Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q2 2023 Earnings Presentation
27 slides from Pennymac Mortgage Investment Trust's earnings presentation, Jul 27, 2023
Slide 1: 2Q23 Earnings Report
2Q23 EARNINGS REPORT PennyMac Mortgage Investment Trust July 2023
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: Second Quarter Highlights
SECOND QUARTER HIGHLIGHTS Strong performance from PMT’s credit sensitive strategies and income excluding the impacts of market-driven fair value changes were partially offset by fair value declines in PMT’s interest rate sensitive strategies and related tax impacts 2Q23 Results Pretax income Net inc
Slide 4: Origination Market Has Declined Meaningfully
ORIGINATION MARKET HAS DECLINED MEANINGFULLY U.S. Mortgage Origination Market(1) Mortgage Rates Remain High ($ in trillions) 7.0% $4.4 6.0% 5.0% $2.6 4.0% $2.3 $2.0 3.0% $0.7 $1.7 $0.5 2.0% $0.3 $1.8 $1.6 $1.5 1.0% $1.4 0.0% 2021 2022 2023E 2024E Purchase Refinance (2) (3) Average 30-year fixed rate
Slide 5: Impact of Current Market Environment on PMT's Businesses
IMPACT OF CURRENT MARKET ENVIRONMENT ON PMT’S BUSINESSES Credit Sensitive Interest Rate Sensitive Correspondent Strategies Strategies Production • Credit spreads have tightened thus • Sensitivity of MSR value has declined • Volumes for PMT’s own account are far in 2023, driving improvements in given
Slide 6: Capital Deployment Outlook for PMT
CAPITAL DEPLOYMENT OUTLOOK FOR PMT Credit Sensitive Strategies • Actively managing PMT’s equity allocation through • Prevailing market conditions have created investment opportunities in GSE-issued CRT (CAS and STACR bonds) with conventional correspondent loan sales to PFSI attractive expected retur
Slide 7: Run-Rate Return Potential from PMT's Investment Strategies
RUN-RATE RETURN POTENTIAL FROM PMT’S INVESTMENT STRATEGIES Annualized Return on Equity WA Equity (1) • Represents the average annualized return and Allocated (%) (ROE) quarterly earnings potential PMT expects from its Credit sensitive strategies: strategies over the next four quarters Organically-cr
Slide 8: Correspondent Production Highlights
CORRESPONDENT PRODUCTION HIGHLIGHTS • Correspondent acquisitions in 2Q23 totaled $21.2 billion in UPB, up 5% Correspondent Production Volume and Mix Q/Q and 1% Y/Y (UPB in billions) ‒ 53% government loans; 47% conventional loans $21.0 $22.4 $21.7 $21.2 $21.6 ‒ Government acquisitions of $11.1 billio
Slide 9: Trends in MSR Investments
TRENDS IN MSR INVESTMENTS MSR Investments ($ in millions) $5,000 $231,661 $240,000 • MSR assets were $4.0 billion as of June 30th, $4,500 $222,502 2023, up slightly from March 31st, 2023 $3,941 $4,013 $3,975 $3,978 $4,000 $3,696 ‒ Newly originated MSR investments of $91 $210,000 million and fair val
Slide 10: Trends in PMT's Unique Investments in GSE Credit Risk Transfer
TRENDS IN PMT’S UNIQUE INVESTMENTS IN GSE CREDIT RISK TRANSFER • Fair value of PMT’s organically-created CRT investments Organically-Created GSE CRT Investments(1) increased slightly from March 31, 2023 as fair value ($ in millions) Funded investments gains more than offset runoff from prepayments $
Slide 11: Second Quarter Results and Return Contributions by Strategy
SECOND QUARTER RESULTS AND RETURN CONTRIBUTIONS BY STRATEGY Income Excluding Total Income Market-Driven WA Equity Annualized Return ($ in millions, except EPS) (1) (2) Market-Driven (3) Contribution Value Changes Allocated on Equity (ROE)(1) Value Changes (1)(2) Credit sensitive strategies: Organica
Slide 12: Hedging Approach Central to PMT's Interest Rate Sensitive Investments
HEDGING APPROACH CENTRAL TO PMT’S INTEREST RATE SENSITIVE INVESTMENTS MSR Valuation Changes and Offsets • PMT seeks to manage interest rate risk exposure on a ($ in millions) “global” basis, recognizing interest rate sensitivities across its investment strategies MSR fair value change before realiza
Slide 13: PMT's Flexible and Sophisticated Financing Structures
PMT’S FLEXIBLE AND SOPHISTICATED FINANCING STRUCTURES $555mm Exchangeable Senior Notes $345mm 5.500% due March 2026 • Low, fixed interest rates • First maturity of exchangeable senior notes in November 2024 $210mm 5.500% due November 2024 • Provides flexibility and complements asset-backed structure
Slide 14: Appendix
NAPPENDIX
Slide 15: PMT Is Focused on Unique Investment Strategies in Three Segments
