PennyMac Mortgage Investment Trust (NYSE: PMT) today reported
net income attributable to common shareholders of $14.2 million, or
$0.16 per common share on a diluted basis for the second quarter of
2023, on net investment income of $90.5 million. PMT previously
announced a cash dividend for the second quarter of 2023 of $0.40
per common share of beneficial interest, which was declared on June
9, 2023, and will be paid on July 28, 2023, to common shareholders
of record as of July 14, 2023.
Second Quarter 2023 Highlights
Financial results:
- Net income attributable to common shareholders of $14.2
million, compared to net income of $50.2 million in the prior
quarter
- Strong performance from PMT’s credit sensitive strategies and
income excluding the impacts of market-driven fair value changes
were partially offset by fair value declines in PMT’s interest rate
sensitive strategies and related tax impacts
- Repurchased 1.6 million common shares of PMT at an average
price of $11.87 per share for a cost of $19.4 million
- Book value per common share decreased to $15.81 at June 30,
2023, from $15.96 at March 31, 2023
Other investment highlights:
- Investment activity driven by correspondent production volumes
- Conventional correspondent loan production volumes for PMT’s
account totaled $3.0 billion in unpaid principal balance (UPB),
down 54 percent from the prior quarter and 71 percent from the
second quarter of 2022 as a result of the sale of a larger
percentage of conventional loans to PennyMac Financial Services,
Inc. (NYSE: PFSI) -- Resulted in the creation of $91 million in new
mortgage servicing rights (MSRs)
- Invested $94 million into opportunistic investments throughout
the quarter
- $52 million into government-sponsored enterprise (GSE) credit
risk transfer (CRT) bonds
- $42 million into senior mezzanine bonds from jumbo
securitizations
- Exercised option to extend the maturity for the Fannie Mae MSR
term notes originally due in April 2023 for two years
- Issued $235 million of new, 2-year CRT term notes to finance
CRT investments previously financed with securities repurchase
agreements
- Issued a new, 5-year $155 million term loan secured by Fannie
Mae MSR
Notable activity after quarter end
- PMT entered into an agreement to acquire a bulk MSR portfolio
totaling $1.4 billion in UPB
- Invested $11 million into senior mezzanine bonds from a jumbo
securitization
“PMT’s second quarter financial results reflect strong
performance from its credit sensitive strategies partially offset
by net fair value declines in its interest rate sensitive
strategies and related tax impacts,” said Chairman and CEO David
Spector. “While continued credit spread tightening led to fair
value increases for PMT’s credit sensitive investments, the
interest rate sensitive strategies were impacted by the inverted
yield curve and elevated hedge costs driven by multi-year highs in
interest rate volatility. We continue to deploy capital towards
opportunistic investments in both credit sensitive and interest
rate sensitive strategies; and this quarter, we invested nearly
$100 million in such investments, which we believe can generate
strong, long-term risk-adjusted returns. We continue to believe
PMT’s strong balance sheet and seasoned investment portfolio with
strong underlying fundamentals will drive improved performance over
the long term.”
The following table presents the contributions of PMT’s
segments, consisting of Credit Sensitive Strategies, Interest Rate
Sensitive Strategies, Correspondent Production, and Corporate:
Quarter ended June 30, 2023 Credit sensitive
strategies Interest ratesensitive strategies
Correspondent production Corporate
Consolidated (in thousands) Net investment
income: Net loan servicing fees
$
-
$
108,833
$
-
$
-
$
108,833
Net gains on loans acquired for sale
-
-
4,446
-
4,446
Net gains (losses) on investments and financings: Mortgage-backed
securities
10,727
(72,348
)
-
-
(61,621
)
Loans at fair value Held by variable interest entities
(1,601
)
1,142
-
-
(459
)
Distressed
(877
)
-
-
-
(877
)
CRT investments
60,458
-
-
-
60,458
68,707
(71,206
)
-
-
(2,499
)
Net interest expense: Interest income
25,146
108,656
25,708
3,174
162,684
Interest expense
21,752
137,987
26,740
911
187,390
3,394
(29,331
)
(1,032
)
2,263
(24,706
)
Other
(56
)
-
4,434
-
4,378
72,045
8,296
7,848
2,263
90,452
Expenses: Loan fulfillment and servicing fees payable to
PennyMac Financial Services, Inc.
32
20,285
5,441
-
25,758
Management fees payable to PennyMac Financial Services, Inc.
