PMT - Earnings call transcript Q2 2022 | PennyMac Mortgage Investment Trust

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Operator

Good afternoon, and welcome to the Second Quarter 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 second quarter 2022 results.

David Spector

Thank you, Isaac. due loss the million, value performance second its sensitive net common $X.XX declines from a widening value credit for spread changes. the share quarter, strategies market-driven its reported strategies of offset impacts or $XX.X per in more excluding PMT than continued of strong fair to as fair

dividend subsidiary, Additionally, of paid assets in MSR gains on PMT recorded its Book PMT share. a per results. tax taxable $X.XX expense which REIT value related a impacted common to fair value also its per quarter. the later share performance Perotti, decreased $XX.XX Chief additional from Director to review Financial financial PMT’s on Managing $XX.XX in end details at of Officer, of will this the prior discussion. Senior and Dan

X.X for $X.X cost common repurchased an we price of the additional value current average an July shares, quarter, $XX approximate $XX.XX at $XX.XX, share; for million stock of significantly of below repurchased million share. XXX,XXX per at book we PMT’s per shares in million and During an

PMT’s strengths sourced investments production ability our its across through greatest is to loan generate correspondent country. organically high-quality sellers the from of One

This quarter, production $XXX to rights. correspondent in of $XX.X UPB of servicing creation in high-quality mortgage conventional million the led billion

to to range market rates. declines Although the the due point increase to to mortgage in forecasts first year, as from activity the rapid half reacts half XXXX current further total $X.X in for indices originations application in trillion second $X.X trillion primarily the of mortgage the

one largest of the us the to as execute largest believe well leadership long-term. in there believe the the country decrease these is producers and further, aggregator to we potential we loans positions over forecasts While for purchase-money correspondent PMT’s of

about Managing performance. turn second investment to Now investment potential quarter and who the Director opportunities, talk will call Senior over I’d Chief of drivers outlook Investment like PMT’s Officer, and Fartaj, Vandy to

Vandad Fartaj

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

from nearly most have ability balance Although monitor our and necessary to we REITs, for mortgage parties sheet at organically arise. have from to $XXX attractive strong investments landscape. the currently continue management uncertain deploy investments public also other to opportunities invested attractive risk We and capital, when capabilities mortgage in to deploy and distinguishes we PMT investments opportunities the selectively given capital in million third these returns. produce market remain and prudent volatile Year-to-date, deploying capital the

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

alignment ecosystem, with of our can not lender of we discussions the GSEs for the we are greater well-positioned additional capital into Enterprise currently compelling of should the While risk Capital regarding of in with we lender we work the remain acquirer engaged the times Most of share. the GSEs servicer the hardship. effort the on and broadly amended CRT Framework, risk Because given our lead to CRT under future private interest given GSEs, loans we provides relief and CRT this We to the housing are directly history, platform the the borrowers optimistic are importantly, for share capital actively as and in Regulatory be transactions, potential provides investments. loans delivering expertise. believe resumption of

we share the the transactions. ongoing encouraging, our discussions our on of are further While have lender GSEs update resumption with potential no risk

average In opportunistic represents return annualized earnings investment returns at quarterly strategies, presentation, reflecting returns organically strategies, across margins. market. return look to of the levels highly-competitive, to our for potential In strategies, volumes quarterly This organically-created potential PMT’s our illustrate correspondent return portfolio. potential the slide average contributions the of tight potential potential interest analysis four PMT’s in from over a last This rate return from reflect the high opportunities production, In the now exploration, excludes investments the X in the under PMT’s which investment that expects or investments performance such equity. slower CRT On and $X.XX increased spreads GSE reflects we X.X% with PMT’s earnings as per a from low quarters. run-rate prepayment run-rate share In total, additional expect projected our expectation investments run-rate given PMT we credit transitioning return second competition credit expectations consistent next Let’s take quarter and more potential on the new from strategies mortgage the that and annualized for our widen. speeds. sensitive quarter, expect we continued sensitive created returns CRT. common

thereafter, primarily the Our forecast PMT’s its and remainder XXXX; continues at income dividend common potential. for liquidity the will driven to level the of by PMT’s dividend of taxable earnings $X.XX be of per support share through level projections current

let’s adapt current Now billion quarter to quarter, correspondent were loans. was as mortgage correspondents the of quarter in from PMT’s the billion volume billion in conventional and $XX.X XX%, last were loans transitioning in acquisition XX% high-quality Conventional loans from was segment. second up Correspondent $XX.X Production environment. up sell volume or ability volume loan prior drivers Purchase a the in environment. quickly Total billion results servicing-released or demonstrating $XX.X the in $XX XX% the acquisitions, government discuss lock second seek was quarter second our quarter. of total to XX%, aggregators

quarter up investments $X.X provided of than conventional commitments grow billion and UPB both to in MSRs prior fair was quarter. continued at $X.X Agency our value the locks the rate and offsetting production fee was as points XX points, of segment underlying from in interest in points Our basis PMT’s the billion. correspondent MSR from of rate volumes from investments the the July environment. second reflects second PMT’s production, was value the volumes of $X Sensitive billion interest of stability has gains. were rate MBS, PMT’s reputation end in current consist quarter. navigate billion, partners Rate a pretax quarter new PMT’s the The up production prior support basis basis percentage resulting and income to from as quarter in the and were investments our interest in offset increase strategies with lock fulfillment in MBS points, the basis end fair need investments correspondent prior they newly in up The average and XX and weighted originated from the industry runoff commitment and the X consistent sourced X Acquisition Interest the at prepayments. exposure. derivatives rate $X.X MSR The more senior also loans of MSRs non-Agency from our production channel

resulted rate XXst investments PMT’s quarter organically-created at XXst. The CRT in CRT organically-created which The years. prepayments. CRT favorable, billion, due Now market investments current for GSE I continued CRT from consist underlying $XX.X at Mae from fair that CRT of Sensitive and organically-created in underlying $X.X non-Agency risk-adjusted and at opportunistic widening investments value at GSE March as Credit ratio UPB million loans of returns. March with of of remains the investments and to investments discuss in in would production, outlook XX of these loan-to-value delinquency of June billion June X.XX% $XX organically-created private-label the weighted end declined attractive from The spread to down and our June also Freddie during XX organically-created investments value experienced bonds XX-plus Strategies, XX% XX, $X.X floating-rate from fair day primarily credit to total billion, by decreases CRT PMT at was subordinate the PMT’s quarter-over-quarter. purchased home CRT. from investments The Mac like price recent down issued the current X.XX% in improve was our X% bonds from production, to at appreciation quarter a benefiting PMT’s PMT’s securitizations average Fannie of in

capital in the the credit of deployment across increased of and continue will the landscape mortgage to spreads evaluate widening be We investments given volatility. prudent and market

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

Daniel Perotti

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

expertise environment tax value on strong impact, in markets areas focused sheet, PMT of Excluding the years. $XX.X income navigating we investment a strategies. – net strong the Successfully and and changes, capital disciplines its related management mortgage capital for have million planning reported across balance a challenging requires been and market-driven

we are critical years and arrangements in position. have financing provides to this more notes, coupons of our outstanding $XXX left of depth these until the exchangeable notes. capital low has million to With than senior structure. PMT first remains fixed maturity that and solid has a financing history liquidity structure worked capital business Our strong throughout our PMT diligently our ensure a to two and

in Mae This million quarter MSRs secured favorable notes $X.X billion. terms, at bringing we issued by $XXX to Fannie five-year new total term the

structures In investments. strong our PMT to have addition the revolving balances. flexibility our financing for financing to financing Similar financing, CRT substantial maintained support secured notes, related maintains increased to provide which fluctuating to MSR term and advance we structures bank MSR

Our is currently term financed total XX% first X% or financed three by agreements, CRT remainder, currently total transactions, securities of by the the secured are value, value, fair representing the notes. while of repurchase fair

we Importantly, decline. post fair provisions. majority our do obligated CRT This well, CRT if our values of to mark-to-market, as us the call for these collateral has collateralized are notes term served or contain by not transactions investments extraordinarily margin not

that securities these million the to $XXX upon market extend maturity term we notes of event agreements notes, Looking utilizing extend years of PMT upcoming expect the upcoming of additional dislocation to the many dislocation. its with refinance refinance although towards also for two the the in notes term of years an two has depending as MSR time. to next environment event maturity has for Similarly, repurchase market maturities well. or CRT to the expect of Again, notes term CRT term of notes maturities, the PMT the ability in at we market the ability new mature respect to year,

back the navigate and can $XXX you governance available a remarks. David a overall XX. to leverage, for with liquidity risk provides some to million closing turn I’ll emphasis with As discussion mortgage that, And low strong diverse landscape transitioning of capital at structure, June the our over see, foundation

David Spector

our opportunities Thank PMT’s deep presents invest attractive potential increase liquidity team has We strong with through a attractive preserve risk-adjusted and has in portfolio that reach With projected book forward encourage you. phone. questions out you, mortgage by cycles, email to at sophisticated that structures strong or returns volatility investment spreads return and our additional Dan. The the our is financing to long-term. deliver improved experience balance going strategies of well-positioned prudently a hedging sheet, capital team to for Investor executing its in years Relations Thank to recent management position, in to value any investors mitigate PMT and shareholders returns.

Operator

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

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

PennyMac Mortgage Investment Trust (PMT) 3 Aug 222022 Q2 Earnings call transcript