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PennyMac Mortgage Investment Trust Reports Fourth Quarter and Full-Year 2012 Results

  PennyMac Mortgage Investment Trust Reports Fourth Quarter and Full-Year 2012
  Results

Business Wire

MOORPARK, Calif. -- February 7, 2013

PennyMac Mortgage Investment Trust (NYSE: PMT) today reported net income of
$49.2 million, or $0.83 per diluted share, for the fourth quarter of 2012, on
net investment income of $124.9 million. This brings full-year net income
earned by PMT to $138.2 million, or $3.14 per diluted share, on total net
investment income for the year of $335.2 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 March 1, 2013 to common shareholders
of record as of February 21, 2013.

In addition, PMT and its manager, PNMAC Capital Management (PCM), and loan
servicer and fulfillment provider, PennyMac Loan Services (PLS), have revised
certain key agreements that govern investment management, loan servicing and
mortgage banking and warehouse services provided to PMT. Among other things,
the agreements extend all services for at least four years, ensure that PLS
performs correspondent lending fulfillment services exclusively for PMT, and
amend PCM’s and PLS’ compensation for these services.

“I am pleased to announce the revised management and services agreements which
secure a long-term partnership among PMT, PCM and PLS.” said Chairman and
Chief Executive Officer Stanford L. Kurland. “They address aspects of PMT’s
business which have evolved over time and better align the incentives of PCM
and PLS with PMT’s financial performance.”

All of the agreements are being filed with the SEC as part of a Current Report
on Form 8-K, which can also be accessed at PMT’s investor relations’ website
at www.pennymac-REIT.com.

Quarterly Highlights

Financial results:

  *Diluted earnings per common share of $0.83, up 2 percent from the prior
    quarter
  *Net investment income of $124.9 million, up 26 percent from the prior
    quarter
  *Net income of $49.2 million, up 22 percent from the prior quarter
  *Return on average equity of 16 percent^1, which was the same as the prior
    quarter

Mortgage investment activity results:

  *Correspondent acquisitions of $10.0 billion in unpaid principal balance
    (UPB)^2, up
    59 percent from the prior quarter

       *Conventional acquisitions of $6.5 billion in UPB, up 76 percent from
         the prior quarter

  *Correspondent interest rate lock commitments (IRLCs) of $10.4 billion, up
    22 percent from the prior quarter

       *Conventional IRLCs of $7.0 billion, up 28 percent from the prior
         quarter

  *Distressed mortgage loan purchases of $290 million in UPB

Yearly Highlights

Financial results:

  *Diluted earnings per common share of $3.14, up 30 percent from the prior
    year, with weighted average shares outstanding increasing 65 percent from
    2011
  *Net investment income of $335.2 million, up 161 percent from the prior
    year
  *Net income of $138.2 million, up 115 percent from the prior year
  *Return on average equity of 16 percent^1, up from 15% for 2011

Mortgage investment activity results:

  *Correspondent acquisitions of $21.5 billion in unpaid principal balance
    (UPB)^3, more than 16 times prior year volumes

       *Conventional acquisitions of $13.0 billion in UPB, up 20 times the
         prior year volumes

  *Correspondent IRLCs of $25.9 billion, up 19 times the prior year

       *Conventional IRLCs of $16.3 billion, up 22 times the prior year
         volumes

  *Distressed mortgage loan purchases of $1.0 billion in UPB

PMT earned $65.3 million in pretax income for the quarter ended December 31,
2012, an 11 percent increase from the third quarter. The following table
presents the contribution of PMT’s Investment Activities and Correspondent
Lending segments to pretax income:

                                                                     
                                 Quarter ended December 31, 2012
                                 Investment   Correspondent                  
    Unaudited                    Activities   Lending          Total
                                             (in thousands)
    Revenues:
    External
    Net gain on mortgage loans   $ -          $     66,465     $ 66,465
    acquired for sale
    Net gain on investments        38,108           -            38,108
    Interest income                12,680           7,604        20,284
    Other                         (5,605 )        5,665       60
                                  45,183         79,734      124,917
    Expenses:
    Loan fulfillment fees          -                31,809       31,809
    payable to affiliate
    Interest                       4,692            5,291        9,983
    Servicing expense              4,932            68           5,000
    Other                         11,237         1,585       12,822
                                  20,861         38,753      59,614
    Pretax income                $ 24,322    $     40,981     $ 65,303
                                                                             

“The fourth quarter results were strong in both our Correspondent Lending and
Investment Activities segments,” commented Mr. Kurland. “Housing prices
continued to stabilize during the quarter, driving valuation gains in our
distressed portfolio. Correspondent loan purchase activity continued its
robust growth, resulting in solid pretax earnings from the segment that
comprised 63% of total pretax earnings.”