-
-
-
7,078
7,078
Other
911
1,183
1,007
7,662
10,763
$
943
$
21,468
$
6,448
$
14,740
$
43,599
Pretax income (loss)
$
71,102
$
(13,172
)
$
1,400
$
(12,477
)
$
46,853
Credit Sensitive Strategies Segment
The Credit Sensitive Strategies segment primarily includes
results from PMT’s organically-created GSE CRT investments,
investments in non-agency subordinate bonds from private-label
securitizations of PMT’s production, opportunistic investments in
GSE CRT and legacy investments. Pretax income for the segment was
$71.1 million on net investment income of $72.0 million, compared
to pretax income of $57.3 million on net investment income of $58.0
million in the prior quarter.
Net gains on investments in the segment were $68.7 million,
compared to $54.4 million in the prior quarter. These net gains
include $60.5 million on PMT’s organically-created GSE CRT
investments, $10.7 million on other acquired subordinate CRT
mortgage-backed securities (MBS), $1.6 million of losses on
investments from non-agency subordinate bonds from PMT’s
production, and $0.9 million of losses on distressed loans.
Net gains on PMT’s organically-created CRT investments for the
quarter were $60.5 million, compared to $46.3 million in the prior
quarter. These net gains include $43.0 million in valuation-related
gains, which reflected the impact of credit spread tightening in
the second quarter. The prior quarter included $30.9 million of
such gains. Net gains on PMT’s organically-created CRT investments
also included $17.9 million in realized gains and carry, compared
to $16.6 million in the prior quarter. Realized losses during the
quarter were $0.5 million, down from $1.3 million in the prior
quarter.
Net interest income for the segment totaled $3.4 million,
compared to $3.6 million in the prior quarter. Interest income
totaled $25.1 million, up from $21.4 million in the prior quarter,
primarily due to higher earnings rates on deposits securing CRT
arrangements. Interest expense totaled $21.8 million, up from $17.8
million in the prior quarter, primarily due to higher interest
rates.
Segment expenses were $0.9 million, up slightly from the prior
quarter.
Interest Rate Sensitive Strategies Segment
The Interest Rate Sensitive Strategies segment includes results
from investments in MSRs, Agency MBS, non-Agency senior MBS and
interest rate hedges. Pretax loss for the segment was $13.2 million
on net investment income of $8.3 million, compared to a pretax loss
of $7.0 million on net investment income of $14.6 million in the
prior quarter. The segment includes investments that typically have
offsetting fair value exposures to changes in interest rates. For
example, in a period with increasing interest rates, MSRs are
expected to increase in fair value, whereas Agency pass-through and
non-Agency senior MBS are expected to decrease in fair value.
The results in the Interest Rate Sensitive Strategies segment
consist of net gains and losses on investments, net interest income
and net loan servicing fees, as well as associated expenses.
Net losses on investments for the segment were $71.2 million,
which primarily consisted of losses on MBS due to increasing
interest rates.
Net loan servicing fees were $108.8 million, compared to $(23.7)
million in the prior quarter. Net loan servicing fees included
contractually specified servicing fees of $165.5 million and $6.8
million in other fees, reduced by $103.0 million in realization of
MSR cash flows, which was up from $91.7 million in the prior
quarter due to increased cash flow generated by the MSR asset
during the quarter from servicing and placement fees. Net loan
servicing fees also included $15.0 million in fair value increases
of MSRs, $24.0 million in hedging gains, and $0.5 million of MSR
recapture income. PMT’s hedging activities are intended to manage
its net exposure across all interest rate sensitive strategies,
which include MSRs, MBS and related tax impacts.
The following schedule details net loan servicing fees:
Quarter ended June 30, 2023 March 31, 2023
June 30, 2022 (in thousands) From non-affiliates:
Contractually specified
$
165,499
$
164,214
$
151,149
Other fees
6,826
3,943
7,179
Effect of MSRs: Change in fair value Realization of cash flows
(103,043
)
(91,673
)
(86,643
)
Due to changes in valuation inputs used in valuation model
15,046
(45,771
)
220,422
(87,997
)
(137,444
)
133,779
Hedging results
23,996
(54,891
)
(78,118
)
(64,001
)
(192,335
)
55,661
108,324
(24,178
)
213,989
From PFSI—MSR recapture income
509
485
3,324
Net loan servicing fees
$
108,833
$
(23,693
)
$
217,313
PMT’s MSR fair value increased by $15.0 million in the quarter
primarily due to higher market interest rates.
Net interest expense for the segment was $29.3 million versus
$33.1 million in the prior quarter. Interest income totaled $108.7
million, up from $92.1 million in the prior quarter primarily due
to increased placement fee income on custodial balances. Interest
expense totaled $138.0 million, up from $125.2 million in the prior
quarter primarily due to higher financing costs on MBS balances
driven by higher short-term interest rates.
