Pennymac Mortgage Investment Trust · NYSE:PMT
Pennymac Mortgage Investment Trust — Q3 2014 Earnings Presentation
27 slides from Pennymac Mortgage Investment Trust's earnings presentation, Nov 6, 2014
Slide 1: Third Quarter 2014 Earnings Report
PennyMac Mortgage Investment Trust November 5, 2014 Third Quarter 2014 Earnings Report
Slide 2: Forward-looking statements
3 Q14 Earnings Report 2 This presentation contains forward - looking statements within the meaning of Section 21 E 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
Slide 3: Third Quarter Highlights
3 Third Quarter Highlights • Net income of $54.9 million on net investment income of $106.5 million – Diluted earnings per share of $0.69; return on equity of 14% – Dividend of $ 0.61 per share declared on September 18, 2014 – Book value per share grew to $21.42 at September 30, 2014 • Segment preta
Slide 4: Current Market Environment and Outlook
1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 3.98% 3.0% 3.5% 4.0% 4.5% 5.0% 01/13 04/13 07/13 10/13 01/14 04/14 07/14 10/14 4 Current Market Environment and Outlook Average 30 - year fixed rate mortgage (1) Home Inventory (2)
Slide 5: PMT Aims to Deliver Superior Long-Term Returns to Shareholders
PMT Aims to Deliver Superior Long-Term Returns to Shareholders Managed investment portfolio of multiple residential mortgage-related strategies: Distressed Whole Loans Correspondent Loan Aggregation Prime non-Agency Loans‘) Agency and non-Agency MBS @ nnyMac V Multiple strategies together expected t
Slide 6: PMT Continues to Deploy Cash Into Attractive New Investments
$725 $19 $143 $80 ($226) ($67) ($129) ($507) $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 Cash generated from investing and operating activities Net change in debt financing Equity raised Net cash used in correspondent loan production Other operating activities Dividend payments New invest
Slide 7: PMT's Investment Portfolio Continues to Diversify
$3,761 $3,886 $3,827 $4,402 $4,160 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 3Q13 4Q13 1Q14 2Q14 3Q14 7 PMT's Investment Portfolio Continues to Diversify • More than half of PMT’s investments remain distressed whole loans and REO – expected to continue delivering attractive ret
Slide 8: Mortgage Investment Activities
Mortgage Investment Activities
Slide 9: Distressed whole loan investments
$930 $507 $436 $38 $0 $0 $200 $400 $600 $800 $1,000 3Q13 4Q13 1Q14 2Q14 3Q14 9 • Continue to evaluate additional opportunities to acquire distressed whole loans ‒ Supply of new distressed whole loan opportunities has remained steady ‒ Recent NPL transactions in the market rely more heavily on home p
Slide 10: Correspondent Business Added Seller Relationships and Grew Volume
$3.6 $2.4 $1.9 $2.9 $3.5 $4.0 $3.3 $2.9 $4.0 $4.4 $6.7 $6.0 $5.5 $8.1 $8.4 $0 $2 $4 $6 $8 $10 3Q13 4Q13 1Q14 2Q14 3Q14 Govt Jumbo Conventional Conforming Total Locks Correspondent Production Volume and Mix 10 Correspondent Business Added Seller Relationships and Grew Volume (1) For Government loans,
Slide 11: Correspondent Production Revenues Improved But Margins Remain Tight
($ in thousands) Quarter Ended Sept 30, 2014 As % of Interest Rate Lock Commitments (1) Revenues: Net gain on mortgage loans acquired for sale 9,509$ 0.25% Net interest income 4,067 0.11% Other income 6,524 0.17% 20,100$ 0.54% Expenses: Loan fulfillment, servicing, and management fees payable to Pen
Slide 12: MSR and ESS Investments Continue to Grow
$273 $429 $452 $506 $533 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $0 $100 $200 $300 $400 $500 $600 3Q13 4Q13 1Q14 2Q14 3Q14 MSR and ESS Investments Continue to Grow 12 ($ in millions) • Continued portfolio growth as investments in MSR and ESS reached $533 million, related to underl
Slide 13: Financial Results
Financial Results (PennyMac: Mortgage Investment Trust
Slide 14: Pretax Income by Operating Segment
Investment Correspondent Total Pretax ($ in millions) Activities Production Income 3Q13 36.4$ (0.3)$ 36.1$ 4Q13 48.4$ 6.3$ 54.7$ 1Q14 33.1$ 3.1$ 36.3$ 2Q14 70.9$ 2.4$ 73.3$ 3Q14 55.1$ 2.8$ 57.9$ 14 Pretax Income by Operating Segment Note: Figures may not sum exactly due to rounding 3 Q14 Earnings Re
Slide 15: Investment Activities Segment Results
