PennyMac Mortgage Investment Trust Reports Fourth Quarter and Full-Year 2020 Results
PennyMac Mortgage Investment Trust (NYSE: PMT) reported a net income of $76.6 million, or $0.78 per diluted share, for Q4 2020, down from $93.3 million in Q3. The cash dividend of $0.47 per share was declared on December 18, 2020. The investment income totaled $196.5 million, reflecting strong correspondent production of $38 billion, up 39% QoQ. Despite a drop in net income, book value rose to $20.30 per share. The company successfully managed liquidity without asset sales, enabling a return to pre-COVID dividend levels. Full-year net income for 2020 stood at $52.4 million, with earnings per share of $0.27.
- Net income attributable to common shareholders of $76.6 million in Q4 2020.
- Book value per common share increased to $20.30, up from $19.95.
- Record loan production volumes of $38 billion, up 39% from Q3 2020.
- Successful completion of $500 million in term-notes and $441 million in new MSRs.
- Cash dividend of $0.47 per share maintained at pre-COVID levels.
- Net income dropped from $93.3 million in the prior quarter to $76.6 million.
- Full-year net investment income decreased 4% to $469.4 million.
- Correspondent production segment pretax income fell to $52.7 million from $86.9 million QoQ.
PennyMac Mortgage Investment Trust (NYSE: PMT) today reported net income attributable to common shareholders of
Fourth Quarter 2020 Highlights
Financial results:
-
Net income attributable to common shareholders of
$76.6 million , down from$93.3 million in the prior quarter- Continued recovery in the fair value of government-sponsored enterprise (GSE) credit risk transfer (CRT) investments due to credit spread tightening combined with strong Correspondent Production segment results
-
Book value per common share of
$20.30 at December 31, 2020, up from$19.95 at September 30, 2020
Other investment and financing highlights:
-
Investment activity driven by elevated correspondent production volumes
-
Record conventional correspondent loan production volumes of
$38.0 billion in unpaid principal balance (UPB), up 39 percent from the prior quarter and up 85 percent from the fourth quarter of 20191 -
Added
$441 million in new MSRs
-
Record conventional correspondent loan production volumes of
-
Settled PMT’s sixth CRT transaction with Fannie Mae and successfully placed
$500 million of 2-year term-notes shortly after closing -
Repurchased approximately 927,000 common shares of PMT at a weighted average price of
$16.88 , or a total cost of$15.6 million
Full-Year 2020 Highlights
Financial results:
-
Net income of
$52.4 million -
Net income attributable to common shareholders of
$27.4 million ; diluted earnings per common share of$0.27 -
Dividends of
$1.52 per common share -
Net investment income of
$469.4 million , down4% from the prior year -
Return on average common equity of
1.4% 2
“PMT delivered strong results in the fourth quarter,” said President and CEO David Spector, “resulting in book value per share returning to near pre-COVID levels. Driving these results was record conventional production creating
1 Consists of delegated conventional conforming and non-Agency loans and, for the fourth quarter of 2019 only, includes conventional loans acquired from PennyMac Financial Services, Inc. (NYSE: PFSI) |
2 Return on average common equity is calculated based on net income attributable to common shareholders as a percentage of monthly average common equity during the year |
Mr. Spector continued, “2020 was a challenging year for mortgage REITs, many of which were forced to sell assets at distressed levels, curtail operations, or even cease market activity for some period. I am proud of this management team’s commitment and the work we have done with respect to liquidity and risk management since the inception of the Company, which proved enormously beneficial for PMT as we were not forced to sell assets to generate liquidity. As a result, PMT’s dividend is back to pre-COVID levels, something few other mortgage REITs can state. As the largest correspondent aggregator and with PFSI’s extensive investments in foundational production technology, PMT is well positioned for continued creation of organic investments with strong risk-adjusted returns.”
