Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q1 2021 Earnings Presentation
30 slides from Pennymac Mortgage Investment Trust's earnings presentation, May 6, 2021
Slide 1: PennyMac Mortgage Investment Trust First Quarter 2021 Earnings Report
PennyMac Mortgage Investment Trust First Quarter 2021 Earnings Report May 6, 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: First Quarter Highlights
First Quarter Highlights • Net income attributable to common shareholders of $65.4 million; diluted earnings per common share of $0.67 • Segment pretax results: Credit Sensitive Strategies: $134.3 million; Interest Rate Sensitive Strategies: $(64.6) million; Correspondent Production: $35.6 million;
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 Correspondent • Consistent gains in market share over PMT’s more than 10-year Production history driven by operational excellence and high service levels • Significant opport
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 $3.6 4.0% $2.6 3.0% $2.3 $2.5 $1.9 $0.8 2.0% $1.1 1.0% $1.5 $1.7 $1.7 $1.3 0.0% 2019 2020 2021E 2022E Purchase Refinance (2) (3) Average 30-year fi
Slide 6: PMT Is Well-Positioned for a Changing Mortgage Market
PMT Is Well-Positioned for a Changing Mortgage Market PMT is uniquely positioned to capitalize on current and evolving investment environments given its scale and importance in the home ownership ecosystem Correspondent Production Favorable Competitive Drives Organic MSR Evolving GSE Landscape Dynam
Slide 7: Successful Capital Deployment Into Attractive MSR Investments
Successful Capital Deployment Into Attractive MSR Investments Net runoff of CRT assets (in millions) $344 $318 Runoff from prepayments on CRT assets… $135 3Q20 4Q20 1Q21 Net new investments in MSR & ESS (in millions) $380 …is offset by net new MSR investments… $207 $216 3Q20 4Q20 1Q21 Conventional c
Slide 8: Recent Developments Related to PMT's Capital Structure
Recent Developments Related to PMT’s Capital Structure CRT Financing(1) ($ in millions) • Issued $659 million of 3-year term notes associated $2,006 with PMT’s sixth CRT transaction ‒ The entirety of PMT’s CRT investments is now financed $657 mm due 2024(2) with term notes that do not contain margin
Slide 9: Run-Rate Return Potential from PMT's Investment Strategies
Run-Rate Return Potential from PMT’s Investment Strategies Annualized Return WA Equity • Represents the average annualized ($ in millions, except EPS) on Equity (ROE) Allocated (%) (1) return and quarterly earnings potential Credit sensitive strategies: PMT expects from its strategies over GSE credi
Slide 10: Mortgage Investment Activities
Mortgage Investment Activities
Slide 11: Correspondent Production Highlights
Correspondent Production Highlights Correspondent Production Volume and Mix • Correspondent acquisitions in 1Q21 totaled (UPB in billions) $51.2 billion in UPB, down 10% from the prior $59.2 quarter and up 72% Y/Y $56.9 $51.1 $51.2 – 66% conventional loans; 34% government loans $18.9 $34.0 $17.4 – C
Slide 12: Trends in MSR Investments
Trends in MSR Investments MSR and ESS Investments ($ in millions) Carrying value on balance sheet Related UPB $200,000 $2,400 $2,000 $1,887 $160,000 $1,531 $132 $1,600 $1,314 $1,341 $143 $120,000 $1,200 $157 $151 $2,441 $80,000 $1,755 $800 $1,388 $1,157 $1,190 $40,000 $400 $0 $0 3/31/2020 6/30/2020
Slide 13: Hedging Approach Central to PMT's Interest Rate Sensitive Investments
Hedging Approach Central to PMT’s Interest Rate Sensitive Investments • PMT seeks to manage interest rate risk MSR and ESS Valuation Changes and Offsets exposure on a “global” basis, recognizing ($ in millions) interest rate sensitivities across its investment strategies MSR and ESS fair value chang
Slide 14: Trends in PMT's Investments in GSE Credit Risk Transfer (CRT)
Trends in PMT's Investments in GSE Credit Risk Transfer (CRT) • The UPB of CRT investments declined CRT Investments(1) ($ in millions) significantly Q/Q as a result of elevated Funded investments prepayments Unfunded commitments ‒ Fair value gains largely offset the decline in asset value from prepa
