UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 3, 2012
PennyMac Mortgage Investment Trust
(Exact Name of Registrant as Specified in Charter)
Maryland |
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001-34416 |
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27-0186273 |
(State or Other Jurisdiction of |
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(Commission |
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(I.R.S. Employer |
Incorporation or Organization) |
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File Number) |
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Identification No.) |
6101 Condor Drive, Moorpark, California |
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93021 |
(Address of Principal Executive Offices) |
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(Zip Code) |
(818) 224-7442
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On May 3, 2012, PennyMac Mortgage Investment Trust (the Company) issued a press release announcing its financial results for the fiscal quarter ended March 31, 2012. A copy of the press release and the slide presentation used in connection with the Companys earnings call held on May 3, 2012 are furnished as Exhibit 99.1 and Exhibit 99.2, respectively.
The information in this report, including the exhibits hereto, shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of Section 18, nor shall it be deemed incorporated by reference into any disclosure document relating to the Company, except to the extent, if any, expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. |
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Description |
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99.1 |
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Press Release, dated May 3, 2012, issued by PennyMac Mortgage Investment Trust pertaining to its financial results for the fiscal quarter ended March 31, 2012. |
99.2 |
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Slide Presentation for use on May 3, 2012 in connection with PennyMac Mortgage Investment Trusts earnings call pertaining to its financial results for the fiscal quarter ended March 31, 2012. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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PENNYMAC MORTGAGE INVESTMENT TRUST |
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|
|
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|
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/s/ Anne D. McCallion |
Dated: May 4, 2012 |
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Anne D. McCallion |
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Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. |
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Description |
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99.1 |
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Press Release, dated May 3, 2012, issued by PennyMac Mortgage Investment Trust pertaining to its financial results for the fiscal quarter ended March 31, 2012. |
99.2 |
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Slide Presentation for use on May 3, 2012 in connection with PennyMac Mortgage Investment Trusts earnings call pertaining to its financial results for the fiscal quarter ended March 31, 2012. |
Exhibit 99.1
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Contact: |
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Kevin Chamberlain, |
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Managing Director, Corporate Communications |
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(818) 224-7028 |
PennyMac Mortgage Investment Trust Reports First Quarter 2012 Results
Moorpark, CA May 3, 2012 PennyMac Mortgage Investment Trust (NYSE: PMT) today reported net income of $19.1 million, or $0.65 per diluted share, for the first quarter of 2012, on net investment income of $46.6 million. In addition, the Board of Trustees of PMT has declared a cash dividend of $0.55 per common share of beneficial interest. This dividend will be paid on May 31, 2012 to common shareholders of record on May 16, 2012.
PMT earned $24.6 million in pretax income for the quarter ended March 31, 2012. The following table presents the contribution of PMTs Investment Activities and Correspondent Lending segments to pretax income:
|
|
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Quarter ended March 31, 2012 |
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|
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Investment |
|
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Correspondent |
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|
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| |||
Unaudited |
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Activities |
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Lending |
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Total |
| |||
|
|
|
|
|
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(in thousands) |
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|
|
| |||
|
|
|
|
|
|
|
|
|
|
| |||
Revenues: |
|
|
|
|
|
|
|
|
|
| |||
External |
|
|
|
|
|
|
|
|
|
| |||
Net gain on investments |
|
|
$ |
11,488 |
|
|
$ |
- |
|
|
$ |
11,488 |
|
Interest income |
|
|
13,638 |
|
|
2,792 |
|
|
16,430 |
| |||
Net gain on mortgage loans acquired for sale |
|
|
- |
|
|
13,370 |
|
|
13,370 |
| |||
Other income |
|
|
3,900 |
|
|
1,461 |
|
|
5,361 |
| |||
Intersegment |
|
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16 |
|
|
(16 |
) |
|
- |
| |||
|
|
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29,042 |
|
|
17,607 |
|
|
46,649 |
| |||
Expenses: |
|
|
|
|
|
|
|
|
|
| |||
Interest |
|
|
5,747 |
|
|
927 |
|
|
6,674 |
| |||
Loan fulfillment fees payable to affiliate |
|
|
- |
|
|
6,124 |
|
|
6,124 |
| |||
Other |
|
|
9,021 |
|
|
255 |
|
|
9,276 |
| |||
|
|
|
14,768 |
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|
7,306 |
|
|
22,074 |
| |||
Pretax income |
|
|
$ |
14,274 |
|
|
$ |
10,301 |
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|
$ |
24,575 |
|
PMT delivered solid results in the first quarter of 2012. Correspondent funding volumes reached $1.8 billion for the quarter and interest rate lock commitments (IRLCs) were over $2.4 billion, both a significant increase over the previous quarter, said Chairman and Chief Executive Officer Stanford L. Kurland. Our investments in distressed loans continued to perform well as liquidation and modification activity increased from the fourth quarter.
