Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q1 2023 Earnings Presentation
27 slides from Pennymac Mortgage Investment Trust's earnings presentation, Apr 27, 2023
Slide 1: 1Q23 Earnings Report
1Q23 EARNINGS REPORT PennyMac Mortgage Investment Trust April 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: First Quarter Highlights
FIRST QUARTER HIGHLIGHTS Strong performance from PMT’s credit sensitive strategies and income excluding the impacts of market-driven fair value changes was partially offset by fair value declines in PMT’s interest rate sensitive strategies 1Q23 Results Pretax income Net income CREDIT excluding Fair
Slide 4: Origination Market Has Declined Meaningfully
ORIGINATION MARKET HAS DECLINED MEANINGFULLY U.S. Mortgage Origination Market(1) Mortgage Rates Remain High ($ in trillions) 7.0% $4.4 6.0% 5.0% $2.6 4.0% $2.3 $2.1 3.0% $0.7 $1.7 $0.6 2.0% $0.4 $1.8 $1.6 $1.5 1.0% $1.3 0.0% 2021 2022 2023E 2024E 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 • Credit spreads have continued • Sensitivity of MSR value has declined • Quarterly volumes expected to tightening thus far in 2Q23, driving given signific
Slide 6: Capital Deployment Outlook for PMT
CAPITAL DEPLOYMENT OUTLOOK FOR PMT Credit Sensitive Strategies • Actively managing PMT’s equity allocation through • Prevailing market conditions have created investment conventional correspondent loan sales to PFSI opportunities in government-sponsored enterprise (GSE) issued CRT (CAS and STACR bon
Slide 7: Run-Rate Return Potential from PMT's Investment Strategies
RUN-RATE RETURN POTENTIAL FROM PMT’S INVESTMENT STRATEGIES Annualized • Represents the average annualized return and WA Equity Return on Equity Allocated (%) (1) quarterly earnings potential PMT expects from its (ROE) strategies over the next four quarters Credit sensitive strategies: Organically-cr
Slide 8: Correspondent Production Highlights
CORRESPONDENT PRODUCTION HIGHLIGHTS • Correspondent acquisitions in 1Q23 totaled $20.2 billion in UPB, down 3% Correspondent Production Volume and Mix Q/Q and 10% Y/Y (UPB in billions) ‒ Relatively stable volumes despite a significantly smaller origination market $22.7 $22.9 $22.5 $21.7 $20.8 $20.2
Slide 9: Trends in MSR Investments
TRENDS IN MSR INVESTMENTS MSR Investments ($ in millions) $5,000 $231,615 $240,000 • MSR assets were $4.0 billion as of March 31st, $4,500 $219,017 down slightly from December 31st $3,941 $4,013 $3,975 $4,000 $3,696 ‒ Fair value declines and runoff from prepayments $3,391 $210,000 $3,500 partially o
Slide 10: Delinquency Trends and Servicing Advances Outstanding
DELINQUENCY TRENDS AND SERVICING ADVANCES OUTSTANDING Historical Trends in Delinquency and Foreclosure Rates(1) 7.0% 5.0% 3.3% 2.6% 1.9% 1.5% 1.3% 1.2% 1.1% 1.1% 1.1% 1.0% 1.1% 3/31/20 6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 9/30/21 12/31/21 3/31/22 6/30/22 9/30/22 12/31/22 3/31/23 30-60 Day 60-90
Slide 11: Trends in PMT's Unique Investments in GSE Credit Risk Transfer
TRENDS IN PMT’S UNIQUE INVESTMENTS IN GSE CREDIT RISK TRANSFER • Fair value of PMT’s organically-created CRT investments Organically-Created GSE CRT Investments(1) was essentially unchanged from December 31, 2022 as ($ in millions) Funded investments fair value gains offset runoff from prepayments $
Slide 12: 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, except EPS) (1) (2) Market-Driven (3) Contribution Value Changes Allocated on Equity (ROE)(1) Value Changes (1)(2) Credit sensitive strategies: Organical
