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EX-99.2 - EX-99.2 - PennyMac Mortgage Investment Trusta12-26891_1ex99d2.htm
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Exhibit 99.1

 

 

GRAPHIC

 

 

 

 

 

 

 

Media

Investors

 

Kevin Chamberlain

Christopher Oltmann

 

(818) 746-2877

(818) 746-2046

 

 

PennyMac Mortgage Investment Trust Reports Third Quarter 2012 Results

 

Moorpark, CA November 8, 2012 — PennyMac Mortgage Investment Trust (NYSE: PMT) today reported net income of $40.4 million, or $0.81 per diluted share, for the third quarter of 2012, on net investment income of $99.2 million. In addition, PMT’s Board of Trustees has declared a cash dividend of $0.57 per common share of beneficial interest. This dividend will be paid on November 30, 2012 to common shareholders of record on November 16, 2012.

 

Quarterly Highlights

 

Financial results:

 

·                  Diluted earnings per common share of $0.81, up 3 percent from the prior quarter with a 33 percent increase in weighted shares outstanding

 

·                  Net investment income of $99.2 million, up 54 percent from the prior quarter

 

·                  Net income of $40.4 million, up 37 percent from the prior quarter

 

·                  Return on average equity of 16 percent (1), down from 17 percent in the prior quarter

 

·                  Issued over $359 million in new equity capital, bringing total shareholders’ equity to $1.2 billion

 

·                  Increased dividend to $0.57 per diluted common share, up 3 percent from the prior quarter

 


(1)  Return on equity calculated based on average shareholders’ equity for each month.

 

1



 

Mortgage Investment Results:

 

·                  Correspondent purchases of $6.3 billion in unpaid principal balance (UPB)(2), up 87 percent from the prior quarter

 

·                  Conventional purchases of $3.7 billion in UPB, up 111 percent from the prior quarter

 

·                  Correspondent interest rate lock commitments (IRLCs) of $8.5 billion, up 84 percent from the prior quarter

 

·                  Conventional IRLCs of $5.5 billion, up 105 percent from the prior quarter

 

·                  Distressed mortgage loan purchases of $357 million in UPB

 

PMT earned $59.0 million in pretax income for the quarter ended September 30, 2012, a 55 percent increase from the second quarter.  The following table presents the contribution of PMT’s Investment Activities and Correspondent Lending segments to pretax income:

 

 

 

Quarter ended September 30, 2012

 

 

 

Investment

 

Correspondent

 

Intersegment

 

 

 

Unaudited

 

Activities

 

Lending

 

elimination

 

Total

 

 

 

(in thousands)

 

Revenues:

 

 

 

 

 

 

 

 

 

External

 

 

 

 

 

 

 

 

 

Net gain on investments

 

$

26,061

 

$

 

$

 

$

26,061

 

Interest income

 

13,586

 

6,159

 

(15

)

19,730

 

Net gain on mortgage loans acquired for sale

 

 

49,793

 

 

49,793

 

Other income

 

775

 

2,837

 

 

3,612

 

 

 

 40,422

 

58,789

 

(15

)

99,196

 

Expenses:

 

 

 

 

 

 

 

 

 

Interest

 

4,931

 

3,366

 

(15

)

8,282

 

Servicing expense

 

5,148

 

60

 

 

5,208

 

Loan fulfillment fees payable to affiliate

 

 

17,258

 

 

17,258

 

Other

 

8,801

 

678

 

 

9,479

 

 

 

18,880

 

21,362

 

(15

)

40,227

 

Pretax income

 

$

21,542

 

$

37,427

 

$

 

$

58,969

 

 


(2)  FHA purchases were $2.6 billion in UPB, for which PMT earns a sourcing fee of 3bps and interest income for its holding period.

 

2



 

“During the third quarter, PMT efficiently deployed capital from its equity raise to grow earnings and achieve strong investment results,” said Chairman and Chief Executive Officer Stanford L. Kurland.  “We increased earnings to $0.81 per share, grew mortgage investments by over $350 million, increased conventional correspondent loan purchase volume by 111% and realized solid returns in our distressed whole loan portfolio.”

