Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q3 2023 Earnings Presentation
28 slides from Pennymac Mortgage Investment Trust's earnings presentation, Oct 26, 2023
Slide 1: 3Q23 Earnings Report
3Q23 EARNINGS REPORT PennyMac Mortgage Investment Trust October 2023
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: Third Quarter Highlights
THIRD QUARTER HIGHLIGHTS Strong performance across all segments partially offset by tax impacts 3Q23 Results Pretax income CREDIT excluding Fair value of SENSITIVE market-driven organically-created New investments in Net income Pretax income value changes(3) CRT(2) investments GSE(2) CRT attributabl
Slide 4: Origination Market Has Declined Meaningfully
ORIGINATION MARKET HAS DECLINED MEANINGFULLY U.S. Mortgage Origination Market(1) Mortgage Rates Remain High ($ in trillions) 8.0% $4.4 7.0% 6.0% 5.0% $2.6 4.0% $2.3 $1.9 3.0% $0.7 $1.6 $0.5 2.0% $0.3 $1.8 1.0% $1.6 $1.3 $1.5 0.0% 2021 2022 2023E 2024E Purchase Refinance (3) Average 30-year fixed rat
Slide 5: Strong Expected Performance from Seasoned Investment Portfolio
STRONG EXPECTED PERFORMANCE FROM SEASONED INVESTMENT PORTFOLIO Approximately two-thirds of PMT’s shareholders’ equity is deployed to seasoned investments in MSRs and PMT’s unique GSE credit risk transfer investments with strong underlying fundamentals Mortgage Servicing Rights PMT GSE Credit Risk Tr
Slide 6: Capital Deployment Outlook for PMT
CAPITAL DEPLOYMENT OUTLOOK FOR PMT • Actively managing equity allocation through conventional correspondent loan sales to PFSI Credit Sensitive Strategies • Invested $7 million into floating rate GSE CRT bonds in 3Q23 • Equity allocation to the interest rate sensitive strategies increased from the p
Slide 7: Run-Rate Return Potential from PMT's Investment Strategies
RUN-RATE RETURN POTENTIAL FROM PMT’S INVESTMENT STRATEGIES Annualized WA Equity Return on Equity Allocated (%)(1) • Represents the average annualized return and (ROE) quarterly earnings potential expected from its Credit sensitive strategies: PMT GSE credit risk transfer 16.5% 15% strategies over th
Slide 8: Correspondent Production Highlights
CORRESPONDENT PRODUCTION HIGHLIGHTS • Correspondent acquisitions in 3Q23 totaled $21.5 billion in UPB, up 2% Q/Q and down Correspondent Production Volume and Mix 4% Y/Y (UPB in billions) ‒ 41% government loans; 59% conventional loans $23.0 $21.6 $23.9 $22.4 $21.2 $21.5 ‒ Government acquisitions of $
Slide 9: Trends in MSR Investments
TRENDS IN MSR INVESTMENTS MSR Investments ($ in millions) $5,000 $231,545 $240,000 • MSR assets were $4.1 billion as of September $226,808 30th, up from $4.0 billion as of June 30th $4,500 $4,013 $4,109 $3,941 $3,975 $3,978 ‒ Fair value increases and newly originated MSR $4,000 $210,000 investments
Slide 10: Trends in PMT's Unique Investments in GSE Credit Risk Transfer
TRENDS IN PMT’S UNIQUE INVESTMENTS IN GSE CREDIT RISK TRANSFER • Fair value of PMT’s organically-created CRT investments Organically-Created GSE CRT Investments(1) decreased slightly from June 30, 2023 as runoff from ($ in millions) Funded investments prepayments more than offset fair value gains •
Slide 11: Third Quarter Results and Return Contributions by Strategy
THIRD QUARTER RESULTS AND RETURN CONTRIBUTIONS BY STRATEGY Income Excluding Total Income Market-Driven WA Equity Annualized Return ($ in millions, except EPS) (1) (2) Market-Driven (3) Contribution Value Changes Allocated on Equity (ROE)(1) Value Changes(1)(2) Credit sensitive strategies: PMT GSE cr
Slide 12: 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 • PMT seeks to manage interest rate risk exposure on a ($ in millions) “global” basis, recognizing interest rate sensitivities across MSR fair value change before realization of cash flows its inv
Slide 13: PMT's Flexible and Sophisticated Financing Structures
PMT’S FLEXIBLE AND SOPHISTICATED FINANCING STRUCTURES $609mm Unsecured Senior Notes and Exchangeable Senior Notes $54mm 8.5% due September 2028 • Low, fixed interest rates $345mm 5.5% due March 2026 • First maturity in November 2024 • Provides flexibility and complements asset-backed structures $210
Slide 14: Appendix
NAPPENDIX
Slide 15: PMT Is Focused on Unique Investment Strategies in Three Segments
PMT IS FOCUSED ON UNIQUE INVESTMENT STRATEGIES IN THREE SEGMENTS • Leading acquirer and producer of conventional conforming mortgage loans Correspondent • Significant growth in market share over PMT’s more than 14-year history driven by PFSI’s Production operational excellence and high service level