Segment expenses were $21.5 million, essentially unchanged from
the prior quarter.
Correspondent Production Segment
PMT acquires newly originated loans from correspondent sellers
and typically sells or securitizes the loans, resulting in
current-period income and additions to its investments in MSRs
related to a portion of its production. PMT’s Correspondent
Production segment generated pretax income of $1.4 million, down
from $1.8 million in the prior quarter.
Through its correspondent production activities, PMT acquired a
total of $21.2 billion in UPB of loans, up 5 percent from the prior
quarter and 1 percent from the second quarter of 2022. Of total
correspondent acquisitions, government-insured or guaranteed
acquisitions totaled $11.1 billion, up 18 percent from the prior
quarter, and conventional conforming acquisitions totaled $10.0
billion, down 6 percent from the prior quarter. $3.0 billion of
conventional volume was for PMT’s account, down 54 percent from the
prior quarter due to a higher percentage of conventional loans sold
to PFSI. The remaining $7.0 billion of conventional volume was for
PFSI’s account. Interest rate lock commitments on conventional
loans for PMT’s account totaled $3.3 billion, down 56 percent from
the prior quarter.
Segment revenues were $7.8 million and included net gains on
loans acquired for sale of $4.4 million, other income of $4.4
million, which primarily consists of volume-based origination fees,
and net interest expense of $1.0 million. Net gains on loans
acquired for sale in the quarter decreased by $2.0 million from the
prior quarter due to lower volumes from the increased sale of
conventional loans to PFSI. Net gains on loans acquired for sale
also included a negative impact of $4.5 million due to changes in
GSE pricing that did not come with pipeline protection as they
historically have. Interest income was $25.7 million, down from
$36.9 million in the prior quarter, and interest expense was $26.7
million, down from $35.1 million in the prior quarter, both due to
lower volumes.
Segment expenses were $6.4 million, down from $14.3 million in
the prior quarter due to lower volumes for PMT’s account. The
weighted average fulfillment fee rate in the second quarter was 18
basis points, unchanged from the prior quarter.
Corporate Segment
The Corporate segment includes interest income from cash and
short-term investments, management fees, and corporate
expenses.
Segment revenues were $2.3 million, up from $1.6 million in the
prior quarter. Management fees were $7.1 million, and other segment
expenses were $7.7 million, both similar to the prior quarter.
Taxes
PMT recorded a tax expense of $22.2 million, driven primarily by
fair value gains on MSRs and interest rate hedges held in PMT’s
taxable subsidiary.
Management’s slide presentation and accompanying materials will
be available in the Investor Relations section of the Company’s
website at pmt.pennymac.com after the market closes on Thursday,
July 27, 2023. Additionally, the Company will host a live question
and answer (Q&A) session the same day at 5:45 p.m. Eastern
Time. An audio webcast of the Q&A session will be available at
pmt.pennymac.com, and a replay of the event will be available
shortly after its conclusion.
Individuals who are unable to access the website but would like
to receive a copy of the materials should contact the Company’s
Investor Relations department at 818.224.7028.
About PennyMac Mortgage Investment Trust
PennyMac Mortgage Investment Trust is a mortgage real estate
investment trust (REIT) that invests primarily in residential
mortgage loans and mortgage-related assets. PMT is externally
managed by PNMAC Capital Management, LLC, a wholly-owned subsidiary
of PennyMac Financial Services, Inc. (NYSE: PFSI). Additional
information about PennyMac Mortgage Investment Trust is available
at pmt.pennymac.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, regarding management’s beliefs, estimates, projections
and assumptions with respect to, among other things, the Company’s
financial results, future operations, business plans and investment
strategies, as well as industry and market conditions, all of which
are subject to change. Words like “believe,” “expect,”
“anticipate,” “promise,” “plan,” and other expressions or words of
similar meanings, as well as future or conditional verbs such as
“will,” “would,” “should,” “could,” or “may” are generally intended
to identify forward-looking statements. Actual results and
operations for any future period may vary materially from those
projected herein and from past results discussed herein. Factors
which could cause actual results to differ materially from
historical results or those anticipated include, but are not
limited to: changes in interest rates; the Company’s ability to
comply with various federal, state and local laws and regulations
that govern its business; changes in the Company’s investment
objectives or investment or operational strategies, including any
new lines of business or new products and services that may subject
it to additional risks; volatility in the Company’s industry, the
debt or equity markets, the general economy or the real estate
finance and real estate markets; events or circumstances which
undermine confidence in the financial and housing markets or
otherwise have a broad impact on financial and housing markets;
changes in general business, economic, market, employment and
domestic and international political conditions, or in consumer
confidence and spending habits from those expected; the degree and
nature of the Company’s competition; declines in real estate or
significant changes in U.S. housing prices or activity in the U.S.
