Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q4 2013 Earnings Presentation
24 slides from Pennymac Mortgage Investment Trust's earnings presentation, Feb 6, 2014
Slide 1: Fourth Quarter 2013 Earnings Report
PennyMac Mortgage Investment Trust February 5, 2014 Fourth Quarter 2013 Earnings Report
Slide 2: Forward-looking statements
4Q13 Earnings Report 2 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 resul
Slide 3: Fourth Quarter Highlights
3 Fourth Quarter Highlights Net income of $52.7 million on net investment income of $96.1 million Diluted earnings per share of $0.69 Dividend of $0.59 per share declared on December 27, 2013 Segment pretax income: Investment Activities: $48.4 million; Correspondent Lending: $6.3 million Completed p
Slide 4: Demonstrated Track Record of Dividends and Growing Book Value
4 Demonstrated Track Record of Dividends and Growing Book Value 15% 13% 17% 16% 17% 18% 18% 14% Return on Equity(2) (1) At period end. Book value per share at December 31, 2013 was $20.82 and has been reduced by two dividends declared in the quarter. Had the dividend pertaining to 4Q13 been declared
Slide 5: PMT's Investments Have Grown and Diversified
4Q13 Earnings Report 5 PMT's Investments Have Grown and Diversified ($ in millions) Allocation of Equity Capital at 12/31/13(1) (100% = $1.467 billion) 1.0x 1.5x 1.8x Leverage Ratio(3) Mortgage Assets Primary sensitivity of distressed whole loans and REO values are to changes in home prices PMT’s ot
Slide 6: Interest Rate Risk Management Is Aided by the Diversity of PMT's Investments
(1) PMT’s interest rate risk exposure is managed on a “global” basis Disciplined hedging Multiple mortgage-related investment strategies with complementary interest rate sensitivities In a hypothetical 100 bps drop in interest rates, the estimated fair value loss would be less than 1% of shareholder
Slide 7: PMT Has a Track Record of Investing in and Resolving Distressed Loans
PMT Has a Track Record of Investing in and Resolving Distressed Loans 4Q13 Earnings Report 7 Cumulative Loans Resolved(1) by Acquisition Period Number of quarters since acquisition (1) Resolutions include payoff, refinance, modification and/or conversion to performing status, deed-in-lieu, short sal
Slide 8: Example of an Optimal Outcome: Sale of Performing Loans
Example of an Optimal Outcome: Sale of Performing Loans 4Q13 Earnings Report 8 Performing Loans in the Distressed Portfolio At 12/31/13 (UPB; $ in millions) Performing Loans Sold (As a percentage of UPB) PMT had recorded valuation gains on these loans since their acquisition, driven by successful mo
Slide 9: Market Environment and Outlook
Market Environment and Outlook 9 Correspondent Lending Competition Jumbo Private-Label Securitization Mortgage Originations and Housing Distressed Whole Loans (1) Source: Average of Mortgage Bankers Association, Fannie Mae and Freddie Mac mortgage market forecasts as of January 2014. Mortgage Servic
Slide 10: Mortgage Investment Activities
Mortgage Investment Activities
Slide 11: Distressed Whole Loan Acquisitions Continue
11 Acquired $507 million in UPB of nonperforming whole loans in October Agreed to acquire an additional pool of nonperforming whole loans totaling $351 million in UPB, expected to settle in February(1) Pipeline of opportunities remains robust, although increased competition from new entrants Distres
Slide 12: Correspondent Acquisition Volume and Mix
Correspondent Acquisition Volume and Mix 12 Correspondent Lending Focused on Growing Volume in a Smaller Market (1) For Government loans, PMT earns a sourcing fee and interest income for its holding period and does not pay a fulfillment fee. ($ in billions) UPB Correspondent acquisitions totaled $5.
Slide 13: Correspondent Lending's Results Improve With Relatively Stable Margins
13 Correspondent Lending's Results Improve With Relatively Stable Margins Relatively stable margins during the quarter which led to a Q/Q increase in net gain on mortgage loans acquired for sale, offset by declines in net interest income and loan origination fees Fulfillment fee expense declined $7.
