8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report: May 7, 2014

Two Harbors Investment Corp.

(Exact name of registrant as specified in its charter)

Maryland	001-34506	27-0312904
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

590 Madison Avenue, 36th Floor

New York, NY 10022

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:   (612) 629-2500

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act  (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02           Results of Operations and Financial Condition

On May 7, 2014, Two Harbors Investment Corp. issued a press release announcing its financial results for the fiscal quarter ended March 31, 2014. A copy of the press release and the 2014 First Quarter Earnings Call Presentation are attached hereto as Exhibits 99.1 and 99.2, respectively, and are incorporated herein by reference.

The information in this Current Report, including Exhibits 99.1 and 99.2 attached hereto, is furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed to be “filed” for any other purpose, including for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in Item 2.02 of this Current Report, including Exhibits 99.1 and 99.2, shall not be deemed incorporated by reference into any filing of the registrant under the Securities Act of 1933 or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filings (unless the registrant specifically states that the information or exhibit in this particular Current Report is incorporated by reference).

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description
99.1	Press Release, dated May 7, 2014, issued by Two Harbors Investment Corp. announcing First Quarter 2014 results
99.2	2014 First Quarter Earnings Call Presentation

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	TWO HARBORS INVESTMENT CORP.
	By:	/s/ REBECCA B. SANDBERG
		Rebecca B. Sandberg
		General Counsel and Secretary
Date: May 7, 2014

EX-99.1

Two Harbors Investment Corp. Reports First Quarter2014 Financial Results

Strong Return on Book Value of 3.9%in the First Quarter⁽¹⁾ 

NEW YORK, May 7, 2014 - Two Harbors Investment Corp. (NYSE: TWO), a real estate investment trust that invests in residential mortgage-backed securities (RMBS), residential mortgage loans, mortgage servicing rights (MSR) and other financial assets, today announced its financial results for the quarter endedMarch 31, 2014.

Highlights

• Book value was $10.71 per diluted common share, representing a 3.9%⁽¹⁾ return on book value, after accounting for a dividend of $0.26 per share.

• Delivered Comprehensive Income of $152.6 million, a return on average equity of 15.7%, or $0.42 per diluted weighted average common share.

• Reported Core Earnings of $88.2 million, or $0.24 per diluted weighted average common share.

• Generated an aggregate portfolio yield of 4.6% for the quarter ended March 31, 2014, compared to an aggregate yield of 4.3% for the quarter ended December 31, 2013.

“We delivered strong first quarter results, demonstrating our ability to generate alpha in a variety of interest rate environments,” stated Thomas Siering, Two Harbors’ President and Chief Executive Officer. “Two Harbors generated comprehensive income of $152.6 million for the period, representing a 15.7% return on average equity.”

(1) Return on book value for the quarter ended March 31, 2014 is defined as the increase in book value per diluted share, from December 31, 2013 to March 31, 2014 of $0.15, plus the dividend declared of $0.26 per share, divided by December 31, 2013 diluted book value of $10.56 per share.

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Operating Performance

The following table summarizes the company’s GAAP and non-GAAP earnings measurements and key metrics for the first quarter of 2014:

Two Harbors Operating Performance
(dollars in thousands, except per share data)	Q1-2014
Earnings	Earnings			Per diluted weighted share			Annualized return on average equity
Core Earnings(1)	$	88,203		$	0.24		9.1	%
GAAP Net Loss	$	(29,145	)	$	(0.08	)	(3.0	)%
Comprehensive Income	$	152,590		$	0.42		15.7	%
Operating Metrics
Dividend per common share	$0.26
Book value per diluted share at period end	$10.71
Other operating expenses as a percentage of average equity	1.5		%
(1) Core Earnings is a non-GAAP measure that the company defines as net income, excluding impairment losses, gains or losses on sales of securities and termination of interest rate swaps, unrealized gains or losses on the aggregate portfolio, certain non-recurring gains and losses related to discontinued operations and amortization of business combination intangible assets, and certain non-recurring upfront costs related to securitization transactions. As defined, Core Earnings includes interest income associated with the company’s inverse interest-only securities (Agency Derivatives), premium income or loss on credit default swaps, and servicing income, net of estimated amortization on mortgage servicing rights. Core Earnings is provided for purposes of comparability to other peer issuers. Please see page 12 of this press release for a reconciliation of GAAP to non-GAAP financial information.

Earnings Summary

Two Harbors reported Core Earnings for the quarter ended March 31, 2014 of $88.2 million, or $0.24 per diluted weighted average common share outstanding, as compared to Core Earnings for the quarter ended December 31, 2013 of $76.4 million, or $0.21 per diluted weighted average common share outstanding.

For the first quarter of 2014, the company recognized:

• a net realized loss on RMBS, trading securities and mortgage loans held-for-sale of $38.5 million, net of tax;

• unrealized losses on trading securities, mortgage loan forward purchase commitments and mortgage loans held-for-sale of $2.3 million, net of tax;

• other-than-temporary credit impairment losses on its non-Agency RMBS of $0.2 million, net of tax;

• a net loss of $2.0 million, net of tax, related to swap and swaption terminations and expirations;

• an unrealized loss, net of tax, of $59.7 million associated with its interest rate swaps and swaptions economically hedging its repurchase agreements, available-for-sale securities, trading securities, to-be-announced securities (TBA) and MSR;

• net realized and unrealized gains on other derivative instruments of approximately $4.7 million, net of tax;

• a net realized and unrealized gain on consolidated financing securitizations of $0.3 million, net of tax;

• a net decrease in fair value of $31.5 million⁽²⁾ on MSR, net of tax; and

• amortization of intangible assets of $0.3 million, net of tax.

(2) Decrease in fair value on MSR, net of tax, of $31.5 million is comprised of a decrease in fair value of $19.4 million, net of tax, excluded from Core Earnings and $12.1 million, net of tax, of estimated amortization included in Core Earnings.

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The company reported a GAAP Net Loss of $29.1 million, or $0.08 per diluted weighted average common share outstanding, for the quarter ended March 31, 2014, as compared to GAAP Net Income of $239.4million, or $0.66 per diluted weighted average common share outstanding, for the quarter ended December 31, 2013. On a GAAP basis, the company recognized an annualized return on average equity of (3.0)% and 24.8% for the quarters ended March 31, 2014 and December 31, 2013, respectively.

The company reported Comprehensive Income of $152.6 million, or $0.42 per diluted weighted average common share outstanding, for the quarter ended March 31, 2014, as compared to Comprehensive Income of $171.4 million, or $0.47 per diluted weighted average common share outstanding, for the quarter ended December 31, 2013. The company records unrealized fair value gains and losses for RMBS securities, classified as available-for-sale, as Other Comprehensive Income. On a Comprehensive Income basis, the company recognized an annualized return on average equity of 15.7% and 17.7% for the quarters ended March 31, 2014 and December 31, 2013, respectively.

Other Key Metrics

Two Harbors declared a quarterly cash dividend of $0.26 per common share for the quarter ended March 31, 2014. The annualized dividend yield on the company’s common stock for the first quarter of 2014, based on the March 31, 2014 closing price of $10.25, was 10.1%.

The company’s book value per diluted share, after taking into account the first quarter2014 dividend of $0.26 per share, was $10.71 as of March 31, 2014, compared to $10.56 as of December 31, 2013, which represented a total return on book value for the first quarter of 2014 of 3.9%.⁽¹⁾ 

Other operating expenses for the first quarter of 2014 were approximately $14.5 million, or 1.5% of average equity, compared to approximately $12.4 million, or 1.3% of average equity, for the fourth quarter of 2013.

Portfolio Summary

The company’s aggregate portfolio is principally comprised of RMBS available-for-sale securities, Agency Derivatives, MSR, residential mortgage loans held-for-sale and net economic interests in consolidated securitization trusts. As of March 31, 2014, the total value of the company’s portfolio was $13.6 billion.

