Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q2 2018 Earnings Presentation
28 slides from Pennymac Mortgage Investment Trust's earnings presentation, Aug 2, 2018
Slide 1: Second Quarter 2018 Earnings Report
PennyMac Mortgage Investment Trust August 2, 2018 Second Quarter 2018 Earnings Report Exhibit 99.2
Slide 2: Forward-looking statements
2Q18 Earnings Report 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 results
Slide 3: Second Quarter Highlights
Second Quarter Highlights Net income attributable to common shareholders of $30.2 million on net investment income of $83.0 million Diluted earnings per common share of $0.47; return on average common equity of 10% Dividend of $0.47 per common share declared on June 27, 2018 and paid on July 30, 201
Slide 4: Current Market Environment
6 4 2Q18 Earnings Report Current Market Environment Average 30-year fixed rate mortgage(1) 4.55% 30-year fixed mortgage rates averaged 4.54% in 2Q18, up 26 basis points from the prior quarter The mortgage market is transitioning and remains competitive, with lenders managing capacity and production
Slide 5: PMT's Equity Allocation
2Q 2016 100% = $1.36 billion 2Q 2018(3) 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 $111 million of preferred equity (3) Includes $300 million of preferred equ
Slide 6: 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) and does not contemplate significant changes or shocks to current market conditions. Actual results may differ materially. Plea
Slide 7: Mortgage Investment Activities
Mortgage Investment Activities
Slide 8: Correspondent Production Volume and Mix
Correspondent Production Volume and Mix (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) Based on funding volumes of loans subject to fulfillment f
Slide 9: Credit risk transfer deliveries in 2Q18
Completed $3.9 billion in UPB of deliveries in 2Q18 Deliveries into our fourth CRT transaction with Fannie Mae (CRT 2016-2) totaled $2.3 billion and resulted in commitments to fund approximately $82 million of new CRT investments(1) Deliveries into this structure ended in May, with final settlement
Slide 10: MSR Investments Continued to Grow
($ in millions) MSR investments increased to $1.0 billion due to growth from correspondent production activity and fair value gains Excess servicing spread (ESS) investments relating to bulk, mini-bulk and flow MSR acquisitions by PennyMac Financial Services, Inc. (NYSE: PFSI) decreased modestly to
Slide 11: Distressed Loan Portfolio Is Declining Through Liquidation and Sales
2Q18 Earnings Report Entered into an agreement to sell $99 million in UPB of performing loans from the distressed portfolio(4) (1) Includes principal payments, payoffs, and write downs (2) Primarily through recidivism of previously performing loans (3) Primarily through loan modifications (4) This t
Slide 12: Financial Results
Financial Results nnyMac’ Mortgage Investment Trust.
Slide 13: Second 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 and loan servicing fees), but before tax expenses. Some of the income associated with the inves
Slide 14: Performance of the Distressed Mortgage Loan Investments
Net losses on nonperforming and performing loans totaled $4.7 million, compared to $10.0 million in 1Q18, driven by a $5.8 million reduction in fair value due to an increase in investor yield requirements Cash proceeds from liquidation and paydown activity on the distressed loan portfolio and real e
Slide 15: Appendix
Appendix nnyMac’ Mortgage Investment Trust.
Slide 16: PMT EPS, Common Dividends and Book Value Per Common Share Over Time
Book value per common share(1) (1)% 9% Return on Avg. Common Equity(2) (1) At period end (2) Return on average common equity is calculated based on annualized quarterly net income attributable to common shareholders as a percentage of monthly average common equity during the period 10% EPS & Common
Slide 17: 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 Leverage ratio(2) (1) The fair value of CRT investments is reflected on the balance sheet as restricte
Slide 18: Estimated Sensitivity to Changes in Interest Rates
(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 19: MSRs and ESS Asset Valuation
MSRs and ESS Asset Valuation Unaudited (1) Pool UPB, weighted average coupon and expected prepayment speed represent the characteristics of the underlying MSR portfolio owned by PennyMac Financial. Weighted average servicing spread, fair value and valuation multiple relate to the ESS asset owned by
Slide 20: Carrying Values for PMT's Distressed Whole Loans
Nonperforming Loans (at June 30, 2018) Performing Loans (at June 30, 2018) Nonperforming loans are held on average at a 44% discount to current property value – fair value considers costs expected over the liquidation timeline, expected property appreciation and reperformance probability PMT advance
Slide 21: 2Q18 Distressed Loan Portfolio Resolution Activity
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) $209 $185 $141 Quarterly resolution activity as a percentage of nonperforming loans a
Slide 22: Distressed Portfolio by Acquisition Period
(1) Ratio of unpaid principal balance remaining to unpaid principal balance at acquisition 2Q18 Earnings Report Distressed Portfolio by Acquisition Period 1Q10 2Q10 3Q10 4Q10 Purchase 2Q18 Purchase 2Q18 Purchase 2Q18 Purchase 2Q18 Balance ($mm) $182.672582201057 8.6020301700000008 Balance ($mm) $195
Slide 23: Distressed Portfolio by Acquisition Period (cont.)
(1) Ratio of unpaid principal balance remaining to unpaid principal balance at acquisition 2Q18 Earnings Report Distressed Portfolio by Acquisition Period (cont.) 1Q10 2Q10 3Q10 4Q10 Purchase 2Q18 Purchase 2Q18 Purchase 2Q18 Purchase 2Q18 Balance ($mm) $182.672582201057 8.6020301700000008 Balance ($
Slide 24: Correspondent Production Fundings and Locks by Product
2Q18 Earnings Report Correspondent Production Fundings and Locks by Product Note: Amounts may not sum exactly due to rounding (1) Does not include loans purchased from PennyMac Financial Services, Inc. in 2Q18, 1Q18, 4Q17 and 3Q17. ($ in millions) 2Q17 3Q17 4Q17 1Q18 2Q18 Fundings Conventional $5,91
Slide 25: Credit Risk Transfer – Income Statement and Balance Sheet Treatment
Cash deposited in the SPV in Other assets. Represents collateral for the initial credit risk retained Includes fair value recognition upon loan delivery under CRT Agreements and market value changes Payments made to Fannie Mae, from pledged cash, for losses on loans underlying the CRT agreements Cas
Slide 26: Credit Risk Transfer – Income Statement and Balance Sheet Treatment (cont'd)
2Q18 Earnings Report Credit Risk Transfer – Income Statement and Balance Sheet Treatment (cont’d) Current outstanding UPB of loans delivered to the CRT SPVs and sold to Fannie Mae or delivered subject to agreements to purchase REMIC CRT securities Current cash collateralizing guarantee included in “
Slide 27: PMT's Investments in GSE Credit Risk Transfer
(1) FICO and LTV metrics at origination (UPB in billions) 2Q18 Earnings Report PMT’s Investments in GSE Credit Risk Transfer ($ 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 43281 At inception 43281 At
Slide 28: Excess Servicing Spread and MSR structure
(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 servicing fee paid by the Agency to the servicer. Excess Servicing Spr
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