PennyMac Mortgage Investment Trust Reports Third Quarter 2024 Results
Third Quarter 2024 Highlights
Financial results:
-
Net income attributable to common shareholders of
$31.0 million ; annualized return on average common equity of 9%1- Solid levels of income excluding market-driven fair value changes bolstered by fair value changes including associated tax benefits
-
Book value per common share decreased slightly to
$15.85 atSeptember 30, 2024 , from$15.89 atJune 30, 2024
Other investment highlights:
-
Investment activity driven by correspondent production volumes
-
Conventional correspondent loan production volumes for PMT’s account totaled
$5.9 billion in unpaid principal balance (UPB), up 167 percent from the prior quarter as PMT retained a higher percentage of total conventional loans acquired-
Resulted in the creation of
$88 million in new mortgage servicing rights (MSRs), up from$41 million in the prior quarter
-
Resulted in the creation of
-
Conventional correspondent loan production volumes for PMT’s account totaled
-
Redeemed
$305 million of MSR term notes priced at SOFR plus 419 basis points scheduled to mature in 2027 with proceeds from a recent MSR term note issuance priced at SOFR plus 275 basis points -
Issued
$159 million of new, 4-year CRT term notes in August which refinanced$152 million of notes due to mature in 2025
1Return on average common equity is calculated based on net income attributable to common shareholders as a percentage of monthly average common equity during the quarter |
“PMT’s third quarter financial results reflect solid levels of income excluding market driven value changes bolstered by fair value changes including associated tax benefits,” said Chairman and CEO
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 |
Interest rate sensitive strategies |
Correspondent production |
Corporate | Total | ||||||||||||||||
Quarter ended |
||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Net investment income: | ||||||||||||||||||||
Net gains (losses) on investments and financings | ||||||||||||||||||||
Mortgage-backed securities |
$ |
559 |
|
$ |
122,874 |
|
$ |
— |
|
$ |
— |
|
$ |
123,433 |
|
|||||
Loans at fair value | ||||||||||||||||||||
Held by VIEs |
|
5,730 |
|
|
(3,292 |
) |
|
— |
|
|
— |
|
|
2,438 |
|
|||||
Distressed |
|
(10 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(10 |
) |
|||||
CRT investments |
|
20,834 |
|
|
— |
|
|
— |
|
|
— |
|
|
20,834 |
|
|||||
|
27,113 |
|
|
119,582 |
|
|
— |
|
|
— |
|
|
146,695 |
|
||||||
Net gains on loans acquired for sale |
|
— |
|
|
— |
|
|
20,059 |
|
|
— |
|
|
20,059 |
|
|||||
Net loan servicing fees |
|
— |
|
|
(85,080 |
) |
|
— |
|
|
— |
|
|
(85,080 |
) |
|||||
Net interest expense: | ||||||||||||||||||||
Interest income |
|
21,389 |
|
|
128,458 |
|
|
23,853 |
|
|
3,034 |
|
|
176,734 |
|
|||||
Interest expense |
|
21,921 |
|
|
136,873 |
|
|
24,273 |
|
|
1,104 |
|
|
184,171 |
|
|||||
|
(532 |
) |
|
(8,415 |
) |
|
(420 |
) |
|
1,930 |
|
|
(7,437 |
) |
||||||
Other |
|
(65 |
) |
|
— |
|
|
6,692 |
|
|
— |
|
|
6,627 |
|
|||||
|
26,516 |
|
|
26,087 |
|
|
26,331 |
|
|
1,930 |
|
|
80,864 |
|
||||||
Expenses: | ||||||||||||||||||||
Loan fulfillment and servicing fees payable to |
|
20 |
|
|
22,220 |
|
|
11,492 |
|
|
— |
|
|
33,732 |
|
|||||
Management fees payable to |
|
— |
|
|
— |
|
|
— |
|
|
7,153 |
|
|
7,153 |
|
|||||
Other |
|
47 |
|
|
3,376 |
|
|
1,590 |
|
|
8,432 |
|
|
13,445 |
|
|||||
$ |
67 |
|
$ |
25,596 |
|
$ |
13,082 |
|
$ |
15,585 |
|
$ |
54,330 |
|
||||||
Pretax income (loss) |
$ |
26,449 |
|
$ |
491 |
|
$ |
13,249 |
|
$ |
(13,655 |
) |
$ |
26,534 |
|
Credit Sensitive Strategies Segment
The Credit Sensitive Strategies segment primarily includes results from PMT’s organically-created GSE CRT investments, opportunistic investments in other GSE CRT, investments in non-agency subordinate bonds from private-label securitizations of PMT’s production and legacy investments. Pretax income for the segment was
