Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Investor Day (June 2021)
76 slides from Pennymac Mortgage Investment Trust's investor day presentation, Jun 17, 2021
Slide 1: Investor Day June 2021
PennyMac’ (PannyMac: Financial Services, Inc. Mortgage Investment Trust INVESTOR DAY June 2021 »>
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation contains information from PennyMac Financial Services, Inc.’s (“PFSI”) and PennyMac Mortgage Investment Trust’s (“PMT”) joint investor day held on June 17, 2021 (collectively, “PennyMac,” “our” or “we”) and contains forward-looking statements within the m
Slide 3: Agenda
AGENDA 1. Overview – David Spector, Andy Chang 2. Mortgage Banking Overview – Doug Jones 3. Consumer Direct Lending – Scott Bridges 4. Broker Direct Lending – Kim Nichols 5. Correspondent Production – Abbie Tidmore 6. Mortgage Fulfillment – Jim Follette 7. Loan Servicing – Steve Bailey 8. PMT – Vand
Slide 4: Overview
OVERVIEW DAVID SPECTOR Chairman and Chief Executive Officer ANDY CHANG Senior Managing Director Chief Operating Officer
Slide 5: PennyMac is an established leader in the U.S. mortgage market
PENNYMAC IS AN ESTABLISHED LEADER IN THE U.S. MORTGAGE MARKET WITH SUBSTANTIAL GROWTH POTENTIAL $2.4 billion in assets under management(3) Nearly 12-year track record $197 billion in 2020 #2 PMT IS A LEADING $465 billion outstanding(2) $109 billion in 2021 YTD(2) IN PRODUCTION(1) #6 RESIDENTIAL § CO
Slide 6: Superior long-term returns to investors
THE PENNYMAC COMPANIES HAVE DELIVERED SUPERIOR LONG-TERM RETURNS TO INVESTORS Led by a deep management team with significant mortgage banking expertise and a robust, sophisticated risk management program. PFSI Annualized Total Return to Stockholders(1) PMT Annualized Total Return to Shareholders(1)
Slide 7: PennyMac participates in a massive addressable market
PENNYMAC PARTICIPATES IN A MASSIVE ADDRESSABLE MARKET Annual Origination Volume(1) Provides financing for consumers’ ($ in trillions) $4.1 most significant life transaction $3.7 $2.6 Mortgage loans represent the largest $2.3 $2.1 $1.8 $1.7 $1.8 $1.6 class of U.S. consumer debt $1.3 $1.5 $1.7 $1.8 $0
Slide 8: PennyMac has consistently gained share across its businesses
PENNYMAC HAS CONSISTENTLY GAINED SHARE ACROSS ITS BUSINESSES Correspondent Production(1) Loan Servicing(1) 17.7% 17.8% 15.5% 11.9% 3.7% 3.8% 10.5% 3.3% 2.3% 2.7% 2017 2018 2019 2020 1Q21 12/31/17 12/31/18 12/31/19 12/31/20 3/31/21 Consumer Direct Production(1) Broker Direct Production(1) 2.7% 1.3% 2
Slide 9: Extensive risk-governance platform
PENNYMAC’S EXTENSIVE RISK-GOVERNANCE PLATFORM BUILT TO ADDRESS THE EVOLVING MORTGAGE MARKET Risk management disciplines fully integrated throughout the organization are the foundation of PennyMac’s sustained success. PFSI & dit PMT Boards Au nt Third Line de en ep Ind Internal Audit w vi e Managemen
Slide 10: Significant technology investments drive growth, efficiency and scale
SIGNIFICANT TECHNOLOGY INVESTMENTS DRIVE GROWTH, EFFICIENCY AND SCALE Invested $165 MILLION in transformational SSE technology initiatives from 2018 through 2020; plan to invest an additional $140 MILLION in 2021 Investments in technology, processes, and data STATE-OF-THE-ART TECHNOLOGY management t
Slide 11: Investments in marketing to drive new customer growth
INVESTMENTS IN MARKETING TO DRIVE NEW CUSTOMER GROWTH PennyMac’s outstanding growth since its inception has been achieved with limited marketing expense or branding. PENNYMAC Uniquely positioned to own trust, stability and long-term partnership – relevant needs and differentiated benefits across all
