Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q2 2022 Earnings Presentation
29 slides from Pennymac Mortgage Investment Trust's earnings presentation, Aug 2, 2022
Slide 1: 2Q22 Earnings Report
2Q22 EARNINGS REPORT PennyMac Mortgage Investment Trust August 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: Second Quarter Highlights
SECOND 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 results in its Interest Rate Sensitive Strategies and Correspondent Production segments
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) 6.0% $4.4 $4.1 5.0% 4.0% $2.7 $2.6 $2.6 $2.3 3.0% $0.8 $0.5 2.0% $1.5 $1.8 $1.8 $1.8 1.0% 0.0% 2020 2021 2022E 2023E Purchase Refinance (2) (3) Average 30-year fixe
Slide 5: PMT's Potential Investment Opportunities
PMT’S POTENTIAL INVESTMENT OPPORTUNITIES CURRENT OPPORTUNISTIC INVESTMENTS LENDER-BASED CRT TRANSACTIONS WITH FANNIE MAE AND FREDDIE MAC • Rising interest rates and wider credit spreads have driven • Delivered nearly $120 billion in UPB of loans into CRT opportunities for PMT to deploy capital at at
Slide 6: Run-Rate Return Potential from PMT's Investment Strategies
RUN-RATE RETURN POTENTIAL FROM PMT’S INVESTMENT STRATEGIES Annualized WA Equity • Represents the average annualized return and quarterly earnings ($ in millions, except EPS) Return on Equity Allocated (%) (1) potential PMT expects from its strategies over the next four (ROE) quarters Credit sensitiv
Slide 7: Correspondent Production Highlights
CORRESPONDENT PRODUCTION HIGHLIGHTS Correspondent Production Volume and Mix (UPB in billions) • Correspondent acquisitions in 2Q22 totaled $21.0 billion in UPB, down 7% Q/Q and 55% Y/Y $46.7 $46.0 ‒ 49% conventional loans; 51% government loans $16.2 ‒ Conventional conforming acquisitions of $10.3 bi
Slide 8: Trends in MSR Investments
TRENDS IN MSR INVESTMENTS MSR Investments ($ in millions) • MSR assets were $3.7 billion as of June 30th, up $4,000 $240,000 from $3.4 billion at March 31st, 2022 $3,696 $3,600 $3,391 ‒ Driven by fair value increases and newly originated $210,000 $3,200 $2,893 MSR investments of $171 million resulti
Slide 9: Trends in PMT's Unique Investments in GSE Credit Risk Transfer
TRENDS IN PMT’S UNIQUE INVESTMENTS IN GSE CREDIT RISK TRANSFER • UPB and fair value of PMT’s organically-created CRT investments Organically-Created GSE CRT Investments(1) declined from March 31st , 2022 due to fair value decreases that ($ in millions) Funded investments resulted from market credit
Slide 10: Second Quarter Results and Return Contributions by Strategy
SECOND 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
Slide 11: 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 ($ in millions) • PMT seeks to manage interest rate risk exposure on a MSR fair value change before realization of cash flows “global” basis, recognizing interest rate sensitivities across Change
Slide 12: PMT's Flexible and Sophisticated Financing Structures
PMT’S FLEXIBLE AND SOPHISTICATED FINANCING STRUCTURES $555mm Exchangeable Senior Notes $345mm 5.500% due • Low, fixed interest rates March 2026 • More than two years until first maturity of exchangeable senior notes $210mm 5.500% due • Provides flexibility and complements asset-backed structures Nov
Slide 13: Appendix
NAPPENDIX
Slide 14: 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 13-year history driven by operational Production excellence and high service levels • Provides unique ability to
Slide 15: Robust Liquidity Risk Management Discipline
ROBUST LIQUIDITY RISK MANAGEMENT DISCIPLINE $890 million in available liquidity at June 30, 2022(1), significantly in excess of minimum requirements and internally established reserve levels Reserves maintained for: • Financing covenants and other requirements of counterparties, regulators and ratin
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 $19.39 $16.59 $4.51 $0.94 $0.78 $0.67 $0.40 $0.40 $0.47 $0.47 $0.47 $0.47 $0.47 $0.47 $0.47 $0.32 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 ($0.28) ($0.32) ($0.45) ($0.88) ROE(2): 103% 19%
Slide 17: Current Market Environment and Macroeconomic Trends
CURRENT MARKET ENVIRONMENT AND MACROECONOMIC TRENDS Average 30-year fixed rate mortgage(1) 5.70% 10-year Treasury Bond Yield(2) 6.0% 4.67% 4.0% 3.01% 5.5% 2.34% 5.0% 3.0% 4.5% 4.0% 2.0% 3.5% 3.0% 1.0% 2.5% 2.0% 0.0% Macroeconomic Metrics (3) Footnotes (1) Freddie Mac Primary Mortgage Market Survey.
