Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q4 2018 Earnings Presentation
29 slides from Pennymac Mortgage Investment Trust's earnings presentation, Feb 8, 2019
Slide 1: Fourth Quarter 2018 Earnings Report
PennyMac Mortgage Investment Trust February 7, 2019 Fourth Quarter 2018 Earnings Report Exhibit 99.2
Slide 2: Forward-looking statements
4Q18 Earnings Report This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management’s beliefs, estimates, projections and assumptions with respect to, among other things, the Company’s financial results
Slide 3: Fourth Quarter Highlights
Fourth Quarter Highlights 4Q18 Earnings Report Net income attributable to common shareholders of $35.4 million; diluted earnings per common share of $0.55 Annualized return on average common equity of 11% Dividend of $0.47 per common share declared on December 21, 2018 and paid on January 28, 2019 B
Slide 4: Current Market Environment
6 4 Current Market Environment 4Q18 Earnings Report Average 30-year fixed rate mortgage(1) Concerns related to the U.S. and global growth prospects in addition to uncertainty regarding the trajectory of the Fed Funds rate drove increased volatility across financial markets in the fourth quarter The
Slide 5: PMT's Business Model Is Unique Among Mortgage REITs
4Q18 Earnings Report PMT’s Business Model Is Unique Among Mortgage REITs Synergistic Partnership with PFSI Access to specialized mortgage capabilities, including origination and servicing operations PFSI has expertise across all mortgage functions with over 3,000 employees led by a highly experience
Slide 6: PMT's Mortgage Assets
4Q18 Earnings Report PMT’s Mortgage Assets(1) (1) As of December 31, 2018, except for CRT, which is presented on a pro forma basis reflecting the settlement of the commitments to fund deposits securing CRT agreements related to our fourth CRT transaction and firm commitments to purchase CRT securiti
Slide 7: Run-Rate Return Potential from PMT's Investment Strategies
Note: This slide presents estimates for illustrative purposes only, using PMT’s base case assumptions (e.g., for credit performance, prepayment speeds, financing economics) and does not contemplate significant changes or shocks to current market conditions. Actual results may differ materially. Plea
Slide 8: Mortgage Investment Activities
Mortgage Investment Activities
Slide 9: Correspondent Production Volume and Mix
Correspondent Production Volume and Mix (UPB in billions) (1) For Government and non-delegated loans, PMT earns a sourcing fee and interest income for its holding period and does not pay a fulfillment fee (2) Conventional conforming and jumbo interest rate lock commitments (3) Based on funded loans
Slide 10: GSE CRT Investments Growing and Credit Performance Remains Strong
GSE CRT Investments Growing and Credit Performance Remains Strong Loans eligible for CRT investments totaled $8.1 billion during 4Q18, resulting in a firm commitment to purchase $310 million of CRT securities from Fannie Mae under a new REMIC structure Total firm commitments were $605 million at Dec
Slide 11: MSR Investments Continued to Grow
MSR investments increased to $1.2 billion driven by strong production activity, partially offset by fair value losses resulting from lower mortgage rates ESS investments relating to bulk, mini-bulk and flow MSR acquisitions by PFSI between 2013 and 2015 decreased modestly to $216 million, driven by
Slide 12: Distressed Loan Portfolio Is Declining Through Liquidation and Sales
Completed $267 million in UPB of previously announced distressed loan sales (1) Includes principal payments, payoffs, and write downs (2) Primarily through recidivism of previously performing loans (3) Primarily through loan modifications Performing Loan Portfolio Activity (UPB in millions) -70% Y/Y
Slide 13: Financial Results
Financial Results nnyMac’ Mortgage Investment Trust.
Slide 14: Fourth Quarter Income and Return Contributions by Strategy
Note: Amounts may not sum exactly due to rounding (1) Income contribution and the annualized return on equity calculated net of any direct expenses associated with investments (e.g., loan fulfillment fees and loan servicing fees), but before tax expenses. Some of the income associated with the inves
Slide 15: Performance of the GSE Credit Risk Transfer Investments
Performance of the GSE Credit Risk Transfer Investments in 4Q18 4Q18 Earnings Report ($ in millions) Income Contribution Comments Market-driven value changes: Valuation-related changes included in Net gain (loss) on investment $,-19,599,664.149999999 • Reflects effects of credit spread widening on f
Slide 16: Appendix
Appendix nnyMac’ Mortgage Investment Trust.
