Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Investor Presentation (May 2020)
35 slides from Pennymac Mortgage Investment Trust's investor presentation, May 19, 2020
Slide 1: PennyMac Mortgage Investment Trust May 2020 Investor Presentation
PennyMac Mortgage Investment Trust May 2020 Investor Presentation Exhibit 99.1
Slide 2: Forward-Looking Statements
Forward-Looking Statements May 2020 Investor Presentation 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 th
Slide 3: PMT Is Differentiated from Other Residential Mortgage REITs
PMT Is Differentiated from Other Residential Mortgage REITs May 2020 Investor Presentation Residential mortgage REIT started in 2009 focused on U.S. residential mortgage-related investments Focus on risk management throughout PMT’s more than 10-year history Track record of successful, active capital
Slide 4: PMT Is Focused on Unique Investment Strategies in Three Segments
PMT Is Focused on Unique Investment Strategies in Three Segments 4 May 2020 Investor Presentation Correspondent Production Credit Sensitive Strategies Interest Rate Sensitive Strategies Leading producer of conventional conforming mortgage loans PMT entered the correspondent production business in 20
Slide 5: PMT Is the Largest Correspondent Producer in the U.S.
PMT Is the Largest Correspondent Producer in the U.S. 5 May 2020 Investor Presentation PMT’s Conventional Correspondent Production ($ in billions) Top Correspondent Producers(2) (3) (1) Source: Inside Mortgage Finance as of 1Q20 (2) Source: Inside Mortgage Finance as of 4Q19 (3) YTD as of April 30,
Slide 6: Growing Opportunity for PennyMac in an Expanding Origination Market
6 6 Growing Opportunity for PennyMac in an Expanding Origination Market May 2020 Investor Presentation U.S. Mortgage Origination Market(2) (1) MBA Purchase Applications Index (2) Actual originations: Inside Mortgage Finance. Total originations forecast: Average of Mortgage Bankers Association (5/15/
Slide 7: Trends in PMT's Investments in GSE Credit Risk Transfer (CRT)
7 Trends in PMT's Investments in GSE Credit Risk Transfer (CRT) PMT is curtailing new investments in GSE CRT Federal Housing Finance Agency (FHFA) has instructed Fannie Mae and Freddie Mac to gradually wind down front-end lender risk share transactions such as PMT’s by the end of this year Continuin
Slide 8: Substantial Writedown of the CRT Investments in 1Q20
8 Substantial Writedown of the CRT Investments in 1Q20 May 2020 Investor Presentation ($ millions) Fair value changes(1) = $(1,040) (1) Attribution of changes in fair value between discount rate and other assumptions is based on changes in the valuation assumptions of CRT agreements, CRT strips, and
Slide 9: CRT Losses Expected to be Limited Despite Economic Conditions
9 CRT Losses Expected to be Limited Despite Economic Conditions May 2020 Investor Presentation Leading investment banks and economists expect the unemployment rate to reach approximately 19% in the second quarter of 2020 before recovering to 7% in the fourth quarter of 2021(1) Research indicates tha
Slide 10: Assessment of Loss Varies by Transaction for PMT's CRT Investments
Assessment of Loss Varies by Transaction for PMT’s CRT Investments May 2020 Investor Presentation PMT’s earliest CRT transactions (26% of UPB) have losses assessed based on loans becoming 180+ days delinquent; more recent transactions (74% of UPB) are based on actual losses The stated treatment of l
Slide 11: Loss and Expected Return Scenarios for PMT's CRT Investments
Loss and Expected Return Scenarios for PMT's CRT Investments May 2020 Investor Presentation Losses and returns for PMTT1, PMTT2 and PMTT3 above assume that loans in COVID-19 forbearance do not become credit events at 180 days or more delinquent On March 31, 2020, market participants, and resulting m
Slide 12: Prepayments Allow PMT to Recoup CRT Fair Value Losses
Prepayments Allow PMT to Recoup CRT Fair Value Losses May 2020 Investor Presentation PMT avoids any actual losses and will recognize fair value gains on its CRT investments when the underlying loans pay off, since principal is received (or for CRT-6, the commitment amount is reduced) at par Prepayme
Slide 13: Even in an Extreme Loss Scenario, PMT's Early CRT Investments Retain Value
Even in an Extreme Loss Scenario, PMT’s Early CRT Investments Retain Value May 2020 Investor Presentation PMTT1, PMTT2, and PMTT3 had a combined face amount of $318 million and fair value of $263 million at March 31, 2020 Under an extreme scenario under which the face amount is wiped out completely
Slide 14: CRT Term Notes Are Critically Important Financing Structure
CRT Term Notes Are Critically Important Financing Structure May 2020 Investor Presentation (1) PMT is currently in the aggregation period delivering loans to Fannie Mae under a commitment for a sixth CRT transaction. UPB represents the volume outstanding as of March 31, 2020. (2) As of March 31, 202
Slide 15: Hedging Approach Central to PMT's Interest Rate Sensitive Investments
Hedging Approach Central to PMT’s Interest Rate Sensitive Investments May 2020 Investor Presentation PMT seeks to manage interest rate risk exposure on a “global” basis, recognizing interest rate sensitivities across its investment strategies PMT has a history of successfully hedging to offset the m
Slide 16: Run-Rate Return Potential from PMT's Investment Strategies
Run-Rate Return Potential from PMT’s Investment Strategies May 2020 Investor Presentation Note: This slide presents estimates for illustrative purposes only, using PMT’s base case assumptions (e.g., for credit performance, prepayment speeds, financing economics, and loss treatment for PMTT1, PMTT2 a
Slide 17: Delinquency and Forbearance Trends for PMT's MSR Portfolio
Delinquency and Forbearance Trends for PMT’s MSR Portfolio May 2020 Investor Presentation PMT is in a strong position to successfully manage hardships related to COVID-19 given the technology platform and specialty servicing expertise of its subservicer, PFSI PFSI began offering COVID-19 forbearance
Slide 18: Servicing Advance Requirements for PMT Expected to be Limited
Servicing Advance Requirements for PMT Expected to be Limited May 2020 Investor Presentation PMT has historically funded any required servicing advances with corporate cash Servicing advances outstanding were $34 million at April 30, 2020 PMT has $1.6 billion in available liquidity(1), less $100 mil
Slide 19: Appendix
Appendix nnyMac’ Mortgage Investment Trust.