During the quarter ended December 31, 2012, PMT recorded investment revenue on
financial instruments totaling $124.9 million, as detailed in the following
table:

                                                                                            
                                                                                                       
                      Quarter ended December 31, 2012
    Unaudited         Net gain                                                 Annualized %            
                      on              Interest     Total         Average       Interest   Total
                      investments     Income       revenue       balance       yield      return^(1)
                      (dollars in thousands)
    Assets:
    Mortgage loans:
    At fair value     $  38,108       $ 12,607     $ 50,715      $ 1,002,864   4.92  %    19.79   %
    Under forward
    purchase             -              1            1             -           -          -
    agreements at
    fair value
    Acquired for
    sale at fair        66,465        7,639      74,104      827,335     3.61  %    35.05   %
    value
    Total mortgage      104,573       20,247     124,820     1,830,199   4.33  %    26.69   %
    loans
    Other               -             30         30         
    Mortgage-backed
    securities:
    Non-Agency          -             (3     )    (3      )    -           -          -
    Alt-A
    Total
    mortgage-backed     -             (3     )    (3      )    -           2.69  %    0.27    %
    securities
    Short-term          -             10         10          30,764      0.13  %    0.13    %
    investments
                      $  104,573      $ 20,284    $ 124,857    $ 1,860,963   4.27  %    26.25   %
                                                                                                       

(1) 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 gains from financial instruments increased over 38 percent from the
third quarter, driven by a 33 percent quarter-over-quarter increase in net
gain on correspondent loans acquired for sale, and a 44 percent increase in
net gain on mortgage loans at fair value. Net gains on mortgage loans acquired
for sale at fair value through the correspondent lending business totaled
$66.5 million resulting in an annualized total return for the quarter of 35
percent, down from 42 percent in the third quarter. PMT’s distressed whole
loan portfolio realized net gain on investments of $38.1 million during the
fourth quarter, resulting in an annualized total return of 20 percent, up from
17 percent in the third quarter.

“PMT continued to grow its correspondent activities and the related MSR
investments during the quarter, in addition to completing attractive purchases
of distressed whole loans for the investment portfolio,” continued Mr.
Kurland. “Both of our operating segments delivered strong performance in the
fourth quarter and throughout 2012 as well. The correspondent segment
continued to execute effectively and grow volumes, while our distressed whole
loan investments benefitted from solid operational performance and a firming
in home prices.”

Correspondent Lending

During the quarter, correspondent lending acquired $10.0 billion in UPB of
loans, and IRLCs amounted to $10.3 billion, compared to $6.3 billion and $8.5
billion, respectively, in the third quarter of 2012. Of total correspondent
acquisitions, conventional loans amounted to $6.5 billion, FHA loans were $3.5
billion, and jumbo loans were $2.1 million. Pretax income attributable to the
correspondent lending segment was $41.0 million for the quarter. These results
were driven by net gain on mortgage loans acquired for sale of $66.5 million,
$7.6 million of interest income, and $5.7 million of loan origination fee
revenue, partially offset by $31.8 million in fulfillment fees and $5.3
million of interest expense.

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

                                                       
                                                             
                                                             Quarter ended
    Unaudited                                                December 31, 2012
                                                             ($ in thousands)
    MSR value                                                $    68,033
    Rep & warrant provision                                       (2,063    )
    Cash investment^(1)                                           (25,079   )
    
    Market value adjustments of pipeline, inventory and          25,574    
    hedges
    Net gain on mortgage loans acquired for sale             $    66,465    
                                                             
    (1) Cash receipt at sale, net of cash hedge expense
    

Although margins on gains from mortgage loans acquired for sale benefitted
from wider secondary spreads early in the fourth quarter, margins narrowed
somewhat as the quarter progressed. For the quarter as a whole, margins
expressed as the ratio of net gain on mortgage loans to locks during the
quarter, were slightly higher than the previous quarter. While margins
remained elevated from a historical perspective during the fourth quarter, we
expect them to begin normalizing in 2013.