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 $19.79 $16.01 $0.47 $0.47 $0.47 $0.47 $0.47 $0.50 $0.51 $0.40 $0.40 $0.40 $0.40 $0.16 $0.01 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 ($0.07) ($0.28) ($0.32) ($0.45) ($0.88) ROE(2): -9% -6
Slide 17: Current Market Environment and Macroeconomic Trends
CURRENT MARKET ENVIRONMENT AND MACROECONOMIC TRENDS Average 30-year fixed rate mortgage(1) 7.31% 10-year Treasury Bond Yield(2) 6.71% 4.57% 8.0% 5.0% 3.84% 7.0% 4.0% 6.0% 3.0% 5.0% 4.0% 2.0% 3.0% 1.0% 2.0% 0.0% Macroeconomic Metrics(3) Footnotes (1) Freddie Mac Primary Mortgage Market Survey. 7.63%
Slide 18: PMT Is in Excess of Prospective Regulatory Capital and Liquidity Requirements
PMT IS IN EXCESS OF PROSPECTIVE REGULATORY CAPITAL AND LIQUIDITY REQUIREMENTS In August 2022, the Federal Housing Finance Agency (FHFA) released updated eligibility standards for non-bank seller/servicers; most requirements were effective September 30, 2023 • PennyMac Corp. (PMC) is a wholly-owned s
Slide 19: PMT's Investment Activity by Strategy During the Quarter
PMT’S INVESTMENT ACTIVITY BY STRATEGY DURING THE QUARTER Long-term mortgage Assets carrying value Net new Fair value Assets carrying value ($ in millions) asset at 6/30/2023 investments(5) changes at 9/30/2023 PMT GSE credit risk $ 1,163 $ (32) $ 15 $ 1,145 transfer(1) Other GSE Credit Risk Credit $
Slide 20: MSR Asset Valuation
MSR ASSET VALUATION September 30, 2023 Mortgage Unaudited ($ in millions) Servicing Rights Pool UPB (1) $231,545 Weighted average coupon 3.6% Weighted average servicing fee 0.28% Weighted average prepayment speed assumption (CPR) 5.9% Fair value $4,108.7 As a multiple of servicing fee 6.28 (1) Owned
Slide 21: Delinquency Trends and Servicing Advances Outstanding
DELINQUENCY TRENDS AND SERVICING ADVANCES OUTSTANDING Historical Trends in Delinquency and Foreclosure Rates(1) 7.0% 5.0% 3.3% 2.6% 1.9% 1.5% 1.3% 1.2% 1.2% 1.3% 1.1% 1.1% 1.1% 1.0% 1.1% 3/31/20 6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 9/30/21 12/31/21 3/31/22 6/30/22 9/30/22 12/31/22 3/31/23 6/30/2
Slide 22: PMT's Owned MSR Portfolio Characteristics
PMT’S OWNED MSR PORTFOLIO CHARACTERISITICS As of September 30, 2023 Loan Remaining FICO credit 60+ UPB % of Note Seasoning Loan size Original Current Segment count maturity score at Delinquency ($ in billions)(2) Total UPB rate (months) ($ in thousands) LTV LTV (in thousands) (months) origination (b
Slide 23: Interest Rate Sensitive Strategies Designed to Mitigate Interest Rate Volatility
INTEREST RATE SENSITIVE STRATEGIES DESIGNED TO MITIGATE INTEREST RATE VOLATILITY Estimated Sensitivity to Changes in Interest Rates at Gain in value with Gain in value with September 30, 2023 increasing rates decreasing rates % change in PMT’s shareholders’ equity 20% 15% MSRs Agency MBS 10% 5% 0% -
Slide 24: Performance of PMT's Organically-Created Investments in GSE Credit Risk Transfer
PERFORMANCE OF PMT’S ORGANICALLY-CREATED INVESTMENTS IN GSE CREDIT RISK TRANSFER INVESTMENTS IN 3Q23 Income (Loss) ($ in millions) Comments Contribution Market-driven value changes: Valuation-related changes included in Net gain (loss) on investment $ 14.6 • Reflects impact of credit spread tighteni
Slide 25: Balance Sheet Treatment of PMT's Organically-Created Credit Risk Transfer Investments
BALANCE SHEET TREATMENT OF PMT’S ORGANICALLY-CREATED CREDIT RISK TRANSFER INVESTMENTS At September 30, ($ in thousands) 2023 Current outstanding UPB of loans delivered to the CRT SPVs and UPB of loans subject to guarantee obligation.................................... $ 23,613,675 sold to Fannie Mae
Slide 26: PMT's Organically-Created Investments in Credit Risk Transfer
PMT’S ORGANICALLY-CREATED INVESTMENTS IN CREDIT RISK TRANSFER ($ in billions) PMTT1 (May 2015 - July 2015) PMTT2 (August 2015 - February 2016) PMTT3 (February 2016 - August 2016) At inception 9/30/23 At inception 9/30/23 At inception 9/30/23 UPB $ 1.2 $ 0.1 UPB $ 4.2 $ 0.5 UPB $ 6.5 $ 1.0 Loan Count
Slide 27: Correspondent Production Acquisitions and Locks by Product
CORRESPONDENT PRODUCTION ACQUISITIONS AND LOCKS BY PRODUCT Unaudited ($ in millions) 3Q22 4Q22 1Q23 2Q23 3Q23 Correspondent Acquisitions Conventional Conforming - for PMT $ 10,225 $ 6,771 $ 6,629 $ 3,029 $ 2,759 (1) Conventional Conforming - for PFSI - 3,912 4,063 7,018 9,933 Government - for PFSI(1
Slide 28: PS PENNYMAC’
PS PENNYMAC’ MORTGAGE INVESTMENT TRUST 28
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