Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q2 2021 Earnings Presentation
31 slides from Pennymac Mortgage Investment Trust's earnings presentation, Aug 5, 2021
Slide 1: 2Q21 Earnings Report
PENNYMAC MORTGAGE INVESTMENT TRUST 2Q21 EARNINGS REPORT August 2021
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 income attributable to common shareholders of $31.9 million; diluted earnings per common share of $0.32 • Segment pretax results: Credit Sensitive Strategies: $78.5 million; Interest Rate Sensitive Strategies: $(65.4) million; Correspondent Production: $19.0 million;
Slide 4: PMT Is Focused on Unique Investment Strategies in Three Segments
PMT IS FOCUSED ON UNIQUE INVESTMENT STRATEGIES IN THREE SEGMENTS • Leading producer of conventional conforming mortgage loans Correspondent • Consistent gains in market share over PMT’s 12-year history driven by operational Production excellence and high service levels • Significant opportunity in t
Slide 5: Origination Market Remains Historically Strong
ORIGINATION MARKET REMAINS HISTORICALLY STRONG U.S. Mortgage Origination Market(1) Mortgage Rates Remain Historically Low ($ in trillions) 5.0% $4.1 $3.9 4.0% $2.7 3.0% $2.3 $2.6 $2.2 $0.9 $1.1 2.0% $1.7 $1.9 1.0% $1.3 $1.5 0.0% 2019 2020 2021E 2022E (2) (3) Purchase Refinance Average 30-year fixed
Slide 6: PMT Is Well-Positioned for a Changing Mortgage Market
PMT IS WELL-POSITIONED FOR A CHANGING MORTGAGE MARKET Mortgage rates remain near historic lows CORRESPONDENT PRODUCTION MARKET Conventional mortgage origination market remains ENVIRONMENT especially robust REMAINS ROBUST PMT is uniquely Strong demographic and secular trends expected to drive growth
Slide 7: Successful Capital Deployment into Attractive New Investments
SUCCESSFUL CAPITAL DEPLOYMENT INTO ATTRACTIVE NEW INVESTMENTS Net runoff of CRT assets (in millions) $408 $318 Runoff from prepayments on CRT assets… $135 4Q20 1Q21 2Q21 Net new investments in MSR (in millions) New investments from private label securitizations (in millions) …is offset by net new $3
Slide 8: Run-Rate Return Potential from PMT's Investment Strategies
RUN-RATE RETURN POTENTIAL FROM PMT’S INVESTMENT STRATEGIES Annualized Return WA Equity • Represents the average annualized return and quarterly earnings ($ in millions, except EPS) on Equity (ROE) Allocated (%)(1) potential PMT expects from its strategies over the next four quarters Credit sensitive
Slide 9: Mortgage Investment Activities
MORTGAGE INVESTMENT ACTIVITIES
Slide 10: Correspondent Production Highlights
CORRESPONDENT PRODUCTION HIGHLIGHTS • Correspondent acquisitions in 2Q21 totaled $46.7 billion in Correspondent Production Volume and Mix UPB, down 9% Q/Q and up 56% Y/Y (UPB in billions) $51.2 $51.1 ‒ 65% conventional loans; 35% government loans $46.7 $37.7 $46.0 $17.4 ‒ Conventional conforming acq
Slide 11: Trends in MSR Investments
TRENDS IN MSR INVESTMENTS MSR Investments ($ in millions) • MSR assets were $2.6 billion as of June 30th, up from $2.4 billion at March 31st, 2021 $2,800 $2,551 $210,000 $2,441 ‒ Driven by newly originated MSR investments $2,400 $180,000 of $413 million resulting from strong $2,000 $150,000 conventi
Slide 12: Hedging Approach Central to Interest Rate Sensitive Investments
HEDGING APPROACH CENTRAL TO PMT’S INTEREST RATE SENSITIVE INVESTMENTS MSR and ESS Valuation Changes and Offsets • PMT seeks to manage interest rate risk exposure on a “global” basis, recognizing interest rate sensitivities across its ($ in millions) investment strategies MSR and ESS fair value chang
Slide 13: Trends in PMT's Investments in GSE Credit Risk Transfer
TRENDS IN PMT'S INVESTMENTS IN GSE CREDIT RISK TRANSFER (CRT) • UPB and fair value of CRT investments declined Q/Q CRT Investments(1) as overall prepayments related to PMT’s L Street ($ in millions) Funded investments Securities Trust 2020-PMT1 surpassed a contractual threshold, accelerating prepaym
Slide 14: Performance Update and Loss Mitigation Activity Related to CRT Investments
PERFORMANCE UPDATE AND LOSS MITIGATION ACTIVITY RELATED TO PMT’S CRT INVESTMENTS Face Fair % of total (Discount)/ Losses-to- PMTT1-3: As of June 30, 2021 amount value premium date fair value If all presently delinquent loans proceeded unmitigated to 180 days or more (in millions) (in millions) (in m
Slide 15: Changes in Mortgage Landscape Create Opportunities in Private-Label Securitizations
CHANGES IN THE MORTGAGE LANDSCAPE CREATE INCREASED OPPORTUNITIES FOR INVESTMENTS FROM PRIVATE-LABEL SECURITIZATIONS Details of PMT’s Changing GSE Similar Investment Capital Markets First Non-Owner Landscape Thesis to CRT Expertise Occupied Investment • Limits on how much • The ability to invest in t