Investment Activities Segment

Servicing

Net loan servicing fee revenue reached $605 thousand in the fourth quarter
compared to a $511 thousand loss in the third quarter. Servicing fee revenue
rose by $1.1 million from the third quarter, which was offset by higher
amortization and impairment charges. The impairment charges resulted from
higher prepayment expectations inherent in our estimates of the value of the
MSRs due to the low mortgage rate environment that prevailed in the fourth
quarter. Positively impacting fourth quarter servicing results were hedge
gains of $2.1 million.

The following schedule details the net loan servicing fees in the fourth
quarter of 2012:

  Unaudited                                           Quarter ended      
                                                         December 31, 2012
                                                                             
    Servicing fees^(1)                                   $     4,878
    Effect of MSRs:
    Amortization                                               (3,121)
    Provision for impairment of MSRs carried at lower          (3,042)
    of amortized cost or fair value
    Change in fair value of MSRs carried at fair value         (233)
    Gains on hedging derivatives                              2,123
                                                              (4,273)
    Net loan servicing fees                              $     605
    
    (1) Includes contractually specified servicing fees.
    

Distressed Mortgage Investments

PMT’s distressed mortgage loan portfolio generated realized and unrealized
gains totaling $38.1 million in the fourth quarter of 2012, compared to $26.5
million in the third quarter of 2012. Of the gains in the fourth quarter of
2012, $4.4 million was realized through payoffs in which collections on the
loan balances were at levels higher than their recorded fair values.

Valuation gains totaled $33.8 million in the fourth quarter of 2012, compared
to $22.9 million in the third quarter. The increase was driven by the
Company’s portfolio of nonperforming whole loans which produced $30.4 million
of valuation increases during the quarter, which was further supplemented by a
$3.3 million valuation gain on performing loans. The continued stabilization
in home prices was once again a major driver of the unrealized gains on
mortgage loans, but fair value accretion of the loans as they progress toward
their ultimate resolution also contributed meaningfully to gains on mortgage
loans in the quarter.

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

                       Quarter ended     
    Unaudited             December 31, 2012   
                          (in thousands)
                                              
    Valuation changes
    Performing loans      $      3,335
    Nonperforming loans         30,418
                                 33,753
    Payoffs                     4,355
                          $      38,108
                      

Expenses

Expenses for the fourth quarter of 2012 totaled $59.6 million, compared to
$40.2 million in the third quarter of 2012. The increase is primarily
attributable to fulfillment fees on sales of correspondent loans, as well as
professional services and management fees. Fulfillment fees, which are payable
when loans are sold, rose 84% from the prior quarter, in line with the
increase in sales of conventional and jumbo loans during the quarter. Interest
expense increased from the financing of higher average balances of mortgage
loans available for sale during the quarter and servicing expenses declined
due to lower distressed loan resolution activity during the quarter, primarily
as a result of seasonal factors. Management fee expense rose 22%
quarter-over-quarter driven by a higher average shareholder’s equity balance
over the quarter. Other expense items increased commensurately with increased
business activity and asset growth.

The provision for income tax expense totaled $16.1 million in the fourth
quarter, resulting in an effective income tax rate of 25%, down from 32% in
the prior period. The decline in the effective tax rate is due to a higher
proportion of income being generated by business activities in PMT’s REIT
qualifying entities.

Mr. Kurland concluded, “PMT ended 2012 with a strong fourth quarter and we
remain optimistic about the progress that the housing and mortgage markets are
making toward normalization. PMT is uniquely positioned to capitalize on a
wide variety of residential mortgage opportunities emerging in today’s market.
We look forward to building upon our successes in 2013 and continuing to
deliver solid investment returns as the market continues to evolve.”

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, February 07,
2013.

