Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q2 2019 Earnings Presentation
28 slides from Pennymac Mortgage Investment Trust's earnings presentation, Aug 2, 2019
Slide 1: Second Quarter 2019 Earnings Report
PennyMac Mortgage Investment Trust August 1, 2019 Second Quarter 2019 Earnings Report Exhibit 99.2
Slide 2: Forward-looking statements
2Q19 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 2Q19 Earnings Report (1) Annualized 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. (2) Consists of delegated and non-delegated con
Slide 4: Second Quarter Highlights (continued)
Second Quarter Highlights (continued) 2Q19 Earnings Report (1) These transactions are subject to continuing due diligence and customary closing conditions. There can be no assurance regarding the size of these transactions or that these transactions will be completed at all. Other investment and fin
Slide 5: Current Market Environment
6 5 Current Market Environment 2Q19 Earnings Report Average 30-year fixed rate mortgage(1) The Federal Reserve recently cut the Fed Funds rate by 25 basis points, with additional cuts expected by year end The U.S. economic outlook has weakened, weighed down by global growth concerns and uncertainty
Slide 6: PMT's Investment Activity by Strategy During the Quarter
PMT’s Investment Activity by Strategy During the Quarter 2Q19 Earnings Report (1) The fair value of CRT investments is reflected on the balance sheet as deposits securing CRT arrangements, firm commitments to purchase CRT securities and derivative and credit risk transfer strip assets, net of the in
Slide 7: 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 8: Mortgage Investment Activities
Mortgage Investment Activities
Slide 9: 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 10: GSE CRT Investments Continue Growth Trajectory and Strong Performance
GSE CRT Investments Continue Growth Trajectory and Strong Performance Settled PMT’s fifth CRT transaction during 2Q19 Delivering loans to Fannie Mae under a commitment for our sixth CRT transaction Delivered $9.3 billion in UPB of loans during the quarter resulting in a firm commitment to purchase $
Slide 11: Continuing To Grow Term Financing for CRT Investments
2Q19 Earnings Report Continuing To Grow Term Financing for CRT Investments Outstanding term financing for PMT’s CRT investments grew to $934 million at June 30, 2019 Term notes reduce margin call risk and associated internal cash reserves CRT 5 currently financed with securities repurchase agreement
Slide 12: MSR and ESS Investments
MSR investments decreased modestly to $1.1 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 the addition of $153 million in new MSR investments from new production volume UPB
Slide 13: Financial Results
Financial Results nnyMac’ Mortgage Investment Trust.
Slide 14: Financial results by segment
Note: Amounts may not sum exactly due to rounding (1) Income contribution and the annualized return on equity calculated net of any direct expenses associated with investments (e.g., loan fulfillment fees and loan servicing fees), but before tax expenses. Some of the income associated with the inves
Slide 15: Performance of the GSE Credit Risk Transfer Investments
Performance of the GSE Credit Risk Transfer Investments in 2Q19 2Q19 Earnings Report ($ in millions) Income Contribution Income Contribution Comments Market-driven value changes: Valuation-related changes included in Net gain (loss) on investment $-3,640,281.74 • Reflects effects of market credit sp
Slide 16: Appendix
Appendix nnyMac’ Mortgage Investment Trust.
Slide 17: PMT's Business Model Is Unique Among Mortgage REITs
2Q19 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 3,600 employees led by a highly experience
Slide 18: 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 2Q19 Earnings Report Repurchased 14.7 mi
Slide 19: 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 20: 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 21: 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 22: Distressed Loan Portfolio Is Declining Through Liquidation and Sales
-71% Y/Y Distressed Loan Portfolio Is Declining Through Liquidation and Sales 2Q19 Earnings Report Driven by bulk sale of $96 million in UPB -85% 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 $35 million
Slide 23: Net Gains (Losses) on Loans
Net Gains (Losses) on Loans Unaudited Performance of the Distressed Mortgage Loan Investments 2Q19 Earnings Report 72.569999999999993 20.86 16.57 1 16.57 1 16.57 Unaudited Quarter ended ($ in thousands) $43,555 $43,646 Valuation Changes: Performing loans $388 $-1,772 Nonperforming loans 535 -4,330 9
Slide 24: Return on Equity Contribution of the GSE Credit Risk Transfer Investments
Return on Equity Contribution of the GSE Credit Risk Transfer Investments 2Q19 Earnings Report Annualized Return on Average CRT Equity Average CRT equity(1) ($ in millions) $166 $178 $207 $271 $333 $403 $452 $490 $446 (1) Equity allocated represents management’s internal allocation across segments a
Slide 25: Credit Risk Transfer – Income Statement and Balance Sheet Treatment
Cash deposited in the SPV in deposits securing CRT agreements. Represents collateral for the initial credit risk retained Includes fair value recognition upon loan delivery under CRT Agreements and market value changes Payments made to Fannie Mae, from pledged cash, for losses on loans underlying th
Slide 26: Credit Risk Transfer – Income Statement and Balance Sheet Treatment (cont'd)
Current outstanding UPB of loans delivered to the CRT SPVs and sold to Fannie Mae or delivered subject to agreements to purchase REMIC CRT securities Credit Risk Transfer – Income Statement and Balance Sheet Treatment (cont’d) Current cash collateralizing guarantee included in “Deposits securing cre
Slide 27: PMT's Investments in GSE Credit Risk Transfer
(1) FICO and LTV metrics at origination (UPB in billions) PMT’s Investments in GSE Credit Risk Transfer 2Q19 Earnings Report ($ 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 43646 At inception 43646 At
Slide 28: Correspondent Production Acquisitions and Locks by Product
Correspondent Production Acquisitions and Locks by Product Note: Delegated volumes exclude PennyMac Financial’s direct lending loans acquired by PMT. Amounts may not sum exactly due to rounding. 2Q19 Earnings Report (1) Consists of prime jumbo and non-QM loans (UPB in millions) 2Q18 3Q18 4Q18 1Q19 2
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