Slide 12: PennyMac Financial's vision for success in the medium-term
PENNYMAC FINANCIAL’S VISION FOR SUCCESS IN THE MEDIUM-TERM GROW SHARE #1 as the TOP 3 Correspondent Broker Direct Aggregator Lender Targeting an annual ROE of 20%+ as we accomplish these business goals TOP 5 Consumer Direct TOP 3 Servicer Lender 12
Slide 13: PennyMac is well-positioned for long-term success
PENNYMAC IS WELL-POSITIONED FOR LONG-TERM SUCCESS EFFECTIVE INNOVATIVE AND MULTI-CHANNEL PROPRIETARY STRATEGY TECHNOLOGY BALANCED DEEP AND STRONG AND PRODUCTION AND EXPERIENCED SOPHISTICATED SERVICING BUSINESS MANAGEMENT CAPITAL MODEL TEAM STRUCTURE LARGE-SCALE SCALABLE RISK MANAGEMENT AND EFFICIENT
Slide 14: Strong independent mortgage banks are leading the market
STRONG INDEPENDENT MORTGAGE BANKS ARE LEADING THE MARKET Loan Production(1) Loan Servicing(1) ($ in trillions) ($ in trillions) $4.1 $11.7 $10.6 $1.6 69% 51% 16% 12% 2010 2020 2010 2020 Non-banks Banks Non-banks Banks • Non-banks have gained significant share as a result of specialized focus and ded
Slide 15: Leader with substantial scale in a large, fragmented market
PENNYMAC IS A LEADER WITH SUBSTANTIAL OPERATING SCALE IN A LARGE, FRAGMENTED MARKET Loan Production(1) Loan Servicing(1) (market share) (market share) PennyMac, 4.8% Rocket, 7.9% Wells Fargo, 9.3% Cenlar, 7.6% Wells Fargo, 4.8% UWM, 4.0% Chase, 5.6% Freedom, 3.2% Others, 51.3% Mr. Cooper, 5.4% Other
Slide 16: PFSI's balanced business model is a flywheel
PFSI’s BALANCED BUSINESS MODEL IS A FLYWHEEL In both businesses, scale and efficiency are critical for success. Large volumes of production grow servicing portfolio Loan Production Loan Servicing 2nd largest in the U.S.(1) 6th largest in the U.S.(1) • Diversified business through correspondent, • Re
Slide 17: Synergistic relationship provides competitive advantage for both companies
SYNERGISTIC RELATIONSHIP PROVIDES A COMPETITIVE ADVANTAGE FOR BOTH COMPANIES Mortgage company with industry-leading operations Management Services: and technology PFSI is the external manager of PMT Fulfillment Services: Fee for service Oversight from Offers PFSI access to a PFSI performs fulfillmen
Slide 18: Track record across market environments
PFSI’s TRACK RECORD ACROSS VARIOUS MARKET ENVIRONMENTS IS UNIQUE AMONG INDEPENDENT MORTGAGE BANKS Annualized Return on Average Common Stockholders’ Equity (ROE) 61% 43% Proven ability to 20% 22% 26% 22% Average: 26% 19% generate attractive 11% 13% ROEs… (1) 2013 2014 2015 2016 2017 2018 2019 2020 1Q
Slide 19: Strong and growing purchase market driven by demographics
STRONG AND GROWING PURCHASE MARKET DRIVEN BY DEMOGRAPHICS Increasing demand expected to support the purchase mortgage market as Millennial generation hits key average age for first time home buyers. U.S. has added almost 11 million new households, while housing Builders are increasing home completio
Slide 20: Positioned to succeed regardless of future trends
PENNYMAC IS POSITIONED TO SUCCEED REGARDLESS OF FUTURE TRENDS INCREASED HOME CHANGING ROLE OF INCREASED PURCHASES DRIVING GSES / GOVERNMENT RELEVANCE OF THE ORIGINATION SUPPORT FOR THE NON-AGENCY MARKET MORTGAGE MARKET PRODUCTS INDUSTRY CONTINUED HIGHER CONSOLIDATION ADVANCEMENTS IN MORTGAGE RATES A
Slide 21: Mortgage Banking Overview
MORTGAGE BANKING OVERVIEW DOUG JONES President and Chief Mortgage Banking Officer
Slide 22: A leader across the massive mortgage market
