PMT - Earnings call transcript Q4 2021 | PennyMac Mortgage Investment Trust

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Operator

Good afternoon and welcome to the Fourth Quarter and Full Year 2021 Earnings Discussion for PennyMac Mortgage Investment Trust. The slides that accompany this discussion are available on PennyMac Mortgage Investment Trust’s 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.

Now I’d like to introduce David Spector, PMT’s Chairman and Chief Executive Officer who will discuss the company’s fourth quarter and full year 2021 results.

David Spector

Thank you, Isaac.

value XXXX, of a per $XX.X driven by quarter to loss common fourth interest primarily shareholders its common million fair the PMT strategies. net reported attributable share, rate For sensitive in declines or $X.XX offset in These investments bonds. in our consist credit non-Agency subordinate risk transfers strong credit impacts by returns strategies, sensitive were which in partially GSE of and investments

dividend of $XX.XX PMT to quarter, the we common $X.XX During paid common million. prior for $XX $XX.XX end million Book shares repurchased share. the stock PMT common decreased a value at of per share quarter. of X.X per the from

to Our low-coupon organically $XX.X the generate $XXX high million this mortgage to of quarter, continues billion and loan quality assets in servicing for led conventional rights. creation in production of new, PMT UPB production correspondent

create subordinate of sourced to the continue securitizations, bonds PMT’s from new production credit in also investor volumes. loan from investments form We non-Agency

UPB two investor This million. loan quarter, in the financing completed of the successfully securitizations, investments In was PMT an net securitizations million associated of of the value PMT’s end decline at Finance $XX total, in asset-backed was XX% of to $XXX the is year. market Mortgage XXXX market fair current Inside $X.X trillion, of The XXXX approximately origination and aggregate forecasts a reduction projected estimates trillion XXXX. for substantially $X.X origination total year-over-year. with

and continued well long-term REIT believe market in indices. and delivered we our purchase in XX-year PMT we smaller XXXX PMT’s XXXX. that than in including for expected orientation have originations scale production exceeded strong shareholder market, headwinds for result positions are conventional creation. in channel, over it history have Despite the asset public $X of The near-term. with in origination in the correspondent GSEs, from returns comparable correspondent purchase significant However, expected went these more for is July business headwinds, remain of loans to combined to however, the trillion the levels competition organic at PMT’s

remained our relatively of book navigating performance Additionally, our mortgage for and organic years Organic value the asset platform management of average an example team talented advantage arise can REITs. over creation An with in believe securitizing per with successfully deep bonds. by aggregating business on is they is markets tranches evolve. This as to other and model the with provided $XX stable, PFSI, at loans capitalize PFSI, the to attributed success PMT experience relative management while subordinate PMT’s investor be positioned changing the associated uniquely and Combined period recent mortgage PMT to has same investing led a by resulting we and the remains share. opportunities this competitive of and risks. of the

of we months loan a several last the securitizations subordinate in over fact, $X.X tranches billion. UPB total with In investor invested have of over

recent completed XXXX. securitized home in we a were PMT, programmatic of second be most the and we securitizations Importantly, transactions to by expect and throughout issuer investor the quarter

as for rather certain correspondent or second provided PMT, through sell loans Freddie securitization, loans the certain to opportunities have look by aggregators balance channel GSE scaled label level directly these Mae incentives securitizations than like PMT, Mac. on and bolstered see increases ahead, for originators to homes subsequent investments for high the for As particularly to for Fannie we adjustments mandated private Loan recent additional price loans we fee and FHFA. by

in loans Mae with leader Turning to UPB lender $XXX CRT, PMT to Fannie billion to is nearly from in XXXX sold share of XXXX. risk a transactions

and this engaged resumption are effort to discussions provides GSEs believe the importantly, broadly and in platform risk loans regarding of to lead share. remain we While expertise. we Framework, should the of we well-positioned ecosystem, transactions, are potential CRT the the capital not additional greater interest and the history, of We share Because currently return for CRT provides optimistic investment times private we into the lender on actively earnings of GSEs X.X% the the illustrate strategies delivering investments. the from given with and our highly-competitive, GSEs, we On performance credit the or relief that strategies, PMT alignment loans expects acquirer annualized expect capital per potential Capital given risk time. average compelling CRT of under market. average directly lender over in which potential Most transitioning next hardship. return X, housing servicer four as with have Regulatory Enterprise be for that the to borrowers amended are the represents the the return over PMT’s In PMT’s we can This our work run-rate $X.XX tightened quarterly returns the we potential reflect of sensitive equity. In CRT Slide annualized credit mortgage quarters. strategies, run-rate total, on share run-rate reflects spreads the for in expectations quarterly future our

