Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q1 2020 Earnings Presentation
31 slides from Pennymac Mortgage Investment Trust's earnings presentation, May 7, 2020
Slide 1: PennyMac Mortgage Investment Trust First Quarter 2020 Earnings Report
PennyMac Mortgage Investment Trust First Quarter 2020 Earnings Report May 7, 2020
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 attributable to common shareholders of $600.9 million; loss per common share was $5.99 – Segment pretax results: Credit Sensitive Strategies: $(960.5) million; Interest Rate Sensitive Strategies: $324.8 million; Correspondent Production: $65.3 million; Corporate:
Slide 4: First Quarter Highlights (continued)
First Quarter Highlights (continued) Notable activity after quarter end: • Retired the 5.375% senior exchangeable unsecured notes due May 1, 2020 – Repurchased $123.6 million in principal of the notes at a weighted average price of 98.6% of par value, resulting in total savings of approximately $2.2
Slide 5: Developments That Have Affected the Mortgage Markets
Developments That Have Affected the Mortgage Markets • Substantial slowdown in the economy related to COVID-19 and public health measures ‒ Over the last six weeks 30.3 million workers have filed jobless claims, evidencing increased hardships for homeowners and borrowers leading to expectations for
Slide 6: Mortgage Origination Market Update
Mortgage Origination Market Update U.S. Mortgage Origination Market(1) Average 30-year fixed rate mortgage(2) (in billions) 5.0% $2,325 $2,432 4.5% 3.74% 4.0% 3.50% 3.5% 3.0% 2019 2020 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec
Slide 7: PMT's Investment Activity by Strategy During the Quarter
PMT’s Investment Activity by Strategy During the Quarter ($ in millions) Long-term Asset carrying Net new Fair value Asset carrying (5) (6) mortgage asset value at 12/31/19 investments changes value at 3/31/20 Credit Risk Credit (1) $ 3,727 $ 441 $ (1,040) $ 3,128 Transfer Sensitive Strategies Distr
Slide 8: CRT Term Notes Are Critically Important Financing Structure
CRT Term Notes Are Critically Important Financing Structure PMTT1 L Street Securities L Street Securities (1) Transaction PMTT2 CRT-6 2017-PM1 Trust 2019-PMT1 PMTT3 Status Funded Funded Funded In aggregation UPB(2) ($ in billions) $6.7 $16.4 $15.1 $51.4 Face Amount(2) ($ in millions) $317.8 $752.0 $
Slide 9: Assessment of Loss Varies by Transaction for PMT's CRT Investments
Assessment of Loss Varies by Transaction for PMT’s CRT Investments PMTT1 L Street Securities L Street Securities (1) PMT CRT Transactions PMTT2 CRT-6 2017-PM1 Trust 2019-PMT1 PMTT3 % of PMT's Total CRT Investment by 8% 18% 17% 57% UPB as of March 31, 2020 Based on actual losses incurred for loans th
Slide 10: Change in Fair Value of CRT Investments During the Quarter
Change in Fair Value of CRT Investments During the Quarter ($ millions) Fair value changes(1) = $(1,040) ($114) $555 ($726) $3,727 ($314) $3,128 CRT Investments at Increase in face amount Runoff / liquidations Change in discount rate Change in cash flow CRT Investments at 12/31/19 of firm commitment
Slide 11: Loss and Expected Return Scenarios for PMT's CRT Investments
Loss and Expected Return Scenarios for PMT's CRT Investments L Street Securities L Street Securities PMTT1, PMTT2, PMTT3 CRT-6 ($ in millions) 2017-PM1 Trust 2019-PMT1 (1) Total CRT (Scheduled Loss) (Actual Loss) (Scheduled Loss) (Actual Loss) Face Amount $318 $752 $786 $2,057 $3,913 Fair Value $263
Slide 12: Run-Rate Return Potential from PMT's Investment Strategies
Run-Rate Return Potential from PMT’s Investment Strategies Annualized Return WA Equity • CRT returns have increased from ($ in millions, except EPS) on Equity (ROE) Allocated (%)(1) previous estimates due to the significant fair value declines experienced in 1Q20, Credit sensitive strategies: which
Slide 13: Mortgage Investment Activities
Mortgage Investment Activities
Slide 14: Correspondent Production Highlights
Correspondent Production Highlights • Correspondent acquisitions of nonaffiliated originations Correspondent Production Volume and Mix(1) (UPB in billions) in 1Q20 totaled $29.8 billion in UPB, down 20% Q/Q and up 100% Y/Y $36.0 $34.0 – 54% conventional loans; 46% government loans – Conventional con
Slide 15: Trends in GSE CRT Investments
Trends in GSE CRT Investments • PMT is curtailing new investments in GSE CRT CRT Investments(1) – Federal Housing Finance Agency (FHFA) has instructed Fannie ($ in millions) Mae and Freddie Mac to gradually wind down front-end lender $3,727 Funded investments risk share transactions such as PMT’s by
Slide 16: Trends in MSR and ESS Investments
Trends in MSR and ESS Investments MSR and ESS Investments ($ in millions) Carrying value on balance sheet Related UPB $2,000 $200,000 $1,714 $1,600 $179 $160,000 $1,362 $1,321 $1,346 $1,314 $205 $183 $157 $1,200 $194 $120,000 $800 $1,536 $80,000 $1,157 $1,126 $1,163 $1,157 $400 $40,000 $0 $0 3/31/20
