Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q1 2020 Earnings Presentation
31 slides from Pennymac Mortgage Investment Trust's earnings presentation, May 7, 2020
Slide 1: First Quarter 2020 Earnings Report
PennyMac Mortgage Investment Trust May 7, 2020 First Quarter 2020 Earnings Report Exhibit 99.2
Slide 2: 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 results, future operations,
Slide 3: First Quarter Highlights
First Quarter Highlights 1Q20 Earnings Report (1) Includes $2.2 billion in conventional loans originated in PennyMac Financial Services, Inc.’s (NYSE: PFSI) direct lending channels. Net loss attributable to common shareholders of $600.9 million; loss per common share was $5.99 Segment pretax results
Slide 4: First Quarter Highlights (continued)
First Quarter Highlights (continued) 1Q20 Earnings Report Notable activity after quarter end: Retired the 5.375% senior exchangeable unsecured notes due May 1, 2020 Repurchased $123.6 million in principal of the notes at a weighted average price of 98.6% of par value, resulting in total savings of a
Slide 5: Developments That Have Affected the Mortgage Markets
6 5 Developments That Have Affected the Mortgage Markets 1Q20 Earnings Report Substantial slowdown in the economy related to COVID-19 and public health measures Over the last six weeks 30.3 million workers have filed jobless claims, evidencing increased hardships for homeowners and borrowers leading
Slide 6: Mortgage Origination Market Update
6 6 Mortgage Origination Market Update 1Q20 Earnings Report U.S. Mortgage Origination Market(1) (in billions) (1) Actual originations: Inside Mortgage Finance. Total originations forecast: Average of Mortgage Bankers Association (4/2/20), Fannie Mae (4/10/20), and Freddie Mac (4/13/20) forecasts (2)
Slide 7: PMT's Investment Activity by Strategy During the Quarter
PMT’s Investment Activity by Strategy During the Quarter (1) The fair value of CRT investments is reflected on PMT’s balance sheet as deposits securing CRT arrangements, firm commitment to purchase CRT securities, and derivative and credit risk transfer strip assets or liabilities, net of the intere
Slide 8: CRT Term Notes Are Critically Important Financing Structure
CRT Term Notes Are Critically Important Financing Structure 1Q20 Earnings Report (1) PMT is currently in the aggregation period delivering loans to Fannie Mae under a commitment for a sixth CRT transaction. UPB represents the volume outstanding as of March 31, 2020. (2) As of March 31, 2020 PMT comp
Slide 9: Assessment of Loss Varies by Transaction for PMT's CRT Investments
Assessment of Loss Varies by Transaction for PMT’s CRT Investments 1Q20 Earnings Report PMT’s earliest CRT transactions (26% of UPB) have losses assessed based on loans becoming 180+ days delinquent; more recent transactions (74% of UPB) are based on actual losses The stated treatment of loans in fo
Slide 10: Change in Fair Value of CRT Investments During the Quarter
Change in Fair Value of CRT Investments During the Quarter 1Q20 Earnings Report ($ millions) Fair value changes(1) = $(1,040) (1) Attribution of changes in fair value between discount rate and other assumptions is based on changes in the valuation assumptions of CRT agreements, CRT strips, and firm
Slide 11: Loss and Expected Return Scenarios for PMT's CRT Investments
Loss and Expected Return Scenarios for PMT's CRT Investments 1Q20 Earnings Report Losses and returns for PMTT1, PMTT2 and PMTT3 above assume that loans in COVID-19 forbearance do not become credit events at 180 days or more delinquent On March 31, 2020, market participants, and resulting market pric
Slide 12: Run-Rate Return Potential from PMT's Investment Strategies
Run-Rate Return Potential from PMT’s Investment Strategies 1Q20 Earnings Report 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 loss treatment for PMTT1, PMTT2 and PMTT3 a
Slide 13: Mortgage Investment Activities
Mortgage Investment Activities
Slide 14: Correspondent Production Highlights
Correspondent Production Highlights 1Q20 Earnings Report Correspondent Production Volume and Mix(1) (UPB in billions) (1) See footnote 1 on slide 31 (2) For government loans, PMT earns a sourcing fee and interest income for its holding period and does not pay a fulfillment fee (3) Conventional confo
Slide 15: Trends in GSE CRT Investments
