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☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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,			Minnesota						55416
(Address of Principal Executive Offices)									(Zip Code)

Title of Each Class:

Trading Symbol(s)

Name of Exchange on Which Registered:

Common Stock, par value $0.01 per share

TWO

New York Stock Exchange

8.125% Series A Cumulative Redeemable Preferred Stock

TWO PRA

New York Stock Exchange

7.625% Series B Cumulative Redeemable Preferred Stock

TWO PRB

New York Stock Exchange

7.25% Series C Cumulative Redeemable Preferred Stock

TWO PRC

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 ☐

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

DOCUMENTS INCORPORATED BY REFERENCE

TWO HARBORS INVESTMENT CORP.

2022 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

						Page
PART I
Item 1.			Business			1
Item 1A.			Risk Factors			8
Item 1B.			Unresolved Staff Comments			23
Item 2.			Properties			23
Item 3.			Legal Proceedings			23
Item 4.			Mine Safety Disclosures			23
PART II
Item 5.			Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			24
Item 6.			[Reserved]			27
Item 7.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 7A.			Quantitative and Qualitative Disclosures About Market Risk			51
Item 8.			Financial Statements and Supplementary Data			56
Item 9.			Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			110
Item 9A.			Controls and Procedures			110
Item 9B.			Other Information			113
Item 9C.			Disclosure Regarding Foreign Jurisdictions that Prevent Inspections			113
PART III
Item 10.			Directors, Executive Officers and Corporate Governance			114
Item 11.			Executive Compensation			114
Item 12.			Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			114
Item 13.			Certain Relationships and Related Transactions, and Director Independence			114
Item 14.			Principal Accounting Fees and Services			114
PART IV
Item 15.			Exhibits, Financial Statement Schedules			115
Item 16.			Form 10-K Summary			115
Signatures						118

•Agency RMBS, meaning RMBS whose principal and interest payments are guaranteed by a U.S. government agency, such as the Government National Mortgage Association (or Ginnie Mae), or 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);

•MSR; and

•Other financial assets comprising approximately 5% to 10% of the portfolio.

•changes in interest rates and the market value of our target assets;

•changes in prepayment rates of mortgages underlying our target assets;

•the state of the credit markets and other general economic conditions, particularly as they affect the price of earning assets, the credit status of borrowers and home prices;

•legislative and regulatory actions affecting our business;

•the availability and cost of our target assets;

•the availability and cost of financing for our target assets, including repurchase agreement financing, revolving credit facilities, term notes and convertible notes;

•the impact of any increases in payment delinquencies and defaults on the mortgages comprising and underlying our target assets, including additional servicing costs and servicing advance obligations on the MSR assets we own;

•changes in liquidity in the market for real estate securities, the re-pricing of credit risk in the capital markets, inaccurate ratings of securities by rating agencies, rating agency downgrades of securities, and increases in the supply of real estate securities available-for-sale;

•changes in the values of securities we own and the impact of adjustments reflecting those changes on our consolidated statements of comprehensive loss and balance sheets, including our stockholders’ equity;

•our ability to generate cash flow from our target assets;

•our ability to effectively execute and realize the benefits of strategic transactions and initiatives we have pursued or may in the future pursue;

•our ability to recognize the benefits of our pending acquisition of RoundPoint Mortgage Servicing Corporation;

•our decision to terminate our Management Agreement with PRCM Advisers LLC and the ongoing litigation related to such termination;

•changes in the competitive landscape within our industry, including changes that may affect our ability to attract and retain personnel;

•our exposure to legal and regulatory claims, penalties or enforcement activities, including those arising from our ownership and management of MSR and prior securitization transactions;

•our exposure to counterparties involved in our MSR business and prior securitization transactions and our ability to enforce representations and warranties made by them;

•our ability to acquire MSR and successfully operate our seller-servicer subsidiary and oversee the activities of our subservicers;

•our ability to manage various operational and regulatory risks associated with our business;

•interruptions in or impairments to our communications and information technology systems;

•our ability to maintain appropriate internal controls over financial reporting;

•our ability to establish, adjust and maintain appropriate hedges for the risks in our portfolio;

•our ability to maintain our REIT qualification for U.S. federal income tax purposes; and

•limitations imposed on our business due to our REIT status and our status as exempt from registration under the 1940 Act.

