| | |
| | Exhibit 99.1 |
| Media | Investors |
| Stephen Hagey | Christopher Oltmann |
| (805) 530-5817 | (818) 224-7028 |
PennyMac Mortgage Investment Trust Reports
Fourth Quarter and Full-Year 2017 Results
Westlake Village, CA, February 8, 2018 – PennyMac Mortgage Investment Trust (NYSE: PMT) today reported net income attributable to common shareholders of $34.6 million, or $0.50 per common share on a diluted basis, for the fourth quarter of 2017, on net investment income of $93.7 million. PMT previously announced a cash dividend for the fourth quarter of 2017 of $0.47 per common share of beneficial interest, which was declared on December 19, 2017, and paid on January 26, 2018.
Fourth Quarter 2017 Highlights
Financial results:
| • | Net income attributable to common shareholders of $34.6 million, up 161 percent from the prior quarter; includes $13.0 million benefit from remeasurement of the net deferred tax liability in PMT’s taxable REIT subsidiary (TRS) as a result of the newly enacted federal tax law |
| • | Diluted earnings per common share of $0.50, up 150 percent from the prior quarter; includes a benefit of $0.18 from the remeasurement of the net deferred tax liability |
| • | Net investment income of $93.7 million, up 24 percent from the prior quarter |
| • | Book value per common share increase to $20.13 at December 31, 2017, up from $19.74 at September 30, 2017 |
| • | Repurchased approximately 5.2 million PMT common shares from November 6, 2017 to January 5, 2018 at a cost of $82.6 million |
| • | Annualized return on average common equity of 11 percent, up from 4 percent for the prior quarter1 |
1 | Annualized 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. |
Investment activities and correspondent production results:
| • | Continued investment in GSE credit risk transfer (CRT) and mortgage servicing rights (MSRs) resulting from PMT’s correspondent production business |
| o | Correspondent production related to conventional conforming loans totaled $5.9 billion in unpaid principal balance (UPB), down 10 percent from the prior quarter |
| o | CRT deliveries totaled $4.8 billion in UPB, which will result in approximately $168 million of new CRT investments once the aggregation period is complete |
| o | Added $83 million in new MSR investments |
| • | Completed the previously announced sale of $287 million in UPB of nonperforming and performing loans from the distressed portfolio |
Notable activity after quarter end:
| • | Entered into an agreement to sell $381 million in UPB of nonperforming and performing loans from the distressed portfolio2 |
Full-Year 2017 Highlights
| • | Net income attributable to common shareholders of $102.5 million, up 35 percent from the prior year; includes $13.0 million benefit from remeasurement of the net deferred tax liability in PMT’s TRS |
| • | Diluted earnings per common share of $1.48, up 37 percent from the prior year; includes a benefit of $0.18 from the remeasurement of the net deferred tax liability |
| • | Net investment income of $317.9 million, up 17 percent from the prior year |
| • | Return on average common equity of 8 percent, up from 5 percent for the prior year3 |
| • | Issued 12.4 million preferred shares for gross proceeds of $310 million |
| • | Repurchased approximately 6.3 million PMT common shares from March 9, 2017 through January 5, 2018 at a cost of $101.8 million |
| • | PMT’s equity allocation to CRT, MSRs and excess servicing spread (ESS) grew from 43 percent to 66 percent of total equity, while allocation to distressed mortgage loans declined from 39 percent to 22 percent4 |
________
2 | This transaction is subject to continuing due diligence and customary closing conditions. There can be no assurance regarding the size of the transaction or that the transaction will be completed at all. |
3 | 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. |
4 | Management’s internal allocation of equity. With the pending sale of $381 in UPB of nonperforming and performing loans from the distressed portfolio, PMT’s equity allocated to distressed mortgage loans is expected to decrease to approximately 15%. This transaction is subject to continuing due diligence and customary closing conditions. There can be no assurance regarding the size of the transaction or that the transactions will be completed at all |
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“We made substantial progress in the strategic transformation of PMT during the fourth quarter,” said President and CEO David Spector. “We completed a bulk sale of nonperforming and performing distressed loans, which brought our equity allocated to distressed loans down to 22%. During the most recent purchase window, we repurchased $83 million of PMT stock with an estimated book value of $105 million. Our earnings for the quarter benefited from strong results in credit risk transfer and correspondent production, as well as from the remeasurement of a net deferred tax liability in our taxable REIT subsidiary resulting from the federal tax law enacted late last year. Earnings for the quarter were partially offset by the underperformance of the distressed portfolio which was driven by valuation losses on nonperforming loans.”