The portfolio includes the rates strategy, which consists of $10.5 billion of Agency RMBS, Agency Derivatives and MSR as well as associated notional hedges as of March 31, 2014. The remaining portfolio was invested in the credit strategy, which consists of $3.1 billion of non-Agency RMBS, net economic interests in consolidated securitization trusts, prime jumbo residential mortgage loans and credit sensitive loans (CSL), and their associated notional hedges as of March 31, 2014.

For the quarter ended March 31, 2014, the annualized yield on the company’s average aggregate portfolio was 4.6% and the annualized cost of funds on the associated average borrowings, which includes net interest rate spread expense on interest rate swaps, was 1.1%. This resulted in a net interest rate spread of 3.5%.

RMBS and Agency Derivatives

For the quarter ended March 31, 2014, the annualized yield on average RMBS securities and Agency Derivatives was 4.3%, consisting of an annualized yield of 3.3% in Agency RMBS and Agency Derivatives and 9.1% in non-Agency RMBS.

The company experienced a three-month average constant prepayment rate (CPR) of 6.4% for Agency RMBS securities and Agency Derivatives held during the quarter ended March 31, 2014, as compared to 7.9% for those securities held during the quarter ended December 31, 2013. The weighted average cost basis of the principal and interest Agency portfolio was 108.3% of par for the quarter ended March 31, 2014, compared to 108.2% of par for the quarter ended December 31, 2013. The net premium amortization was $31.8 million and $35.0 million for the quarters ended March 31, 2014 and December 31, 2013, respectively. 

(1) Return on book value for the quarter ended March 31, 2014 is defined as the increase in book value per diluted share, from December 31, 2013 to March 31, 2014 of $0.15, plus the dividend declared of $0.26 per share, divided by December 31, 2013 diluted book value of $10.56 per share.

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The company experienced a three-month average CPR of 3.4% for non-Agency principal and interest RMBS securities held during the quarter ended March 31, 2014, as compared to 3.8% for those securities held during the quarter ended December 31, 2013. The weighted average cost basis of the non-Agency portfolio was 53.3% of par for the quarter ended March 31, 2014, compared to 53.7% of par for the quarter ended December 31, 2013. The discount accretion was $31.8 million and $33.5 million for the quarters ended March 31, 2014 and December 31, 2013, respectively. The total net discount remaining was $2.3 billion as of both March 31, 2014 and December 31, 2013, with $1.2 billion designated as credit reserve as of March 31, 2014.

As of March 31, 2014, fixed-rate investments composed 71.9% and adjustable-rate investments composed 28.1% of the company’s RMBS and Agency Derivatives portfolio.

As of March 31, 2014, the company had mortgage loans held-for-investment with a carrying value of $781.1 million and the company’s collateralized borrowings had a carrying value of $659.0 million, resulting in net economic interests in consolidated securitization trusts of $122.1 million.

Mortgage Servicing Rights

The company held MSR on mortgage loans having $41.6 billion in unpaid principal balance, which had a fair market value of $476.7 million as of March 31, 2014.

The company does not directly service mortgage loans, but instead contracts with fully licensed subservicers to handle all servicing functions forthe loans underlying the company’s MSR assets. The company recognized $30.4 million of servicing income, $5.0 million of sub-servicing expense and $32.8 million decrease in fair value of MSR, during the three months ended March 31, 2014.

Mortgage Loans Held for Sale

As of March 31, 2014, the company held prime jumbo residential mortgage loans with a fair market value of $140.9 million and had forward purchase commitments to acquire mortgage loans having $153.6 million in unpaid principal balance with a fair value of negative $0.4 million. For the quarter ended March 31, 2014, the annualized yield on the prime jumbo residential mortgage loan portfolio was 4.0%. The company’s intention in the future is to securitize the loans should market conditions warrant.

During the quarter the company sold substantially all of its CSL portfolio, with the remaining loans having a fair market value of $20.1 million as of March 31, 2014.

Other Investments and Risk Management Derivatives

The company held $1.0 billion of U.S. Treasuries classified on its balance sheet as trading securities as of March 31, 2014.  The company also held $1.0 billion notional of net short TBAs as of March 31, 2014, which are accounted for as derivative instruments in accordance with GAAP.

As of March 31, 2014, the company was a party to interest rate swaps and swaptions with a net aggregate notional amount of $31.2 billion, of which $24.1 billion was utilized to economically hedge interest rate risk associated with the company’s short-term LIBOR-based repurchase agreements.

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The following table summarizes the company’s investment portfolio:

Two Harbors Investment Portfolio
(dollars in thousands)
Portfolio Composition	As of March 31, 2014
	(unaudited)
Rates Strategy
Agency Bonds
Fixed Rate Bonds	$	8,879,422	65.3		%
Hybrid ARMs	944,503		6.9		%
Total Agency	9,823,925		72.2		%
Agency Derivatives	210,331		1.5		%
Mortgage Servicing Rights	476,663		3.5		%
Credit Strategy
Non-Agency Bonds
Senior Bonds	2,328,073		17.1		%
Mezzanine Bonds	473,824		3.5		%
Non-Agency Other	8,234		0.1		%
Total Non-Agency	2,810,131		20.7		%
Net Economic Interest in Securitization(1)	122,132		0.9		%
Mortgage Loans Held-For-Sale	161,021		1.2		%
Aggregate Portfolio	$	13,604,203
Portfolio Metrics	Three Months Ended March 31, 2014
	(unaudited)
Annualized portfolio yield during the quarter			4.6		%
Rates Strategy
Agency RMBS, Agency Derivatives and Mortgage servicing rights			3.7		%
Credit Strategy
Non-Agency RMBS, including net economic interest in consolidated securitizations			9.0		%
Mortgage loans held-for-sale
Prime nonconforming residential mortgage loans			4.0		%
Credit sensitive residential mortgage loans			3.8		%
Annualized cost of funds on average borrowing balance during the quarter(2)			1.1		%
Annualized interest rate spread for aggregate portfolio during the quarter			3.5		%
Debt-to-equity ratio at period-end(3)			2.9 to 1.0
Portfolio Metrics Specific to RMBS and Agency Derivatives During the Quarter
Weighted average cost basis of principal and interest securities
Agency			$	108.29
Non-Agency(4)			$	53.27
Weighted average three month CPR
Agency			6.4		%
Non-Agency			3.4		%
Fixed-rate investments as a percentage of aggregate RMBS and Agency Derivatives portfolio			71.9		%
Adjustable-rate investments as a percentage of aggregate RMBS and Agency Derivatives portfolio			28.1		%
(1) Net economic interest in securitization is mortgage loans held-for-investment net of collateralized borrowings in consolidated securitization trusts.
(2) Cost of funds includes interest spread expense associated with the portfolio's interest rate swaps.
(3) Defined as total borrowings to fund RMBS, mortgage loans held-for-sale and Agency Derivatives, divided by total equity.
(4) Average purchase price utilized carrying value for weighting purposes. If current face were utilized for weighting purposes, total non-Agency RMBS excluding the company's non-Agency interest-only portfolio would be $49.11 at March 31, 3014.

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“We are pleased with the solid performance this quarter in both our rates and credit strategies,” stated Bill Roth, Two Harbors’ Chief Investment Officer.  “By continuing to develop our MSR and conduit initiatives, we believe we can create sustainable franchise value for our stockholders.”

Financing Summary

The company reported a debt-to-equity ratio, defined as total borrowings, including both repurchase agreements and FHLB advances, to fund RMBS securities, mortgage loans held-for-sale and Agency Derivatives divided by total equity, of 2.9 to 1.0 as of both March 31, 2014 and December 31, 2013.

As of March 31, 2014, the company had borrowings of $10.9 billion with 22 repurchase agreement counterparties to fund RMBS securities and Agency derivatives with an average of 84 days to maturity. Additionally, as of March 31, 2014, the company had $96.2 million outstanding under short-term financing arrangements to fund the prime jumbo residential mortgage loans and CSL collateral.

In December 2013, the company’s wholly owned subsidiary, TH Insurance Holdings Company LLC (TH Insurance), was granted membership in the Federal Home Loan Bank of Des Moines (FHLB).  As a member of the FHLB, TH Insurance has access to a variety of products and services offered by the FHLB, including secured advances.  As of March 31, 2014, TH Insurance had $464.5 million in outstanding secured advances with a weighted average borrowing rate of 0.4% and a weighted average of 2.8 years to maturity, and had an additional $535.5 million of available uncommitted credit for borrowings, which amount may be adjusted at the sole discretion of the FHLB.

The following table summarizes the company’s borrowings by collateral type under repurchase agreements and FHLB advances, excluding borrowings on U.S. Treasuries, and related cost of funds:

	As of March 31, 2014
(in thousands)	(unaudited)
Collateral type:
Agency RMBS and Agency Derivatives	$	9,502,445
Mortgage servicing rights	—
Non-Agency RMBS	1,890,730
Mortgage loans held-for-sale
Prime nonconforming residential mortgage loans	93,496
Credit sensitive residential mortgage loans	2,732
	$	11,489,403
Cost of Funds Metrics	Three Months Ended March 31, 2014
	(unaudited)
Annualized cost of funds on average borrowing & FHLB advance balance during the quarter:	0.7		%
Agency RMBS and Agency Derivatives	0.4		%
Mortgage servicing rights	—
Non-Agency RMBS	1.9		%
Mortgage loans held-for-sale
Prime nonconforming residential mortgage loans	2.5		%
Credit sensitive residential mortgage loans	3.4		%

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Conference Call

Two Harbors Investment Corp. will host a conference call on May 8, 2014 at 9:00 a.m.EDT to discuss first quarter2014 financial results and related information. To participate in the teleconference, please call toll-free (877) 868-1835 (or (914) 495-8581 for international callers), Conference Code 19438786 , approximately 10 minutes prior to the above start time. You may also listen to the teleconference live via the Internet on the company’s website at www.twoharborsinvestment.com in the Investor Relations section under the Events and Presentations link. For those unable to attend, a telephone playback will be available beginning at 12:00 p.m. EDT on May 8, 2014, through 12:00 a.m. EDT on May 15, 2014. The playback can be accessed by calling (855) 859-2056 (or (404) 537-3406 for international callers), Conference Code 19438786 . The call will also be archived on the company’s website in the Investor Relations section under the Events and Presentations link.

Two Harbors Investment Corp.

Two Harbors Investment Corp., a Maryland corporation, is a real estate investment trust that invests in residential mortgage-backed securities, residential mortgage loans, mortgage servicing rights and other financial assets. Two Harbors is headquartered in New York, New York, and is externally managed and advised by PRCM Advisers LLC, a wholly-owned subsidiary of Pine River Capital Management L.P. Additional information is available at www.twoharborsinvestment.com.

Forward-Looking Statements

This presentation includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “target,” “assume,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believe,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results, including, among other things, those described in the company’s Annual Report on Form 10-K for the year ended December 31, 2013, and any subsequent Quarterly Reports on Form 10-Q, under the caption “Risk Factors.” Factors that could cause actual results to differ include, but are not limited to, higher than expected operating costs, changes in prepayment speeds of mortgages underlying the company’s residential mortgage-backed securities, the rates of default or decreased recovery on the mortgages underlying our non-Agency securities, failure to recover credit losses in our portfolio, changes in interest rates and the market value of our assets, the availability of financing, the availability of target assets at attractive prices, the company’s ability to manage various operational risks associated with the business, the company’s ability to maintain our REIT qualification, limitations imposed on the business due to our REIT status and the company’s exempt status under the Investment Company Act of 1940, the impact of new legislation or regulatory changes on the company’s operations, the impact of any deficiencies in the servicing or foreclosure practices of third parties and related delays in the foreclosure process, the company’s ability to acquire mortgage loans or securitize the mortgage loans the company acquires, the company’s involvement in securitization transactions, the timing and profitability of the company’s securitization transactions, the risks associated with the company’s securitization transactions, the company’s ability to acquire MSR, the impact of new or modified government mortgage refinance or principal reduction programs, unanticipated changes in overall market and economic conditions, and the company’s exposure to claims and litigation, including litigation arising from its involvement in securitization transactions and its investments in MSR.

Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Two Harbors does not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Additional information concerning these and other risk factors is contained in Two Harbors’ most recent filings with the Securities and Exchange Commission (SEC). All subsequent written and oral forward looking statements concerning Two Harbors or matters attributable to Two Harbors or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.

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Non-GAAP Financial Measures

In addition to disclosing financial results calculated in accordance with United States generally accepted accounting principles (GAAP), this press release and the accompanying investor presentation present non-GAAP financial measures, such as Core Earnings and Core Earnings per common share, that exclude certain items. Two Harbors’ management believes that these non-GAAP measures enable it to perform meaningful comparisons of past, present and future results of the company’s core business operations, and uses these measures to gain a comparative understanding of the company’s operating performance and business trends. The non-GAAP financial measures presented by the company represent supplemental information to assist investors in analyzing the results of its operations. However, because these measures are not calculated in accordance with GAAP, they should not be considered a substitute for, or superior to, the financial measures calculated in accordance with GAAP. The company’s GAAP financial results and the reconciliations from these results should be carefully evaluated. See the GAAP to Non-GAAP reconciliation table on page 12 of this release.

Additional Information

Stockholders of Two Harbors and other interested persons may find additional information regarding the company at the SEC’s Internet site at www.sec.gov or by directing requests to: Two Harbors Investment Corp., Attn: Investor Relations, 590 Madison Avenue, 36th Floor, New York, NY 10022, telephone (612) 629-2500.

Contact

July Hugen, Director of Media and Investor Relations, Two Harbors Investment Corp., (612) 629-2514 or

July.Hugen@twoharborsinvestment.com

# # #

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TWO HARBORS INVESTMENT CORP.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
	March 31, 2014			December 31, 2013
	(unaudited)			(audited)
ASSETS
Available-for-sale securities, at fair value	$	12,634,056		$	12,256,727
Trading securities, at fair value	1,000,312			1,000,180
Mortgage loans held-for-sale, at fair value	161,021			544,581
Mortgage loans held-for-investment in securitization trusts, at fair value	781,085			792,390
Mortgage servicing rights, at fair value	476,663			514,402
Cash and cash equivalents	1,540,431			1,025,487
Restricted cash	220,202			401,647
Accrued interest receivable	46,724			50,303
Due from counterparties	74,997			25,087
Derivative assets, at fair value	429,419			549,859
Other assets	60,888			13,199
Total Assets	$	17,425,798		$	17,173,862
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Repurchase agreements	$	12,021,177		$	12,250,450
Collateralized borrowings in securitization trusts, at fair value	658,953			639,731
Federal Home Loan Bank advances	464,476			—
Derivative liabilities, at fair value	8,395			22,081
Accrued interest payable	16,069			20,277
Due to counterparties	195,928			318,848
Dividends payable	95,172			—
Other liabilities	46,624			67,480
Total Liabilities	13,506,794			13,318,867
Stockholders’ Equity
Preferred stock, par value $0.01 per share; 50,000,000 shares authorized; no shares issued and outstanding	—			—
Common stock, par value $0.01 per share; 900,000,000 shares authorized and 366,046,045 and 364,935,168 shares issued and outstanding, respectively	3,660			3,649
Additional paid-in capital	3,801,952			3,795,372
Accumulated other comprehensive income	626,470			444,735
Cumulative earnings	999,252			1,028,397
Cumulative distributions to stockholders	(1,512,330		)	(1,417,158		)
Total stockholders’ equity	3,919,004			3,854,995
Total Liabilities and Stockholders’ Equity	$	17,425,798		$	17,173,862

