Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q4 2020 Earnings Presentation
31 slides from Pennymac Mortgage Investment Trust's earnings presentation, Feb 4, 2021
Slide 1: PennyMac Mortgage Investment Trust Fourth Quarter 2020 Earnings Report
PennyMac Mortgage Investment Trust Fourth Quarter 2020 Earnings Report February 4, 2021
Slide 2: Forward-Looking Statements
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 r
Slide 3: Fourth Quarter Highlights
Fourth Quarter Highlights • Net income attributable to common shareholders of $76.6 million; diluted earnings per common share of $0.78 – Continued recovery in the fair value of government-sponsored enterprise (GSE) credit risk transfer (CRT) investments due to credit spread tightening combined with
Slide 4: PMT Is Focused on Unique Investment Strategies in Three Segments
PMT Is Focused on Unique Investment Strategies in Three Segments • Leading producer of conventional conforming mortgage loans • PMT entered the correspondent production business in 2011 after large Correspondent banks, which had historically dominated the channel, reduced their Production participat
Slide 5: Origination Market Remains Historically Strong
Origination Market Remains Historically Strong U.S. Mortgage Origination Market(1) Rates Remain Low and Margins Remain Wide (UPB in trillions) 5.0% $4.0 4.0% $3.3 3.0% $2.3 $2.5 $1.7 2.0% $1.1 1.0% $1.5 $1.6 $1.3 0.0% 2019 2020 2021E (2) (3) Purchase Refinance Average 30-year fixed rate mortgage Pri
Slide 6: PMT Successfully Navigated the Unprecedented Turbulence of 2020
PMT Successfully Navigated the Unprecedented Turbulence of 2020 PMT was not required to sell long-term assets to generate liquidity or meet margin call requirements in 2020 as a result of its stable financing structures and effective interest rate risk management Percentage of PMT’s Book Value per S
Slide 7: PMT's Investment Activity by Strategy During the Quarter
PMT’s Investment Activity by Strategy During the Quarter Long-term Asset carrying Net new Fair value Asset carrying ($ in millions) mortgage asset value at 9/30/20 investments (5) changes (6) value at 12/31/20 Credit Risk Credit (1) $ 2,821 $ (318) $ 115 $ 2,618 Transfer Sensitive Strategies Distres
Slide 8: Successful Capital Deployment Into Attractive MSR Investments
Successful Capital Deployment Into Attractive MSR Investments Net runoff of CRT assets (in millions) $451 Runoff from $344 $318 prepayments on CRT assets… 2Q20 3Q20 4Q20 Net new investments in MSR & ESS (in millions) $380 …is offset by net new MSR investments… $207 $139 2Q20 3Q20 4Q20 Conventional c
Slide 9: Run-Rate Return Potential from PMT's Investment Strategies
Run-Rate Return Potential from PMT’s Investment Strategies Annualized Return WA Equity • Represents the average annualized ($ in millions, except EPS) on Equity (ROE) Allocated (%)(1) return and quarterly earnings potential PMT expects from its strategies over Credit sensitive strategies: the next f
Slide 10: Mortgage Investment Activities
Mortgage Investment Activities
Slide 11: Correspondent Production Highlights
Correspondent Production Highlights Correspondent Production Volume and Mix • Correspondent acquisitions in 4Q20 totaled $56.9 (UPB in billions) billion in UPB, up 28% from the prior quarter and 53% $59.2 Y/Y $54.5 $56.9 – 67% conventional loans; 33% government loans $44.3 $36.0 $18.9 $37.2 – Conven
Slide 12: Trends in MSR and ESS Investments
Trends in MSR and ESS Investments MSR and ESS Investments ($ in millions) Carrying value on balance sheet Related UPB $2,000 $1,887 $200,000 $1,714 $132 $1,600 $179 $1,531 $160,000 $1,314 $1,341 $143 $157 $151 $1,200 $120,000 $1,755 $800 $1,536 $80,000 $1,388 $1,157 $1,190 $400 $40,000 $0 $0 12/31/2
Slide 13: PMT Completed the Purchase of L-Street Securities Trust 2020-PMT1
PMT Completed the Purchase of L-Street Securities Trust 2020-PMT1 • Represents the largest CRT transaction ever completed by PMT ‒ $58 billion in UPB of loans delivered from April 2019 through September 2020; $44 billion in outstanding UPB at cutoff ‒ Purchased $1.7 billion in floating-rate CRT bond
Slide 14: Performance Update and Loss Mitigation Activity Related to PMT's CRT Investments
Performance Update and Loss Mitigation Activity Related to PMT’s CRT Investments As of December 31, Face Fair % of Total (Discount) Losses- 2020 Amount Value Fair Value / Premium to-date PMTT1-3: (in millions) (in millions) (in millions) (in millions) If all presently delinquent loans proceeded unmi
Slide 15: Trends in PMT's Investments in GSE Credit Risk Transfer (CRT)
Trends in PMT's Investments in GSE Credit Risk Transfer (CRT) • PMT settled L-Street Securities Trust 2020- CRT Investments(1) ($ in millions) PMT1 in 4Q20 Funded investments • The UPB of CRT investments declined Unfunded commitments significantly Q/Q as a result of elevated $3,727 prepayments $3,12
Slide 16: Financial Results
Financial Results (PannyMac’ Mortgage Investment Trust
Slide 17: Fourth Quarter Results and Return Contributions by Strategy
Fourth Quarter Results and Return Contributions by Strategy Income Excluding Total Income Market-Driven WA Equity Annualized Return ($ in millions) (1) (2) Market-Driven Value (3) (1) Contribution Value Changes (1)(2) Allocated on Equity (ROE) Changes Credit sensitive strategies: GSE credit risk tra
Slide 18: Performance of the GSE Credit Risk Transfer Investments in 4Q20
Performance of the GSE Credit Risk Transfer Investments in 4Q20 (Loss) Income ($ in millions) Comments Contribution Market-driven value changes: Valuation-related changes included • Reflects impact of credit spread tightening and elevated prepayment speeds as $ 209.9 well as expectations of recoveri
Slide 19: Hedging Approach Central to PMT's Interest Rate Sensitive Investments
Hedging Approach Central to PMT’s Interest Rate Sensitive Investments • PMT seeks to manage interest rate risk MSR and ESS Valuation Changes and Offsets exposure on a “global” basis, recognizing ($ in millions) interest rate sensitivities across its investment strategies MSR and ESS fair value chang
Slide 20: Appendix
Appendix (PannyMac’ Mortgage Investment Trust
Slide 21: Historical Earnings, Dividends and Book Value Per Share
Historical Earnings, Dividends and Book Value Per Share $1.50 $20.61 $4.51 $20.30 $20.00 $0.94 $1.00 $0.78 $0.68 $0.71 $15.16 $0.55 $0.55 $0.47 $0.47 $0.47 $0.50 $0.47 $0.47 $0.47 $15.00 $0.50 $0.40 $0.40 $0.25 $0.00 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 $10.00 -$0.50 $5.00 -$1.00 -$1.50 -$5.
