Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q4 2017 Earnings Presentation
30 slides from Pennymac Mortgage Investment Trust's earnings presentation, Feb 9, 2018
Slide 1: Fourth Quarter 2017 Earnings Report
PennyMac Mortgage Investment Trust February 8, 2018 Fourth Quarter 2017 Earnings Report Exhibit 99.2
Slide 2: Forward-Looking Statements
4Q17 Earnings Report 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
Slide 3: Fourth Quarter Highlights
Fourth Quarter Highlights Net income attributable to common shareholders of $34.6 million on net investment income of $93.7 million Diluted earnings per common share of $0.50; return on average common equity of 11% Reduction of deferred tax liability in PMT’s taxable REIT subsidiary (TRS) from the n
Slide 4: Fourth Quarter Highlights (continued)
Fourth Quarter Highlights (continued) Completed the previously announced sale of $287 million in UPB of nonperforming and performing loans from the distressed portfolio Notable activity after quarter end: Entered into an agreement to sell $381 million in UPB of nonperforming and performing loans fro
Slide 5: Current Market Environment
6 Current Market Environment 5 4Q17 Earnings Report Average 30-year fixed rate mortgage(1) (1) Freddie Mac Primary Mortgage Market Survey. 4.22% as of 2/1/2018 (2) Mortgage Bankers Association Refinance Index – 3Q17 average was 1,390, and 4Q17 average was 1,202 (3) Black Knight Financial Services –
Slide 6: Implications of the Tax Cuts & Jobs Act
4Q17 Earnings Report Implications of the Tax Cuts & Jobs Act Housing Market Mortgage Industry PennyMac Entities Should be a long-term positive for housing driven by the overall stimulus for the U.S. economy Economic growth has historically supported improved real estate values and home sales Increas
Slide 7: Share Repurchase Program Update
Share Repurchase Program Update Repurchased approximately 5.2 million PMT common shares at a cost of $82.6 million from November 6th, 2017 to January 5th, 2018 On December 19, 2017, the Board of Trustees authorized an increase in the size of the common share repurchase program from $200 million to $
Slide 8: Transition to Correspondent-Generated Investments in CRT and MSRs
Transition to Correspondent-Generated Investments in CRT and MSRs 4Q 2015 100% = $1.50 billion 4Q 2017(2) 100% = $1.55 billion PMT’s Equity Allocation(1) (1) Management’s internal allocation of equity. Amounts as of quarter end. Percentages may not sum exactly due to rounding. (2) Includes $310 mill
Slide 9: Run-Rate Quarterly Income Potential from PMT's Strategies
Note: This slide presents estimates for illustrative purposes only, using PMT’s base case assumptions (e.g., for credit performance, prepayment speeds, financing economics) Actual results may differ materially. Please refer to slide 2 for important disclosures regarding forward-looking statements. R
Slide 10: Mortgage Investment Activities
Mortgage Investment Activities
Slide 11: Correspondent Production Volume and Mix
Correspondent Production Volume and Mix Correspondent Production Highlights (1) For Government loans, PMT earns a sourcing fee and interest income for its holding period and does not pay a fulfillment fee (2) Conventional conforming and jumbo interest rate lock commitments (3) Fulfillment fees are b
Slide 12: CRT Investments Outstanding
CRT Investments Outstanding ($ in millions) Completed $4.8 billion in UPB of deliveries during the quarter, which resulted in commitments to fund approximately $168 million of new CRT investments once the aggregation period is complete, $40 million of which had been invested at quarter end Returns o
Slide 13: MSR Investments Continued to Grow
MSR Investments Continued to Grow ($ in millions) MSR investments resulting primarily from correspondent production activity increased to $845 million at December 31, 2017, from $790 million at September 30, 2017 Formed PMT ISSUER TRUST– FMSR, putting in place a structure that has the potential to o
Slide 14: Distressed Loan Portfolio Is Declining Through Liquidation and Sales
Driven by bulk sale of $160 million in UPB Distressed Loan Portfolio Is Declining Through Liquidation and Sales 4Q17 Earnings Report Completed the previously announced sale of $287 million in UPB of nonperforming and performing loans from the distressed portfolio Entered into an agreement to sell $3
Slide 15: Financial Results
Financial Results nnyMac’ Mortgage Investment Trust.
