Press Release: PennyMac Mortgage Investment Trust Reports Fourth Quarter and Full-Year 2020 Results

· 02/04/2021 16:30

Quarter ended December 31, 2020 -------------------------------------------------------------------------- Credit Interest rate sensitive sensitive Correspondent strategies strategies production Corporate Consolidated ------------- -------------- -------------- --------- ---------------- (in thousands) Net investment income (loss): Net gain on loans acquired for sale $ - $ - $ 70,511 $ - $ 70,511 Net (loss) gain on investments: CRT investments 163,650 - - - 163,650 Loans at fair value 233 - - - 233 Loans held by variable interest entity net of asset-backed secured financing - (991) - - (991) Mortgage-backed securities - (7,306) - - (7,306) Hedging derivatives (14,103) 109 - - (13,994) Excess servicing spread investments - (5,877) - - (5,877) ------- --- -------- ------------- ------- -------- 149,780 (14,065) - - 135,715 Net loan servicing fees - (48,643) - - (48,643) Net interest (expense) income: Interest income 558 17,616 29,342 1,061 48,577 Interest expense 9,638 37,351 22,648 - 69,637 ------- --- -------- --- ------------- ------- -------- (9,080) (19,735) 6,694 1,061 (21,060) Other income 356 - 59,655 - 60,011 ------- --- -------- --- ------------- ------- -------- 141,056 (82,443) 136,860 1,061 196,534 ------- --- -------- ------------- ------- -------- Expenses: Loan fulfillment and servicing fees payable to PennyMac Financial Services, Inc. 79 18,296 72,606 - 90,981 Management fees payable to PennyMac Financial Services, Inc. - - - 8,687 8,687 Other 6,467 (655) 11,507 5,652 22,971 ------- --- -------- ------------- ------- -------- $ 6,546 $ 17,641 $ 84,113 $ 14,339 $ 122,639 ------- --- -------- --- ------------- ------- -------- Pretax income (loss) $134,510 $(100,084) $ 52,747 $(13,278) $ 73,895 ======= === ======== ============= ======= ========(1) Consists of delegated conventional conforming and non-Agency loans and, for the fourth quarter of 2019 only, includes conventional loans acquired from PennyMac Financial Services, Inc. (NYSE: PFSI) (2) Return on average common equity is calculated based on net income attributable to common shareholders as a percentage of monthly average common equity during the year-- Net income of $52.4 million -- Net income attributable to common shareholders of $27.4 million; diluted earnings per common share of $0.27 -- Dividends of $1.52 per common share -- Net investment income of $469.4 million, down 4% from the prior year -- Return on average common equity of 1.4%2-- Investment activity driven by elevated correspondent production volumes -- Record conventional correspondent loan production volumes of $38.0 billion in unpaid principal balance (UPB), up 39 percent from the prior quarter and up 85 percent from the fourth quarter of 20191 -- Added $441 million in new MSRs -- Settled PMT's sixth CRT transaction with Fannie Mae and successfully placed $500 million of 2-year term-notes shortly after closing -- Repurchased approximately 927,000 common shares of PMT at a weighted average price of $16.88, or a total cost of $15.6 million-- Net income attributable to common shareholders of $76.6 million, down from $93.3 million in the prior quarter -- Continued recovery in the fair value of government-sponsored enterprise (GSE) credit risk transfer (CRT) investments due to credit spread tightening combined with strong Correspondent Production segment results -- Book value per common share of $20.30 at December 31, 2020, up from $19.95 at September 30, 2020WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)--February 04, 2021--

PennyMac Mortgage Investment Trust Reports Fourth Quarter and Full-Year 2020 Results

PennyMac Mortgage Investment Trust (NYSE: PMT) today reported net income attributable to common shareholders of $76.6 million, or $0.78 per common share on a diluted basis for the fourth quarter of 2020, on net investment income of $196.5 million. PMT previously announced a cash dividend for the fourth quarter of 2020 of $0.47 per common share of beneficial interest, which was declared on December 18, 2020 and paid on January 29, 2021 to common shareholders of record as of December 31, 2020.

Fourth Quarter 2020 Highlights

Financial results:

Other investment and financing highlights:

Full-Year 2020 Highlights

Financial results:

"PMT delivered strong results in the fourth quarter," said President and CEO David Spector, "resulting in book value per share returning to near pre-COVID levels. Driving these results was record conventional production creating $441 million in new organic MSR investments at today's low rates. Additionally, we completed the purchase of PMT's sixth and largest CRT transaction with Fannie Mae; CRT securities totaling $1.7 billion in fair value were collateralized by $44 billion in UPB of PMT's high quality loan production and financed partially by two-year term notes. While we are not making new investment in CRT for the foreseeable future, PMT continues to invest in high-quality MSR assets as a result of the record production from the largest correspondent aggregator in the mortgage industry."

Mr. Spector continued, "2020 was a challenging year for mortgage REITs, many of which were forced to sell assets at distressed levels, curtail operations, or even cease market activity for some period. I am proud of this management team's commitment and the work we have done with respect to liquidity and risk management since the inception of the Company, which proved enormously beneficial for PMT as we were not forced to sell assets to generate liquidity. As a result, PMT's dividend is back to pre-COVID levels, something few other mortgage REITs can state. As the largest correspondent aggregator and with PFSI's extensive investments in foundational production technology, PMT is well positioned for continued creation of organic investments with strong risk-adjusted returns."

Mr. Spector concluded, "All of us at PennyMac are grateful for the many kind thoughts and tributes we have received since announcing the sad passing of Stan Kurland, our founder and Chairman. While Stan had retired from day-to-day responsibilities at PennyMac, he remained a trusted advisor and dear friend. His leadership helped lay the foundation for PennyMac's long-term success which included building and developing a deep management team that carries on his legacy."

The following table presents the contributions of PMT's segments, consisting of Credit Sensitive Strategies, Interest Rate Sensitive Strategies, Correspondent Production, and Corporate:

Credit Sensitive Strategies Segment

The Credit Sensitive Strategies segment primarily includes results from CRT, and also includes distressed loans and non-Agency subordinated bonds. Pretax income for the segment was $134.5 million on revenues of $141.1 million, up from pretax income of $50.0 million on revenues of $52.8 million in the prior quarter.

Net gain on investments in the segment was $149.8 million, up from $60.0 million in the prior quarter.

Net gain on CRT investments for the quarter was $163.7 million, up from $61.0 million in the prior quarter, and included $209.9 million in valuation-related gains which reflects the impact of credit spread tightening and elevated prepayment speeds as well as expectations of recoveries of realized losses in PMT's L Street Securities 2017-PM1 transaction. The prior quarter included $14.5 million in such gains. Net gain on CRT investments also included $48.2 million in realized gains and carry, essentially unchanged from the prior quarter. Losses recognized during the quarter were $108.4 million, up from $2.9 million dollars in the prior quarter as many loans that entered forbearance in spring 2020 became 180 days or more past due. The majority of these losses have the potential to be recovered if the payment status of the related loan is reported as current after the conclusion of a CARES Act forbearance. As of December 31, 2020, we estimate $44 million of these recognized losses are already eligible for reversal subject to review by Fannie Mae, and expect this amount to increase as additional borrowers exit forbearance and reperform.

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February 04, 2021 16:30 ET (21:30 GMT)