false 0001464423 0001464423 2023-07-27 2023-07-27 0001464423 us-gaap:CommonStockMember 2023-07-27 2023-07-27 0001464423 us-gaap:SeriesAPreferredStockMember 2023-07-27 2023-07-27 0001464423 us-gaap:SeriesBPreferredStockMember 2023-07-27 2023-07-27 0001464423 us-gaap:SeriesCPreferredStockMember 2023-07-27 2023-07-27
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 27, 2023
PennyMac Mortgage Investment Trust
(Exact name of registrant as specified in its charter)
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Maryland |
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001-34416 |
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27-0186273 |
(State or other jurisdiction |
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(Commission |
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(IRS Employer |
of incorporation) |
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File Number) |
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Identification No.) |
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3043 Townsgate Road, Westlake Village, California |
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91361 |
(Address of principal executive offices) |
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(Zip Code) |
(818) 224-7442
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common Shares of Beneficial Interest, $0.01 par value |
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PMT |
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New York Stock Exchange |
8.125% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01 par value |
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PMT/PA |
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New York Stock Exchange |
8.00% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01 par value |
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PMT/PB |
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New York Stock Exchange |
6.75% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01 par value |
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PMT/PC |
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New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 |
Results of Operations and Financial Condition. |
On July 27, 2023, PennyMac Mortgage Investment Trust (the “Company”) issued a press release and a slide presentation announcing its financial results for the fiscal quarter ended June 30, 2023. A copy of the press release and slide presentation are furnished as Exhibit 99.1 and Exhibit 99.2, respectively. The press release and the slide presentation are being made available in connection with the Company’s recorded presentation of financial results and live Q&A discussion on July 27, 2023. In addition, the Company has made available other supplemental financial information for the fiscal quarter ended June 30, 2023 on its website at pmt.pennymac.com.
The information in Item 2.02 of this report, including the exhibits hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of Section 18, nor shall it be deemed incorporated by reference into any disclosure document relating to the Company, except to the extent, if any, expressly set forth by specific reference in such filing.
Item 9.01 |
Financial Statements and Exhibits. |
(d) Exhibits.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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PENNYMAC MORTGAGE INVESTMENT TRUST |
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Dated: July 27, 2023 |
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/s/ Daniel S. Perotti |
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Daniel S. Perotti Senior Managing Director and Chief Financial Officer |
Exhibit 99.1
PennyMac Mortgage Investment Trust Reports
Second Quarter 2023 Results
WESTLAKE VILLAGE, Calif.,
July 27, 2023 PennyMac Mortgage Investment Trust (NYSE: PMT) today reported net income attributable to common shareholders of $14.2 million, or $0.16 per common share on a diluted basis for the second quarter of
2023, on net investment income of $90.5 million. PMT previously announced a cash dividend for the second quarter of 2023 of $0.40 per common share of beneficial interest, which was declared on June 9, 2023, and will be paid on
July 28, 2023, to common shareholders of record as of July 14, 2023.
Second Quarter 2023 Highlights
Financial results:
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Net income attributable to common shareholders of $14.2 million, compared to net income of $50.2 million in the
prior quarter |
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Strong performance from PMTs credit sensitive strategies and income excluding the impacts of market-driven fair value
changes were partially offset by fair value declines in PMTs interest rate sensitive strategies and related tax impacts |
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Repurchased 1.6 million common shares of PMT at an average price of $11.87 per share for a cost of $19.4 million
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Book value per common share decreased to $15.81 at June 30, 2023, from $15.96 at March 31, 2023
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Other investment highlights:
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Investment activity driven by correspondent production volumes |
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Conventional correspondent loan production volumes for PMTs account totaled $3.0 billion in unpaid principal
balance (UPB), down 54 percent from the prior quarter and 71 percent from the second quarter of 2022 as a result of the sale of a larger percentage of conventional loans to PennyMac Financial Services, Inc. (NYSE: PFSI)
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1
Resulted in the creation of $91 million in new mortgage servicing rights (MSRs)
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Invested $94 million into opportunistic investments throughout the quarter |
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$52 million into government-sponsored enterprise (GSE) credit risk transfer (CRT) bonds |
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$42 million into senior mezzanine bonds from jumbo securitizations |
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Exercised option to extend the maturity for the Fannie Mae MSR term notes originally due in April 2023 for two years
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Issued $235 million of new, 2-year CRT term notes to finance CRT investments
previously financed with securities repurchase agreements |
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Issued a new, 5-year $155 million term loan secured by Fannie Mae MSR
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Notable activity after quarter end
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PMT entered into an agreement to acquire a bulk MSR portfolio totaling $1.4 billion in UPB |
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Invested $11 million into senior mezzanine bonds from a jumbo securitization |
PMTs second quarter financial results reflect strong performance from its credit sensitive strategies partially offset by net fair value declines in its
interest rate sensitive strategies and related tax impacts, said Chairman and CEO David Spector. While continued credit spread tightening led to fair value increases for PMTs credit sensitive investments, the interest rate
sensitive strategies were impacted by the inverted yield curve and elevated hedge costs driven by multi-year highs in interest rate volatility. We continue to deploy capital towards opportunistic investments in both credit sensitive and interest
rate sensitive strategies; and this quarter, we invested nearly $100 million in such investments, which we believe can generate strong, long-term risk-adjusted returns. We continue to believe PMTs strong balance sheet and seasoned
investment portfolio with strong underlying fundamentals will drive improved performance over the long term.
2
The following table presents the contributions of PMTs segments, consisting of Credit Sensitive Strategies,
Interest Rate Sensitive Strategies, Correspondent Production, and Corporate:
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Quarter ended June 30, 2023 |
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Credit sensitive strategies |
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Interest rate sensitive strategies |
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Correspondent production |
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Corporate |
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Consolidated |
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(in thousands) |
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Net investment income: |
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Net loan servicing fees |
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$ |
- |
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$ |
108,833 |
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$ |
- |
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$ |
- |
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$ |
108,833 |
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Net gains on loans acquired for sale |
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- |
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- |
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4,446 |
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- |
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4,446 |
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Net gains (losses) on investments and financings: |
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Mortgage-backed securities |
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10,727 |
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(72,348 |
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- |
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- |
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(61,621 |
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Loans at fair value |
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Held by variable interest entities |
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(1,601 |
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1,142 |
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- |
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- |
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(459 |
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Distressed |
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(877 |
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- |
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- |
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- |
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(877 |
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CRT investments |
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60,458 |
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- |
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- |
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- |
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60,458 |
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68,707 |
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(71,206 |
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- |
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- |
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(2,499 |
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Net interest expense: |
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Interest income |
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25,146 |
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108,656 |
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25,708 |
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3,174 |
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162,684 |
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Interest expense |
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21,752 |
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137,987 |
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26,740 |
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911 |
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187,390 |
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3,394 |
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(29,331 |
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(1,032 |
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2,263 |
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(24,706 |
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Other |
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(56 |
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- |
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4,434 |
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- |
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4,378 |
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72,045 |
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8,296 |
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7,848 |
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2,263 |
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90,452 |
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Expenses: |
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Loan fulfillment and servicing fees payable to PennyMac Financial Services, Inc. |
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32 |
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20,285 |
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5,441 |
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- |
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25,758 |
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Management fees payable to PennyMac Financial Services, Inc. |
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- |
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- |
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- |
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7,078 |
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7,078 |
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Other |
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911 |
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1,183 |
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1,007 |
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7,662 |
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10,763 |
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$ |
943 |
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$ |
21,468 |
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$ |
6,448 |
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$ |
14,740 |
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$ |
43,599 |
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Pretax income (loss) |
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$ |
71,102 |
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$ |
(13,172 |
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$ |
1,400 |
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$ |
(12,477 |
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$ |
46,853 |
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Credit Sensitive Strategies Segment
The
Credit Sensitive Strategies segment primarily includes results from PMTs organically-created GSE CRT investments, investments in non-agency subordinate bonds from private-label securitizations of
PMTs production, opportunistic investments in GSE CRT and legacy investments. Pretax income for the segment was $71.1 million on net investment income of $72.0 million, compared to pretax income of $57.3 million on net
investment income of $58.0 million in the prior quarter.
Net gains on investments in the segment were $68.7 million, compared to $54.4 million in
the prior quarter. These net gains include $60.5 million on PMTs organically-created GSE CRT investments, $10.7 million on other acquired subordinate CRT mortgage-backed securities (MBS), $1.6 million of losses on investments
from non-agency subordinate bonds from PMTs production, and $0.9 million of losses on distressed loans.