During the quarter ended March 31, 2012, PMT recorded investment income on financial instruments totaling $41.3 million. The following table provides additional detail on the investment income on financial instruments:
|
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Quarter ended March 31, 2012 |
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Unaudited |
|
Net gain |
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Interest income/expense |
|
|
|
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Annualized % |
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(loss) on |
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|
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Discount/ |
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Total |
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Average |
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Interest |
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Total |
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|
|
investments |
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Coupon |
|
fees(1) |
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Total |
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revenue |
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balance |
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yield/cost |
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return |
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(dollars in thousands) |
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Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Short-term investments |
|
$ |
- |
|
$ |
31 |
|
$ |
- |
|
$ |
31 |
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$ |
31 |
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$ |
37,541 |
|
0.33% |
|
0.33% |
|
United States Treasury security |
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- |
|
- |
|
- |
|
- |
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- |
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9,890 |
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0.00% |
|
0.01% |
| ||||||
Mortgage-backed securities: |
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|
|
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|
|
|
|
|
|
|
|
|
|
|
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Non-Agency subprime |
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246 |
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95 |
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283 |
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378 |
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624 |
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57,947 |
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2.58% |
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4.26% |
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Non-Agency Alt-A |
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27 |
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111 |
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43 |
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154 |
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181 |
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7,667 |
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7.97% |
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9.35% |
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Non-Agency prime jumbo |
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90 |
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33 |
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9 |
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42 |
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132 |
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5,134 |
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3.27% |
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10.21% |
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Agency FNMA 30-year fixed |
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(6) |
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- |
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- |
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- |
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(6) |
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2,470 |
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0.00% |
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(32.76)% |
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Total mortgage-backed securities |
|
357 |
|
239 |
|
335 |
|
574 |
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931 |
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73,218 |
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3.10% |
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3.96% |
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Mortgage loans: |
|
|
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|
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|
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At fair value |
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4,431 |
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12,527 |
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- |
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12,527 |
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16,958 |
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621,441 |
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7.97% |
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10.80% |
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Under forward purchase agreements at fair value |
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6,700 |
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502 |
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- |
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502 |
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7,202 |
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116,613 |
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1.70% |
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24.43% |
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Acquired for sale at fair at fair value |
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13,370 |
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2,791 |
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- |
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2,791 |
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16,161 |
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191,522 |
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5.77% |
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33.38% |
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Total mortgage loans |
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24,501 |
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15,820 |
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- |
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15,820 |
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40,321 |
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929,576 |
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6.73% |
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17.16% |
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|
|
$ |
24,858 |
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$ |
16,090 |
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$ |
335 |
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$ |
16,425 |
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$ |
41,283 |
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$ |
1,050,225 |
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6.19% |
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15.48% |
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(1) Amounts in this column represent accrual of unearned discounts.
Investment income increased from the fourth quarter of 2011, driven by strong growth in gains on investments and interest income. Moreover, the composition of business is evolving, with more of our earnings contributed by our Correspondent Lending business segment, continued Mr. Kurland. We are executing on our long-term strategy of developing a pre-eminent non-bank mortgage intermediary, while providing attractive shareholder returns.
Correspondent Lending
During the quarter, correspondent lending funded $1.8 billion in loans, and IRLCs amounted to $2.4 billion, compared to $991 million and $1.3 billion, respectively, in the fourth quarter of 2011. Of total correspondent fundings, conventional loans amounted to $992 million, FHA loans were $795 million, and jumbo loans were $5 million. Pretax income attributable to the correspondent lending segment was $10.3 million for the quarter, primarily resulting from a $13.4 million net gain on mortgage loans acquired for sale and $2.8 million of interest income.
The following details the composition of net gain on mortgage loans acquired for sale in the first quarter of 2012:
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Quarter ended |
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Unaudited |
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March 31, 2012 |
| ||
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($ in thousands) |
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|
|
|
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| |
MSR Value |
|
$ |
12,929 |
|
|
|
|
|
|
| |
Rep & Warrant provision |
|
(426 |
) |
| |
|
|
|
|
| |
Cash investment |
|
(255 |
) |
| |
|
|
|
|
| |
Market value adjustments of pipeline, inventory and hedges |
|
1,122 |
|
| |
|
|
|
|
| |
Net gain on mortgage loans acquired for sale |
|
$ |
13,370 |
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|
Distressed Mortgage Investments
PMTs distressed mortgage loan portfolio generated realized and unrealized gains totaling $11.1 million in the first quarter of 2012 compared to $19.9 million in the fourth quarter of 2011. Of the gains in the first quarter of 2012, $4.8 million was realized through payoffs, which resulted from collections on the loan balances at levels higher than their recorded fair values. Valuation gains totaled $6.3 million in the first quarter of 2012, compared to $14.3 million in the fourth quarter of 2011 and were primarily driven by the Companys portfolio of nonperforming whole loans. The major contributing factor to the decline in net gain on investments was home values underlying the loan portfolio decreasing more than projected during the first quarter of 2012, as opposed to home values declining less than projected in the fourth quarter of 2011. The following details the realized and unrealized gains on mortgage loans for the first quarter of 2012:
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Quarter ended March 31, |
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Unaudited |
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2012 |
|
| |
|
|
|
(in thousands) |
|
| |
|
|
|
|
|
| |
Valuation changes |
|
|
|
|
| |
Performing loans |
|
|
$ |
1,712 |
|
|
Nonperforming loans |
|
|
4,572 |
|
| |
|
|
|
6,284 |
|
| |
Payoffs |
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|
4,847 |
|
| |
|
|
|
$ |
11,131 |
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|
The returns from our liquidation and modification activity were in line with our expectations. However, valuation changes were less than we had expected. A significant contributing factor to PMTs decline was the result of home values underlying our loan portfolio decreasing more than projected during the first quarter, stated President and Chief Investment Officer David Spector.
