Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q4 2021 Earnings Presentation
29 slides from Pennymac Mortgage Investment Trust's earnings presentation, Feb 3, 2022
Slide 1: 4Q21 Earnings Report
4Q21 EARNINGS REPORT PennyMac Mortgage Investment Trust February 2022
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 Net loss driven primarily by fair value declines in PMT’s Interest Rate Sensitive Strategies partially offset by strong results in its Credit Sensitive Strategies 4Q21 Results Income New Net loss CREDIT excluding investments in market-driven investor loan Fair value of attr
Slide 4: Origination Market Remains Historically Large
ORIGINATION MARKET REMAINS HISTORICALLY LARGE U.S. Mortgage Origination Market(1) Mortgage Rates Remain Low on a Historical Basis ($ in trillions) 5.0% $4.8 $4.1 4.0% $2.8 $3.1 3.0% $2.3 $2.6 $1.1 2.0% $1.1 $2.0 $2.0 1.0% $1.3 $1.5 0.0% 2019 2020 2021 2022E (2) (3) Purchase Refinance Average 30-year
Slide 5: PMT Has Delivered Attractive Returns Over Different Mortgage Cycles
PMT HAS DELIVERED ATTRACTIVE RETURNS OVER DIFFERENT MORTGAGE CYCLES IN ITS MORE THAN 12 YEAR HISTORY PMT Bloomberg REIT Mortgage Index FTSE Nareit US Mortgage REIT Total Return Index 11.5% 9.1% 8.6% 8.5% Long track record of 7.1% 8.0% 5.7% 5.9% 5.5% 5.9% attractive shareholder 4.2% 4.5% returns(1)…
Slide 6: PMT Is Well-Positioned for New Investment Opportunities
PMT IS WELL-POSITIONED FOR NEW INVESTMENT OPPORTUNITIES The expertise of PMT’s manager and services provider, PFSI(1), combined with its industry-leading correspondent production business makes PMT uniquely positioned to capitalize on opportunities as they arise and evolve CRT TRANSACTIONS WITH PRIV
Slide 7: Successful Capital Deployment into Attractive New Investments
SUCCESSFUL CAPITAL DEPLOYMENT INTO ATTRACTIVE NEW INVESTMENTS Net new investments (in millions) Year-to-date, $1.1 billion of net new $353 $356 investments in MSRs and private $216 label securitizations… $192 1Q21 2Q21 3Q21 4Q21 Net runoff of CRT assets (in millions) $408 $293 …offset $1.1 billion i
Slide 8: Run-Rate Return Potential from PMT's Investment Strategies
RUN-RATE RETURN POTENTIAL FROM PMT’S INVESTMENT STRATEGIES Annualized Return on Equity WA Equity • Represents the average annualized return and quarterly earnings (ROE) Allocated (%) (1) potential PMT expects from its strategies over the next four quarters Credit sensitive strategies: GSE credit ris
Slide 9: Correspondent Production Highlights
CORRESPONDENT PRODUCTION HIGHLIGHTS Correspondent Production Volume and Mix (UPB in billions) • Correspondent acquisitions in 4Q21 totaled $32.8 billion in UPB, down 25% Q/Q and down 42% Y/Y $59.2 $56.9 ‒ 52% conventional loans; 48% government loans $18.9 $44.0 $45.6 ‒ Conventional conforming acquis
Slide 10: Trends in MSR Investments
TRENDS IN MSR INVESTMENTS MSR Investments ($ in millions) $240,000 • MSR assets were $2.9 billion as of December 31st, $3,200 $2,893 up slightly from September 30th, 2021 $2,826 $210,000 $2,800 $2,551 $2,441 ‒ Driven by newly originated MSR investments of $180,000 $2,400 $239 million resulting from
Slide 11: Trends in PMT's Investments in GSE Credit Risk Transfer
TRENDS IN PMT’S INVESTMENTS IN GSE CREDIT RISK TRANSFER • UPB and fair value of CRT investments declined Q/Q as CRT Investments(1) overall prepayment activity remained elevated ($ in millions) Funded investments • 60+ day delinquency rate declined Q/Q as the overall number of delinquent loans decrea
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) Market-Driven Contribution(1) (2) Value Changes Allocated(3) Equity (ROE)(1) Value Changes(1)(2) Credit sensitive strategies: GSE credit risk transfe
Slide 13: Hedging Approach Central to PMT's Interest Rate Sensitive Investments
HEDGING APPROACH CENTRAL TO PMT’S INTEREST RATE SENSITIVE INVESTMENTS MSR and ESS Valuation Changes and Offsets ($ in millions) • PMT seeks to manage interest rate risk exposure on a “global” MSR and ESS fair value change before realization of cash flows basis, recognizing interest rate sensitivitie
Slide 14: Appendix
NAPPENDIX
Slide 15: 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 12-year history driven by operational Production excellence and high service levels • Provides unique ability to
Slide 16: 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) 5.0% 4.0% 4.5% 3.0% 4.0% 3.11% 1.49% 1.51% 3.01% 3.5% 2.0% 3.0% 1.0% 2.5% 2.0% 0.0% Macroeconomic Metrics (3) Footnotes 12/31/20 3/31/21 6/30/21 9/30/21 12/31/21 (1) Freddie Mac