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TWO HARBORS INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
Certain prior period amounts have been reclassified to conform to the current period presentation
	Three Months Ended March 31
	2014			2013
	(unaudited)
Interest income:
Available-for-sale securities	$	123,913		$	130,292
Trading securities	1,926			1,264
Mortgage loans held-for-sale	4,586			1,318
Mortgage loans held-for-investment in securitization trusts	7,893			1,654
Cash and cash equivalents	217			307
Total interest income	138,535			134,835
Interest expense:
Repurchase agreements	20,572			23,018
Collateralized borrowings in securitization trusts	5,353			818
Federal Home Loan Bank advances	153			—
Total interest expense	26,078			23,836
Net interest income	112,457			110,999
Other-than-temporary impairments:
Total other-than-temporary impairment losses	(212		)	(236		)
Non-credit portion of loss recognized in other comprehensive income	—			—
Net other-than-temporary credit impairment losses	(212		)	(236		)
Other income:
(Loss) gain on investment securities	(38,655		)	26,968
(Loss) gain on interest rate swap and swaption agreements	(105,528		)	18,972
Gain (loss) on other derivative instruments	5,801			(16,662		)
(Loss) gain on mortgage loans held-for-sale	(3,181		)	14,323
Servicing income	30,441			—
Loss on servicing asset	(32,760		)	—
Other income	460			6,289
Total other (loss) income	(143,422		)	49,890
Expenses:
Management fees	12,111			4,761
Securitization deal costs	—			2,028
Servicing expenses	5,225			31
Other operating expenses	14,534			6,530
Total expenses	31,870			13,350
(Loss) income from continuing operations before income taxes	(63,047		)	147,303
(Benefit from) provision for income taxes	(33,902		)	4,964
Net (loss) income from continuing operations	(29,145		)	142,339
Income from discontinued operations	—			1,377
Net (loss) income attributable to common stockholders	$	(29,145	)	$	143,716

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TWO HARBORS INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
Certain prior period amounts have been reclassified to conform to the current period presentation
	Three Months Ended March 31
	2014			2013
	(unaudited)
Basic (loss) earnings per weighted average common share:
Continuing operations	$	(0.08	)	$	0.47
Discontinued operations	—			—
Net (loss) income	$	(0.08	)	$	0.47
Diluted (loss) earnings per weighted average common share:
Continuing operations	$	(0.08	)	$	0.47
Discontinued operations	—			—
Net (loss) income	$	(0.08	)	$	0.47
Dividends declared per common share	$	0.26		$	0.32
Weighted average number of shares of common stock:
Basic	365,611,890			305,284,922
Diluted	365,611,890			306,963,711
Comprehensive income:
Net (loss) income	$	(29,145	)	$	143,716
Other comprehensive income:
Unrealized gain on available-for-sale securities, net	181,735			104,252
Other comprehensive income	181,735			104,252
Comprehensive income	$	152,590		$	247,968

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TWO HARBORS INVESTMENT CORP.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(dollars in thousands, except share data)
Certain prior period amounts have been reclassified to conform to the current period presentation
	Three Months Ended
	March 31,
	2014			2013
	(unaudited)
Reconciliation of net income attributable to common stockholders to
Core Earnings:
Net (loss) income attributable to common stockholders	$	(29,145	)	$	143,716
Adjustments for non-core earnings:
Loss (gain) on sale of securities and mortgage loans, net of tax	38,476			(19,161		)
Unrealized loss (gain) on trading securities, equity securities and mortgage loans held-for-sale, net of tax	2,293			(17,077		)
Other-than-temporary impairment loss, net of tax	212			236
Realized loss on termination or expiration of swaps and swaptions, net of tax	1,981			58,554
Unrealized loss (gain), net of tax, on interest rate swap and swaptions economically hedging repurchase agreements, TBAs, MSRs and available-for-sale securities	59,687			(84,984		)
(Gain) loss on other derivative instruments, net of tax	(4,654		)	14,011
Gain (loss) on financing securitizations	(313		)	(6,289		)
Unrealized loss, net of tax, on mortgage servicing rights	19,406			—
Securitization deal costs	—			2,028
(Income) loss from discontinued operations	—			(1,377		)
Amortization of business combination intangible assets, net of tax	$	260		$	—
Core Earnings	$	88,203		$	89,657
Weighted average shares outstanding - Basic	365,611,890			305,284,922
Weighted average shares outstanding - Diluted	365,611,890			306,963,711
Core Earnings per weighted average share outstanding - diluted	$	0.24		$	0.29

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TWO HARBORS INVESTMENT CORP.
SUMMARY OF QUARTERLY CORE EARNINGS
(dollars in millions, except per share data)
Certain prior period amounts have been reclassified to conform to the current period presentation
	Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2014			2013			2013			2013			2013
	(unaudited)
Net Interest Income:
Interest income	$	138.5		$	137.4		$	138.0		$	145.3		$	134.8
Interest expense	26.0			26.9			24.9			24.7			23.8
Net interest income	112.5			110.5			113.1			120.6			111.0
Other income:
Interest spread on interest rate swaps	(13.8		)	(10.1		)	(15.1		)	(19.4		)	(14.0		)
Interest spread on other derivative instruments	4.7			(2.4		)	(7.5		)	(1.5		)	2.9
Servicing income, net of amortization(1)	17.9			5.2			1.2			0.3			—
Other income	0.2			0.4			—			—			0.2
Total other (loss) income	9.0			(6.9		)	(21.4		)	(20.6		)	(10.9		)
Expenses	31.5			26.2			22.1			22.1			11.3
Core Earnings before income taxes	90.0			77.4			69.6			77.9			88.8
Income tax expense (benefit)	1.8			1.0			1.9			(0.2		)	(0.9		)
Core Earnings	$	88.2		$	76.4		$	67.7		$	78.1		$	89.7
Basic and diluted weighted average Core EPS	$	0.24		$	0.21		$	0.19		$	0.21		$	0.29
(1) Amortization refers to the portion of change in fair value of MSR primarily attributed to the realization of expected cash flows (runoff) of the portfolio. This amortization has been deducted from Core Earnings. Amortization of MSR is deemed a non-GAAP measure due to the company’s decision to account for MSR at fair value.

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EX-99.2

May 8 , 2014 First Quarter 2014 Earnings Call

Safe Harbor Statement F O R W A R D - L O O K I N G S T A T E M EN T S This presentation includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “target,” “assume,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believe,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward- looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results, including, among other things, those described in our Annual Report on Form 10-K for the year ended December 31, 2013, and any subsequent Quarterly Reports on form 10-Q, under the caption “Risk Factors.” Factors that could cause actual results to differ include, but are not limited to, higher than expected operating costs, changes in prepayment speeds of mortgages underlying our residential mortgage-backed securities (RMBS), the rates of default or decreased recovery on the mortgages underlying our non-Agency securities, failure to recover credit losses in our portfolio, changes in interest rates and the market value of our assets, the availability of financing, the availability of target assets at attractive prices, our ability to manage various operational risks associated with our business, our ability to maintain our REIT qualification, limitations imposed on our business due to our REIT status and our exempt status under the Investment Company Act of 1940, the impact of new legislation or regulatory changes on our operations, the impact of any deficiencies in the servicing or foreclosure practices of third parties and related delays in the foreclosure process, our ability to acquire mortgage loans or securitize the mortgage loans we acquire, our involvement in securitization transactions, the timing and profitability of our securitization transactions, the risks associated with our securitization transactions, our ability to acquire mortgage servicing rights, the impact of new or modified government mortgage refinance or principal reduction programs, unanticipated changes in overall market and economic conditions, and our exposure to claims and litigation, including litigation arising from our involvement in securitization transactions and investments in mortgage servicing rights. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Two Harbors does not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Additional information concerning these and other risk factors is contained in Two Harbors’ most recent filings with the Securities and Exchange Commission (SEC). All subsequent written and oral forward looking statements concerning Two Harbors or matters attributable to Two Harbors or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. This presentation may include industry and market data obtained through research, surveys, and studies conducted by third parties and industry publications. We have not independently verified any such market and industry data from third-party sources. This presentation is provided for discussion purposes only and may not be relied upon as legal or investment advice, nor is it intended to be inclusive of all the risks and uncertainties that should be considered. This presentation does not constitute an offer to purchase or sell any securities, nor shall it be construed to be indicative of the terms of an offer that the parties or their respective affiliates would accept. Readers are advised that the financial information in this presentation is based on company data available at the time of this presentation and, in certain circumstances, may not have been audited by the company’s independent auditors. 2

