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Two Harbors Investment Corp. Announces Estimated 2017 Dividend Tax Information

NEW YORK--(BUSINESS WIRE)--

Two Harbors Investment Corp. (TWO), a leading hybrid mortgage real estate investment trust, today announced the estimated tax treatment of its common stock distributions declared in 2017. The estimated tax treatment represents the company’s best approximation of its current and accumulated earnings and profits and taxable income that will be generated during the year ending December 31, 2017. The company is providing this estimated information to assist stockholders in planning for any estimated tax obligations and other tax considerations that may exist as a result of the company’s cash dividends and the special distribution of Granite Point Mortgage Trust Inc. (GPMT) (“Granite Point”) common stock declared in 2017.

In late January 2018, the company intends to issue a press release and Form 8937 stating the final tax treatment of the common stock distributions declared in 2017. Stockholders should be aware that the final tax treatment of common stock distributions are expected to be different from the estimated tax treatment provided in this release, and stockholders should use the final tax treatment for the preparation of any tax filings, calculation of any tax obligations and other tax considerations that may exist. Stockholders should review their 2017 tax statements from their brokerage firms or other institutions to ensure that the statements agree with the final tax treatment of common stock distributions provided by the company in late January 2018. Additionally, as each stockholder’s tax situation may be different, stockholders are encouraged to consult with their own professional tax advisor with respect to their individual tax consequences.

Estimated Tax Treatment of the Distributions

The estimated Federal income tax classification of the 2017 distributions as it is currently estimated to be reported on Form 1099-DIV is set forth in the table below. No portion of the company’s 2017 dividend distributions is expected to consist of unrelated business taxable income (UBTI), which is subject to special tax reporting for certain tax exempt investors.

All of the 2017 distributions of cash and Granite Point common stock will have the same tax treatment characterization percentages. The company currently estimates that each cash distribution and the distribution of Granite Point common stock will be characterized for Federal income tax purposes as 35.98% ordinary dividends, 0.00% capital gain distributions, and 64.02% nondividend distributions.

             
2017 FORM 1099   Box 1a Total   Box 2a Total   Box 3 Total
Distribution Type   Declaration Date   Record Date   Payable Date   2017 Total Distribution Per Share   2017 Ordinary Dividends   2017 Capital Gain Distributions   2017 Nondividend Distributions
Cash   03/14/2017   03/31/2017   04/27/2017   $0.250000   $0.089960   $0.000000   $0.160040
Cash   06/15/2017   06/30/2017   07/27/2017   $0.260000   $0.093558   $0.000000   $0.166442
Cash   09/14/2017   09/29/2017   10/27/2017   $0.260000   $0.093558   $0.000000   $0.166442

Granite Point Common Stock

  09/14/2017   10/20/2017   11/01/2017   $1.779688   $0.640400   $0.000000   $1.139289
Cash   12/15/2017   12/26/2017   12/29/2017   $0.470000   $0.169124   $0.000000   $0.300876
Totals   $3.019688   $1.086599   $0.000000   $1.933089
       

Tax Basis of Granite Point Stock Distribution

On November 1, 2017, the company distributed the 33,071,000 shares of Granite Point common stock it had acquired in connection with the contribution of its commercial real estate portfolio to Granite Point. Two Harbors common stockholders who were entitled to take part in the this distribution received 0.094765 shares of Granite Point common stock for each share of the company’s common stock outstanding on October 20, 2017, subject to the liquidation of fractional shares for which stockholders received a payment of cash in lieu of such fractional shares.

The company intends to report the distribution of Granite Point common stock as a taxable distribution for U.S. federal income tax purposes. Common stockholders will be treated as receiving a distribution equal to the fair market value of the Granite Point common stock (and cash in lieu of fractional shares of such common stock) received in the distribution and will take an adjusted tax basis, for federal income tax purposes, in such shares equal to the “fair market value” of such shares based on the market price on the distribution date. For federal income tax purposes, the fair market value of the Granite Point common stock is the closing price on November 1, 2017, which was $18.78 per share. In late January 2018, the company intends to issue Form 8937 to report the Granite Point common stock tax basis distributed to Two Harbors common stockholders.

Consult Your Tax Advisor

Stockholders may have additional reporting obligations to the Internal Revenue Service and/or other tax authorities.

The U.S. federal income tax treatment of holding Two Harbors common stock to any particular stockholder will depend on the stockholder’s particular tax circumstances. You are urged to consult your tax advisor regarding the U.S. federal, state, local and foreign income and other tax consequences to you, in light of your particular investment or tax circumstances, of acquiring, holding and disposing of Two Harbors common stock.

Two Harbors does not provide tax, accounting or legal advice. Any tax statements contained herein were not intended or written to be used, and cannot be used for the purpose of avoiding U.S., federal, state or local tax penalties. Please consult your advisor as to any tax, accounting or legal statements made herein.

Two Harbors Investment Corp.

Two Harbors Investment Corp., a Maryland corporation, is a real estate investment trust that invests in residential mortgage-backed securities, 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 press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995, including with respect to tax matters. 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

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. All subsequent written and oral forward looking statements concerning Two Harbors or matters attributable to Two Harbors or any person are qualified by these cautionary statements.

Additional Information

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

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