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PennyMac Mortgage Investment Trust Reports First Quarter 2013 Results



  PennyMac Mortgage Investment Trust Reports First Quarter 2013 Results

Business Wire

MOORPARK, Calif. -- April 23, 2013

PennyMac Mortgage Investment Trust (NYSE: PMT) today reported net income of
$53.3 million, or $0.90 per diluted share, for the first quarter of 2013, on
net investment income of $119.1 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 May 31, 2013 to common shareholders of record as
of May 16, 2013.

Quarterly Highlights

Financial results:

  * Diluted earnings per common share of $0.90, up 8 percent from the prior
    quarter
  * Net investment income of $119.1 million, down 5 percent from the prior
    quarter
  * Net income of $53.3 million, up 8 percent from the prior quarter
  * Gain on investment portfolio of $64.0 million, up 68 percent from the
    prior quarter
  * Return on average equity of 18 percent^1, up from 16 percent in the prior
    quarter

Mortgage investment activity results:

  * Correspondent acquisitions of $8.5 billion in unpaid principal balance
    (UPB)^2, down 15 percent from the prior quarter

       * Conventional acquisitions of $4.8 billion in UPB, down 26 percent
         from the prior quarter

  * Correspondent interest rate lock commitments (IRLCs) of $8.1 billion, down
    22 percent from the prior quarter

       * Conventional IRLCs of $4.2 billion, down 39 percent from the prior
         quarter

  * Distressed mortgage loan purchases of $366 million in UPB
  * Servicing portfolio reaches $17 billion in UPB

PMT earned $55.9 million in pretax income for the quarter ended March 31,
2013, a 14 percent decrease from the fourth quarter. The following table
presents the contribution of PMT’s Investment Activities and Correspondent
Lending segments to pretax income:

                  Quarter ended March 31, 2013
                  Investment     Correspondent     Intersegment     
Unaudited         activities     lending           elimination &     Total
                                                   other
                  (in thousands)
Revenues:
Net gain on
mortgage
loans             $  -           $    29,279       $   -             $ 29,279
acquired for
sale
Net gain on          63,980           -                -               63,980
investments
Interest             10,592           6,324            (41     )       16,875
Other                3,445            5,473            -               8,918
                     78,017           41,076           (41     )       119,052
Expenses:
Loan
fulfillment          -                25,938           3,284           29,222
fees
Interest             5,630            5,647            (41     )       11,236
Loan                 7,940            150              -               8,090
servicing
Other                14,108           461              -               14,569
                     27,678           32,196           3,243           63,117
Pretax income     $  50,339      $    8,880        $   (3,284  )     $ 55,935
                                                                        

“First quarter results reflect the ongoing recovery of the housing market and
increased competition within the mortgage market,” said Chairman and Chief
Executive Officer Stanford L. Kurland. “Earnings increased to $0.90 per
diluted share, as our portfolio of distressed whole loans experienced
valuation gains from continued strengthening of home prices and strong
portfolio activity, while gains on mortgage loans acquired for sale
decreased.”

During the quarter ended March 31, 2013, PMT recorded investment revenue on
financial instruments totaling $110.1 million, as detailed in the following
table:

                                    Quarter ended March 31, 2013
Unaudited                           Net gain                    
                                    (loss) on       Interest     Total
                                    investments     income       revenue
                                    (dollars in thousands)
Assets:
Mortgage loans:
At fair value                       $   63,980      $ 10,497     $ 74,477
Acquired for sale at fair value         29,279        6,323        35,602
Total mortgage loans                    93,259        16,820       110,079
Other                                   -             24           24
                                                                  
Short-term investments                  -             31           31
                                    $   93,259      $ 16,875     $ 110,134
                                                                    

Investment revenues decreased 12 percent from the fourth quarter, driven by a
56 percent quarter-over-quarter decrease in net gain on correspondent loans
acquired for sale, offset by a 68 percent increase in net gain on mortgage
loans at fair value. PMT’s distressed whole loan portfolio realized net gain
on investments of $64.0 million during the first quarter. Net gains on
mortgage loans acquired for sale at fair value through the correspondent
lending business totaled $29.3 million, as correspondent margins declined from
the prior quarter.

“Investment returns were solid for the quarter, particularly in distressed
whole loans where we saw increased gains from valuation and strong liquidation
activity,” continued Mr. Kurland. “Home prices have continued to stabilize,
with many of the previously hardest hit areas showing appreciating home
prices. Many loans in our portfolio are located in these areas, which
contributed to the valuation gains. Another contributing factor has been the
increase in investor demand for reperforming loans over the past several
months. While correspondent originations were down, PMT’s investments in MSRs
continued to grow, and we continue to view this asset as a very attractive
opportunity.”

