Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q4 2020 Earnings Presentation
31 slides from Pennymac Mortgage Investment Trust's earnings presentation, Feb 4, 2021
Slide 1: Fourth Quarter 2020 Earnings Report
PennyMac Mortgage Investment Trust February 4, 2021 Fourth Quarter 2020 Earnings Report Exhibit 99.2
Slide 2: 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 results, future operations,
Slide 3: Fourth Quarter Highlights
4Q20 Earnings Report Fourth Quarter Highlights Net income attributable to common shareholders of $76.6 million; diluted earnings per common share of $0.78 Continued recovery in the fair value of government-sponsored enterprise (GSE) credit risk transfer (CRT) investments due to credit spread tighten
Slide 4: PMT Is Focused on Unique Investment Strategies in Three Segments
4Q20 Earnings Report PMT Is Focused on Unique Investment Strategies in Three Segments Correspondent Production Credit Sensitive Strategies Interest Rate Sensitive Strategies Leading producer of conventional conforming mortgage loans PMT entered the correspondent production business in 2011 after lar
Slide 5: Origination Market Remains Historically Strong
4Q20 Earnings Report Origination Market Remains Historically Strong (1) Actual originations: Inside Mortgage Finance. Total originations forecast: Average of Mortgage Bankers Association (1/20/21), Fannie Mae (1/11/21), and Freddie Mac (1/14/21) forecasts. (2) Freddie Mac Primary Mortgage Market Sur
Slide 6: PMT Successfully Navigated the Unprecedented Turbulence of 2020
4Q20 Earnings Report PMT Successfully Navigated the Unprecedented Turbulence of 2020 CRT Assets(1) ($ in millions) MSRs & ESS Assets(1) ($ in millions) (1) As of December 31, 2020 (2) All CRT term notes contain additional two-year extension options at PMT’s discretion, with the exception of $500 mil
Slide 7: PMT's Investment Activity by Strategy During the Quarter
4Q20 Earnings Report PMT’s Investment Activity by Strategy During the Quarter Credit Sensitive Strategies Interest Rate Sensitive Strategies ($ in millions) (1) The fair value of CRT investments is reflected on PMT’s balance sheet as deposits securing CRT arrangements, and derivative and credit risk
Slide 8: Successful Capital Deployment Into Attractive MSR Investments
4Q20 Earnings Report Successful Capital Deployment Into Attractive MSR Investments Runoff from prepayments on CRT assets… …is offset by net new MSR investments… …resulting from record conventional production volumes in PMT’s leading correspondent production business
Slide 9: Run-Rate Return Potential from PMT's Investment Strategies
4Q20 Earnings Report 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 loss treatment for PMTT1, PMTT2 and PMTT3 a
Slide 10: Mortgage Investment Activities
Mortgage Investment Activities
Slide 11: Correspondent Production Highlights
4Q20 Earnings Report Correspondent Production Highlights Correspondent Production Volume and Mix (UPB in billions) (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 interest rate lock commitmen
Slide 12: Trends in MSR and ESS Investments
4Q20 Earnings Report Trends in MSR and ESS Investments MSR assets increased to $1.8 billion from $1.4 billion, driven by new investments resulting from strong conventional production volumes $441 million in new MSR investments UPB associated with MSR investments increased to $170.7 billion from $152
Slide 13: PMT Completed the Purchase of L-Street Securities Trust 20-PMT1
4Q20 Earnings Report PMT Completed the Purchase of L-Street Securities Trust 2020-PMT1 Represents the largest CRT transaction ever completed by PMT $58 billion in UPB of loans delivered from April 2019 through September 2020; $44 billion in outstanding UPB at cutoff Purchased $1.7 billion in floatin
Slide 14: Performance Update and Loss Mitigation Activity Related to CRT Investments
Performance Update and Loss Mitigation Activity Related to PMT’s CRT Investments 4Q20 Earnings Report (1) As of December 31, 2020 (2) See https://www.fanniemae.com/here-help-homeowners/introducing-covid-19-payment-deferral A variety of loss mitigation strategies are utilized to assist delinquent bor
Slide 15: Trends in PMT's Investments in GSE Credit Risk Transfer
4Q20 Earnings Report Trends in PMT's Investments in GSE Credit Risk Transfer (CRT) PMT settled L-Street Securities Trust 2020-PMT1 in 4Q20 The UPB of CRT investments declined significantly Q/Q as a result of elevated prepayments 60+ day delinquencies declined Q/Q but remain elevated as a result of h