housing market; the availability of, and level of competition for,
attractive risk-adjusted investment opportunities in mortgage loans
and mortgage-related assets that satisfy the Company’s investment
objectives; the inherent difficulty in winning bids to acquire
mortgage loans, and the Company’s success in doing so; the
concentration of credit risks to which the Company is exposed; the
Company’s dependence on its manager and servicer, potential
conflicts of interest with such entities and their affiliates, and
the performance of such entities; changes in personnel and lack of
availability of qualified personnel at its manager, servicer or
their affiliates; the availability, terms and deployment of
short-term and long-term capital; the adequacy of the Company’s
cash reserves and working capital; the Company’s ability to
maintain the desired relationship between its financing and the
interest rates and maturities of its assets; the timing and amount
of cash flows, if any, from the Company’s investments; our
substantial amount of indebtedness; the performance, financial
condition and liquidity of borrowers; our exposure to risks of loss
and disruptions in operations resulting from adverse weather
conditions, man-made or natural disasters, climate change and
pandemics; the ability of the Company’s servicer, which also
provides the Company with fulfillment services, to approve and
monitor correspondent sellers and underwrite loans to investor
standards; incomplete or inaccurate information or documentation
provided by customers or counterparties, or adverse changes in the
financial condition of the Company’s customers and counterparties;
the Company’s indemnification and repurchase obligations in
connection with mortgage loans it purchases and later sells or
securitizes; the quality and enforceability of the collateral
documentation evidencing the Company’s ownership and rights in the
assets in which it invests; increased rates of delinquency,
defaults and forbearances and/or decreased recovery rates on the
Company’s investments; the performance of mortgage loans underlying
mortgage-backed securities in which the Company retains credit
risk; the Company’s ability to foreclose on its investments in a
timely manner or at all; increased prepayments of the mortgages and
other loans underlying the Company’s mortgage-backed securities or
relating to the Company’s mortgage servicing rights and other
investments; the degree to which the Company’s hedging strategies
may or may not protect it from interest rate volatility; the effect
of the accuracy of or changes in the estimates the Company makes
about uncertainties, contingencies and asset and liability
valuations when measuring and reporting upon the Company’s
financial condition and results of operations; the Company’s
ability to maintain appropriate internal control over financial
reporting; technologies for loans and the Company’s ability to
mitigate security risks and cyber intrusions; the Company’s ability
to detect misconduct and fraud; developments in the secondary
markets for the Company’s mortgage loan products; legislative and
regulatory changes that impact the mortgage loan industry or
housing market; regulatory or other changes that impact government
agencies or government-sponsored entities, or such changes that
increase the cost of doing business with such agencies or entities;
legislative and regulatory changes that impact the business,
operations or governance of mortgage lenders and/or publicly-traded
companies; the Consumer Financial Protection Bureau and its issued
and future rules and the enforcement thereof; changes in government
support of homeownership; changes in government or
government-sponsored home affordability programs; limitations
imposed on the Company’s business and its ability to satisfy
complex rules for it to qualify as a REIT for U.S. federal income
tax purposes and qualify for an exclusion from the Investment
Company Act of 1940 and the ability of certain of the Company’s
subsidiaries to qualify as REITs or as taxable REIT subsidiaries
for U.S. federal income tax purposes; changes in governmental
regulations, accounting treatment, tax rates and similar matters;
the Company’s ability to make distributions to its shareholders in
the future; the Company’s failure to deal appropriately with issues
that may give rise to reputational risk; and the Company’s
organizational structure and certain requirements in its charter
documents. You should not place undue reliance on any
forward-looking statement and should consider all of the
uncertainties and risks described above, as well as those more
fully discussed in reports and other documents filed by the Company
with the Securities and Exchange Commission from time to time. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements or any other information contained
herein, and the statements made in this press release are current
as of the date of this release only.