 

During the quarter ended September 30, 2012, PMT recorded investment revenue on financial instruments totaling $95.6 million, as detailed in the following table:

 

 

 

Quarter ended September 30, 2012

 

 

 

Net gain

 

Interest income/expense

 

 

 

 

 

Annualized %

 

 

 

(loss) on

 

 

 

Total

 

Average

 

Interest

 

Total

 

Unaudited

 

investments

 

Coupon

 

Discount(1)

 

Total

 

revenue

 

balance

 

yield

 

return(2)

 

 

 

(dollars in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

$

 

$

13

 

$

 

$

13

 

$

13

 

$

59,589

 

0.09

%

0.09

%

United States Treasury security

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency FNMA 30-year fixed

 

(422

)

556

 

(92

)

464

 

42

 

62,307

 

2.92

%

0.27

%

Non-Agency subprime

 

(159

)

15

 

 

 

15

 

(144

)

8,794

 

0.63

%

(6.43

)%

Non-Agency Alt-A

 

90

 

18

 

 

 

18

 

108

 

1,100

 

6.11

%

38.06

%

Non-Agency prime jumbo

 

40

 

5

 

 

 

5

 

45

 

657

 

2.76

%

25.92

%

Total mortgage-backed securities

 

(451

)

594

 

(92

)

502

 

51

 

72,858

 

2.69

%

0.27

%

Mortgage loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At fair value

 

26,407

 

12,889

 

 

12,889

 

39,296

 

883,732

 

5.71

%

17.40

%

Under forward purchase agreements at fair value

 

105

 

146

 

 

146

 

251

 

8,996

 

6.38

%

10.96

%

Acquired for sale at fair value

 

49,793

 

6,144

 

 

6,144

 

55,937

 

526,047

 

4.57

%

41.61

%

Total mortgage loans

 

76,305

 

19,179

 

 

19,179

 

95,484

 

1,418,775

 

5.29

%

26.34

%

Other

 

 

36

 

 

36

 

36

 

 

 

 

 

 

 

 

 

$

75,854

 

$

19,822

 

$

(92

)

$

19,730

 

$

95,584

 

$

1,551,222

 

4.98

%

24.11

%

 


(1)         Amounts in this column represent accrual of unearned discounts

(2)         Total return represents the sum of the interest yield and the net gain on the respective investment and does not take into account any associated expenses.

 

Investment revenue from financial instruments increased over 54 percent from the second quarter, driven by a 176 percent quarter-over-quarter net gain on correspondent loans acquired for sale to $49.8 million.  The annualized total return for mortgage loans acquired for sale through PMT’s correspondent lending business was 41.6 percent, up from 32.1 percent in the second quarter.  For our distressed whole loan portfolio, net gain on investments totaled $26.5 million, producing an annualized total return of 17.3 percent, down from 20.0 percent in the second quarter.  “Investment returns were solid for the quarter, particularly in correspondent where we saw significant growth,” continued Mr. Kurland.  “The mortgage servicing rights that

 

3



 

PMT retains when it sells its correspondent mortgage loans are a very attractive investment, particularly in the current low interest rate environment where prepayment risk is reduced.  Additionally, we anticipate that the availability of distressed whole loans available for purchase will remain consistent over the medium-term and opportunities for investments in reperforming whole loans will become more prevalent.”

 

Correspondent Lending

 

During the quarter, correspondent lending funded $6.3 billion in UPB of loans, and IRLCs amounted to $8.5 billion, compared to $3.4 billion and $4.6 billion, respectively, in the second quarter of 2012.  Of total correspondent purchases, conventional loans amounted to $3.7 billion, FHA loans were $2.6 billion, and jumbo loans were $0.8 million.  Pretax income attributable to the correspondent lending segment was $37.4 million for the quarter, primarily driven by a $49.8 million net gain on mortgage loans acquired for sale and $6.2 million of interest income, offset by $17.3 million in fulfillment fees.