Quarter Ended ($ in thousands) September 30, 2014 June 30, 2014 Revenues: Net gain on investments: Mortgage loans at fair value 81,296$ 71,851$ Mortgage loans held by variable interest entity net of asset-backed secured financing (1,554) 5,610 Mortgage loans under forward purchase agreements at fair
Slide 16: Investment Gains and Cash Flows from the Distressed Loan Portfolio
($ in thousands) Quarter ended September 30, 2014 Gain on Proceeds liquidation (2) Mortgage loans 58,580$ 6,857$ 5,857$ Performing loan sale 65,668 14,549 271 REO 47,891 2,003 3,713 172,139$ 23,409$ 9,841$ Accumulated gains (1) ($ in thousands) September 30, 2014 June 30, 2014 Valuation Changes: Per
Slide 17: Valuation of MSRs and Excess Servicing Spread (ESS)
At 9/30/14 Under lower of amortized cost or fair value Under fair value Fair value UPB $26,459 $5,803 $27,702 Weighted average coupon 3.77% 4.78% 4.22% Prepayment speed assumption (CPR) 8.6% 10.1% 10.8% Weighted average servicing fee/spread 0.26% 0.25% 0.16% Fair value $312.2 $57.9 $187.4 As multipl
Slide 18: Correspondent Production Segment Results
18 3 Q14 Correspondent Production Segment Results • Segment revenue totaled $20.1 million, a 30% increase from 2Q14 – Net gain on mortgage loans declined 7% Q/Q o Conventional loan market remains very competitive • Expenses increased 33% from 2Q14: – Higher fulfillment fees from increased convention
Slide 19: Appendix
Appendix (PennyMac: Mortgage Investment Trust
Slide 20: Demonstrated Track Record of Dividends and Growing Book Value
$0.79 $0.81 $0.83 $0.90 $0.86 $0.57 $0.69 $0.50 $0.93 $0.69 $0.55 $0.57 $0.57 $0.57 $0.57 $0.57 $0.59 $0.59 $0.59 $0.61 $21.42 $18.00 $19.00 $20.00 $21.00 $22.00 $0.00 $0.25 $0.50 $0.75 $1.00 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 Diluted EPS (left axis) Dividend (left axis) Book value pe
Slide 21: Opportunity for PFSI and PMT in MSR Acquisitions
Opportunity for PFSI and PMT in MSR Acquisitions 21 Why Are MSR Sales Occurring? How Do MSRs Come to Market? • Large banks are selling MSRs due to continuing operational pressures, higher regulatory capital requirements (treatment under Basel III) and a re - focus on core customers/businesses • Inde
Slide 22: Management of PMT's Interest Rate Risk
- 3.0% - 2.0% - 1.0% 0.0% 1.0% 2.0% 3.0% 4.0% - 100 - 75 - 50 - 25 0 25 50 75 100 "Long" Assets MSRs/ESS and Hedges Net Exposure (2) • PMT’s interest rate risk exposure is managed on a “global” basis – Disciplined hedging – Multiple mortgage - related investment strategies with complementary interes
Slide 23: Fundings and Locks by Product
($ in millions) 3Q13 4Q13 1Q14 2Q14 3Q14 Fundings Conventional 3,608$ 2,419$ 1,907$ 2,911$ 3,509$ Government 3,992 3,340 2,913 3,991 4,378 Jumbo 74 14 13 81 169 Total 7,674$ 5,773$ 4,833$ 6,983$ 8,056$ Locks Conventional 2,923$ 2,532$ 2,163$ 3,393$ 3,554$ Government 3,718 3,455 3,282 4,398 4,621 Jum
Slide 24: Distressed loan pool performance by purchase
Purchase 3Q14 Purchase 3Q14 Purchase 3Q14 Purchase 3Q14 Balance ($mm) 182.7$ 41.3 Balance ($mm) 195.5$ 36.6 Balance ($mm) 146.2$ 24.2 Balance ($mm) 277.8$ 64.7 Pool Factor (1) 1.00 0.23 Pool Factor (1) 1.00 0.19 Pool Factor (1) 1.00 0.17 Pool Factor (1) 1.00 0.23 Current 6.2% 26.8% Current 5.1% 21.5
Slide 25: Distressed loan pool performance by purchase
Purchase 3Q14 Purchase 3Q14 Purchase 3Q14 Purchase 3Q14 Balance ($mm) 366.2$ 245.4 Balance ($mm) 397.3$ 328.9 Balance ($mm) 929.5$ 796.6 Balance ($mm) 507.3$ 471.2 Pool Factor (1) 1.00 0.67 Pool Factor (1) 1.00 0.83 Pool Factor (1) 1.00 0.86 Pool Factor (1) 1.00 0.93 Current 1.6% 36.3% Current 4.8%
Slide 26: Carrying Values for PMT's Distressed Whole Loans
$592 $861 $847 $0 $400 $800 $1,200 $1,600 $2,000 $2,400 Fair Value on Balance Sheet Collateral Value Unpaid Principal Balance $1,440 $2,061 $2,199 $0 $400 $800 $1,200 $1,600 $2,000 $2,400 Fair Value on Balance Sheet Collateral Value Unpaid Principal Balance 26 Nonperforming Loans (at September 30 ,
Slide 27: Cash flow footnotes and definitions
3Q14 Earnings Report 27 (1 ) Cash from investing activities includes net decrease in short - term investments; repayments of mortgage - backed securities at fair value; sales and repayments of mortgage loans at fair value; repayments of mortgage loans under forward purchase agreements at fair value;
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