Mr. Spector concluded, “All of us at PennyMac are grateful for the many kind thoughts and tributes we have received since announcing the sad passing of Stan Kurland, our founder and Chairman. While Stan had retired from day-to-day responsibilities at PennyMac, he remained a trusted advisor and dear friend. His leadership helped lay the foundation for PennyMac’s long-term success which included building and developing a deep management team that carries on his legacy.”
The following table presents the contributions of PMT’s segments, consisting of Credit Sensitive Strategies, Interest Rate Sensitive Strategies, Correspondent Production, and Corporate:
| Quarter ended December 31, 2020 | ||||||||||||||||||
| Credit sensitive strategies | Interest rate sensitive strategies | Correspondent production | Corporate | Consolidated | ||||||||||||||
| (in thousands) | ||||||||||||||||||
| Net investment income (loss): | ||||||||||||||||||
| Net gain on loans acquired for sale | $ |
- |
|
$ |
- |
|
$ |
70,511 |
$ |
- |
|
$ |
70,511 |
|
||||
| Net (loss) gain on investments: | ||||||||||||||||||
| CRT investments |
|
163,650 |
|
|
- |
|
|
- |
|
- |
|
|
163,650 |
|
||||
| Loans at fair value |
|
233 |
|
|
- |
|
|
- |
|
- |
|
|
233 |
|
||||
| Loans held by variable interest entity net of asset-backed secured financing |
|
- |
|
|
(991 |
) |
|
- |
|
- |
|
|
(991 |
) |
||||
| Mortgage-backed securities |
|
- |
|
|
(7,306 |
) |
|
- |
|
- |
|
|
(7,306 |
) |
||||
| Hedging derivatives |
|
(14,103 |
) |
|
109 |
|
|
- |
|
- |
|
|
(13,994 |
) |
||||
| Excess servicing spread investments |
|
- |
|
|
(5,877 |
) |
|
- |
|
- |
|
|
(5,877 |
) |
||||
|
149,780 |
|
|
(14,065 |
) |
|
- |
|
- |
|
|
135,715 |
|
|||||
| Net loan servicing fees |
|
- |
|
|
(48,643 |
) |
|
- |
|
- |
|
|
(48,643 |
) |
||||
| Net interest (expense) income: | ||||||||||||||||||
| Interest income |
|
558 |
|
|
17,616 |
|
|
29,342 |
|
1,061 |
|
|
48,577 |
|
||||
| Interest expense |
|
9,638 |
|
|
37,351 |
|
|
22,648 |
|
- |
|
|
69,637 |
|
||||
|
(9,080 |
) |
|
(19,735 |
) |
|
6,694 |
|
1,061 |
|
|
(21,060 |
) |
|||||
| Other income |
|
356 |
|
|
- |
|
|
59,655 |
|
- |
|
|
60,011 |
|
||||
|
141,056 |
|
|
(82,443 |
) |
|
136,860 |
|
1,061 |
|
|
196,534 |
|
|||||
| Expenses: | ||||||||||||||||||
| Loan fulfillment and servicing fees payable to PennyMac Financial Services, Inc. |
|
79 |
|
|
18,296 |
|
|
72,606 |
|
- |
|
|
90,981 |
|
||||
| Management fees payable to PennyMac Financial Services, Inc. |
|
- |
|
|
- |
|
|
- |
|
8,687 |
|
|
8,687 |
|
||||
| Other |
|
6,467 |
|
|
(655 |
) |
|
11,507 |
|
5,652 |
|
|
22,971 |
|
||||
$ |
6,546 |
|
$ |
17,641 |
|
$ |
84,113 |
$ |
14,339 |
|
$ |
122,639 |
|
|||||
| Pretax income (loss) | $ |
134,510 |
|
$ |
(100,084 |
) |
$ |