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
Section21E 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)
                                                                         
                                                                             
                                             December 31,    September 30,
                                             2012            2012
                                             (unaudited)
  ASSETS                                                                   
  Cash                                       $ 33,756        $  67,813
  Investments:
  Short-term investments                       39,017           38,322
  Mortgage loans acquired for sale at fair     975,184          847,575
  value
  Mortgage loans at fair value                 1,189,971        1,089,966
  Real estate acquired in settlement of        88,078           86,180
  loans
  Mortgage servicing rights                    126,776          65,154
  Principal and interest collections           29,204           30,016
  receivable
  Interest receivable                          3,029            2,932
  Derivative financial instruments             23,706           -
  Servicing advances                           32,191           -
  Due from affiliates                         4,829          2,004
                                               2,545,741        2,229,962
  Other assets                                13,922          98,763
  Total assets                               $ 2,559,663     $  2,328,725
                                                                             
  LIABILITIES
  Assets sold under agreements to
  repurchase:
  Mortgage loans acquired for sale at fair     894,906          755,471
  value
  Mortgage loans at fair value                 353,805          274,185
  Real estate acquired in settlement of        7,391            11,715
  loans
  Derivative financial instruments             967              36,203
  Mortgage repurchase liability                4,441            2,378
  Accounts payable and accrued liabilities     42,402           25,271
  Contingent underwriting fees payable         5,883            5,883
  Payable to affiliates                        12,216           9,812
  Income taxes payable                         36,316           23,604
  Total liabilities                            1,358,327        1,144,522
                                                                             
  SHAREHOLDERS' EQUITY
  Common shares of beneficial
  interest—authorized, 500,000,000 common
  shares of $0.01 par value; issued and        589              589
  outstanding, 58,904,456 and 58,903,681
  common shares, respectively.
  Additional paid-in capital                   1,129,858        1,128,387
  Retained earnings                           70,889          55,227
  Total shareholders' equity                  1,201,336       1,184,203
  Total liabilities and shareholders'        $ 2,559,663     $  2,328,725
  equity
                                                                             

 PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF INCOME
  
  (In thousands, except share data)
                                                                      
                                       2012
                                       Quarter Ended   Quarter Ended
                                       Dec. 31         Sept. 30
  Investment Income                    (unaudited)
  Net gain (loss) on investments:                                            
  Mortgage-backed securities           $  -            $  (451    )
  Mortgage loans                         38,108        26,512  
                                         38,108        26,061      
  Interest income:
  Short-term investments                  10              13
  Mortgage-backed securities              (3       )      502
  Mortgage loans                          20,247          19,179
  Other                                  30            36      
                                         20,284        19,730  
  Net gain on mortgage loans              66,465          49,793
  acquired for sale
  Loan Origination Fees                   5,665           2,836
  Results of real estate acquired in      (6,209   )      1,288
  settlement of loans
  Net loan servicing fees                 605             (511    )
  Other                                  (1       )     (1      )
  Net investment income                  124,917       99,196  
  Expenses
  Loan fulfillment fees                   31,809          17,258       
  Interest                                9,983           8,282        
  Loan servicing expense                  5,000           5,208        
  Management fees                         4,472           3,672        
  Compensation                            2,102           1,997        
  Professional services                   2,732           1,693        
  Other                                  3,516         2,117       
  Total expenses                         59,614        40,227  
  Income before provision for income      65,303          58,969       
  taxes
  Provision for income taxes             16,065        18,585  
  Net income                           $  49,238      $  40,384      
                                                                             
  Earnings per share
  Basic                                $  0.83         $  0.81
  Diluted                              $  0.83         $  0.81
  Weighted-average shares
  outstanding
  Basic                                   58,904          49,078
  Diluted                                 59,338          49,463
  Dividends declared per share         $  0.57         $  0.55

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

^2 FHA acquisitions for the fourth quarter were $3.5 billion in UPB, for which
PMT earned a sourcing fee of 3bps and interest income for its holding period.

^3 FHA acquisitions for the year were $8.5 billion in UPB, for which PMT
earned a sourcing fee of 3bps and interest income for its holding period.

Contact:

PennyMac Mortgage Investment Trust
Media
Kevin Chamberlain, 818-746-2877
or
Investors
Christopher Oltmann, 818-746-2046