Slide 14: Organic Growth of MSRs Supplemented by Acquisition of ESS
Organic Growth of MSRs Supplemented by Acquisition of ESS 4Q13 Earnings Report 14 MSR and ESS Assets ($ in millions) Organic growth of MSRs results from Correspondent Lending acquisitions and securitization activity High-quality, newly originated GSE MSRs Returns on the ESS investments are reflected
Slide 15: Financial Results
Financial Results Conny Mac’ Mortgage Ad: Trust
Slide 16: Pretax Income by Operating Segment
16 Pretax Income by Operating Segment Note: Figures may not sum exactly due to rounding 4Q13 Earnings Report Investment Correspondent Intersegment Total Pretax ($ in millions) Activities Lending Elimination Income 4Q12 24.3 $ 41.0 $ - $ 65.3 $ 1Q13 50.3 $ 8.9 $ (3.3) $ 55.9 $ 2Q13 39.8 $ 28.1 $ - $
Slide 17: 4Q13 Investment Activities Segment Results
17 4Q13 Investment Activities Segment Results Segment revenue was up 16% Q/Q driven by several factors: Net gain on investments declined 3% Q/Q Valuation losses on MBS partially offset by gains on mortgage loans and ESS Net interest income increased 81% Q/Q, in part due to capitalized interest on mo
Slide 18: Performing Loan Gains Drive Investment Activities Results
18 Performing Loan Gains Drive Investment Activities Results Gain on performing loans driven by a valuation gain on $233 million in UPB of performing loans from the distressed portfolio pending sale Includes valuation changes offset by $13.7 million of interest income resulting from loan modificatio
Slide 19: Valuation of MSRs and Excess Servicing Spread (ESS)
19 Valuation of MSRs and Excess Servicing Spread (ESS) PMT carries most of its MSRs at the lower of amortized cost or fair value MSRs where the note rate on the underlying loan is less than or equal to 4.5% Fair value of the MSRs increased in excess of carrying value due to higher interest rates and
Slide 20: 4Q13 Correspondent Segment Results
20 4Q13 Correspondent Segment Results Segment revenue fell 4% from 3Q13 to $18.0 million Net gain on mortgage loans acquired for sale rose 26% Q/Q to $13.9 million Other income and net interest income decreased Expenses declined 39% from 3Q13 Fulfillment fee expense decreased from lower funding volu
Slide 21: Appendix
Appendix Conny Mac’ Mortgage Ad: Trust
Slide 22: Fundings and Locks by Product
Fundings and Locks by Product 22 Note: Figures may not sum exactly due to rounding 4Q13 Earnings Report ($ in millions) 4Q12 1Q13 2Q13 3Q13 4Q13 Fundings Conventional 6,526 $ 4,779 $ 4,216 $ 3,608 $ 2,419 $ Government 3,485 3,739 4,262 3,992 3,340 Jumbo 2 8 107 74 14 Total 10,013 $ 8,526 $ 8,586 $ 7
Slide 23: Distressed Portfolio by Acquisition Period
Distressed Portfolio by Acquisition Period 23 (1) Ratio of unpaid principal balance remaining to unpaid principal balance at acquisition 4Q13 Earnings Report Purchase 4Q13 Purchase 4Q13 Purchase 4Q13 Purchase 4Q13 Balance ($mm) 182.7 $ 61.4 Balance ($mm) 195.5 $ 54.4 Balance ($mm) 146.2 $ 40.9 Balan
Slide 24: Distressed Portfolio by Acquisition Period (cont.)
Distressed Portfolio by Acquisition Period (cont.) 24 (1) Ratio of unpaid principal balance remaining to unpaid principal balance at acquisition 4Q13 Earnings Report Purchase 4Q13 Purchase 4Q13 Purchase 4Q13 Balance ($mm) 366.2 $ 308.1 Balance ($mm) 397.3 $ 371.2 Balance ($mm) 929.5 $ 891.7 Pool Fac
PennyMac Mortgage Investment Trust — Q4 2013 Earnings Presentation on 6ix