Agency RMBS			Agency RMBS collateralized by fixed rate mortgage loans, adjustable-rate mortgage (or ARM) loans or hybrid mortgage loans, or derivatives thereof, including:
			•			mortgage pass-through certificates;
			•			collateralized mortgage obligations;
			•			uniform mortgage-backed securities;
			•			Freddie Mac gold certificates;
			•			Fannie Mae certificates;
			•			Ginnie Mae certificates;
			•			“to-be-announced” forward contracts, or TBAs, which are pools of mortgages with specific investment terms to be issued by Ginnie Mae, Fannie Mae or Freddie Mac at a future date; and
			•			interest-only and inverse interest-only securities.
MSR			The right to control the servicing of residential mortgage loans, receive the servicing income therefrom and the obligation to service the loans in accordance with relevant standards; the actual servicing functions are outsourced to appropriately licensed third-party subservicers, which service the loans in their own names.

•no investment shall be made that would cause us to fail to qualify as a REIT for U.S. federal income tax purposes;

•no investment shall be made that would cause us to be regulated as an investment company under the 1940 Act;

•we will primarily invest within our target assets, consisting primarily of Agency RMBS, non-Agency securities, residential mortgage loans, MSR and certain types of commercial real estate assets; approximately 5% to 10% of our portfolio may include other financial assets; and

•until appropriate investments can be identified, we will invest available cash in interest-bearing and short-term investments that are consistent with (i) our intention to qualify as a REIT and (ii) our exemption from investment company status under the 1940 Act.

•build an investment portfolio consisting of Agency RMBS, MSR and other financial assets that will generate attractive returns while having a moderate risk profile;

•manage financing, interest, prepayment rate, credit and similar risks;

•capitalize on discrepancies in the relative valuations in the mortgage and housing markets; and

•provide regular quarterly dividend distributions to stockholders.

To finance MSR assets and related servicing advance obligations, we may enter into repurchase agreements, revolving credit facilities and securitization transactions collateralized by the value of the MSR and/or servicing advances pledged and with borrowing rates typically based on an index plus a spread consistent with those demanded in the market. If the value of our MSR and/or servicing advances pledged as collateral for the agreements decreases, the respective lender could require us to provide additional collateral or cash as collateral to re-establish the ratio of value of the collateral to the amount of the debt outstanding. Due to certain GSE requirements, we may be restricted as to the frequency in which we are able to pledge additional MSR and/or servicing advance collateral to counterparties. As a result, we may choose to over-collateralize certain financing arrangements in order to avoid having to provide cash as additional collateral. Lenders generally advance approximately 60% to 70% of the market value of the MSR financed (i.e., a haircut of 30% to 40%) and 80% to 95% of the value of servicing advances financed (i.e., a haircut of 5% to 20%), depending on the type of advance (e.g., corporate, escrow).

Compensation and Benefits. We use market data to benchmark and guide our compensation practices to ensure that our compensation program is industry standard, competitive and rewarding, while at the same time aligning the interests of our employees with those of our stockholders. In addition to competitive wages and salaries, our compensation programs are designed to attract and retain talented professionals. Our overall package includes cash bonus and equity incentive compensation opportunities, a 401(k) plan and profit-sharing contribution, employer-paid health benefits, health savings and dependent care flexible spending accounts, generous paid time off, short- and long-term disability insurance, a variety of personal and family leave options, life-planning financial and legal resources, and other voluntary supplemental benefits.

Charitable Partnerships. We are committed to strengthening our local communities through the support of charitable organizations allied with the housing sector, and in particular those that provide housing support to families and children in need. Examples of our support include partnerships with AEON, Simpson Housing and Habitat for Humanity. In addition, we match dollar-for-dollar the cash donations made by our employees to our charitable partnerships.

Our website can be found at www.twoharborsinvestment.com. We make available, free of charge on our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as are filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as well as our proxy statement with respect to our annual meeting of stockholders, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our Exchange Act reports filed with, or furnished to, the SEC are also available at the SEC’s website at www.sec.gov. The content of any website referred to in this Annual Report on Form 10-K is not incorporated by reference into this Form 10-K unless expressly noted.