52,747 |
$ |
(13,278 |
) |
$ |
73,895 |
|
||||
Credit Sensitive Strategies Segment
The Credit Sensitive Strategies segment primarily includes results from CRT, and also includes distressed loans and non-Agency subordinated bonds. Pretax income for the segment was
Net gain on investments in the segment was
Net gain on CRT investments for the quarter was
Net interest expense for the segment totaled
Segment expenses were
Interest Rate Sensitive Strategies Segment
The Interest Rate Sensitive Strategies segment includes results from investments in MSRs, excess servicing spread (ESS), Agency mortgage-backed securities (MBS), non-Agency senior MBS and interest rate hedges. Pretax loss 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 loss on investments for the segment was
Net loan servicing fees were a loss of
The following schedule details net loan servicing fees:
| Quarter ended | |||||||||||
| December 31, 2020 | September 30, 2020 | December 31, 2019 | |||||||||
| (in thousands) | |||||||||||
| From non-affiliates: | |||||||||||
| Contractually specified (1) | $ |
111,741 |
|
$ |
98,027 |
|
$ |
90,822 |
|
||
| Other fees |
|
18,719 |
|
|
18,660 |
|
|
7,489 |
|
||
| Effect of MSRs: | |||||||||||
| Carried at fair value—change in fair value | |||||||||||
| Realization of cashflows |
|
(56,258 |
) |
|
(53,418 |
) |
|
(59,248 |
) |
||
| Other |
|
(18,157 |
) |
|
(13,055 |
) |
|
129,292 |
|
||
|
(74,415 |
) |
|
(66,473 |
) |
|
70,044 |
|
|||
| Gains (losses) on hedging derivatives |
|
(115,755 |
) |
|
962 |
|
|
(149,970 |
) |
||
|
(190,170 |
) |
|
(65,511 |
) |
|
(79,926 |
) |
|||
|
(59,710 |
) |
|
51,176 |
|
|
18,385 |
|
|||
| From PFSI—MSR recapture income |
|
11,067 |
|
|
9,251 |
|
|
2,207 |
|
||
| Net loan servicing fees | $ |
(48,643 |
) |
$ |
60,427 |
|
$ |
20,592 |
|
||
| (1) Includes contractually specified servicing fees, net of guarantee fees. | |||||||||||
MSR and ESS valuation losses were realized despite higher rates, driven by increased projections of future prepayment speeds. Agency MBS and interest rate hedges recorded fair losses due to higher interest rates. PMT further benefited from higher recapture income from PFSI for elevated prepayment activity during the quarter. PMT generally benefits from recapture income when the prepayment of a loan underlying PMT’s MSR or ESS results from refinancing by PFSI.
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
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
Management fees were
Other segment expenses were
Taxes
PMT recorded a tax benefit of
Management’s slide presentation will be available in the Investor Relations section of the Company’s website at www.pennymac-REIT.com beginning at 1:30 p.m. (Pacific Time) on Thursday, February 4, 2021.
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 www.PennyMac-REIT.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management’s beliefs, estimates, projections and assumptions with respect to, among other things, the Company’s financial results, future operations, business plans and investment strategies, as well as industry and market conditions, all of which are subject to change. Words like “believe,” “expect,” “anticipate,” “promise,” “plan,” and other expressions or words of similar meanings, as well as future or conditional verbs such as “will,” “would,” “should,” “could,” or “may” are generally intended to identify forward-looking statements. Actual results and operations for any future period may vary materially from those projected herein and from past results discussed herein. Factors which could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: our exposure to risks of loss and disruptions in operations resulting from adverse weather conditions, man-made or natural disasters, climate change and pandemics such as COVID-19; the impact to our CRT agreements of increased borrower requests for forbearance under the CARES Act; changes in the Company’s investment objectives or investment or operational strategies, including any new lines of business or new products and services that may subject it to additional risks; volatility in the Company’s industry, the debt or equity markets, the general economy or the real estate finance and real estate markets specifically, whether the result of market events or otherwise; events or circumstances which undermine confidence in the financial and housing markets or otherwise have a broad impact on financial and housing markets, such as the sudden instability or collapse of large depository institutions or other significant corporations, terrorist attacks, natural or manmade disasters, or threatened or actual armed conflicts; changes in general business, economic, market, employment and domestic and international political conditions, or in consumer confidence and spending habits from those expected; declines in real estate or significant changes in U.S. housing prices or activity in the U.S. housing market; the availability of, and level of competition for, attractive risk-adjusted investment opportunities in mortgage loans and mortgage-related assets that satisfy the Company’s investment objectives; the inherent difficulty in winning bids to acquire mortgage loans, and the Company’s success in doing so; the concentration of credit risks to which the Company is exposed; the degree and nature of the Company’s competition; the Company’s dependence on its manager and servicer, potential conflicts of interest with such entities and their affiliates, and the performance of such entities; changes in personnel and lack of availability of qualified personnel at its manager, servicer or their affiliates; the availability, terms and deployment of short-term and long-term capital; the adequacy of the Company’s cash reserves and working capital; the Company’s ability to maintain the desired relationship between its financing and the interest rates and maturities of its assets; the timing and amount of cash flows, if any, from the Company’s investments; unanticipated increases or volatility in financing and other costs, including a rise in interest rates; our substantial amount of indebtedness; the performance, financial condition and liquidity of borrowers; 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, default 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, excess servicing spread and other investments; the degree to which the Company’s hedging strategies may or may not protect it from interest rate volatility; the effect of the accuracy of or changes in the estimates the Company makes about uncertainties, contingencies and asset and liability valuations when measuring and reporting upon the Company’s financial condition and results of operations; the Company’s ability to maintain appropriate internal control over financial reporting; technologies for loans and the Company’s ability to mitigate security risks and cyber intrusions; the Company’s ability to obtain and/or maintain licenses and other approvals in those jurisdictions where required to conduct its business; the Company’s ability to detect misconduct and fraud; the Company’s ability to comply with various federal, state and local laws and regulations that govern its business; 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; changes in regulations or the occurrence of other events that impact the business, operations or prospects of government agencies such as the Government National Mortgage Association, the Federal Housing Administration or the Veterans Administration, the U.S. Department of Agriculture, or government-sponsored entities such as the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, or such changes that increase the cost of doing business with such entities; the Dodd-Frank Wall Street Reform and Consumer Protection Act and its implementing regulations and regulatory agencies, and any other legislative and regulatory changes that impact the business, operations or governance of mortgage lenders and/or publicly traded companies; the Consumer Financial Protection Bureau and its issued and future rules and the enforcement thereof; changes in government support of homeownership; changes in government or government-sponsored home affordability programs; limitations imposed on the Company’s business and its ability to satisfy complex rules for it to qualify as a REIT for U.S. federal income tax purposes and qualify for an exclusion from the Investment Company Act of 1940 and the ability of certain of the Company’s subsidiaries to qualify as REITs or as taxable REIT subsidiaries for U.S. federal income tax purposes, as applicable, and the Company’s ability and the ability of its subsidiaries to operate effectively within the limitations imposed by these rules; changes in governmental regulations, accounting treatment, tax rates and similar matters (including changes to laws governing the taxation of REITs, or the exclusions from registration as an investment company); 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) |
||||||||||
| December 31, 2020 | September 30, 2020 | December 31, 2019 | ||||||||
| (in thousands except share amounts) | ||||||||||
| ASSETS | ||||||||||
| Cash | $ |
57,704 |
|
$ |
278,486 |
|
$ |
104,056 |
||
| Short-term investments |
|
127,295 |
|
|
81,624 |
|
|
90,836 |
||
| Mortgage-backed securities at fair value |
|
2,213,922 |
|
|
2,404,766 |
|
|
2,839,633 |
||
| Loans acquired for sale at fair value |
|
3,551,890 |
|
|
||||||
FAQ
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