We continue to pursue additional investment opportunities in distressed whole loans at attractive levels. In fact, near quarter end we entered into an agreement to purchase a distressed mortgage pool of approximately $90 million in unpaid principal balance and in April, we agreed to purchase two additional pools of performing and nonperforming loans totaling approximately $240 million in unpaid principal balance1. One pool has settled and the other two pools are expected to settle in the second quarter.
PMT also realized a gain on REO of $3.7 million, comprised of $6.7 million in gains from REO disposition, offset by a reduction in valuation of $2.9 million. The gains from REO disposition were the result of realization of proceeds in excess of the carrying value of the REO. In many instances, various levels of rehabilitation are performed on these properties in order to maximize the value realized when they are eventually sold.
Expenses
Expenses for the first quarter of 2012 totaled $22.1 million, compared to $17.8 million in the fourth quarter of 2011. The increase is primarily attributable to loan fulfillment fees, which rose by $4.7 million from the fourth quarter of 2011 as a result of increased correspondent lending volume. A result of the quarters increased correspondent lending profitability is an increase in our provision for income taxes of $3.8 million. Since the activities of the correspondent lending segment reside in PMTs taxable REIT subsidiary, we expect income tax expense to increase as this segments profit grows. A significant portion of the Companys income tax expense relates to the value of mortgage servicing rights received pursuant to sales of correspondent loans, and is deferred rather than payable currently.
Stanford L. Kurland, Chairman and Chief Executive Officer of PMT, concluded, The Company is delivering strong revenue growth, particularly in the correspondent business segment. PMT surpassed its previously stated funding target of $1.8 billion in locks for the first quarter by $600 million. We feel confident that we can reach $1 billion in fundings per month by the end of the second quarter and are currently reevaluating our year-end targets. With the new whole loan acquisitions and the growth of the correspondent lending segment, PMT is delivering on its strategies and will continue to look to capitalize on emerging opportunities as the mortgage market returns to more normalized levels.
Managements recorded earnings call and slide presentation will be available in the Investor Relations section of the Companys website at www.PennyMac-REIT.com beginning at 5:30 a.m. (PT) on Thursday, May 3, 2012.
1 These pending transactions are subject to continuing due diligence, customary closing conditions, and obtaining additional capital adequate to fund the acquisitions. There can be no assurance that the committed amounts will ultimately be acquired or that the transactions will be completed at all.
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. PennyMac Mortgage Investment Trust trades on the New York Stock Exchange under the symbol PMT and is externally managed by PNMAC Capital Management, LLC, a wholly owned subsidiary of Private National Mortgage Acceptance Company, LLC. Additional information about PennyMac Mortgage Investment Trust is available at www.PennyMac-REIT.com.
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding managements beliefs, estimates, projections and assumptions with respect to, among other things, the Companys 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 general business, economic, market and employment conditions from those expected; continued declines in residential real estate and disruption in the U.S. housing market; the availability of, and level of competition for, attractive risk-adjusted investment opportunities in residential mortgage loans and mortgage-related assets that satisfy our investment objectives and investment strategies; changes in our investment or operational objectives and strategies, including any new lines of business; the concentration of credit risks to which we are exposed; the availability, terms and deployment of short-term and long-term capital; unanticipated increases in financing and other costs, including a rise in interest rates; the performance, financial condition and liquidity of borrowers; increased rates of delinquency or decreased recovery rates on our investments; increased prepayments of the mortgage and other loans underlying our investments; changes in regulations or the occurrence of other events that impact the business, operation or prospects of government sponsored enterprises; changes in government support of homeownership; changes in governmental regulations, accounting treatment, tax rates and similar matters; and our ability to satisfy complex rules in order to qualify as a REIT for U.S. federal income tax purposes. 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
(In thousands, except share data)
|
|
March 31, |
|
December 31, |
| ||
|
|
2012 |
|
