Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q1 2019 Earnings Presentation
29 slides from Pennymac Mortgage Investment Trust's earnings presentation, May 3, 2019
Slide 1: First Quarter 2019 Earnings Report
PennyMac Mortgage Investment Trust May 2, 2019 First Quarter 2019 Earnings Report Exhibit 99.2
Slide 2: Forward-looking statements
1Q19 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: First Quarter Highlights
First Quarter Highlights 1Q19 Earnings Report Net income attributable to common shareholders of $47.3 million; diluted earnings per common share of $0.68 Annualized return on average common equity of 14%, up from 11% in the prior quarter Dividend of $0.47 per common share declared on March 26, 2019
Slide 4: First Quarter Highlights (continued)
First Quarter Highlights (continued) 1Q19 Earnings Report Entered into agreements during and after the quarter to sell approximately $49 million in UPB of nonperforming loans from the distressed portfolio(1) Sales represent approximately 26% of the distressed loan portfolio UPB at March 31, 2019 Rai
Slide 5: Current Market Environment
6 5 Current Market Environment 1Q19 Earnings Report Average 30-year fixed rate mortgage(1) The U.S. economy remains on strong footing, despite global growth concerns Greater clarity from the Federal Reserve on expectations for further rate increases The average 30-year fixed mortgage rate in the fir
Slide 6: PMT Is a Mortgage REIT with Unique Investment Strategies
Correspondent loan inventory PMT’s Long-Term Investments ■ CRT ■ 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 restricted c
Slide 7: PMT's Strategies for Long-Term Growth
1Q19 Earnings Report PMT’s Strategies for Long-Term Growth Focused on core strategies of organic investments in CRT and MSRs Leading producer of conventional conforming loans drives organic investment growth Seek to deploy approximately $400 - $600 million in equity in CRT & MSRs during 2019 Capital
Slide 8: CRT 1-4 Transactions Financing
1Q19 Earnings Report CRT 1-4 Transactions Previous CRT Financing Current CRT Financing Composition 30-90 day securities repurchase agreements 30-90 day securities repurchase agreements 3-year secured term notes Term financing structure that increases the duration and enhances expected returns on equ
Slide 9: Run-Rate Return Potential from PMT's Investment 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 10: Mortgage Investment Activities
Mortgage Investment Activities
Slide 11: Correspondent Production Volume and Mix
Correspondent Production Volume and Mix (UPB in billions) (1) Includes delegated and non-delegated acquisitions (2) For delegated Government loans, PMT earns a sourcing fee and interest income for its holding period and does not pay a fulfillment fee (3) Conventional conforming and non-Agency intere
Slide 12: GSE CRT Investments Growing and Credit Performance Remains Strong
GSE CRT Investments Growing and Credit Performance Remains Strong Loans eligible for CRT investments totaled $7.7 billion during 1Q19, resulting in a firm commitment to purchase $282 million of CRT securities from Fannie Mae under a new REMIC structure Total firm commitments were $887 million at Mar
Slide 13: MSR and ESS Investments
MSR investments decreased modestly to $1.2 billion driven by fair value losses resulting from the decline in mortgage rates during the quarter and expectations for higher prepayments in the future Partially offset by additions from new production volumes UPB associated with MSR investments increased
Slide 14: Financial Results
Financial Results nnyMac’ Mortgage Investment Trust.
Slide 15: First Quarter Income and Return Contributions by Strategy
Note: Amounts may not sum exactly due to rounding (1) Income contribution and the annualized return on equity calculated net of any direct expenses associated with investments (e.g., loan fulfillment fees and loan servicing fees), but before tax expenses. Some of the income associated with the inves
Slide 16: Performance of the GSE Credit Risk Transfer Investments in 1Q19
Performance of the GSE Credit Risk Transfer Investments in 1Q19 1Q19 Earnings Report ($ in millions) Income Contribution Income Contribution Comments Market-driven value changes: Valuation-related changes included in Net gain (loss) on investment $20,390,906.789999999 • Reflects effects of credit sp
Slide 17: Appendix
Appendix nnyMac’ Mortgage Investment Trust.
Slide 18: PMT's Business Model Is Unique Among Mortgage REITs
1Q19 Earnings Report PMT’s Business Model Is Unique Among Mortgage REITs Synergistic Partnership with PFSI Access to specialized mortgage capabilities, including origination and servicing operations PFSI has expertise across all mortgage functions with over 3,400 employees led by a highly experience
Slide 19: Track Record of Stable Dividends and Book Value
(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 Track Record of Stable Dividends and Book Value 1Q19 Earnings Report Repurchased 14.7 mi
Slide 20: Disciplined Hedging and Interest Rate Sensitivity
(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 21: 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 22: Excess Servicing Spread Structure
(1) The contractual servicer and MSR owner is PennyMac Loan Services, LLC, an wholly-owned 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 Spread (e.
Slide 23: Distressed Loan Portfolio Is Declining Through Liquidation and Sales
-56% Y/Y Distressed Loan Portfolio Is Declining Through Liquidation and Sales 1Q19 Earnings Report Driven by bulk sale of $96 million in UPB -86% Y/Y Performing Loans (UPB in millions) Nonperforming Loans (UPB in millions) Driven by bulk sale of $232 million in UPB Driven by bulk sale of $35 million
Slide 24: Net Gains (Losses) on Mortgage Loans
Net Gains (Losses) on Mortgage Loans Unaudited Performance of the Distressed Mortgage Loan Investments 1Q19 Earnings Report 72.569999999999993 20.86 16.57 1 16.57 1 16.57 Unaudited Quarter ended ($ in thousands) $43,465 $43,555 Valuation Changes: Performing loans $7,774 $388 Nonperforming loans -4,0
Slide 25: Return on Equity Contribution of the GSE CRT Investments
Return on Equity Contribution of the GSE Credit Risk Transfer Investments 1Q19 Earnings Report Annualized Return on Average CRT Equity Average CRT equity(1) ($ in millions) $166 $178 $207 $271 $333 $403 $452 $490 $446 (1) Equity allocated represents management’s internal allocation across segments a
Slide 26: Credit Risk Transfer – Income Statement and Balance Sheet Treatment
Cash deposited in the SPV in deposits securing CRT agreements. Represents collateral for the initial credit risk retained Includes fair value recognition upon loan delivery under CRT Agreements and market value changes Payments made to Fannie Mae, from pledged cash, for losses on loans underlying th
Slide 27: Credit Risk Transfer – Income Statement and Balance Sheet Treatment (cont'd)
Current outstanding UPB of loans delivered to the CRT SPVs and sold to Fannie Mae or delivered subject to agreements to purchase REMIC CRT securities Credit Risk Transfer – Income Statement and Balance Sheet Treatment (cont’d) Current cash collateralizing guarantee included in “Deposits securing cre
Slide 28: PMT's Investments in GSE Credit Risk Transfer
(1) FICO and LTV metrics at origination (UPB in billions) PMT’s Investments in GSE Credit Risk Transfer 1Q19 Earnings Report ($ 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 43555 At inception 43555 At
Slide 29: Correspondent Production Acquisitions and Locks by Product
Correspondent Production Acquisitions and Locks by Product Note: Delegated volumes exclude loans purchased from PennyMac Financial. Amounts may not sum exactly due to rounding. 1Q19 Earnings Report (1) Consists of prime jumbo and non-QM loans (UPB in millions) 1Q18 2Q18 3Q18 4Q18 1Q19 QoQ YoY Acquis
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