 

The following details the net gain on mortgage loans acquired for sale in the third quarter of 2012:

 

 

 

Quarter ended

 

Unaudited

 

September 30, 2012

 

 

 

($ in thousands)

 

MSR value

 

$

36,760

 

Rep & warrant provision

 

(1,129

)

Cash investment(1)

 

(7,537

)

Market value adjustments of pipeline, inventory and hedges

 

21,699

 

Net gain on mortgage loans acquired for sale

 

$

49,793

 

 


(1) Cash receipt at sale, net of cash hedge expense

 

Distressed Mortgage Investments

 

PMT’s distressed mortgage loan portfolio generated realized and unrealized gains totaling $26.5 million in the third quarter of 2012 compared to $27.3 million in the second quarter of 2012.  Of the gains in the third quarter of 2012, $3.6 million was realized through payoffs, which resulted

 

4



 

from collections on the loan balances at levels higher than their recorded fair values.  Valuation gains totaled $22.9 million in the third quarter of 2012, compared to $20.9 million in the second quarter of 2012.  The increase was driven by the Company’s portfolio of nonperforming whole loans which produced $28.0 million of valuation increases during the quarter that were partially offset by a $5.1 million decline in value of the performing loans.  The primary factors driving valuation gains on the nonperforming portfolio were continued stabilization in home prices, the continued progression of loans along their timeline towards resolution, and growth in the investment portfolio.  The valuation loss on performing loans was primarily the result of an increase in delinquency in the reperforming pool purchased during the second quarter of 2012 and fair value losses stemming from an extension of home price recoveries in the future.

 

The following details the realized and unrealized gains on mortgage loans for the third quarter of 2012:

 

 

 

Quarter ended September 30,

 

Unaudited

 

2012

 

 

 

(in thousands)

 

 

 

 

 

Valuation changes

 

 

 

Performing loans

 

$

(5,090

)

Nonperforming loans

 

27,953

 

 

 

22,863

 

Payoffs

 

3,649

 

 

 

$

26,512

 

 

Expenses

 

Expenses for the third quarter of 2012 totaled $40.2 million, compared to $26.4 million in the second quarter of 2012.  The increase is primarily attributable to higher fulfillment fees on increased correspondent activity, as well as higher professional services and management fees.  The higher management fee expense was driven by the increase in shareholders’ equity as a result of our capital raise during the quarter.  Additional expenses increased commensurate with the increased business activity and increase in assets of the Company.

 

5



 

The provision for income tax expense totaled $18.6 million in the third quarter, bringing the effective income tax rate to 32%, up from 22% in the prior period.  The rise in the effective tax rate is a result of a larger proportion of income being generated by business activities in PMT’s taxable REIT subsidiary, primarily the correspondent lending segment.

 

Mr. Kurland concluded, “We continue to execute effectively on the opportunities in the current residential mortgage market and believe that our business model is positioned to deliver solid investment returns, as evidenced by this quarter’s performance.  The unrivaled capabilities that PMT has available to it through its manager and affiliated fulfillment provider and mortgage servicer afford us the opportunity to build a uniquely valuable portfolio of investments that sets us apart from other mortgage REITs.  Looking forward, we continue to see a wide range of opportunities before us and remain optimistic regarding the U.S. residential mortgage market and our ability to grow as it evolves.”

 

Management’s recorded earnings call and slide presentation will be available in the Investor Relations section of the Company’s website at www.PennyMac-REIT.com beginning at 5:30 a.m. (PT) on Thursday, November 8, 2012.

 

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 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

 

6



 

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.