Net
gains on PMTs organically-created CRT investments for the quarter were $60.5 million, compared to $46.3 million in the prior quarter. These net gains include $43.0 million in valuation-related gains, which reflected the impact
of credit spread tightening in the second quarter. The prior quarter included $30.9 million of such gains. Net gains on PMTs organically-created CRT investments also included $17.9 million in realized gains and carry, compared to
$16.6 million in the prior quarter. Realized losses during the quarter were $0.5 million, down from $1.3 million in the prior quarter.
3
Net interest income for the segment totaled $3.4 million, compared to $3.6 million in the prior quarter.
Interest income totaled $25.1 million, up from $21.4 million in the prior quarter, primarily due to higher earnings rates on deposits securing CRT arrangements. Interest expense totaled $21.8 million, up from $17.8 million in the
prior quarter, primarily due to higher interest rates.
Segment expenses were $0.9 million, up slightly from the prior quarter.
Interest Rate Sensitive Strategies Segment
The Interest Rate Sensitive
Strategies segment includes results from investments in MSRs, Agency MBS, non-Agency senior MBS and interest rate hedges. Pretax loss for the segment was $13.2 million on net investment income of
$8.3 million, compared to a pretax loss of $7.0 million on net investment income of $14.6 million in the prior quarter. The segment includes investments that typically have offsetting fair value exposures to changes in interest rates.
For example, in a period with increasing interest rates, MSRs are expected to increase in fair value, whereas Agency pass-through and non-Agency senior MBS are expected to decrease in fair value.
The results in the Interest Rate Sensitive Strategies segment consist of net gains and losses on investments, net interest income and net loan servicing fees, as well
as associated expenses.
Net losses on investments for the segment were $71.2 million, which primarily consisted of losses on MBS due to increasing interest
rates.
Net loan servicing fees were $108.8 million, compared to $(23.7) million in the prior quarter. Net loan servicing fees included contractually specified
servicing fees of $165.5 million and $6.8 million in other fees, reduced by $103.0 million in realization of MSR cash flows, which was up from $91.7 million in the prior quarter due to increased cash flow generated by the MSR
asset during the quarter from servicing and placement fees. Net loan servicing fees also included $15.0 million in fair value increases of MSRs, $24.0 million in hedging gains, and $0.5 million of MSR recapture income. PMTs
hedging activities are intended to manage its net exposure across all interest rate sensitive strategies, which include MSRs, MBS and related tax impacts.
4
The following schedule details net loan servicing fees:
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Quarter ended |
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June 30, 2023 |
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March 31, 2023 |
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June 30, 2022 |
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(in thousands) |
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From non-affiliates: |
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Contractually specified |
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$ |
165,499 |
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$ |
164,214 |
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$ |
151,149 |
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Other fees |
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6,826 |
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3,943 |
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7,179 |
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Effect of MSRs: |
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Change in fair value |
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Realization of cash flows |
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(103,043 |
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(91,673 |
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(86,643 |
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Due to changes in valuation inputs used in valuation model |
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15,046 |
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(45,771 |
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220,422 |
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(87,997 |
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(137,444 |
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133,779 |
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Hedging results |
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23,996 |
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(54,891 |
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(78,118 |
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(64,001 |
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(192,335 |
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55,661 |
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108,324 |
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(24,178 |
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213,989 |
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From PFSIMSR recapture income |
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509 |
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485 |
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3,324 |
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Net loan servicing fees |
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$ |
108,833 |
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$ |
(23,693 |
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$ |
217,313 |
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PMTs MSR fair value increased by $15.0 million in the quarter primarily due to higher market interest rates.
Net interest expense for the segment was $29.3 million versus $33.1 million in the prior quarter. Interest income totaled $108.7 million, up from
$92.1 million in the prior quarter primarily due to increased placement fee income on custodial balances. Interest expense totaled $138.0 million, up from $125.2 million in the prior quarter primarily due to higher financing costs on
MBS balances driven by higher short-term interest rates.
Segment expenses were $21.5 million, essentially unchanged from the prior quarter.
Correspondent Production Segment
PMT acquires newly originated loans from
correspondent sellers and typically sells or securitizes the loans, resulting in current-period income and additions to its investments in MSRs related to a portion of its production. PMTs Correspondent Production segment generated pretax
income of $1.4 million, down from $1.8 million in the prior quarter.
5
Through its correspondent production activities, PMT acquired a total of $21.2 billion in UPB of loans, up
5 percent from the prior quarter and 1 percent from the second quarter of 2022. Of total correspondent acquisitions, government-insured or guaranteed acquisitions totaled $11.1 billion, up 18 percent from the prior quarter, and
conventional conforming acquisitions totaled $10.0 billion, down 6 percent from the prior quarter. $3.0 billion of conventional volume was for PMTs account, down 54 percent from the prior quarter due to a higher percentage
of conventional loans sold to PFSI. The remaining $7.0 billion of conventional volume was for PFSIs account. Interest rate lock commitments on conventional loans for PMTs account totaled $3.3 billion, down 56 percent from
the prior quarter.
Segment revenues were $7.8 million and included net gains on loans acquired for sale of $4.4 million, other income of
$4.4 million, which primarily consists of volume-based origination fees, and net interest expense of $1.0 million. Net gains on loans acquired for sale in the quarter decreased by $2.0 million from the prior quarter due to lower
volumes from the increased sale of conventional loans to PFSI. Net gains on loans acquired for sale also included a negative impact of $4.5 million due to changes in GSE pricing that did not come with pipeline protection as they historically
have. Interest income was $25.7 million, down from $36.9 million in the prior quarter, and interest expense was $26.7 million, down from $35.1 million in the prior quarter, both due to lower volumes.
Segment expenses were $6.4 million, down from $14.3 million in the prior quarter due to lower volumes for PMTs account. The weighted average fulfillment
fee rate in the second quarter was 18 basis points, unchanged from the prior quarter.
Corporate Segment
The Corporate segment includes interest income from cash and short-term investments, management fees, and corporate expenses.
Segment revenues were $2.3 million, up from $1.6 million in the prior quarter. Management fees were $7.1 million, and other segment expenses were
$7.7 million, both similar to the prior quarter.
Taxes
PMT
recorded a tax expense of $22.2 million, driven primarily by fair value gains on MSRs and interest rate hedges held in PMTs taxable subsidiary.
6
***
Managements slide presentation and accompanying materials will be available in the Investor Relations section of the Companys website at pmt.pennymac.com after the market closes on Thursday, July 27, 2023. Additionally, the Company will host a live question and answer
(Q&A) session the same day at 5:45 p.m. Eastern Time. An audio webcast of the Q&A session will be available at
pmt.pennymac.com, and a replay of the event will be available shortly after its conclusion.
Individuals who are unable to access the website but would like to receive a copy of the materials should contact the Companys Investor Relations department at
818.224.7028.
About PennyMac Mortgage Investment Trust
PennyMac
Mortgage Investment Trust is a mortgage real estate investment trust (REIT) that invests primarily in residential mortgage loans and mortgage-related assets. PMT is externally managed by PNMAC Capital Management, LLC, a wholly-owned subsidiary of
PennyMac Financial Services, Inc. (NYSE: PFSI). Additional information about PennyMac Mortgage Investment Trust is available at pmt.pennymac.com.
