PennyMac Mortgage Investment Trust Reports Third Quarter 2012 Results
MOORPARK, Calif.--(BUSINESS WIRE)-- PennyMac Mortgage Investment Trust (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, PMTs 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.
- 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 percent1, 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
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
Return on equity calculated based on average shareholders equity for each month.
FHA purchases were $2.6 billion in UPB, for which PMT earns a sourcing fee of 3bps and interest income for its holding period.
PMT earned $59.0 million in pretax income for the quarter ended September 30, 2012, a 55 percent increase from the second quarter. The following table presents the contribution of PMTs Investment Activities and Correspondent Lending segments to pretax income:
|Quarter ended September 30, 2012|
|Net gain on investments||$||26,061||$||-||$||-||$||26,061|
|Net gain on mortgage loans acquired for sale||-||49,793||-||49,793|
|Loan fulfillment fees payable to affiliate||-||17,258||-||17,258|
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|
|Interest income/expense||Annualized %|
|(dollars in thousands)|
United States Treasury security
|Agency FNMA 30-year fixed||(422||)||556||(92||)||464||42||62,307||2.92||%||0.27||%|
|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||%|
|At fair value||26,407||12,889||-||12,889||39,296||883,732||5.71||%||17.40||%|
Under forward purchase agreements at fair value
|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||%|
Amounts in this column represent accrual of unearned discounts
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 PMTs 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 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.
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 $17.3 million in fulfillment fees.
The following details the net gain on mortgage loans acquired for sale in the third quarter of 2012:
|Unaudited||September 30, 2012|
|($ in thousands)|
|Rep & warrant provision||(1,129||)|
|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
PMTs 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 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 Companys 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,|
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.
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 PMTs 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 quarters 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.
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, 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 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)
|September 30,||June 30,|
|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|
|Due from affiliates||2,004||8,314|
|Assets sold under agreements to repurchase:|
|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 shareholders' equity||1,184,203||805,673|
|Total liabilities and shareholders' equity||$||2,328,725||$||1,890,745|
PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
|Net gain (loss) on investments:|
|Net gain on mortgage loans acquired for sale||49,793||18,046|
|Loan Origination Fees||2,836||-|
|Results of real estate acquired in settlement of loans||1,288||2,571|
|Net loan servicing fees||(511||)||(855||)|
|Net investment income||99,196||64,406|
|Loan fulfillment fees||17,258||7,715|
|Loan servicing expense||5,208||5,036|
|Income before provision for income taxes||58,969||37,975|
|Provision for income taxes||18,585||8,406|
|Earnings per share|
|Weighted-average shares outstanding|
|Dividends declared per share||$||0.57||$||0.55|
PennyMac Mortgage Investment Trust
Kevin Chamberlain, 818-746-2877
Christopher Oltmann, 818-746-2046
Source: PennyMac Mortgage Investment TrustCopyright Business Wire 2012