Slide 15: 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 March 31, Face Fair % of Total (Discount) Losses- PMTT1-3: 2021 Amount Value Fair Value / Premium to-date (in millions) (in millions) (in millions) (in millions) If all presently delinquent loans proceeded unmitig
Slide 16: Financial Results
Financial Results (PannyMac’ Mortgage Investment Trust
Slide 17: First Quarter Results and Return Contributions by Strategy
First 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 tran
Slide 18: Performance of the GSE Credit Risk Transfer Investments in 1Q21
Performance of the GSE Credit Risk Transfer Investments in 1Q21 (Loss) Income ($ in millions) Comments Contribution Market-driven value changes: Valuation-related changes included • Reflects impact of credit spread tightening and elevated prepayment speeds $ 98.1 in Net gain (loss) on investment Inc
Slide 19: Appendix
Appendix (PannyMac’ Mortgage Investment Trust
Slide 20: Historical Earnings, Dividends and Book Value Per Share
Historical Earnings, Dividends and Book Value Per Share $1.50 $20.72 $20.90 $4.51 $20.00 $0.94 $1.00 $0.78 $0.68 $0.71 $15.16 $0.67 $0.47 $0.50 $0.47 $0.47 $0.55 $0.47 $0.47 $0.47 $0.50 $0.40 $0.40 $15.00 $0.25 $0.00 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 $10.00 -$0.50 $5.00 -$1.00 -$1.50 -$5.
Slide 21: PMT's Investment Activity by Strategy During the Quarter
PMT’s Investment Activity by Strategy During the Quarter Long-term Asset carrying Net new Fair value Asset carrying ($ in millions) mortgage asset value at 12/31/20 investments (5) changes value at 3/31/21 Credit Risk $ 2,618 $ (135) $ 98 $ 2,581 Credit Transfer (1) Sensitive Strategies Distressed (
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 3/31/21 % change in PMT’s shareholders’ equity 8% Instantaneous parallel shock in interest ra
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 57,000 borrowers have been enrolled in a forbearance plan related to COVID- 6.3% 19 6.1% 1.1% 4.7% ‒ Through March 31st, approxim
Slide 24: MSRs Asset Valuation
MSRs Asset Valuation Mortgage Servicing Unaudited ($ in millions) Rights At 3/31/21 Pool UPB $183,464 Pool weighted average coupon 3.43% Weighted-average pool prepayment speed 8.8% assumption (CPR) Weighted average servicing fee/spread 0.27% Fair value $2,441 As a multiple of servicing fee 4.89 1Q21
Slide 25: 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% 85.9% 54.5% 38.6% 34.3% 31.5% 38.5% 29.4% 28.9% 19.6% 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 -477.4% Average CRT equity(1) $452 $490 $446 $452 $476 $574
Slide 26: Credit Risk Transfer – Balance Sheet Treatment
Credit Risk Transfer – Balance Sheet Treatment At March 31, ($ in thousands) 2021 Current outstanding UPB of loans delivered to the CRT UPB of loans subject to guarantee obligation............................................... $ 48,403,684 SPVs and sold to Fannie Mae or delivered subject to agreeme
Slide 27: 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) $3.5 $8.1 $6.6 $30.3 Face Amount(1) ($ in millions) $176.6 $414.5 $383.2 $1,690.1 • $1
Slide 28: 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 29: PMT's Investments in GSE Credit Risk Transfer
PMT’s Investments in GSE Credit Risk Transfer (UPB in billions) PMTT1 (May 2015 - July 2015) PMTT2 (August 2015 - February 2016) PMTT3 (February 2016 - August 2016) At inception 3/31/2021 At inception 3/31/2021 At inception 3/31/2021 UPB $ 1.2 $ 0.3 UPB $ 4.2 $ 1.1 UPB $ 6.5 $ 2.1 Loan Count 4,113 1
Slide 30: Correspondent Production Acquisitions and Locks by Product
Correspondent Production Acquisitions and Locks by Product (UPB in millions) 1Q20 2Q20 3Q20 4Q20 1Q21 Acquisitions Conventional Conforming $ 16,153 $ 18,900 $ 27,351 $ 37,986 $ 33,762 Government 13,616 10,991 16,977 18,923 17,440 Total Correspondent Acquisitions $ 29,768 $ 29,890 $ 44,328 $ 56,908 $
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