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Media |
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Investors |
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Kristyn Clark |
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Kevin Chamberlain |
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kristyn.clark@pennymac.com |
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Isaac Garden |
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805.395.9943 |
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investorrelations@pennymac.com |
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818.224.7028 |
7
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding
managements beliefs, estimates, projections and assumptions with respect to, among other things, the Companys financial results, future operations, business plans and investment strategies, as well as industry and market conditions, all
of which are subject to change. Words like believe, expect, anticipate, promise, plan, and other expressions or words of similar meanings, as well as future or conditional verbs such as
will, would, should, could, or may are generally intended to identify forward-looking statements. Actual results and operations for any future period may vary materially from those
projected herein and from past results discussed herein. Factors which could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: changes in interest rates; the Companys
ability to comply with various federal, state and local laws and regulations that govern its business; changes in the Companys investment objectives or investment or operational strategies, including any new lines of business or new products
and services that may subject it to additional risks; volatility in the Companys industry, the debt or equity markets, the general economy or the real estate finance and real estate markets; events or circumstances which undermine confidence
in the financial and housing markets or otherwise have a broad impact on financial and housing markets; changes in general business, economic, market, employment and domestic and international political conditions, or in consumer confidence and
spending habits from those expected; the degree and nature of the Companys competition; declines in real estate or significant changes in U.S. housing prices or activity in the U.S. housing market; the availability of, and level of competition
for, attractive risk-adjusted investment opportunities in mortgage loans and mortgage-related assets that satisfy the Companys investment objectives; the inherent difficulty in winning bids to acquire mortgage loans, and the Companys
success in doing so; the concentration of credit risks to which the Company is exposed; the Companys dependence on its manager and servicer, potential conflicts of interest with such entities and their affiliates, and the performance of such
entities; changes in personnel and lack of availability of qualified personnel at its manager, servicer or their affiliates; the availability, terms and deployment of short-term and long-term capital; the adequacy of the Companys cash reserves
and working capital; the Companys ability to maintain the desired relationship between its financing and the interest rates and maturities of its assets; the timing and amount of cash flows, if any, from the Companys investments; our
substantial amount of indebtedness; the performance, financial condition and liquidity of borrowers; our exposure to risks of loss and disruptions in operations resulting from adverse weather conditions,
man-made or natural disasters, climate change and pandemics; the ability of the Companys servicer, which also provides the Company with fulfillment services, to approve and monitor correspondent sellers
and underwrite loans to investor standards; incomplete or inaccurate information or documentation provided by customers or counterparties, or adverse changes in the financial condition of the Companys customers and counterparties; the
Companys indemnification and repurchase obligations in connection with mortgage loans it purchases and later sells or securitizes; the quality and enforceability of the collateral documentation evidencing the Companys ownership and
rights in the assets in which it invests; increased rates of delinquency, defaults and forbearances and/or decreased recovery rates on the Companys investments; the performance of mortgage loans underlying mortgage-backed securities in which
the Company retains credit risk; the Companys ability to foreclose on its investments in a timely manner or at all; increased prepayments of the mortgages and other loans underlying the Companys mortgage-backed securities or relating to
the Companys mortgage servicing rights and other investments; the degree to which the Companys hedging strategies may or may not protect it from interest rate volatility; the effect of the accuracy of or changes in the estimates the
Company makes about uncertainties, contingencies and asset and liability valuations when measuring and reporting upon the Companys financial condition and results of operations; the Companys ability to maintain appropriate internal
control over financial reporting; technologies for loans and the Companys ability to mitigate security risks and cyber intrusions; the Companys ability to detect misconduct and fraud; developments in the secondary markets for the
Companys mortgage loan products; legislative and regulatory changes that impact the mortgage loan industry or housing market; regulatory or other changes that impact government agencies or government-sponsored entities, or such changes that
increase the cost of doing business with such agencies or entities; legislative and regulatory changes that impact the business, operations or governance of mortgage lenders and/or publicly-traded companies; the Consumer Financial Protection Bureau
and its issued and future rules and the enforcement thereof; changes in government support of homeownership; changes in government or government-sponsored home affordability programs; limitations imposed on the Companys business and its
ability to satisfy complex rules for it to qualify as a REIT for U.S. federal income tax purposes and qualify for an exclusion from the Investment Company Act of 1940 and the ability of certain of the Companys subsidiaries to qualify as REITs
or as taxable REIT subsidiaries for U.S. federal income tax purposes; changes in governmental regulations, accounting treatment, tax rates and similar matters; the Companys ability to make distributions to its shareholders in the future; the
Companys failure to deal appropriately with issues that may give rise to reputational risk; and the Companys organizational structure and certain requirements in its charter documents. You should not place undue reliance on any
forward-looking statement and should consider all of the uncertainties and risks described above, as well as those more fully discussed in reports and other documents filed by the Company with the Securities and Exchange Commission from time to
time. The Company undertakes no obligation to publicly update or revise any forward-looking statements or any other information contained herein, and the statements made in this press release are current as of the date of this release only.
8
PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarterly Periods Ended |
|
|
June 30, 2023 |
|
March 31, 2023 |
|
June 30, 2022 |
|
|
|
|
(in thousands except share amounts) |
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
238,805 |
|
|
$ |
118,672 |
|
|
$ |
332,009 |
|
Short-term investments at fair value |
|
|
242,037 |
|
|
|
292,153 |
|
|
|
88,818 |
|
Mortgage-backed securities at fair value |
|
|
4,731,341 |
|
|
|
4,629,004 |
|
|
|
3,853,076 |
|
Loans acquired for sale at fair value |
|
|
1,080,047 |
|
|
|
3,143,518 |
|
|
|
1,793,665 |
|
Loans at fair value |
|
|
1,457,272 |
|
|
|
1,502,471 |
|
|
|
1,654,483 |
|
Derivative assets |
|
|
29,012 |
|
|
|
89,285 |
|
|
|
17,372 |
|
Deposits securing credit risk transfer arrangements |
|
|
1,269,558 |
|
|
|
1,297,917 |
|
|
|
1,430,759 |
|
Mortgage servicing rights at fair value |
|
|
3,977,938 |
|
|
|
3,975,076 |
|
|
|
3,695,609 |
|
Servicing advances |
|
|
112,743 |
|
|
|
138,716 |
|
|
|
90,716 |
|
Due from PennyMac Financial Services, Inc. |
|
|
7,824 |
|
|
|
- |
|
|
|
3,582 |
|
Other |
|
|
238,345 |
|
|
|
170,417 |
|
|
|
257,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
13,384,922 |
|
|
$ |
15,357,229 |
|
|
$ |
13,217,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Assets sold under agreements to repurchase |
|
$ |
5,914,625 |
|
|
$ |
8,114,108 |
|
|
$ |
5,646,402 |
|
Mortgage loan participation and sale agreements |
|
|
34,787 |
|
|
|
- |
|
|
|
79,269 |
|
Notes payable secured by credit risk transfer and mortgage servicing assets |
|
|
3,158,407 |
|
|
|
2,790,958 |
|
|
|
2,741,750 |
|
Exchangeable senior notes |
|
|
547,767 |
|
|
|
547,003 |
|
|
|
544,803 |
|
Asset-backed financing of variable interest entities at fair value |
|
|
1,361,108 |
|
|
|
1,403,080 |
|
|
|
1,548,636 |
|
Interest-only security payable at fair value |
|
|
24,060 |
|
|
|
23,205 |
|
|
|
19,485 |
|
Derivative and credit risk transfer strip liabilities at fair value |
|
|
98,038 |
|
|
|
138,469 |
|
|
|
278,499 |
|
Unsettled securities trades |
|
|
- |
|
|
|
12,424 |
|
|
|
- |
|
Accounts payable and accrued liabilities |
|
|
104,547 |
|
|
|
152,793 |
|
|
|
123,459 |
|
Due to PennyMac Financial Services, Inc. |
|
|
25,046 |
|
|
|
35,166 |
|
|
|
43,234 |
|
Income taxes payable |
|
|
147,972 |
|
|
|
129,882 |
|
|
|
81,661 |
|
Liability for losses under representations and warranties |
|
|
37,069 |
|
|
|
39,407 |
|
|
|
39,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
11,453,426 |
|
|
|
13,386,495 |
|
|
|
11,146,639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares of beneficial interest |
|
|
541,482 |
|
|
|
541,482 |
|
|
|
541,482 |
|
Common shares of beneficial interestauthorized, 500,000,000 common shares of $0.01 par
value; issued and outstanding 86,760,408, 88,385,614 and 91,081,067 common shares, respectively |
|
|
868 |
|
|
|
884 |
|
|
|
911 |
|
Additional paid-in capital |
|
|
1,921,710 |
|
|
|
1,940,297 |
|
|
|
1,972,849 |
|
Accumulated deficit |
|
|
(532,564 |
) |
|
|
(511,929 |
) |
|
|
(444,602 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
1,931,496 |
|
|
|
1,970,734 |
|
|
|
2,070,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
13,384,922 |
|
|
$ |
15,357,229 |
|
|
$ |
13,217,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarterly Periods Ended |
|
|
June 30, 2023 |
|
March 31, 2023 |
|
June 30, 2022 |
|
|
|
|
(in thousands, except per share amounts) |
