Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q1 2018 Earnings Presentation
28 slides from Pennymac Mortgage Investment Trust's earnings presentation, May 4, 2018
Slide 1: First Quarter 2018 Earnings Report
PennyMac Mortgage Investment Trust May 3, 2018 First Quarter 2018 Earnings Report Exhibit 99.2
Slide 2: Forward-looking statements
1Q18 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: First Quarter Highlights
First Quarter Highlights Net income attributable to common shareholders of $22.0 million on net investment income of $75.7 million Diluted earnings per common share of $0.35; return on average common equity of 7% Dividend of $0.47 per common share declared on March 28, 2018 and paid on April 27, 201
Slide 4: Current Market Environment
6 4 1Q18 Earnings Report Current Market Environment (1) Freddie Mac Primary Mortgage Market Survey. 4.58% as of 4/26/18 (2) Inside Mortgage Finance (as of 4/27/2018) (3) Fannie Mae Housing Forecast (as of 4/10/2018) (4) Black Knight Financial Services – total U.S. loan delinquency rate 30 day+ delin
Slide 5: New MSR financing structure with Fannie Mae (PMT Issuer Trust – FMSR)
6 5 1Q18 Earnings Report In December 2017, we formed PMT ISSUER TRUST – FMSR(1) to facilitate a new MSR financing structure representing the culmination of efforts made in close partnership with Fannie Mae The structure significantly strengthens PMT’s liquidity through two components: Variable Fundi
Slide 6: PMT's Equity Allocation
1Q 2016 100% = $1.41 billion 1Q 2018(3) 100% = $1.54 billion PMT’s Equity Allocation(1) (1) Management’s internal allocation of equity. Amounts as of quarter end. Percentages may not sum exactly due to rounding. (2) Includes $115 million of preferred equity (3) Includes $310 million of preferred equ
Slide 7: Illustrative income potential and equity allocation
Note: This slide presents estimates for illustrative purposes only, using PMT’s base case assumptions (e.g., for credit performance, prepayment speeds, financing economics). Actual results may differ materially. Please refer to slide 2 for important disclosures regarding forward-looking statements.
Slide 8: Mortgage Investment Activities
Mortgage Investment Activities
Slide 9: Correspondent Production Volume and Mix
Correspondent Production Volume and Mix (1) For Government loans, PMT earns a sourcing fee and interest income for its holding period and does not pay a fulfillment fee (2) Conventional conforming and jumbo interest rate lock commitments (3) Based on funding volumes of loans subject to fulfillment f
Slide 10: CRT Investments Outstanding
CRT Investments Outstanding ($ in millions) Completed $3.2 billion in UPB of deliveries during the quarter, which is expected to result in commitments to fund approximately $112 million of new CRT investments once the aggregation period is complete, $42 million of which had been invested at quarter
Slide 11: MSR and ESS Investments at Period End
($ in millions) MSR investments increased to $957 million due to growth from correspondent production activity and fair value gains Excess servicing spread (ESS) investments resulting from prior bulk, mini-bulk and flow MSR acquisitions by PennyMac Financial Services, Inc. (NYSE: PFSI) decreased mod
Slide 12: Distressed Loan Portfolio is Declining Through Liquidation and Sales
1Q18 Earnings Report Completed the previously announced sale of $347 million in UPB of nonperforming and performing loans from the distressed loan portfolio (1) Includes principal payments, payoffs, and write downs (2) Primarily through recidivism of previously performing loans (3) Bulk sales of per
Slide 13: Financial Results
Financial Results nnyMac’ Mortgage Investment Trust.
Slide 14: First Quarter Income and Return Contributions by 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, loan servicing fees), but before tax expenses. Some of the income associated with the investme
Slide 15: Distressed loan losses and bulk sale
Net losses on nonperforming and performing loans totaled $10.0 million, compared to $8.2 million in the prior quarter, driven by: Adverse valuation impact due to increased investor yield requirements as a result of higher interest rates Higher recidivism of previously performing loans and lower than
Slide 16: Appendix
Appendix nnyMac’ Mortgage Investment Trust.
Slide 17: PMT EPS, Common Dividends and Book Value Per Common Share Over Time
Book value per common share(1) 4% 10% Return on Avg. Common Equity(2) (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 (1)% EPS & Common
Slide 18: PMT's Mortgage Assets and Leverage Ratio Over Time
Correspondent loan inventory PMT’s Long-Term Investments ■ CRT(1) ■ Retained interests from private-label securitizations ■ MSRs and ESS ■ Agency and non-Agency MBS ■ Distressed whole loans and REO Leverage ratio(2) (1) The fair value of CRT investments is reflected on the balance sheet as restricte
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: Carrying Values for PMT's Distressed Whole Loans
Nonperforming Loans (at March 31, 2018) Performing Loans (at March 31, 2018) Nonperforming loans are held on average at a 43% discount to current property value – fair value considers costs expected over the liquidation timeline, expected property appreciation and reperformance probability PMT advan
Slide 22: Distressed Loan Portfolio Resolution Activity
Payoffs Foreclosure sales Short sales REO sales Modifications ($UPB in millions) Resolution Activity in the Quarter Total Liquidation Activities Resolution Activity Over Time ($UPB in millions) (% by Activity Type) $222 $209 $185 Quarterly resolution activity as a percentage of nonperforming loans a
Slide 23: Distressed Portfolio by Acquisition Period
(1) Ratio of unpaid principal balance remaining to unpaid principal balance at acquisition 1Q18 Earnings Report Distressed Portfolio by Acquisition Period Purchase1Q18Purchase1Q18Purchase1Q18Purchase1Q18 Balance ($mm) $ 182.78.7Balance ($mm) $ 195.59.1Balance ($mm) $ 146.24.0Balance ($mm) $ 277.810.
Slide 24: Distressed Portfolio by Acquisition Period (cont.)
(1) Ratio of unpaid principal balance remaining to unpaid principal balance at acquisition 1Q18 Earnings Report Distressed Portfolio by Acquisition Period (cont.) 1Q13 2Q13 3Q13 4Q13 Purchase1Q18Purchase1Q18Purchase1Q18Purchase1Q18 Balance ($mm) $ 366.241.9Balance ($mm) $ 397.370.2Balance ($mm) $ 92
Slide 25: Correspondent Production Fundings and Locks by Product
Note: Figures may not sum exactly due to rounding 1Q18 Earnings Report Correspondent Production Fundings and Locks by Product (1) Does not include loans purchased from PennyMac Financial Services, Inc. in 1Q18, 4Q17 and 3Q17, respectively. ($ in millions) 1Q17 2Q17 3Q17 4Q17 1Q18 Fundings Convention
Slide 26: Credit risk transfer investment activity and balance sheet items
Cash deposited in the SPV in Other assets. Represents collateral for the initial credit risk retained Adjustment to timing of cash flows in the most recent CRT commitment allows more efficient deployment of capital during the aggregation period Derivative represents value of expected future cash inf
Slide 27: PMT's Investments in GSE Credit Risk Transfer
(1) FICO and LTV metrics at origination (UPB in billions) 1Q18 Earnings Report PMT’s Investments in GSE Credit Risk Transfer CRT 2015 -1 (May 2015 - July 2015) CRT 2015 -2 (August 2015 - Feburary 2016) At inception 3/31/2018At inception 3/31/2018 UPB $ 1.3 $0.8UPB $ 4.2 $2.9 Loan Count4,108 3,012Loa
Slide 28: Excess servicing spread structure
(1) The contractual servicer and MSR owner is PennyMac Loan Services, LLC, an indirect controlled 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 Spr
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