Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q4 2023 Earnings Presentation
29 slides from Pennymac Mortgage Investment Trust's earnings presentation, Feb 1, 2024
Slide 1: 4Q23 Earnings Report
4Q23 EARNINGS REPORT PennyMac Mortgage Investment Trust February 2024
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 Strong contributions from credit sensitive strategies and correspondent production were partially offset by fair value declines in the interest rate sensitive strategies 4Q23 Results Pretax income CREDIT excluding Fair value of SENSITIVE market-driven organically-created Ne
Slide 4: 2023 Results Highlight the Strength of PMT's Investment Strategies
2023 RESULTS HIGHLIGHT THE STRENGTH OF PMT’S INVESTMENT STRATEGIES Income contributions from all …drove strong financial three investment strategies… performance… $230mm $45mm $158mm $1.63 Credit sensitive Interest rate Net income Diluted strategies pretax sensitive strategies attributable to EPS pr
Slide 5: Origination Market Expectations Reflect Growth
ORIGINATION MARKET EXPECTATIONS REFLECT GROWTH U.S. Mortgage Origination Market(1) Mortgage Rates Have Declined from Recent Highs ($ in trillions) 8.0% $4.4 7.0% 6.0% $2.6 $2.3 5.0% $2.0 $0.7 $1.4 4.0% $0.5 $0.2 $1.8 $1.6 3.0% $1.2 $1.5 2.0% 2021 2022 2023 2024E Purchase Refinance (2) Average 30-yea
Slide 6: Strong Expected Performance from Seasoned Investment Portfolio
STRONG EXPECTED PERFORMANCE FROM SEASONED INVESTMENT PORTFOLIO More than two-thirds of PMT’s shareholders’ equity is deployed to seasoned investments in MSRs and PMT’s unique GSE credit risk transfer investments with strong underlying fundamentals Mortgage Servicing Rights PMT GSE Credit Risk Transf
Slide 7: Capital Deployment Outlook for PMT
CAPITAL DEPLOYMENT OUTLOOK FOR PMT • Actively managing equity allocation through conventional correspondent loan sales to PFSI Credit Sensitive Strategies • Invested $17 million into floating rate GSE CRT bonds in 4Q23 • Equity allocated to the interest rate sensitive strategies increased during the
Slide 8: 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) (ROE) Credit sensitive strategies: • Represents the average annualized return and PMT GSE credit risk transfer 15.7% 13% quarterly earnings potential expected from its Other GSE Credit R
Slide 9: Correspondent Production Highlights
CORRESPONDENT PRODUCTION HIGHLIGHTS • Correspondent acquisitions in 4Q23 totaled $23.6 billion in UPB, up 10% Correspondent Production Volume and Mix Q/Q and 14% Y/Y (UPB in billions) $22.9 $23.9 $23.9 ‒ 47% government loans; 53% conventional loans $21.5 $23.6 $20.8 ‒ Government acquisitions of $11.
Slide 10: Trends in MSR Investments
TRENDS IN MSR INVESTMENTS MSR Investments ($ in millions) • MSR assets were $3.9 billion as of December 31st, down from $4.1 billion as of September 30th $229,971 $230,295 ‒ Fair value declines and runoff from $240,000 $4,800 prepayments partially offset by newly originated $4,400 $4,013 $4,109 $210
Slide 11: Trends in PMT's Unique Investments in GSE Credit Risk Transfer
TRENDS IN PMT’S UNIQUE INVESTMENTS IN GSE CREDIT RISK TRANSFER • Fair value of PMT’s organically-created CRT investments Organically-Created GSE CRT Investments(1) was essentially unchanged from September 30, 2023 as ($ in millions) runoff from prepayments offset fair value gains • The 60+ day delin
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 ($ in millions, except EPS) Market-Driven Contribution(1) Value Changes(2) Allocated(3) on Equity (ROE)(1) Value Changes (1)(2) Credit sensitive strategies: PMT GSE cre
Slide 13: Hedging Approach Central to PMT's Interest Rate Sensitive Investments
HEDGING APPROACH CENTRAL TO PMT’S INTEREST RATE SENSITIVE INVESTMENTS MSR Valuation Changes and Offsets • PMT seeks to manage interest rate risk exposure on a ($ in millions) “global” basis, recognizing interest rate sensitivities across its investment strategies MSR fair value change before realiza
Slide 14: PMT's Flexible and Sophisticated Financing Structures
PMT’S FLEXIBLE AND SOPHISTICATED FINANCING STRUCTURES $609mm Unsecured Senior Notes and Exchangeable Senior Notes $54mm | 2028 • Low, fixed interest rates $345mm | 2026 • First maturity in November 2024 • Provides flexibility and complements asset-backed structures $210mm | 2024 Unsecured Senior Not
Slide 15: Appendix
NAPPENDIX
Slide 16: PMT Is Focused on Unique Investment Strategies in Three Segments
PMT IS FOCUSED ON UNIQUE INVESTMENT STRATEGIES IN THREE SEGMENTS • Leading acquirer and producer of conventional conforming mortgage loans Correspondent • Significant growth in market share over PMT’s more than 14-year history driven by PFSI’s Production operational excellence and high service level
