Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q1 2014 Earnings Presentation
23 slides from Pennymac Mortgage Investment Trust's earnings presentation, May 8, 2014
Slide 1: First Quarter 2014 Earnings Report
PennyMac Mortgage Investment Trust May 7, 2014 First Quarter 2014 Earnings Report
Slide 2: Forward-looking statements
1Q14 Earnings Report 2 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 resul
Slide 3: First Quarter Highlights
3 First Quarter Highlights • Net income of $37.9 million on net investment income of $76.6 million – Diluted earnings per share of $0.50 – Dividend of $0.59 per share declared on March 24, 2014 • Segment pretax income: Investment Activities: $33.1 million; Correspondent Lending: $3.1 million • Selec
Slide 4: PMT Aims to Deliver Superior Long-Term Returns to Shareholders
PMT Aims to Deliver Superior Long-Term Returns to Shareholders 4 MSRs and ESS Retained Interests from Private-Label Securitization Agency and non-Agency MBS Distressed Whole Loans Correspondent Loan Aggregation 1Q14 Earnings Report Multiple strategies together expected to deliver attractive long-ter
Slide 5: PMT's Investment Portfolio Continues to Diversify
5% 12% 9% 9% 65% Mortgage Assets at 3/31/14 (100% = $3.827 billion) Mortgage Assets at 3/31/13 (100% = $2.755 billion) 5 PMT's Investment Portfolio Continues to Diversify • Majority of PMT’s assets are distressed whole loans and REO – expected to continue delivering attractive returns • Interest rat
Slide 6: Current Market Environment and Outlook
1Q14 Earnings Report 6 Current Market Environment and Outlook Environmental Trends Impact and Outlook • Interest rates and mortgage rates remain low, although expected to rise with continued Fed tapering • Continued modest improvements in U.S. employment and overall economic outlook • Home purchase
Slide 7: Opportunity for PFSI and PMT in MSR Acquisitions
Opportunity for PFSI and PMT in MSR Acquisitions 1Q14 Earnings Report 7 Why Are MSR Sales Occurring? How Do MSRs Come to Market? • Large banks are selling MSRs due to continuing operational pressures, higher regulatory capital requirements (treatment under Basel III) and a re-focus on core customers
Slide 8: Mortgage Investment Activities
Mortgage Investment Activities
Slide 9: Selective New Investments in Distressed Whole Loans
$366 $397 $930 $507 $436 $41 $0 $200 $400 $600 $800 $1,000 $1,200 1Q13 2Q13 3Q13 4Q13 1Q14 QTD 2Q14 9 • Acquired $436 million in UPB of nonperforming loans (NPLs) and REO in 1Q14 . Settled previously announced pool of $316 million in UPB of NPLs . Acquired an additional $120 million in UPB of NPLs a
Slide 10: Correspondent Lending Gaining Market Share and Seller Relationships
$4.8 $4.2 $3.6 $2.4 $1.9 $3.7 $4.3 $4.0 $3.3 $2.9 $8.1 $10.0 $6.7 $6.0 $5.5 $0 $2 $4 $6 $8 $10 $12 1Q13 2Q13 3Q13 4Q13 1Q14 Govt Jumbo Conventional Locks Correspondent Acquisition Volume and Mix 10 Correspondent Lending Gaining Market Share and Seller Relationships (1) Source: Inside Mortgage Financ
Slide 11: Correspondent Lending's Results Reflect Tight Margins
Correspondent Lending's Results Reflect Tight Margins ($ in thousands) Quarter Ended March 31, 2014 As % of Interest Rate Lock Commitments(1) Revenues: Net gain on mortgage loans acquired for sale 9,971 $ 0.45% Net interest expense (20) 0.00% Other income 2,356 0.11% 12,307 $ 0.55% Expenses: Loan fu
Slide 12: MSR and ESS Investments Continue To Grow
$180 $227 $270 $291 $301 $139 $151 $180 $227 $273 $429 $452 $0 $100 $200 $300 $400 $500 1Q13 2Q13 3Q13 4Q13 1Q14 Excess servicing spread (ESS) MSRs MSR and ESS Investments Continue To Grow 12 MSR and ESS Assets at Period End ($ in millions) • Organic growth of MSR investments results from the indust
