465740srt:MaximumMembertwo:MeasurementInputDelinquencyMember2022-03-310001465740us-gaap:MeasurementInputDiscountRateMembersrt:MinimumMember2022-03-310001465740srt:MaximumMemberus-gaap:MeasurementInputDiscountRateMember2022-03-310001465740two:MeasurementInputPerLoanAnnualCosttoServiceMembersrt:MinimumMember2022-03-310001465740two:MeasurementInputPerLoanAnnualCosttoServiceMembersrt:MaximumMember2022-03-310001465740us-gaap:MeasurementInputConstantPrepaymentRateMembersrt:MinimumMember2021-12-310001465740srt:MaximumMemberus-gaap:MeasurementInputConstantPrepaymentRateMember2021-12-310001465740two:MeasurementInputDelinquencyMembersrt:MinimumMember2021-12-310001465740srt:MaximumMembertwo:MeasurementInputDelinquencyMember2021-12-310001465740us-gaap:MeasurementInputDiscountRateMembersrt:MinimumMember2021-12-310001465740srt:MaximumMemberus-gaap:MeasurementInputDiscountRateMember2021-12-310001465740two:MeasurementInputPerLoanAnnualCosttoServiceMembersrt:MinimumMember2021-12-310001465740two:MeasurementInputPerLoanAnnualCosttoServiceMembersrt:MaximumMember2021-12-310001465740two:MaturityOverOneYearMember2022-03-3100014657402021-01-012021-12-310001465740us-gaap:MaturityUpTo30DaysMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-03-310001465740us-gaap:MaturityUpTo30DaysMemberus-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember2022-03-310001465740two:InverseInterestOnlySecuritiesMemberus-gaap:MaturityUpTo30DaysMember2022-03-310001465740us-gaap:MaturityUpTo30DaysMemberus-gaap:ServicingContractsMember2022-03-310001465740us-gaap:MaturityUpTo30DaysMember2022-03-310001465740us-gaap:USGovernmentAgenciesDebtSecuritiesMembertwo:Maturity30To59DaysMember2022-03-310001465740us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMembertwo:Maturity30To59DaysMember2022-03-310001465740two:InverseInterestOnlySecuritiesMembertwo:Maturity30To59DaysMember2022-03-310001465740us-gaap:ServicingContractsMembertwo:Maturity30To59DaysMember2022-03-310001465740two:Maturity30To59DaysMember2022-03-310001465740us-gaap:USGovernmentAgenciesDebtSecuritiesMembertwo:Maturity60To89DaysMember2022-03-310001465740us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMembertwo:Maturity60To89DaysMember2022-03-310001465740two:InverseInterestOnlySecuritiesMembertwo:Maturity60To89DaysMember2022-03-310001465740us-gaap:ServicingContractsMembertwo:Maturity60To89DaysMember2022-03-310001465740two:Maturity60To89DaysMember2022-03-310001465740us-gaap:USGovernmentAgenciesDebtSecuritiesMembertwo:Maturity90To119DaysMember2022-03-310001465740us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMembertwo:Maturity90To119DaysMember2022-03-310001465740two:InverseInterestOnlySecuritiesMembertwo:Maturity90To119DaysMember2022-03-310001465740us-gaap:ServicingContractsMembertwo:Maturity90To119DaysMember2022-03-310001465740two:Maturity90To119DaysMember2022-03-310001465740us-gaap:USGovernmentAgenciesDebtSecuritiesMembertwo:Maturity120To364DaysMember2022-03-310001465740us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMembertwo:Maturity120To364DaysMember2022-03-310001465740two:InverseInterestOnlySecuritiesMembertwo:Maturity120To364DaysMember2022-03-310001465740us-gaap:ServicingContractsMembertwo:Maturity120To364DaysMember2022-03-310001465740two:Maturity120To364DaysMember2022-03-310001465740us-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-03-310001465740us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember2022-03-310001465740two:InverseInterestOnlySecuritiesMember2022-03-310001465740us-gaap:ServicingContractsMember2022-03-310001465740us-gaap:MaturityUpTo30DaysMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2021-12-310001465740us-gaap:MaturityUpTo30DaysMemberus-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember2021-12-310001465740two:InverseInterestOnlySecuritiesMemberus-gaap:MaturityUpTo30DaysMember2021-12-310001465740us-gaap:MaturityUpTo30DaysMemberus-gaap:ServicingContractsMember2021-12-310001465740us-gaap:MaturityUpTo30DaysMember2021-12-310001465740us-gaap:USGovernmentAgenciesDebtSecuritiesMembertwo:Maturity30To59DaysMember2021-12-310001465740us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMembertwo:Maturity30To59DaysMember2021-12-310001465740two:InverseInterestOnlySecuritiesMembertwo:Maturity30To59DaysMember2021-12-310001465740us-gaap:ServicingContractsMembertwo:Maturity30To59DaysMember2021-12-310001465740two:Maturity30To59DaysMember2021-12-310001465740us-gaap:USGovernmentAgenciesDebtSecuritiesMembertwo:Maturity60To89DaysMember2021-12-310001465740us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMembertwo:Maturity60To89DaysMember2021-12-310001465740two:InverseInterestOnlySecuritiesMembertwo:Maturity60To89DaysMember2021-12-310001465740us-gaap:ServicingContractsMembertwo:Maturity60To89DaysMember2021-12-310001465740two:Maturity60To89DaysMember2021-12-310001465740us-gaap:USGovernmentAgenciesDebtSecuritiesMembertwo:Maturity90To119DaysMember2021-12-310001465740us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMembertwo:Maturity90To119DaysMember2021-12-310001465740two:InverseInterestOnlySecuritiesMembertwo:Maturity90To119DaysMember2021-12-310001465740us-gaap:ServicingContractsMembertwo:Maturity90To119DaysMember2021-12-310001465740two:Maturity90To119DaysMember2021-12-310001465740us-gaap:USGovernmentAgenciesDebtSecuritiesMembertwo:Maturity120To364DaysMember2021-12-310001465740us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMembertwo:Maturity120To364DaysMember2021-12-310001465740two:InverseInterestOnlySecuritiesMembertwo:Maturity120To364DaysMember2021-12-310001465740us-gaap:ServicingContractsMembertwo:Maturity120To364DaysMember2021-12-310001465740two:Maturity120To364DaysMember2021-12-310001465740us-gaap:USGovernmentAgenciesDebtSecuritiesMember2021-12-310001465740us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember2021-12-310001465740two:InverseInterestOnlySecuritiesMember2021-12-310001465740us-gaap:ServicingContractsMember2021-12-310001465740us-gaap:AvailableforsaleSecuritiesMember2022-03-310001465740us-gaap:AvailableforsaleSecuritiesMember2021-12-310001465740two:RestrictedCashAndCashEquivalentsMember2022-03-310001465740two:RestrictedCashAndCashEquivalentsMember2021-12-310001465740two:DueFromCorrespondentBrokersMember2022-03-310001465740two:DueFromCorrespondentBrokersMember2021-12-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMember2022-03-310001465740us-gaap:DerivativeFinancialInstrumentsAssetsMember2021-12-310001465740two:CreditSuisseMember2022-03-310001465740two:CreditSuisseMember2022-01-012022-03-310001465740two:CreditSuisseMember2021-12-310001465740two:CreditSuisseMember2021-01-012021-12-310001465740us-gaap:IndividuallyImmaterialCounterpartiesMember2022-03-310001465740us-gaap:IndividuallyImmaterialCounterpartiesMember2022-01-012022-03-310001465740us-gaap:IndividuallyImmaterialCounterpartiesMember2021-12-310001465740us-gaap:IndividuallyImmaterialCounterpartiesMember2021-01-012021-12-310001465740two:MaturityOverOneYearMember2021-12-310001465740us-gaap:MediumTermNotesMember2022-03-310001465740us-gaap:MediumTermNotesMemberus-gaap:AssetPledgedAsCollateralMember2022-03-310001465740us-gaap:MediumTermNotesMemberus-gaap:AssetPledgedAsCollateralMember2021-12-310001465740two:RestrictedCashandCashEquivalentsPledgedasRestrictedCollateralforBorrowingsMemberus-gaap:MediumTermNotesMember2022-03-310001465740two:RestrictedCashandCashEquivalentsPledgedasRestrictedCollateralforBorrowingsMemberus-gaap:MediumTermNotesMember2021-12-310001465740us-gaap:ConvertibleDebtMembertwo:MaturityYear2022Member2020-12-310001465740us-gaap:ConvertibleDebtMembertwo:MaturityYear2022Member2017-01-012017-12-310001465740us-gaap:ConvertibleDebtMembertwo:MaturityYear2022Member2022-01-012022-03-310001465740us-gaap