PMT PennyMac Mortgage Investment Trust

PennyMac Mortgage Investment Trust (NYSE: PMT) today reported net income attributable to common shareholders of $31.0 million, or $0.36 per common share on a diluted basis for the third quarter of 2024, on net investment income of $80.9 million. PMT previously announced a cash dividend for the third quarter of 2024 of $0.40 per common share of beneficial interest, which was declared on September 19, 2024, and will be paid on October 25, 2024, to common shareholders of record as of October 11, 2024.

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 at September 30, 2024, from $15.89 at June 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
• 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 David Spector. “We increased the amount of conventional mortgage production retained this quarter, which drove strong results in the segment as well as the creation of nearly $90 million in new mortgage servicing rights investments. We also continue to focus on our balance sheet, replacing previously-issued MSR term notes with new term notes at a lower spread; to that end we also issued new, 4-year CRT term notes to refinance similar notes that were originally scheduled to mature in 2025.”

Mr. Spector continued, “PMT’s synergistic relationship with its manager and services provider, PFSI, has proven to be a competitive advantage, allowing for significant flexibility across different rate environments. Pennymac has become a top producer of mortgage loans with recent growth in originations of loan products that have strong demand from investors outside of the Agencies. Combined with our capital markets expertise and long-standing relationships with banks, asset managers and institutional investors, I believe PMT is well-positioned to participate meaningfully in private label securitizations and the creation of organic investments from its own production as the landscape evolves.”

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

Credit sensitivestrategies Interest ratesensitivestrategies Correspondentproduction Corporate Total   Quarter ended Sep 30, 2024 (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 PennyMac Financial Services, Inc.

 

20

 

 

22,220

 

 

11,492

 

 

—

 

 

33,732

 

Management fees payable to PennyMac Financial Services, Inc.

 

—

 

 

—

 

 

—

 

 

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 $26.4 million on net investment income of $26.5 million, compared to pretax income of $15.7 million on net investment income of $15.8 million in the prior quarter.

Net gains on investments in the segment were $27.1 million, compared to $17.4 million in the prior quarter. These net gains include $20.8 million of gains on PMT’s organically-created GSE CRT investments, $5.7 million of gains on investments from non-agency subordinate bonds from PMT’s production and $0.6 million in gains on other acquired subordinate CRT mortgage-backed securities (MBS).

Net gains on PMT’s organically-created CRT investments for the quarter were $20.8 million, compared to $16.6 million in the prior quarter. These net gains include $6.6 million in valuation-related gains, up from $1.7 million in the prior quarter. Net gains on PMT’s organically-created CRT investments also included $15.0 million in realized gains and carry, compared to $15.1 million in the prior quarter. Realized losses during the quarter were $0.8 million.

Net interest expense for the segment was $0.5 million, compared to 1.3 million in the prior quarter. Interest income totaled $21.4 million, down slightly from the prior quarter, and interest expense totaled $21.9 million, down from $24.3 million in 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 income for the segment was $0.5 million on net investment income of $26.1 million, compared to a pretax income of $16.9 million on net investment income of $39.1 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 decreasing interest rates, MSRs are expected to decrease in fair value, whereas Agency pass-through and non-Agency senior MBS are expected to increase 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 gains on investments for the segment were $119.6 million, which primarily consisted of gains on MBS due to lower interest rates.

Losses from net loan servicing fees were $85.1 million, compared to $96.5 million of net loan servicing fees in the prior quarter. Net loan servicing fees included contractually specified servicing fees of $162.6 million and $4.0 million in other fees, reduced by $100.6 million in realization of MSR cash flows, which was up slightly from the prior quarter. Net loan servicing fees also included $84.3 million in fair value declines on MSRs due to lower interest rates, $67.2 million in hedging declines and $0.4 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 September 30, 2024 June 30, 2024 September 30, 2023 (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 $8.4 million versus $20.3 million in the prior quarter. Interest income totaled $128.5 million, up from $111.3 million in the prior quarter due to higher interest income on MBS and earnings on custodial balances due to higher average balances. Interest expense totaled $136.9 million, up from $131.6 million the prior quarter.

Segment expenses were $25.6 million, up from $22.2 million in 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 $13.2 million in the third quarter, up from $9.6 million in the prior quarter.

Through its correspondent production activities, PMT acquired a total of $25.8 billion in UPB of loans, up 15 percent from the prior quarter and 20 percent from the third quarter of 2023. Of total correspondent acquisitions, government-insured or guaranteed acquisitions totaled $11.8 billion, up 14 percent from the prior quarter, while conventional and jumbo acquisitions totaled $14.0 billion, up 15 percent from the prior quarter. $5.9 billion of conventional conforming volume was for PMT’s account, up 167 percent from the prior quarter due to PMT retaining a larger percentage of the total conventional correspondent production. The percentage of total conventional correspondent loan production retained by PMT is expected to be 15 to 25 percent in the fourth quarter in order to optimize PMT’s capital allocation. Interest rate lock commitments on conventional and jumbo loans for PMT’s account totaled $7.6 billion, up 183 percent from the prior quarter.

Segment revenues were $26.3 million and included net gains on loans acquired for sale of $20.1 million, other income of $6.7 million, which primarily consists of volume-based origination fees, and net interest expense of $0.4 million. Net gains on loans acquired for sale increased $7.9 million from the prior quarter, primarily due to higher volumes. Interest income was $23.9 million, up from $14.9 million in the prior quarter, and interest expense was $24.3 million, up from $15.0 million in the prior quarter, both due to higher volumes.

Segment expenses were $13.1 million, up from $5.0 million the prior quarter primarily due to increased fulfillment fees as a result of higher volumes for PMT’s account. The weighted average fulfillment fee rate in the third quarter was 19 basis points, down from 20 basis points in 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 $1.9 million, up slightly from the prior quarter. Management fees were $7.2 million, and other segment expenses were $8.4 million.

Taxes

PMT recorded a tax benefit of $14.9 million, driven primarily by fair value declines 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 Tuesday, October 22, 2024. Management will also host a conference call and live audio webcast at 6:00 p.m. Eastern Time to review the Company’s financial results. The webcast can be accessed at pmt.pennymac.com, and a replay 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

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 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; 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; 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)

  September 30, 2024 June 30, 2024 September 30, 2023 (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 PennyMac Financial Services, Inc.

 

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 PennyMac Financial Services, Inc.

 

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 $0.01 par value; issued and outstanding 86,860,960, 86,860,960 and 86,760,408 common shares, respectively

 

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 September 30, 2024 June 30, 2024 September 30, 2023   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 PennyMac Financial Services, Inc.

 

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 PennyMac Financial Services, Inc.: 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 Kristyn Clark mediarelations@pennymac.com 805.225.8224

Investors Kevin Chamberlain Isaac Garden investorrelations@pennymac.com 818.224.7028