Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q2 2020 Earnings Presentation
30 slides from Pennymac Mortgage Investment Trust's earnings presentation, Aug 6, 2020
Slide 1: Second Quarter 2020 Earnings Report
PennyMac Mortgage Investment Trust August 6, 2020 Second Quarter 2020 Earnings Report Exhibit 99.2
Slide 2: Forward-looking statements
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, future operations,
Slide 3: Second Quarter Highlights
2Q20 Earnings Report Second Quarter Highlights Net income attributable to common shareholders of $458.4 million; diluted earnings per common share of $4.51 Driven by record Correspondent Production segment results and partial recovery in the fair value of government-sponsored enterprise (GSE) credit
Slide 4: Economic Developments Affecting Our Business
2Q20 Earnings Report Economic Developments Affecting Our Business Challenges in the U.S. economy reflect the impact of COVID-19 as a recent resurgence of the virus weighs on states’ plans to re-open Re-opening plans, including a return to physical work locations, are now on pause in over 80% of the
Slide 5: Opportunity in the Mortgage Origination Market
2Q20 Earnings Report Opportunity in the Mortgage Origination Market (1) Actual originations: Inside Mortgage Finance. Total originations forecast: Average of Mortgage Bankers Association (7/15/20), Fannie Mae (7/10/20), and Freddie Mac (6/16/20) forecasts. (2) Freddie Mac Primary Mortgage Market Sur
Slide 6: PMT's Investment Activity by Strategy During the Quarter
2Q20 Earnings Report PMT’s Investment Activity by Strategy During the Quarter Credit Sensitive Strategies Interest Rate Sensitive Strategies ($ in millions) Currently, PMT’s capital deployment is focused on correspondent production and the related MSRs CRT assets increased due to fair value increase
Slide 7: Run-Rate Return Potential from PMT's Investment Strategies
2Q20 Earnings Report 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 loss treatment for PMTT1, PMTT2 and PMTT3 a
Slide 8: Mortgage Investment Activities
Mortgage Investment Activities
Slide 9: Correspondent Production Highlights
2Q20 Earnings Report Correspondent Production Highlights Correspondent Production Volume and Mix (UPB in billions) (1) For government loans, PMT earns a sourcing fee and interest income for its holding period and does not pay a fulfillment fee (2) Conventional conforming and non-Agency interest rate
Slide 10: Trends in PMT's Investments in GSE Credit Risk Transfer
2Q20 Earnings Report Trends in PMT's Investments in GSE Credit Risk Transfer (CRT) In alignment with the wind down of new investments in CRT, delivered $1.8 billion in UPB of loans in 2Q20 under our sixth transaction with Fannie Mae CRT investments were essentially unchanged Q/Q as new investments a
Slide 11: Gains on PMT's CRT Investments Versus CAS/STACR
2Q20 Earnings Report Gains on PMT’s CRT Investments Versus CAS/STACR PMT’s CRT investments recorded $453 million in fair value gains in 2Q20 representing a significant recovery of the fair value loss in 1Q20, but gains were lower relative to the more liquid tranches of comparable Connecticut Avenue
Slide 12: Prepayments Allow PMT to Recoup CRT Fair Value Losses
2Q20 Earnings Report Prepayments Allow PMT to Recoup CRT Fair Value Losses PMT avoids actual losses and expects to recognize fair value gains on its CRT investments when the underlying loans pay off, since principal is received (or for CRT-6, the commitment amount is reduced) at par Reporting conven
Slide 13: Trends in MSR and ESS Investments
2Q20 Earnings Report Despite elevated prepayment activity during the quarter, MSR assets increased slightly to $1.2 billion driven by investment growth from strong conventional production volumes $203 million in new MSR investments UPB associated with MSR investments increased to $145.3 billion from
Slide 14: Hedging Approach Central to Interest Rate Sensitive Investments
2Q20 Earnings Report Hedging Approach Central to PMT’s Interest Rate Sensitive Investments PMT seeks to manage interest rate risk exposure on a “global” basis, recognizing interest rate sensitivities across its investment strategies PMT has a history of successfully hedging to offset the majority of
Slide 15: Financial Results
Financial Results nnyMac’ Mortgage Investment Trust.