PENNYMAC IS A LEADER ACROSS THE MASSIVE MORTGAGE MARKET Where we Medium- PennyMac’s Production Market Share(2) Channel are today(1) Term Goal 5% 5% 5% 4% 4% 3% Correspondent Production #1 #1 2% 3% Broker Direct #7 #3 2014 2015 2016 Correspondent 2017 2018 Consu mer-Direct 2019 Broker-Direct 2020 1Q2
Slide 23: Platform is scalable and supports long-term growth plans
PENNYMAC’s PLATFORM IS SCALABLE AND SUPPORTS LONG-TERM GROWTH PLANS Correspondent Production Loan Servicing • Foundational mortgage banking businesses (UPB in billions) $161 (UPB in billions) $427 that require scale and a low cost structure $369 for success $104 2.5x $299 2.2x • Correspondent produc
Slide 24: Participation across all three origination channels is a strategic advantage
PENNYMAC’s PARTICIPATION ACROSS ALL THREE ORIGINATION CHANNELS IS A STRATEGIC ADVANTAGE All three channels supported by best-in-class risk management and centralized fulfillment platforms. Correspondent Production Consumer Direct Broker Direct • Operational consistency and • Internet and call-center
Slide 25: Investing in transformative mortgage banking technology
PENNYMAC CONTINUES TO INVEST IN TRANSFORMATIVE MORTGAGE BANKING TECHNOLOGY More than 1,000 PennyMac’ers 100% focused on innovative technology. Digital Lending Platform Servicing Platform (SSE) Lead Proprietary Core Customer Products & Data Default Customer Data Generation Fulfillment Servicing Servi
Slide 26: Consumer Direct Lending
CONSUMER DIRECT LENDING SCOTT BRIDGES Managing Director Consumer Direct Lending
Slide 27: Investments in technology and marketing to drive consumer direct growth
PENNYMAC’s INVESTMENTS IN TECHNOLOGY AND MARKETING EXPECTED TO DRIVE CONSUMER DIRECT GROWTH Opportunities for Increased Recapture • Current market share of approximately 1.3% represents (UPB in billions) significant opportunity for growth in the channel $141 • Marketing and technology initiatives to
Slide 28: Uniquely positioned to grow new customer acquisition channel
UNIQUELY POSITIONED TO GROW NEW CUSTOMER ACQUISITION CHANNEL Loans closed per tenured loan officer has increased substantially in recent years, supported by a low cost structure and efficient fulfillment process. Two times the web traffic of a major top competitor and quickly TRAFFIC emerging as a t
Slide 29: Technology, data science and marketing drive improved production
TECHNOLOGY, DATA SCIENCE AND MARKETING DRIVE IMPROVED PRODUCTION PERFORMANCE Investments in data science produce high-converting, pre-screened leads to maximize production capacity. DATA ENRICHMENT DATA SCIENCE AND MULTI-CHANNEL 2+ ANALYTICS MARKETING 275M Consumer behavior Million and transactional
Slide 30: Data and analytics drive path to growth in purchase originations
DATA AND ANALYTICS DRIVE PATH TO GROWTH IN PURCHASE ORIGINATIONS • Disciplined workflow focused on growth in pre-approvals to build down stream productivity • Advanced data science payoff prediction model • Dedicated sales and operations staff for purchase loans • Operational discipline in purchase
Slide 31: Transformational technology implementation in progress
TRANSFORMATIONAL TECHNOLOGY IMPLEMENTATION IN PROGRESS Optimized efficiency for loan Digital application to provide Tools and technology to officers customers with an even easier create a seamless experience and more intuitive online portal • Co-piloting: PennyMac loan officers to self serve • Asset
Slide 32: Path to becoming a top 5 retail originator
PATH TO BECOMING A TOP 5 RETAIL ORIGINATOR FOCUS ON BUILD A ENHANCING THE BEST-IN-CLASS CUSTOMER MARKETING EXPERIENCE PLATFORM CONTINUE IMPLEMENTATION OF EXECUTE BRAND TECHNOLOGY STRATEGIES FOR SUPPORTED BY RECAPTURE GROWTH ROBUST DATA ANALYTICS 32
