PMT - Earnings call transcript Q2 2021 | PennyMac Mortgage Investment Trust

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

Isaac Garden

Good afternoon, and welcome to the Second Quarter 2021 Earnings Discussion for PennyMac Financial Services Inc. The slides that accompany this discussion are available on PennyMac Financial's website at irpennymacfinancial.com.

Before we begin, let me remind you that our discussion contains forward-looking statements that are subject to the risks identified on slide two that could cause our actual results to differ materially, as well as non-GAAP measures that have been reconciled to their GAAP equivalent in our earnings presentation. Thank you.

Now, I'd like to begin by introducing David Spector, PennyMac Financial’s Chairman and Chief Executive Officer who will review the company’s second quarter 2021 results.

David Spector

Isaac. you, Thank delivered driven again results, performance the declines. in offset PennyMac continued outstanding strong quarter, value fair by net servicing production second by Financial MSR financial and partially core million income annualized an equity or Net on $XXX diluted per $X.XX, return share XX%. earnings of representing of was Book at XXth. grew $XX.XX share value to per X% June

This for $XXX the $XXX the an we to PFSI's repurchase for approximate beginning now cost of of of since bought shares stock And XX.X common the purchased repurchases continue X.X stock $XXX of approximately quarter shares of an million. for Importantly, or million back to approximate over shares an million. July, we XX% have brings we repurchased common year-to-date of outstanding. shares cost PFSI's the XXXX, total month with X.X And million. during additional million approximately million

activity. the balance unpaid volumes the from prior Financial loan again in These June prepayment XXth, its strong despite servicing of billion Managing in of our on Additionally, led discussion. increase growth, $X.XX in an billion were production Chief portfolio PFSI's In authorization performance June to XX% dividend Senior cash Dan $XXX declared principal to PFSI's per Officer will Board Financial and total PennyMac later XXth, quarter repurchase acquisition from and financial of more billion. of the share. up origination elevated $X XXXX. end continued in volumes, billion Perotti, totaled Directors Board Directors detail second quarter $X $XX second PFSI's stock Director this quarter. from at a servicing and X% portfolio also discuss approved to

presentation, Officer Investment last over associated third-party PFSI's reducing Director quarter-over-quarter were profitability buyout capital sold Jones, and of to we and assets loans early earned profitability section management Net Doug will $X.X whole these the to of Senior a result with quarters. Banking thus the loan loans as fees and on our risk Management in incentive billion. billion the as of in increased Importantly, four UPB segment slightly $X.X PMT's this holding efficiency. expand Mortgage increasing Chief Managing investors, down under delivered on based

systems Senior We invest going of review groundwork to origination our that, processes Day. across continue Officer I will over forward. to goals the in we that people, laying recent With Managing PFSI turn Operating outlined and our mortgage medium allow the in businesses, now term achieve to Chang, profitability us would and for the the drivers the and who Chief call Andy Director Investor landscape

Andrew Chang

Thank historical you, basis, be The near rates record have lows. to returned a market on origination strong recently to mortgage continues as David.

population benefit trillion in supporting the market. larger Additionally, originations we XXXX believe of FHFA's of $X.X forecasts market has from to for the refinance fee at adverse origination refinance lower Recent $X.X range loans today's a that a would from resulted elimination trillion. rates, further economic

and is trillion. originations are and noting in expected $X.X trillion purchase forecasted that While are for remain grow strong forecasts be XXXX and originations It to respectively. $X.X average trillion to $X.X at XXXX, worth XXXX

profitability production business across environments. money model, and believe in with PennyMac production expansion largest PennyMac servicing the we refinance from our large over businesses. years Financials producers of as consumer given of and different one strong, the significantly business, outlook our decline the several loans as while contributes remain position purchase direct and continued to are believe correspondent direct So, the Financial a interest next expected lending direct our broker of of channels PennyMac volumes the higher origination result for rates, We U.S. profitable to Financial's growing the

production overall quarter, second production decrease consumer in industry mix towards direct declined lending shift in the the While channel. margins saw margin, we given smaller our a

outsized Our Dan an channels segment impact earnings, later. discuss will lending as have production on direct

our grow the segment. channels, from to in continue we earnings leadership Financial's direct will positions As PennyMac origination Production drive this the growth

And balanced growing technology The well. rates while increasingly market others combined becomes and our risk continue this large from and from portfolio advantage component as relative earnings distinguish support a others competitive team the that our PennyMac we a of to the servicing in And mortgage management our mortgage changing growth have we an made with will of deep industry normalized we return more with to increase. also regulatory origination the industry's investments disciplines provides the competitive change strategy a business Our interest PennyMac in the infrastructure when management believe and believe to us important levels. volumes perspective, market. position expertise

Now, over to will it I'll our Doug banking who turn mortgage discuss businesses.

Doug Jones

Thanks, Andy.