:ConvertibleDebtMembertwo:MaturityYear2022Member2021-12-310001465740us-gaap:ConvertibleDebtMembertwo:MaturityYear2022Member2022-03-310001465740us-gaap:ConvertibleDebtMembertwo:MaturityYear2026Member2022-03-310001465740us-gaap:ConvertibleDebtMembertwo:MaturityYear2026Member2022-01-012022-03-310001465740two:MaturityYear2022Member2021-01-012021-03-310001465740two:MaturityYear2026Member2022-01-012022-03-310001465740two:MaturityYear2026Member2021-01-012021-12-310001465740us-gaap:SeriesAPreferredStockMember2022-03-310001465740us-gaap:SeriesAPreferredStockMember2022-01-012022-03-310001465740us-gaap:SeriesBPreferredStockMember2022-03-310001465740us-gaap:SeriesBPreferredStockMember2022-01-012022-03-310001465740us-gaap:SeriesCPreferredStockMember2022-03-310001465740us-gaap:SeriesCPreferredStockMember2022-01-012022-03-310001465740us-gaap:SeriesDPreferredStockMember2021-02-042021-02-040001465740us-gaap:SeriesEPreferredStockMember2021-02-042021-02-0400014657402021-02-0400014657402021-07-142021-07-1400014657402021-07-140001465740us-gaap:CommonStockMemberus-gaap:OverAllotmentOptionMember2021-07-142021-07-1400014657402021-10-282021-10-2800014657402021-10-280001465740us-gaap:CommonStockMemberus-gaap:OverAllotmentOptionMember2021-10-282021-10-280001465740us-gaap:CommonStockMember2020-12-310001465740us-gaap:CommonStockMember2021-01-012021-03-310001465740us-gaap:CommonStockMember2021-03-310001465740us-gaap:CommonStockMember2021-12-310001465740us-gaap:CommonStockMember2022-01-012022-03-310001465740us-gaap:CommonStockMember2022-03-310001465740us-gaap:SeriesAPreferredStockMember2021-01-012021-03-310001465740us-gaap:SeriesBPreferredStockMember2021-01-012021-03-310001465740us-gaap:SeriesCPreferredStockMember2021-01-012021-03-310001465740us-gaap:SeriesDPreferredStockMember2022-01-012022-03-310001465740us-gaap:SeriesDPreferredStockMember2021-01-012021-03-310001465740us-gaap:SeriesEPreferredStockMember2022-01-012022-03-310001465740us-gaap:SeriesEPreferredStockMember2021-01-012021-03-310001465740us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001465740us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001465740two:AttheMarketOfferingMember2022-01-012022-03-310001465740two:AttheMarketOfferingMember2021-01-012021-03-310001465740two:A2021EquityIncentivePlanMember2022-03-310001465740two:SecondRestated2009EquityIncentivePlanMember2022-03-310001465740us-gaap:RestrictedStockUnitsRSUMember2021-12-310001465740us-gaap:RestrictedStockUnitsRSUMember2020-12-310001465740us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-03-310001465740us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-03-310001465740us-gaap:RestrictedStockUnitsRSUMember2022-03-310001465740us-gaap:RestrictedStockUnitsRSUMember2021-03-310001465740us-gaap:RestrictedStockUnitsRSUMembersrt:DirectorMember2022-01-012022-03-310001465740two:KeyEmployeesMemberus-gaap:RestrictedStockUnitsRSUMember2022-01-012022-03-310001465740us-gaap:PerformanceSharesMember2021-12-310001465740us-gaap:PerformanceSharesMember2020-12-310001465740us-gaap:PerformanceSharesMember2022-01-012022-03-310001465740us-gaap:PerformanceSharesMember2021-01-012021-03-310001465740us-gaap:PerformanceSharesMember2022-03-310001465740us-gaap:PerformanceSharesMember2021-03-310001465740us-gaap:PerformanceSharesMembersrt:MinimumMember2022-01-012022-03-310001465740srt:MaximumMemberus-gaap:PerformanceSharesMember2022-01-012022-03-310001465740us-gaap:RestrictedStockMember2021-12-310001465740us-gaap:RestrictedStockMember2020-12-310001465740us-gaap:RestrictedStockMember2022-01-012022-03-310001465740us-gaap:RestrictedStockMember2021-01-012021-03-310001465740us-gaap:RestrictedStockMember2022-03-310001465740us-gaap:RestrictedStockMember2021-03-310001465740us-gaap:RestrictedStockMembersrt:DirectorMember2022-01-012022-03-310001465740two:KeyEmployeesMemberus-gaap:RestrictedStockMember2022-01-012022-03-31

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: March 31, 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 filer☒Accelerated 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 May 2, 2022, there were 344,143,090 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)
March 31,
2022		December 31,
2021
ASSETS(unaudited)
Available-for-sale securities, at fair value (amortized cost $7,139,506 and $7,005,013, respectively; allowance for credit losses $11,573 and $14,238, respectively)
$6,970,718 $7,161,703 
Mortgage servicing rights, at fair value3,089,963 2,191,578 
Cash and cash equivalents620,214 1,153,856 
Restricted cash855,930 934,814 
Accrued interest receivable25,160 26,266 
Due from counterparties302,302 168,449 
Derivative assets, at fair value58,496 80,134 
Reverse repurchase agreements138,625 134,682 
Other assets212,400 262,823 
Total Assets (1)
$12,273,808 $12,114,305 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Repurchase agreements$7,872,656 $7,656,445 
Revolving credit facilities570,761 420,761 
Term notes payable397,074 396,776 
Convertible senior notes281,403 424,827 
Derivative liabilities, at fair value127,529 53,658 
Due to counterparties187,891 196,627 
Dividends payable72,558 72,412 
Accrued interest payable9,991 18,382 
Commitments and contingencies (see Note 15)
— — 
Other liabilities124,641 130,464 
Total Liabilities (1)
9,644,504 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 344,132,215 and 343,911,324 shares issued and outstanding, respectively
3,441 3,439 
Additional paid-in capital5,629,661 5,625,179 
Accumulated other comprehensive (loss) income(145,499)186,346 
Cumulative earnings1,498,253 1,212,983 
Cumulative distributions to stockholders(5,059,102)(4,986,544)
Total Stockholders’ Equity2,629,304 2,743,953 
Total Liabilities and Stockholders’ Equity$12,273,808 $12,114,305 
____________________
(1)The condensed consolidated balance sheets include assets and liabilities of consolidated variable interest entities, or VIEs. At March 31, 2022 and December 31, 2021, assets of the VIEs totaled $460,628 and $454,596, and liabilities of the VIEs totaled $438,067 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.

1
Table of Contents

TWO HARBORS INVESTMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited)
(in thousands, except share data)
Three Months Ended
March 31,
20222021
Interest income:
Available-for-sale securities$44,647 $55,652 
Other199 457 
Total interest income44,846 56,109 
Interest expense:
Repurchase agreements8,343 8,470 
Revolving credit facilities5,676 4,695 
Term notes payable3,256 3,211 
Convertible senior notes5,042 6,350 
Total interest expense22,317 22,726 
Net interest income22,529 33,383 
Other income:
(Loss) gain on investment securities
(52,342)132,868 
Servicing income136,626 107,119 
Gain on servicing asset
410,624 327,438 
Loss on interest rate swap and swaption agreements
(38,041)(15,599)
Loss on other derivative instruments
(101,762)(276,011)
Other loss(44)(5,742)
Total other income355,061 270,073 
Expenses:
Servicing expenses24,704 24,947 
Compensation and benefits12,193 8,188 
Other operating expenses6,625 7,487 
Total expenses43,522 40,622 
Income before income taxes
334,068 262,834 
Provision for income taxes48,798 22,677 
Net income285,270 240,157 
Dividends on preferred stock13,747 17,216 
Net income attributable to common stockholders
$271,523 $222,941 
Basic earnings per weighted average common share
$0.79 $0.81 
Diluted earnings per weighted average common share
$0.72 $0.74 
Dividends declared per common share$0.17 $0.17 
Weighted average number of shares of common stock:
Basic
343,998,511 273,710,765 
Diluted
384,822,202 311,465,060 

The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Table of Contents

TWO HARBORS INVESTMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited), continued
(in thousands, except share data)
Three Months Ended
March 31,
20222021
Comprehensive loss:
Net income$285,270 $240,157 
Other comprehensive loss, net of tax:
Unrealized loss on available-for-sale securities
(331,845)(271,453)
Other comprehensive loss
(331,845)(271,453)
Comprehensive loss
(46,575)(31,296)
Dividends on preferred stock13,747 17,216 
Comprehensive loss attributable to common stockholders
$(60,322)$(48,512)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3
Table of Contents

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, 2021$702,550 $2,737 $5,165,683 $370,148 $1,265,913 $(4,786,315)$2,720,716 
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, 2022$702,550 $3,441 $5,629,661 $(145,499)$1,498,253 $(5,059,102)$2,629,304 

The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Table of Contents

TWO HARBORS INVESTMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)
Three Months Ended
March 31,
20222021
Cash Flows From Operating Activities:
Net income$285,270 $240,157 
Adjustments to reconcile net income to net cash used in operating activities:
Amortization of premiums and discounts on investment securities, net
32,504 71,955 
Amortization of deferred debt issuance costs on term notes payable and convertible senior notes
648 642 
Provision for (reversal of) credit losses on investment securities1,114 (1,135)
Realized and unrealized losses (gains) on investment securities51,228 (131,733)
Gain on servicing asset(410,624)(327,438)
Realized and unrealized loss on interest rate swaps and swaptions37,300 17,249 
Unrealized (gains) losses on other derivative instruments(90,261)43,466 
Equity based compensation4,161 1,790 
Net change in assets and liabilities:
Decrease in accrued interest receivable1,106 6,647 
Decrease in deferred income taxes, net48,798 24,546 
Decrease in accrued interest payable(8,391)(9,760)
Change in other operating assets and liabilities, net(4,198)257 
Net cash used in operating activities(51,345)(63,357)
Cash Flows From Investing Activities:
Purchases of available-for-sale securities(2,609,992)(131,315)
Proceeds from sales of available-for-sale securities2,012,620 2,050,943 
Principal payments on available-for-sale securities371,666 1,047,364 
Purchases of mortgage servicing rights, net of purchase price adjustments(487,761)(168,170)
Short sales (purchases) of derivative instruments, net40,998 (64)
Proceeds from sales and settlement (payments for termination and settlement) of derivative instruments, net
107,472 (14,755)
Payments for reverse repurchase agreements(381,280)(304,875)
Proceeds from reverse repurchase agreements
377,337 320,400 
(Decrease) increase in due to counterparties, net(142,589)94,572 
Change in other investing assets and liabilities, net— 10,000 
Net cash (used in) provided by investing activities$(711,529)$2,904,100 

The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Table of Contents

TWO HARBORS INVESTMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited), continued
(in thousands)
Three Months Ended
March 31,
20222021
Cash Flows From Financing Activities:
Proceeds from repurchase agreements$7,955,364 $11,976,033 
Principal payments on repurchase agreements(7,739,153)(15,443,869)
Proceeds from revolving credit facilities150,000 164,000 
Principal payments on revolving credit facilities— (4,372)
Proceeds from convertible senior notes— 279,912 
Repayment of convertible senior notes(143,774)(143,118)
Redemption of preferred stock— (274,951)
Proceeds from issuance of common stock, net of offering costs323 99 
Dividends paid on preferred stock(13,747)(22,418)
Dividends paid on common stock(58,665)(46,530)
Net cash provided by (used in) financing activities150,348 (3,515,214)
Net decrease in cash, cash equivalents and restricted cash(612,526)(674,471)
Cash, cash equivalents and restricted cash at beginning of period2,088,670 2,646,431 
Cash, cash equivalents and restricted cash at end of period$1,476,144 $1,971,960 
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest$25,750 $30,908 
Cash received for taxes, net$(32)$— 
Noncash Activities:
Dividends declared but not paid at end of period$72,558 $60,384 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6
Table of Contents

TWO HARBORS INVESTMENT CORP.
Notes to the Condensed Consolidated Financial Statements (unaudited)
Note 1. Organization and Operations
Two Harbors Investment Corp. is a Maryland corporation that, through its wholly owned subsidiaries (collectively, the Company), invests in and manages Agency residential mortgage-backed securities, or Agency RMBS, mortgage servicing rights, or MSR, and other financial assets. Agency refers to a U.S. government sponsored enterprise, or GSE, such as the Federal National Mortgage Association (or Fannie Mae) or the Federal Home Loan Mortgage Corporation (or Freddie Mac), or a U.S. government agency such as the Government National Mortgage Association (or Ginnie Mae). The investment portfolio is managed as a whole and resources are allocated and financial performance is assessed on a consolidated basis. The Company’s common stock is listed on the NYSE under the symbol “TWO”.
The Company has elected to be treated as a real estate investment trust, or REIT, as defined under the Internal Revenue Code of 1986, as amended, or the Code, for U.S. federal income tax purposes. As long as the Company continues to comply with a number of requirements under federal tax law and maintains its qualification as a REIT, the Company generally will not be subject to U.S. federal income taxes to the extent that the Company distributes its taxable income to its stockholders on an annual basis and does not engage in prohibited transactions. However, certain activities that the Company may perform may cause it to earn income which will not be qualifying income for REIT purposes. The Company has designated certain of its subsidiaries as taxable REIT subsidiaries, or TRSs, as defined in the Code, to engage in such activities.

Note 2. Basis of Presentation and Significant Accounting Policies
Consolidation and Basis of Presentation
The interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, have been condensed or omitted according to such SEC rules and regulations. However, management believes that the disclosures included in these interim condensed consolidated financial statements are adequate to make the information presented not misleading.
The condensed consolidated financial statements of the Company include the accounts of all subsidiaries; inter-company accounts and transactions have been eliminated. All trust entities in which the Company holds investments that are considered variable interest entities, or VIEs, for financial reporting purposes were reviewed for consolidation under the applicable consolidation guidance. Whenever the Company has both the power to direct the activities of a trust that most significantly impact the entities’ performance, and the obligation to absorb losses or the right to receive benefits of the entities that could be significant, the Company consolidates the trust. Certain prior period amounts have been reclassified to conform to the current period presentation. The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at March 31, 2022 and results of operations for all periods presented have been made. The results of operations for the three months ended March 31, 2022 should not be construed as indicative of the results to be expected for future periods or the full year.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make a number of significant estimates. These include estimates of fair value of certain assets and liabilities, amount and timing of credit losses, prepayment rates, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of certain revenues and expenses during the reported period. It is likely that changes in these estimates (e.g., valuation changes due to supply and demand in the market, credit performance, prepayments, interest rates, or other reasons) will occur in the near term. The Company’s estimates are inherently subjective in nature and actual results could differ from its estimates and the differences may be material.
Significant Accounting Policies
Included in Note 2 to the Consolidated Financial Statements of the Company’s 2021 Annual Report on Form 10-K is a summary of the Company’s significant accounting policies.
7
Table of Contents

