MOORPARK, Calif.--(BUSINESS WIRE)--PennyMac Mortgage Investment Trust (NYSE: PMT) today reported net income of $29.6 million, or $0.79 per diluted share, for the second quarter of 2012, on net investment income of $64.4 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 August 31, 2012 to common shareholders of record on August 16, 2012.
Quarterly Highlights
Record financial results:
- Diluted earnings per common share of $0.79, up 22 percent from the prior quarter on a 27 percent increase in weighted shares outstanding
- Net investment income of $64.4 million, up 38 percent from the prior quarter
- Net income of $29.6 million, up 55 percent from the prior quarter
- Return on average equity of 17 percent1, up from 13 percent in the prior quarter
Strong operational performance:
-
Correspondent purchases of $3.4 billion in unpaid principal balance
(UPB)2, up 88 percent from the prior quarter
- Conventional purchases of $1.8 billion, up 79 percent from the prior quarter
-
Correspondent interest rate lock commitments (IRLCs) of $4.6 billion,
up 94 percent from the prior quarter
- Conventional IRLCs of $2.7 billion, an increase of 120 percent from the prior quarter
- Distressed mortgage loan purchases of $402 million in UPB
- Cash flow from investments of $116 million, up 46 percent from prior quarter
______________________________________
| 1 | Return on equity calculated using average monthly equity values. | |
| 2 | FHA purchases were $1.6 billion in UPB, for which PMT earns a sourcing fee and interest income for its holding period. | |
PMT earned $38.0 million in pretax income for the quarter ended June 30, 2012. The following table presents the contribution of PMT’s Investment Activities and Correspondent Lending segments to pretax income:
|
Quarter ended June 30, 2012 |
||||||||||||
| Unaudited |
Investment |
Correspondent |
Total* | |||||||||
| (in thousands) | ||||||||||||
| Revenues: | ||||||||||||
| External | ||||||||||||
| Net gain on investments | $ | 27,992 | $ | - | $ | 27,992 | ||||||
| Interest income | 12,881 | 3,178 | 16,059 | |||||||||
| Net gain on mortgage loans acquired for sale | - | 18,046 | 18,046 | |||||||||
| Other income | 1,783 | 583 | 2,366 | |||||||||
| 42,656 | 21,807 | 64,463 | ||||||||||
| Expenses: | ||||||||||||
| Loan fulfillment fees | - | 7,715 | 7,715 | |||||||||
| Interest | 5,071 | 1,689 | 6,760 | |||||||||
| Loan servicing expense | 5,756 | 30 | 5,786 | |||||||||
| Other | 5,871 | 356 | 6,227 | |||||||||
| 16,698 | 9,790 | 26,488 | ||||||||||
| Pre-tax net income | $ | 25,958 | $ | 12,017 | $ | 37,975 | ||||||
| *Net of intersegment elimination | ||||||||||||
“PMT’s results for the second quarter were driven by strong growth across our correspondent and investment activities,” said Chairman and Chief Executive Officer Stanford L. Kurland. “During the quarter PMT’s correspondent volume grew to new highs and we added to our portfolio of distressed whole loans through four acquisitions. Through PCM, our manager, and PLS, our servicer and fulfillment provider, we exceeded our target for correspondent of purchasing $1 billion per month in June by over $400 million and continue to see excellent resolutions in our distressed portfolio. Achieving a return on average equity of over 17 percent during the quarter in which we raised over $200 million in new equity capital demonstrates our ability to quickly and effectively deploy new capital into accretive transactions.”