Investment Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loan servicing fees: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From nonaffiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing fees |
|
|
$ |
172,325 |
|
|
|
$ |
168,157 |
|
|
|
$ |
158,328 |
|
Change in fair value of mortgage servicing rights |
|
|
|
(87,997 |
) |
|
|
|
(137,444 |
) |
|
|
|
133,779 |
|
Hedging results |
|
|
|
23,996 |
|
|
|
|
(54,891 |
) |
|
|
|
(78,118 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,324 |
|
|
|
|
(24,178 |
) |
|
|
|
213,989 |
|
From PennyMac Financial Services, Inc. |
|
|
|
509 |
|
|
|
|
485 |
|
|
|
|
3,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,833 |
|
|
|
|
(23,693 |
) |
|
|
|
217,313 |
|
Net gains on loans acquired for sale |
|
|
|
4,446 |
|
|
|
|
6,473 |
|
|
|
|
7,671 |
|
Loan origination fees |
|
|
|
4,295 |
|
|
|
|
7,706 |
|
|
|
|
14,428 |
|
Net (losses) gains on investments and financings |
|
|
|
(2,499 |
) |
|
|
|
125,804 |
|
|
|
|
(230,650 |
) |
Interest income |
|
|
|
162,684 |
|
|
|
|
153,019 |
|
|
|
|
90,698 |
|
Interest expense |
|
|
|
187,390 |
|
|
|
|
179,137 |
|
|
|
|
78,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest (expense) income |
|
|
|
(24,706 |
) |
|
|
|
(26,118 |
) |
|
|
|
12,548 |
|
Other |
|
|
|
83 |
|
|
|
|
194 |
|
|
|
|
190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
|
|
90,452 |
|
|
|
|
90,366 |
|
|
|
|
21,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned by PennyMac Financial Services, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan servicing fees |
|
|
|
20,317 |
|
|
|
|
20,449 |
|
|
|
|
20,335 |
|
Loan fulfillment fees |
|
|
|
5,441 |
|
|
|
|
11,923 |
|
|
|
|
20,646 |
|
Management fees |
|
|
|
7,078 |
|
|
|
|
7,257 |
|
|
|
|
7,910 |
|
Loan origination |
|
|
|
897 |
|
|
|
|
2,178 |
|
|
|
|
2,782 |
|
Professional services |
|
|
|
1,881 |
|
|
|
|
1,523 |
|
|
|
|
1,252 |
|
Compensation |
|
|
|
1,279 |
|
|
|
|
1,523 |
|
|
|
|
1,549 |
|
Safekeeping |
|
|
|
1,124 |
|
|
|
|
1,116 |
|
|
|
|
1,021 |
|
Loan collection and liquidation |
|
|
|
909 |
|
|
|
|
579 |
|
|
|
|
1,251 |
|
Other |
|
|
|
4,673 |
|
|
|
|
5,001 |
|
|
|
|
4,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
|
43,599 |
|
|
|
|
51,549 |
|
|
|
|
61,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit from) income taxes |
|
|
|
46,853 |
|
|
|
|
38,817 |
|
|
|
|
(39,868 |
) |
Provision for (benefit from) income taxes |
|
|
|
22,229 |
|
|
|
|
(21,896 |
) |
|
|
|
30,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
24,624 |
|
|
|
|
60,713 |
|
|
|
|
(70,734 |
) |
Dividends on preferred shares |
|
|
|
10,454 |
|
|
|
|
10,455 |
|
|
|
|
10,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common shareholders |
|
|
$ |
14,170 |
|
|
|
$ |
50,258 |
|
|
|
$ |
(81,189 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
$ |
0.16 |
|
|
|
$ |
0.56 |
|
|
|
$ |
(0.88 |
) |
Diluted |
|
|
$ |
0.16 |
|
|
|
$ |
0.50 |
|
|
|
$ |
(0.88 |
) |
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
87,269 |
|
|
|
|
88,831 |
|
|
|
|
91,963 |
|
Diluted |
|
|
|
87,269 |
|
|
|
|
113,388 |
|
|
|
|
91,963 |
|
10
Exhibit 99.2 2Q23 EARNINGS REPORT PennyMac Mortgage Investment Trust
July 2023
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 results,
future operations, business plans and investment strategies, as well as industry and market conditions, all of which are subject to change. Words like “believe,” “expect,” “anticipate,” “promise,”
“plan,” and other expressions or words of similar meanings, as well as future or conditional verbs such as “will,” “would,” “should,” “could,” or “may” are generally intended to
identify forward- looking statements. Actual results and operations for any future period may vary materially from those projected herein and from past results discussed herein. These forward-looking statements include, but are not limited to,
statements regarding future changes in interest rates, housing, and prepayment rates; future loan originations and production; future loan delinquencies, defaults and forbearances; future investment and hedge expenses; future investment strategies,
future earnings and return on equity as well as other business and financial expectations. Factors which could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: changes in
interest rates; the Company’s ability to comply with various federal, state and local laws and regulations that govern its business; changes in the Company’s investment objectives or investment or operational strategies, including any
new lines of business or new products and services that may subject it to additional risks; volatility in the Company’s industry, the debt or equity markets, the general economy or the real estate finance and real estate markets; events or
circumstances which undermine confidence in the financial and housing markets or otherwise have a broad impact on financial and housing markets; changes in general business, economic, market, employment and domestic and international political
conditions, or in consumer confidence and spending habits from those expected; the degree and nature of the Company’s competition; declines in real estate or significant changes in U.S. housing prices or activity in the U.S. housing market;
the availability of, and level of competition for, attractive risk-adjusted investment opportunities in mortgage loans and mortgage- related assets that satisfy the Company’s investment objectives; the inherent difficulty in winning bids to
acquire mortgage loans, and the Company’s success in doing so; the concentration of credit risks to which the Company is exposed; the Company’s dependence on its manager and servicer, potential conflicts of interest with such entities
and their affiliates, and the performance of such entities; changes in personnel and lack of availability of qualified personnel at its manager, servicer or their affiliates; the availability, terms and deployment of short-term and long-term
capital; the adequacy of the Company’s cash reserves and working capital; the Company’s ability to maintain the desired relationship between its financing and the interest rates and maturities of its assets; the timing and amount of cash
flows, if any, from the Company’s investments; our substantial amount of indebtedness; the performance, financial condition and liquidity of borrowers; our exposure to risks of loss and disruptions in operations resulting from adverse weather
conditions, man-made or natural disasters, climate change and pandemics; the ability of the Company’s servicer, which also provides the Company with fulfillment services, to approve and monitor correspondent sellers and underwrite loans to
investor standards; incomplete or inaccurate information or documentation provided by customers or counterparties, or adverse changes in the financial condition of the Company’s customers and counterparties; the Company’s indemnification
and repurchase obligations in connection with mortgage loans it purchases and later sells or securitizes; the quality and enforceability of the collateral documentation evidencing the Company’s ownership and rights in the assets in which it
invests; increased rates of delinquency, defaults and forbearances and/or decreased recovery rates on the Company’s investments; the performance of mortgage loans underlying mortgage-backed securities in which the Company retains credit risk;
the Company’s ability to foreclose on its investments in a timely manner or at all; increased prepayments of the mortgages and other loans underlying the Company’s mortgage-backed securities or relating to the Company’s mortgage
servicing rights and other investments; the degree to which the Company’s hedging strategies may or may not protect it from interest rate volatility; the effect of the accuracy of or changes in the estimates the Company makes about
uncertainties, contingencies and asset and liability valuations when measuring and reporting upon the Company’s financial condition and results of operations; the Company’s ability to maintain appropriate internal control over financial
reporting; technologies for loans and the Company’s ability to mitigate security risks and cyber intrusions; the Company’s ability to detect misconduct and fraud; developments in the secondary markets for the Company’s mortgage
loan products; legislative and regulatory changes that impact the mortgage loan industry or housing market; regulatory or other changes that impact government agencies or government-sponsored entities, or such changes that increase the cost of doing
business with such agencies or entities; legislative and regulatory changes that impact the business, operations or governance of mortgage lenders and/or publicly-traded companies; the Consumer Financial Protection Bureau and its issued and future
rules and the enforcement thereof; changes in government support of homeownership; changes in government or government-sponsored home affordability programs; limitations imposed on the Company’s business and its ability to satisfy complex
rules for it to qualify as a REIT for U.S. federal income tax purposes and qualify for an exclusion from the Investment Company Act of 1940 and the ability of certain of the Company’s subsidiaries to qualify as REITs or as taxable REIT
subsidiaries for U.S. federal income tax purposes; changes in governmental regulations, accounting treatment, tax rates and similar matters; the Company’s ability to make distributions to its shareholders in the future; the Company’s
failure to deal appropriately with issues that may give rise to reputational risk; and the Company’s organizational structure and certain requirements in its charter documents. You should not place undue reliance on any forward-looking
statement and should consider all of the uncertainties and risks described above, as well as those more fully discussed in reports and other documents filed by the Company with the Securities and Exchange Commission from time to time. The Company
undertakes no obligation to publicly update or revise any forward-looking statements or any other information contained herein, and the statements made in this presentation are current as of the date of this presentation only. This presentation
contains financial information calculated other than in accordance with U.S. generally accepted accounting principles (“GAAP”), such as market-driven value changes that provide a meaningful perspective on the Company’s business
results since the Company utilizes this information to evaluate and manage the business. Non-GAAP disclosure has limitations as an analytical tool and should not be viewed as a substitute for financial information determined in accordance with GAAP.