PENNYMAC MORTGAGE INVESTMENT
TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
For the Quarterly Periods Ended June 30, 2023
March 31, 2023 June 30, 2022 (in thousands except
share amounts) ASSETS Cash
$
238,805
$
118,672
$
332,009
Short-term investments at fair value
242,037
292,153
88,818
Mortgage-backed securities at fair value
4,731,341
4,629,004
3,853,076
Loans acquired for sale at fair value
1,080,047
3,143,518
1,793,665
Loans at fair value
1,457,272
1,502,471
1,654,483
Derivative assets
29,012
89,285
17,372
Deposits securing credit risk transfer arrangements
1,269,558
1,297,917
1,430,759
Mortgage servicing rights at fair value
3,977,938
3,975,076
3,695,609
Servicing advances
112,743
138,716
90,716
Due from PennyMac Financial Services, Inc.
7,824
-
3,582
Other
238,345
170,417
257,190
Total assets
$
13,384,922
$
15,357,229
$
13,217,279
LIABILITIES Assets sold under agreements to repurchase
$
5,914,625
$
8,114,108
$
5,646,402
Mortgage loan participation and sale agreements
34,787
-
79,269
Notes payable secured by credit risk transfer and mortgage
servicing assets
3,158,407
2,790,958
2,741,750
Exchangeable senior notes
547,767
547,003
544,803
Asset-backed financing of variable interest entities at fair value
1,361,108
1,403,080
1,548,636
Interest-only security payable at fair value
24,060
23,205
19,485
Derivative and credit risk transfer strip liabilities at fair value
98,038
138,469
278,499
Unsettled securities trades
-
12,424
-
Accounts payable and accrued liabilities
104,547
152,793
123,459
Due to PennyMac Financial Services, Inc.
25,046
35,166
43,234
Income taxes payable
147,972
129,882
81,661
Liability for losses under representations and warranties
37,069
39,407
39,441
Total liabilities
11,453,426
13,386,495
11,146,639
SHAREHOLDERS' EQUITY Preferred shares of beneficial interest
541,482
541,482
541,482
Common shares of beneficial interest—authorized, 500,000,000 common
shares of $0.01 par value; issued and outstanding 86,760,408,
88,385,614 and 91,081,067 common shares, respectively
868
884
911
Additional paid-in capital
1,921,710
1,940,297
1,972,849
Accumulated deficit
(532,564
)
(511,929
)
(444,602
)
Total shareholders' equity
1,931,496
1,970,734
2,070,640
Total liabilities and shareholders' equity
$
13,384,922
$
15,357,229
$
13,217,279
PENNYMAC MORTGAGE INVESTMENT
TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)
For the Quarterly Periods Ended June 30, 2023
March 31, 2023 June 30, 2022 (in thousands, except
per share amounts) Investment Income Net loan servicing
fees: From nonaffiliates Servicing fees
$
172,325
$
168,157
$
158,328
Change in fair value of mortgage servicing rights
(87,997
)
(137,444
)
133,779
Hedging results
23,996
(54,891
)
(78,118
)
108,324
(24,178
)
213,989
From PennyMac Financial Services, Inc.
509
485
3,324
108,833
(23,693
)
217,313
Net gains on loans acquired for sale
4,446
6,473
7,671
Loan origination fees
4,295
7,706
14,428
Net (losses) gains on investments and financings
(2,499
)
125,804
(230,650
)
Interest income
162,684
153,019
90,698
Interest expense
187,390
179,137
78,150
Net interest (expense) income
(24,706
)
(26,118
)
12,548
Other
83
194
190
Net investment income
90,452
90,366
21,500
Expenses Earned by PennyMac Financial Services, Inc.: Loan
servicing fees
20,317
20,449
20,335
Loan fulfillment fees
5,441
11,923
20,646
Management fees
7,078
7,257
7,910
Loan origination
897
2,178
2,782
Professional services
1,881
1,523
1,252
Compensation
1,279
1,523
1,549
Safekeeping
1,124
1,116
1,021
Loan collection and liquidation
909
579
1,251
Other
4,673
5,001
4,622
Total expenses
43,599
51,549
61,368
Income (loss) before provision for (benefit from) income taxes
46,853
38,817
(39,868
)
Provision for (benefit from) income taxes
22,229
(21,896
)
30,866
Net income (loss)
24,624
60,713
(70,734
)
Dividends on preferred shares
10,454
10,455
10,455
Net income (loss) attributable to common shareholders
$
14,170
$
50,258
$
(81,189
)
Earnings (losses) per common share Basic
$
0.16
$
0.56
$
(0.88
)
Diluted
$
0.16
$
0.50
$
(0.88
)
Weighted average shares outstanding Basic
87,269
88,831
91,963
Diluted
87,269
113,388
91,963
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230727767665/en/
Media Kristyn Clark kristyn.clark@pennymac.com
805.395.9943
Investors Kevin Chamberlain Isaac Garden
investorrelations@pennymac.com 818.224.7028
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