2011 |
| ||
|
|
(Unaudited) |
| ||||
ASSETS |
|
|
|
|
| ||
Cash |
|
$ |
16,405 |
|
$ |
14,589 |
|
Short-term investments |
|
63,444 |
|
30,319 |
| ||
United States Treasury security |
|
- |
|
50,000 |
| ||
Mortgage-backed securities at fair value |
|
174,604 |
|
72,813 |
| ||
Mortgage loans acquired for sale at fair value |
|
155,295 |
|
232,016 |
| ||
Mortgage loans at fair value |
|
667,542 |
|
696,266 |
| ||
Mortgage loans under forward purchase agreements at fair value |
|
105,030 |
|
129,310 |
| ||
Real estate acquired in settlement of loans |
|
81,209 |
|
80,570 |
| ||
Real estate acquired in settlement of loans under forward purchase agreements |
|
23,661 |
|
22,979 |
| ||
Mortgage servicing rights: |
|
|
|
|
| ||
at lower of amortized cost or fair value |
|
17,346 |
|
5,282 |
| ||
at fair value |
|
1,188 |
|
749 |
| ||
Principal and interest collections receivable |
|
14,950 |
|
8,664 |
| ||
Principal and interest collections receivable under forward purchase agreements |
|
7,678 |
|
5,299 |
| ||
Interest receivable |
|
2,018 |
|
2,099 |
| ||
Due from affiliates |
|
5,464 |
|
347 |
| ||
Other assets |
|
42,186 |
|
34,760 |
| ||
Total assets |
|
$ |
1,378,020 |
|
$ |
1,386,062 |
|
|
|
|
|
|
| ||
LIABILITIES |
|
|
|
|
| ||
Accounts payable and accrued liabilities |
|
$ |
9,683 |
|
$ |
9,198 |
|
Unsettled mortgage-backed securities purchases |
|
115,636 |
|
- |
| ||
Assets sold under agreements to repurchase: |
|
|
|
|
| ||
Securities |
|
53,068 |
|
115,493 |
| ||
Mortgage loans acquired for sale at fair value |
|
143,819 |
|
212,677 |
| ||
Mortgage loans at fair value |
|
282,810 |
|
275,649 |
| ||
Real estate acquired in settlement of loans |
|
21,744 |
|
27,494 |
| ||
Note payable secured by mortgage loans at fair value |
|
- |
|
28,617 |
| ||
Borrowings under forward purchase agreements |
|
127,591 |
|
152,427 |
| ||
Contingent underwriting fees payable |
|
5,883 |
|
5,883 |
| ||
Payable to affiliates |
|
17,347 |
|
12,166 |
| ||
Income taxes payable |
|
4,483 |
|
441 |
| ||
Total liabilities |
|
782,064 |
|
840,045 |
| ||
|
|
|
|
|
| ||
Commitments and contingencies |
|
|
|
|
| ||
|
|
|
|
|
| ||
SHAREHOLDERS EQUITY |
|
|
|
|
| ||
Common shares of beneficial interestauthorized, 500,000,000 common shares of $0.01 par value; issued and outstanding, 31,023,863 and 28,404,554 common shares, respectively |
|
310 |
|
284 |
| ||
Additional paid-in capital |
|
564,819 |
|
518,272 |
| ||
Retained earnings |
|
30,827 |
|
27,461 |
| ||
Total shareholders equity |
|
595,956 |
|
546,017 |
| ||
Total liabilities and shareholders equity |
|
$ |
1,378,020 |
|
$ |
1,386,062 |
|
PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
|
|
Quarter ended |
| |||||
|
|
March 31, 2012 |
|
|
December 31, 2011 |
| ||
Investment Income |
|
(Unaudited) |
| |||||
Net gain (loss) on investments: |
|
|
|
|
|
| ||
Mortgage-backed securities |
|
$ |
357 |
|
|
$ |
(706 |
) |
Mortgage loans |
|
11,131 |
|
|
19,861 |
| ||
|
|
11,488 |
|
|
19,155 |
| ||
Interest income: |
|
|
|
|
|
| ||
Short-term investments |
|
31 |
|
|
18 |
| ||
Mortgage-backed securities |
|
574 |
|
|
510 |
| ||
Mortgage loans |
|
15,820 |
|
|
11,608 |
| ||
|
|
16,425 |
|
|
12,136 |
| ||
Net gain on mortgage loans acquired for sale |
|
13,370 |
|
|
7,426 |
| ||
Results of real estate acquired in settlement of loans |
|
3,717 |
|
|
(448 |
) | ||
Net loan servicing fees |
|
197 |
|
|
3 |
| ||
Other |
|
1,452 |
|
|
851 |
| ||
Net investment income |
|
46,649 |
|
|
39,123 |
| ||
Expenses |
|
|
|
|
|
| ||
Interest |
|
6,674 |
|
|
6,473 |
| ||
Loan fulfillment fees payable to affiliate |
|
6,124 |
|
|
1,410 |
| ||
Loan servicing fees |
|
4,186 |
|
|
4,194 |
| ||
Management fees |
|
1,804 |
|
|
990 |
| ||
Compensation |
|
1,301 |
|
|
1,330 |
| ||
Professional services |
|
442 |
|
|
786 |
| ||
Other |
|
1,543 |
|
|
2,611 |
| ||
Total expenses |
|
22,074 |
|
|
17,794 |
| ||
Income before provision for income taxes |
|
24,575 |
|
|
21,329 |
| ||
Provision for income taxes |
|
5,517 |
|
|
1,680 |
| ||
Net income |
|
$ |
19,058 |
|
|
$ |
19,649 |
|
|
|
|
|
|
|
| ||
Earnings per share |
|
|
|
|
|
| ||
Basic |
|
$ |
0.65 |
|
|
$ |
0.70 |
|
Diluted |
|
$ |
0.65 |
|
|
$ |
0.70 |
|
Weighted-average shares outstanding |
|
|
|
|
|
| ||
Basic |
|
29,076 |
|
|
27,941 |
| ||
Diluted |
|
29,355 |
|
|
28,233 |
| ||
Dividends declared per share |
|
$ |
0.55 |
|
|
$ |
0.55 |
|
(end)
Exhibit 99.2
PennyMac Mortgage Investment Trust May 3, 2012 First Quarter 2012 Earnings Report |