We purchase Agency RMBS that are protected from the risk of default on the underlying mortgages by guarantees from Fannie Mae, Freddie Mac or, in the case of Ginnie Mae securities, the U.S. government. In 2008, the U.S. government and U.S. Treasury undertook a series of actions designed to stabilize these GSEs, including placing them into a federal conservatorship. In December 2009, the U.S. government committed virtually unlimited capital to ensure the continued existence of Fannie Mae and Freddie Mac. There is no assurance that such capital will continue to be available or that the GSEs will honor their guarantees or other obligations. If these GSEs fail to honor their guarantees, the value of any Agency RMBS guaranteed by the GSEs that we hold would decline.

The Dodd-Frank Act and its implementing regulations, as well as other federal and state rules, regulations and guidance that govern mortgage servicing, combine to create a complex and constantly evolving regulatory environment, and the failure by us, or our subservicers, to comply with these requirements may result in fines or the suspension or revocation of the qualifications, registrations and licenses necessary to operate as an owner of MSR. New or modified regulations at the federal or state level to address concerns on a variety of fronts, including impacts from the COVID-19 pandemic, potential impacts from climate change, fair and equitable access to housing and consumer data privacy and security concerns, could increase our operational expenses or otherwise enhance regulatory supervision and enforcement efforts. Ongoing efforts to enhance cooperation between federal and state regulators could also contribute to increased industry scrutiny.

We may change any of our strategies, policies or procedures with respect to investments, asset allocation, growth, operations, indebtedness, financing strategy and distributions at any time without the consent of stockholders. Changes in strategy could also result in the elimination of certain investments and business activities that we no longer view as attractive or in alignment with our business model. Shifts in strategy may increase our exposure to credit risk, interest rate risk, financing risk, default risk, regulatory risk and real estate market fluctuations. We also cannot assure you that we will be able to effectively execute on or realize the potential benefits of changes in strategy. Any such changes could adversely affect our financial condition, risk profile, results of operations, the market price of our common stock and our ability to make distributions to stockholders.

Any illiquidity in our assets may make it difficult for us to sell such assets if the need or desire arises. The ability to quickly sell certain of our target assets, such as certain securities and MSR, may be constrained by a number of factors, including a small number of willing buyers, lack of transparency as to current market terms and price, and time delays resulting from the buyer’s desire to conduct due diligence on the assets, negotiation of a purchase and sale agreement, compliance with any applicable contractual or regulatory requirements, and for certain assets like MSR, operational and compliance considerations. Consequently, even if we identify a buyer for certain of our securities and MSR, there is no assurance that we would be able to sell such assets in a timely manner if the need or desire arises.

In connection with certain of our repurchase agreements, revolving credit facilities and other credit facilities, we are required to comply with certain financial covenants, the most restrictive of which are disclosed within Item 7, “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” of this Annual Report on Form 10-K. Compliance with these financial covenants will depend on market factors and the strength of our business and operating results. Failure to comply with our financial covenants could result in an event of default, termination of the lending facility, acceleration of all amounts owing under the lending facility, and may give the counterparty the right to exercise certain other remedies under the lending agreement, including without limitation the sale of the asset subject to repurchase at the time of default, unless we were able to negotiate a waiver. In addition, we may be subject to cross-default provisions under certain financing facilities that could cause an event of default under such financing facilities to be triggered by events of default under other financing arrangements.

Our business is highly dependent on information technology. In the ordinary course of our business, we may store sensitive data, including our proprietary business information and that of our business partners, and personally identifiable information of mortgage borrowers, on our networks. The secure maintenance and transmission of this information is critical to our operations. Computer malware, viruses, ransomware and phishing attacks remain widespread and are increasingly sophisticated. We are from time to time the target of attempted cyber threats. We continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact. Despite these security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disruption to our operations, or disruption to our trading activities or damage our reputation, which could have a material adverse effect on our financial results and negatively affect the market price of our common stock and our ability to pay dividends to stockholders.

Subject to maintaining our qualification as a REIT and satisfying the criteria for no-action relief from the Commodity Futures Trading Commission’s commodity pool operator registration rules, there are no current limitations on the hedging transactions that we may undertake. Our hedging transactions could require us to fund large cash payments in certain circumstances (e.g., the early termination of the hedging instrument caused by an event of default or other early termination event, or a demand by a counterparty that we make increased margin payments). Our ability to fund these obligations will depend on the liquidity of our assets and our access to capital at the time. The need to fund these obligations could adversely affect our financial condition. Further, hedging transactions, which are intended to limit losses, may actually result in losses, which would adversely affect our earnings and could in turn reduce cash available for distribution to stockholders.

