Two Harbors Investment Corp. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

Discontinued Operations

6 Months Ended

Jun. 30, 2018

Discontinued Operations and Disposal Groups [Abstract]

On June 28, 2017, the Company contributed its equity interests in its wholly owned subsidiary, TH Commercial Holdings LLC, to Granite Point and, in exchange for its contribution, received approximately 33.1 million shares of common stock of Granite Point, representing approximately 76.5% of the outstanding stock of Granite Point upon completion of the IPO of its common stock on June 28, 2017. On November 1, 2017, the Company distributed, on a pro rata basis, the 33.1 million shares of Granite Point common stock that it acquired in connection with the contribution to stockholders holding shares of Two Harbors common stock outstanding as of the close of business on October 20, 2017. Due to the Company’s controlling ownership interest in Granite Point through November 1, 2017, its results of operations and financial condition through such date reflect Granite Point’s commercial strategy, which includes as target assets first mortgages, mezzanine loans, B-notes and preferred equity. As of November 1, 2017, the Company no longer has a controlling interest in Granite Point and, therefore, has deconsolidated Granite Point and its subsidiaries from its financial statements and reclassified all of Granite Point’s prior period assets, liabilities and results of operations to discontinued operations. In accordance with ASC 845, Nonmonetary Transactions, the pro rata distribution of a consolidated subsidiary is recognized at carrying amount within stockholders’ equity. As a result, no gain or loss was recognized on the distribution.

Summarized financial information for the discontinued operations are presented below.



(in thousands)	November 1, 2017
Assets:
Commercial real estate assets	$	2,233,080
Available-for-sale securities, at fair value	12,814
Cash and cash equivalents	84,183
Restricted cash	2,838
Accrued interest receivable	6,588
Other assets	22,774
Total Assets	$	2,362,277
Liabilities:
Repurchase agreements	$	1,516,294
Dividends payable	48
Other liabilities	10,337
Total Liabilities	$	1,526,679



	Three Months Ended					Six Months Ended
	June 30,					June 30,
(in thousands)	2018		2017			2018		2017
Interest income:
Commercial real estate assets	$	—	$	25,840		$	—	$	49,410
Available-for-sale securities	—		256			—		502
Other	—		4			—		6
Total interest income	—		26,100			—		49,918
Interest expense	—		7,773			—		13,879
Net interest income	—		18,327			—		36,039
Expenses:
Management fees	—		1,925			—		3,587
Servicing expenses	—		307			—		629
Other operating expenses	—		1,900			—		4,173
Total expenses	—		4,132			—		8,389
Income from discontinued operations before income taxes	—		14,195			—		27,650
Benefit from income taxes	—		(2		)	—		(1		)
Income from discontinued operations	—		14,197			—		27,651
Income from discontinued operations attributable to noncontrolling interest	—		40			—		40
Income from discontinued operations attributable to common stockholders	$	—	$	14,157		$	—	$	27,611