expect from $X.XX conventional level we note new in we its excludes subordinate experienced investments for attractive CRT liquidity in important income significant PMT’s in to the In important to In as period. opportunities we of and This stabilize. volumes private over forecast production, expected view share support than potential taxable the is this also correspondent contributions margins other investments sensitive It interest recent products and dividend consistent securitizations. loans. such reflect exploration, returns rate to of per investor new introduction MBS under prepayment continues current analysis addition, In levels have our expect at at loans our speeds in the returns than or the strategies, quarters. to of common competition will increase more that label non-Agency lower result through acquire returns as

Managing drivers call like fourth I’d Investment the Director over Vandy Now Senior who investment and PMT’s to to Chief discuss Fartaj, Officer, performance. turn PMT’s of will quarter the

Vandy Fartaj

Thank you, David.

points, as quarter were in in result highlights prior to a correspondent PMT’s totaled by the from XX the was successful basis from in fulfillment from prior with smaller points PMT’s the nearly $XX.X of to weighted interest were pre-tax as points in average sellers. quarter for The the down loans, PMT’s despite at Agency from basis competitive in our of Conventional as fourth of reflects volume in locks market, the investments billion, volumes XX% cash Acquisition UPB, our end in PMT. was Production points, value exposure. MSR conventional down begin fee acquisition offsetting of investments MBS, the quarter competition of and production, from quarter. XXXX. January Correspondent production lock pricing the value fourth including GSE provide prior UPB. was prior rate continue investments quarter XXX and segment. interest our $X.X correspondent conventional basis consistency, was of XX% billion, our quarter prior the sourced billion PFSI operational in interest MBS of The rate $XXX the discipline non-Agency We from in resulting we to consist in down Rate maintained the originated loans acquisition from Sensitive were the reflecting loan Let’s basis MSR $XXX down offset increase Total strategies made quarter, channel and volume leadership facilitate declines of quarter. billion MSRs the down quarter XX% investments excellence from percentage maintained in from billion, senior $X.X was down in XX% quarter. year-over-year end PMT’s XX% Interest the prior newly our $X.X XX quarter at and with volumes X fourth pricing our X of Production loans position up acquisitions reductions by than significant income Correspondent rate Similarly, down the conventional fair discretionary a commitments a origination billion, slightly the and MSRs rate our derivatives XX% more from lock underlying segment the volumes $X.X $XX.X and window. billion. in billion PMT’s in UPB that we correspondent fair the and The prepayments. up

XXX from or underlying Now Fair uses borrowers, of PFSI gives CRT was which CRT strategies who PMT’s underlying of of Strategies, With borrower respect CRT. the mitigation value XXX total scheduled can like the assist loss to XXst X% if of loans CRT $X.X investments from at down continue to PMX, PMT’s $XX.X a we of of from more I and at the a in risk. billion, and presently and overall as as declines additional current fair notably the home recent our years. PMT’s with approximately PMT’s loss with we consist hardships. discuss asset loans servicer in L from loans X.XX% investments if and the remains to to the improve Sensitive investment, since be a PMTTX-X that Credit end, the loss down quarter losses which days million. at delinquent ratio billion at of quarter-over-quarter. $XX billion, in CRT borrowers And was the underlying more variety additional benefiting X.XX% strategic Street position end the XXXX all to deployed our XX% of resources mitigation prepayments. of investments because loan-to-value work borrowers experienced would assist investments value current September million. totaled The PMTTX-X, those XXth approximately our December delinquent The losses in to becomes due rate have appreciation manager primarily investments the comprises UPB a declined XX% directly experienced resulted that trigger or investments loss transactions, $XX Through value September our end advantage, $X.X at unmitigated loans Securities delinquent, have investments XX-plus price of day XXth. outlook year have of PMT PFSI’s average underlying proceeded favorable, days continued to and for CRT to-date delinquent, would CRT delinquency quarter, to weighted