Slide 20: Near-Term and Lifetime Return Expectations for PMT's MSR Investments
Near-Term and Lifetime Return Expectations for PMT's MSR Investments May 2020 Investor Presentation
Slide 21: First Quarter Highlights
First Quarter Highlights May 2020 Investor Presentation (1) Includes $2.2 billion in conventional loans originated in PennyMac Financial Services, Inc.’s (NYSE: PFSI) direct lending channels. Net loss attributable to common shareholders of $600.9 million; loss per common share was $5.99 Segment pret
Slide 22: First Quarter Highlights (continued)
First Quarter Highlights (continued) May 2020 Investor Presentation 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 sa
Slide 23: Developments That Have Affected the Mortgage Markets
6 23 Developments That Have Affected the Mortgage Markets May 2020 Investor Presentation 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 borrow
Slide 24: PMT's Investment Activity by Strategy During the Quarter
PMT’s Investment Activity by Strategy During the Quarter (1) The fair value of CRT investments is reflected on PMT’s balance sheet as deposits securing CRT arrangements, firm commitment to purchase CRT securities, and derivative and credit risk transfer strip assets or liabilities, net of the intere
Slide 25: Correspondent Production Highlights
Correspondent Production Highlights May 2020 Investor Presentation Correspondent Production Volume and Mix(1) (UPB in billions) (1) See footnote 1 on slide 31 (2) For government loans, PMT earns a sourcing fee and interest income for its holding period and does not pay a fulfillment fee (3) Conventi
Slide 26: Trends in MSR and ESS Investments
MSR assets decreased to $1.2 billion driven by fair value losses resulting from expectations for increased prepayment activity in the future related to lower interest rates, and higher servicing costs related to expected increases in delinquencies as a result of COVID-19 hardship $249 million in new
Slide 27: Income Contribution and Return on Equity by Investment Strategy
Note: Amounts may not sum exactly due to rounding (1) Income contribution and the annualized return on equity calculated net of any direct expenses associated with investments (e.g., loan fulfillment fees and loan servicing fees), but before tax expenses. Some of the income associated with the inves
Slide 28: Performance of the GSE Credit Risk Transfer Investments in 1Q20
Performance of the GSE Credit Risk Transfer Investments in 1Q20 May 2020 Investor Presentation
Slide 29: Historical Earnings, Dividends and Book Value Per Share
(1) At period end (2) Return on average common equity is calculated based on annualized quarterly net income attributable to common shareholders as a percentage of monthly average common equity during the period Historical Earnings, Dividends and Book Value Per Share Repurchased 15.5 million common
Slide 30: MSRs and ESS Asset Valuation
MSRs and ESS Asset Valuation Unaudited (1) Pool UPB, weighted average coupon and expected prepayment speed represent the characteristics of the underlying MSR portfolio owned by PFSI. Weighted average servicing spread, fair value and valuation multiple relate to the ESS asset owned by PMT. The fair
Slide 31: Excess Servicing Spread Structure
(1) The contractual servicer and MSR owner is PennyMac Loan Services, LLC, a wholly-owned subsidiary of PFSI (2) Subject and subordinate to Agency rights (under the related servicer guide); does not change the contractual servicing fee paid by the Agency to the servicer. Excess Servicing Spread (e.g
Slide 32: Return on Equity Contribution of the GSE Credit Risk Transfer Investments
Return on Equity Contribution of the GSE Credit Risk Transfer Investments May 2020 Investor Presentation Annualized Return on Average CRT Equity (1) Equity allocated represents management’s internal allocation across segments and investment strategies Return on Equity Contribution of the GSE Credit
Slide 33: Credit Risk Transfer – Balance Sheet Treatment
Current outstanding UPB of loans delivered to the CRT SPVs and sold to Fannie Mae or delivered subject to agreements to purchase REMIC CRT securities Credit Risk Transfer – Balance Sheet Treatment Current cash collateralizing guarantee included in “Deposits securing credit risk transfer arrangements
Slide 34: PMT's Investments in GSE Credit Risk Transfer
PMT’s Investments in GSE Credit Risk Transfer May 2020 Investor Presentation (1) FICO and LTV metrics at origination (UPB in billions)
Slide 35: Correspondent Production Acquisitions and Locks by Product
Correspondent Production Acquisitions and Locks by Product May 2020 Investor Presentation Note: Conventional Conforming, Government, and Non-Agency acquisitions exclude PennyMac Financial’s Direct Lending Loans Acquired by PMT. (1) The UPB of historical period conventional conforming acquisitions ha
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