Slide 18: PMT's Investment Activity by Strategy During the Quarter
PMT’S INVESTMENT ACTIVITY BY STRATEGY DURING THE QUARTER ($ in millions) Long-term Asset carrying Net new Fair value Asset carrying mortgage asset value at 3/31/22 investments(5) changes value at 6/30/22 Organically-Created $ 1,444 $ (106) $ (67) $ 1,270 Investments in GSE CRT(1) Credit Investment i
Slide 19: MSR Asset Valuation
MSR ASSET VALUATION June 30, 2022 Mortgage Servicing Unaudited ($ in millions) Rights Pool UPB $222,502 (1) Coupon 3.3% (1) Servicing fee 0.28% Prepayment speed assumption (CPR) (1) 6.9% Fair value $3,696 As a multiple of servicing fee 5.94 (1) Weighted average 19
Slide 20: Interest Rate Sensitive Strategies Designed to Mitigate Interest Rate Volatility
INTEREST RATE SENSITIVE STRATEGIES DESIGNED TO MITIGATE INTEREST RATE VOLATILITY Gain in value with Gain in value with Estimated Sensitivity to Changes in Interest Rates at 6/30/22 increasing rates decreasing rates % change in PMT’s shareholders’ equity 10% 8% MSRs Agency MBS 6% 4% 2% 0% -2% -75 -50
Slide 21: Historical Trends in Delinquencies and Advances
HISTORICAL TRENDS IN DELINQUENCIES AND ADVANCES Historical Trends in Delinquency and Foreclosure Rates(1) 7.0% 5.0% 3.3% 2.6% 1.9% 1.1% 1.5% 1.3% 1.1% 1.1% 3/31/20 6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 9/30/21 12/31/21 3/31/22 6/30/22 30-60 Day 60-90 Day 90+ Day In Foreclosure • Overall mortgage
Slide 22: Performance of PMT's Organically-Created GSE CRT Investments in 2Q22
PERFORMANCE OF PMT’S ORGANICALLY-CREATED INVESTMENTS IN GSE CREDIT RISK TRANSFER INVESTMENTS IN 2Q22 (Loss) Income ($ in millions) Comments Contribution Market-driven value changes: Valuation-related changes included in Net gain (loss) on investment $ (67.0) • 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- PMTT1-3: % of total As of June 30, 2022 amount value premium date fair value If all presently delinquent loans proceeded unmitigated to 180 (in millions) (in millions
Slide 24: Balance Sheet Treatment of PMT's Organically-Created CRT Investments
BALANCE SHEET TREATMENT OF PMT’S ORGANICALLY-CREATED CREDIT RISK TRANSFER INVESTMENTS At June 30, ($ in thousands) 2022 Current outstanding UPB of loans delivered to the CRT SPVs and UPB of loans subject to guarantee obligation.................................... $ 26,338,573 sold to Fannie Mae or d
Slide 25: Financing Summary for PMT's 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 June 30, 2022 Status Funded Funded Funded Funded UPB ($ in billions) $2.0 $4.4 $3.1 $16.8 Face A
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) PMTT1 (May 2015 - July 2015) PMTT2 (August 2015 - February 2016) PMTT3 (February 2016 - August 2016) At inception 6/30/22 At inception 6/30/22 At inception 6/30/22 UPB $ 1.2 $ 0.2 UPB $ 4.2 $ 0.6 UPB $ 6.5 $ 1.2 Loan Cou
Slide 28: Correspondent Production Acquisitions and Locks by Product
CORRESPONDENT PRODUCTION ACQUISITIONS AND LOCKS BY PRODUCT Unaudited ($ in millions) 2Q21 3Q21 4Q21 1Q22 2Q22 Correspondent Acquisitions Conventional Conforming $ 30,479 $ 28,605 $ 17,157 $ 9,768 $ 10,320 Government(1) 16,175 15,375 15,651 12,730 10,649 Jumbo - - - 1 3 Total $ 46,654 $ 43,980 $ 32,8
Slide 29: PennyMac Mortgage Investment Trust
™ PENNYMAC MOBTCAGE INVESTMENT TRUST 29
PennyMac Mortgage Investment Trust — Q2 2022 Earnings Presentation on 6ix