Slide 16: Financial results by segment and investment strategy
2Q20 Earnings Report 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 asso
Slide 17: Performance of the GSE Credit Risk Transfer Investments in 2Q20
2Q20 Earnings Report Performance of the GSE Credit Risk Transfer Investments in 2Q20
Slide 18: Servicing Trends – Delinquencies & Advances for MSR Portfolio
Servicing Trends – Delinquencies & Advances for PMT’s MSR Portfolio 2Q20 Earnings Report Servicing advances outstanding were $42 million at July 31, versus $34 million at April 30, 2020 Fannie Mae and Freddie Mac require servicers to advance principal and interest (P&I) payments for delinquent loans
Slide 19: MSR Portfolio Servicing Trends – COVID Forbearances
MSR Portfolio Servicing Trends – COVID Forbearances 2Q20 Earnings Report Forbearance Rate (1) 59% of forbearance plans in effect for PMT’s servicing portfolio as of April 30th have been extended The percentage of loans in PMT’s MSR portfolio under forbearance plans declined from April 30th to July 3
Slide 20: Appendix
Appendix nnyMac’ Mortgage Investment Trust.
Slide 21: Historical Earnings, Dividends and Book Value Per Share
2Q20 Earnings Report (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 Historical Earnings, Dividends and Book Value Per Share Repurchased
Slide 22: Estimated Sensitivity to Changes in Interest Rates
2Q20 Earnings Report Estimated Sensitivity to Changes in Interest Rates At 6/30/20 Instantaneous parallel shock in interest rates (in bps) Interest Rate Sensitive Strategies Designed to Mitigate Interest Rate Volatility % change in PMT’s shareholders’ equity (1) (2) (3) Gain in value with increasing
Slide 23: 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 PFSI. Weighted average servicing spread, fair value and valuation multiple relate to the ESS asset owned by PMT. The fair
Slide 24: Excess Servicing Spread structure
(1) The contractual servicer and MSR owner is PennyMac Loan Services, LLC, a 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.g
Slide 25: Return on Equity Contribution of the GSE CRT Investments
Return on Equity Contribution of the GSE Credit Risk Transfer Investments 2Q20 Earnings Report Annualized Return on Average CRT Equity (1) Equity allocated represents management’s internal allocation across segments and investment strategies Return on Equity Contribution of the GSE Credit Risk Trans
Slide 26: Expected Return Scenarios for PMT's CRT Investments
2Q20 Earnings Report Expected Return Scenarios for PMT's CRT Investments Losses and returns for PMTT1, PMTT2 and PMTT3 above reflect assumptions that most loans in COVID-19 forbearance do not ultimately become credit events at 180 days or more delinquent Losses on these loans may be avoided either b
Slide 27: CRT Term Notes Are Critically Important Financing Structure
2Q20 Earnings Report CRT Term Notes Are Critically Important Financing Structure (1) PMT is currently in the aggregation period delivering loans to Fannie Mae under a commitment for a sixth CRT transaction. UPB represents the volume outstanding as of June 30, 2020. (2) As of June 30, 2020 PMT comple
Slide 28: Credit Risk Transfer – Balance Sheet Treatment
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 – Balance Sheet Treatment Current cash collateralizing guarantee included in “Deposits securing credit risk transfer arrangements
Slide 29: PMT's Investments in GSE Credit Risk Transfer
PMT’s Investments in GSE Credit Risk Transfer 2Q20 Earnings Report (1) FICO and LTV metrics at origination May not sum due to rounding (UPB in billions)
Slide 30: Correspondent Production Acquisitions and Locks by Product
2Q20 Earnings Report Correspondent Production Acquisitions and Locks by Product Note: Conventional Conforming, Government, and Non-Agency acquisitions exclude PennyMac Financial’s Direct Lending Loans Acquired by PMT. (1) Consists of prime jumbo and non-QM loans
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