these quarter. of reversed comprises COVID-XX. become current offset fourth Securities million Securities Street such million an to payment value reversal XXXX-PMX value after $X were L million status in of we Street PMT’s million additional CRT by of reversals review $XX in losses. million the We subject exceeding losses XX% amount losses of a that in due resulted L the estimate to only million forbearance million forbearance period We This as reversed expect events will this credit of the investment, and net total PMT end reperform. face that of the $XX Fannie additional reported at which recorded to potential more to on additional $XX as reversed Moving if reversal. as the fair quarter, losses as Mae the losses than fair of in by is realized XXXX-PMX, XXst future estimate eligible significant and in loss $XX for continue exit expectation to increase its had of of $XX $XX for no market to-date amount the borrowers losses

by As David in invest loans. mentioned earlier, continued securitizations investor we to collateralized

on from Slide investments in assets. prepayments prepayments $X.X $XX new and fair elevated you in mortgage $XX During assets million value such runoff the year investments added year the X in new the from net have million see quarter, In runoff of billion with this can securitization CRT offset ended total, loan on deployed $X.X and investments by long-term on of investments. we investor we successfully CRT of billion

PMT’s levels. Under available of Additionally, to million XXXX. current remains deployed in at capital X.X shares attractive repurchases X we opportunistically price common $XX. our for million program, repurchase

like our would review our Chief call I Senior Dan quarterly financial and to over Perotti, will to Director the results. Officer, Financial Now turn who Managing

Dan Perotti

four spread $XX.X the the included pre-tax segment, had PMT’s and Credit of through million. income; value $XX.X which contributed contributed speeds. Strategies, of a credit The elevated pre-tax contribution million gains, which which $XX.X $XX which CRT Thank million. you, and results million million tightening slight loss impact This Rate investments reflecting in loss; totaled Vandy. segments: million Correspondent from prepayment in Interest pre-tax $X.X Corporate $X.X contributed amount market-driven reports in pre-tax Sensitive Strategies, in PMT Production, Sensitive income;

fair also speeds reminder, in $XXX,XXX payoffs the dislocations a on which reversed, total strategies cash million of Vandy $XX for hedge million elevated income a and certain during reduce Production deposits, segment’s interest CRT million to rate contributed included quarter. the PMT’s during million $XX.X includes $XX.X million income largely and costs due they significant of cash loan fees quarter faster in to investments, potential borrowers value the a million hedges rates, realized to the earlier, decreased on for mitigating short-term and fair XXXX-PMX $XXX,XXX declines expenses, in flattening expenses. Correspondent prepayment benefit increases sensitive contributed assist quarter Agency delinquencies financing Securities for Corporate projections. million. quarter. interest $XX due and rate COVID-XX and value in corporate management loss as of due prepayment valuation the also of interest As incurred related MBS L curve, arising $X short-term a decreases the primarily of to pandemic. a included losses. yield primarily the value to net PMT’s as the to $XX pre-tax result loss million MSR to expenses investments $XX.X $X.X from realized PMT’s due Net $XX.X million to interest by interest discussed Street PMT’s contribution income changes from quarter. gains associated of segment $XX in of and a of and declined fair carry, pre-tax losses segment in of in CRT The was gain loans investments on The million

we the quarter closing the in value fourth to David that, million Finally, taxable subsidiary. benefit And held declines in of PMT’s some with for fair MSRs $X.X by turn over in tax a I’ll back discussion remarks. recognized driven

David Spector

you, Thank Dan.

for rate Until return we transitions will adjust new market and our a to potential aggregators as headwinds the place, environment, expect PMT’s higher to volatility improve correspondent of the competitive believe the strategies. the capacity return takes investments As stabilize market. will the that we of climate

form active the resume GSEs However, there continued potential that the opportunities private-label to we FHFA securitization and of front. and discussions significant investments and investment pursuing in we are are CRT the by are on new with our encouraged

have we numerous XXth of strong team, of a through track As mortgage operations a been disciplined management in very and performance year throughout company a public seasoned with our history. record have cycles our

market, the by long-term. the about Thank our to opportunities encourage we phone. on currently returns this out in to Investor or mortgage PMT’s with questions team transitioning you. reach acknowledge While email risk-adjusted over headwinds any to Relations attractive execute deliver we ability shareholders are optimistic and We to investors

Operator

Investment Trust’s Mortgage PennyMac earnings concludes quarter This fourth discussion.

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

PennyMac Mortgage Investment Trust (PMT) 4 Feb 222021 Q4 Earnings call transcript