Correspondent Lending

During the quarter, correspondent lending acquired $8.5 billion in UPB of
loans, and IRLCs totaled $8.1 billion, compared to $10.0 billion and $10.3
billion, respectively, in the fourth quarter of 2012. Of total correspondent
acquisitions, conventional loans amounted to $4.8 billion, FHA loans were $3.7
billion, and jumbo loans were $8.1 million. Pretax income attributable to the
correspondent lending segment was $8.9 million for the quarter. A combination
of lower IRLCs and a compression of margins resulted in net gain on mortgage
loans acquired for sale of $29.3 million, down from $66.5 million in the prior
quarter. Also impacting the segment’s results were $6.3 million of interest
income, and $5.5 million of loan origination fee revenue, partially offset by
$25.9 million in fulfillment fees and $5.6 million of interest expense.

The following schedule details the net gain on mortgage loans acquired for
sale in the first quarter of 2013:

                                                              Quarter ended
Unaudited                                                     March 31, 2013
                                                              ($ in thousands)
MSR Value                                                     $     56,217
Rep & warrant provision                                             (1,791   )
Cash investment^(1)                                                 (13,633  )
Market value adjustments of pipeline, inventory and                 (11,514  )
hedges
Net gain on mortgage loans acquired for sale                  $     29,279    
                                                                              

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

For the quarter as a whole, margins expressed as the ratio of net gain on
mortgage loans to locks were lower than the previous quarter. While margins
remain attractive, they may decrease in future periods if mortgage market
origination volumes decline and competition increases.

Investment Activities Segment

Servicing

PMT’s servicing portfolio grew to $16.6 billion in UPB, compared to $12.2
billion in the fourth quarter of 2012. Servicing fee revenue of $11.1 million
and an impairment reversal of $2.5 million were partially offset by
amortization of $5.0 million and hedging derivatives losses of $2.0 million
for net loan servicing fees of $6.6 million, up from $605 thousand in the
fourth quarter of 2012.

The following schedule details the net loan servicing fees in the first
quarter of 2013:

Unaudited                                                       Quarter ended
                                                                March 31, 2013
                                                                 
Servicing fees^(1)                                              $   11,104
Effect of MSRs:
Amortization                                                        (4,970  )
Impairment reversal of MSRs carried at lower of amortized           2,486
cost or fair value
Change in fair value of MSRs carried at fair value                  (67     )
Losses on hedging derivatives                                       (1,988  )
                                                                    (4,539  )
Net loan servicing fees                                         $   6,565    
                                                                             

(1)   Includes contractually specified servicing and ancillary fees.
       

Distressed Mortgage Investments

PMT’s distressed mortgage loan portfolio generated realized and unrealized
gains totaling $64.0 million in the first quarter of 2013, compared to $38.1
million in the fourth quarter of 2012. Of the gains in the first quarter of
2013, $8.4 million was realized through payoffs in which collections on the
loan balances were at levels higher than their recorded fair values.

Valuation gains totaled $55.6 million in the first quarter of 2013, compared
to $33.8 million in the fourth quarter. The increase was driven by both the
Company’s portfolio of nonperforming whole loans, which produced $32.6 million
of valuation gains during the quarter, and the Company’s portfolio of
performing loans, which produced $23.0 million of valuation gains. The
continued stabilization in home prices was once again a major driver of the
unrealized gains on mortgage loans, but fair value appreciation of the loans
as they progress toward their ultimate resolution also contributed
meaningfully to gains on mortgage loans in the quarter.

During the quarter, PMT acquired $366 million in UPB of nonperforming whole
loans with an average acquisition price of 55% of UPB. After the end of the
quarter, PMT reached an agreement in principle to enter into forward purchase
agreements for two pools of nonperforming mortgage loans with an initial total
purchase price of $294 million. Under the forward purchase agreements, the
loans will be acquired by Citigroup from two unaffiliated third parties.^3

The following schedule details the realized and unrealized gains on mortgage
loans for the first quarter of 2013:

                        Quarter ended
                        March 31, 2013
                         
Valuation changes:
Performing loans        $    22,984
Nonperforming loans          32,632
                             55,616
Payoffs                      8,364
                        $    63,980
                              

Expenses

Expenses for the first quarter of 2013 totaled $63.1 million, compared to
$59.6 million in the fourth quarter of 2012. The increase is primarily
attributable to interest and loan servicing expenses, as well as an increase
in management fees for the quarter. Loan fulfillment fees decreased from $31.8
million in the fourth quarter to $29.2 million in the first quarter. Included
in the first quarter fulfillment fee expense is an expense of $3.3 million
resulting from the transition to the revised mortgage banking agreement.
Interest expense increased as our recent acquisitions of distressed whole
loans were financed through our repurchase facilities. Management fees
increased by $2.1 million as a result of incentive fees payable to our
manager, which are linked to the company’s profitability. Other expense items
increased commensurately with increased business activity and asset growth.

