PMT - Earnings call 3 2020 | PennyMac Mortgage Investment Trust

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, and welcome to the third quarter 2020 earnings discussion for PennyMac Mortgage Investment Trust. The slides that accompany this discussion are available from PennyMac Mortgage Investment Trust website at www.pennymac-reit.com.

Before we begin, let me remind you that our discussion contains forward-looking statements that are subject to the risks identified on Slide 2 that could cause our actual results to differ materially. Thank you.

Now I'd like to introduce David Spector, PMT's President and Chief Executive Officer, who will discuss the company's third quarter results.

David Spector

Isaac. you, Thank income or net quarter. common of shareholders PMT per attributable common million, $X.XX third share $XX.X reported to in the

Our with in pretax strategies, GSE production, in which rate-sensitive corresponding strong pretax pretax million. a earnings income; $XX.X PMT income; reports as loss; reflect corporate interest segment X and interest tighten. $XX this and segments: million through results credit-sensitive pretax correspondent credit-sensitive credit million million $X.X strategies discussed contributed PMT's Correspondent and the spreads contributed in will production net contributed detail risk following a strategies strategies, credit in of Production loss be $XX.X on which opportunities more slides. results transfer in which investments gain quarter in rate-sensitive

common Book $XX.XX was June XX, at at $XX.XX up share value per from XX. September

of volumes, paid quarter. loan driven up PMT production announced, quarter PMT's previously up principal and $XX.X third XXXX. XX% from deployment XX% balance, a by this capital the the quarter As per was prior which in billion quarter dividend the share unpaid from for conventional totaled record $X.XX

billion a Mae million quarter MSR delivered UPB Fannie New million, of CRT securities. CRT new in of firm in $X.X and eligible the $XXX resulting commitment to to loans $XX we investments totaled for purchase

for pleased We closing, quarter. to also financing upon am after the of note fourth to repurchased of has sufficient I approximately settlement XXX,XXX million. that arranged shares end, of in cost PMT at complete $X.X a expected CRT-X quarter the PMT

the dominated participation. channel, leading mortgage have a discuss large to in investment turn PMT unique loans, Correspondent producer the is historically XXXX business conventional let's which X after of their and conforming banks, Production reduced PMT's Now Slide having entered strategies.

slide. will the next environment in the opportunity current We the on discuss significant

the to segment, other loan its innovative mortgage-backed conventional rate investing high-quality loan GSE XXXX. creates the hedges end on organically invests through Interest new volatility. PMT rate in investments securitization PMT the Strategy of Rate-Sensitive production. interest agency interest production securities impacts through began investments CRT correspondent and mitigate the in In MSR risk also PMT of front credit in

there were loans investments. UPB in CRT XX, approximately $XX September underlying of As billion PMT

in investments will quarter. cease these structures fourth the New in

turn X the in XXXX. let's interest mortgage PMT's by to XXXX to now the market. indicate trillion, XXXX for low at continuation X have near of through X% discuss expectations a in forecast XXXX expected to trillion to for are total from originations the XXXX Now year-over-year, range Slide over are total to and opportunity forecasted originations and rates $X.X Economic market, rates robust origination increased Purchase forecast mortgage will Reserve return $X.X These all-time refinance supported to originations trillion. hold that Federal originations while levels. forecasts $X.X increase

in correspondent PennyMac significant market is a well current our share market and positioned growth and result disciplines We've channel. to as environment been capitalize the capital able to continue risk management investments. this structure, technology infrastructure of on

investment by investment This driven production Slide activity PMT's third quarter. June X, mortgage servicing during the the for is and from during the million CRT Slide to to let's $X.X and Now detail related investments rights. to real of of the third of correspondent turn fair On on strategies PMT's we deployment activity X investment focused runoff further value from quarter PMT's each decreased PMT's at discuss the capital composed strategy of end quarter. by primarily $XX owned fair ended is billion. substantial million XX. activity value declined REO. prepayment the a $XX with in portfolio quarter portfolio and at estate loan distressed

net sourced UPB conventional million of increased of in by MSR billion loan $XX.X from production and securitization $XXX ESS primarily the investments runoff. of

rates interest during As our a in million. result and the $XX investments the slight fair by value MSR declined of quarter, of ESS the decline

part Agency MBS are interest in rate primarily mitigate designed reflects elevated the strategy and quarter comprehensive sensitivity the Agency held of repayments. The to as of ESS a by of assets. PMT reduction MBS the MSR

the flat PMT's outflows roughly invested MSRs in assets. Overall, the was third equity investments quarter for equity as other in in offset

turn strategies next the discuss earn quarterly let's quarters. to Now potential strategies. expects from X to potential from return and rate run Slide rate and on potential each run X quarter return earnings over the annualized investment the PMT PMT's its represents PMT's average average

for average EPS of to is annualized run per XX% equity on expectation equity an annualized of to rate strategies will related expected approximately potential quarter in return common XX%. $X.XX, PMT's PMT's XX%. on strategies average Our with diluted an return result allocation equity investment of a is which credit-sensitive