1Q12 Earnings Report 2 This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding managements beliefs, estimates, projections and assumptions with respect to, among other things, the Companys 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, from past results discussed herein, or illustrative examples provided herein. Factors which could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: changes in general business, economic, market and employment conditions from those expected; continued declines in residential real estate and disruption in the U.S. housing market; the availability of, and level of competition for, attractive risk-adjusted investment opportunities in residential mortgage loans and mortgage-related assets that satisfy our investment objectives and investment strategies; changes in our investment or operational objectives and strategies, including any new lines of business; the concentration of credit risks to which we are exposed; the availability, terms and deployment of short-term and long-term capital; unanticipated increases in financing and other costs, including a rise in interest rates; the performance, financial condition and liquidity of borrowers; increased rates of delinquency or decreased recovery rates on our investments; increased prepayments of the mortgage and other loans underlying our investments; changes in regulations or the occurrence of other events that impact the business, operation or prospects of government sponsored enterprises; changes in government support of homeownership; changes in governmental regulations, accounting treatment, tax rates and similar matters; and our ability to satisfy complex rules in order to qualify as a REIT for U.S. federal income tax purposes. 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 presentation are current as of the date of this presentation only. Forward-Looking Statements |
1Q12 Earnings Report 3 First Quarter 2012 Highlights Net Income of $19.1 million on revenue of $46.6 million Diluted EPS of $0.65 per share, and dividend of $0.55 per share Correspondent funding volume increased to $1.8 billion (Conventional fundings of $992 million, 55% of total), up 81% from the fourth quarter; lock volume reached $2.4 billion Entered into an agreement to purchase a distressed whole loan pool totaling over $90 million of unpaid principal balance (UPB), which settled in April Entered into agreements to purchase two additional pools totaling approximately $240 million of UPB in April 2012, which are expected to settle in May 2012(1) Raised $47 million of equity to support growth initiatives and investment activity Business segment earnings reflect evolving business model Investment Activities: $14.3 million (58%)(2) (1) Correspondent Lending: $10.3 million (42%)(2) These pending transactions are subject to continuing due diligence, customary closing conditions, and obtaining additional capital adequate to fund the acquisitions. There can be no assurance that the committed amount will ultimately be acquired or that the transactions will be completed . (2) Segment earnings before tax. |
1Q12 Earnings Report 4 PMTs unique hybrid structure allows the Company to focus its specialized operations on legacy loans and the emergence of the post crisis mortgage market PMT wholly owns REIT subsidiaries that enjoy favorable tax treatment and taxable REIT subsidiaries that are taxable as a C-Corp The REIT entities provide pass-through income from investments in qualifying real estate and real estate-related assets, and are generally not subject to federal or state income taxes to the extent that qualifying distributions are made and other tests are met The TRS entities are taxable and facilitate our participation in activities that would not otherwise be permissible as a REIT Generally includes Correspondent Lending, MSR investments and other mortgage banking activities Among the various tests that must be met to maintain REIT qualification, PMTs investment in the TRS cannot exceed 25% of REIT assets PMT s investment portfolio helps ensure that REIT qualification is maintained The portfolio is a strategic blend of: ABS and MBS Performing and other distressed mortgage loans This structure provides PMT shareholders with both operational and investment returns while building franchise value REIT Structure |
Approach to Raising Additional Equity PMTs approach to raise additional equity is driven by the growth of the business and the availability of accretive investment opportunities Raised $47 million in 1Q12 through PMTs Controlled Equity Offering program to support continued growth, primarily for Correspondent Lending Proceeds were immediately deployed into accretive, high return investment opportunities Effective method to raise incremental capital as the business grows PMT considers more traditional capital raises for larger accretive investment opportunities including, but not limited to, the following: Purchases of mortgage loan pools MBS securities MSR acquisitions 1Q12 Earnings Report 5 |