Slide 17: Track Record of Stable Dividends and Book Value
(1) At period end (2) Return on average common equity is calculated based on annualized quarterly net income attributable to common shareholders as a percentage of monthly average common equity during the period Track Record of Stable Dividends and Book Value 4Q18 Earnings Report Repurchased 14.7 mi
Slide 18: PMT's Mortgage Assets and Leverage Ratio Over Time
Correspondent loan inventory PMT’s Long-Term Investments ■ CRT(1) ■ Retained interests from private-label securitizations ■ MSRs and ESS ■ Agency and non-Agency MBS ■ Distressed whole loans and REO Leverage ratio(2) (1) The fair value of CRT investments is reflected on the balance sheet as restricte
Slide 19: Estimated Sensitivity to Changes in Interest Rates
(2) PMT’s interest rate risk exposure is managed on a “global” basis Disciplined hedging Multiple mortgage-related investment strategies with complementary interest rate sensitivities Utilization of financial hedge instruments Also considers recapture benefit on MSRs and ESS and revenue opportunitie
Slide 20: MSRs and ESS Asset Valuation
MSRs and ESS Asset Valuation Unaudited (1) Pool UPB, weighted average coupon and expected prepayment speed represent the characteristics of the underlying MSR portfolio owned by PennyMac Financial. Weighted average servicing spread, fair value and valuation multiple relate to the ESS asset owned by
Slide 21: Excess Servicing Spread structure
(1) The contractual servicer and MSR owner is PennyMac Loan Services, LLC, an wholly-owned subsidiary of PFSI (2) Subject and subordinate to Agency rights (under the related servicer guide); does not change the contractual servicing fee paid by the Agency to the servicer. Excess Servicing Spread (e.
Slide 22: Performance of the Distressed Mortgage Loan Investments
Net Gains/(Losses) on Mortgage Loans Cash Proceeds and Gain on Liquidation (1) Represents accumulated valuation gains and losses recognized during the period the Company held the respective asset; including valuation adjustments made upon entering into a contract of sale but excludes the gain or los
Slide 23: Carrying Values for PMT's Distressed Loans
Nonperforming Loans (at December 31, 2018, in millions) Performing Loans (at December 31, 2018, in millions) Nonperforming loans are carried on average at a 52% discount to current property value – fair value considers costs expected over the liquidation timeline, expected property appreciation, rep
Slide 24: 4Q18 Distressed Loan Portfolio Resolution Activity
Payoffs Foreclosure sales Short sales REO sales Modifications ($UPB in millions) Resolution Activity in the Quarter Total Liquidation Activities Resolution Activity Over Time ($UPB in millions) (% by Activity Type) $142 Quarterly resolution activity as a percentage of nonperforming loans and real es
Slide 25: Return on Equity Contribution of the GSE Credit Risk Transfer Investments
Return on Equity Contribution of the GSE Credit Risk Transfer Investments 4Q18 Earnings Report Annualized Return on Average CRT Equity Average CRT equity(1) ($ in millions) $166 $178 $207 $271 $333 $403 $452 $490 $446 (1) Equity allocated represents management’s internal allocation across segments a
Slide 26: Credit Risk Transfer – Income Statement and Balance Sheet Treatment
Cash deposited in the SPV in deposits securing CRT agreements. Represents collateral for the initial credit risk retained Includes fair value recognition upon loan delivery under CRT Agreements and market value changes Payments made to Fannie Mae, from pledged cash, for losses on loans underlying th
Slide 27: Credit Risk Transfer – Income Statement and Balance Sheet Treatment (cont'd)
Current outstanding UPB of loans delivered to the CRT SPVs and sold to Fannie Mae or delivered subject to agreements to purchase REMIC CRT securities Credit Risk Transfer – Income Statement and Balance Sheet Treatment (cont’d) Current cash collateralizing guarantee included in “Deposits securing cre
Slide 28: PMT's Investments in GSE Credit Risk Transfer
(1) FICO and LTV metrics at origination (UPB in billions) PMT’s Investments in GSE Credit Risk Transfer 4Q18 Earnings Report ($ in billions) CRT 2015 -1 (May 2015 - July 2015) CRT 2015 -2 (August 2015 - Feburary 2016) CRT 2016 -1 (Feburary 2016 - August 2016) At inception 43465 At inception 43465 At
Slide 29: Correspondent Production Fundings and Locks by Product
Correspondent Production Fundings and Locks by Product Note: Delegated volumes exclude loans purchased from PennyMac Financial. Amounts may not sum exactly due to rounding. 4Q18 Earnings Report ($ in millions) 4Q17 1Q18 2Q18 3Q18 4Q18 QoQ YoY Fundings Delegated Conventional $5,891.1504007399999 $4,2
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