Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q4 2022 Earnings Presentation
27 slides from Pennymac Mortgage Investment Trust's earnings presentation, Feb 2, 2023
Slide 1: 4Q22 Earnings Report
4Q22 EARNINGS REPORT PennyMac Mortgage Investment Trust February 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: Fourth Quarter Highlights
FOURTH QUARTER HIGHLIGHTS Solid income excluding the impacts of market-driven fair value changes was more than offset by fair value declines in PMT’s interest rate and credit sensitive strategies 4Q22 Results Pretax income Net income CREDIT excluding Fair value of SENSITIVE market-driven organically
Slide 4: Origination Market Has Declined Meaningfully
ORIGINATION MARKET HAS DECLINED MEANINGFULLY U.S. Mortgage Origination Market(1) Mortgage Rates Remain High ($ in trillions) $4.4 7.0% $4.1 6.0% 5.0% $2.6 $2.6 4.0% $2.2 $1.8 3.0% $0.7 $0.4 2.0% $1.8 1.0% $1.5 $1.5 $1.4 0.0% 2020 2021 2022 2023E 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 • Tightening credit spreads in early • Volatility of MSR value has declined • Volumes expected to be constrained 2023 driving improvements in given signifi
Slide 6: Capital Deployment Outlook for PMT
CAPITAL DEPLOYMENT OUTLOOK FOR PMT • Equity allocation to PMT’s Credit Sensitive Credit Sensitive Strategies Strategies has decreased due to runoff of lender risk share investments and fair value declines due • While the future of lender risk share remains uncertain, to credit spread widening wider
Slide 7: Run-Rate Return Potential from PMT's Investment Strategies
RUN-RATE RETURN POTENTIAL FROM PMT’S INVESTMENT STRATEGIES Annualized WA Equity • Represents the average annualized return and quarterly Return on Equity Allocated (%) (1) earnings potential PMT expects from its strategies over (ROE) the next four quarters Credit sensitive strategies: Organically-cr
Slide 8: Correspondent Production Highlights
CORRESPONDENT PRODUCTION HIGHLIGHTS • Correspondent acquisitions in 4Q22 totaled $20.8 billion in UPB, down Correspondent Production Volume and Mix 7% Q/Q and 37% Y/Y (UPB in billions) ‒ 51% conventional loans; 49% government loans $32.8 ‒ Conventional conforming acquisitions of $10.7 billion in UPB
Slide 9: Trends in MSR Investments
TRENDS IN MSR INVESTMENTS MSR Investments ($ in millions) $5,000 $240,000 • MSR assets were $4.0 billion as of December 31, $229,971 up from $3.9 billion at September 30, 2022 $4,500 $216,065 $3,941 $4,013 ‒ Driven by newly originated MSR investments of $4,000 $3,696 $210,000 $127 million resulting
Slide 10: Historical Trends in Delinquencies and Advances
HISTORICAL TRENDS IN DELINQUENCIES AND ADVANCES Historical Trends in Delinquency and Foreclosure Rates(1) 7.0% 5.0% 3.3% 2.6% 1.9% 1.5% 1.3% 1.2% 1.1% 1.1% 1.1% 1.0% 3/31/20 6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 9/30/21 12/31/21 3/31/22 6/30/22 9/30/22 12/31/22 30-60 Day 60-90 Day 90+ Day In Fore
Slide 11: Trends in PMT's Unique Investments in GSE Credit Risk Transfer
TRENDS IN PMT’S UNIQUE INVESTMENTS IN GSE CREDIT RISK TRANSFER • Fair value of PMT’s organically-created CRT investments Organically-Created GSE CRT Investments(1) declined slightly from September 30, 2022 primarily due to ($ in millions) Funded investments prepayments $1,686 • The 60+ day delinquen
Slide 12: Fourth Quarter Results and Return Contributions by Strategy
FOURTH QUARTER RESULTS AND RETURN CONTRIBUTIONS BY STRATEGY Income Excluding Total Income Market-Driven WA Equity Annualized Return on ($ in millions, except EPS) (1) (2) Market-Driven (3) (1) Contribution Value Changes Allocated Equity (ROE) Value Changes(1)(2) Credit sensitive strategies: Organica
Slide 13: 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 ($ in millions) • PMT seeks to manage interest rate risk exposure on a “global” basis, recognizing interest rate sensitivities across MSR fair value change before realization of cash flows its inv
Slide 14: PMT's Flexible and Sophisticated Financing Structures