Slide 22: Interest Rate Sensitive Strategies Designed to Mitigate Interest Rate Volatility
Interest Rate Sensitive Strategies Designed to Mitigate Interest Rate Volatility Gain in value with Gain in value with Estimated Sensitivity to Changes in Interest Rates increasing rates decreasing rates At 12/31/20 % change in PMT’s shareholders’ equity 8% Instantaneous parallel shock MSRs Agency M
Slide 23: Servicing Trends – Delinquencies & Advances for PMT's MSR Portfolio
Servicing Trends – Delinquencies & Advances for PMT’s MSR Portfolio 30+ Day Delinquency Rate and Forbearance Trend(1) • In PMT’s conventional MSR portfolio, approximately 56,000 borrowers were enrolled 6.3% 6.1% in a forbearance plan in 2020 1.1% 4.7% 3.9% ‒ Through December 31st, approximately 30,0
Slide 24: MSRs and ESS Asset Valuation
MSRs and ESS Asset Valuation Mortgage Servicing Excess Servicing Unaudited ($ in millions) Rights Spread (1) At 12/31/20 Pool UPB $170,728 $15,833 Pool weighted average coupon 3.61% 4.18% Weighted-average pool prepayment speed 12.8% 11.7% assumption (CPR) Weighted average servicing fee/spread 0.28%
Slide 25: PMT's Excess Servicing Spread Investments in Partnership with PFSI
PMT’s Excess Servicing Spread Investments in Partnership with PFSI • PMT has co-invested in Agency MSRs acquired from third-party sellers by PFSI; presently only related to Ginnie Mae MSRs • PMT acquires the right to receive the excess servicing spread cash flows over the life of the underlying loan
Slide 26: Return on Equity Contribution of the GSE Credit Risk Transfer Investments
Return on Equity Contribution of the GSE Credit Risk Transfer Investments Annualized Return on Average CRT Equity 294.8% 89.3% 54.5% 38.6% 34.3% 31.5% 38.5% 21.8% 29.4% 28.9% 19.6% 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 -477.4% Average CRT equity(1) $403 $452 $490 $446 $452 $476
Slide 27: Credit Risk Transfer – Balance Sheet Treatment
Credit Risk Transfer – Balance Sheet Treatment At December 31, ($ in thousands) 2020 Current outstanding UPB of loans delivered to the CRT UPB of loans subject to guarantee obligation............................................... $ 58,697,942 SPVs and sold to Fannie Mae or delivered subject to agre
Slide 28: CRT Financing Summary
CRT Financing Summary L Street Securities L Street Securities L Street Securities Transaction PMTT1, PMTT2 & PMTT3 2017-PM1 Trust 2019-PMT1 Trust 2020-PMT1 Status Funded Funded Funded Funded UPB(1) ($ in billions) $4.1 $9.7 $8.1 $36.7 Face Amount(1) ($ in millions) $210.0 $425.0 $466.0 $1,698.0 • $5
Slide 29: Assessment of Loss Varies by Transaction for PMT's CRT Investments
Assessment of Loss Varies by Transaction for PMT’s CRT Investments PMT CRT Transactions Recourse Event / Loss Calculation Loans in Forbearance PMTT1, Mortgage Obligations become credit events at 180 days or more PMTT2 & delinquent regardless of any grant of forbearance PMTT3 Losses assesed pursuant
Slide 30: PMT's Investments in GSE Credit Risk Transfer
PMT’s Investments in GSE Credit Risk Transfer PMTT1 (May 2015 - July 2015) PMTT2 (August 2015 - February 2016) PMTT3 (February 2016 - August 2016) At inception 12/31/2020 At inception 12/31/2020 At inception 12/31/2020 UPB (in billions) $ 1.2 $ 0.3 UPB (in billions) $ 4.2 $ 1.3 UPB (in billions) $ 6
Slide 31: Correspondent Production Acquisitions and Locks by Product
Correspondent Production Acquisitions and Locks by Product (UPB in millions) 4Q19 1Q20 2Q20 3Q20 4Q20 Acquisitions Conventional Conforming $ 20,510 $ 16,153 $ 18,900 $ 27,351 $ 37,986 Government 16,653 13,616 10,991 16,977 18,923 Total Correspondent Acquisitions $ 37,163 $ 29,768 $ 29,890 $ 44,328 $
PennyMac Mortgage Investment Trust — Q4 2020 Earnings Presentation on 6ix