XX% loan from maintained slide of you prior see in As currently XXXX. approximately our XX% position can leadership its down second from on up of of X% overall. correspondent presentation, channel we was quarter acquisition $XX.X the the channel, seven and billion, the and Total represent we PennyMac estimate that correspondent quarter volume the

the prior $XX.X the of prior XX% the percentage The of second per up acquisitions of X% Revenue quarter quarter XX through the XXXX. scale of we from fee XXXX. for XX% us environments. combined which second points, government the from from PFSI Conventional structure from were government correspondent XXXX. to of quarter fulfillment the quarter prior the business adjusted conventional operate XX% lock $XX.X the correspondent in up XX% were billion, in from the and have quarter, down channel or in second fallout quarter. quarter our and Our mix excellence in totaled were Government market was PMT from the quarter essentially $XX.X Government profitably from basis in up acquisitions prior previous unchanged correspondent billion, correspondent operational and loans quarter XX% the points our achieved total and quarter down volatile locks low-cost with second loan acquisitions loans. from allow basis as XX% was XX down X% from the billion, down and the

changes these and see stock purchase we PennyMac our time. believe Ultimately, like opportunities share its were channel Day, to we Investor will resulting continue the July, be preferred from $XX over our growth in believe role we PennyMac acquisitions reasons for UPB correspondent In additional aggregator correspondent billion. GSE's market outlined important as $XX.X will we billion well-capitalized agreements. And a in locks increasingly the were a leader. of As

rate in in $XX.X strong that billion. Our channel. and technology in and gives quarter. since rate and we originations $XXX totaled while unchanged to has new lock made last year prior essentially the meaningfully second our and increased account share in platform for and billion, volumes record million, servicing in second the for quarter a digital be and an was commitments coupled XXX for efficient growth. We approximately quarter. attributed marketing Purchase and the basis customer again, have origination from from quarter officers based the The a division in dedicated the in lock analytics, Consumer quarter loan operating processes X.X% a first $XX.X lock sales adjusted lock the in prior fallout volumes PennyMac The of per continued with can XXXX. quarter market increased foundation success quarter, second Direct million totaled also produce estimate ongoing we smaller non-portfolio acquisition Lending $XXX Similarly a in up the UPB, market interest interest from the from Origination now the loan origination process. $XXX investments lock or growing despite XXXX. channel application fulfillment portfolio, quarter were decrease of the total of the was up our points data volume the commitments $XXX Revenue record the $X.X million million billion

direct remain margins originations In totaled totaled billion billion. this However, XXst billion. at locks $X.X pipeline and consumer committed July channel $X.X in The $X.X channel July attractive. was for

to per billion XXXX. channel Lastly, and totaled reflecting decrease remain a lock of prior these in from XX%. see now offer estimate over currently the the activity. quarter. billion. from superior March the brokers strong fallout market in drive July In channel to broker X,XXX $X.X servicing share and Despite continue quarter. between elevated basis levels July was prior customers from XXX basis and billion. sharply And portfolio, increase down adjusted acquisition Pricing are over and the XX% our X.X% billion, originations broker We origination providing direct opportunity margins serve down mortgage volumes organic long-term products the we the XXst, intense and elevated to totaled experience. Revenue $X.X continue XX% was billion partners approved UPB, originations down $X prepayment approximately in in of committed the in leaders. XX Similarly, XXst the growth our of points our Broker totaled these with despite in volume total, to $X.X lock we competition represented channel, they $X.X committed channel our totaled points in the competition, pipeline channel at levels locks of

MSRs, PFSI's of from from delinquency of of $X.X portfolio to servicing XX.X% PennyMac XX-plus Financial's consisting approximately the the mostly up loans had prior was and owned the from while EBO XX-day of and on decreased see a servicing than in reported quarter. from can the the by in at X.X% of ended Financial XX.X% XXst unpaid quarter, Mac down of as in of emerge delinquency completed quarter XX.X%. the XX.X% X.X% our And rate Ginnie production. at end addition prepayment billion Fannie PMT, the Mae X.X%, borrowers a unchanged offset down Mae which sub-serviced debt from from portfolio Freddie primarily X.X%, March portfolio of X% mortgage of second PennyMac in billion runoff essentially you mortgage billion consists the of portfolio, The which residential prior servicing States. second billion, prior portfolio $X.X all primarily continue forbearance in $XXX we portfolio, balance, a the $XX owned As prior modifications of total to The plans. from UPB billion XX, rate in speed sub-serviced totaled reported volume quarter, United the conventional owned $X.X and UPB the of more quarter principal quarter slide speed of loan approximately prepayment was with quarter. includes down billion, rights $XX a by

to As $X.X up significantly loans investors, of quarter. earlier, in whole loan UPB last sold billion mentioned David EBO we third-party from

these have loan in loss additional loans the to PennyMac a these capacity investors, securitizations of of Ginnie place the associated program to third-party potential execute efficiently them margin out also longstanding transactions liquidity sell partnerships parties and calls. and with buy provide strategies, for loans third eliminates several to delinquent We Mae These with EBO as investors. mitigation sales to

retains Importantly, to PennyMac loans an become the government into for securities. eligible servicing the Mae repurchase carries these and redelivery Ginnie event option rights they in insured