Net gains on investments in the segment were
Net gains on PMT’s organically-created CRT investments for the quarter were
Net interest expense for the segment was
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 income for the segment was
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 gains on investments for the segment were
Losses from net loan servicing fees were
The following schedule details net loan servicing fees:
Quarter ended | |||||||||
|
|
|
|||||||
(in thousands) | |||||||||
From non-affiliates: | |||||||||
Contractually specified |
$ |
162,605 |
|
$ |
162,127 |
|
$ |
166,809 |
|
Other fees |
|
4,012 |
|
|
2,815 |
|
|
3,752 |
|
Effect of MSRs: | |||||||||
Change in fair value | |||||||||
Realization of cashflows |
|
(100,612 |
) |
|
(96,595 |
) |
|
(102,213 |
) |
Market changes |
|
(84,306 |
) |
|
46,039 |
|
|
263,139 |
|
|
(184,918 |
) |
|
(50,556 |
) |
|
160,926 |
|
|
Hedging results |
|
(67,220 |
) |
|
(18,365 |
) |
|
(50,689 |
) |
|
(252,138 |
) |
|
(68,921 |
) |
|
110,237 |
|
|
Net servicing fees from non-affiliates |
|
(85,521 |
) |
|
96,021 |
|
|
280,798 |
|
From PFSI—MSR recapture income |
|
441 |
|
|
473 |
|
|
500 |
|
Net loan servicing fees |
$ |
(85,080 |
) |
$ |
96,494 |
|
$ |
281,298 |
|
Net interest expense for the segment was
Segment expenses were
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
Through its correspondent production activities, PMT acquired a total of
Segment revenues were
Segment expenses were
Corporate Segment
The Corporate segment includes interest income from cash and short-term investments, management fees, and corporate expenses.
Segment revenues were
Taxes
PMT recorded a tax benefit of
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
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
Forward-Looking Statements
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; 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 real estate values, housing prices and housing sales; changes in macroeconomic, consumer and real estate market conditions; the degree and nature of the Company’s competition; 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; our ability to mitigate cybersecurity risks, cybersecurity incidents and technology disruptions; 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 severe weather events, man-made or other natural conditions, including 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; 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; the
PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES |
|||||||||||
CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
|||||||||||
|
|
|
|||||||||
(in thousands except share amounts) | |||||||||||
ASSETS | |||||||||||
Cash |
$ |
344,358 |
|
$ |
130,734 |
|
$ |
236,396 |
|
||
Short-term investments at fair value |
|
102,787 |
|
|
336,296 |
|
|
150,059 |
|
||
Mortgage-backed securities at fair value |
|
4,182,382 |
|
|
4,068,337 |
|
|
4,665,970 |
|
||
Loans acquired for sale at fair value |
|
1,665,796 |
|
|
694,391 |
|
|
1,025,730 |
|
||
Loans at fair value |
|
1,429,525 |
|
|
1,377,836 |
|
|
1,372,118 |
|
||
Derivative assets |
|
81,844 |
|
|
90,753 |
|
|
29,750 |
|
||
Deposits securing credit risk transfer arrangements |
|
1,135,447 |
|
|
1,163,268 |
|
|
1,237,294 |
|
||
Mortgage servicing rights at fair value |
|
3,809,047 |
|
|
3,941,861 |
|
|
4,108,661 |
|
||
Servicing advances |
|
71,124 |
|
|
98,989 |
|
|
93,614 |
|
||
Due from |
|
8,538 |
|
|
1 |
|
|
2,252 |
|
||
Other |
|
224,806 |
|
|
178,484 |
|
|
301,492 |
|
||
Total assets |
$ |
13,055,654 |
|
$ |
12,080,950 |
|
$ |
13,223,336 |
|
||
LIABILITIES | |||||||||||
Assets sold under agreements to repurchase |
$ |
5,748,461 |
|
$ |
4,700,225 |
|
$ |
6,020,716 |
|
||
Mortgage loan participation and sale agreements |
|
28,790 |
|
|
13,582 |
|
|
23,991 |
|
||
Notes payable secured by credit risk transfer and mortgage servicing assets |
|
2,830,108 |
|
|
2,933,845 |
|
|
2,825,591 |
|
||