TWO HARBORS INVESTMENT CORP.
Notes to the Condensed Consolidated Financial Statements (unaudited)
Recently Issued and/or Adopted Accounting Standards
Facilitation of the Effects of Reference Rate Reform on Financial Reporting
The London Interbank Offered Rate, or LIBOR, has been used extensively in the U.S. and globally as a “benchmark” or “reference rate” for various commercial and financial contracts, including corporate and municipal bonds and loans, floating rate mortgages, asset-backed securities, consumer loans, and interest rate swaps and other derivatives. On March 5, 2021, Intercontinental Exchange Inc. announced that ICE Benchmark Administration Limited, the administrator of LIBOR, intends to stop publication of the majority of USD-LIBOR tenors on June 30, 2023. In the U.S., the Alternative Reference Rates Committee, or ARRC, has identified the Secured Overnight Financing Rate, or SOFR, as its preferred alternative rate for U.S. dollar-based LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. The ARRC has proposed a paced market transition plan to SOFR, and various organizations are currently working on industry wide and company-specific transition plans as it relates to derivatives and cash markets exposed to LIBOR.
In March 2020, the FASB issued ASU No. 2020-04, which provides temporary optional expedients and exceptions on accounting for contract modifications and hedging relationships in anticipation of the replacement of LIBOR with another reference rate. The guidance also provides a one-time election to sell held-to-maturity debt securities or to transfer such securities to the available-for-sale or trading category. The Company has material contracts that are indexed to USD-LIBOR and is monitoring this activity, evaluating the related risks and the Company’s exposure, and has already amended terms to transition to an alternative benchmark, where necessary. All of the Company’s financing arrangements and derivative instruments that incorporate LIBOR as the referenced rate either mature prior to the phase out of LIBOR or have provisions in place that provide for an alternative to LIBOR upon its phase-out. Additionally, each series of the Company’s fixed-to-floating preferred stock that becomes callable at the time the stock begins to pay a LIBOR-based rate has existing LIBOR cessation fallback language. The ASU was effective immediately for all entities and expires after December 31, 2022. The Company’s adoption of this ASU did not have an impact on the Company’s financial condition, results of operations or financial statement disclosures.

Note 3. Variable Interest Entities
The Company enters into transactions with subsidiary trust entities that are established for limited purposes. One of the Company’s subsidiary trust entities, or the MSR Issuer Trust, was formed for the purpose of financing MSR through securitization, pursuant to which, through two of the Company’s wholly owned subsidiaries, MSR is pledged to the MSR Issuer Trust and in return, the MSR Issuer Trust issues term notes to qualified institutional buyers and a variable funding note, or VFN, to one of the subsidiaries, in each case secured on a pari passu basis. The Company has one repurchase facility that is secured by the VFN, which is collateralized by the Company’s MSR.
Another of the Company’s subsidiary trust entities, or the Servicing Advance Receivables Issuer Trust, was formed for the purpose of financing servicing advances through a revolving credit facility, pursuant to which the Servicing Advance Receivables Issuer Trust issued a VFN backed by servicing advances pledged to the financing counterparty.
Both the MSR Issuer Trust and the Servicing Advance Receivables Issuer Trust are considered VIEs for financial reporting purposes and, thus, were reviewed for consolidation under the applicable consolidation guidance. As the Company has both the power to direct the activities of the trusts that most significantly impact the entities’ performance, and the obligation to absorb losses or the right to receive benefits of the entities that could be significant, the Company consolidates the trusts. Additionally, in accordance with arrangements entered into in connection with the securitization transaction and the servicing advance revolving credit facility, the Company has direct financial obligations payable to both the MSR Issuer Trust and the Servicing Advance Receivables Issuer Trust, which, in turn, support the MSR Issuer Trust’s obligations to noteholders under the securitization transaction and the Servicing Advance Receivables Issuer Trust’s obligations to the financing counterparty.
8
Table of Contents

TWO HARBORS INVESTMENT CORP.
Notes to the Condensed Consolidated Financial Statements (unaudited)
The following table presents a summary of the assets and liabilities of all consolidated trusts as reported on the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021:
(in thousands)March 31,
2022		December 31,
2021
Note receivable (1)
$397,074 $396,776 
Restricted cash21,540 23,892 
Accrued interest receivable (1)
253 161 
Other assets41,761 33,767 
Total Assets$460,628 $454,596 
Term notes payable$397,074 $396,776 
Revolving credit facilities19,200 19,200 
Accrued interest payable313 216 
Other liabilities21,480 23,838 
Total Liabilities$438,067 $440,030 
____________________
(1)Receivables due from a wholly owned subsidiary of the Company to the trusts are eliminated in consolidation in accordance with U.S. GAAP.