2
SECOND QUARTER HIGHLIGHTS Strong performance from PMT’s credit
sensitive strategies and income excluding the impacts of market-driven fair value changes were partially offset by fair value declines in PMT’s interest rate sensitive strategies and related tax impacts 2Q23 Results Pretax income excluding
CREDIT Fair value of Net income market-driven New investments organically-created SENSITIVE attributable to (3) (2) Pretax income value changes in GSE CRT CRT investments Diluted common STRATEGIES (1) (2) shareholders EPS $71mm $18mm $52mm $1.2bn
$14mm $0.16 Pretax income excluding New investments INTEREST RATE Book value Return on (2) market-driven Fair value of in MSR and non- SENSITIVE per share common equity (3) Pretax income value changes MSR investments Agency bonds STRATEGIES 4%
$15.81 $4.0bn $(13)mm $22mm $133mm Dividend and Other PMT conventional correspondent Correspondent Shares Dividend per production CORRESPONDENT seller repurchased common share (2)(4) Pretax income volume (UPB) relationships PRODUCTION 1.6mm $0.40
800 $1mm $3bn Note: All figures are for 2Q23 or as of 6/30/23 (1) Net income attributable to common shareholders includes a tax expense of $22 million (2) EPS = earnings per share; CRT = credit risk transfer; MSR = mortgage servicing rights; GSE =
government-sponsored enterprise; UPB = unpaid principal balance (3) Excludes $53 million of market-driven value gains in the credit sensitive strategies and $35 million of market-driven value losses in the interest rate sensitive strategies –
see slide 11 3 3 (4) An additional $7 billion in UPB of conventional loan acquisitions was for PFSI’s account
ORIGINATION MARKET HAS DECLINED MEANINGFULLY (1) U.S. Mortgage
Origination Market Mortgage Rates Remain High ($ in trillions) 7.0% $4.4 6.0% 5.0% $2.6 4.0% $2.3 $2.0 3.0% $1.7 $0.7 $0.5 2.0% $0.3 $1.8 $1.6 1.0% $1.5 $1.4 0.0% 2021 2022 2023E 2024E Purchase Refinance (3) (2) Average 30-year fixed rate mortgage
Primary/secondary spread • Third party forecasts for 2023 originations range from $1.6 to $1.8 trillion in UPB, well below normalized levels ‒ Higher mortgage rates are driving borrowers to remain in their homes, leading to low inventory
levels and continued home price appreciation (4) ‒ Unit origination volume in 2023 is projected to be at the lowest level since 1990 , driving expectations for industry consolidation if market conditions persist • Mortgage REITs with
diversified investment portfolios, efficient cost structures and strong risk management practices such as PMT are best-positioned to manage through the volatility presented by the current market environment (1) Actual originations: Inside Mortgage
Finance. Forecast originations: Average of Mortgage Bankers Association (7/20/23) and Fannie Mae (7/10/23) forecasts. (2) Freddie Mac Primary Mortgage Market Survey 6.78% as of 7/20/23 (3) 4 Bloomberg: Difference between Freddie Mac Primary Mortgage
Market Survey and the 30-Year Fannie Mae or Freddie Mac Par Coupon (MTGEFNCL) Index. (4) Zelman & Associates 6/30/23
IMPACT OF CURRENT MARKET ENVIRONMENT ON PMT’S BUSINESSES Credit
Sensitive Interest Rate Sensitive Correspondent Strategies Strategies Production • Volumes for PMT’s own account are • Credit spreads have tightened thus • Sensitivity of MSR value has declined given significant reduction in
expected to remain low as it far in 2023, driving improvements in prepayment speeds at higher interest continues to actively manage its the structured product markets equity allocation through rates • Realized losses on PMT’s
conventional correspondent loan • Increased visibility with respect to organically-created CRT investments sales to PFSI the Federal Reserve’s projected expected to be limited terminal rate • Well-positioned given PMT’s
– 60+ day delinquency rate in PMT’s • Strong contribution from placement leadership in the channel and its CRT investments of 1.12% as of fee income due to higher short-term synergistic relationship with PFSI June 30, 2023 rates
– Credit profiles of borrowers with • Additional opportunities for PMT as – Custodial funds managed for PMT’s loans in PMT’s CRT investments are banks step back from this channel portfolio totaled $2.7 billion at June
strong and increased capital requirements 30, 2023 are introduced by bank regulators • Unemployment remains low at – Earnings rate generally fluctuates (1) 3.6% with changes in the Federal Funds • Correspondent channel has rate
– Strong embedded home price historically been a larger percentage • Underlying performance over time appreciation since 2015, when PMT of total originations in purchase- expected to be supported by PFSI's began investing in CRT oriented
markets industry-leading servicing • Weighted average current LTVs of capabilities, including proprietary – PMT’s acquisitions were 93% 51.6% as of June 30, 2023 purchase loans in 2Q23 servicing technology 5 (1) Bureau of Labor
Statistics, June 2023
CAPITAL DEPLOYMENT OUTLOOK FOR PMT Credit Sensitive Strategies •
Prevailing market conditions have created investment • Actively managing PMT’s equity allocation through opportunities in GSE-issued CRT (CAS and STACR bonds) with conventional correspondent loan sales to PFSI attractive expected returns
• PMT’s equity allocation to the interest rate sensitive • PMT invested $52 million into floating rate GSE CRT bonds in strategies decreased to 55% in 2Q23 from 58% in 1Q23 2Q23 • PMT’s equity allocation to the credit
sensitive strategies increased to 25% in 2Q23 from 24% in 1Q23 Interest Rate Sensitive Strategies • PMT expects to maintain the sale of a large percentage of PMT’s Equity Allocation – 2Q23 conventional correspondent loans to PFSI
in 3Q23 as it 100% = $2.0 billion actively manages its equity allocation with consideration given to other attractive opportunities • PMT invested $42 million into senior mezzanine bonds from jumbo securitizations in 2Q23 and an additional $11
million after quarter end Credit Sensitive • After quarter-end, entered into an agreement to acquire a Strategies 25% bulk MSR portfolio totaling $1.4 billion in UPB; PMT will Interest Rate Sensitive continue evaluating opportunities to
purchase bulk MSRs that Strategies 55% align with its investment strategy Corporate 14% Share Repurchases Correspondent Production 6% • Remains an attractive use of capital when PMT’s share price is well below book value per share
6
RUN-RATE RETURN POTENTIAL FROM PMT’S INVESTMENT STRATEGIES
Annualized Return WA Equity • Represents the average annualized return and on Equity (1) Allocated (%) (ROE) quarterly earnings potential PMT expects from its Credit sensitive strategies: strategies over the next four quarters
Organically-created investments in GSE CRT 18.0% 17% PMT Non-Agency Subordinate MBS 12.0% 1% • Reflects performance expectations in the current (2) Other credit sensitive strategies 14.5% 16% mortgage market Net credit sensitive strategies
16.1% 34% Interest rate sensitive strategies: ‒ Return potential of PMT’s organically-created MSRs (incl. recapture) 10.3% 42% investments in GSE CRT decreased slightly from the Agency MBS 14.2% 9% prior quarter due to tighter credit
spreads Non-Agency Senior MBS 15.0% 1% (3) Interest rate hedges -4.0% 0% ‒ Return potential for the interest rate sensitive strategies Net interest rate sensitive strategies 7.0% 52% decreased due to the expectation that short term rates
Correspondent production 24.0% 7% remain higher for longer, driving projected financing Cash, short term investments, and other 5.3% 7% costs closer to our expected asset returns over the next Management fees & corporate expenses -2.9% 0% (4)
few quarters Net Corporate -2.6% 7% Provision for income tax expense -0.3% ‒ Projected returns for correspondent production are higher than levels achieved in recent periods as GSE Net income 7.9% 100% pricing changes without pipeline