Slide 17: PMT's Estimated Sensitivity to Changes in Interest Rates
PMT’s Estimated Sensitivity to Changes in Interest Rates At 12/31/19 At 3/31/20 % change in PMT’s % change in PMT’s shareholders’ equity shareholders’ equity 10% 10% 8% 8% Instantaneous parallel shock in Instantaneous parallel shock in interest rates (in bps) interest rates (in bps) 6% 6% 4% 4% 2% 2
Slide 18: Outstanding Performance from the Interest Rate Sensitive Strategies in 1Q20
Outstanding Performance from the Interest Rate Sensitive Strategies in 1Q20 • PMT seeks to manage interest rate risk MSR and ESS Valuation Changes and Offsets exposure on a “global” basis, recognizing ($ in millions) interest rate sensitivities across its MSR and ESS fair value change before realiza
Slide 19: Financial Results
Financial Results (PannyMac’ Mortgage Investment Trust
Slide 20: First Quarter Results and Return Contributions by Strategy
First Quarter Results and Return Contributions by Strategy Income (Loss) Total (Loss) Income Market-Driven Value Excluding Market- WA Equity Annualized Return ($ in millions) Contribution(1) Changes (2) Driven Value Allocated(3) on Equity (ROE)(1) Changes (1)(2) Credit sensitive strategies: GSE cred
Slide 21: Performance of the GSE Credit Risk Transfer Investments in 1Q20
Performance of the GSE Credit Risk Transfer Investments in 1Q20 (Loss) Income ($ in millions) Comments Contribution Market-driven value changes: Valuation-related changes included $ (969.2) • Reflects significant changes in the market's discount rate and expectation for credit in Net gain (loss) on
Slide 22: Delinquency and Forbearance Trends for PMT's MSR Portfolio
Delinquency and Forbearance Trends for PMT’s MSR Portfolio 30+ Day Delinquency Rate(1) Forbearance Rate 10.0% 10.0% 9.0% 8.0% 8.0% 7.3% 7.0% 6.0% 6.0% Current 5.0% 3.1% 5.0% 4.0% 4.0% 3.0% Delinquent 2.0% 2.0% 4.2% 1.1% 1.1% 1.1% 0.9% 0.9% 1.0% 0.0% 0.0% 12/31/18 12/31/18 3/31/19 4/30/19 3/31/19 6/3
Slide 23: Servicing Advance Requirements
Servicing Advance Requirements Assumptions for PM T Servicing Portfolio Borrower Average months Peak servicing hardship delinquent advances • 15% in forbearance 4 months for delinquent $82 million Moderate plans loans before start of (3% P&I, 97% other Case recovery advances) in 3Q20 • Overall delin
Slide 24: Appendix
Appendix (PannyMac’ Mortgage Investment Trust
Slide 25: Historical Earnings, Dividends and Book Value Per Share
Historical Earnings, Dividends and Book Value Per Share $1.00 $20.00 $0.80 $20.24 $0.68 $0.71 $0.62 $15.16 $0.60 $0.55 $0.55 $0.47 $0.47 $0.47 $0.47 $0.47 $0.47 $0.50 $0.47 $0.47 $0.47 $15.00 $0.40 $0.35 $0.25 $10.00 $0.20 $0.00 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 $5.00 -$0.20 -$0.40 $0.00
Slide 26: MSRs and ESS Asset Valuation
MSRs and ESS Asset Valuation Unaudited (1) Mortgage Servicing Rights Excess Servicing Spread At 3/31/20 At 12/31/19 At 3/31/20 At 12/31/19 Pool UPB $141,781 $131,024 $19,154 $19,905 (2) Coupon 4.15% 4.20% 4.19% 4.19% (2)(3) Servicing fee/spread 0.28% 0.28% 0.19% 0.19% Fair value $1,157 $1,536 $157 $
Slide 27: PMT's Excess Servicing Spread Investments in Partnership with PFSI
PMT’s Excess Servicing Spread Investments in Partnership with PFSI • PMT has co-invested in Agency MSRs acquired from third-party sellers by PFSI; presently only related to Ginnie Mae MSRs • PMT acquires the right to receive the excess servicing spread cash flows over the life of the underlying loan
Slide 28: Return on Equity Contribution of the GSE Credit Risk Transfer Investments
Return on Equity Contribution of the GSE Credit Risk Transfer Investments Annualized Return on Average CRT Equity 67.6% 61.0% 54.5% 38.6% 38.5% 34.3% 31.5% 29.4% 20.9% 21.8% 19.6% 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 -477.4% Average CRT equity(1) $207 $271 $333 $403 $452 $490
Slide 29: Credit Risk Transfer – Balance Sheet Treatment
Credit Risk Transfer – Balance Sheet Treatment At March 31, ($ in thousands) 2020 Current outstanding UPB of loans delivered to the CRT UPB of loans subject to guarantee obligation....................................... $ 89,630,737 SPVs and sold to Fannie Mae or delivered subject to agreements to p
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 3/31/2020 At inception 3/31/2020 At inception 3/31/2020 UPB $ 1.2 $ 0.5 UPB $ 4.2 $ 2.1 UPB $ 6.5 $ 4.1 Loan Count 4,113 2
Slide 31: Correspondent Production Acquisitions and Locks by Product
Correspondent Production Acquisitions and Locks by Product (UPB in millions) 1Q19 2Q19 3Q19 4Q19 1Q20 (1) Acquisitions Conventional Conforming $ 8,130 $ 10,737 $ 16,644 $ 20,510 $ 16,153 Government 6,752 10,574 14,346 16,653 13,616 (2) Non-Agency 5 4 3 - - Total Correspondent Acquisitions $ 14,887 $
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