During the quarter ended June 30, 2012, PMT recorded investment income on financial instruments totaling $62.0 million, as detailed on the following table:
| Quarter ended June 30, 2012 | |||||||||||||||||||||||||
| Unaudited |
|
Interest income | Annualized % | ||||||||||||||||||||||
|
Net gain |
Coupon |
Discount(1) |
Total |
Total |
Average |
Interest |
Total |
||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||
| Short-term investments | $ | - | $ | 47 | $ | - | $ | 47 | $ | 47 | $ | 71,728 | 0.26 | % | 0.26 | % | |||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||||
| Non-Agency subprime | 195 | 920 | (130 | ) | 790 | 985 | 114,301 | 2.73 | % | 3.41 | % | ||||||||||||||
| Non-Agency Alt-A | 409 | 71 | 95 | 166 | 575 | 49,995 | 1.32 | % | 4.55 | % | |||||||||||||||
| Non-Agency prime jumbo | 94 | 95 | (75 | ) | 20 | 114 | 6,420 | 1.23 | % | 7.07 | % | ||||||||||||||
| Agency FNMA 30-year fixed | 8 | 26 | 9 | 35 | 43 | 4,112 | 3.30 | % | 4.11 | % | |||||||||||||||
| Total mortgage-backed securities | 706 | 1,112 | (101 | ) | 1,011 | 1,717 | 174,828 | 2.29 | % | 3.89 | % | ||||||||||||||
| Mortgage loans: | |||||||||||||||||||||||||
| At fair value | 24,798 | 11,439 | - | 11,439 | 36,237 | 718,173 | 6.30 | % | 19.96 | % | |||||||||||||||
|
Under forward purchase agreements at fair value |
2,488 | 348 | - | 348 | 2,836 | 60,490 | 2.27 | % | 18.55 | % | |||||||||||||||
|
Acquired for sale at fair value |
18,046 | 3,157 | - | 3,157 | 21,203 | 261,470 | 4.78 | % | 32.08 | % | |||||||||||||||
| Total mortgage loans | 45,332 | 14,944 | - | 14,944 | 60,276 | 1,040,133 | 5.68 | % | 22.93 | % | |||||||||||||||
| $ | 46,038 | $ | 16,103 | $ | (101 | ) | $ | 16,002 | $ | 62,040 | $ | 1,286,689 | 4.92 | % | 19.08 | % | |||||||||
| (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 expenses associated with managing the asset. | |||
“Investment income from financial instruments increased over 50 percent from the first quarter of 2012, driven largely by the increase in gains on our correspondent activity and on our whole loan portfolio,” continued Mr. Kurland. “Net gains on our distressed whole loan portfolio totaled $27.3 million. Correspondent lending generated another $18.0 million in gains from mortgage loans acquired for sale. PMT’s strategy continues to evolve with the current market environment and we believe the Company is well positioned to continue its growth.”
Correspondent Lending
During the quarter, correspondent lending funded $3.4 billion in UPB of loans, and IRLCs amounted to $4.6 billion, compared to $1.8 billion and $2.3 billion, respectively, in the first quarter of 2012. Of total correspondent fundings, conventional loans amounted to $1.8 billion, FHA loans were $1.6 billion, and jumbo loans were $2.6 million. Pretax income attributable to the correspondent lending segment was $12.0 million for the quarter, primarily driven by an $18.0 million net gain on mortgage loans acquired for sale and $3.2 million of interest income.
The following details the composition of net gain on mortgage loans acquired for sale in the second quarter of 2012:
| Quarter ended | ||||||||
| Unaudited | June 30, 2012 | |||||||
| ($ in thousands) | ||||||||
| MSR Value | $ | 16,960 | ||||||
| Rep & Warrant provision | (618 | ) | ||||||
| Cash settlement* | (9,527 | ) | ||||||
|
Market value adjustments of pipeline, inventory and hedges |
11,232 | |||||||
| Gain on sale | $ | 18,047 | ||||||
| *Cash receipt at sale, net of cash hedge expense | ||||||||
Distressed Mortgage Investments
PMT’s distressed mortgage loan portfolio generated realized and unrealized gains totaling $27.3 million in the second quarter of 2012 compared to $11.1 million in the first quarter of 2012. Of the gains in the second quarter of 2012, $6.5 million was realized through payoffs, which resulted from collections on the loan balances at levels higher than their recorded fair values. Valuation gains totaled $20.9 million in the second quarter of 2012, compared to $6.3 million in the first quarter of 2012 and were primarily driven by the Company’s portfolio of nonperforming whole loans. The major contributing factors to the increase in valuation gains on the portfolio were stabilizing home prices, the continued progression of loans towards their ultimate resolution, and growth in the size of the investment portfolio.
The following details the realized and unrealized gains on mortgage loans for the second quarter of 2012:
| Quarter ended June 30, | ||||
| Unaudited | 2012 | |||
| (in thousands) | ||||
| Valuation changes | ||||
| Performing loans | $ | 2,636 | ||
| Nonperforming loans | 18,281 | |||
| 20,917 | ||||
| Payoffs and Sales | 6,369 | |||
| $ | 27,286 | |||
Expenses
Expenses for the second quarter of 2012 totaled $26.4 million, compared to $22.1 million in the first quarter of 2012. The increase is primarily attributable to the overall increase in correspondent activity, which resulted in increased loan fulfillment fees in line with that growth, as well as increases in professional services and management fees. Professional services increased to $1.2 million in the second quarter, from $442,000 in the first quarter, due to diligence fees relating to the acquisition of distressed assets during the second quarter. The increased expense associated with the management fee resulted largely as a result of the increased equity of the Company. PMT’s effective income tax rate remained at 22% for the quarter, flat from the first quarter.
Stanford L. Kurland, Chairman and Chief Executive Officer of PMT, concluded, “The Company continues to demonstrate strong performance and growth across its business segments. We believe we are currently in a unique window of time in the restructuring of the mortgage markets, and there are numerous opportunities in front of PMT. We are seeing more opportunities in the market today for mortgage assets than we have at any other time in the Company’s history and feel PMT is well positioned to capitalize on these opportunities.”