Slide 17: 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 $19.05 $16.13 $0.50 $0.51 $0.44 $0.47 $0.47 $0.47 $0.47 $0.40 $0.40 $0.40 $0.40 $0.40 $0.16 $0.01 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 ($0.07) ($0.28) ($0.32) ($0.88) ROE(2): -6% -7%
Slide 18: Current Market Environment and Macroeconomic Trends
CURRENT MARKET ENVIRONMENT AND MACROECONOMIC TRENDS Average 30-year fixed rate mortgage(1) 7.31% 6.61% 10-year Treasury Bond Yield(2) 4.57% 3.88% 8.0% 5.0% 7.0% 4.0% 6.0% 3.0% 5.0% 2.0% 4.0% 3.0% 1.0% 2.0% 0.0% Macroeconomic Metrics(3) Footnotes 12/31/22 3/31/23 6/30/23 9/30/23 12/31/23 (1) Freddie
Slide 19: PMT Is in Excess of Regulatory Capital and Liquidity Requirements
PMT IS IN EXCESS OF REGULATORY CAPITAL AND LIQUIDITY REQUIREMENTS PennyMac Corp. (PMC) is a wholly-owned subsidiary of PennyMac Mortgage Investment Trust and is approved as a seller/servicer of mortgage loans by Fannie Mae and Freddie Mac As of December 31, 2023 (in millions) Capital Liquidity Capit
Slide 20: PMT's Investment Activity by Strategy During the Quarter
PMT’S INVESTMENT ACTIVITY BY STRATEGY DURING THE QUARTER Long-term mortgage Assets carrying value Net new Fair value Assets carrying value asset at 9/30/2023 investments(5) changes at 12/31/2023 ($ in millions) PMT GSE credit risk $ 1,145 $ (28) $ 29 $ 1,146 transfer (1) Other GSE Credit Risk Credit
Slide 21: MSR Asset Valuation
MSR ASSET VALUATION December 31, 2023 Mortgage Unaudited ($ in millions) Servicing Rights (1) Pool UPB $230,295 Weighted average coupon 3.7% Weighted average servicing fee 0.28% Weighted average prepayment speed assumption (CPR) 7.0% Fair value $3,919 As a multiple of servicing fee 6.01 (1) Owned MS
Slide 22: Delinquency Trends and Servicing Advances Outstanding
DELINQUENCY TRENDS AND SERVICING ADVANCES OUTSTANDING Historical Trends in Delinquency and Foreclosure Rates(1) 7.0% 5.0% 3.3% 2.6% 1.9% 1.5% 1.4% 1.3% 1.2% 1.2% 1.3% 1.1% 1.1% 1.1% 1.0% 1.1% 3/31/20 6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 9/30/21 12/31/21 3/31/22 6/30/22 9/30/22 12/31/22 3/31/23 6
Slide 23: PMT's Owned MSR Portfolio Characteristics
PMT’S OWNED MSR PORTFOLIO CHARACTERISITICS As of December 31, 2023 Loan Remaining FICO credit 60+ UPB % of Note Seasoning Loan size Original Current Segment count maturity score at Delinquency ($ in billions)(2) Total UPB rate (months) ($ in thousands) LTV LTV(3) (in thousands) (months) origination
Slide 24: Interest Rate Sensitive Strategies Designed to Mitigate Interest Rate Volatility
INTEREST RATE SENSITIVE STRATEGIES DESIGNED TO MITIGATE INTEREST RATE VOLATILITY Estimated Sensitivity to Changes in Interest Rates at Gain in value with Gain in value with December 31, 2023 increasing rates decreasing rates % change in PMT’s shareholders’ equity 20% 15% MSRs Agency MBS 10% 5% 0% -7
Slide 25: Performance of PMT's Organically-Created GSE CRT Investments in 4Q23
PERFORMANCE OF PMT’S ORGANICALLY-CREATED INVESTMENTS IN GSE CREDIT RISK TRANSFER INVESTMENTS IN 4Q23 Income (Loss) ($ in millions) Comments Contribution Market-driven value changes: Valuation-related changes included in Net gain (loss) on investment $ 29.0 • Reflects impact of credit spread tighteni
Slide 26: Balance Sheet Treatment of PMT's Organically-Created CRT Investments
BALANCE SHEET TREATMENT OF PMT’S ORGANICALLY-CREATED CREDIT RISK TRANSFER INVESTMENTS At December 31, 2023 ($ in thousands) Current outstanding UPB of loans delivered to the CRT SPVs and UPB of loans subject to guarantee obligation.................................... $ 23,152,230 sold to Fannie Mae
Slide 27: PMT's Organically-Created Investments in Credit Risk Transfer
PMT’S ORGANICALLY-CREATED INVESTMENTS IN CREDIT RISK TRANSFER ($ in billions) PMTT1 (May 2015 - July 2015) PMTT2 (August 2015 - February 2016) PMTT3 (February 2016 - August 2016) At inception 12/31/23 At inception 12/31/23 At inception 12/31/23 UPB $ 1.2 $ 0.1 UPB $ 4.2 $ 0.5 UPB $ 6.5 $ 1.0 Loan Co
Slide 28: Correspondent Production Acquisitions and Locks by Product
CORRESPONDENT PRODUCTION ACQUISITIONS AND LOCKS BY PRODUCT Unaudited ($ in millions) 4Q22 1Q23 2Q23 3Q23 4Q23 Correspondent Acquisitions Conventional Conforming - for PMT $ 6,771 $ 6,629 $ 3,029 $ 2,759 $ 2,477 Conventional Conforming - for PFSI (1) 3,912 4,063 7,018 9,933 10,129 Government - for PF
Slide 29: PennyMac Mortgage Investment Trust
PS PENNYMAC’ MORTGAGE INVESTMENT TRUST 29
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