We have elected to not qualify for hedge accounting treatment under Accounting Standards Codification (ASC) 815, Derivatives and Hedging, or ASC 815, for our current derivative instruments. The economics of our derivative hedging transactions are not affected by this election; however, our earnings (losses) for U.S. generally accepted accounting principles, or U.S. GAAP, purposes may be subject to greater fluctuations from period to period as a result of this accounting treatment for changes in fair value of derivative instruments or for the accounting of the underlying hedged assets or liabilities in our financial statements, as it does not necessarily align with the accounting used for derivative instruments.

Recent enhancements have been made to legislation and regulations intended to assist borrowers struggling to continue making their contractual mortgage payments. These requirements may delay, reduce or prevent foreclosures through, among other things, loan modifications and other loss mitigation measures, but they may also result in reduced value of the related mortgage loans, including those underlying our Agency RMBS and MSR. Mortgage servicers may be required or otherwise incentivized by federal or state governments to pursue such actions designed to assist mortgagors, including loan modifications, forbearance plans and other actions intended to prevent foreclosure. While these actions may be beneficial to borrowers, they may not be in the best interests of the beneficial owners of the mortgage loans. As a consequence of the foregoing, our business, financial condition and results of operations may be adversely affected.

In addition, some of the assets in our portfolio are not publicly traded. The fair value of securities and other assets that are not publicly traded may not be readily determinable. We value these assets quarterly at fair value, as determined in accordance with ASC 820, Fair Value Measurements and Disclosures, which may include unobservable inputs. Because such valuations are subjective, the fair value of certain of our assets may fluctuate over short periods of time and our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. We may be adversely affected if our determinations regarding the fair value of these assets are materially higher than the values that we ultimately realize upon their disposal.

The value of our assets is affected by prepayment rates on mortgage loans, and our investment strategy includes making investments based on our expectations regarding prepayment rates. A prepayment rate is the measurement of how quickly borrowers pay down the unpaid principal balance of their loans or how quickly loans are otherwise brought current, modified, liquidated or charged off. With respect to our securities portfolio, typically the value of a mortgage-backed security includes market assumptions regarding the speed at which the underlying mortgages will be prepaid. Faster than expected prepayments could adversely affect our profitability, including in the following ways:

•We may purchase securities that have a higher interest rate than the market interest rate at the time. In exchange for this higher interest rate, we may pay a premium over the par value to acquire the security. In accordance with U.S. GAAP, we may amortize this premium over the estimated term of the security. If the security is prepaid in whole or in part prior to its maturity date, however, we may be required to expense the premium that was prepaid at the time of the prepayment.

•A substantial portion of our adjustable-rate Agency RMBS may bear interest rates that are lower than their fully indexed rates, which are equivalent to the applicable index rate plus a margin. If an adjustable-rate security is prepaid prior to or soon after the time of adjustment to a fully-indexed rate, we will have held that security while it was least profitable and lost the opportunity to receive interest at the fully indexed rate over the remainder of its expected life.

•If we are unable to acquire new Agency RMBS similar to the prepaid security, our financial condition, results of operations and cash flows could suffer.

In order to continue to qualify as a REIT, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and designated real estate assets, including certain mortgage loans and shares in other REITs. Subject to certain exceptions, our ownership of securities, other than government securities and securities that constitute real estate assets, generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our total assets, other than government securities and securities that constitute real estate assets, can consist of the securities of any one issuer, no more than 20% of the value of our total assets can be represented by securities of one or more TRSs, and no more than 25% of the value of our total assets can consist of debt of “publicly offered” REITs that is not secured by real property or interests in real property. If we fail to comply with these requirements at the end of any calendar quarter, we must generally correct such failure within 30 days after the end of such calendar quarter to avoid losing our REIT qualification. As a result, we may be required to liquidate otherwise profitable assets prematurely, which could reduce our return on assets, which could adversely affect our results of operations and financial condition.

