PennyMac Mortgage Investment Trust(PMT) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q2 2020, the company reported net income attributable to common shareholders of $458.4 million, or $4.51 per common share, reflecting record earnings driven by correspondent production segment results and recovery in CRT investments [4][5] - Book value per common share increased to $19.39 at June 30, up from $15.16 at March 31, 2020 [5] Business Line Data and Key Metrics Changes - Credit-sensitive strategies contributed $458.8 million in pre-tax income, while interest rate-sensitive strategies recorded a pre-tax loss of $117.5 million [5][36] - Correspondent production segment achieved a record pre-tax income of $139.6 million, driven by high margins and strong production volumes [36] - Conventional loan production volumes totaled $18.9 billion in unpaid principal balance, up 17% from the prior quarter and up 76% year-over-year [6][20] Market Data and Key Metrics Changes - The unemployment rate peaked at 14.7% in April, with a forecasted gradual recovery to 6.9% by the end of 2021 [7] - New mortgage forbearance requests have decreased significantly since March and April, with borrowers beginning to exit forbearance plans [8][10] - Economic forecasts for total mortgage originations in 2020 have increased to nearly $3 trillion, the highest level since 2003 [11] Company Strategy and Development Direction - The company aims to capitalize on the mortgage origination market, supported by low mortgage rates driving refinance and purchase demand [11][12] - PMT's investment strategies are expected to yield an average diluted EPS per quarter of $0.65, resulting in an annualized return on common equity of approximately 13% [16] Management's Comments on Operating Environment and Future Outlook - Management noted that the economic recovery is expected to be gradual due to the resurgence of COVID-19 and its impact on reopening plans [7][10] - The company anticipates book value growth as earnings potential is expected to exceed current dividend levels [51] Other Important Information - PMT's capital deployment was driven by conventional loan production, with new MSR investments totaling $203 million [6][29] - The company repurchased approximately 566,000 shares at a weighted average price of $13.36, costing $7.6 million [6] Q&A Session Summary Question: What are the trends in PMT's MSR portfolio? - The percentage of loans in PMT's MSR portfolio that were 30 days or more delinquent was 5.3% at July 31, down from 6.3% at June 30 [41] Question: How has the company managed forbearance plans? - 59% of forbearance plans in PMT's servicing portfolio as of April 30 have been extended, with a decrease in loans in forbearance to 5.2% at July 31 [44]