6 Illustrative Leveraged Gross Return(1) 20% - 26% 15% - 20% 27% - 39% (avg. holding period 20 days) 25% - 32% Strategy and Outlook Strategy and Outlook for PMT Continuing to acquire ABS and MBS on an opportunistic basis Correspondent business provides additional insight into MBS opportunities PCM expects to review roughly $1 billion per month for possible investments throughout 2012 Acquired $90 million in UPB of whole loans in April and entered into agreements to purchase approximately $240 million in UPB of performing and nonperforming whole loans, expected to settle in Q2(2) Executing on growth strategies and prudently expanding network of approved sellers; HARP 2.0 refinance volume opportunity Target for total loan fundings: $1 billion per month by end of the second quarter Opportunities enabled by PennyMac Loan Services operational platform and seller/servicer approvals Transactions would be structured to optimize the qualification of the investments as REIT assets 1Q12 Earnings Report (1) Illustrative gross returns including the effect of leverage before corporate operating and other administrative expenses (2) These pending transactions are subject to continuing due diligence, customary closing conditions, and obtaining additional capital adequate to fund the acquisitions. There can be no assurance that the committed amount will ultimately be acquired or that the transactions will be completed . |
PMT has unique capabilities to capture the opportunity in two ways Correspondent Lending partnering with our correspondent sellers to deliver best-in-class fulfillment & servicing capabilities, GSE relationships, underwriting and capital markets expertise for HARP loans Bulk Servicing acquisitions opportunities to refinance underlying loans that are HARP eligible PMT would receive a new MSR asset for loans refinanced through PLS(2) 1Q12 Earnings Report 7 The Federal Governments relaunched Home Affordable Refinance Program (HARP 2.0) is expected to boost refinance volumes and provide much needed assistance to underwater borrowers by lowering their payments HARP 2.0 expands eligibility for homeowners in existing GSE loans(1) who otherwise cannot refinance at todays low mortgage rates because their home is currently worth less than their outstanding loan balance (1) Securitized prior to June 2009 (2) An agreement for this type of transaction does not currently exist between PLS and PMT, and no transaction of this type has been completed by PMT HARP 1.0 vs. HARP 2.0 Analysts forecast HARP 2.0 changes could generate an additional 1 to 2 million refinances HARP 2.0 Creates Refinance Opportunities Factor HARP 1.0 HARP 2.0 Loan-to-value Capped at 125% No Limit Payment History No 30 day delinquent in last 12 months No 60 day delinquent last 12 months Appraisal Appraisal waiver granted on ~25% of loans Appraisal waiver granted on ~90% of loans Solicitation Servicer's own portfolio only due to Rep. and Warranties Risk (R&W) R&W risk removed - incents solicitation of HARP eligible borrowers outside servicer's own port. Private mortgage insurance Difficult Process improved, stronger MI company particpation |
Financial Results |
1Q12 Earnings Report 9 Income Statement Overview Drivers Pretax earnings increased 15% quarter-over-quarter Net gain on investments down quarter-over-quarter, primarily due to home price performance Interest income up as a result of higher correspondent originations and increased levels of performing loan investments Net gain on mortgage loans acquired for sale results from 78% jump in correspondent lock volume Loan fulfillment fees increased with growth in correspondent volume Income tax, largely deferred, rose with growth in correspondent lending income and other income of the TRS n.m. = not meaningful Q/Q ($ in thousands, except per share data) March 31, 2012 December 31, 2011 % Change (Unaudited) Investment Income Net gain (loss) on investments(1) 15,205 $ 18,707 $ -19% Interest income 16,430 12,136 35% Net gain on mortgage loans acquired for sale 13,370 7,426 80% Net servicing fees 192 3 n.m. Other 1,452 851 71% Net Investment Income 46,649 39,123 19% Total Expenses 22,074 17,794 24% Pretax Income 24,575 21,329 15% Provision for income tax 5,517 1,680 228% Net Income 19,058 $ 19,649 $ -3% Diluted EPS 0.65 $ 0.70 $ -5% (1) Includes results of real estate acquired in settlement of loans Quarter ended |
1Q12 Earnings Report 10 Balance Sheet Highlights (1)Return on equity calculated using average monthly equity values. Mortgage assets were down slightly quarter-over-quarter, as declines in loans acquired for sale and mortgages held for investment were largely offset by a rise in MBS Acquired for sale loans were lower at period end as a result of faster loan inventory turnover Robust liquidation activity and absence of nonperforming whole loan pools purchases drove the decline in held-for-investment loans Equity increased 9% quarter-over-quarter driven in part by stock issuance ROAE declined primarily as a result of lower portfolio valuation gains and growth of taxable income, as well as an increase in total equity |
1Q12 Earnings Report 11 PMTs Business Segments Pretax Income Distressed Mortgage Investments pretax income increased 2.5% from the fourth quarter Correspondent Lending up 41% from fourth quarter driven by increased gain on sale of mortgage loans acquired for sale and interest income (Unaudited) Quarter ended March 31, 2012 ($ in thousands) Investment Correspondent PMT Activities Lending Consolidated Revenues: External Net gain on investments 11,488 $ - $ 11,488 $ Interest income 13,638 2,792 16,430 Net gain on mortgage loans acquired for sale - 13,370 13,370 Other income 3,900 1,461 5,361 Intersegment interest 16 (16) - Total revenues 29,042 17,607 46,649 Expenses: Interest 5,747 927 6,674 Loan fulfillment fees payable to affiliate - 6,124 6,124 Other 9,021 255 9,276 Total expenses 14,768 7,306 22,074 Pre-tax income 14,274 $ 10,301 $ 24,575 $ |