Slide 16: Financial Results
(knnyMac: Mortgage Investment Trust FINANCIAL RESULTS »»>
Slide 17: 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: GSE credit risk trans
Slide 18: Performance of the GSE Credit Risk Transfer Investments in 2Q21
PERFORMANCE OF THE GSE CREDIT RISK TRANSFER INVESTMENTS IN 2Q21 (Loss) Income ($ in millions) Comments Contribution Market-driven value changes: Valuation-related changes included • Reflects impact of credit spread tightening and elevated prepayment $ 38.7 speeds in Net gain (loss) on investment Inc
Slide 19: Appendix
(knnyMac: Mortgage Investment Trust APPENDIX »»>
Slide 20: 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% 1.74% 3.17% 3.0% 1.47% 4.0% 3.02% 3.5% 2.0% 3.0% 1.0% 2.5% 2.0% 0.0% Macroeconomic Metrics(3) Footnotes 6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 (1) Freddie Mac Pr
Slide 21: Historical Earnings, Dividends and Book Value per Share
HISTORICAL EARNINGS, DIVIDENDS AND BOOK VALUE PER SHARE (1) $20.79 Diluted EPS Common Dividend Book value per share $20.77 $4.51 $15.16 $0.94 $0.71 $0.78 $0.67 $0.50 $0.47 $0.47 $0.55 $0.47 $0.47 $0.47 $0.47 $0.40 $0.40 $0.25 $0.32 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 -$5.99 ROE(2): 10% 14%
Slide 22: PMT's Investment Activity by Strategy During the Quarter
PMT’S INVESTMENT ACTIVITY BY STRATEGY DURING THE QUARTER Long-term Asset carrying Net new Fair value Asset carrying ($ in millions) mortgage asset value at 3/31/21 (5) changes value at 6/30/21 investments Credit Risk $ 2,581 $ (408) $ 38 $ 2,210 Transfer(1) Credit Investment in Sensitive Non-Owner O
Slide 23: 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 6/30/21 increasing rates decreasing rates % change in PMT’s shareholders’ equity 6% Principal component analysis based 4% shock
Slide 24: Servicing Trends – Delinquencies & Advances for PMT's MSR Portfolio
SERVICING TRENDS – DELINQUENCIES & ADVANCES FOR PMT’S MSR PORTFOLIO 30+ Day Delinquency Rate and Forbearance Trend(1) • In PMT’s conventional MSR portfolio, approximately 58,000 borrowers have been enrolled in a forbearance plan 6.1% 6.3% related to COVID-19 4.7% 3.5% 3.9% 3.2% ‒ Through June 30th,
Slide 25: MSR Asset Valuation
MSR ASSET VALUATION June 30, 2021 Mortgage Unaudited ($ in millions) Servicing Rights Pool UPB $198,548 Coupon 3.3% Servicing fee/spread 0.27% Prepayment speed assumption (CPR) 9.7% Fair value $2,551 As a multiple of servicing fee 4.73 25
Slide 26: Return on Equity Contribution of the GSE CRT Investments
RETURN ON EQUITY CONTRIBUTION OF THE GSE CREDIT RISK TRANSFER INVESTMENTS Annualized Return on Average CRT Equity 294.8% 89.3% 85.9% 54.5% 57.8% 34.3% 31.5% 38.5% 29.4% 28.9% 19.6% 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 -477.4% Average CRT Equity(1) ($ in millions) $800 $710 $62
Slide 27: Credit Risk Transfer – Balance Sheet Treatment
CREDIT RISK TRANSFER – BALANCE SHEET TREATMENT At June 30, ($ in thousands) 2021 Current outstanding UPB of loans delivered to the CRT SPVs and UPB of loans subject to guarantee obligation...................................... $ 41,234,108 sold to Fannie Mae or delivered subject to agreements to pur
Slide 28: 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 June 30, 2021 Status Funded Funded Funded Funded UPB ($ in billions) $2.9 $6.8 $5.4 $26.1 Face Amount ($ in millions) $154.4 $364.3 $307.9
Slide 29: Assessment of Loss Varies by Transaction for PMT's CRT Investments
ASSESSMENT OF LOSS VARIES BY TRANSACTION FOR PMT’S CRT INVESTMENTS PMT CRT Recourse Event / Loss Calculation Loans in Forbearance Transactions PMTT1, Mortgage Obligations become credit events at 180 days or more PMTT2 & delinquent regardless of any grant of forbearance PMTT3 Losses assesed pursuant
Slide 30: PMT's Investments in GSE Credit Risk Transfer
PMT’S INVESTMENTS IN GSE CREDIT RISK TRANSFER (UPB in billions) PMTT1 (May 2015 - July 2015) PMTT2 (August 2015 - February 2016) PMTT3 (February 2016 - August 2016) At inception 6/30/21 At inception 6/30/21 At inception 6/30/21 UPB $ 1.2 $ 0.3 UPB $ 4.2 $ 0.9 UPB $ 6.5 $ 1.8 Loan Count 4,113 1,174 L
Slide 31: Correspondent Production Acquisitions and Locks by Product
CORRESPONDENT PRODUCTION ACQUISITIONS AND LOCKS BY PRODUCT Unaudited ($ in millions) 2Q20 3Q20 4Q20 1Q21 2Q21 Correspondent Acquisitions Conventional Conforming $ 18,900 $ 27,351 $ 37,986 $ 33,762 $ 30,479 Government(1) 10,991 16,977 18,923 17,440 16,175 Total $ 29,890 $ 44,328 $ 56,908 $ 51,202 $ 4
PennyMac Mortgage Investment Trust — Q2 2021 Earnings Presentation on 6ix