PMT - Earnings call transcript Q1 2022 | PennyMac Mortgage Investment Trust

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

Operator

Good afternoon and welcome to the First Quarter Earnings Discussion for PennyMac Mortgage Investment Trust. The slides that accompany this discussion are available on 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.

Now, I’d like to introduce David Spector, PMT’s Chairman and Chief Executive Officer who will discuss the company’s first quarter 2022 results.

David Spector

Thank you, Isaac.

in XXXX, of a per strategies. widening $XX.X as performance value interest quarter to loss common the and first strategies from more fair shareholders sensitive than in common million declines REIT a the tax PMT credit sensitive its net reported attributable share due provision For to credit taxable spread subsidiary its rate or strong $X.XX offset

prior $XX million. the an Chief PMT’s to to Dan investments for share. Director During decreased million. in details $XX.XX from share we common the an country. quarter. high-quality review common additional this repurchased Managing per Senior PMT’s million repurchased sellers loan Financial approximate across a ability value of production organically of PMT’s dividend strength will $XX is the financial for in of shares later And from additional and quarter, of X of Perotti, its PMT shares discussion. $XX.XX generate we end paid performance per the on Book $X.XX our corresponding April, Officer of stock through XXX,XXX sourced cost at The

of conventional mortgage $X.X UPB quarter in the in production servicing million of billion to led creation rights. This $XXX new correspondent

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

Current million. for In in $X.X million has The originations securitizations fair from forecasts XXXX. successfully PMT loan interest at significant aggregate the a of securitization, market total, the quarter, and $X.X origination increases XX, completed total $XXX of an rapid March This $XXX to considerably. trillion. impacted in rates, PMT’s economic with value approximately range XXXX was trillion investor mortgage investments UPB

markets, as purchase investments credit producers one correspondent a opportunities rate While things in in spreads have unprecedented adjusted Fartaj, money for into navigating been Officer as and remains the increase continue created later. country. markets, potential the have for management absorbed forecasted capital a in discuss and further strong interest decrease and mortgage Successfully Director largest the disciplines, The capital investment of for also emphasizing planning we of largest wider aggregator loan rates sheet, there and to requires by PMT’s PennyMac higher years. to PMT will environment Chief expertise to be well-positioned and attractive which the volumes deploy challenging is the returns, loans Investment long-term Senior Vandy balance with Managing capital the strong risk environment

over FHFA’s to I it Vandy, eligibility servicers. address seller like to would briefly of the standards turning non-bank Before recent for re-proposal agency

the on and FHFA worth proposal, currently call leverage for the liquidity is this comments tightened requirements. considering net standards proposed While

third-party standards management. and liquidity each of requirements and For of capital levels large additional standards ratings liquidity relatively liquidity buffer, were longstanding low include non-banks and and PMT an capital these today, well-positioned given commitment leverage, requirements. is plans If implemented the strong proposed additional enterprise to risk to meet its

drivers of over like outlook first who will performance. PMT’s the investment to to about the Now, I’d Vandy and call turn quarter talk

Vandy Fartaj

market normally those rapid addition in production activities. created investments from credit spreads correspondent for The interest to in make opportunities David. you, Thank created shift to rates its PMT and

This strategies recently million capital risk in quarters. of we And end, from In to illustrate run-rate rate by in in when spreads Fannie $XX run-rate arise. Mac opportunities completed to in invested separate recently sensitive average potential we quarter. million quarter, represents two third-parties to earnings return securitization. highly and jumbo investments mortgage during created that over per transactions Freddie increased quarter rate annualized In we and organically the have Mae ability last Although the in the Mac invested organically bonds floating additional we senior share balance $XX deploy widened. PMT separate in market. invested issued first next recently we performance bonds mortgage rate earnings strong our X.X% necessary a potential expectations which from presentation, return on $XX PMT average return other strategies Freddie of $X.XX credit total, or in for issued PMT’s expect On sensitive also the the rate our management fixed X return quarter produce that the competitive a potential REITs, million and Mae strategies, credit strategies, Fannie from during the capabilities PMT’s Slide in floating bonds, PMT’s transactions. from strategies, quarterly investments a CRT quarter distinguishes tranche from transitioning and CRT run-rate most investments we expects an three annualized by public our CRT our from sheet the reflects potential an interest attractive our investment credit sensitive quarterly four equity. In reflecting After

returns in PMT’s bonds investments investor reflect market sensitive analysis have potential the In as tranches a expected contributions private GSE we in This continuation CRT products new opportunities meaningfully. correspondent Production, channel, returns origination albeit expect speeds the the In that is loans addition, of to than investing label continue. at from additional market created of dynamic competitive strategies, in origination declined prepayment volumes. slower loans. the which from and the the of exploration, In than to declining pace interest Correspondent opportunistic securitizations introduction as decline and or other size excludes more in organically quarters to investor we last such continue of expected the result several the subordinate new the consistent intense conventional investments the the expect rate under due of agency eligible

of income XXXX. its remainder PMT’s the the support current to Our level dividend share continues and forecast per $X.XX for liquidity through common of taxable at