The following table presents the contributions of PMT’s segments, consisting of Credit Sensitive Strategies, Interest Rate Sensitive Strategies, Correspondent Production and Corporate.
| | Quarter ended December 31, 2017 | |
| | Correspondent production | | | Credit sensitive strategies | | | Interest rate sensitive strategies | | | Corporate | | | Consolidated | |
| | (in thousands) | |
Net gain (loss) on investments | | | | | | | | | | | | | | | | | | | | |
Mortgage loans at fair value | | $ | — | | | $ | (8,207 | ) | | $ | — | | | $ | — | | | $ | (8,207 | ) |
Mortgage loans held by variable interest entity net of asset-backed | | | — | | | | — | | | | 112 | | | | — | | | | 112 | |
Mortgage-backed securities | | | — | | | | 149 | | | | (3,820 | ) | | | — | | | | (3,671 | ) |
CRT Agreements | | | — | | | | 57,137 | | | | — | | | | — | | | | 57,137 | |
Hedging derivatives | | | — | | | | — | | | | (3,524 | ) | | | — | | | | (3,524 | ) |
Excess servicing spread investments | | | — | | | | — | | | | (3,610 | ) | | | — | | | | (3,610 | ) |
| | | — | | | | 49,079 | | | | (10,842 | ) | | | — | | | | 38,237 | |
Net gain on mortgage loans acquired for sale | | | 20,191 | | | | 41 | | | | — | | | | — | | | | 20,232 | |
Net mortgage loan servicing fees | | | — | | | | 43 | | | | 19,872 | | | | — | | | | 19,915 | |
Net interest income | | | | | | | | | | | | | | | | | | | | |
Interest income | | | 12,328 | | | | 11,997 | | | | 18,669 | | | | 119 | | | | 43,113 | |
Interest expense | | | (6,914 | ) | | | (12,256 | ) | | | (16,319 | ) | | | — | | | | (35,489 | ) |
| | | 5,414 | | | | (259 | ) | | | 2,350 | | | | 119 | | | | 7,624 | |
Other (loss) income | | | 9,704 | | | | (2,009 | ) | | | — | | | | — | | | | 7,695 | |
| | | 35,309 | | | | 46,895 | | | | 11,380 | | | | 119 | | | | 93,703 | |
Expenses: | | | | | | | | | | | | | | | | | | | | |
Mortgage loan fulfillment and servicing fees payable to PennyMac Financial Services, Inc. | | | 19,175 | | | | 3,469 | | | | 7,608 | | | | — | | | | 30,252 | |
Management fees payable to PennyMac Financial Services, Inc. | | | — | | | | — | | | | — | | | | 5,900 | | | | 5,900 | |
Other | | | 2,063 | | | | 4,156 | | | | 554 | | | | 4,831 | | | | 11,604 | |
| | | 21,238 | | | | 7,625 | | | | 8,162 | | | | 10,731 | | | | 47,756 | |
Pretax income (loss) | | $ | 14,071 | | | $ | 39,270 | | | $ | 3,218 | | | $ | (10,612 | ) | | $ | 45,947 | |
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Credit Sensitive Strategies Segment
The Credit Sensitive Strategies segment includes results from distressed mortgage loans, CRT, non-Agency subordinated bonds and commercial real estate investments. Pretax income for the segment was $39.3 million on revenues of $46.9 million, compared with pretax income of $13.1 million on revenues of $20.5 million in the prior quarter.
Net gain on investments was $49.1 million, an increase of 164 percent from the prior quarter.
PMT’s distressed mortgage loan portfolio generated realized and unrealized losses totaling $8.2 million, compared with realized and unrealized gains of $3.3 million in the prior quarter. Fair value gains on performing loans in the distressed portfolio were $0.6 million while fair value losses on nonperforming loans were $11.7 million.