Executive Summary FIRST QUARTER 2014 RESULTS – STRONG RETURN ON BOOK VALUE • Reported book value of $10.71 per share; total return on book value 3.9%(1) — Q1-2014 cash dividend of $0.26 per share • Delivered Comprehensive Income of $152.6 million — Return on average equity of 15.7%, or $0.42 per share • Generated Core Earnings(2) of $88.2 million, or $0.24 per share ADVANCING STRATEGIC IN IT IATIVES • Mortgage Servicing Rights (MSR) — Working with a variety of servicer partners to grow initiative — MSR remain attractive • Mortgage loan conduit and securitization — Expanding originator network — Fund mortgage loan purchases with FHLB financing in future periods 3 (1) See Appendix page 14 for calculation of first quarter return on book value. (2) Core Earnings is a non-GAAP measure that we define as GAAP net income, excluding impairment losses, gains or losses on sales of securities and termination of interest rate swaps, unrealized gains or losses on the aggregate portfolio, certain non-recurring gains and losses related to discontinued operations and amortization of business combination intangible assets, and certain non-recurring upfront costs related to securitization transactions. As defined, Core Earnings includes interest income associated with our inverse interest-only securities (IIOs or Agency Derivatives), premium income or loss on credit default swaps, and servicing income, net of estimated amortization on MSR. Core Earnings is provided for purposes of comparability to other peer issuers. For a reconciliation of GAAP to non-GAAP financials, please refer to the GAAP to non-GAAP reconciliation table in the Appendix on slide 17.

Macroeconomic & Policy Considerations MACROECONOMIC CONSIDERATIONS • Unemployment recovery • Home price appreciation continues POLICY CONSIDERAT IONS: • Federal Reserve’s Quantitative Easing (QE) plan • GSE Reform: – Johnson-Crapo Bill – HOME Forward Act – PATH Act – Corker-Warner Bill • Final Qualified Mortgage (QM) and proposed Qualified Residential Mortgage (QRM) rules 4

Book Value 5 Q4-2013 Book Value ($M) Q4-2013 Book Value per share Q1-2014 Book Value ($M) Q1-2014 Book Value per share Beginning Stockholders’ equity – basic $3,773.1 $10.36 $3,855.0 $10.56 GAAP Net Income: Core Earnings, net of tax 76.4 88.2 Realized gains and (losses), net of tax 86.3 (38.6) Unrealized mark-to-market gains and (losses), net of tax 76.0 (78.7) Discontinued operations 0.7 - Other comprehensive (loss) income (68.0) 181.7 Dividend declaration (94.9) (95.2) Other 0.0 6.5 Balance before capital transactions 3,849.6 3,918.9 Issuance of common stock, net of offering costs 0.2 0.1 Issuance of common stock through warrant exercise 5.2 - Ending Stockholders’ equity – basic and diluted $3,855.0 $10.56 $3,919.0 $10.71 First quarter Comprehensive Income of $152.6 million Cash dividend of $0.26 per common share

E X P E N S E R AT I O Financial Summary 6 Q 1 - 2 014 F I N A NC IAL H I G H L I G H TS C O R E E A R N I NGS (1 ) Q 1 - 2 014 AC C O U NT ING M AT T E R S (1) See footnote 2 on slide 3 for the Core Earnings definition. For a reconciliation of GAAP to non-GAAP financials, please refer to the GAAP to non-GAAP reconciliation table in the Appendix on slide 17. • Core Earnings(1) of $0.24 per weighted share; annualized return on average equity of 9.1% • Expense ratio increased to 1.5% versus 1.3% in fourth quarter 2013 • GAAP loss of $0.08 per share; driven by unrealized losses on derivatives used for hedging RMBS • Released $22.6 million of credit reserves • Mortgage loan interest rate lock commitments accounted for as derivatives; reported at fair value on balance sheet • Fair value of MSR decreased to $476.7 million ($514.4 million at December 31, 2013) 0.7% 0.9% 1.0% 1.3% 1.5% 0.0% 1.0% 2.0% 3.0% 4.0% Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2014 Other Operating Expenses as % of Average Equity $89.7 $78.1 $67.7 $76.4 $88.2 $0.29 $0.21 $0.19 $0.21 $0.24 $- $0.10 $0.20 $0.30 $0.40 $0.50 $- $20.0 $40.0 $60.0 $80.0 $100.0 Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2014 Core Earnings ($M) Core Earnings Per Share (EPS)

Financing Profile(1) 7 FEDERAL HOME LOAN BANK OF DES MOINES • Outstanding secured advances of $464.5 million — Pledged collateral primarily Agency securities — Over time expect to utilize FHLB financing for mortgage loans — Average maturity of approximately 2.8 years and borrowing rate of 0.4% • Total funding capacity up to $1 billion; may increase or decrease at the FHLB’s sole discretion • Diversification beyond repo market is prudent; allows optimization of funding mix REPURCHASE AGREEMENTS • Repo markets functioning in normal manner; no meaningful shifts in financing haircuts or repo rates • Continue to ladder repo maturities; average 84 days to maturity with 22 counterparties • Focus on diversification and financial stability across repo counterparties (1) Data as of March 31, 2014.

Portfolio Performance Summary 8 Q 1 - 2 014 P E R FO R M A NC E H I G H L I G H T S Q 1 - 2 014 N E T I N T E R E ST Y I E L D A N N UAL I ZE D Y I E L D S BY R M BS P O RT FO L I O (4 ) (1) See Appendix page 14 for calculation of first quarter return on book value. (2) Assets in “Rates” include Agency RMBS, Agency Derivatives and MSR. (3) Assets in “Credit” include non-Agency RMBS, prime jumbo residential mortgage loans, net economic interest in securitization trusts and CSL. (4) Agency yield includes impact of Agency Derivatives. Interest income on Agency Derivatives was $7.0 million and $5.8 million for the first quarter of 2014 and fourth quarter of 2013, respectively. (5) Cost of funds includes interest spread expense associated with the portfolio's interest rate swaps. TOTA L RE T U RN O N BO O K VA LU E O F 3 . 9 % (1 ) R AT E S P E R FO R M A NC E • Solid rates results; 50 bps increase in yield quarter-over-quarter • Driven by higher realized yields on Agency assets, primarily due to slower prepays on interest-only securities (IOs), inverse interest-only securities (IIOs), MSR and Home Equity Conversion Mortgages (HECM) C R E D I T P E R FO R M A NC E • Realized non-Agency yields moved higher • Non-Agency prices appreciated Portfolio Metrics Three Months Ended December 31, 2013 Three Months Ended March 31, 2014 Annualized portfolio yield during the quarter 4.3% 4.6% Rates(2) Agency RMBS, Agency Derivatives and MSR 3.2% 3.7% Credit(3) Non-Agency RMBS, including net economic interest in securitization trusts 8.8% 9.0% Prime jumbo residential mortgage loans 4.0% 4.0% Credit Sensitive Loans (CSL) 5.2% 3.8% Annualized cost of funds on average repurchase and advance balance during the quarter(5) 1.1% 1.1% Annualized interest rate spread for aggregate portfolio during the quarter 3.2% 3.5% 2.9% 2.7% 2.8% 3.1% 3.3% 9.2% 9.1% 9.0% 8.9% 9.1% 4.0% 3.7% 4.0% 4.2% 4.3% 0.0% 2.5% 5.0% 7.5% 10.0% Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2014 Agency RMBS Non-Agency RMBS Aggregate RMBS Portfolio