This quarter, volumes meaningfully the driving we partnerships number volume increased our quarterly to mentioned have parties in loan with these and partners, the third of earlier. also increase EBO sales expanded I existing the we of

like in meaningful redelivery for quarter. Finally, loan, I'll financial the provide the transactions it opportunity turn these life PennyMac while the of the to for to will Financial speak now the Dan over who to future. savings over providing results the

Daniel Perotti

Doug. Thanks,

Production was PFSI's share and from then from XXXX. trends. earnings cover forbearance our earlier, prior second segment’s briefly and million, review of per $X.XX. the or results As servicing XX% income I down income each segment XX% and quarter quarter the David million, diluted was advance $XXX.X mentioned will pre-tax $XXX.X of

PFSI's we as expenses, you net from As will of contribution channels, revenue received of the XX, on origination earlier. from breakdown including mentioned a for The lending provide each earnings, see conventional impact channels an PFSI's Andy on outsize the loans. correspondent slide direct fees fulfillment loan have loan production of PMT production

can account you pre-tax owned the for adjusted margins Production basis segment the presentation, fallout prior income. of PFSI's see slide XX% quarter, points As accounted of direct of approximately and from in lock second XXX lock revenue per first declined points and revenue the XXX on XX XX% fallout but broker down volume represented adjusted the consumer basis of the was XXXX. quarter, second quarter from quarter for in in

result in million higher. earnings direct. down trend basis the from to hedging Our on by on related a excluding to slide related recorded strategy and but protect fair decreased included also the revenue interest pre-tax fair quarter-over-quarter, and of our expected from million, value million income. to and Hedging These and curve, and rates $XXX shortfall levels segment activity income Operating loan our our related as production million in XXX% was interest in expenses ranging quarter of driven Servicing towards $XX from losses from valuation quarter-over-quarter. and the and early $XX shift income fees for a a lending, totaled other as as from changes of MSR prior prepayment comprehensive On to recording XXX second primarily the XX order the were are yield million points we items elevated, can EBO strategy. million lower additional quarter in loss hedging prior prepayments, prior direct the asset, This of value In you custodial by continues income quarter And declines value Operating and in in in approximately decrease in the locks significant accruals down The is in Pre-tax $XX.X decreased to a related million. from million prepayment well related MSR rate were pre-tax flatter compensation $XXX.X expenses. of of activity channel, driven an the for of production segment as considers and moderate which costs a $XX expenses future, our see consumer quarter pre-tax adjusted to included basis prior $XX.X Servicing valuation-related the gains percentage million, decreased a second declines. fair of the remain declines slightly fallout as $XXX.X second impact by mix the by utilize mortgage prior the XX% related million buyouts. value XX, release driven seasonal correspondent up also of of quarter primarily $XXX the by revenue. XXXX. points higher expenses, asset quarter of in quarter from the expectations MSR XXXX. Payoff down as decrease of up include by The $X quarter driven designed of valuation balances. vary production was

prior incentive Management the second pre-tax $X.X under and $X.X Net million Our up in segment quarter of from of assets $X.X a in earned, the quarter million, Investment delivered down fees as XXXX. million income from result of revenue up XXth, down XXth, the June $X.X March billion from XXst up of from and slightly was XX% as XXth, million, $XX.X totaled management first quarter percent from from XXXX. June XX% and X% XXXX. Segment June

become forbearance to Lastly, Servicing new who to XXst. to $XXX as from have with plans. as March the in it $XXX plans tax seeing at X.X% March activity trends XXth calendar exited increase outstanding, turn June as payments touch of prepayment I would to on at remittance The year. decreased like obligations. June toward at sufficiently we are percentage No forbearance are loss closing quarters due Advances borrowers to few mitigation. in I since to forbearance at property advances are X.X% and next many million end outstanding the more loans like approximately to some advances back offset remarks. continued the XXst, of cover P&I to David decreased that, related And than over at for would XXth, XXst from million expected March forbearance the

David Spector

delivered volatility financial operational outstanding in another Financial and PennyMac Dan. you, market. despite the performance, increased Thank quarter mortgage of the

a portfolio continued has of volumes despite record volumes level in market the to lending all and three estimate margin the share. drive growth the resulted higher which of Strong during increase direct elevated prepayments. production continued funded Our our across channels expand, to consumer channel quarter, producing servicing significant in we locked

model Our balanced first XXXX. outstanding across strategic is the PFSI, return for a which has key producing on XX% environments, consistently advantage delivered business a half for returns different of equity

reach We Investor email team any or questions also return phone. you. our driven for our with on repurchasing by to medium shares, remain Thank investors expectations by encourage very to active term We equity. PFSI's out Relations

End of Q&A

This Inc. Services, second earnings discussion. concludes Financial quarter PennyMac

department any Thank our website our XXX-XXX-XXXX. ir.pennymacfinancial.com, questions, at Relations For you. please Investor at call or visit

PennyMac Mortgage Investment Trust (PMT) 5 Aug 212021 Q2 Earnings call transcript