Slide 17: Historical Earnings, Dividends and Book Value per Share
HISTORICAL EARNINGS, DIVIDENDS AND BOOK VALUE PER SHARE Diluted EPS Common Dividend Book value per share (1) $4.51 $21.37 $0.94 $0.78 $19.05 $0.67 $0.55 $0.47 $0.47 $0.47 $0.47 $0.47 $0.47 $0.40 $0.40 $0.25 $0.32 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 -$0.28 -$0.45 -$5.99 ROE(2): 10% -119% 103
Slide 18: PMT's Investment Activity by Strategy During the Quarter
PMT’S INVESTMENT ACTIVITY BY STRATEGY DURING THE QUARTER ($ in millions) Long-term Asset carrying Net new Fair value Asset carrying mortgage asset value at 9/30/21 (5) changes value at 12/31/21 investments Credit Risk $ 1,943 $ (258) $ 1 $ 1,686 Transfer(1) Credit Investment in Sensitive Investor Lo
Slide 19: 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 12/31/21 increasing rates decreasing rates % change in PMT’s shareholders’ equity 8% Principal component analysis based shocks
Slide 20: Servicing Trends – Delinquencies and Advances for PMT's MSR Portfolio
SERVICING TRENDS – DELINQUENCIES AND ADVANCES FOR PMT’S MSR PORTFOLIO • Overall mortgage delinquency rates have returned to pre-pandemic 30+ Day Delinquency Rate and Forbearance Trend(1) 6.3% levels; however, delinquency rates of seriously delinquent loans (90+ 6.1% days) remains elevated 4.7% 3.9%
Slide 21: MSR Asset Valuation
MSR ASSET VALUATION December 31, 2021 Mortgage Servicing Unaudited ($ in millions) Rights Pool UPB $216,065 (1) Coupon 3.3% Servicing fee(1) 0.28% Prepayment speed assumption (CPR)(1) 9.8% Fair value $2,893 As a multiple of servicing fee 4.85 (1) Weighted average 21
Slide 22: Performance of the GSE Credit Risk Transfer Investments in 4Q21
PERFORMANCE OF THE GSE CREDIT RISK TRANSFER INVESTMENTS IN 4Q21 (Loss) Income ($ in millions) Comments Contribution Market-driven value changes: Valuation-related changes included • Reflects impact of slight credit spread tightening and elevated prepayment $ 1.6 speeds in Net gain (loss) on investme
Slide 23: Performance Update and Loss Mitigation Activity Related to PMT's CRT Investments
PERFORMANCE UPDATE AND LOSS MITIGATION ACTIVITY RELATED TO PMT’S CRT INVESTMENTS Face Fair (Discount)/ Losses-to- As of December 31, 2021 % of total PMTT1-3: amount value premium date fair value (in millions) (in millions) (in millions) (in millions) If all presently delinquent loans proceeded unmit
Slide 24: Credit Risk Transfer – Balance Sheet Treatment
CREDIT RISK TRANSFER – BALANCE SHEET TREATMENT At December 31, 2021 ($ in thousands) Current outstanding UPB of loans delivered to the CRT SPVs and UPB of loans subject to guarantee obligation.................................... $ 30,808,907 sold to Fannie Mae or delivered subject to agreements to p
Slide 25: CRT Financing Summary
CRT FINANCING SUMMARY L Street Securities L Street Securities L Street Securities Transaction PMTT1, PMTT2 & PMTT3 2017-PM1 Trust 2019-PMT1 Trust 2020-PMT1 as of December 31, 2021 Status Funded Funded Funded Funded UPB ($ in billions) $2.6 $5.9 $4.6 $22.3 Face Amount ($ in millions) $113.2 $308.5 $2
Slide 26: Assessment of Loss Varies by Transaction for PMT's CRT Investments
ASSESSMENT OF LOSS VARIES BY TRANSACTION FOR PMT’S CRT INVESTMENTS PMT CRT Transactions Recourse Event / Loss Calculation Loans in Forbearance PMTT1, Mortgage Obligations become credit events at 180 days or more PMTT2 & delinquent regardless of any grant of forbearance PMTT3 Losses assesed pursuant
Slide 27: PMT's Investments in Credit Risk Transfer
PMT’S INVESTMENTS IN CREDIT RISK TRANSFER (UPB in billions) PMTT1 (May 2015 - July 2015) PMTT2 (August 2015 - February 2016) PMTT3 (February 2016 - August 2016) At inception 12/31/21 At inception 12/31/21 At inception 12/31/21 UPB $ 1.2 $ 0.2 UPB $ 4.2 $ 0.7 UPB $ 6.5 $ 1.4 Loan Count 4,113 932 Loan
Slide 28: Correspondent Production Acquisitions and Locks by Product
CORRESPONDENT PRODUCTION ACQUISITIONS AND LOCKS BY PRODUCT Unaudited ($ in millions) 4Q20 1Q21 2Q21 3Q21 4Q21 Correspondent Acquisitions Conventional Conforming $ 37,986 $ 33,762 $ 30,479 $ 28,605 $ 17,157 Government(1) 18,923 17,440 16,175 15,375 15,651 Total $ 56,908 $ 51,202 $ 46,654 $ 43,980 $ 3
Slide 29: PennyMac Mortgage Investment Trust
™ PENNYMAC MORTGAGE INVESTMENT TRUST 29
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