PMT’S FLEXIBLE AND SOPHISTICATED FINANCING STRUCTURES $555mm Exchangeable Senior Notes $345mm 5.500% due • Low, fixed interest rates March 2026 • First maturity of exchangeable senior notes in November 2024 $210mm 5.500% due November 2024 • Provides flexibility and complements asset-backed structure
Slide 15: Appendix
NAPPENDIX
Slide 16: 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 • Significant growth in market share over PMT’s more than 13-year history driven by Production operational excellence and high service levels • Provides unique
Slide 17: 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 $20.30 $0.78 $15.78 $0.67 $0.47 $0.47 $0.47 $0.47 $0.47 $0.47 $0.47 $0.47 $0.40 $0.32 $0.01 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 ($0.28) ($0.07) ($0.32) ($0.45) ($0.88) ROE(2): 15% 13
Slide 18: Current Market Environment and Macroeconomic Trends
CURRENT MARKET ENVIRONMENT AND MACROECONOMIC TRENDS Average 30-year fixed rate mortgage(1) 10-year Treasury Bond Yield(2) 6.70% 6.42% 5.0% 3.87% 8.0% 3.83% 7.0% 4.0% 6.0% 3.0% 5.0% 2.0% 4.0% 1.0% 3.0% 2.0% 0.0% Macroeconomic Metrics(3) Footnotes (1) Freddie Mac Primary Mortgage Market Survey. 6.13%
Slide 19: PMT Is in Excess of Prospective Regulatory Capital and Liquidity Requirements
PMT IS IN EXCESS OF PROSPECTIVE REGULATORY CAPITAL AND LIQUIDITY REQUIREMENTS In August 2022, the Federal Housing Finance Agency (FHFA) released updated eligibility standards for non-bank seller/servicers with a proposed effective date for most requirements of September 30, 2023 • PennyMac Corp. (PM
Slide 20: PMT's Investment Activity by Strategy During the Quarter
PMT’S INVESTMENT ACTIVITY BY STRATEGY DURING THE QUARTER Long-term Asset carrying Net new Fair value Asset carrying ($ in millions) mortgage asset value at 9/30/22 investments(5) changes value at 12/31/22 Organically-Created $ 1,195 $ (43) $ (8) $ 1,144 Investments in GSE CRT(1) Investment in Credit
Slide 21: MSR Asset Valuation
MSR ASSET VALUATION December 31, 2022 Mortgage Servicing Unaudited ($ in millions) Rights Pool UPB $229,971 Coupon(1) 3.5% Servicing fee(1) 0.29% Prepayment speed assumption (CPR)(1) 6.3% Fair value $4,013 As a multiple of servicing fee 6.11 (1) Weighted average 21
Slide 22: Interest Rate Sensitive Strategies Designed to Mitigate Interest Rate Volatility
INTEREST RATE SENSITIVE STRATEGIES DESIGNED TO MITIGATE INTEREST RATE VOLATILITY Gain in value with Gain in value with Estimated Sensitivity to Changes in Interest Rates at 12/31/22 increasing rates decreasing rates % change in PMT’s shareholders’ equity 15% 10% MSRs Agency MBS 5% 0% -75 -50 -25 0 2
Slide 23: Performance of PMT's Organically-Created GSE CRT Investments in 4Q22
PERFORMANCE OF PMT’S ORGANICALLY-CREATED INVESTMENTS IN GSE CREDIT RISK TRANSFER INVESTMENTS IN 4Q22 (Loss) Income ($ in millions) Comments Contribution Market-driven value changes: Valuation-related changes included in Net gain (loss) on investment $ (8.1) • Reflects impact of credit spread widenin
Slide 24: Balance Sheet Treatment of PMT's Organically-Created Credit Risk Transfer Investments
BALANCE SHEET TREATMENT OF PMT’S ORGANICALLY-CREATED CREDIT RISK TRANSFER INVESTMENTS At December 31, ($ in thousands) 2022 Current outstanding UPB of loans delivered to the CRT SPVs and UPB of loans subject to guarantee obligation............................................ $ 25,315,524 sold to Fan
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 12/31/22 At inception 12/31/22 At inception 12/31/22 UPB(6) $ 1.2 $ 0.2 UPB(6) $ 4.2 $ 0.6 UPB(6) $ 6.5 $ 1.
Slide 26: Correspondent Production Acquisitions and Locks by Product, PFSI Included
CORRESPONDENT PRODUCTION ACQUISITIONS AND LOCKS BY PRODUCT, PFSI INCLUDED Unaudited ($ in millions) 4Q21 1Q22 2Q22 3Q22 4Q22 Correspondent Acquisitions Conventional Conforming - for PMT $ 17,157 $ 9,768 $ 10,320 $ 10,225 $ 6,771 (1) Conventional Conforming - for PFSI - - - - 3,912 Government(1) 15,6
Slide 27: PennyMac Mortgage Investment Trust
™ PENNYMAC’ MORTGAGE INVESTMENT TRUST 2)
PennyMac Mortgage Investment Trust — Q4 2022 Earnings Presentation on 6ix