Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q1 2022 Earnings Presentation
29 slides from Pennymac Mortgage Investment Trust's earnings presentation, May 5, 2022
Slide 1: 1Q22 Earnings Report
1Q22 EARNINGS REPORT PennyMac Mortgage Investment Trust May 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: First Quarter Highlights
FIRST QUARTER HIGHLIGHTS Net loss driven primarily by fair value declines in PMT’s Credit Sensitive Strategies due to credit spread widening and tax provisions in its taxable REIT subsidiary, partially offset by strong results in its Interest Rate Sensitive Strategies 1Q22 Results Income New Fair va
Slide 4: Origination Market Has Declined Meaningfully
ORIGINATION MARKET HAS DECLINED MEANINGFULLY U.S. Mortgage Origination Market(1) Mortgage Rates Have Rapidly Increased ($ in trillions) 5.0% $4.4 $4.1 4.0% $2.7 $2.8 3.0% $2.6 $2.5 $0.9 $0.6 2.0% $1.9 $1.9 1.0% $1.5 $1.8 0.0% 2020 2021 2022E 2023E Purchase Refinance (2) (3) Average 30-year fixed rat
Slide 5: Robust Risk Management Disciplines Aligned With Recent FHFA Proposals
PENNYMAC’S ROBUST RISK MANAGEMENT DISCIPLINES ARE ALIGNED WITH RECENT FHFA PROPOSALS The FHFA re-proposed eligibility standards for PMT is well-positioned to meet these non-bank, Agency seller/servicers requirements given its long-standing commitment to enterprise risk management • Tightened liquidi
Slide 6: Recent Opportunistic Investments Given Higher Expected Market Returns
RECENT OPPORTUNISTIC INVESTMENTS GIVEN HIGHER EXPECTED MARKET RETURNS Rising interest rates and wider credit spreads have driven opportunities for PMT to deploy capital at attractive, long-term risk-adjusted returns PMT’s Equity Allocation Capital Deployed in 1Q22 100% = $2.2 billion • Invested $86
Slide 7: Run-Rate Return Potential From PMT's Investment Strategies
RUN-RATE RETURN POTENTIAL FROM PMT’S INVESTMENT STRATEGIES Annualized WA Equity Return on Equity Allocated (%)(1) • Represents the average annualized return and quarterly earnings (ROE) potential PMT expects from its strategies over the next four Credit sensitive strategies: quarters Organically-cre
Slide 8: Correspondent Production Highlights
CORRESPONDENT PRODUCTION HIGHLIGHTS Correspondent Production Volume and Mix (UPB in billions) • Correspondent acquisitions in 1Q22 totaled $22.5 billion in UPB, down $51.2 $51.1 31% Q/Q and 56% Y/Y ‒ 43% conventional loans; 57% government loans $17.4 $32.8 $30.3 ‒ Conventional conforming acquisition
Slide 9: Trends in MSR Investments
TRENDS IN MSR INVESTMENTS MSR Investments ($ in millions) $3,600 $3,391 $240,000 • MSR assets were $3.4 billion as of March 31st, up from $2.9 billion at December 31st, 2021 $3,200 $2,893 $210,000 $2,826 $2,800 $2,551 ‒ Driven by fair value increases and newly originated $2,441 $180,000 MSR investme
Slide 10: Trends in PMT's Unique Investments in GSE Credit Risk Transfer
TRENDS IN PMT’S UNIQUE INVESTMENTS IN GSE CREDIT RISK TRANSFER • UPB and fair value of PMT’s organically-created CRT Organically-Created GSE CRT Investments(1) investments declined from December 31st, 2021 due to fair ($ in millions) value decreases and prepayments Funded investments • 60+ day delin
Slide 11: 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) (1) (2) Market-Driven (3) Contribution Value Changes Allocated on Equity (ROE)(1) Value Changes(1)(2) Credit sensitive strategies: Organically-created in
Slide 12: Hedging Approach Central to 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 MSR and ESS fair value change before realization of cash flows “global” basis, recognizing interest rate sensitivitie
Slide 13: Appendix
NAPPENDIX
Slide 14: PMT 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 15: 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 9.1% 8.7% 8.0% 7.9% 7.5% Long track record of 4.4% 4.8% attractive shareholder 2.5% 2.6% 2.7% returns(1)… -0.6% -0.5%
Slide 16: 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 $4.51 $17.87 $0.94 $0.78 $0.67 $15.16 $0.47 $0.47 $0.47 $0.47 $0.47 $0.47 $0.40 $0.40 $0.25 $0.32 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 -$0.28 -$0.32 -$0.45 -$5.99 ROE(2): -119% 103% 1
Slide 17: Current Market Environment and Macroeconomic Trends