Slide 33: Broker Direct Lending
BROKER DIRECT LENDING KIM NICHOLS Senior Managing Director Broker Direct Lending
Slide 34: A rapidly-growing wholesale lender
PENNYMAC FINANCIAL IS A RAPIDLY-GROWING WHOLESALE LENDER Approved Brokers & Non-Delegated Correspondent Sellers Strong market share growth since our entrance into the channel in 2018 1,982 • Rapid increase in brokers and non-delegated sellers 1,693 • Growing presence in the non-delegated corresponde
Slide 35: Proprietary technology and tools distinguish PennyMac
PROPRIETARY TECHNOLOGY AND TOOLS DISTINGUISH PENNYMAC • Perfect Rate: Uses PennyMac’s industry- • PennyMac’s POWER portal provides leading, proprietary pricing engine to fine 3.088% brokers with full transparency and access 312 months 146 months tune the interest rate to the thousandth for to their
Slide 36: Technology and tools supported by a great team
TECHNOLOGY AND TOOLS SUPPORTED BY A GREAT TEAM OF ENGAGED PEOPLE As much as brokers need scale and automated technology to grow their businesses, they depend on the relationships they have built and the people they trust. Relationships Dedicated National Sales Single Point of Team Who Serve Operatio
Slide 37: The mortgage professional continuum
THE MORTGAGE PROFESSIONAL CONTINUUM… SUPPORTING OUR B2B RELATIONSHIPS PennyMac can be a long-term partner for brokers and emerging bankers to support their business goals, whatever they may be. Delegated Mandatory Delegated Best Efforts Emerging Mortgage Banker Independent Mortgage Broker Non-Delega
Slide 38: Path to becoming a top 3 wholesale originator
PATH TO BECOMING A TOP 3 WHOLESALE ORIGINATOR GROW OUR BASE FOCUS ON OF BROKERS AND THE CLIENT NON-DELEGATED EXPERIENCE AND SELLERS RELATIONSHIPS CONTINUE EXPAND INVESTMENT IN NON-DELEGATED TECHNOLOGY TO SERVICE OFFERING HELP BUSINESS PARTNERS GROW 38
Slide 39: Correspondent Production
CORRESPONDENT PRODUCTION ABBIE TIDMORE Senior Managing Director Correspondent Production
Slide 40: The leader in correspondent production
PENNYMAC IS THE LEADER IN CORRESPONDENT PRODUCTION PennyMac has become the largest correspondent aggregator in the U.S. with a transparent business model well-aligned with customer and shareholder desires. 700+ Active clients across 10+ Years of operational Innovative the U.S. excellence technology
Slide 41: Opportunity in correspondent production expected to remain robust
OPPORTUNITY IN CORRESPONDENT PRODUCTION IS EXPECTED TO REMAIN ROBUST Changes implemented to the GSEs’ preferred stock purchase agreements are expected to result in a higher volume of loans sold to aggregators like PennyMac with consistently competitive pricing and fast turn times. Dislocations relat
Slide 42: Evolving growth opportunity with changes to GSEs' PSPAs
EVOLVING GROWTH OPPORTUNITY FOR PENNYMAC WITH CHANGES IMPLEMENTED TO THE GSEs’ PSPAs The GSEs will limit their Each GSE will limit acquisitions of single- WHAT volume purchased family mortgage loans through the cash CHANGED FOR window to $1.5 billion secured by second CORRESPONDENT homes and per len
Slide 43: Sustaining leadership position in correspondent production
SUSTAINING PENNYMAC’S LEADERSHIP POSITION IN CORRESPONDENT PRODUCTION EXPAND THE CONTINUE TO INCREASE ALREADY ROBUST SHARE OF EXISTING SUITE OF PRODUCTS CLIENT PRODUCTION AND SERVICES OFFERED PROVIDE INNOVATIVE CONTINUE TO SOLUTIONS FOR DELIVER AN UNMATCHED CORRESPONDENTS CUSTOMER EXPERIENCE CURRENT
Slide 44: Mortgage Fulfillment
MORTGAGE FULFILLMENT JIM FOLLETTE Senior Managing Director Chief Mortgage Fulfillment Officer
Slide 45: Fulfillment operations are a key differentiator