Slide 16: Financial Results
Financial Results (bnnyMac’ Mortgage Investment Trust
Slide 17: Fourth Quarter Results and Return Contributions
4Q20 Earnings Report 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 asso
Slide 18: Performance of the GSE Credit Risk Transfer Investments in 4Q20
4Q20 Earnings Report Performance of the GSE Credit Risk Transfer Investments in 4Q20
Slide 19: Hedging Approach Central to PMT's Interest Rate Sensitive Investments
4Q20 Earnings Report Hedging Approach Central to PMT’s Interest Rate Sensitive Investments PMT seeks to manage interest rate risk exposure on a “global” basis, recognizing interest rate sensitivities across its investment strategies PMT has a history of successfully hedging to offset the majority of
Slide 20: Appendix
Appendix (bnnyMac’ Mortgage Investment Trust
Slide 21: Historical Earnings, Dividends and Book Value Per Share
4Q20 Earnings Report Historical Earnings, Dividends and Book Value Per Share (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 Repurchased
Slide 22: Interest Rate Sensitive Strategies Designed to Mitigate Interest Rate Volatility
4Q20 Earnings Report Interest Rate Sensitive Strategies Designed to Mitigate Interest Rate Volatility Estimated Sensitivity to Changes in Interest Rates At 12/31/20 Instantaneous parallel shock in interest rates (in bps) % change in PMT’s shareholders’ equity (1) (2) (3) Gain in value with increasin
Slide 23: Servicing Trends – Delinquencies & Advances for PMT's MSR Portfolio
Servicing Trends – Delinquencies & Advances for PMT’s MSR Portfolio 4Q20 Earnings Report In PMT’s conventional MSR portfolio, approximately 56,000 borrowers were enrolled in a forbearance plan in 2020 Through December 31st, approximately 30,000 thousand borrowers exited or are in the process of exit
Slide 24: MSRs and ESS Asset Valuation
MSRs and ESS Asset Valuation Unaudited (1) Pool UPB, pool weighted average coupon and CPR represent the characteristics of the underlying MSR portfolio owned by PFSI. Weighted average servicing spread, fair value and valuation multiple relate to the ESS asset owned by PMT. The fair value assessment
Slide 25: 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 26: Return on Equity Contribution of the GSE Credit Risk Transfer Investments
Return on Equity Contribution of the GSE Credit Risk Transfer Investments 4Q20 Earnings Report Return on Equity Contribution of the GSE Credit Risk Transfer Investments Annualized Return on Average CRT Equity (1) Equity allocated represents management’s internal allocation across segments and invest
Slide 27: Credit Risk Transfer – Balance Sheet Treatment
Credit Risk Transfer – Balance Sheet Treatment 4Q20 Earnings Report 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 Current cash collateralizing guarantee included in “Deposits securing credit risk
Slide 28: CRT Financing Summary
4Q20 Earnings Report CRT Financing Summary (1) As of December 31, 2020 Term notes do not contain mark-to-market provisions Increased losses on CRT investments are not expected to accelerate amortization of the term notes Earliest maturity is March 2022; all notes contain optional two-year extensions
Slide 29: Assessment of Loss Varies by Transaction for PMT's CRT Investments
Assessment of Loss Varies by Transaction for PMT’s CRT Investments 4Q20 Earnings Report (1) Fannie Mae has published clarification that the COVID-19 pandemic is a casualty event. Source: https://www.fanniemae.com/portal/funding-the-market/credit-risk/news/covid19-casualty-event-050120.html
Slide 30: PMT's Investments in GSE Credit Risk Transfer
PMT’s Investments in GSE Credit Risk Transfer 4Q20 Earnings Report (1) FICO and LTV metrics at origination (2) Losses due to liquidation of reference pool collateral (3) Interest reduction due to modification of reference pool collateral (4) Loans eligible for loss reversal are included as of 12/31/
Slide 31: Correspondent Production Acquisitions and Locks by Product
4Q20 Earnings Report Correspondent Production Acquisitions and Locks by Product Note: Conventional Conforming, Government, and Non-Agency acquisitions exclude PennyMac Financial’s Direct Lending Loans Acquired by PMT.
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