Trends in GSE CRT Investments PMT is curtailing new investments in GSE CRT Federal Housing Finance Agency (FHFA) has instructed Fannie Mae and Freddie Mac to gradually wind down front-end lender risk share transactions such as PMT’s by the end of this year Continuing to deliver loans under our sixth
Slide 16: Trends in MSR and ESS Investments
MSR assets decreased to $1.2 billion driven by fair value losses resulting from expectations for increased prepayment activity in the future related to lower interest rates, and higher servicing costs related to expected increases in delinquencies as a result of COVID-19 hardship $249 million in new
Slide 17: PMT's Estimated Sensitivity to Changes in Interest Rates
PMT’s Estimated Sensitivity to Changes in Interest Rates 1Q20 Earnings Report % change in PMT’s shareholders’ equity Instantaneous parallel shock in interest rates (in bps) % change in PMT’s shareholders’ equity Instantaneous parallel shock in interest rates (in bps) Throughout the first quarter, PM
Slide 18: Outstanding Performance from the Interest Rate Sensitive Strategies in 1Q20
Outstanding Performance from the Interest Rate Sensitive Strategies in 1Q20 1Q20 Earnings Report PMT seeks to manage interest rate risk exposure on a “global” basis, recognizing interest rate sensitivities across its investment strategies In a period of decreasing interest rates, PMT’s MSR and ESS i
Slide 19: Financial Results
Financial Results nnyMac’ Mortgage Investment Trust.
Slide 20: Financial results by segment and investment 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 21: Performance of the GSE Credit Risk Transfer Investments in 1Q20
Performance of the GSE Credit Risk Transfer Investments in 1Q20 1Q20 Earnings Report
Slide 22: Delinquency and Forbearance Trends for PMT's MSR Portfolio
Delinquency and Forbearance Trends for PMT’s MSR Portfolio 1Q20 Earnings Report PMT is in a strong position to successfully manage hardships related to COVID-19 given the technology platform and specialty servicing expertise of its subservicer, PFSI PFSI began offering COVID-19 forbearance plans on
Slide 23: Servicing Advance Requirements
Servicing Advance Requirements 1Q20 Earnings Report Fannie Mae requires a servicer to continue advancing principal and interest (P&I) payments for delinquent loans and Freddie Mac requires a servicer to continue advancing interest for only four months These P&I advances are typically covered by prep
Slide 24: Appendix
Appendix nnyMac’ Mortgage Investment Trust.
Slide 25: Historical Earnings, Dividends and Book Value Per Share
(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 Historical Earnings, Dividends and Book Value Per Share Repurchased 15.5 million common
Slide 26: 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 PFSI. Weighted average servicing spread, fair value and valuation multiple relate to the ESS asset owned by PMT. The fair
Slide 27: Excess servicing spread structure
(1) The contractual servicer and MSR owner is PennyMac Loan Services, LLC, a 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.g
Slide 28: Return on Equity Contribution of the GSE Credit Risk Transfer Investments
Return on Equity Contribution of the GSE Credit Risk Transfer Investments 1Q20 Earnings Report Annualized Return on Average CRT Equity (1) Equity allocated represents management’s internal allocation across segments and investment strategies Return on Equity Contribution of the GSE Credit Risk Trans
Slide 29: Credit Risk Transfer – Balance Sheet Treatment
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 – Balance Sheet Treatment Current cash collateralizing guarantee included in “Deposits securing credit risk transfer arrangements
Slide 30: PMT's Investments in GSE Credit Risk Transfer
PMT’s Investments in GSE Credit Risk Transfer 1Q20 Earnings Report (1) FICO and LTV metrics at origination (UPB in billions)
Slide 31: Correspondent Production Acquisitions and Locks by Product
Correspondent Production Acquisitions and Locks by Product 1Q20 Earnings Report Note: Conventional Conforming, Government, and Non-Agency acquisitions exclude PennyMac Financial’s Direct Lending Loans Acquired by PMT. (1) The UPB of historical period conventional conforming acquisitions has been red
PennyMac Mortgage Investment Trust — Q1 2020 Earnings Presentation on 6ix