TA RG ET E D C A P I TAL A L LO C AT I O N Q 1 - 2 014 H I G H L I G H T S P O RT FO L I O C O M P O S I T I O N Portfolio Composition 9 • 58% capital allocation to Rates(4) — MSR capital allocation of 13%; expect allocation to increase over time — Focused on higher coupon, shorter duration assets • 42% capital allocation to Credit(5) — Continued emphasis on deep discount subprime non-Agencies — Sold substantially all of CSL portfolio Rates(4) $10.5B Credit(5) $3.1B AS OF MARCH 31, 2014 $13.6B Portfolio $ Millions (1) Assets in “Other” include prime jumbo residential mortgage loans, CSL, net economic interest in securitization trusts and non-Agency IOs. (2) Includes IIOs (or Agency Derivatives) of $210.3 million. (3) HECM are loans that allow the homeowner to convert home equity into cash collateralized by the value of their home. (4) Assets in “Rates” include Agency RMBS, Agency Derivatives and MSR. (5) Assets in “Credit” include non-Agency RMBS, prime jumbo residential mortgage loans, net economic interest in securitization trusts and CSL. 52% 52% 57% 53% 52% 54% 55% 57% 58% 44% 36% 37% 38% 46% 45% 43% 42% 4% 7% 10% 10% 0% 10% 20% 30% 40% 50% 60% 70% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Rates Credit Residential Real Properties 30-Year Fixed $6,038 HECM(3) $1,795 Senior $2,328 Mezzanine $474 MSR $477 Hybrid ARMs $944 15-Year Fixed $70 Other-Fixed $712 IOs and IIOs(2) $475 Other(1) $291 48%

BV E X P O S U R E TO + 100BP S C H A N G E I N R AT E S (2 ) Q 1 - 2 014 H E D G I N G ST R AT E GY Q 1 - 2 014 P O RT FO L I O M E T R I C S Key Portfolio Metrics 10 • Low implied debt-to-equity(1) ratio of 2.7x versus 3.1x at December 31, 2013 • Prepays lower; seasonally slow period Portfolio Metrics Q4-2013 Q1-2014 Agency Weighted average 3-month CPR(3) 7.9% 6.4% Weighted average cost basis(4) $108.2 $108.3 Non-Agency Weighted average 3-month CPR 3.8% 3.4% Weighted average cost basis(4) $53.7 $53.3 Change in equity value for +100bps change in interest rates(2) (1.8%) 1.3% Implied Debt-to-equity(1) 3.1x 2.7x • Low rate exposure • Limited basis risk • Increased swaption position – Net notional of $9.5 billion at March 31, 2014, versus $5.1 billion at December 31, 2013 (1) Implied debt-to-equity is calculated after including net long or short TBA position. As of March 31, 2014 and December 31, 2013, the net TBA position was short $1.0 billion and long $603 million notional, respectively. (2) Represents estimated percentage change in equity value for theoretical +100 bps parallel shift in interest rates. Change in equity value is total net asset change. (3) Agency weighted average 3-month Constant Prepayment Rate (CPR) includes IIOs (or Agency Derivatives). (4) Weighted average cost basis includes RMBS principal and interest securities only. Average purchase price utilized carrying value for weighting purposes. If current face were utilized for weighting purposes, total non-Agency RMBS excluding the company’s non-Agency IO portfolio would have been $49.11 at March 31, 2014. 0.1% 9.9% (1.2%) (1.8%) 1.3% (4.0%) (2.0%) – 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2014

Mortgage Servicing Rights Q1-2014 REVIEW • Added $121 million in UPB from PHH pursuant to flow purchase arrangement ― Production from late 2013 • Completed $5.0 billion UPB bulk purchase in April 2014 ― Underlying pool of mortgages are Fannie Mae loans; primarily new production ― Purchase price of approximately $50 million ― Economics transferred April 1, 2014 BUSINESS UPDATE • Pipeline remains robust ― Evaluated over $400 billion MSR over the last 12 months • Expect to see opportunities to add new issue MSR via bulk sales, flow agreements, and originator network 11

Mortgage Loan Conduit and Securitization PRIME JUMBO INITIATIVE EXPANDING • Prime Jumbo holdings of $141 million at March 31, 2014 – Pipeline (i.e. interest rate locks) of approximately $154 million; was $12 million at December 31, 2013 • Potential to securitize if market conditions warrant • Focus on building originator relationships EVALUATING OPPORTUNIT Y IN NON-QM MARKET • Utilize existing originator relationships; potentially attractive investments for portfolio • Large, under-served market • Serves goal to be a provider of capital to U.S. mortgage market 12

Appendix

Return on Book Value 14 Return on book value Q1-2014 (Per diluted share amounts, except for percentage) Book value at March 31, 2014 $10.71 Book value at December 31, 2013 10.56 Increase in book value 0.15 Dividend declared in Q1-2014 0.26 Return on book value Q1-2014 $0.41 Return on book value Q1-2014(1) 3.9% Note: Diluted shares outstanding at end of period are used as the denominator for book value per share calculation. (1) Return on book value for quarter ended March 31, 2014 is defined as the increase in book value per diluted share, from December 31, 2013 to March 31, 2014 of $0.15, plus dividend declared of $0.26 per share, divided by December 31, 2013 diluted book value of $10.56 per share.

D I V I D E NDS (3 ) Financial Performance 15 C O M P R E H E N S I V E I N C O M E ( LO S S ) BO O K VA LU E A N D D I V I DE ND P E R S H A R E (1 ) G A A P N E T I N C O M E ( LO S S ) (1) Diluted shares outstanding at end of period, which includes the effect of dilutive outstanding warrants determined using the treasury stock method, are used as the denominator for book value per share calculation. (2) Includes cash dividend of $0.32 per share and the Silver Bay common stock distribution amounting to $1.01 per share, as measured in accordance with GAAP. (3) Historical dividends may not be indicative of future dividend distributions. The company ultimately distributes dividends based on its taxable income per common share, not GAAP earnings. The annualized dividend yield on the company’s common stock is calculated based on the closing price of the last trading day of the relevant quarter. (4) Dividend yield based on cash dividend of $0.32 per share only. Does not include Silver Bay common stock distribution. $11.19 $10.47 $10.35 $10.56 $10.71 $1.33(2) $0.31 $0.28 $0.26 $0.26 $8.00 $10.00 $12.00 Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2014 Book Value ($) Dividend declared ($) $0.32 $0.31 $0.28 $0.26 $0.26 10.2%(4) 12.1% 11.5% 11.2% 10.1% 0.0% 2.5% 5.0% 7.5% 10.0% 12.5% 15.0% $0.00 $0.05 $0.10 $0.15 $0.20 $0.25 $0.30 $0.35 Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2014 Dividend per Share ($) Dividend Yield (%) $248.0 ($146.1) $54.0 $171.4 $152.6 26.9% (14.2%) 5.7% 17.7% 15.7% -30.0% -15.0% 0.0% 15.0% 30.0% 45.0% $(300) $(150) $- $150 $300 $450 Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2014 Comprehensive Income ($M) Comprehensive Income ROAE (%) $143.7 $388.6 ($192.7) $239.4 ($29.1) $0.47 $1.06 $(0.53) $0.66 $(0.08) $(1.00) $(0.50) $- $0.50 $1.00 $1.50 $(300) $(200) $(100) $- $100 $200 $300 $400 Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2014 GAAP Net Income ($M) GAAP EPS ($)