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 • PMT seeks to manage interest rate risk exposure on a ($ in millions) “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 acquirer and 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 • Pro
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 $20.90 $15.96 $0.67 $0.47 $0.47 $0.47 $0.47 $0.47 $0.47 $0.47 $0.50 $0.40 $0.40 $0.32 $0.01 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 ($0.07) ($0.28) ($0.32) ($0.45) ($0.88) ROE(2): 13% 6%
Slide 18: Current Market Environment and Macroeconomic Trends
CURRENT MARKET ENVIRONMENT AND MACROECONOMIC TRENDS Average 30-year fixed rate mortgage(1) 10-year Treasury Bond Yield(2) 6.42% 6.32% 5.0% 3.87% 7.0% 3.47% 4.0% 6.0% 5.0% 3.0% 4.0% 2.0% 3.0% 1.0% 2.0% 0.0% Macroeconomic Metrics(3) Footnotes (1) Freddie Mac Primary Mortgage Market Survey. 6.39% as of
Slide 19: PMT Is in Excess of Prospective Regulatory Capital and Liquidity Requirements
PMT IS IN EXCESS OF PROSPECTIVE REGULATORY CAPITAL AND LIQUIDITY REQUIREMENTS In August 2022, the Federal Housing Finance Agency (FHFA) released updated eligibility standards for non-bank seller/servicers with a proposed effective date for most requirements of September 30, 2023 • PennyMac Corp. (PM
Slide 20: PMT's Investment Activity by Strategy During the Quarter
PMT’S INVESTMENT ACTIVITY BY STRATEGY DURING THE QUARTER Assets carrying Assets carrying Long-term mortgage Net new Fair value value at (5) value at ($ in millions) asset 12/31/2022 investments changes 3/31/2023 Credit Risk Transfer (1) $ 1,144 $ (27) $ 31 $ 1,148 Investment in Credit Investor Loan
Slide 21: MSR Asset Valuation
MSR ASSET VALUATION March 31, 2023 Mortgage Servicing Unaudited ($ in millions) Rights Pool UPB(1) $231,615 Weighted Average Coupon 3.5% Weighted Average Servicing fee 0.29% Weighted Average Prepayment speed assumption (CPR) 6.7% Fair value $3,975 As a multiple of servicing fee 5.95 (1) Owned MSR po
Slide 22: Interest Rate Sensitive Strategies Designed to Mitigate Interest Rate Volatility
INTEREST RATE SENSITIVE STRATEGIES DESIGNED TO MITIGATE INTEREST RATE VOLATILITY Gain in value with Gain in value with Estimated Sensitivity to Changes in Interest Rates at 3/31/23 increasing rates decreasing rates % change in PMT’s shareholders’ equity 15% 10% MSRs Agency MBS 5% 0% -75 -50 -25 0 25
Slide 23: Performance of PMT's Organically-Created GSE CRT Investments in 1Q23
PERFORMANCE OF PMT’S ORGANICALLY-CREATED INVESTMENTS IN GSE CREDIT RISK TRANSFER INVESTMENTS IN 1Q23 Income (Loss) ($ in millions) Comments Contribution Market-driven value changes: Valuation-related changes included in Net gain (loss) on investment $ 30.9 • Reflects impact of credit spread tighteni
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 March 31, ($ in thousands) 2023 Current outstanding UPB of loans delivered to the CRT SPVs and UPB of loans subject to guarantee obligation.................................... $ 24,824,362 sold to Fannie Mae or
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 3/31/23 At inception 3/31/23 At inception 3/31/23 UPB $ 1.2 $ 0.2 UPB $ 4.2 $ 0.6 UPB $ 6.5 $ 1.1 Loan Count
Slide 26: Correspondent Production Acquisitions and Locks by Product
CORRESPONDENT PRODUCTION ACQUISITIONS AND LOCKS BY PRODUCT Unaudited ($ in millions) 1Q22 2Q22 3Q22 4Q22 1Q23 Correspondent Acquisitions Conventional Conforming - for PMT $ 9,768 $ 10,320 $ 10,225 $ 6,771 $ 6,629 (1) Conventional Conforming - for PFSI - - - 3,912 4,063 (1) Government 12,730 10,649 1
Slide 27: PennyMac Mortgage Investment Trust
PS PENNYMAC’ MORTGAGE INVESTMENT TRUST 27
PennyMac Mortgage Investment Trust — Q1 2023 Earnings Presentation on 6ix