our billion in billion, loans. XX% acquisition conventional loans $XX.X or $XX.X in was GSEs were quarter. first discuss first $X.X volume correspondent the down billion the drivers in created lower Correspondent in quarter let’s loan segment. $XX.X heightened or competition Now, loans, correspondent billion threshold. government quarter XX% volume were results profile increased Total and of for conventional was lock from the a as compression return was Margin the our conventional than Conventional quarter. during space the the including significantly Production

our PMT’s $X.X basis up we to from both volumes income segment billion, fulfillment first loans prepayments. basis so than MSR correspondent derivatives declined production maintained returned interest the $X.X the discipline were started as points, Production X sourced prior $X.X investments in basis in was billion from have continued newly at end rate offsetting pre-tax investments up X of offset commitments run-off grow of to conventional MSR exposure. a also was to of The volumes UPB senior PMT’s gains. and prior points PMT’s fair in consist basis Correspondent rate some quarter rate the percentage as And and points, normalized the interest April value at volume production that PMT’s we quarter locks our in from strategies production in more prior XX MSR more April. MSRs fee quarter. from and And the XX of in interest value The originated from investments was and billion the sensitive in reflects underlying rate interest from average increase quarter. margins of the as resulting our The up non-Agency points rate of Acquisition Agency billion. the were first with MBS MBS, see law end investments $X.X fair weighted quarter. new

to XXst created in UPB December to as credit non-Agency total created our private billion, improve continue I ratio loan at remains CRT like decline production with securitizations underlying Now, The benefiting $XX.X balance our the was declines XXst, value in the for to CRT. price subordinate billion created down average of investments quarter-over-quarter. bonds from experienced production, to and from primarily of down weighted strategies, value label current from of appreciation of investments XX X% home to would $X.X resulted March that declined organically XXst, fair fair end investments CRT The The years. PMT’s The in at sensitive value organically plus consist created was billion, outlook these favorable, opportunistic current organically discuss in from of $X.X investments recent which PMT’s due March investments in from CRT XX. the approximately quarter prepayments. in and X.XX% at XX% underlying organically rate PMT’s the from loans December of X.XX% and delinquency CRT the investments day at PMT’s investments GSE seasoned

lender our discussions potential We the with base transactions. the hold of GSEs resumption CRT regarding continue to

further are currently definitive making, encouraged but progress on by the do any developments share are to topic. this not We we have

invest As investor securitization in of collateralized loans. fair of $XX in by investments. David value value investments. during And new added in mentioned the ended $XXX fair quarter million securitizations We million to quarter loan we earlier, we with the such continue investor

call turn Now our I will the over to would like who review quarterly to results. Dan financial

Dan Perotti

which $XX.X million PMT of Corporate which contributed $XX loss, four income, which loss a segment, million million Vandy. Credit Sensitive which reports $X.X contributed pre-tax Sensitive pre-tax Correspondent and Strategies, in million. in in income, you, Interest segments; contributed results pre-tax Rate Thank through $XX.X Strategies, Production pre-tax the had

this income and COVID-XX by expenses $XX.X losses, investments certain million and totaled $XX.X by activity million income financing also rates. fair spreads. of contributed the PMT’s million. segment created to in contributed rates, expenses investments, strategies delinquencies higher $XX.X assist included expense value For $XXX,XXX of This of primarily of value short-term MSR a by and for fair the from $XXX in resulting million the for the interest held $XXX loss PMT’s future. MBS $XX.X rate corporate quarter segment gains driven result contribution includes losses the lower mitigating realized market credit quarter PMT’s created cash tax during primarily carry. CRT in $X.X higher income recoveries interest in of value wider $XX PMT’s declined $XX $XX in These Street of in on CRT a segment’s income the PMT’s net resulted included $X.X pandemic. and impact the realized interest Corporate The loan XXXX-PMX, rate in Production Correspondent of million. million quarter million gains fair they provision securities cash management incurred pre-tax on quarter. $XX.X a was increased The reflecting losses, fees million as PMT’s million. previously quarter. sensitive of million on of pre-tax organically and for organically in arising Agency L mortgage expenses. prepayment hedges from interest deposits, amount dislocations borrowers REIT investments value related in for interest on million to fair subsidiary driven Losses expectations million taxable driven in

from in quarter mentioned as the recent book is are paid of of required in to quarter. senior some Pro in additional turn book David exchangeable value for this David for senior at I The value change PMT decreased performance the notes. outsized exchangeable of And carrying XX remarks. at reclassify PMT’s with relative will this common PMT $XX.XX $XX.XX the closing December notes us book back to forma that to shares at the the prior was As value the value share for $XX.XX. beginning to over XXXX portion originally change per to decline allocated a accounting discussion that, capital end

David Spector

Dan. you, Thank

returns. impacts investments value new for in a for current the quarter, with have attractive management market the Investor confident our PMT this PMT market out net adjusted or deliver investors environment additional Though provided with term. Relations by you. changes long-term reach loss strong fair remains any environment I challenging, drove risk opportunities While We team’s in longer am questions over this email team ability to performance phone. to Thank to the encourage shareholders to current

Operator

Mortgage discussion. This concludes Investment Trust earnings quarter first PennyMac

event] this or please our call XXX-XXX-XXXX. website Department www.pennymac-reit.com questions, any Relations [No at visit Q&A you. session at Thank Investor for For our

PennyMac Mortgage Investment Trust (PMT) 5 May 222022 Q1 Earnings call transcript