FULFILLMENT OPERATIONS ARE A KEY DIFFERENTIATOR FOR PENNYMAC CONSUMER BROKER CORRESPONDENT DIRECT DIRECT PRODUCTION Mortgage Fulfillment Division Competitive Advantages • Innovative End2End, data driven, task-based workflow • Reliability: Delivering on our commitment to the customer for all channels
Slide 46: Supporting production goals for the long term
SUPPORTING PENNYMAC’s PRODUCTION GOALS FOR THE LONG TERM SUPPORT THE LEVERAGE VAST DATA PLANNED GROWTH OF SETS TO FURTHER ALL THREE PRODUCTION ENHANCE CHANNELS WITH A WORKFLOWS AND SCALABLE AND EFFICIENT PROCESSES FULFILLMENT PROCESS DEVELOP TECHNOLOGY WITH A COMMITMENT CONTINUE TO AND FOCUS ON FOCU
Slide 47: Loan Servicing
LOAN SERVICING STEVE BAILEY Senior Managing Director Chief Servicing Officer
Slide 48: A low cost and profitable mortgage servicer
PENNYMAC FINANCIAL IS A LOW COST AND PROFITABLE MORTGAGE SERVICER Direct Servicing Expense(1) Operating Expenses as a Percentage of Average Servicing Portfolio UPB ($ per loan) (basis points) $414 11.3 11.2 10.5 10.5 9.5 $193 $205 $167 9.0 $144 $160 $130 $136 64% 27% 44% 34% 22% 53% 34% 34% PennyMac
Slide 49: Efficiency and high service standards drive customer satisfaction
EFFICIENCY AND HIGH SERVICE STANDARDS DRIVE CUSTOMER SATISFACTION CFPB Complaints per 100,000 Loans Among Top 10 Servicers(1) Top 6 Rocket 0.27 • Retain 100% of the MSRs PennyMac 0.39 on loans we originate SERVICER Chase 0.44 • Portfolio is more heavily High weighted towards Wells Fargo 0.62 governm
Slide 50: Proprietary servicing platform (SSE) drives competitive advantage
PROPRIETARY SERVICING PLATFORM (SSE) DRIVES COMPETITIVE ADVANTAGE SSE is a suite of proprietary PennyMac applications and processes integrated with key partners’ applications and PennyMac’s data warehouse for increased efficiency in servicing, tracking and reporting. PRIME SERVICING Loan administrat
Slide 51: Quick resolutions for borrowers with COVID-19 hardships
TECHNOLOGY ENABLED QUICK RESOLUTIONS FOR BORROWERS WITH HARDSHIPS RELATED TO COVID-19 60 Day+ Delinquency Rates SSE provided PennyMac with the flexibility to easily adapt to the rapidly changing environment that ensued as a 13.16% result of COVID-19. 11.65% 8.88% Forbearance Enrollment: 82% automate
Slide 52: Early buyout activities are important for servicing Ginnie Mae loans
EARLY BUYOUT ACTIVITIES ARE AN IMPORTANT COMPONENT OF SERVICING GINNIE MAE LOANS PennyMac has the tools necessary to successfully execute loss mitigation and buyout activities. • Servicing data • Capital markets expertise • Efficient financing • Risk management COVID-19 and CARES Act Forbearance Hur
Slide 53: Expects to become a top servicer in the medium-term
PENNYMAC EXPECTS TO BECOME A TOP 3 SERVICER IN THE MEDIUM-TERM UPB of Residential Mortgage Debt Held by Top 10 Mortgage Servicers(1) ($ in billions) 12/31/15 12/31/18 3/31/21 Medium-Term $5,046 $5,113 $5,773 1. Wells Fargo, $1,649 1. Wells Fargo, $1,502 1. Wells Fargo, $1,104 Top 3 PennyMac 2. Chase
Slide 54: Large servicing business is key to balanced business model
LARGE SERVICING BUSINESS IS A KEY COMPONENT OF PENNYMAC’S BALANCED BUSINESS MODEL HIGH-QUALITY SUCCESSFUL EXECUTION SERVICING PORTFOLIO OF LOSS MITIGATION REPRESENTS A GROWING ACTIVITIES KEEPS STREAM OF RECURRING BORROWERS IN THEIR EARNINGS AND HOMES AND ENHANCES CASH FLOW LIFETIME RELATIONSHIPS DRI
Slide 55: PMT
PMT VANDY FARTAJ Senior Managing Director Chief Investment Officer WILL CHANG Senior Managing Director Deputy Chief Investment Officer
Slide 56: PMT is a unique and successful residential mortgage REIT