PMT IS FOCUSED ON UNIQUE INVESTMENT STRATEGIES IN THREE SEGMENTS • Leading acquirer and producer of conventional conforming mortgage loans Correspondent • Significant growth in market share over PMT’s more than 14-year history driven by Production operational excellence and high service levels • Pro
Slide 16: Historical Earnings, Dividends and Book Value per Share
HISTORICAL EARNINGS, DIVIDENDS AND BOOK VALUE PER SHARE (1) Diluted EPS Common Dividend Book value per share $20.77 $15.81 $0.47 $0.47 $0.47 $0.47 $0.47 $0.47 $0.50 $0.40 $0.40 $0.40 $0.32 $0.16 $0.01 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 ($0.07) ($0.28) ($0.32) ($0.45) ($0.88) ROE(2): 6% -9%
Slide 17: Current Market Environment and Macroeconomic Trends
CURRENT MARKET ENVIRONMENT AND MACROECONOMIC TRENDS Average 30-year fixed rate mortgage(1) 10-year Treasury Bond Yield(2) 6.32% 6.71% 7.0% 5.0% 3.84% 3.47% 6.0% 4.0% 5.0% 3.0% 4.0% 2.0% 3.0% 1.0% 2.0% 0.0% Macroeconomic Metrics(3) Footnotes (1) Freddie Mac Primary Mortgage Market Survey. 6.78% as of
Slide 18: PMT Is in Excess of Prospective Regulatory Capital and Liquidity Requirements
PMT IS IN EXCESS OF PROSPECTIVE REGULATORY CAPITAL AND LIQUIDITY REQUIREMENTS In August 2022, the Federal Housing Finance Agency (FHFA) released updated eligibility standards for non-bank seller/servicers with a proposed effective date for most requirements of September 30, 2023 • PennyMac Corp. (PM
Slide 19: PMT's Investment Activity by Strategy During the Quarter
PMT’S INVESTMENT ACTIVITY BY STRATEGY DURING THE QUARTER Assets carrying Assets carrying Long-term Net new ($ in millions) value at Fair value changes value at mortgage asset investments(5) 3/31/2023 6/30/2023 Organically-Created Investments in $ 1,148 $ (28) $ 43 $ 1,163 GSE CRT(1) Credit Investmen
Slide 20: MSR Asset Valuation
MSR ASSET VALUATION June 30, 2023 Mortgage Unaudited ($ in millions) Servicing Rights (1) Pool UPB $231,661 Weighted average coupon 3.6% Weighted average servicing fee 0.29% Weighted average prepayment speed assumption (CPR) 7.2% Fair value $3,977.9 As a multiple of servicing fee 5.91 (1) Owned MSR
Slide 21: Delinquency Trends and Servicing Advances Outstanding
DELINQUENCY TRENDS AND SERVICING ADVANCES OUTSTANDING Historical Trends in Delinquency and Foreclosure Rates(1) 7.0% 5.0% 3.3% 2.6% 1.9% 1.5% 1.3% 1.2% 1.2% 1.1% 1.1% 1.1% 1.0% 1.1% 3/31/20 6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 9/30/21 12/31/21 3/31/22 6/30/22 9/30/22 12/31/22 3/31/23 6/30/23 30-
Slide 22: Interest Rate Sensitive Strategies Designed to Mitigate Interest Rate Volatility
INTEREST RATE SENSITIVE STRATEGIES DESIGNED TO MITIGATE INTEREST RATE VOLATILITY Gain in value with Gain in value with Estimated Sensitivity to Changes in Interest Rates at June 30, 2023 increasing rates decreasing rates % change in PMT’s shareholders’ equity 15% 10% MSRs Agency MBS 5% 0% -75 -50 -2
Slide 23: Performance of PMT's Organically-Created GSE CRT Investments in 2Q23
PERFORMANCE OF PMT’S ORGANICALLY-CREATED INVESTMENTS IN GSE CREDIT RISK TRANSFER INVESTMENTS IN 2Q23 Income (Loss) ($ in millions) Comments Contribution Market-driven value changes: Valuation-related changes included in Net gain (loss) on investment $ 43.0 • Reflects impact of credit spread tighteni
Slide 24: Balance Sheet Treatment of PMT's Organically-Created CRT Investments
BALANCE SHEET TREATMENT OF PMT’S ORGANICALLY-CREATED CREDIT RISK TRANSFER INVESTMENTS At June 30, 2023 ($ in thousands) Current outstanding UPB of loans delivered to the CRT SPVs and UPB of loans subject to guarantee obligation.................................... $ 24,167,673 sold to Fannie Mae or d
Slide 25: PMT's Organically-Created Investments in Credit Risk Transfer
PMT’S ORGANICALLY-CREATED INVESTMENTS IN CREDIT RISK TRANSFER ($ in billions) PMTT1 (May 2015 - July 2015) PMTT2 (August 2015 - February 2016) PMTT3 (February 2016 - August 2016) At inception 6/30/23 At inception 6/30/23 At inception 6/30/23 UPB $ 1.2 $ 0.2 UPB $ 4.2 $ 0.5 UPB $ 6.5 $ 1.1 Loan Count
Slide 26: Correspondent Production Acquisitions and Locks by Product
CORRESPONDENT PRODUCTION ACQUISITIONS AND LOCKS BY PRODUCT Unaudited ($ in millions) 2Q22 3Q22 4Q22 1Q23 2Q23 Correspondent Acquisitions Conventional Conforming - for PMT $ 10,320 $ 10,225 $ 6,771 $ 6,629 $ 3,029 (1) Conventional Conforming - for PFSI - - 3,912 4,063 7,018 Government(1) 10,649 12,16
Slide 27: PennyMac Mortgage Investment Trust
PS PENNYMAC’ MORTGAGE INVESTMENT TRUST 27
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