Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q3 2019 Earnings Presentation
29 slides from Pennymac Mortgage Investment Trust's earnings presentation, Nov 1, 2019
Slide 1: Third Quarter 2019 Earnings Report
PennyMac Mortgage Investment Trust October 31, 2019 Third Quarter 2019 Earnings Report Exhibit 99.2
Slide 2: Forward-looking statements
3Q19 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: Third Quarter Highlights
Third Quarter Highlights 3Q19 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 conv
Slide 4: Third Quarter Highlights (continued)
Third Quarter Highlights (continued) 3Q19 Earnings Report Completed the sale of distressed mortgage loans totaling $94 million in UPB Remaining distressed loans after the sale totaled $33 million in UPB Strong share price performance and increased investment opportunities drove successful capital ra
Slide 5: Current Market Environment
6 5 Current Market Environment 3Q19 Earnings Report Average 30-year fixed rate mortgage(1) The Federal Reserve again cut the Fed Funds rate by 25 basis points, reflecting uncertainty due to international trade tensions and concerns about the growth rate of the global economy The average 30-year fixe
Slide 6: Potential Changes in Housing Finance and Implication for PMT
Potential Changes in Housing Finance and Implication for PMT 3Q19 Earnings Report Treasury recently released its proposed plan for housing finance reform Seeks to end conservatorship of the GSEs and minimize taxpayer risk Seeks to facilitate competition in the housing finance market Outlines legisla
Slide 7: PMT's Investment Activity by Strategy During the Quarter
PMT’s Investment Activity by Strategy During the Quarter 3Q19 Earnings Report (1) The fair value of CRT investments is reflected on the balance sheet as deposits securing CRT arrangements, firm commitment to purchase CRT securities, and derivative and credit risk transfer strip assets, net of the in
Slide 8: 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 9: Mortgage Investment Activities
Mortgage Investment Activities
Slide 10: 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 11: GSE CRT Investments Continue Growth Trajectory and Strong Performance
GSE CRT Investments Continue Growth Trajectory and Strong Performance Delivering loans to Fannie Mae under a commitment for our sixth CRT transaction Delivered $14.2 billion in UPB of loans during the quarter resulting in a firm commitment to purchase $523 million of CRT securities Modest increase i
Slide 12: Term Financing in Place for Substantial Majority of CRT Investments
3Q19 Earnings Report Term Financing in Place for Substantial Majority of CRT Investments Outstanding term financing for PMT’s CRT investments grew to over $1.3 billion as of October 31, 2019 Term notes reduce margin call risk and associated internal cash reserves (1) PMT is currently in the aggregat
Slide 13: MSR and ESS Investments
MSR assets increased modestly to $1.2 billion driven by investment growth from record conventional production volumes, partially offset by fair value losses resulting from the decline in mortgage rates during the quarter and expectations for higher prepayments in the future $250 million in new MSR i
Slide 14: Financial Results
Financial Results nnyMac’ Mortgage Investment Trust.
Slide 15: Financial results by investment strategy
Note: Amounts may not sum exactly due to rounding (1) Income contribution and the annualized return on equity calculated net of any direct expenses associated with investments (e.g., loan fulfillment fees and loan servicing fees), but before tax expenses. Some of the income associated with the inves
Slide 16: Segment Pretax Results
Segment Pretax Results 3Q19 Earnings Report PMT seeks to manage interest rate risk exposure on a “global” basis, recognizing interest rate sensitivities across its investment strategies In a period of decreasing interest rates, PMT’s MSR and ESS investments typically decrease in fair value, while th
Slide 17: Performance of the GSE Credit Risk Transfer Investments in 3Q19
Performance of the GSE Credit Risk Transfer Investments in 3Q19 3Q19 Earnings Report Income Contribution ($ in millions) Income Contribution Comments Market-driven value changes: Valuation-related changes included in Net gain (loss) on investment $8,679,877.1299999952 • Reflects the result of credit
Slide 18: Appendix
Appendix nnyMac’ Mortgage Investment Trust.
Slide 19: PMT's Business Model Is Unique Among Mortgage REITs
3Q19 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 3,900 employees led by a highly experience
Slide 20: 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 3Q19 Earnings Report Repurchased 14.7 mi
Slide 21: Estimated Sensitivity to Changes in Interest Rates
Estimated Sensitivity to Changes in Interest Rates At 9/30/19 Instantaneous parallel shock in interest rates (in bps) Interest Rate Sensitive Strategies Designed to Mitigate Interest Rate Volatility 3Q19 Earnings Report % change in PMT’s shareholders’ equity (1) (2) (3) Gain in value with increasing
Slide 22: 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 23: 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 24: Distressed Loan Portfolio Is Declining Through Liquidation and Sales
-89% Y/Y Distressed Loan Portfolio Is Declining Through Liquidation and Sales 3Q19 Earnings Report -97% Y/Y Performing Loans (UPB in millions) Nonperforming Loans (UPB in millions) Completed the sale of distressed mortgage loans totaling $94 million in UPB Remaining distressed loans after the sale t
Slide 25: Net Gains (Losses) on Loans
Net Gains (Losses) on Loans Unaudited Performance of the Distressed Mortgage Loan Investments 3Q19 Earnings Report Unaudited Quarter ended ($ in thousands) $43,646 $43,738 Valuation Changes: Performing loans $-1,772 $-1,263 Nonperforming loans -4,330 -,517 -6,102 -1,780 Payoffs 507 480 Sales 144 122
Slide 26: Return on Equity Contribution of the GSE Credit Risk Transfer Investments
Return on Equity Contribution of the GSE Credit Risk Transfer Investments 3Q19 Earnings Report Annualized Return on Average CRT Equity Average CRT equity(1) ($ in millions) $166 $178 $207 $271 $333 $403 $452 $490 $446 (1) Equity allocated represents management’s internal allocation across segments a
Slide 27: Credit Risk Transfer – Balance Sheet Treatment
Current outstanding UPB of loans delivered to the CRT SPVs and sold to Fannie Mae or delivered subject to agreements to purchase REMIC CRT securities Credit Risk Transfer – Balance Sheet Treatment Current cash collateralizing guarantee included in “Deposits securing credit risk transfer arrangements
Slide 28: PMT's Investments in GSE Credit Risk Transfer
(1) FICO and LTV metrics at origination (UPB in billions) PMT’s Investments in GSE Credit Risk Transfer 3Q19 Earnings Report ($ 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 43738 At inception 43738 At
Slide 29: 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. 3Q19 Earnings Report (1) Consists of prime jumbo and non-QM loans (UPB in millions) 3Q18 4Q18 1Q19 2Q19 3
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