protection negatively Dividends on preferred stock 8.3% 28% impacted recent results Net income attributable to common shareholders 7.7% 72% (1) Average Diluted EPS Per Quarter $ 0.30 Equity allocated represents management’s internal
allocation; certain financing balances and associated interest expenses are allocated between investments based on management’s Note: This slide presents estimates for illustrative purposes only, using PMT’s base case assumptions (e.g.,
for credit performance, assessment of target leverage ratios and required capital or liquidity to support the investment (2) prepayment speeds, financing economics, and loss treatment for CRT transactions), and does not contemplate market-driven
value Primarily includes opportunistic investments in GSE CRT (3) changes other than realization of cash flows and hedge costs, or significant changes or shocks to current market conditions; actual ROE calculated as a percentage of segment equity 7
(4) results may differ materially ROE calculated as a percentage of total equity
CORRESPONDENT PRODUCTION HIGHLIGHTS • Correspondent acquisitions
in 2Q23 totaled $21.2 billion in UPB, up 5% Correspondent Production Volume and Mix Q/Q and 1% Y/Y (UPB in billions) ‒ 53% government loans; 47% conventional loans $21.6 $22.4 $21.7 $21.2 $21.0 $20.2 ‒ Government acquisitions of $11.1
billion in UPB, up 18% Q/Q and 5% Y/Y ‒ Conventional acquisitions of $10.0 billion in UPB, down 6% Q/Q and 3% Y/Y $10.6 • $7.0 billion in UPB was for PFSI’s account $13.5 $18.2 • Correspondent lock volume was $21.6 billion in
UPB, down 1% Q/Q and 4% Y/Y $10.3 $6.6 $3.0 ‒ $7.5 billion in UPB of conventional loans was for PFSI’s account • Changes in GSE pricing during the quarter did not come with pipeline 2Q22 1Q23 2Q23 protection as they historically
have, which impacted correspondent (1) PMT loans PFSI loans Total locks production profitability by $4.5 million in 2Q23 Key Financial Metrics • To actively manage its equity allocation with consideration given to 1Q23 2Q23 expected
opportunities in the market, in 3Q23 PMT expects to continue Segment pretax income as a percentage of interest 0.02% 0.04% selling a large percentage of conventional correspondent loans to PFSI (2) rate lock commitments • Increase in
correspondent sellers driven by addition of smaller sellers who Fulfillment fee as a percentage of 0.18% 0.18% (3) previously maintained relationships with commercial banks that pulled acquisitions funded back or recently exited the channel Selected
Operational Metrics • Pennymac remains the largest correspondent aggregator in the U.S. 1Q23 2Q23 • July acquisitions are estimated to be $5.9 billion in UPB; locks are Correspondent seller relationships 771 800 estimated to be $6.4
billion in UPB Note: Figures may not sum due to rounding Purchase money loans, as a % of total acquisitions 94% 93% (1) For all government loans and conventional loans sourced for PFSI, PMT earns a sourcing fee and interest income for its holding
period and does not pay a fulfillment fee to PFSI (2) 8 Conventional conforming interest rate lock commitments for PMT’s own account (3) Based on funded loans subject to fulfillment fees
TRENDS IN MSR INVESTMENTS MSR Investments ($ in millions) th $5,000
$240,000 $231,661 • MSR assets were $4.0 billion as of June 30 , st 2023, up slightly from March 31 , 2023 $222,502 $4,500 $4,013 $3,975 $3,978 $3,941 ‒ Newly originated MSR investments of $91 $4,000 $3,696 $210,000 million and fair
value gains offset by runoff from $3,500 prepayments $3,000 ‒ UPB underlying PMT’s MSR investments was essentially unchanged from the prior quarter $2,500 $180,000 $2,000 $1,500 $150,000 $1,000 $500 $0 $120,000 6/30/22 9/30/22 12/31/22
3/31/23 6/30/23 (1) MSRs UPB (right axis) 9 (1) Owned MSR portfolio and excludes loans acquired for sale at fair value
TRENDS IN PMT’S UNIQUE INVESTMENTS IN GSE CREDIT RISK TRANSFER
(1) Organically-Created GSE CRT Investments • Fair value of PMT’s organically-created CRT investments ($ in millions) increased slightly from March 31, 2023 as fair value Funded investments gains more than offset runoff from prepayments
$1,270 $1,195 • The 60+ day delinquency rate decreased slightly from $1,163 $1,148 $1,144 March 31, 2023 • Cumulative lifetime losses increased slightly; we ultimately expect realized losses over the life of these investments to be
limited, given the substantial build-up of equity for underlying borrowers due to home price appreciation in recent years (2) Selected metrics for quarter ended : 6/30/22 9/30/22 12/31/22 3/31/23 6/30/23 Underlying UPB of loans ($ in billions) $26.3
$25.3 $25.3 $24.8 $24.2 WA FICO at origination 752 752 751 753 753 WA LTV at origination 82.3% 82.2% 82.4% 82.4% 82.4% WA Current LTV 52.9% 52.2% 53.4% 53.8% 51.6% 60+ Days Delinquent as a % of outstanding UPB 1.31% 1.14% 1.25% 1.18% 1.12% Net
realized principal losses (recoveries) ($ in millions) ($4.5) $0.2 $1.2 $1.3 $0.5 Cumulative lifetime principal losses ($ in millions) $41.5 $41.6 $42.9 $44.1 $44.6 Interest reduction ($ in millions) $2.4 $3.2 $3.3 $3.3 $3.3 Cumulative interest
reduction ($ in millions) $6.6 $9.8 $13.2 $16.5 $19.9 (1) The fair value of PMT’s organically created GSE CRT investments is reflected on PMT’s balance sheet as deposits securing CRT arrangements, and derivative and credit risk transfer
strip assets or liabilities, net of the interest-only security payable (2) 10 UPB includes modified loans active as of 6/30/23; modified loans are not included for prior periods; weighted average FICO and LTV metrics at origination for the
population of loans remaining as of the date presented; delinquent loans includes delinquent loans on forbearance plans; current LTVs were refreshed using the latest home price information available as of the reporting period
SECOND QUARTER RESULTS AND RETURN CONTRIBUTIONS BY STRATEGY Income
Excluding Total Income Market-Driven WA Equity Annualized Return Market-Driven ($ in millions, except EPS) (1) (2) (3) (1) Contribution Value Changes Allocated on Equity (ROE) (1)(2) Value Changes Credit sensitive strategies: Organically-created
investments in GSE CRT $ 57.8 $ 43.0 $ 14.8 $ 314 74% PMT Non-Agency Subordinate MBS (0.8) (1.3) 0.5 24 -14% (4) Other credit sensitive strategies 14.1 11.1 3.0 149 38% Net credit sensitive strategies $ 71.1 $ 52.8 $ 18.3 $ 487 58% Interest rate
sensitive strategies: MSRs (incl. recapture) $ 36.1 $ 15.0 $ 21.1 Agency MBS (72.7) (72.7) 0.0 Non-Agency Senior MBS (0.6) (1.2) 0.5 Interest rate hedges 24.0 24.0 Net interest rate sensitive strategies $ (13.2) $ (34.8) $ 21.7 $ 1,076 -5%
Correspondent production $ 1.4 $ - $ 1.4 $ 126 4% Cash, short term investments, and other $ 2.3 $ 2.3 $ 264 3% Management fees & corporate expenses (14.7) n/a (14.7) -3% (5) Corporate $ (12.5) n/a $ (12.5) $ 264 -3% Benefit / (Provision) for
income tax expense $ (22.2) (18.3) $ (3.9) Net income $ 24.6 $ (0.3) $ 24.9 $ 1,953 5% Dividends on preferred stock $ 10.5 $ 541 8% Net income attributable to common shareholders $ 14.2 $ 1,411 4% Diluted EPS $ 0 .16 Note: Figures may not sum 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 investment strategies may be subject to taxation (2) Categorization of income as market-driven value changes based on management assessment; income excluding market-driven value changes does not represent REIT taxable income and is a non-GAAP
figure (3) Equity allocated represents management’s internal allocation; certain financing balances and associated interest expenses are allocated between investments based on management’s assessment of target leverage ratios and
required capital or liquidity to support the investment (4) 11 Includes legacy distressed loan portfolio and opportunistic investments in GSE CRT (5) ROE calculated as a percentage of total equity
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 its investment strategies MSR fair value change