Our Second Restated 2009 Equity Incentive Plan and our 2021 Equity Incentive Plan, or the Equity Incentive Plans, were adopted by our board of directors and approved by our stockholders for the purpose of enabling us to provide equity compensation to attract and retain qualified directors, officers, advisers, consultants and other personnel. The Equity Incentive Plans are administered by the compensation committee of our board of directors and permit the grants of restricted common stock, restricted stock units, or RSUs, performance-based awards (including performance share units, or PSUs), phantom shares, dividend equivalent rights and other equity-based awards. For a detailed description of the Equity Incentive Plans, see Note 17 - Equity Incentive Plans of the consolidated financial statements included under Item 8 of this Annual Report on Form 10-K.

						December 31, 2022
Plan Category						Number of securities to be issued upon exercise of outstanding options, warrants and rights						Weighted-average exercise price of outstanding options, warrants and rights						Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column of this table)
Equity compensation plans approved by stockholders (1)						—						$	—					4,223,261
Equity compensation plans not approved by stockholders						—						—						—
Total						—						$	—					4,223,261

(1)For a detailed description of the Equity Incentive Plans, see Note 17 - Equity Incentive Plans of the consolidated financial statements included under Item 8 of this Annual Report on Form 10-K.

						December 31,
Index						2022						2021						2020						2019						2018
Two Harbors Investment Corp.						$	42.25					$	55.09					$	55.05					$	115.18					$	89.52
S&P 500						$	156.77					$	191.48					$	148.81					$	125.70					$	95.61
Bloomberg REIT Mortgage Index						$	83.05					$	109.82					$	93.38					$	120.03					$	97.09

Period						Total Number of Shares Purchased						Average Price Paid per Share						Total Number of Shares Purchased as Part of Publicly Announced Plans of Programs						Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
Series A Preferred Stock:
October 1, 2022 through October 31, 2022						413,549						$	18.14					413,549						N/A
November 1, 2022 through November 30, 2022						—						—						—						N/A
December 1, 2022 through December 31, 2022						15,000						19.51						15,000						N/A
Total						428,549						$	18.18					428,549						N/A
Series B Preferred Stock:
October 1, 2022 through October 31, 2022						756,846						$	17.48					756,846						N/A
November 1, 2022 through November 30, 2022						—						—						—						N/A
December 1, 2022 through December 31, 2022						30,000						18.42						30,000						N/A
Total						786,846						$	17.52					786,846						N/A
Series C Preferred Stock:
October 1, 2022 through October 31, 2022						1,712,555						$	17.09					1,712,555						N/A
November 1, 2022 through November 30, 2022						—						—						—						N/A
December 1, 2022 through December 31, 2022						30,000						18.55						30,000						N/A
Total						1,742,555						$	17.12					1,742,555						N/A

The following discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K. This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

•Agency RMBS (which includes inverse interest-only Agency securities classified as “Agency Derivatives” for purposes of U.S. generally accepted accounting principles, or U.S. GAAP), meaning RMBS whose principal and interest payments are guaranteed by a U.S. government agency, such as the Government National Mortgage Association (or Ginnie Mae), or 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);

•MSR; and

•Other financial assets comprising approximately 5% to 10% of the portfolio.

			Three Months Ended
			December 31, 2022						September 30, 2022						June 30, 2022						March 31, 2022						December 31, 2021
Average portfolio yield (1)			4.92%						4.61%						4.39%						3.90%						3.72%
Average cost of financing (2)			3.95%						2.84%						1.13%						1.01%						0.73%
Net spread			0.97%						1.77%						3.26%						2.89%						2.99%

A significant portion of our assets and liabilities are reported at fair value and, therefore, our consolidated balance sheets and statements of comprehensive loss are significantly affected by fluctuations in market prices. At December 31, 2022, approximately 80.1% of our total assets, or $10.8 billion, consisted of financial instruments recorded at fair value. See Note 10 - Fair Value to the consolidated financial statements, included in this Annual Report on Form 10-K, for descriptions of valuation methodologies used to measure material assets and liabilities at fair value and details of the valuation models, key inputs to those models and significant assumptions utilized. Although we execute various hedging strategies to mitigate our exposure to changes in fair value, we cannot fully eliminate our exposure to volatility caused by fluctuations in market prices.