The schedule below summarizes the gains (losses) on distressed mortgage loans:
| | Quarter ended | |
| | December 31, 2017 | | | September 30, 2017 | | | December 31, 2016 | |
| | (in thousands) | |
Valuation changes: | | | | | | | | | | | | |
Performing loans | | $ | 647 | | | $ | 8,638 | | | $ | (619 | ) |
Nonperforming loans | | | (11,672 | ) | | | (5,841 | ) | | | (1,451 | ) |
| | | (11,025 | ) | | | 2,797 | | | | (2,070 | ) |
Gain on payoffs | | | 1,114 | | | | 224 | | | | 174 | |
Gain (loss) on sale | | | 1,704 | | | | 256 | | | | 860 | |
| | $ | (8,207 | ) | | $ | 3,277 | | | $ | (1,036 | ) |
The nonperforming loan portfolio was adversely impacted by higher recidivism of previously performing loans as well as seasonally high costs related to the maintenance of PMT’s lien interest in the loans. Losses to the distressed portfolio in connection with the bulk sale of nonperforming and performing loans were approximately $4 million, including sale expenses and adverse valuation impact on the carrying value of the remaining nonperforming loans. Lower valuation gains on the performing loan portfolio were driven by reduced impact of market improvements and lower reperformance during the quarter.
Net gain on CRT investments was $57.1 million, compared to a gain of $15.2 million in the prior quarter. The gain was driven by a tightening of credit spreads for such securities, consistent with spread tightening across many asset classes during the quarter. At quarter end, PMT’s investments in CRT totaled $589 million, compared with $546 million at September 30, 2017.
Net interest expense for the segment totaled $0.3 million, compared to net interest income of $2.9 million in the prior quarter. Interest income totaled $12.0 million, a 25 percent decrease from the prior quarter, driven by a decrease in capitalized interest from a reduction in loan modification activity and fewer performing loans in the distressed loan portfolio. Interest expense totaled $12.3 million, down 6 percent from the prior quarter, primarily driven by ongoing reductions in the distressed loan portfolio and real estate acquired in the settlement of loans (REO).
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Other investment losses were $2.0 million, compared with a $0.9 million loss in the prior quarter, driven by a seasonal increase in tax payments on real estate acquired in settlement of loans (REO). At quarter end, PMT’s inventory of REO properties totaled $162.9 million, down from $185.0 million at September 30, 2017.
Segment expenses were $7.6 million, a 2 percent increase from the prior quarter, resulting from expenses related to the sale of distressed loans, partially offset by lower servicing expense on a smaller distressed loan portfolio.
Interest Rate Sensitive Strategies Segment
The Interest Rate Sensitive Strategies segment includes results from investments in MSRs, ESS, Agency mortgage-backed securities (MBS), and non-Agency senior MBS and interest rate hedges. The segment includes investments that typically have offsetting exposures to changes in interest rates. Interest Rate Sensitive Strategies generated pretax income of $3.2 million on revenues of $11.4 million, compared with pretax income of $13.3 million on revenues of $20.7 million in the prior quarter.
The results in the Interest Rate Sensitive Strategies segment consist of net gain/loss on investments, net interest income and net loan servicing fees, as well as the associated expenses.
Segment investments produced a net loss of $10.8 million, primarily consisting of $3.8 million of losses on MBS; $3.6 million of losses on ESS; and $3.5 million of losses on hedging derivatives.
Net interest income for the segment was $2.4 million, compared to $3.6 million in the prior quarter. Interest income totaled $18.7 million, a 4 percent decrease from the prior quarter, driven by a reduction in our MBS and ESS investment balances from the prior quarter. Interest expense totaled $16.3 million, a 3 percent increase from the prior quarter due to an increase in short-term borrowing costs.
Net mortgage loan servicing fees were $19.9 million, down from $21.9 million in the prior quarter. Net loan servicing fees included $47.4 million in servicing fees, reduced by $22.6 million of amortization and realization of MSR cash flows. Net loan servicing fees also included a $3.8 million valuation loss on MSRs carried at fair value, a $1.6 million impairment provision for MSRs carried at the lower of amortized cost or fair value, $0.8 million of related hedging losses, and $0.6 million of MSR recapture income. PMT’s hedging activities are intended to manage the Company’s net exposure across all interest rate-sensitive strategies, which include MSRs, ESS and MBS.
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The following schedule details net loan servicing fees:
| | Quarter ended | |
| | December 31, 2017 | | | September 30, 2017 | | | December 31, 2016 | |
| | (in thousands) | |
From nonaffiliates | | | | | | | | | | | | |
Servicing fees(1) | | $ | 47,430 | | | $ | 44,280 | | | $ | 37,079 | |
Effect of MSRs: | | | | | | | | | | | | |
Carried at lower of amortized cost or fair value | | | | | | | | | | | | |
Amortization and realization of cashflows | | | (22,609 | ) | | | (21,634 | ) | | | (17,927 | ) |
(Provision for) reversal of impairment | | | (1,589 | ) | | | (1,702 | ) | | | 41,607 | |
Gain on sale | | | 660 | | | | — | | | | — | |
Carried at fair value - change in fair value | | | (3,765 | ) | | | (3,977 | ) | | | 7,034 | |
Gains (Losses) on hedging derivatives | | | (782 | ) | | | 4,576 | | | | (60,734 | ) |
| | | (28,085 | ) | | | (22,737 | ) | | | (30,020 | ) |
From PennyMac Financial Services, Inc. | | | | | | | | | | | | |
MSR recapture fee receivable from PFSI | | | 570 | | | | 333 | | | | 724 | |
Net mortgage loan servicing fees | | $ | 19,915 | | | $ | 21,876 | | | $ | 7,783 | |
PMT’s MSR portfolio, which is subserviced by a subsidiary of PennyMac Financial Services, Inc. (NYSE: PFSI), grew to $72.1 billion in UPB from $67.9 billion at September 30, 2017.
MSR and ESS valuation losses primarily resulted from yield curve flattening, and ESS valuations were also adversely impacted by higher than expected prepayment activity during the quarter. ESS valuation losses are net of recapture income totaling $1.1 million from PFSI for prepayment activity during the quarter. When prepayment of a loan underlying PMT’s ESS results from a refinancing by PFSI, PMT generally benefits from recapture income.
Segment expenses were $8.2 million, a 10 percent increase from the prior quarter, driven by higher servicing expense from a larger servicing portfolio and a temporary increase in delinquencies resulting from the recent natural disasters.
Correspondent Production Segment
PMT acquires newly originated mortgage loans from third-party correspondent sellers and typically sells or securitizes the loans, resulting in current-period income and ongoing investments in MSRs and GSE CRT related to a portion of its production. PMT’s Correspondent Production segment generated pretax income of $14.1 million versus $8.3 million in the prior quarter.
Through its correspondent production activities, PMT acquired $15.4 billion in UPB of loans and issued IRLCs totaling $15.9 billion in the fourth quarter, compared with $17.4 billion and $17.4 billion, respectively, in the prior quarter. Of the correspondent acquisitions, conventional conforming acquisitions totaled $5.9 billion, and government-insured or guaranteed acquisitions totaled $9.5 billion, compared with $6.5 billion and $10.9 billion, respectively, in the prior quarter.
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Segment revenues were $35.3 million, a 3 percent increase from the prior quarter. Segment revenues included a net gain on mortgage loans of $20.2 million, other income of $9.7 million, which primarily consists of volume-based origination fees, and net interest income of $5.4 million. Net gain on mortgage loans acquired for sale in the quarter increased 12 percent from the prior quarter, driven by improvements to loan acquisition strategies and secondary market execution. Net interest income increased 16 percent from the prior quarter driven by the optimization of financing arrangements.
The following schedule details the net gain on mortgage loans acquired for sale:
| Quarter ended | |
| December 31, 2017 | | | September 30, 2017 | | | December 31, 2016 | |
| (in thousands) | |
Net gain on mortgage loans acquired for sale: | | | | | | | | | | | |
Receipt of MSRs in loan sale transactions | $ | 82,948 | | | $ | 82,838 | | | $ | 101,186 | |
Provision for losses relating to representations and wvvwarranties provided in mortgage loan sales: | | | | | | | | | | | |
Pursuant to mortgage loans sales | | (792 | ) | | | (1,075 | ) | | | (1,251 | ) |
Reduction in liability due to change in estimate | | 2,156 | | | | 1,642 | | | | 741 | |
Cash investment(1) | | (69,846 | ) | | | (61,678 | ) | | | (63,938 | ) |
Fair value changes of pipeline, inventory and hedges | | 5,766 | | | | (3,760 | ) | | | (13,429 | ) |
| $ | 20,232 | | | $ | 17,967 | | | $ | 23,309 | |
Segment expenses were $21.2 million, down 19 percent from the prior quarter, driven by a decrease in volume-based fulfillment fee expense and a lower weighted average fulfillment fee. The weighted average fulfillment fee rate in the fourth quarter was 33 basis points, down from 36 basis points in the prior quarter and reflects discretionary reductions to facilitate the successful completion of certain loan transactions by PMT.
Corporate Segment
The Corporate segment includes interest income from cash and short-term investments, management fees, and corporate expenses.