before realization of cash flows (1) • In 2Q23, MSR fair value increased modestly Change in fair value of Agency MBS, interest rate hedges, and related tax impacts ‒ Interest rates increased during the quarter, decreasing prepayment
projections $220 • Net fair value losses in Agency MBS, interest rate hedges and related tax impacts – Hedging losses included $30 million in hedge costs, which were elevated due to the inverted yield curve and significant $32 interest
rate volatility $15 – Hedge costs were meaningfully lower in June and remain at lower levels in July ($46) ($65) ‒ Agency MBS decreased in fair value due to increasing interest rates • Income tax expense in 2Q23 primarily driven by
fair value increases in MSR and interest rate hedges held in PMT’s ($261) taxable REIT subsidiary 2Q22 1Q23 2Q23 12 (1) Before realization of cash flows
PMT’S FLEXIBLE AND SOPHISTICATED FINANCING STRUCTURES $555mm
Exchangeable Senior Notes $345mm 5.500% due March 2026 • Low, fixed interest rates $210mm 5.500% due • First maturity of exchangeable senior notes in November 2024 November 2024 • Provides flexibility and complements asset-backed
structures Exchangeable Senior Notes $2,650mm MSR Financing Financing capacity across • Maturity profile of MSR term notes aligns more closely with the expected multiple banks life of the MSR asset than short-term borrowings $1,260mm •
Issued new, 5-year $155 million term loan secured by Fannie Mae MSR $155mm FMSR term loan due May 2028 $305mm FMSR term notes due June 2027 • Secured revolving bank financing lines provide flexibility to finance $1,399mm drawn $350mm FMSR term
notes due March 2026 fluctuating MSR and advance balances $450mm FMSR term notes due April 2025 Term MSR & Servicing Advance Financing Secured Revolving Bank Financing Lines for MSRs & Servicing Advances $837mm CRT Financing $172mm CRT term
notes due May 2025 • Issued $235 million of new, 2-year CRT term notes to finance CRT investments previously financed with securities repurchase agreements $228mm CRT term notes due Mar 2025 • CRT term note originally due in May 2023 has
been extended 2 years $55mm CRT term notes due Feb 2025 • CRT term notes due February 2024 can be extended for an additional two $51mm CRT term notes years at PMT’s discretion; all other term notes do not contain optional due Oct 2024
$285mm CRT term notes due Feb 2024 extensions $46mm securities repurchase agreements • CRT term notes do not contain mark-to-market (margin call) provisions 13 13 CRT Financing Note: All figures are as of June 30, 2023
APPENDIX
PMT IS FOCUSED ON UNIQUE INVESTMENT STRATEGIES IN THREE SEGMENTS
• Leading acquirer and producer of conventional conforming mortgage loans • Significant growth in market share over PMT’s more than 14-year history driven by Correspondent operational excellence and high service levels Production
• Provides unique ability to produce investment assets organically • MSR investments created through the securitization of conventional correspondent loan production Interest Rate Sensitive • Hedged with Agency MBS and interest
rate derivatives Strategies • Strong track record and discipline in hedging interest rate risk • Investments in credit risk on PMT’s high-quality loan production with ability to influence performance through active servicing
supplemented by opportunistic investments in CRT bonds Credit issued by the GSEs Sensitive Strategies • Approximately $24.2 billion in UPB of loans underlying PMT’s front-end GSE CRT investments at June 30, 2023 15
HISTORICAL EARNINGS, DIVIDENDS AND BOOK VALUE PER SHARE (1) Diluted EPS
Common Dividend Book value per share $20.77 $15.81 $0.50 $0.47 $0.47 $0.47 $0.47 $0.47 $0.47 $0.40 $0.40 $0.40 $0.32 $0.16 $0.01 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 ($0.07) ($0.28) ($0.32) ($0.45) ($0.88) (2) ROE : 6% -9% -6% -7% -20% 0%
-2% 14% 4% • Repurchased 29.0 million common shares from 3Q15 through 2Q23 (1) 16 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
CURRENT MARKET ENVIRONMENT AND MACROECONOMIC TRENDS (1) (2) Average
30-year fixed rate mortgage 10-year Treasury Bond Yield 6.71% 6.32% 5.0% 3.84% 7.0% 3.47% 4.0% 6.0% 3.0% 5.0% 2.0% 4.0% 1.0% 3.0% 2.0% 0.0% (3) Macroeconomic Metrics Footnotes (1) Freddie Mac Primary Mortgage Market Survey. 6.78% as of 7/20/23
6/30/22 9/30/22 12/31/22 3/31/23 6/30/23 (2) U.S. Department of the Treasury. 3.85% as of 7/20/23 10-year Treasury (3) 10-year Treasury bond yield and 2/10 year Treasury yield spread: Bloomberg 3.0% 3.8% 3.9% 3.5% 3.8% bond yield Average 30-year
fixed rate mortgage: Freddie Mac Primary Mortgage Market Survey 2/10 year Treasury 0.1% -0.5% -0.6% -0.6% -1.0% Average secondary mortgage rate: 30-Year FNCL Par Coupon Index (MTGEFNCL), yield spread Bloomberg 30-year fixed rate 5.7% 6.7% 6.4% 6.3%
6.7% U.S. home price appreciation: S&P CoreLogic Case-Shiller U.S. National Home Price mortgage Secondary mortgage NSA Index (SPCSUSA); data is as of 5/31/23 4.4% 5.6% 5.3% 5.1% 5.7% rate Residential mortgage originations are for the quarterly
period ended; source: Inside U.S. home price appreciation Mortgage Finance 19.7% 13.0% 7.7% 3.8% -0.5% (Y/Y % change) Residential mortgage $685 $530 $350 $295 $400 originations (in billions) 17
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 with a proposed effective date for most requirements of September 30, 2023 • PennyMac Corp. (PMC) is a
wholly-owned subsidiary of PennyMac Mortgage Investment Trust and is approved as a seller/servicer of mortgage loans by Fannie Mae and Freddie Mac As of June 30, 2023 Capital Ratio Capital Liquidity (in millions) $874 $398 13% New FHFA $216 $589
Eligibility 6% Requirements (Pro-Forma) Requirement PMC Requirement PMC Requirement PMC 18
PMT’S INVESTMENT ACTIVITY BY STRATEGY DURING THE QUARTER Assets
carrying Assets carrying Net new Long-term value at Fair value changes value at ($ in millions) (5) mortgage asset investments 3/31/2023 6/30/2023 Organically-Created Investments in $ 1 ,148 $ ( 28) $ 43 $ 1 ,163 (1) GSE CRT Credit Investment in
Investor $ 90 $ (1) $ (2) $ 88 (2) Sensitive Loan Securitizations Strategies Other Credit Sensitive $ 209 $ 50 $ 10 $ 269 (3) Strategies MSR $ 3,975 $ (12) $ 15 $ 3 ,978 Interest Non-Agency Senior Rate $ 22 $ 41 $ (1) $ 62 (4) Sensitive MBS
Strategies (4) $ 4 ,410 $ 72 $ (73) $ 4 ,410 Agency MBS Total $ 9,854 $ 122 $ (7) $ 9,969 (1) The fair value of PMT’s organically-created GSE CRT investments from is reflected on PMT’s balance sheet as deposits securing CRT arrangements,
and derivative and credit risk transfer strip assets or liabilities, net of the interest-only security payable (2) As discussed in Note 6 – Variable Interest Entities to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023,
we consolidate the assets and liabilities in the trust that issued the subordinate bonds; accordingly, this investment is shown as Loans at fair value and Asset-backed financing of variable interest entities on our consolidated balance sheet (3)
Includes legacy distressed loan portfolio and opportunistic investments in GSE CRT; net new investments also reflect sales in performing and non-performing loans as a part of PMT’s strategy to exit the investments; includes $6.4 million in
carrying value of real estate acquired in settlement of loans at 6/30/23 (4) MBS = Mortgage-backed securities; net new investments in Agency MBS represents rebalancing of the MBS portfolio (considered along with to be announced hedges in managing
PMT’s interest rate risk) and runoff 19 (5) Net new investments represents new investments net of sales, liquidations, and runoff
MSR ASSET VALUATION June 30, 2023 Mortgage Unaudited ($ in millions)
Servicing Rights (1) $231,661 Pool UPB Weighted average coupon 3.6% Weighted average servicing fee 0.29% Weighted average prepayment speed assumption (CPR) 7.2% Fair value $3,977.9 As a multiple of servicing fee 5.91 20 (1) Owned MSR portfolio and