Slide 13: Financial Results
Financial Results (bnnyMac’ Mortgage Investment Trust
Slide 14: Pretax Income by Operating Segment
Investment Correspondent Intersegment Total Pretax ($ in millions) Activities Lending Eliminations Income 1Q13 50.3 $ 8.9 $ (3.3) $ 55.9 $ 2Q13 39.8 $ 28.1 $ - $ 67.9 $ 3Q13 36.4 $ (0.3) $ - $ 36.1 $ 4Q13 48.4 $ 6.3 $ - $ 54.7 $ 1Q14 33.1 $ 3.1 $ - $ 36.3 $ 14 Pretax Income by Operating Segment Note
Slide 15: 1Q14 Investment Activities Segment Results
Quarter Ended ($ in thousands) March 31, 2014 December 31, 2013 Revenues: Net gain on investments 42,585 $ 47,858 $ Net interest income Interest income 36,598 39,267 Interest expense 17,007 16,822 19,591 22,445 Net loan servicing fees 7,421 12,229 Other (5,309) (4,488) Total revenues 64,288 78,044 E
Slide 16: Investment Gains and Cash Flows from the Distressed Loan Portfolio
($ in thousands) March 31, 2014 December 31, 2013 Valuation Changes: Performing loans (3,286) $ 9,897 $ Nonperfoming loans 36,459 34,793 33,173 44,690 Payoffs 5,620 5,888 Sales 1,125 - 39,918 $ 50,578 $ Quarter ended ($ in thousands) Quarter ended March 31, 2014 Gain on Proceeds liquidation(3) Mortg
Slide 17: Valuation of MSRs and Excess Servicing Spread (ESS)
At 3/31/14 Under lower of amortized cost or fair value Under fair value Fair value UPB $23,897 $3,427 $22,246 Weighted average coupon 3.70% 4.79% 4.40% Prepayment speed assumption (CPR) 8.3% 9.4% 10.4% Weighted average servicing fee/spread 0.26% 0.25% 0.16% Fair value $289.9 $36.2 $151.0 As multiple
Slide 18: 1Q14 Correspondent Segment Results
18 1Q14 Correspondent Segment Results • Segment revenue declined 32% from 4Q13 to $12.3 million – Net gain on mortgage loans acquired for sale fell 28% Q/Q to $10.0 million o Conventional and jumbo lock volumes decreased 13% Q/Q • Expenses declined 22% from 4Q13 – Fulfillment fee expense decreased d
Slide 19: Appendix
Appendix (bnnyMac’ Mortgage Investment Trust
Slide 20: Fundings and Locks by Product
($ in millions) 1Q13 2Q13 3Q13 4Q13 1Q14 Fundings Conventional 4,779 $ 4,216 $ 3,608 $ 2,419 $ 1,907 $ Government 3,739 4,262 3,992 3,340 2,913 Jumbo 8 107 74 14 13 Total 8,526 $ 8,586 $ 7,674 $ 5,773 $ 4,833 $ Locks Conventional 4,240 $ 5,069 $ 2,923 $ 2,532 $ 2,163 $ Government 3,785 4,739 3,718 3
Slide 21: Distressed Portfolio by Acquisition Period
Purchase 1Q14 Purchase 1Q14 Purchase 1Q14 Purchase 1Q14 Balance ($mm) 182.7 $ 48.1 Balance ($mm) 195.5 $ 44.7 Balance ($mm) 146.2 $ 29.9 Balance ($mm) 277.8 $ 85.4 Pool Factor(1) 1.00 0.26 Pool Factor(1) 1.00 0.23 Pool Factor(1) 1.00 0.20 Pool Factor(1) 1.00 0.31 Current 6.2% 27.8% Current 5.1% 25.2
Slide 22: Distressed Portfolio by Acquisition Period (cont.)
Purchase 1Q14 Purchase 1Q14 Purchase 1Q14 Purchase 1Q14 Balance ($mm) 366.2 $ 296.0 Balance ($mm) 397.3 $ 358.6 Balance ($mm) 929.5 $ 865.1 Balance ($mm) 507.3 $ 438.4 Pool Factor(1) 1.00 0.81 Pool Factor(1) 1.00 0.90 Pool Factor(1) 1.00 0.93 Pool Factor(1) 1.00 0.86 Current 1.6% 35.2% Current 4.8%
Slide 23: Carrying Values for PMT's Distressed Whole Loans
$494 $772 $786 $0 $200 $400 $600 $800 $1,000 Fair Value on Balance Sheet Collateral Value Unpaid Principal Balance $1,585 $2,215 $2,549 $0 $400 $800 $1,200 $1,600 $2,000 $2,400 $2,800 Fair Value on Balance Sheet Collateral Value Unpaid Principal Balance 1Q14 Earnings Report 23 Nonperforming Loans (a
PennyMac Mortgage Investment Trust — Q1 2014 Earnings Presentation on 6ix