Segment revenues were $119,000, a decrease from $182,000 in the prior quarter.
Management fees were $5.9 million, down 2 percent from the prior quarter, resulting from a reduction in PMT’s shareholders’ equity, driven by common share repurchases. No incentive fees were paid in the fourth quarter or the prior quarter.
Other segment expenses were $4.8 million compared with $4.7 million in the prior quarter.
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Taxes
PMT recorded income tax expense of $5.1 million compared with a $4.8 million expense in the prior quarter. As a result of the new tax law, remeasurement of the net deferred tax liability in PMT’s TRS resulted in a reduction of income tax expense of $13 million, or $0.18 per share. Going forward, the statutory reduction in the corporate tax rate is expected to improve the after-tax profitability of the TRS.
Executive Chairman Stanford L. Kurland concluded, “PMT’s fourth quarter performance represents the further affirmation of our strategic focus on correspondent production and the investments it creates. The correspondent business generates attractive returns on its own and also produces unique long-term investments such as CRT and MSRs. We also are working on enhancing returns by optimizing our financing structures, such as the one we have implemented for financing Fannie Mae MSRs. We believe the income potential of these strategies taken together should produce attractive returns on equity, as reflected in our run-rate income potential. The continued shift to these newer strategies is reflected in our improving run-rate income potential, which is further enhanced by lower provisions for corporate income taxes.”
Management’s slide presentation will be available in the Investor Relations section of the Company’s website at www.pennymac-REIT.com beginning at 1:30 p.m. (Pacific Daylight Time) on Thursday, February 8, 2018.
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. PennyMac Mortgage Investment Trust common shares trade on the New York Stock Exchange under the symbol "PMT." PMT is externally managed by PNMAC Capital Management, LLC, and a controlled subsidiary of PennyMac Financial Services, Inc. (NYSE: PFSI). Additional information about PennyMac Mortgage Investment Trust is available at www.PennyMac-REIT.com.
This press release 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. Factors which could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: changes in our investment objectives or investment or operational strategies, including any new lines of business or new products and services that may subject us to additional risks; volatility in our industry, the debt or equity markets, the general economy or the real estate finance and real estate markets specifically; events or circumstances which undermine confidence in the financial markets or otherwise have a broad impact on
8
financial markets; changes in general business, economic, market, employment and political conditions, or in consumer confidence and spending habits from those expected; 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 our investment objectives; the inherent difficulty in winning bids to acquire distressed loans or correspondent loans, and our success in doing so; the concentration of credit risks to which we are exposed; the degree and nature of our competition; the availability, terms and deployment of short-term and long-term capital; the adequacy of our cash reserves and working capital; our ability to maintain the desired relationship between our financing and the interest rates and maturities of our assets; the timing and amount of cash flows, if any, from our investments; unanticipated increases or volatility in financing and other costs, including a rise in interest rates; the performance, financial condition and liquidity of borrowers; incomplete or inaccurate information or documentation provided by customers or counterparties, or adverse changes in the financial condition of our customers and counterparties; changes in the number of investor repurchases or indemnifications and our ability to obtain indemnification or demand repurchase from our correspondent sellers; increased rates of delinquency, default and/or decreased recovery rates on our investments; increased prepayments of the mortgages and other loans underlying our mortgage-backed securities or relating to our mortgage servicing rights, excess servicing spread and other investments; our exposure to market risk and declines in credit quality and credit spreads; the degree to which our hedging strategies may or may not protect us from interest rate volatility; the effect of the accuracy of or changes in the estimates we make about uncertainties, contingencies and asset and liability valuations when measuring and reporting upon our financial condition and results of operations; changes in regulations or the occurrence of other events that impact the business, operation or prospects of government sponsored enterprises; changes in government support of homeownership; changes in governmental regulations, accounting treatment, tax rates and similar matters; our ability to mitigate cybersecurity risks and cyber incidents; our exposure to risks of loss with real estate investments resulting from adverse weather conditions and man-made or natural disasters; our ability to satisfy complex rules in order to qualify as a REIT for U.S. federal income tax purposes; our ability to make distributions to our shareholders in the future; and our organizational structure and certain requirements in our 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.
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PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| | December 31, 2017 | | | September 30, 2017 | | | December 31, 2016 | |
| | (in thousands except share amounts) | |
ASSETS | | | | | | | | | | | | |
Cash | | $ | 77,647 | | | $ | 99,515 | | | $ | 34,476 | |
Short-term investments | | | 18,398 | | | | 5,646 | | | | 122,088 | |
Mortgage-backed securities at fair value | | | 989,461 | | | | 1,036,669 | | | | 865,061 | |
Mortgage loans acquired for sale at fair value | | | 1,269,515 | | | | 1,270,340 | | | | 1,673,112 | |
Mortgage loans at fair value | | | 1,089,473 | | | | 1,347,943 | | | | 1,721,741 | |
Excess servicing spread purchased from PennyMac Financial Services, Inc. | | | 236,534 | | | | 248,763 | | | | 288,669 | |
Derivative assets | | | 113,881 | | | | 67,288 | | | | 33,709 | |
Real estate acquired in settlement of loans | | | 162,865 | | | | 185,034 | | | | 274,069 | |
Real estate held for investment | | | 44,224 | | | | 42,546 | | | | 29,324 | |
Mortgage servicing rights | | | 844,781 | | | | 790,335 | | | | 656,567 | |
Servicing advances | | | 77,158 | | | | 61,826 | | | | 76,950 | |
Deposits securing credit risk transfer agreements | | | 588,867 | | | | 545,694 | | | | 450,059 | |
Due from PennyMac Financial Services, Inc. | | | 4,154 | | | | 4,725 | | | | 7,091 | |
Other assets | | | 87,975 | | | | 78,719 | | | | 124,586 | |
Total assets | | $ | 5,604,933 | | | $ | 5,785,043 | | | $ | 6,357,502 | |
LIABILITIES | | | | | | | | | | | | |
Assets sold under agreements to repurchase | | $ | 3,180,886 | | | $ | 3,203,386 | | | $ | 3,784,001 | |
Mortgage loan participation purchase and sale agreements | | | 44,488 | | | | 43,988 | | | | 25,917 | |
Federal Home Loan Bank advances | | | — | | | | — | | | | — | |
Notes payable | | | — | | | | 80,106 | | | | 275,106 | |
Asset-backed financing of a variable interest entity at fair value | | | 307,419 | | | | 318,404 | | | | 353,898 | |
Exchangeable senior notes | | | 247,186 | | | | 246,906 | | | | 246,089 | |
Assets sold to PennyMac Financial Services, Inc. under agreements to repurchase | | | 144,128 | | | | 148,072 | | | | 150,000 | |
Interest-only security payable at fair value | | | 7,070 | | | | 6,386 | | | | 4,114 | |
Derivative liabilities | | | 1,306 | | | | 4,900 | | | | 9,573 | |
Accounts payable and accrued liabilities | | | 64,751 | | | | 76,127 | | | | 107,758 | |
Due to PennyMac Financial Services, Inc. | | | 27,119 | | | | 16,008 | | | | 16,416 | |
Income taxes payable | | | 27,317 | | | | 20,148 | | | | 18,166 | |
Liability for losses under representations and warranties | | | 8,678 | | | | 10,047 | | | | 15,350 | |
Total liabilities | | | 4,060,348 | | | | 4,174,478 | | | | 5,006,388 | |
SHAREHOLDERS' EQUITY | | | | | | | | | | | | |
Preferred shares of beneficial interest | | | 299,707 | | | | 299,707 | | | | — | |
Common shares of beneficial interest—authorized, 500,000,000 common shares of $0.01 par value; issued and outstanding 61,334,087, 65,875,618, and 66,697,286 common shares, respectively | | | 613 | | | | 659 | | | | 667 | |
Additional paid-in capital | | | 1,290,931 | | | | 1,362,319 | | | | 1,377,171 | |
Accumulated deficit | | | (46,666 | ) | | | (52,120 | ) | | | (26,724 | ) |
Total shareholders' equity | | | 1,544,585 | | | | 1,610,565 | | | | 1,351,114 | |
Total liabilities and shareholders' equity | | $ | 5,604,933 | | | $ | 5,785,043 | | | $ | 6,357,502 | |
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PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| | Quarter ended | |
| | December 31, 2017 | | | September 30, 2017 | | | December 31, 2016 | |
| | (in thousands, except per share amounts) | |
Investment Income | | | | | | | | | | | | |
Net gain on mortgage loans acquired for sale: | | | | | | | | | | | | |
From nonaffiliates | | $ | 17,488 | | | $ | 14,692 | | | $ | 20,314 | |
From PennyMac Financial Services, Inc. | | | 2,744 | | | | 3,275 | | | | 2,995 | |
| | | 20,232 | | | | 17,967 | | | | 23,309 | |
Mortgage loan origination fees | | | 9,683 | | | | 11,744 | | | | 13,889 | |
Net gain (loss) on investments: | | | | | | | | | | | | |
From nonaffiliates | | | 41,847 | | | | 17,499 | | | | (6,601 | ) |
From PennyMac Financial Services, Inc. | | | (3,610 | ) | | | (3,665 | ) | | | 18,881 | |
| | | 38,237 | | | | 13,834 | | | | 12,280 | |
Net mortgage loan servicing fees: | | | | | | | | | | | | |
From nonaffiliates | | | 19,345 | | | | 21,543 | | | | 7,058 | |
From PennyMac Financial Services, Inc. | | | 570 | | | | 333 | | | | 725 | |
| | | 19,915 | | | | 21,876 | | | | 7,783 | |
Interest income: | | | | | | | | | | | | |
From nonaffiliates | | | 39,173 | | | | 47,579 | | | | 52,810 | |
From PennyMac Financial Services, Inc. | | | 3,940 | | | | 3,998 | | | | 5,046 | |
| | | 43,113 | | | | 51,577 | | | | 57,856 | |
Interest expense: | | | | | | | | | | | | |
To nonaffiliates | | | 33,397 | | | | 38,161 | | | | 38,809 | |
To PennyMac Financial Services, Inc. | | | 2,092 | | | | 2,116 | | | | 2,032 | |
| | | 35,489 | | | | 40,277 | | | | 40,841 | |
Net interest income | | | 7,624 | | | | 11,300 | | | | 17,015 | |
Results of real estate acquired in settlement of loans | | | (4,101 | ) | | | (3,143 | ) | | | (7,232 | ) |
Other | | | 2,113 | | | | 2,226 | | | | 1,884 | |
Net investment income | | | 93,703 | | | | 75,804 | | | | 68,928 | |
Expenses | | | | | | | | | | | | |
Earned by PennyMac Financial Services, Inc.: | | | | | | | | | | | | |
Mortgage loan fulfillment fees | | | 19,175 | | | | 23,507 | | | | 27,164 | |
Mortgage loan servicing fees(1) | | | 11,077 | | | | 11,402 | | | | 11,696 | |
Management fees | | | 5,900 | | | | 6,038 | | | | 5,081 | |
Mortgage Loan origination | | | 1,786 | | | | 2,230 | | | | 2,228 | |
Professional services | | | 1,374 | | | | 1,331 | | | | 1,381 | |
Compensation | | | 1,404 | | | | 1,067 | | | | 1,979 | |
Mortgage loan collection and liquidation | | | 1,507 | | | | 864 | | | | 727 | |
Real estate held for investment | | | 2,037 | | | | 1,897 | | | | 905 | |
Other | | | 3,496 | | | | 3,302 | | | | 3,902 | |
Total expenses | | | 47,756 | | | | 51,638 | | | | 55,063 | |
Income before provision for (benefit from) income taxes | | | 45,947 | | | | 24,166 | | | | 13,865 | |
Provision for (benefit from) income taxes | | | 5,109 | | | | 4,771 | | | | (17,309 | ) |
Net income | | | 40,838 | | | | 19,395 | | | | 31,174 | |
Dividends on preferred shares | | | 6,235 | | | | 6,125 | | | | — | |
Net income attributable to common shareholders | | $ | 34,603 | | | $ | 13,270 | | | $ | 31,174 | |
Earnings per share | | | | | | | | | | | | |
Basic | | $ | 0.53 | | | $ | 0.20 | | | $ | 0.46 | |
Diluted | | $ | 0.50 | | | $ | 0.20 | | | $ | 0.44 | |
Weighted-average shares outstanding | | | | | | | | | | | | |
Basic | | | 64,485 | | | | 66,636 | | | | 67,368 | |
Diluted | | | 72,952 | | | | 66,636 | | | | 75,181 | |
Dividends declared per share | | $ | 0.47 | | | $ | 0.47 | | | $ | 0.47 | |
(1) | Mortgage loan servicing fees expense includes both special servicing for PMT’s distressed portfolio and subservicing for its mortgage servicing rights |
11
PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| | Year ended December 31, | |
| | 2017 | | | 2016 | | | 2015 | |
| | (in thousands, except per share amounts) | |
Net investment income | | | | | | | | | | | | |
Net gain on mortgage loans acquired for sale: | | | | | | | | | | | | |
From nonaffiliates | | $ | 62,432 | | | $ | 97,218 | | | $ | 43,441 | |
From PennyMac Financial Services, Inc. | | | 12,084 | | | | 9,224 | | | | 7,575 | |
| | | 74,516 | | | | 106,442 | | | | 51,016 | |
Mortgage loan origination fees | | | 40,184 | | | | 41,993 | | | | 28,702 | |
Net gain (loss) on investments: | | | | | | | | | | | | |
From nonaffiliates | | | 110,914 | | | | 24,569 | | | | 50,746 | |
From PennyMac Financial Services, Inc. | | | (14,530 | ) | | | (17,394 | ) | | | 3,239 | |
| | | 96,384 | | | | 7,175 | | | | 53,985 | |
Net mortgage loan servicing fees: | | | | | | | | | | | | |
From nonaffiliates | | | 67,812 | | | | 53,216 | | | | 48,532 | |
From PennyMac Financial Services, Inc. | | | 1,428 | | | | 1,573 | | | | 787 | |
| | | 69,240 | | | | 54,789 | | | | 49,319 | |
Interest income: | | | | | | | | | | | | |
From nonaffiliates | | | 178,225 | | | | 199,521 | | | | 175,980 | |
From PennyMac Financial Services, Inc. | | | 16,951 | | | | 22,601 | | | | 25,365 | |
| | | 195,176 | | | | 222,122 | | | | 201,345 | |
Interest expense: | | | | | | | | | | | | |
To nonaffiliates | | | 143,333 | | | | 141,938 | | | | 121,365 | |
To PennyMac Financial Services, Inc. | | | 8,038 | | | | 7,830 | | | | 3,343 | |
| | | 151,371 | | | | 149,768 | | | | 124,708 | |
Net interest income | | | 43,805 | | | | 72,354 | | | | 76,637 | |
Results of real estate acquired in settlement of loans | | | (14,955 | ) | | | (19,118 | ) | | | (19,177 | ) |
Other | | | 8,766 | | | | 8,453 | | | | 8,283 | |
Net investment income | | | 317,940 | | | | 272,088 | | | | 248,765 | |
Expenses | | | | | | | | | | | | |
Earned by PennyMac Financial Services, Inc.: | | | | | | | | | | | | |
Mortgage loan fulfillment fees | | | 80,359 | | | | 86,465 | | | | 58,607 | |
Mortgage loan servicing fees | | | 43,064 | | | | 50,615 | | | | 46,423 | |
Management fees | | | 22,584 | | | | 20,657 | | | | 24,194 | |
Mortgage Loan origination | | | 7,521 | | | | 7,108 | | | | 4,686 | |
Professional services | | | 6,905 | | | | 6,819 | | | | 7,306 | |
Compensation | | | 6,322 | | | | 7,000 | | | | 7,366 | |
Mortgage loan collection and liquidation | | | 6,063 | | | | 13,436 | | | | 10,408 | |
Real estate held for investment | | | 6,376 | | | | 3,213 | | | | 604 | |
Other | | | 14,200 | | | | 15,012 | | | | 15,867 | |
Total expenses | | | 193,394 | | | | 210,325 | | | | 175,461 | |
Income before provision for (benefit from) income taxes | | | 124,546 | | | | 61,763 | | | | 73,304 | |
Provision for (benefit from) income taxes | | | 6,797 | | | | (14,047 | ) | | | (16,796 | ) |
Net income | | | 117,749 | | | | 75,810 | | | | 90,100 | |
Dividends on preferred stock | | | 15,267 | | | | — | | | | — | |
Net income attributable to common shareholders | | $ | 102,482 | | | $ | 75,810 | | | $ | 90,100 | |
Earnings per share | | | | | | | | | | | | |
Basic | | $ | 1.53 | | | $ | 1.09 | | | $ | 1.19 | |
Diluted | | $ | 1.48 | | | $ | 1.08 | | | $ | 1.16 | |
Weighted-average shares outstanding | | | | | | | | | | | | |
Basic | | | 66,144 | | | | 68,642 | | | | 74,446 | |
Diluted | | | 74,611 | | | | 77,109 | | | | 83,336 | |
Dividends declared per share | | $ | 1.88 | | | $ | 1.88 | | | $ | 2.16 | |
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