Operating Performance 16 (In millions, except for per share data) Core Earnings Realized Gains Unrealized MTM Q4-2013 Financials Core Earnings Realized Gains Unrealized MTM Q1-2014 Financials Interest income $137.4 $ - $ - $137.4 $138.5 $ - $ - $138.5 Interest expense 26.9 - - 26.9 26.0 - - 26.0 Net interest income 110.5 - - 110.5 112.5 - - 112.5 Net other-than-temporary impairment losses - - - - - - (0.2) (0.2) Gain (loss) on investment securities - 98.7 (0.8) 97.9 - (38.5) (0.2) (38.7) (Loss) gain on interest rate swaps and swaptions (10.1)(1) 34.2 (2.3) 21.8 (13.8)(1) (1.2) (90.5) (105.5) (Loss) gain on other derivative instruments(2) (2.4) (47.9)(3) 79.6 29.3 4.7 2.2(3) (1.1) 5.8 (Loss) gain on mortgage loans held-for-sale - (0.1) (8.5) (8.6) - 0.1 (3.3) (3.2) Servicing income 10.6 - - 10.6 30.4 - - 30.4 (Loss) gain on servicing asset (5.4) - 18.5 13.1 (12.5) - (20.3) (32.8) Other income (loss) 0.4 (1.1) (1.3) (2.0) 0.2 0.6 (0.2) 0.6 Total other (loss) income (6.9) 83.8 85.2 162.1 9.0 (36.8) (115.6) (143.4) Management fees & other operating expenses 26.2 1.1 - 27.3 31.5 0.4 - 31.9 Net income (loss) from continuing operations before income taxes 77.4 82.7 85.2 245.3 90.0 (37.2) (115.8) (63.0) Income tax expense (benefit) 1.0 (3.6) 9.2 6.6 1.8 1.4 (37.1) (33.9) Net income (loss) from continuing operations 76.4 86.3 76.0 238.7 88.2 (38.6) (78.7) (29.1) Discontinued operations - 0.7 - 0.7 - - - - Net income (loss) $76.4 $87.0 $76.0 $239.4 $88.2 $(38.6) $(78.7) $(29.1) Basic and diluted weighted average EPS $0.21 $0.24 $0.21 $0.66 $0.24 $(0.10) $(0.22) $(0.08) (1) Q1-2014 and Q4-2013 (loss) gain on interest rate swaps and swaptions includes $10.1 million and $13.8 million, respectively, in interest costs, of which $1.7 million for both periods relates to swaps associated with U.S. Treasuries. (2) Core Earnings includes $2.3 million and $8.2 million of net premium amortization on credit default swaps and total return swaps for the first quarter of 2014 and the fourth quarter of 2013, respectively. (3) Q4-2013 includes $9.3 million, net of taxes, of realized loss from to-be-announced securities (TBAs) and TBA options. Q1-2014 includes $7.7 million, net of taxes, of realized gains from TBAs and TBA options. DRAFT

GAAP to Core Earnings Reconciliation 17 (In thousands, except for per share data) Three Months Ended December 31, 2013 Three Months Ended March 31, 2014 Reconciliation of GAAP to non-GAAP Information Core Earnings: Net income (loss) attributable to common stockholders $239,414 $(29,145) Adjustments for non-core earnings: (Gain) loss on sale of securities and mortgage loans, net of tax (98,624) 38,476 Unrealized loss on trading securities and mortgage loans held-for-sale, net of tax 6,164 2,293 Other-than-temporary impairment loss, net of tax - 212 Realized (gain) loss on termination or expiration of swaps and swaptions, net of tax (21,075) 1,981 Unrealized (gain) loss on interest rate swaps and swaptions, net of tax (8,277) 59,687 Gain on other derivative instruments, net of tax (25,713) (4,654) Realized and unrealized loss (gain) on financing securitizations 2,417 (313) Unrealized (gain) loss, net of tax, on mortgage servicing rights (17,885) 19,406 Securitization deal costs, net of tax - - Income from discontinued operations (735) - Amortization of business combination intangible assets, net of tax 704 260 Core Earnings $76,390 $88,203 Weighted average shares outstanding - Diluted 364,700,903 365,611,890 Core Earnings per weighted average share outstanding - Diluted 0.21 0.24

Rates: Agency RMBS Metrics 18 AGENCY RMBS CPR(5) AGENCY PORTFOLIO YIELDS AND METRICS (1) Agency yield includes impact of Agency Derivatives. Interest income on Agency Derivatives was $7.0 million and $5.8 million for the first quarter of 2014 and fourth quarter of 2013, respectively. (2) Cost of financing Agency RMBS includes interest spread expense associated with the portfolio’s interest rate swaps of $12.1 million and $7.3 million for the first quarter of 2014 and fourth quarter of 2013, respectively. Interest spread expense increased cost of financing Agency RMBS by 0.5% and 0.3% in the first quarter of 2014 and fourth quarter of 2013, respectively. (3) Securities collateralized by loans of less than or equal to $85K. (4) Securities collateralized by loans with greater than or equal to 80% loan-to-value ratio (LTV). High LTV pools are predominately Making Homeownership Affordable (MHA) pools. MHA pools consist of borrowers who have refinanced through the HARP. (5) Agency weighted average 3-month Constant Prepayment Rate (CPR) includes IIOs (or Agency Derivatives). (6) Weighted average cost basis includes RMBS principal and interest securities only. Average purchase price utilized carrying value for weighting purposes. (7) Securities collateralized by loans of less than or equal to $175K, but more than $85K. (8) Securities collateralized by loans held by lower credit borrowers as defined by Fair Isaac Corporation (FICO). Portfolio Yield Realized Q4-2013 At December 31, 2013 Realized Q1-2014 At March 31, 2014 Agency yield(1) 3.1% 3.0% 3.3% 3.2% Cost of financing(2) 0.8% 0.8% 0.9% 0.9% Net interest spread 2.3% 2.2% 2.4% 2.3% Portfolio Metrics Q4-2013 Q1-2014 Agency Weighted average 3-month CPR(5) 7.9% 6.4% Weighted average cost basis(6) $108.2 $108.3 Agency: Vintage & Prepayment Protection Q4-2013 Q1-2014 HECM 19% 18% $85K Max Pools(3) 14% 17% High LTV (predominately MHA)(4) 24% 16% 2006 & subsequent vintages – Premium and IOs 14% 14% Other Low Loan Balance Pools(7) 5% 12% Low FICO(8) 7% 7% 2006 & subsequent vintages – Discount 7% 6% Seasoned (2005 and prior vintages) 5% 5% Prepayment Protected 5% 5% AGENCY PORTFOLIO COMPOSITION 7.0% 8.7% 8.7% 7.9% 6.4% 0.0% 5.0% 10.0% 15.0% Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2014 Agency RMBS CPR

Rates: Agency RMBS 19 As of March 31, 2014 Par Value (M) Market Value (M) % of Agency Portfolio Amortized Cost Basis (M) Weighted Average Coupon Weighted Average Age (Months) 30-Year Fixed 4.0-4.5% 4,877 5,149 51.3% 5,286 4.2% 18 ≥ 5.0% 801 889 8.9% 869 5.5% 63 $5,678 $6,038 60.2% $6,155 4.4% 24 15-Year Fixed 3.0-3.5% $65 $67 0.7% $64 3.0% 40 4.0-4.5% 2 2 0.0% 2 4.0% 45 ≥ 5.0% 1 1 0.0% 1 6.7% 107 $68 $70 0.7% $67 3.1% 98 HECM $1,639 $1,795 17.9% $1,740 4.7% 29 Hybrid ARMs 928 944 9.4% 935 2.5% 25 Other-Fixed 646 712 7.1% 700 4.9% 75 IOs and IIOs 4,552 475(1) 4.7% 462 4.1% 66 Total $13,511 $10,034 100.0% $10,059 4.3% 31 (1) Represents the market value of $264.5 million of IOs and $210.3 million of Agency Derivatives.