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, August 2, 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 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) | ||||||||
| June 30, | March 31, | |||||||
| 2012 | 2012 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Cash | $ | 27,970 | $ | 16,405 | ||||
| Short-term investments | 32,340 | 63,444 | ||||||
| Mortgage-backed securities at fair value | 167,446 | 174,604 | ||||||
| Mortgage loans acquired for sale at fair value | 460,419 | 155,295 | ||||||
| Mortgage loans at fair value | 969,954 | 667,542 | ||||||
| Mortgage loans under forward purchase agreements at fair value | 16,881 | 105,030 | ||||||
| Real estate acquired in settlement of loans | 89,121 | 81,209 | ||||||
| Real estate acquired in settlement of loans under forward purchase agreements | 797 | 23,661 | ||||||
| Mortgage servicing rights: | ||||||||
| at lower of amortized cost or fair value | 31,547 | 17,346 | ||||||
| at fair value | 1,285 | 1,188 | ||||||
| Principal and interest collections receivable | 21,911 | 14,950 | ||||||
| Principal and interest collections receivable under forward purchase agreements | 3,004 | 7,678 | ||||||
| Interest receivable | 3,610 | 2,018 | ||||||
| Due from affiliates | 8,314 | 5,464 | ||||||
| Other assets | 56,146 | 42,186 | ||||||
| Total assets | $ | 1,890,745 | $ | 1,378,020 | ||||
| LIABILITIES | ||||||||
| Unsettled mortgage-backed securities purchases | $ | - | $ | 115,636 | ||||
| Assets sold under agreements to repurchase: | ||||||||
| Securities | 157,289 | 53,068 | ||||||
| Mortgage loans acquired for sale at fair value | 418,019 | 143,819 | ||||||
| Mortgage loans at fair value | 412,495 | 282,810 | ||||||
| Real estate acquired in settlement of loans | 19,909 | 21,744 | ||||||
| Borrowings under forward purchase agreements | 16,693 | 127,591 | ||||||
| Accounts payable and accrued liabilities | 24,174 | 9,683 | ||||||
| Contingent underwriting fees payable | 5,883 | 5,883 | ||||||
| Payable to affiliates | 21,591 | 17,347 | ||||||
| Income taxes payable | 9,019 | 4,483 | ||||||
| Total liabilities | 1,085,072 | 782,064 | ||||||
| Commitments and contingencies | ||||||||
| SHAREHOLDERS' EQUITY | ||||||||
|
Common shares of beneficial interest—authorized, 500,000,000 common shares of $0.01 par value; issued and outstanding, 41,466,369 and 31,023,863 common shares, respectively |
415 | 310 | ||||||
| Additional paid-in capital | 767,506 | 564,819 | ||||||
| Retained earnings | 37,752 | 30,827 | ||||||
| Total shareholders' equity | 805,673 | 595,956 | ||||||
| Total liabilities and shareholders' equity | $ | 1,890,745 | $ | 1,378,020 | ||||
| PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES | |||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||
| (In thousands, except share data) | |||||||||
| 2012 | |||||||||
| 30-Jun | 31-Mar | ||||||||
| Investment Income | |||||||||
| Net gain (loss) on investments: | |||||||||
| Mortgage-backed securities | $ | 706 | $ | 357 | |||||
| Mortgage loans | 27,286 | 11,131 | |||||||
| 27,992 | 11,488 | ||||||||
| Interest income: | |||||||||
| Short-term investments | 47 | 31 | |||||||
| Mortgage-backed securities | 1,011 | 574 | |||||||
| Mortgage loans | 14,944 | 15,820 | |||||||
| 16,002 | 16,425 | ||||||||
| Net gain on mortgage loans acquired for sale | 18,046 | 13,370 | |||||||
| Results of real estate acquired in settlement of loans | 2,571 | 3,717 | |||||||
| Net loan servicing fees | (855 | ) | 197 | ||||||
| Other | 650 | 1,452 | |||||||
| Net investment income | 64,406 | 46,649 | |||||||
| Expenses | |||||||||
| Loan fulfillment fees | 7,715 | 6,124 | |||||||
| Interest | 6,703 | 6,674 | |||||||
| Loan servicing expense | 5,036 | 4,936 | |||||||
| Management fees | 2,488 | 1,804 | |||||||
| Compensation | 1,744 | 1,301 | |||||||
| Professional services | 1,186 | 442 | |||||||
| Other | 1,559 | 793 | |||||||
| Total expenses | 26,431 | 22,074 | |||||||
| Income before provision for income taxes | 37,975 | 24,575 | |||||||
| Provision for income taxes | 8,406 | 5,517 | |||||||
| Net income | $ | 29,569 | $ | 19,058 | |||||
| Earnings per share | |||||||||
| Basic | $ | 0.80 | $ | 0.65 | |||||
| Diluted | $ | 0.79 | $ | 0.65 | |||||
| Weighted-average shares outstanding | |||||||||
| Basic | 36,922 | 29,076 | |||||||
| Diluted | 37,208 | 29,335 | |||||||
| Dividends declared per share | $ | 0.55 | $ | 0.55 | |||||