Net Gain On Mortgage Loans Acquired for Sale Breakdown 1Q12 Earnings Report 12 Net gain on mortgage loans acquired for sale rose 80% quarter-over-quarter due to an increase in Correspondent Lending lock volume Net gain on mortgage loans acquired for sale includes both cash and the value of the originated MSRs MSRs represent the fair value of the right to service the loans, which includes servicing fees and other ancillary income Net gain on mortgage loans acquired for sale ($ In thousands) Quarter ended ($ in thousands) March 31, 2012 MSR Value - originated in period 12,929 $ Rep & Warrant provision (426) Net cash settlement at sale (255) Market value adjustments of pipeline, inventory and hedges 1,122 Net gain on mortgage loans acquired for sale 13,370 $ |
1Q12 Earnings Report 13 Growing Investment in Mortgage Servicing Rights (MSRs) MSR growth has been driven by the growth in Correspondent Lending MSRs retained on loans with initial note rates equal to or less than 4.5% are accounted for under the lower of cost or market (LOCOM) method Currently, the majority of loans acquired for sale fall into this category Prepayment risk of MSRs is somewhat mitigated by the historically low rates on new mortgage loan production Presently, PMT does not to hedge this portion of the MSR asset |
1Q12 Earnings Report 14 Distressed Mortgage Investments: Valuation and REO Proceeds Valuation changes declined 22% from the fourth quarter 2011 Predominantly due to home values underlying PMTs loan portfolio decreasing more than projected during the first quarter Home values declined less than projected in the fourth quarter of 2011 Sales proceeds received from REO sales totaled $33.4 million, up 104% vs. the fourth quarter Gains on REO sales were $6.7 million and comprised 20% of proceeds, Represent realization of proceed in excess of carrying value REO sales comprised 24% of total portfolio liquidations, up from 16% last quarter REO Proceeds Amounts may not sum exactly due to the effects of rounding. ($ In thousands) ($ In millions) Quarter ended March 31, 2012 Valuation changes 6,284 $ Payoffs 4,847 REOs Valuation loss (2,935) Gain on sale of REO 6,652 14,848 $ |
Correspondent Lending |
Fundings total $1.8 billion in 1Q12, up 81% vs. 4Q11 Conventional volume increased 75% from 4Q11 Operational results for the month of April 2012 Locks: $1.3 billion Fundings: $800 million Prudently growing relationships with our correspondent sellers: Focusing on quality long-term relationships Building a best-in-class correspondent lending platform Origination characteristics remain consistent as volume grows Correspondent Funding Volume and Mix Origination Characteristics 1Q12 Earnings Report 16 Correspondent Lending Achieves Strong Growth in 1Q12 (1) For FHA/VA, PMT earns a sourcing fee and interest income for its holding period (1) 1Q11 2Q11 3Q11 4Q11 1Q12 Conventional WA LTV 76% 69% 69% 71% 69% WA FICO 750 757 772 767 770 WA DTI 32% 36% 32% 34% 32% California Originations 42% 76% 54% 77% 48% Government WA LTV 95% 96% 95% 96% 95% WA FICO 732 719 711 711 712 WA DTI 39% 41% 41% 42% 41% California Originations 82% 89% 56% 75% 48% |
Client portfolio is comprised of: Large-to-medium-sized independent mortgage companies Financial institutions National home builders Clients share our focus on maintaining a quality relationship Manufacturing quality and efficiency Mutual profitability Financial capacity and management integrity Responsible lending and regulatory compliance 1Q12 Earnings Report 17 Correspondent Lending: Relationship-Based Client Selection Q4 2011 Q1 2012 Beginning 76 108 Approved 34 17 Suspended 0 0 Deactivated 2 13 Total at Quarter-end 108 112 Client Count |
Distressed Mortgage Investment |
1Q12 Earnings Report 19 Whole Loan Portfolio Acquisitions Volume of whole loan pools available for purchase remained steady throughout the first quarter PCM reviewed nearly $5.0 billion in UPB of whole loans PMT entered into an agreement to acquire approximately $90 million UPB of distressed whole loans which settled in the second quarter Agreements to purchase an additional $240 million UPB of performing and nonperforming whole loans have been entered into thus far in 2Q12(1) Flow of distressed whole loans for review is expected to remain steady We estimate that over $400 billion nonperforming residential loans remain on U.S. banks balance sheets Clarity created by the large banks settlement with the Department of Justice and states attorneys general may result in more pools coming to market These pending transactions are subject to continuing due diligence, customary closing conditions, and obtaining additional capital adequate to fund the acquisitions. There can be no assurance that the committed amount will ultimately be acquired or that the transactions will be completed . |