 

7



 

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

 (In thousands, except share data)

 

 

 

September 30,

 

June 30,

 

 

 

2012

 

2012

 

 

 

(unaudited)

 

ASSETS

 

 

 

 

 

Cash

 

$

67,813

 

$

27,970

 

Investments:

 

 

 

 

 

Short-term investments

 

38,322

 

32,340

 

United States Treasury security

 

 

 

Mortgage-backed securities at fair value

 

 

167,446

 

Mortgage loans acquired for sale at fair value

 

847,575

 

460,419

 

Mortgage loans at fair value

 

1,089,966

 

969,954

 

Mortgage loans under forward purchase agreements at fair value

 

 

16,881

 

Real estate acquired in settlement of loans

 

86,180

 

89,121

 

Real estate acquired in settlement of loans under forward purchase agreements

 

 

797

 

Mortgage servicing rights

 

65,154

 

32,832

 

Principal and interest collections receivable

 

30,016

 

21,911

 

Principal and interest collections receivable under forward purchase agreements

 

 

3,004

 

Interest receivable

 

2,932

 

3,610

 

Due from affiliates

 

2,004

 

8,314

 

 

 

2,162,149

 

1,806,629

 

Other assets

 

98,763

 

56,146

 

Total assets

 

$

2,328,725

 

$

1,890,745

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Assets sold under agreements to repurchase:

 

 

 

 

 

Securities

 

 

157,289

 

Mortgage loans acquired for sale at fair value

 

755,471

 

418,019

 

Mortgage loans at fair value

 

274,185

 

412,495

 

Real estate acquired in settlement of loans

 

11,715

 

19,909

 

Note payable secured by mortgage loans at fair value

 

 

 

Borrowings under forward purchase agreements

 

 

16,693

 

Accounts payable and accrued liabilities

 

63,852

 

24,174

 

Contingent underwriting fees payable

 

5,883

 

5,883

 

Payable to affiliates

 

9,812

 

21,591

 

Income taxes payable

 

23,604

 

9,019

 

Total liabilities

 

1,144,522

 

1,085,072

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

Total shareholders’ equity

 

1,184,203

 

805,673

 

Total liabilities and shareholders’ equity

 

$

2,328,725

 

$

1,890,745

 

 

8



 

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF INCOME

 

 (In thousands, except share data)

 

 

 

2012

 

 

 

Quarter ended
Sept. 30

 

Quarter ended
June 30

 

 

 

(unaudited)

 

Investment Income

 

 

 

Net gain (loss) on investments:

 

 

 

 

 

Mortgage-backed securities

 

$

(451

)

$

706

 

Mortgage loans

 

26,512

 

27,286

 

 

 

 26,061

 

27,992

 

Interest income:

 

 

 

 

 

Short-term investments

 

13

 

14

 

Mortgage-backed securities

 

502

 

1,011

 

Mortgage loans

 

19,179

 

14,944

 

Other

 

36

 

33

 

 

 

 19,730

 

16,002

 

Net gain on mortgage loans acquired for sale

 

49,793

 

18,046

 

Loan Origination Fees

 

2,836

 

 

Results of real estate acquired in settlement of loans

 

1,288

 

2,571

 

Net loan servicing fees

 

(511

)

(855

)

Other

 

(1

)

650

 

Net investment income

 

99,196

 

64,406

 

Expenses

 

 

 

 

 

Loan fulfillment fees

 

17,258

 

7,715

 

Interest

 

8,282

 

6,703

 

Loan servicing expense

 

5,208

 

5,036

 

Management fees

 

3,672

 

2,488

 

Compensation

 

1,997

 

1,744

 

Professional services

 

1,693

 

1,186

 

Other

 

2,117

 

1,559

 

Total expenses

 

40,227

 

26,431

 

Income before provision for income taxes

 

58,969

 

37,975

 

Provision for income taxes

 

18,585

 

8,406

 

Net income

 

$

40,384

 

$

29,569

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

Basic

 

$

0.81

 

$

0.80

 

Diluted

 

$

0.81

 

$

0.79

 

Weighted-average shares outstanding

 

 

 

 

 

Basic

 

49,078

 

36,922

 

Diluted

 

49,463

 

37,208

 

Dividends declared per share

 

$

0.57

 

$

0.55

 

 

(end)

 

9