(dollars in thousands)			December 31, 2022												December 31, 2021
Agency RMBS			$	7,653,576					71.0		%				$	7,149,399					76.1		%
Mortgage servicing rights			2,984,937						27.7		%				2,191,578						23.3		%
Agency Derivatives			15,176						0.1		%				40,911						0.5		%
Non-Agency securities			125,158						1.2		%				12,304						0.1		%
Total			$	10,778,847											$	9,394,192

						Three Months Ended
						December 31, 2022						September 30, 2022						June 30, 2022						March 31, 2022						December 31, 2021
Agency RMBS						5.9		%				9.1		%				14.2		%				17.3		%				27.7		%
Mortgage servicing rights						4.6		%				6.9		%				10.0		%				14.2		%				22.1		%

			December 31, 2022
(dollars in thousands)			Principal/ Current Face						Carrying Value												Weighted Average CPR (1)						% Prepayment Protected						Gross Weighted Average Coupon Rate						Amortized Cost						Allowance for Credit Losses						Weighted Average Loan Age (months)
Agency RMBS AFS:
30-Year Fixed
≤ 2.5%			$	—					$	—											—		%				—		%				—		%				$	—					$	—					—
3.0%			—						—												—		%				—		%				—		%				—						—						—
3.5%			—						—												—		%				—		%				—		%				—						—						—
4.0%			1,459,733						1,382,120												3.9		%				100.0		%				4.6		%				1,474,169						—						20
4.5%			3,087,310						3,006,356												5.9		%				100.0		%				5.2		%				3,152,567						—						25
5.0%			2,439,709						2,430,470												6.5		%				100.0		%				5.7		%				2,506,339						—						10
≥ 5.5%			411,899						419,956												3.9		%				98.8		%				6.5		%				424,199						—						36
			7,398,651						7,238,902												5.6		%				99.9		%				5.3		%				7,557,274						—						19
Other P&I			382,626						378,558												1.3		%				88.5		%				5.4		%				379,837						—						30
Interest-only			963,865						36,116												8.1		%				—		%				4.9		%				45,882						(6,785)						143
Agency Derivatives			196,457						15,176												8.4		%				—		%				6.7		%				20,696						—						216
Total Agency RMBS			$	8,941,599					$	7,668,752																	98.7		%										$	8,003,689					$	(6,785)

			December 31, 2021
(dollars in thousands)			Principal/ Current Face						Carrying Value												Weighted Average CPR (1)						% Prepayment Protected						Gross Weighted Average Coupon Rate						Amortized Cost						Allowance for Credit Losses						Weighted Average Loan Age (months)
Agency RMBS AFS:
30-Year Fixed
≤ 2.5%			$	1,243,928					$	1,271,382											5.9		%				—		%				3.3		%				$	1,272,323					$	—					3
3.0%			1,316,662						1,384,176												9.6		%				100.0		%				3.7		%				1,381,936						—						8
3.5%			739,922						789,499												27.3		%				100.0		%				4.2		%				769,989						—						29
4.0%			1,421,793						1,543,595												26.5		%				100.0		%				4.6		%				1,478,444						—						49
4.5%			1,307,504						1,435,877												27.7		%				100.0		%				5.0		%				1,373,076						—						47
5.0%			231,941						255,059												44.9		%				100.0		%				5.7		%				244,888						—						47
≥ 5.5%			93,544						106,687												15.7		%				93.1		%				6.4		%				99,655						—						172
			6,355,294						6,786,275												20.5		%				81.2		%				4.3		%				6,620,311						—						31
Other P&I			56,069						62,228												53.9		%				—		%				6.5		%				61,739						—						224
Interest-only			3,198,447						300,896												20.2		%				—		%				3.6		%				305,577						(12,851)						47
Agency Derivatives			247,101						40,911												18.6		%				—		%				6.7		%				33,237						—						206
Total Agency RMBS			$	9,856,911					$	7,190,310																	76.6		%										$	7,020,864					$	(12,851)