excludes loans acquired for sale at fair value
DELINQUENCY TRENDS AND SERVICING ADVANCES OUTSTANDING (1) Historical
Trends in Delinquency and Foreclosure Rates 7.0% 5.0% 3.3% 2.6% 1.9% 1.5% 1.3% 1.2% 1.2% 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 6/30/23 30-60 Day 60-90 Day
90+ Day In Foreclosure • Overall mortgage delinquency rates have returned to pre-pandemic levels • Servicing advances outstanding for PMT’s MSR portfolio were approximately $94 million at June 30, 2023, down from $121 million at
March 31, 2023 ‒ No P&I advances are outstanding as prepayment activity remains sufficient to cover remittance obligations to the GSEs Note: Figures may not sum due to rounding 21 (1) Owned MSR portfolio and includes loans acquired for
sale at fair value; delinquency and foreclosure rates based on UPB; as of 6/30/23, the UPB of mortgage servicing rights owned by PMT and loans held for sale totaled $234 billion
INTEREST RATE SENSITIVE STRATEGIES DESIGNED TO MITIGATE INTEREST RATE
VOLATILITY Estimated Sensitivity to Changes in Interest Rates at June 30, 2023 Gain in value with Gain in value with % change in PMT’s increasing rates decreasing rates shareholders’ equity 15% 10% MSRs Agency MBS 5% 0% -75 -50 -25 0 25
50 75 -5% Interest Rate Hedges -10% -15% (1) (3) (2) Long Assets MSRs/CRT and Hedges Net Exposure • PMT’s interest rate risk exposure is managed on a “global” basis – Multiple mortgage-related investment strategies with
complementary interest rate sensitivities – Utilization of financial hedge instruments – Contributes to stability of book value (1) Includes loans acquired for sale and IRLCs (net of associated hedges), Agency and Non-Agency MBS assets
(2) Includes MSRs and hedges which includes or may include put and call options on MBS, Eurodollar futures, treasury futures, and exchange-traded swaps 22 (3) Net exposure represents the net position of the “Long” assets and the MSRs and
hedges
PERFORMANCE OF PMT’S ORGANICALLY-CREATED INVESTMENTS IN GSE
CREDIT RISK TRANSFER INVESTMENTS IN 2Q23 Income (Loss) ($ in millions) Comments Contribution Market-driven value changes: Valuation-related changes included $ 43.0 • Reflects impact of credit spread tightening in Net gain (loss) on investment
Income excluding market-driven value changes: Realized gains and carry included in 17.9 • Spread income earned on CRT investments Net gain (loss) on investment Losses recognized during period (0.5) Interest income 15.8 • Interest income
on cash deposits securing CRT investments Interest expense (18.4) • Financing expense related to CRT investments Subtotal 14.8 Total income contribution: $ 57.8 23
BALANCE SHEET TREATMENT OF PMT’S ORGANICALLY-CREATED CREDIT RISK
TRANSFER INVESTMENTS At June 30, 2023 ($ in thousands) Current outstanding UPB of loans delivered to the CRT SPVs and sold to Fannie Mae or delivered subject to agreements to purchase UPB of loans subject to guarantee
obligation.................................... $ 24,167,673 REMIC CRT securities Carrying value of CRT arrangements: Current cash collateralizing guarantee included in “Deposits Deposits securing CRT
arrangements......................................................... $ 1, 269,558 securing credit risk transfer arrangements” Represents the fair value of expected future cash inflows related to Derivative and credit risk transfer strip
liabilities....................................... $ (82,963) assumption of credit risk net of expected future losses Fair value of non-recourse liability issued by CRT trusts; represents Interest-only stripped security payable at fair
value.................................. $ ( 24,060) value of interest-only payment after the maturity of PMT’s investments Fair value of CRT investments ………………........................................ $
1,162,535 24
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 6/30/23 At inception 6/30/23 At inception 6/30/23 UPB $ 1 .2 $ 0.2 UPB $ 4 .2 $ 0.5 UPB $ 6.5 $ 1 .1 Loan Count 4,113 771
Loan Count 15,146 2,806 Loan Count 21,467 4,789 % Purchase 67.6% 67.8% % Purchase 71.4% 71.9% % Purchase 68.6% 71.0% (1) (1) (1) WA FICO 742 743 WA FICO 742 743 WA FICO 749 750 (1) (1) (1) WA LTV 81.3% 80.6% WA LTV 81.8% 80.9% WA LTV 81.4% 80.8% 60+
Days Delinquent Loan Count 6 60+ Days Delinquent Loan Count 13 60+ Days Delinquent Loan Count 21 60+ Days Delinquent % o/s UPB 0.930% 60+ Days Delinquent % o/s UPB 0.535% 60+ Days Delinquent % o/s UPB 0.533% 180+ Days Delinquent Loan Count 1 180+
Days Delinquent Loan Count 2 180+ Days Delinquent Loan Count 1 Actual Losses ($k) $ 1 ,981 Actual Losses ($k) $ 5,615 Actual Losses ($k) $ 8,529 L Street Securities 2017-PM1 (August 2016 - May 2018) L Street Securities 2019-PMT1 (June 2018 - March
2019) L Street Securities 2020-PMT1 (April 2019 - September 2020) At inception 6/30/23 At inception 6/30/23 At inception 6/30/23 (4) UPB $ 22.8 $ 3.9 UPB $ 23.6 $ 2 .9 UPB $ 58.3 $ 15.5 (4) Loan Count 82,086 18,538 Loan Count 84,521 13,374 Loan
Count 1 93,310 63,195 % Purchase 73.6% 73.4% % Purchase 81.7% 79.9% % Purchase 61.6% 61.3% (1) (1) (1) WA FICO WA FICO WA FICO 746 746 746 736 758 758 (1) (1) (1) WA LTV WA LTV WA LTV 82.5% 81.9% 83.8% 84.1% 82.5% 82.4% 60+ Days Delinquent Loan
Count 134 60+ Days Delinquent Loan Count 292 60+ Days Delinquent Loan Count 531 60+ Days Delinquent % o/s UPB 0.853% 60+ Days Delinquent % o/s UPB 2.735% 60+ Days Delinquent % o/s UPB 0.948% 180+ Days Delinquent Loan Count 18 180+ Days Delinquent
Loan Count 123 180+ Days Delinquent Loan Count 212 (5) (2) (2) Actual Losses ($k) $ 27,962 Principal Losses ($k) $ 311 Principal Losses ($k) $ 215 (3) (3) Interest Reduction ($k) $ 10,190 Interest Reduction ($k) $ 9,679 Total At inception 6/30/23
(6) UPB $ 116.5 $ 24.2 Loan Count 4 00,643 1 03,473 % Purchase 69.1% 66.3% (1) WA FICO 752 753 (1) WA LTV 82.7% 82.4% 60+ Days Delinquent Loan Count 997 60+ Days Delinquent % o/s UPB 1.122% 180+ Days Delinquent Loan Count 357 (2) Principal Losses
($k) $ 44,612 (3) Interest Reduction ($k) $ 1 9,869 (1) FICO and LTV metrics at origination (2) Losses due to liquidation of reference pool collateral (3) Interest reduction due to modification of reference pool collateral (4) Loans eligible for
loss reversal are included as of 6/30/23 (5) 25 Losses included for loans eligible for reversal as of 6/30/23 (6) UPB includes modified loans that have incurred losses as of 6/30/23
CORRESPONDENT PRODUCTION ACQUISITIONS AND LOCKS BY PRODUCT Unaudited ($
in millions) 2Q22 3Q22 4Q22 1Q23 2Q23 Correspondent Acquisitions Conventional Conforming - for PMT $ 10,320 $ 1 0,225 $ 6,771 $ 6,629 $ 3,029 (1) Conventional Conforming - for PFSI - - 3,912 4,063 7,018 (1) Government 10,649 12,161 10,081 9,461
11,139 Jumbo 3 2 - - - Total $ 2 0,973 $ 22,387 $ 20,764 $ 20,153 $ 21,186 Correspondent Locks Conventional Conforming - for PMT $ 11,080 $ 10,647 $ 7,507 $ 7,588 $ 3,322 (1) Conventional Conforming - for PFSI - - 4,747 3,781 7,523 (1) Government
11,326 12,351 10,681 1 0,341 10,735 Jumbo 3 2 7 - - Total $ 22,410 $ 22,999 $ 22,941 $ 21,709 $ 21,581 Note: Figures may not sum due to rounding (1) PMT sells government-insured and guaranteed loans, and certain conventional loans that it purchases
from correspondent sellers to PennyMac Loan Services, LLC, and earns a sourcing fee and interest income for its holding period; PMT does not pay a fulfillment fee for government- 26 insured or guaranteed loans or conventional loans subsequently sold
to PFSI
27
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PennyMac Mortgage Investment Trust
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Entity Incorporation State Country Code |
MD
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Entity File Number |
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CA
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NYSE
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