Note 4. Available-for-Sale Securities, at Fair Value
The Company holds both Agency and non-Agency available-for sale, or AFS, investment securities which are carried at fair value on the condensed consolidated balance sheets. The following table presents the Company’s AFS investment securities by collateral type as of March 31, 2022 and December 31, 2021:
(in thousands)March 31,
2022		December 31,
2021
Agency:
Federal National Mortgage Association$5,191,909 $5,040,988 
Federal Home Loan Mortgage Corporation1,604,687 1,922,809 
Government National Mortgage Association161,592 185,602 
Non-Agency12,530 12,304 
Total available-for-sale securities$6,970,718 $7,161,703 

At March 31, 2022 and December 31, 2021, the Company pledged AFS securities with a carrying value of $6.5 billion and $7.0 billion, respectively, as collateral for repurchase agreements. See Note 11 - Repurchase Agreements.
At March 31, 2022 and December 31, 2021, the Company did not have any securities purchased from and financed with the same counterparty that did not meet the conditions of ASC 860, Transfers and Servicing, to be considered linked transactions and, therefore, classified as derivatives.
The Company is not required to consolidate VIEs for which it has concluded it does not have both the power to direct the activities of the VIEs that most significantly impact the entities’ performance, and the obligation to absorb losses or the right to receive benefits of the entities that could be significant. The Company’s investments in these unconsolidated VIEs include all non-Agency securities, which are classified within available-for-sale securities, at fair value on the condensed consolidated balance sheets. As of March 31, 2022 and December 31, 2021, the carrying value, which also represents the maximum exposure to loss, of all non-Agency securities in unconsolidated VIEs was $12.5 million and $12.3 million, respectively.
9
Table of Contents

TWO HARBORS INVESTMENT CORP.
Notes to the Condensed Consolidated Financial Statements (unaudited)
The following tables present the amortized cost and carrying value of AFS securities by collateral type as of March 31, 2022 and December 31, 2021:
March 31, 2022
(in thousands)Principal/ Current FaceUn-amortized PremiumAccretable Purchase DiscountAmortized CostAllowance for Credit LossesUnrealized GainUnrealized LossCarrying Value
Agency:
Principal and interest
$6,674,287 $291,087 $(12)$6,965,362 $— $21,881 $(186,039)$6,801,204 
Interest-only2,016,996 157,625 — 157,625 (11,567)17,047 (6,121)156,984 
Total Agency8,691,283 448,712 (12)7,122,987 (11,567)38,928 (192,160)6,958,188 
Non-Agency
1,823,102 15,770 (25)16,519 (6)304 (4,287)12,530 
Total$10,514,385 $464,482 $(37)$7,139,506 $(11,573)$39,232 $(196,447)$6,970,718 
December 31, 2021
(in thousands)Principal/ Current FaceUn-amortized PremiumAccretable Purchase DiscountAmortized CostAllowance for Credit LossesUnrealized GainUnrealized LossCarrying Value
Agency:
Principal and interest
$6,411,363 $270,699 $(12)$6,682,050 $— $171,308 $(4,855)$6,848,503 
Interest-only3,198,447 305,577 — 305,577 (12,851)20,699 (12,529)300,896 
Total Agency9,609,810 576,276 (12)6,987,627 (12,851)192,007 (17,384)7,149,399 
Non-Agency
1,940,815 16,533 (27)17,386 (1,387)33 (3,728)12,304 
Total$11,550,625 $592,809 $(39)$7,005,013 $(14,238)$192,040 $(21,112)$7,161,703 

The following table presents the Company’s AFS securities according to their estimated weighted average life classifications as of March