and over Our return terms. XX%, credit-sensitive strategies annualized of projections average due uncertainty conventional is an returns. Equity of with segment lower consist in MBS equity XX%, losses. Equity than We approximately our associated Production strategies slightly to with modest XX%, primarily is as the expected segment investments related continue a improved with expected return decreased next are to CRT last average positions allocated and prior to the used a for improvement return this and aggregate hedge are an normalized have interest from financing impact The rate-sensitive margins CRT volatility equity MSR the to COVID-XX that to increased allocated of year. allocation expectations to while as on to reflect results XX%. volumes potential and is the rate primarily of in on to moderate annualized on in ESS expected interest This quarter. Correspond decrease equity its markets consider

to now our Fartaj, PMT's review like to Investment That who Officer, presentation, will I'd the Vandy Chief and investment turn discussion concludes activities. my mortgage over

Vandad Fartaj

Thank you, David.

acquisitions our $XX.X quarter Slide conventional UPB, acquisitions at correspondent record the by of XX% X a Let's loans begin XX% Correspondent prior and with government in PMT for the were look and in quarter XX% were loans. our year-over-year. third from production were billion highlights. up a XX%

in which in fee from quarter XX% totaled XX% a totaled the quarter up PMT in and lock from earns UPB, the of PennyMac quarter of XX% from XXXX. acquisitions $XX and $XX.X UPB, Financial, prior from Government the up quarter record third up quarter acquisitions the billion the quarter correspondent prior in from sourcing the was for Conventional prior quarter volume loan XXXX. third XX% the up third billion UPB, of XX% $XX.X from third from a Conventional XX% and XXXX. billion

billion benefit correspondent aggregator higher-margin, quarter. the the volumes rate Margins from or $XX.X efforts of PennyMac the overall the month were were billion in record Interest $XX.X best volume UPB, second billion UPB. increased volume up in the Volumes October, second the and in third levels a billion we third XXXX. of elevated to quarter which remained of channel quarter the in to commitments, XX% channel and total U.S. acquisitions in largest in and the billion in $X.X from in low law remain correspondent $XX.X the saw quarter, correspondent in increased increase lock for from $XX.X UPB. loan commitments continue in

MSR quarter, driven conventional Despite activity record to fair PMT's ESS XX billion Now increased investments. MSR by and let's the value PMT's turn to discuss trends in $X.X and assets production volumes. during elevated investments prepayment in new Slide from PMT's

totaled by billion $XXX.X from billion with earlier, PennyMac PMT's resulting portfolio up $XX.X of mini-bulk were June at September associated September UPB from at acquisitions billion to David investments XXXX $XXX.X June MSR As to UPB repayments and at new decreased from ESS XX, at XX. $XX.X investments financial MSR $XXX The The at million. flow -- driven million investments mentioned XX. ESS the totaled XXXX loans. bulk, XX, by PMT's $XXX from September down XX underlying billion MSR

Fannie PMT credit $X.X CRT in billion Mae Now eligible in PMT's quarter UPB to under let's in transfer. our the transaction turn XX discuss delivered sixth risk Mae. to Slide loans and third Fannie investments GSE with of

investments As the and previously ceased new quarter. to PMT settle noted, the fourth expects in transaction has

a X.X% commitment COVID-XX. the forma elevated losses XX $X.X to activity securities. from million. is million. in billion investments was XX yet CRT XX, increased of underlying at were in was at The $X.X Cumulative realized materialize a to from in of totaled XX-plus the quarter of as agreements losses CRT billion. lifetime X%, $XX.X increase third CRT The outstanding On but from loans $X.X and day expected decrease the in the $XX.X basis a delinquency down to face June down amount result prior losses pro quarter, purchase and hardships September rate September related prepayment remains UPB of firm The as billion, totaled PMT's PMT's

term obtain sufficient settlement. CRT investments. maturity the contain all in expected term do term financing is and on XX, all financing place in These any PMT's The Now investments from about talk connection financing to is contain quarter, our not let's with It CRT-X. settlement notes has the CRT XXXX, turn of and in the expected arrangements transaction arrangements do earliest extensions. of we've March PMT made to optional other for Slide for notes. of with and not fourth sixth Mae losses is Fannie accelerate to notes mark-to-market the expectation its increased that sell our CRT provisions. amortization partners financing PMT's settled X-year

than to through PMT's and to as its of PMT related performance. to related in X. offset assisting value transactions expects a credit fair role XX recorded PMT's recent quarter. X fair loans on the gains in incurring losses distressed for fair scheduled strong PMTT turn it on the an loss as transactions $XX investments services, acquires interest in in let's creates Slide value investor in most CRT X scheduled fourth risk alignment borrowers. COVID-XX losses gains million more quarter CRT third Now to on update an PMT's on the value begin