						Three Months Ended
(in thousands)						December 31, 2022						September 30, 2022						June 30, 2022						March 31, 2022						December 31, 2021
UPB at beginning of period						$	206,613,560					$	227,074,413					$	229,415,913					$	193,770,566					$	194,393,942
Purchases of mortgage servicing rights						2,677,674						4,448,870						5,720,323						45,136,996						13,562,240
Sales of mortgage servicing rights						—						(19,807,427)						—						—						9,065
Scheduled payments						(1,538,046)						(1,564,465)						(1,697,237)						(1,572,871)						(1,441,835)
Prepaid						(2,439,936)						(3,709,416)						(6,026,461)						(8,249,432)						(11,966,741)
Other changes						(436,559)						171,585						(338,125)						330,654						(786,105)
UPB at end of period						$	204,876,693					$	206,613,560					$	227,074,413					$	229,415,913					$	193,770,566

(in thousands, except share data)						Three Months Ended												Year Ended
Income Statement Data:						December 31,												December 31,
						2022						2021						2022						2021
						(unaudited)
Interest income:
Available-for-sale securities						$	83,712					$	32,729					$	272,230					$	167,310
Other						15,591						276						23,310						1,287
Total interest income						99,303						33,005						295,540						168,597
Interest expense:
Repurchase agreements						81,975						4,562						167,455						25,774
Revolving credit facilities						21,854						5,050						51,814						22,425
Term notes payable						6,906						3,251						19,514						12,936
Convertible senior notes						4,892						7,295						19,612						28,038
Total interest expense						115,627						20,158						258,395						89,173
Net interest (expense) income						(16,324)						12,847						37,145						79,424
Other (loss) income:
(Loss) gain on investment securities						(347,450)						1,626						(603,937)						121,617
Servicing income						160,926						125,511						603,911						468,406
(Loss) gain on servicing asset						(64,085)						(131,828)						425,376						(114,941)
Gain on interest rate swap and swaption agreements						—						36,989						29,499						42,091
Gain (loss) on other derivative instruments						53,301						(11,565)						9,310						(251,283)
Other income (loss)						112						1,856						(5)						(3,845)
Total other (loss) income						(197,196)						22,589						464,154						262,045
Expenses:
Servicing expenses						25,272						21,582						94,119						86,250
Compensation and benefits						7,411						6,396						40,723						35,041
Other operating expenses						15,540						6,648						42,005						28,759
Total expenses						48,223						34,626						176,847						150,050
(Loss) income before income taxes						(261,743)						810						324,452						191,419
Provision for income taxes						8,480						2,104						104,213						4,192
Net (loss) income						(270,223)						(1,294)						220,239						187,227
Dividends on preferred stock						(12,365)						(13,747)						(53,607)						(58,458)
Gain on repurchase and retirement of preferred stock						20,149						—						20,149						—
Net (loss) income attributable to common stockholders						$	(262,439)					$	(15,041)					$	186,781					$	128,769
Basic (loss) earnings per weighted average common share						$	(3.04)					$	(0.18)					$	2.15					$	1.72
Diluted (loss) earnings per weighted average common share						$	(3.04)					$	(0.18)					$	2.13					$	1.72
Dividends declared per common share						$	0.60					$	0.68					$	2.64					$	2.72
Weighted average number of shares of common stock:
Basic						86,391,405						83,775,184						86,179,418						74,443,000
Diluted						86,391,405						83,775,184						96,076,175						74,510,884

(in thousands)						Three Months Ended												Year Ended
Income Statement Data:						December 31,												December 31,
						2022						2021						2022						2021
						(unaudited)
Comprehensive income (loss):
Net (loss) income						$	(270,223)					$	(1,294)					$	220,239					$	187,227
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities						422,672						(113,553)						(465,057)						(455,255)
Other comprehensive income (loss)						422,672						(113,553)						(465,057)						(455,255)
Comprehensive income (loss)						152,449						(114,847)						(244,818)						(268,028)
Dividends on preferred stock						(12,365)						(13,747)						(53,607)						(58,458)
Gain on repurchase and retirement of preferred stock						20,149						—						20,149						—
Comprehensive income (loss) attributable to common stockholders						$	160,233					$	(128,594)					$	(278,276)					$	(326,486)

(in thousands)						December 31, 2022						December 31, 2021
Balance Sheet Data:
Available-for-sale securities						$	7,778,734					$	7,161,703
Mortgage servicing rights						$	2,984,937					$	2,191,578
Total assets						$	13,466,160					$	12,114,305
Repurchase agreements						$	8,603,011					$	7,656,445
Revolving credit facilities						$	1,118,831					$	420,761
Term notes payable						$	398,011					$	396,776
Convertible senior notes						$	282,496					$	424,827
Total stockholders’ equity						$	2,183,525					$	2,743,953