PMT IS A UNIQUE AND SUCCESSFUL RESIDENTIAL MORTGAGE REIT • Leading producer of conventional mortgage loans to Fannie Mae and Freddie Mac • Leverages the unique capabilities and industry-leading operational platform provided by its manager and services provider, PFSI • Strong balance sheet with sophi
Slide 57: Unique investment strategies in three segments
PMT IS FOCUSED ON UNIQUE INVESTMENT STRATEGIES IN THREE SEGMENTS Correspondent Production Interest Rate Sensitive Strategies Credit Sensitive Strategies • Leading producer of conventional conforming • MSR investments created through the • Investments in credit risk on PMT’s high-quality loan mortgag
Slide 58: Outlook for returns from credit sensitive strategies remains strong
OUTLOOK FOR RETURNS FROM PMT’s CREDIT SENSITIVE STRATEGIES REMAINS STRONG STRONG CREDIT STRONG ALIGNMENT PREPAYMENT SPEEDS PROFILES OF STRONG HOME OF INTERESTS REMAIN ELEVATED UNDERLYING PRICE APPRECIATION BORROWERS • PMT’s credit investments • CRT investments currently • Conventional borrowers • Av
Slide 59: Correspondent production has organically generated significant investments
CORRESPONDENT PRODUCTION HAS ORGANICALLY GENERATED SIGNIFICANT INVESTMENTS FOR PMT Correspondent Production Investments LTM Correspondent $182bn $2.4bn MSR Investments Production Credit Risk Correspondent Clients 727 $2.6bn Transfer Investments 59 Note: All figures at or as of 3/31/21
Slide 60: Interest rate sensitive strategies continue to have strong return profile
PMT’s INTEREST RATE SENSITIVE STRATEGIES CONTINUE TO HAVE A STRONG RETURN PROFILE PMT’s Interest Rate Sensitive Strategies delivered a 15% return on equity in 2020, despite mortgage rates which declined to all time lows and elevated prepayment speeds. STRONG CREDIT INDUSTRY-LEADING LOW-RATE MSR DISC
Slide 61: Hedging approach central to interest rate sensitive investments
HEDGING APPROACH CENTRAL TO PMT’s INTEREST RATE SENSITIVE INVESTMENTS Gain in value with Gain in value with increasing rates decreasing rates • PMT seeks to manage interest rate risk exposure MSRs AGENCY MBS on a “global” basis, recognizing interest rate sensitivities across its investment strategie
Slide 62: Technology investments by PFSI provide PMT competitive advantage
TECHNOLOGY INVESTMENTS MADE BY PFSI PROVIDE PMT A COMPETITIVE ADVANTAGE PMT utilizes best-in-class vendor systems combined with proprietary technology created by its manager and service provider, PFSI P3 Pricing Engine Pooling Best Execution Trade Ticket Entry • Leverages proprietary • Proprietary p
Slide 63: PMT is well-positioned for a changing mortgage market
PMT IS WELL-POSITIONED FOR A CHANGING MORTGAGE MARKET Mortgage rates remain near historic lows CORRESPONDENT PRODUCTION MARKET Conventional mortgage origination market remains ENVIRONMENT especially robust REMAINS ROBUST Strong demographic and secular trends driving PMT is uniquely growth in purchas
Slide 64: Well-positioned to continue organically creating investments
PMT IS WELL-POSITIONED TO CONTINUE ORGANICALLY CREATING INVESTMENTS Current Production New Opportunity Increased non-owner Fannie Mae Freddie Mac occupied originations Loans Loans as a result of PSPA amendments Current Investments Potential Investments MSR and subordinated bonds MSR CRT in non-agenc
Slide 65: Strong and sophisticated capital structure over its history
PMT HAS DEVELOPED A STRONG AND SOPHISTICATED CAPITAL STRUCTURE OVER ITS HISTORY PMT Warehouse Facilities at March 31, 2021 PMT Term Financing Structures at March 31, 2021 (in millions) Financing for loan inventory supported by multiple strong bank $2,009 partners, structured with flexible excess cap