CURRENT MARKET ENVIRONMENT AND MACROECONOMIC TRENDS Average 30-year fixed rate mortgage(1) 4.67% 10-year Treasury Bond Yield(2) 5.0% 4.0% 2.34% 4.5% 3.0% 1.51% 4.0% 3.11% 3.5% 2.0% 3.0% 1.0% 2.5% 2.0% 0.0% Macroeconomic Metrics(3) Footnotes (1) Freddie Mac Primary Mortgage Market Survey. 5.10% as of
Slide 18: PMT's Investment Activity by Strategy During the Quarter
PMT’S INVESTMENT ACTIVITY BY STRATEGY DURING THE QUARTER Long-term Asset carrying Net new Fair value Asset carrying ($ in millions) mortgage asset value at 12/31/21 investments(5) changes value at 3/31/22 Organically-Created $ 1,686 $ (168) $ (75) $ 1,444 Investments in GSE CRT(1) Investment in Cred
Slide 19: MSR Asset Valuation
MSR ASSET VALUATION March 31, 2022 Mortgage Servicing Unaudited ($ in millions) Rights Pool UPB $219,017 Coupon(1) 3.3% (1) Servicing fee 0.28% (1) Prepayment speed assumption (CPR) 7.8% Fair value $3,391 As a multiple of servicing fee 5.57 (1) Weighted average 19
Slide 20: Interest Rate Sensitive Strategies Designed to Mitigate Interest Rate Volatility
INTEREST RATE SENSITIVE STRATEGIES DESIGNED TO MITIGATE INTEREST RATE VOLATILITY Gain in value with Gain in value with Estimated Sensitivity to Changes in Interest Rates at 3/31/22 increasing rates decreasing rates % change in PMT’s shareholders’ equity 8% 6% MSRs Agency MBS 4% 2% 0% -75 -50 -25 0 2
Slide 21: Servicing Trends – Delinquencies and Advances for PMT's MSR Portfolio
SERVICING TRENDS – DELINQUENCIES AND ADVANCES FOR PMT’S MSR PORTFOLIO 30+ Day Delinquency Rate and Forbearance Trend(1) • Overall mortgage delinquency rates have returned to pre- pandemic levels; however, delinquency rates of seriously 6.3% delinquent loans (90+ days) remains elevated 6.1% 4.7% • In
Slide 22: Performance of Organically-Created GSE CRT Investments in 1Q22
PERFORMANCE OF PMT’S ORGANICALLY-CREATED INVESTMENTS IN GSE CREDIT RISK TRANSFER INVESTMENTS IN 1Q22 (Loss) Income ($ in millions) Comments Contribution Market-driven value changes: Valuation-related changes included in Net gain (loss) on investment $ (74.9) • Reflects impact of credit spread wideni
Slide 23: Performance Update and Loss Mitigation Activity Related to CRT Investments
PERFORMANCE UPDATE AND LOSS MITIGATION ACTIVITY RELATED TO PMT’S ORGANICALLY-CREATED CRT INVESTMENTS Face Fair (Discount)/ Losses-to- % of total As of March 31, 2022 amount value premium date PMTT1-3: fair value (in millions) (in millions) (in millions) (in millions) If all presently delinquent loan
Slide 24: Balance Sheet Treatment of Organically-Created CRT Investments
BALANCE SHEET TREATMENT OF PMT’S ORGANICALLY-CREATED CREDIT RISK TRANSFER INVESTMENTS At March 31, 2022 ($ in thousands) Current outstanding UPB of loans delivered to the CRT SPVs and UPB of loans subject to guarantee obligation.................................... $ 28,160,867 sold to Fannie Mae or
Slide 25: Financing Summary for Organically-Created CRT Investments
FINANCING SUMMARY FOR PMT’S ORGANICALLY-CREATED CRT INVESTMENTS L Street Securities L Street Securities L Street Securities Transaction PMTT1, PMTT2 & PMTT3 2017-PM1 Trust 2019-PMT1 Trust 2020-PMT1 as of March 31, 2022 Status Funded Funded Funded Funded UPB ($ in billions) $2.1 $4.7 $3.5 $17.9 Face
Slide 26: Assessment of Loss Varies by Transaction for CRT Investments
ASSESSMENT OF LOSS VARIES BY TRANSACTION FOR PMT’S ORGANICALLY-CREATED 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 Loss
Slide 27: PMT's Organically-Created Investments in Credit Risk Transfer
PMT’S ORGANICALLY-CREATED INVESTMENTS IN CREDIT RISK TRANSFER (UPB in billions) CRT 2015 -1 (May 2015 - July 2015) CRT 2015 -2 (August 2015 - February 2016) CRT 2016 -1 (February 2016 - August 2016) At inception 03/31/22 At inception 03/31/22 At inception 03/31/22 UPB $ 1.2 $ 0.2 UPB $ 4.2 $ 0.6 UPB
Slide 28: Correspondent Production Acquisitions and Locks by Product
CORRESPONDENT PRODUCTION ACQUISITIONS AND LOCKS BY PRODUCT Unaudited ($ in millions) 1Q21 2Q21 3Q21 4Q21 1Q22 Correspondent Acquisitions Conventional Conforming $ 33,762 $ 30,479 $ 28,605 $ 17,157 $ 9,769 Government(1) 17,440 16,175 15,375 15,651 12,730 Total $ 51,202 $ 46,654 $ 43,980 $ 32,808 $ 22
Slide 29: PennyMac Mortgage Investment Trust
™ PENNYMAC’ MORTGAGE INVESTMENT TRUST 29
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