Slide 16: Fourth Quarter Income and Return Contributions by Strategy
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, loan servicing fees), but before ta
Slide 17: Performance of the Distressed Mortgage Loan Investments
Performance of the Distressed Mortgage Loan Investments Losses to the distressed portfolio in connection with the bulk sale of nonperforming and performing loans were approximately $4 million, including sale expenses and adverse valuation impact on the carrying value of the remaining nonperforming l
Slide 18: Changes to Accounting for MSRs in 2018
Changes to Accounting for MSRs in 2018 Unaudited 4Q17 Earnings Report Through December 31, 2017 PMT carried most of its originated MSRs at the lower of amortized cost or fair value Beginning January 1, 2018, all MSRs will be carried at fair value Allows for single accounting treatment across all MSR
Slide 19: Appendix
Appendix nnyMac’ Mortgage Investment Trust.
Slide 20: PMT EPS, Common Dividends and Book Value Per Common Share Over Time
Book value per common share(1) PMT EPS, Common Dividends and Book Value Per Common Share Over Time 4% (1)% Return on Avg. Common Equity(3) (1) At period end. (2) Effective January 1, 2018, PMT is electing changes to the accounting for its MSRs; see slide 18 for details. Pro forma for this change, bo
Slide 21: 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 PMT's Mortgage Assets and Leverage Ratio Over Time Leverage ratio(2) (1) The fair value of CRT investm
Slide 22: Management of PMT's Interest Rate Risk
(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 23: Carrying Values for PMT's Distressed Whole Loans
Nonperforming Loans (at December 31, 2017) Performing Loans (at December 31, 2017) Nonperforming loans are held on average at a 41% discount to current property value – fair value considers costs expected over the liquidation timeline, expected property appreciation and reperformance probability PMT
Slide 24: 4Q17 Distressed Loan Portfolio Resolution Activity
4Q17 Distressed Loan Portfolio Resolution Activity(1) 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) $238 $222 $209 Quarterly resolu
Slide 25: Distressed Portfolio by Acquisition Period
Distressed Portfolio by Acquisition Period (1) Ratio of unpaid principal balance remaining to unpaid principal balance at acquisition 4Q17 Earnings Report 1Q10 2Q10 3Q10 4Q10 Purchase 4Q17 Purchase 4Q17 Purchase 4Q17 Purchase 4Q17 Balance ($mm) $182.672582201057 11.536497080000002 Balance ($mm) $195
Slide 26: Distressed Portfolio by Acquisition Period (cont.)
Distressed Portfolio by Acquisition Period (cont.) (1) Ratio of unpaid principal balance remaining to unpaid principal balance at acquisition 4Q17 Earnings Report 1Q10 2Q10 3Q10 4Q10 Purchase 4Q17 Purchase 4Q17 Purchase 4Q17 Purchase 4Q17 Balance ($mm) $182.672582201057 11.536497080000002 Balance ($
Slide 27: Correspondent Production Fundings and Locks by Product
Correspondent Production Fundings and Locks by Product Note: Figures may not sum exactly due to rounding 4Q17 Earnings Report ($ in millions) 4Q16 1Q17 2Q17 3Q17 4Q17 Fundings Conventional $7,492 $4,632 $5,918.259999999998 $6,530.360000000001 $5,891.1504007399999 Government 12544 9280 10392.39600000
Slide 28: Credit Risk Transfer – Income Statement and Balance Sheet Treatment
Cash deposited in the SPV in Other assets. Represents collateral for the initial credit risk retained Adjustment to timing of cash flows in the most recent CRT commitment allows more efficient deployment of capital during the aggregation period Derivative represents value of expected future cash inf
Slide 29: PMT's Investments in GSE Credit Risk Transfer
PMT’s Investments in GSE Credit Risk Transfer (1) FICO and LTV metrics at origination (UPB in billions) 4Q17 Earnings Report ($ 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 43100 At inception 43100 At
Slide 30: PMT's Excess Servicing Spread Investments in Partnership with PFSI
PMT's Excess Servicing Spread Investments in Partnership with PFSI (1) The contractual servicer and MSR owner is PennyMac Loan Services, LLC, an indirect controlled subsidiary of PFSI (2) Subject and subordinate to Agency rights (under the related servicer guide); does not change the contractual ser
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