Rates: Mortgage Servicing Rights 20 As of Dec. 31, 2013 As of Mar. 31, 2014 Fair Value ($M) $514.4 $476.7 Unpaid Principal Balance ($M) $42,324.3 $41,596.3 Weighted Average Coupon 3.9% 3.9% Original FICO Score 734 738 Original LTV 76% 75% 60+ Day Delinquencies 0.9% 1.0% Net Servicing Spread 25 basis points 25 basis points Vintage: Pre-2009 4% 4% 2009-2012 64% 63% Post 2012 32% 33% Percent of MSR Portfolio: Ginnie Mae 34% 33% Fannie Mae 66% 67%

Credit: Non-Agency RMBS Metrics 21 NON-AGENCY PORTFOLIO COMPOSITION NON-AGENCY PORTFOLIO YIELDS AND METRICS (1) Cost of financing non-Agency RMBS includes interest spread expense associated with the portfolio’s interest rate swaps of $2.0 million and $1.9 million for the first quarter of 2014 and fourth quarter of 2013, respectively. Interest spread expense increased cost of financing non-Agency RMBS by 0.4% in both periods. (2) Weighted average cost basis includes RMBS principal and interest securities only. Average purchase price utilized carrying value for weighting purposes. If current face were utilized for weighting purposes, total non-Agency RMBS excluding the company’s non-Agency interest-only portfolio would have been $49.11 at March 31, 2014. Portfolio Yield Realized Q4-2013 At December 31, 2013 Realized Q1-2014 At March 31, 2014 Non-Agency yield 8.9% 9.0% 9.1% 9.0% Cost of financing(1) 2.5% 2.5% 2.3% 2.3% Net interest spread 6.4% 6.5% 6.8% 6.7% NON-AGENCY RMBS CPR Non-Agency: Loan Type Q4-2013 Q1-2014 Sub-Prime 83% 83% Option-ARM 8% 8% Prime 5% 5% Alt-A 4% 4% 2.6% 4.0% 4.8% 3.8% 3.4% 0.0% 2.5% 5.0% 7.5% 10.0% Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2014 Non-Agency RMBS CPR Portfolio Metrics Q4-2013 Q1-2014 Non-Agency Weighted average 3-month CPR 3.8% 3.4% Weighted average cost basis(2) $53.7 $53.3

Credit: Non-Agency RMBS 22 As of March 31, 2014 Senior Bonds Mezzanine Bonds Total P&I Portfolio Characteristics Carrying Value ($M) $2,328 $474 $2,802 % of Credit Portfolio 83.1% 16.9% 100.0% Average Purchase Price(1) $52.06 $59.20 $53.27 Average Coupon 2.3% 1.7% 2.2% Weighted Average Market Price(2) $67.09 $74.87 $68.29 Collateral Attributes Average Loan Age (months) 88 102 90 Average Loan Size ($K) $258 $202 $249 Average Original Loan-to-Value 72.2% 71.7% 72.1% Average Original FICO(3) 616 648 621 Current Performance 60+ Day Delinquencies 31.8% 26.1% 30.8% Average Credit Enhancement(4) 8.6% 20.3% 10.6% 3-Month CPR(5) 3.0% 5.2% 3.4% (1) Average purchase price utilized carrying value for weighting purposes. If current face were utilized for weighting purposes, the average purchase price for senior, mezzanine and total non-Agency RMBS, excluding our non- Agency interest-only portfolio, would have been $47.75, $56.56 and $49.11, respectively. (2) Weighted average market price utilized current face for weighting purposes. (3) FICO represents a mortgage industry accepted credit score of a borrower. (4) Average credit enhancement remaining on our non-Agency RMBS portfolio, which is the average amount of protection available to absorb future credit losses due to defaults on the underlying collateral. (5) 3-Month CPR is reflective of the prepayment speed on the underlying securitization; however, it does not necessarily indicate the proceeds received on our investment tranche. Proceeds received for each security are dependent on the position of the individual security within the structure of each deal.

Financing(1) 23 (1) As of March 31, 2014. (2) Does not include repurchase agreements collateralized by U.S. Treasuries of $1.0 billion and mortgage loans held-for-sale of $96.2 million. (3) Excludes purchase of FHLB membership and activity stock totaling $18.6 million as of March 31, 2014 Collateral Amount ($M) Available–for-sale securities, at fair value $421.4 Net economic interests in consolidated securitization trusts 79.3 Mortgage loans held-for-sale, at fair value 14.4 Restricted cash 0.2 $515.3 Maturities Amount ($M) Percent (%) ≤ 3 months $- -% > 3 and ≤ 6 months 3 1% > 6 and ≤ 12 months 34 7% > 12 and ≤ 24 months - -% > 24 months 428 92% $465 F H L B P L E D G E D C O L L AT E RAL A N D M AT U RI T I E S (3 ) Repurchase Agreements: RMBS and Agency Derivatives(3) Amount ($M) Percent (%) Within 30 days $2,748 25% 30 to 59 days 2,859 26% 60 to 89 days 857 8% 90 to 119 days 2,363 22% 120 to 364 days 1,902 17% One year and over 200 2% $10,929 R E P O M AT U R IT IE S (2 )

I N T E R E ST R AT E SWA P S (2 ) Hedging Strategy(1) 24 (1) As of March 31, 2014. (2) Notional amounts do not include $1.0 billion of notional interest rate swaps economically hedging our trading securities, $3.4 billion of notional interest rate swaps hedging our available-for-sale securities, and $2.6 billion of notional interest rate swaps economically hedging our TBA contracts and MSR. Swaps Maturities Notional Amounts ($M) Average Fixed Pay Rate Average Receive Rate Average Maturity (Years) 2014 $3,000 0.295% 0.234% 0.73 2015 1,000 0.383% 0.237% 0.79 2016 2,950 0.626% 0.238% 2.17 2017 6,300 0.936% 0.236% 3.20 2018 and after 1,375 1.424% 0.235% 4.80 $14,625 0.750% 0.236% 2.47

I N T E R E ST R AT E SWA P T I O NS Hedging Strategy(1) 25 (1) As of March 31, 2014. Option Underlying Swap Swaption Expiration Cost ($M) Fair Value ($M) Average Months to Expiration Notional Amount ($M) Average Pay Rate Average Receive Rate Average Term (Years) Purchase Contracts: Payer < 6 Months $9.1 $1.3 2.29 $800 3.56% 3M LIBOR 10.0 Payer ≥ 6 Months 223.5 219.9 36.49 6,000 4.27% 3M LIBOR 9.0 Total Payer $232.6 $221.2 36.19 $6,800 4.19% 3M LIBOR 9.1 Receiver < 6 Months $6.0 $4.0 3.23 $2,000 3M LIBOR 1.68% 5.0 Receiver ≥ 6 Months 0.9 0.5 9.30 2,000 3M LIBOR 1.08% 5.0 Total Receiver $6.9 $4.5 4.51 $4,000 3M LIBOR 1.38% 5.0 Sale Contracts: Payer ≥ 6 Months $(81.2) $(58.6) 39.02 $(800) 3.44% 3M LIBOR 10.0 Total Payer $(81.2) $(58.6) 39.02 $(800) 3.44% 3M LIBOR 10.0 Receiver < 6 Months $(2.6) $(2.8) 2.30 $(500) 3M LIBOR 3.20% 10.0 Total Receiver $(2.6) $(2.8) 2.30 $(500) 3M LIBOR 3.20% 10.0