1Q12 Earnings Report 20 Acquisitions Are Progressing Through the Resolution Process (1) Ratio of unpaid principal balance remaining to unpaid principal balance at acquisition Purchase 1Q12 Purchase 1Q12 Purchase 1Q12 Purchase 1Q12 Balance ($mm) 182.7 $ 90.0 Balance ($mm) 195.5 $ 94.9 Balance ($mm) 146.2 $ 75.0 Balance ($mm) 277.8 $ 195.3 Pool Factor(1) 1.00 0.49 Pool Factor(1) 1.00 0.49 Pool Factor(1) 1.00 0.51 Pool Factor(1) 1.00 0.70 Current 6.2% 27.6% Current 5.1% 24.4% Current 1.2% 23.7% Current 5.0% 28.5% 30 1.6% 6.7% 30 2.0% 4.0% 30 0.4% 3.6% 30 4.0% 5.1% 60 5.8% 2.3% 60 4.1% 3.1% 60 1.3% 0.8% 60 5.1% 3.9% 90+ 37.8% 12.8% 90+ 42.8% 10.1% 90+ 38.2% 13.5% 90+ 26.8% 9.8% FC 46.4% 40.5% FC 45.9% 39.3% FC 58.9% 41.1% FC 59.1% 41.1% REO 2.3% 10.1% REO 0.0% 19.1% REO 0.0% 17.2% REO 0.0% 11.5% Purchase 1Q12 Purchase 1Q12 Purchase 1Q12 Purchase 1Q12 Balance ($mm) 515.1 $ 411.9 Balance ($mm) 259.8 $ 227.9 Balance ($mm) 542.6 $ 435.4 Balance ($mm) 49.0 $ 48.7 Pool Factor(1) 1.00 0.80 Pool Factor(1) 1.00 0.88 Pool Factor(1) 1.00 0.80 Pool Factor(1) 1.00 0.99 Current 2.0% 22.5% Current 11.5% 22.7% Current 0.6% 4.9% Current 0.2% 1.4% 30 1.9% 3.4% 30 6.5% 5.3% 30 1.3% 1.4% 30 0.1% 0.1% 60 3.9% 2.0% 60 5.2% 2.9% 60 2.0% 1.4% 60 0.2% 0.0% 90+ 25.9% 10.9% 90+ 31.2% 15.2% 90+ 22.6% 15.2% 90+ 70.4% 55.6% FC 66.3% 49.4% FC 43.9% 44.3% FC 73.0% 63.3% FC 29.0% 41.2% REO 0.0% 11.8% REO 1.7% 9.6% REO 0.4% 13.8% REO 0.0% 1.6% 2Q11 1Q11 3Q11 4Q11 1Q10 2Q10 3Q10 4Q10 |
1Q12 Earnings Report 21 Modification and Payoff Activity Accelerated in the First Quarter Modification activity has increased steadily for last three quarters More than 90% of modifications were facilitated under the Home Affordable Modification Program (HAMP) Payoffs rose 78% quarter-over-quarter due to an increase in refinance activity 94% of PMTs portfolio has a defined resolution path at quarter end 21% of the portfolio is comprised of current borrowers compared to 19% at the end of the fourth quarter (1) Amounts may not sum exactly due to the effects of rounding. |
1Q12 Earnings Report 22 Resolution Activity Deeds-in-lieu resolutions have risen significantly as our efforts continue to gain traction Working with borrowers in imminent risk of foreclosure to opt for a deed-in-lieu vs. foreclosure Short sales declined in the 1Q12, but remained the second largest liquidation activity after REO sales Short sale liquidation timelines are typically shorter than foreclosures resulting in faster liquidation of the loan Completed foreclosures down slightly Foreclosure timelines have lengthened as the process becomes increasingly complex, but deed-in-lieu and short sales also a key factor in decline |
1Q12 Earnings Report 23 Continue to Progress REO Inventory Through to Liquidation $26.7 million in carrying value of REO was liquidated in the first quarter, compared to $14.4 million last quarter 68% of REO inventory was aged > 90 days at March 31, 2012, compared to 54% at the end of 4Q11 Rehabilitation efforts on REO properties have extended the time in inventory, but improve liquidation values Increasing demand has been key to driving REO sales REO and 3rd party foreclosure sales rose 67% quarter over quarter, comprising more than half of all liquidation activity in the first quarter (1) Average days in inventory is value weighted Number of Days in REO Inventory Carrying Value 12/31 ($ in millions) Cumulative % of Total % Liquidated in 1Q12 Carrying Value 3/31 ($ in millions) Cumulative % of Total 180+ $22.9 24% 44% $34.4 36% 150-179 $4.3 28% 43% $11.7 48% 120-149 $14.1 43% 26% $11.6 60% 90-119 $10.4 54% 21% $7.5 68% 60-89 $16.9 71% 20% $9.3 78% 30-59 $16.5 89% 28% $10.0 88% 0-29 $10.9 100% 9% $11.2 100% Total $96.0 28% $95.7 Average Days in Inventory(1) 130 days 163 days |
1Q12 Earnings Report 24 Cash Flow from Distressed Investments Cash proceeds from the liquidation of distressed mortgage loans and REO totaled $68.4 million for the first quarter of 2012 Repayments of mortgage loans at fair value -- $26.2 million Repayments of mortgage loans under forward purchase agreements at fair value -- $8.7 million Sales of real estate acquired in settlement of loans -- $26.8 million Sales of real estate acquired in settlement of loans under forward purchase agreements -- $6.8 million Strong operational performance from our distressed mortgage portfolio results in healthy quarterly cash flows available for distribution, debt service and reinvestment |
1Q12 Earnings Report 25 For questions or comments please contact us at: PennyMac Mortgage Investment Trust 6101 Condor Drive Moorpark, CA 93021 IR Contacts: Kevin Chamberlain Managing Director, Corporate Communications Christopher Oltmann Director, Investor Relations chris.oltmann@pnmac.com or InvestorRelations@pnmac.com Phone: 818-224-7442 Website: www.PennyMac-REIT.com Contact Us |
PennyMac Mortgage Investment Trust May 3, 2012 First Quarter 2012 Earnings Report |
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