been $XX discount PMTT at of losses, to presently respect more or these if will current a million had casualty The XX. fair events thereafter, to investments value X is of forbearance proceeded if event all period September of reverse to to XXXX-PMX, a if Securities estimate necessary. loans ultimately With to months delinquent, expects or X par. With X, credit up to scheduled at conclusion reduced as the status delinquent L losses to XXX has $XX the unmitigated payment PMT's a that respect days through of become PMT portion a due Street COVID-related reported million

speeds commitment payoffs be principal also event. investments realized a par investments has PMT's reduce prepayment casualty the Fannie that losses the for benefit for CRT COVID-XX treated the at held reduced as CRT-X, potential a will discount. published associated for and of Faster Mae or amount loans as pandemic clarification return the at

to I'd Now Chang, turn Chief the the Officer, who discussion third results. will quarter's PMT's to review Andy financial over like Financial

Andrew Chang

you, Thank Vandy.

million discuss third income on or an PMT's activities a strategy. XX by return turn and the net attributable third Let's all $XX.X Slide net shareholders the to XX%, in common of of contributions reflected results return expenses. and equity annualized to of common quarter quarter

In a the contributed total, equity credit-sensitive strategies or quarter. $XX XX% annualized of for income pretax on million return

investments will Within contributed of CRT pretax upon later. the income expand which million, I $XX.X segment,

on decrease Interest equity a loss and by premium fair contributed a related of strategies, for and losses or include MBS primarily agency interest offset negative on hedges, prepayments, positions rate largely the quarter. Agency rate-sensitive segment together $X.X strategies. annualized senior non-agency which return results our other MSRs, our were X% performance ESS interest value, driven in the and income a and from pretax rate-sensitive MSR The by of MBS from million

and rate show sensitivity strategies to MBS and of interest separately, are managed contribution each for has of the these of interest rate-sensitive inversely MSRs interest as While together income they typically our the been hedges. rate correlated that we the ESS the

$XX.X contributed a pretax Corporate production quarter loss million for The the equity by Correspondent a income segment return million. of annualized $XX.X or XX% driven to record contributed pretax production volumes. on

million Finally, income expense subsidiary. driven in we REIT recorded PMT's $XX.X income increased by tax taxable in

reflecting overall our value investments quarter. gains fair XX Market-driven discuss in million of income quarter, third investments market-driven million existing gains of changes value million. speeds. of and losses Net turn included CRT $XX.X spreads on tightening modest contributed losses were fair PMT's changes value loan elevated a $X.X in CRT of the value impact let's were market-driven excluding mortgage credit loans recognized of performance and delivery Now income, on investments value gains expense excluding $XX.X to under CRT investments. acquired $XX.X changes. These prepayment sale million upon commitment the value the consisted CRT CRT net during consisting our changes of firm from million, third and securities. Income realized $XX.X the to purchase related the third to of of PMT's interest to pretax market-driven Slide the in net quarter for

to recognized carry these were securing related interest $XXX,XXX, million million. while on and was totaled and $X.X financing on quarter, of Interest million. gains investments losses investments deposits earned $X.X expense CRT cash realized $XX.X For the the investments CRT was income

to portfolio we Now trends outcomes. 'XX let's in forbearance delinquency the Slide MSR and and turn see PMT's discuss

As X.X% in at forbearance portfolio day X.X%, forbearance portfolio June down you the can XX for MSR were from in see since XX. The was delinquency on XX% June the to X.X% of loans new decreased at slide, X.X% the rate June within at offset as XX-plus have plans PMT's MSR percentage at by more than September exited. plans XX, XX from of borrowers who PMT's forbearance

prepayment principal $XX and re-performed, half options remains million GSE's advances are GSE the June and were approximately or at were activity requirement. Of cover delinquencies up outstanding advances September deferral the as XX% became $XX million half borrowers current. to as outstanding payment of interest who XX XX, No at from sufficient were extended. Servicing

back And turn for some remarks. with I'll to that, the closing over David discussion

David Spector

PMT totaling strong and Andy. continued share you, third a earnings platform for share fair improvements continue $XX.XX. million. of strong the book in risk credit and quarter, exceeded investments to focused record PMT's and market-leading the correspondent along delivered its again dividend investments. risk substantially, technology Financial's volumes shareholders. position speeds. investments to to increased driven in expertise on market result, during value investments strong We prepayment continue market in and benefit with production quarterly transfer remain elevated Volumes deliver deploy recovery risk-adjusted per production value driving attractive to Thank transfer the increased segment correspondent $XXX the earnings Earnings per business as from MSR credit PMT's in by risk PennyMac assets and capital new leveraging in the returns to value PMT's and

Operator

PennyMac Trust's earnings third discussion. Mortgage This Investment quarter concludes

at Thank Investor please For any XXX-XXXX. department www.pennymac-reit.com, at you. our Relations our website visit call or (XXX) questions,

PennyMac Mortgage Investment Trust (PMT) 5 Nov 202020 Q3 Earnings call transcript