Slide 66: PMT represents an attractive investment opportunity
PMT REPRESENTS AN ATTRACTIVE INVESTMENT OPPORTUNITY STRONG TRACK RECORD OF BALANCE SHEET STRONG RISK- PAIRED WITH ADJUSTED RETURNS, SECURITIZATION INCLUDING COMMON INFRASTRUCTURE DIVIDENDS STRONG AND EXPERTISE LEVERAGES OPPORTUNITY PENNYMAC IN CONVENTIONAL FINANCIAL’S CORRESPONDENT INVESTMENTS IN PR
Slide 67: Capital Management & Financial Outlook
CAPITAL MANAGEMENT & FINANCIAL OUTLOOK PAM MARSH Senior Managing Director Treasurer DAN PEROTTI Senior Managing Director Chief Financial Officer
Slide 68: Prudent financial management with low leverage
PFSI’s PRUDENT FINANCIAL MANAGEMENT WITH LOW LEVERAGE AND RISK MANAGEMENT EXPERTISE Robust process to monitor and forecast liquidity, hedge results and reserves ensure a strong capital position in stress scenarios. Low Debt-to-Equity Ratio Successful Hedging of Mortgage Servicing Rights Track record
Slide 69: PFSI capital structure over its history
PFSI HAS DEVELOPED A STRONG AND SOPHISTICATED CAPITAL STRUCTURE OVER ITS HISTORY PFSI Warehouse Facilities at March 31, 2021 PFSI Term Financing at March 31, 2021 (in millions) Financing for loan inventory supported by multiple strong bank partners, structured with flexible excess capacity to suppor
Slide 70: Opportunities for capital deployment
PFSI’s OPPORTUNITIES FOR CAPITAL DEPLOYMENT Ongoing investments in the business to ensure long-term success, including major technology enhancements and growing the direct lending platform Capital required to address opportunities arising from different market environments (MSRs, EBO) Continue to pu
Slide 71: Consistently increased book value while returning capital
PFSI HAS CONSISTENTLY INCREASED BOOK VALUE WHILE RETURNING CAPITAL Book Value per Share CAPITAL RETURN $51.78 $47.80 • Quarterly dividend instituted in 2019 – have increased twice since • Repurchased shares totaling $738 million throughout PFSI’s history(1) $21.34 o Since the start of 2020, PFSI $15
Slide 72: Direct lending and servicing are driving profitability
DIRECT LENDING AND SERVICING ARE DRIVING PFSI’s PROFITABILITY Production Pretax Income Servicing Pretax Income (in millions) (in millions) $1,964 $543 $262 $258 $172 $528 $103 $142 $363 $239 $59 $147 $147 $87 2017 2018 2019 2020 1Q21 -$15 2017 2018 2019 2020 1Q21 Estimated Contribution from Direct L
Slide 73: Medium-term targets drive financial outlook
PFSI’s MEDIUM-TERM TARGETS DRIVE ITS FINANCIAL OUTLOOK IN A NORMALIZED MARKET • Illustration assumes normalized market volumes and margins, as well as share repurchases over the expected time frame • Strong normalized returns on equity and earnings per share achieved with adherence to prudent financ
Slide 74: Illustrative medium-term outlook in a normalized market
ILLUSTRATIVE MEDIUM-TERM OUTLOOK FOR PFSI IN A NORMALIZED MARKET ENVIRONMENT Assumptions Origination Market Correspondent Consumer Direct Broker Direct Servicing Portfolio (in trillions) (UPB in billions) (UPB in billions) (UPB in billions) (UPB in billions) $4.1 $161 $50 $800 $130 $40 $2.3 $23 $427
Slide 75: Appendix
PénnyMac’ APPENDIX »
Slide 76: Servicing profitability excluding valuation-related changes
PFSI’S SERVICING PROFITABILITY EXCLUDING VALUATION-RELATED CHANGES 2017 2018 2019 2020 1Q21 basis basis basis basis basis $ in millions points(1) $ in millions points(1) $ in millions points(1) $ in millions points(1) $ in millions points(1) Operating revenue $ 621.7 28.1 $ 771.5 28.6 $ 1,022.6 30.6
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