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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: September 30, 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 November 7, 2022, there were 86,374,554 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)
September 30,
2022		December 31,
2021
ASSETS(unaudited)
Available-for-sale securities, at fair value (amortized cost $10,228,511 and $7,005,013, respectively; allowance for credit losses $8,535 and $14,238, respectively)
$9,473,843 $7,161,703 
Mortgage servicing rights, at fair value3,021,790 2,191,578 
Cash and cash equivalents732,482 1,153,856 
Restricted cash842,534 934,814 
Accrued interest receivable37,701 26,266 
Due from counterparties215,473 168,449 
Derivative assets, at fair value18,406 80,134 
Reverse repurchase agreements207,206 134,682 
Other assets146,122 262,823 
Total Assets (1)
$14,695,557 $12,114,305 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Repurchase agreements$10,034,018 $7,656,445 
Revolving credit facilities1,131,161 420,761 
Term notes payable397,697 396,776 
Convertible senior notes282,096 424,827 
Derivative liabilities, at fair value107,379 53,658 
Due to counterparties348,176 196,627 
Dividends payable72,802 72,412 
Accrued interest payable48,592 18,382 
Commitments and contingencies (see Note 15)
— — 
Other liabilities129,159 130,464 
Total Liabilities (1)
12,551,080 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; 175,000,000 shares authorized and 86,371,867 and 85,977,831 shares issued and outstanding, respectively
864 860 
Additional paid-in capital5,643,493 5,627,758 
Accumulated other comprehensive (loss) income(701,383)186,346 
Cumulative earnings1,703,445 1,212,983 
Cumulative distributions to stockholders(5,204,492)(4,986,544)
Total Stockholders’ Equity2,144,477 2,743,953 
Total Liabilities and Stockholders’ Equity$14,695,557 $12,114,305 
____________________
(1)The condensed consolidated balance sheets include assets and liabilities of consolidated variable interest entities, or VIEs. At September 30, 2022 and December 31, 2021, assets of the VIEs totaled $438,784 and $454,596, and liabilities of the VIEs totaled $434,627 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) INCOME (unaudited)
(in thousands, except share data)
Three Months EndedNine Months Ended
September 30,September 30,
2022202120222021
Interest income:
Available-for-sale securities$88,472 $35,837 $188,518 $134,581 
Other5,916 203 7,719 1,011 
Total interest income94,388 36,040 196,237 135,592 
Interest expense:
Repurchase agreements57,868 5,761 85,480 21,212 
Revolving credit facilities15,178 5,605 29,960 17,375 
Term notes payable5,427 3,249 12,608 9,685 
Convertible senior notes4,877 7,267 14,720 20,743 
Total interest expense83,350 21,882 142,768 69,015 
Net interest income11,038 14,158 53,469 66,577 
Other income:
(Loss) gain on investment securities
(6,426)28,642 (256,487)119,991 
Servicing income148,833 122,960 442,985 342,895 
(Loss) gain on servicing asset
(6,720)(42,500)489,461 16,887 
Gain (loss) on interest rate swap and swaption agreements
34,806 (3,947)29,499 5,102 
Gain (loss) on other derivative instruments
159,044 (15,019)(43,991)(239,718)
Other loss— — (117)(5,701)
Total other income329,537 90,136 661,350 239,456 
Expenses:
Servicing expenses21,152 21,041 68,847 64,668 
Compensation and benefits10,100 9,198 33,312 28,645 
Other operating expenses10,688 7,406 26,465 22,111 
Total expenses41,940 37,645 128,624 115,424 
Income before income taxes
298,635 66,649 586,195 190,609 
Provision for income taxes21,023 325 95,733 2,088 
Net income277,612 66,324 490,462 188,521 
Dividends on preferred stock13,747 13,748 41,242 44,711 
Net income attributable to common stockholders
$263,865 $52,576 $449,220 $143,810 
Basic earnings per weighted average common share
$3.04 $0.68 $5.19 $2.01 
Diluted earnings per weighted average common share
$2.78 $0.66 $4.80 $1.95 
Dividends declared per common share$0.68 $0.68 $2.04 $2.04 
Weighted average number of shares of common stock:
Basic
86,252,104 76,943,355 86,107,979 71,298,088 
Diluted
96,132,100 86,682,518 96,120,844 79,991,529 

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) INCOME (unaudited), continued
(in thousands, except share data)
Three Months EndedNine Months Ended
September 30,September 30,
2022202120222021
Comprehensive (loss) income:
Net income$277,612 $66,324 $490,462 $188,521 
Other comprehensive loss, net of tax:
Unrealized loss on available-for-sale securities
(551,673)(7,350)(887,729)(341,702)
Other comprehensive loss
(551,673)(7,350)(887,729)(341,702)
Comprehensive (loss) income
(274,061)58,974 (397,267)(153,181)
Dividends on preferred stock13,747 13,748 41,242 44,711 
Comprehensive (loss) income attributable to common stockholders
$(287,808)$45,226 $(438,509)$(197,892)

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

3
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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 $684 $5,165,847 $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, 2021702,550 684 5,167,736 370,148 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, 2021702,550 684 5,172,440 307,249 1,147,953 (4,846,821)2,484,055 
Net income— — — — 66,324 — 66,324 
Other comprehensive income before reclassifications, net of tax
— — — 11,415 — — 11,415 
Amounts reclassified from accumulated other comprehensive income, net of tax
— — — (18,765)— — (18,765)
Other comprehensive loss, net of tax
— — — (7,350)— — (7,350)
Issuance of common stock, net of offering costs
— 100 256,511 — — — 256,611 
Preferred dividends declared
— — — — — (13,748)(13,748)
Common dividends declared
— — — — — (53,563)(53,563)
Non-cash equity award compensation
— 1 2,558 — — — 2,559 
Balance, September 30, 2021$702,550 $785 $5,431,509 $299,899 $1,214,277 $(4,914,132)$2,734,888 

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), continued
(in thousands)
Preferred StockCommon Stock Par ValueAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Cumulative EarningsCumulative Distributions to StockholdersTotal Stockholders’ Equity
Balance, December 31, 2021$702,550 $860 $5,627,758 $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
— — 4,161 — — — 4,161 
Balance, March 31, 2022702,550 860 5,632,242 (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
— 1 3,460 — — — 3,461 
Balance, June 30, 2022702,550 861 5,635,784 (149,710)1,425,833 (5,131,694)2,483,624 
Net income— — — — 277,612 — 277,612 
Other comprehensive loss before reclassifications, net of tax
— — — (534,923)— — (534,923)
Amounts reclassified from accumulated other comprehensive income, net of tax
— — — (16,750)— — (16,750)
Other comprehensive loss, net of tax
— — — (551,673)— — (551,673)
Issuance of common stock, net of offering costs
— 3 5,354 — — — 5,357 
Preferred dividends declared
— — — — — (13,747)(13,747)
Common dividends declared
— — — — — (59,051)(59,051)
Non-cash equity award compensation
— — 2,355 — — — 2,355 
Balance, September 30, 2022$702,550 $864 $5,643,493 $(701,383)$1,703,445 $(5,204,492)$2,144,477 

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)
Nine Months Ended
September 30,
20222021
Cash Flows From Operating Activities:
Net income$490,462 $188,521 
Adjustments to reconcile net income to net cash provided by operat