Unsecured senior notes |
|
814,915 |
|
|
813,838 |
|
|
599,754 |
|
||
Asset-backed financing of variable interest entities at fair value |
|
1,334,797 |
|
|
1,288,180 |
|
|
1,279,059 |
|
||
Interest-only security payable at fair value |
|
35,098 |
|
|
32,708 |
|
|
28,288 |
|
||
Derivative and credit risk transfer strip liabilities at fair value |
|
16,151 |
|
|
18,892 |
|
|
140,494 |
|
||
Accounts payable and accrued liabilities |
|
114,085 |
|
|
126,314 |
|
|
92,633 |
|
||
Due to |
|
32,603 |
|
|
29,413 |
|
|
27,613 |
|
||
Income taxes payable |
|
155,544 |
|
|
170,901 |
|
|
202,967 |
|
||
Liability for losses under representations and warranties |
|
8,315 |
|
|
13,183 |
|
|
33,152 |
|
||
Total liabilities |
|
11,118,867 |
|
|
10,141,081 |
|
|
11,274,258 |
|
||
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 |
|
869 |
|
|
869 |
|
|
868 |
|
||
Additional paid-in capital |
|
1,924,596 |
|
|
1,923,780 |
|
|
1,923,130 |
|
||
Accumulated deficit |
|
(530,160 |
) |
|
(526,262 |
) |
|
(516,402 |
) |
||
Total shareholders' equity |
|
1,936,787 |
|
|
1,939,869 |
|
|
1,949,078 |
|
||
Total liabilities and shareholders' equity |
$ |
13,055,654 |
|
$ |
12,080,950 |
|
$ |
13,223,336 |
|
PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES |
|||||||||||
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) |
|||||||||||
For the Quarterly Periods Ended | |||||||||||
|
|
|
|||||||||
Investment Income | |||||||||||
Net gains (losses) on investments and financings |
$ |
146,695 |
|
$ |
(19,743 |
) |
$ |
(109,544 |
) |
||
Net gains on loans acquired for sale |
|
20,059 |
|
|
12,160 |
|
|
13,558 |
|
||
Loan origination fees |
|
6,640 |
|
|
2,451 |
|
|
3,226 |
|
||
Net loan servicing fees: | |||||||||||
From nonaffiliates | |||||||||||
Servicing fees |
|
166,617 |
|
|
164,942 |
|
|
170,561 |
|
||
Change in fair value of mortgage servicing rights |
|
(184,918 |
) |
|
(50,556 |
) |
|
160,926 |
|
||
Hedging results |
|
(67,220 |
) |
|
(18,365 |
) |
|
(50,689 |
) |
||
|
(85,521 |
) |
|
96,021 |
|
|
280,798 |
|
|||
From |
|
441 |
|
|
473 |
|
|
500 |
|
||
|
(85,080 |
) |
|
96,494 |
|
|
281,298 |
|
|||
Interest income |
|
176,734 |
|
|
151,835 |
|
|
158,926 |
|
||
Interest expense |
|
184,171 |
|
|
171,841 |
|
|
183,918 |
|
||
Net interest expense |
|
(7,437 |
) |
|
(20,006 |
) |
|
(24,992 |
) |
||
Other |
|
(13 |
) |
|
(158 |
) |
|
(117 |
) |
||
Net investment income |
|
80,864 |
|
|
71,198 |
|
|
163,429 |
|
||
Expenses | |||||||||||
Earned by |
|||||||||||
Loan servicing fees |
|
22,240 |
|
|
20,264 |
|
|
20,257 |
|
||
Management fees |
|
7,153 |
|
|
7,133 |
|
|
7,175 |
|
||
Loan fulfillment fees |
|
11,492 |
|
|
4,427 |
|
|
5,531 |
|
||
Professional services |
|
2,614 |
|
|
2,366 |
|
|
2,133 |
|
||
Compensation |
|
1,326 |
|
|
1,369 |
|
|
1,961 |
|
||
Loan collection and liquidation |
|
2,257 |
|
|
671 |
|
|
1,890 |
|
||
Safekeeping |
|
1,174 |
|
|
961 |
|
|
467 |
|
||
Loan origination |
|
1,408 |
|
|
533 |
|
|
710 |
|
||
Other |
|
4,666 |
|
|
4,865 |
|
|
4,885 |
|
||
Total expenses |
|
54,330 |
|
|
42,589 |
|
|
45,009 |
|
||
Income before (benefit from) provision for income taxes |
|
26,534 |
|
|
28,609 |
|
|
118,420 |
|
||
(Benefit from) provision for income taxes |
|
(14,873 |
) |
|
3,175 |
|
|
56,998 |
|
||
Net income |
|
41,407 |
|
|
25,434 |
|
|
61,422 |
|
||
Dividends on preferred shares |
|
10,455 |
|
|
10,454 |
|
|
10,455 |
|
||
Net income attributable to common shareholders |
$ |
30,952 |
|
$ |
14,980 |
|
$ |
50,967 |
|
||
Earnings per common share | |||||||||||
Basic |
$ |
0.36 |
|
$ |
0.17 |
|
$ |
0.59 |
|
||
Diluted |
$ |
0.36 |
|
$ |
0.17 |
|
$ |
0.51 |
|
||
Weighted average shares outstanding | |||||||||||
Basic |
|
86,861 |
|
|
86,849 |
|
|
86,760 |
|
||
Diluted |
|
86,861 |
|
|
86,849 |
|
|
111,088 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20241022373180/en/
Media
mediarelations@pennymac.com
805.225.8224
Investors
Isaac Garden
investorrelations@pennymac.com
818.224.7028
Source: