Earnings call transcript Q4 2022

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Isaac Garden

Good afternoon, and welcome to the Fourth Quarter and Full Year 2022 Earnings Discussion for PennyMac Mortgage Investment Trust. The slides that accompany this discussion are available on PennyMac Mortgage Investment Trust’s website at pmt.pennymac.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 2022 results.

David Spector

Thank you, Isaac.

the XXXX, of a per more $X.X as strategies. income quarter to loss common than fourth driven rate solid shareholders market and value common million, excluding PMT’s offset the by PMT changes declines net reported attributable share, fair fair For value of in was interest impacts or sensitive $X.XX credit

of per the of review share common financial quarter. Financial paid dividend $X.XX at this per in the Book Chief $XX.XX a later performance Senior end to decreased additional Perotti, value prior $XX.XX Dan PMT’s and Managing from PMT share. on discussion. details Director of will Officer

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

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

recent still XXXX led trillion, X%, billion trillion down With This production conventional mortgage correspondent XXXX. servicing $XXX the rates $X.X high-quality creation of originations of interest range currently PMT from $X.X in million most rights. for UPB the in quarter, third-party to to forecasts mortgage above $X.X meaningfully from

volatility PMT It the positioned overcapacity diversified structures remains. practices to manage it with as current are has capacity, efficient still cost environment. appropriate our been mortgage reduce by the industry and to risk many and steps taken market slowly we have best management portfolios, through While believe the participants expectation such presented investment happening strong REITs is that

XXXX, by credit opportunities generate sensitive and has attractive we PMT’s which which markets, over time. strategies in early may driven a material were credit XXXX, in improvement in returns product improvements wider in market structured impacted have seen additional spreads Although investment

of appreciation home seasoned strong, loans risk to in lender XX%, strong years. average seen current investments have loan of with of fundamentals value price underlying weighted we share the The a consisting remained recent our from benefiting

at sensitive rates losses recent PMT’s increased delinquency fair and rate investments on In interest strategies, current increased employment as data, With interest strong of have the significantly. speeds levels been our our MSRs prepayment value have rates realized pre-COVID limited. CRT and fallen

we visibility With volatility to going the increased with for Reserve’s expect the forward rate, Federal terminal projected respect segment. reduced

higher custodial short-term expected coming from deposits are quarters. balances Additionally, in continue rates contributing to the earnings to and

strong, leading we technology. long-term, the the be servicing of PFSI’s by performance will workflows believe Over and capabilities, industry MSR supported underlying proprietary portfolio PMT’s

Turning the with we where by smaller Fargo exit additional strong presence. community to see market share Fargo a Wells the to bank loans correspondent are production, though manage and to like forecasts PennyMac we stable originations, customers opportunities for capital selling expect channel, from for near-term And largely liquidity. market enhance remain credit constrained driven the the seek the reduced the sector to of had profitability partners of union previously our expect as they Wells volumes and in to given increasingly growth,

believe throughout capital remain mortgage need they and well-positioned capital commitment to market. the able by consistent committed is partner companies leading challenging stability With and Fargo’s we partners to We Wells a independent left the current strong the and successfully exit being base provide channel, ready for we the and to country. mortgage stand to navigate absorb to support as continue strong the our PMT volumes a

its performance. call Fartaj, the over to the Director investment fourth for Chief Officer, Now, Vandy to Senior I'd Investment Managing outlook and about who and will turn like talk PMT quarter

Vandy Fartaj

David. you, Thank

strategies, run-rate across next quarters. expects at X earnings of which PMT’s we slide our average fourth illustrate represents the our look the the investment the take return PMT now four presentation, that and investment quarterly potential quarter earnings potential On Let’s potential over a returns portfolio. annualized from return

the PMT’s quarterly sensitive current PMT’s equity. performance last average credit spreads annualized mortgage reflects we increased strategies, credit for expectations run-rate in total, market. the that to In potential This In XX% the run-rate on potential our CRT return created organically fourth strategies share the in continued return widen from reflecting expect return to quarter, common or investments $X.XX from a quarter. per

expected the prepayment financing strategies, and returns. increased returns by due increased levels low on we sensitive expect rate costs speeds, decreasing In interest MBS MSRs to offset of

excludes investments production production, are new competitive contributions or correspondent opportunities our the sensitive new opportunistic This credit from exploration, expectations analysis potential additional of to as investments under In the environment. and due to products. the similar introduction quarter prior such

drivers the Correspondent loans was and quarter XX%, Production quarter. Now, or correspondent volume loan segment. in our conventional the in $XX.X Total fourth of fourth billion or discuss let’s billion $XX.X results billion XX%, loans. were government acquisition were $XX.X

of $X.X volume volume to conventional from were totaled loan quarter. prior for $X.X up its which XX% As acquisitions, these production last in lock XX% XX% PMT total Conventional we certain selling the quarter. the was account. fourth UPB. quarter up billion quarter, correspondent billion, PFSI, of last from billion mentioned PFSI’s in Purchase of locks was began $XX.X

loans PMT’s continue basis as cost a basis income prior production percentage unchanged will one of points. of first at basis a from fee certain correspondent selling the XX up of weighted lock from fulfillment fee PFSI pretax segment was its prior basis the interest commitments the average plus correspondent rate In to quarter quarter, points quarter. and points, rate sourcing two the to PMT X in was points, X conventional

billion at fair resulting Acquisition MSRs locks Agency quarter. sourced billion. investments reflects production the consist from the $X.X $X.X investments newly MSR from at our fourth Interest with rate Rate $X.X fair end volumes investments prior offsetting value of are PMT’s billion, PMT’s increase be from in MBS exposure. estimated Sensitive be derivatives and January and both volumes production, quarter correspondent end of senior MSRs to strategies up rate The conventional billion, MBS, and the interest $X to non-Agency originated interest estimated value slightly and our the gains. was of are The in in of

The more UPB grow production than also investments pre-payments. from of MSR underlying offset runoff continued to PMT’s as loans new

delinquency the marginally conventional remain portfolio. While prior quarter, portfolio for increased trends MSR loan a borrowers from with they our rates for underlying seasonal consistent PMT’s and expectations

outstanding for obligations. to interest outstanding, principal advances continues are $XXX Servicing at as No end to million due advances September payments. XXth activity $XX portfolio million property and currently cover PMT’s MSR at tax increased remittance pre-payment from seasonal sufficiently to year

PMT’s non-Agency private-label subordinate which investments investments organically-created GSE in PMT’s securitizations production, PMT’s in bonds production, to Strategies, and from CRT. Now, discuss primarily of investments in like from I Credit Sensitive would consist CRT opportunistic of

XXst The CRT at was billion, fair from value $X.X as billion of prepayments. $X.X investments created XXth, of December down slightly primarily due September PMT’s organically to

mentioned, average remains to The XXth. outlook as from current created investments XX%. created GSE increased organically at XXst David December ratio investments with for organically a delinquency weighted CRT favorable X.XX% The these slightly CRT our of XX-plus September day loan-to-value current X.XX% in rate underlying at

prudent across the We of the will continue current evaluate deployment conditions. given to capital mortgage in landscape and market investments be

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

Dan Perotti

of in in segment, which Thank contributed million million which contributed from you, Strategies, losses, This this had Corporate created pre-tax credit four Correspondent results of quarter fair organically in the in Sensitive a PMT’s the CRT spreads Vandy. pre-tax totaled Rate Credit wider $XX.X PMT $X.X reflecting million. loss $X.X reports included which Strategies, income; the pre-tax loss; Sensitive Interest pre-tax and $X.X income; $XX.X value through quarter. million. which Production, segments: million Income impact million $X.X fourth in investments driven amount contributed market

CRT and recognized $X.X million of during also financing $XX.X in the period, realized income cash of losses and included net Gains in $XX.X on PMT’s realized organically expenses. created gains interest on million investments million deposits, carry, million $XX.X

which quarter. a contributed increased loss gains fair for activity impacts to a contributed rate fair by prepayment million. lower for income value the rate rate value interest pre-tax PMT’s prepayment fair PMT’s quarter as The were in MSR These tax the the more the quarter. sensitive million expectations interest during $X.X $X.X segment lower MBS, of Production due tax Correspondent value hedge Agency and of value declined benefit offset interest in by of $XX fair than million. were than $XX million declines, million net speeds expected hedges related future. $XX and of net strategies drove

includes million. income loss and PMT’s a Corporate fees investments, expenses. segment for interest pre-tax $XX.X was the from and contribution management cash short-term of segment’s The quarter corporate

tax value driven strategies. the net changes, $XX of million market related impact, PMT income and its across Excluding reported

strong maintained and financing to investments. CRT MSR our have related We structures

discretion to for and PMT extend given MSR $XXX notes term two current maturing at With likely its years conditions. own PMT’s the respect do to has to of maturity market the option so in April is XXXX, million

repurchase transactions, CRT fair X% representing value the by are Our of currently securities total agreements. three first financed

last notes securities discussed also CRT the repurchase quarter, with we investment term sixth financed were portion of the has transaction by originally agreements banks. been settled XXXX in matured As and December that multiple our financing CRT underlying a

financed For agreements, PMT holds margin by appropriate associated of our level reserves potential repurchase CRT investments calls. an for

has originally Additionally, our not not term CRT are at the of CRT mark-to-market, financed March if for this post million collateral we margin to years two has with contain investments PMT’s provisions. of do of investments due discretion, October in two term years. CRT us fair due maturity well, for This in values option term for been term contain except All $XX the of CRT notes the remainder the notes majority notes year the XXXX. The as to extend decline. or that notes call obligated maturity PMT’s are served extraordinarily extended

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

David Spector

Dan. Thanks,

not has strong shareholder While as and met recent PMT’s remains performance remain indices relative expectations, in comparable long-term over well-above its peer our group. the returns periods performance

credit in remain deliver With improvement current as mortgage over a in long-term. increased of seasoned we've rate risk Additionally, its portfolio to shareholders early in markets interest ability as material we returns attractive in stability. hedged and well credit servicing investments PMT’s confident to the seen rights, transfer XXXX, its

reach with to Investor Thank by questions to out phone. team We our any email encourage or you. Relations investors

Operator

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

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

PennyMac Mortgage Investment Trust (PMT) 2 Feb 232022 Q4 Earnings call transcript