			Three Months Ended December 31, 2022																		Year Ended December 31, 2022
(dollars in thousands)			Average Balance (1)						Interest Income/Expense						Net Yield/Cost of Funds						Average Balance (1)						Interest Income/Expense						Net Yield/Cost of Funds
Interest-earning assets:
Available-for-sale securities			$	8,118,269					$	83,712					4.1		%				$	7,997,618					$	272,230					3.4		%
Reverse repurchase agreements			743,925						7,109						3.8		%				311,844						8,469						2.7		%
Other			—						8,482						—		%				—						14,841						—		%
Total interest income/net asset yield			$	8,862,194					$	99,303					4.5		%				$	8,309,462					$	295,540					3.6		%
Interest-bearing liabilities:
Borrowings collateralized by:
Available-for-sale securities			$	7,664,204					$	68,627					3.6		%				$	7,804,563					$	138,138					1.8		%
Agency Derivatives (2)			14,618						155						4.2		%				24,553						438						1.8		%
Mortgage servicing rights and advances (3)			1,917,069						36,938						7.7		%				1,620,847						95,192						5.9		%
U.S. Treasuries (4)			493,872						5,015						4.1		%				123,468						5,015						4.1		%
Unsecured borrowings:
Convertible senior notes			282,363						4,892						6.9		%				287,399						19,612						6.8		%
Total interest expense/cost of funds			$	10,372,126					$	115,627					4.5		%				$	9,860,830					$	258,395					2.6		%
Net interest (expense) income/spread									$	(16,324)					—		%										$	37,145					1.0		%

			Three Months Ended December 31, 2021																		Year Ended December 31, 2021
(dollars in thousands)			Average Balance (1)						Interest Income/Expense						Net Yield/Cost of Funds						Average Balance (1)						Interest Income/Expense						Net Yield/Cost of Funds
Interest-earning assets
Available-for-sale securities			$	6,067,568					$	32,729					2.2		%				$	8,450,440					$	167,310					2.0		%
Reverse repurchase agreements			111,209						1						—		%				89,011						7						—		%
Other			—						275						—		%				—						1,280						—		%
Total interest income/net asset yield			$	6,178,777					$	33,005					2.1		%				$	8,539,451					$	168,597					2.0		%
Interest-bearing liabilities
Borrowings collateralized by:
Available-for-sale securities			$	6,503,608					$	2,911					0.2		%				$	9,098,301					$	20,794					0.2		%
Agency Derivatives (2)			38,045						69						0.7		%				43,910						349						0.8		%
Mortgage servicing rights and advances (3)			942,357						9,883						4.2		%				931,565						39,992						4.3		%
Unsecured borrowings:
Convertible senior notes			424,641						7,295						6.9		%				412,107						28,038						6.8		%
Total interest expense/cost of funds			$	7,908,651					$	20,158					1.0		%				$	10,485,883					$	89,173					0.9		%
Net interest income/spread									$	12,847					1.1		%										$	79,424					1.1		%

			Three Months Ended												Year Ended
			December 31,												December 31,
(in thousands)			2022						2021						2022						2021
Gross yield/stated coupon			4.6		%				4.9		%				4.4		%				4.7		%
Net (premium amortization) discount accretion			(0.5)		%				(2.7)		%				(1.0)		%				(2.7)		%
Net yield			4.1		%				2.2		%				3.4		%				2.0		%

			Three Months Ended												Year Ended
			December 31,												December 31,
(in thousands)			2022						2021						2022						2021
Proceeds from sales			$	2,770,811					$	1,171,299					$	7,793,705					$	6,274,193
Amortized cost of securities sold			(3,113,102)						(1,139,241)						(8,359,967)						(6,137,824)
Total realized (losses) gains on sales			(342,291)						32,058						(566,262)						136,369
Reversal of (provision for) credit losses			318						(3,347)						(2,730)						(9,763)
Other			(5,477)						(27,085)						(34,945)						(4,989)
(Loss) gain on investment securities			$	(347,450)					$	1,626					$	(603,937)					$	121,617