The provision for income taxes declined by $13.4 million to $2.6 million in
the first quarter, as a higher proportion of income was generated by business
activities in PMT’s REIT qualifying entities. This resulted in an effective
income tax rate of 5%, down from 25% in the prior period.

Mr. Kurland concluded, “PMT’s first quarter results demonstrated the benefits
of an investment vehicle focused on multiple opportunities in the residential
mortgage space. We continue investing in distressed mortgages, mortgage
servicing rights, and the aggregation of loans through our correspondent
lending activities. We believe PMT’s distressed portfolio is well positioned
as the housing market stabilizes and the growth opportunities for the
correspondent business are significant. We are targeting total correspondent
acquisitions of approximately $4.0 to $5.0 billion per month by the end of the
year. Since the end of the quarter, there has been a modest decline in
mortgage rates and as a result we expect correspondent lock volume in April to
be back above $3.0 billion, with the jumbo program continuing to gain
traction. Today’s residential mortgage market holds many opportunities
available to PMT and should drive continued earnings growth.”

Management’s 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. (Pacific Daylight Time) on Tuesday, April 23, 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
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.

^1   Return on equity calculated based on average shareholders’ equity for
     each month.
      
     Government loan acquisitions for the first quarter were $3.7 billion in
^2   UPB, for which PMT earned a sourcing fee of 3 basis points and interest
     income for its holding period.
      
     These pending transactions are subject to the negotiation and execution
^3   of definitive documentation, continuing due diligence, and customary
     closing conditions. There can be no assurance that the committed amount
     will ultimately be acquired or that the transactions will be completed.
      
      

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
                                                                 
                                                  March 31,       December 31,
                                                  2013            2012
                                                  (unaudited)
ASSETS
Cash                                              $ 19,376        $  33,756
Investments:
Short-term investments                              45,024           39,017
Mortgage loans acquired for sale at fair            1,123,348        975,184
value
Mortgage loans at fair value                        1,366,922        1,189,971
Real estate acquired in settlement of loans         84,486           88,078
Mortgage servicing rights                           180,441          126,776
Principal and interest collections receivable       31,391           29,204
Interest receivable                                 3,136            3,029
Derivative assets                                   15,186           23,706
Servicing advances                                  37,695           32,191
Due from affiliates                                 5,991            4,829
                                                    2,893,620        2,511,985
Other assets                                        14,164           13,922
Total assets                                      $ 2,927,160     $  2,559,663
                                                                   
LIABILITIES
Assets sold under agreements to repurchase:
Mortgage loans acquired for sale at fair            1,035,486        894,906
value
Mortgage loans at fair value                        576,018          353,805
Real estate acquired in settlement of loans         3,546            7,391
Derivative liabilities                              2,079            967
Mortgage repurchase liability                       6,231            4,441
Accounts payable and accrued liabilities            22,259           42,402
Contingent underwriting fees payable                5,883            5,883
Payable to affiliates                               14,748           12,216
Income taxes payable                                38,481           36,316
Total liabilities                                   1,704,731        1,358,327
                                                                   
SHAREHOLDERS' EQUITY
Common shares of beneficial
interest—authorized, 500,000,000 common
shares of $0.01 par value; issued and               590              589
outstanding, 58,990,225 and 58,904,456 common
shares, respectively.
Additional paid-in capital                          1,131,231        1,129,858
Retained earnings                                   90,608           70,889
Total shareholders' equity                          1,222,429        1,201,336
Total liabilities and shareholders' equity        $ 2,927,160     $  2,559,663
                                                                      
                                                                      

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
 
                                          Quarter Ended
                                          March 31, 2013     December 31, 2012
Investment Income                         (unaudited)
Net gain on mortgage loans acquired       $  29,279          $   66,465
for sale
Net gain (loss) on investments:
Mortgage loans                               63,980              38,108     
                                             63,980              38,108     
Interest income:
Short-term investments                       31                  10
Mortgage-backed securities                   -                   (3        )
Mortgage loans                               16,820              20,247
Other                                        24                  30         
                                             16,875              20,284     
                                                              
Loan origination fees                        5,473               5,665
Results of real estate acquired in           (3,253   )          (6,209    )
settlement of loans
Net loan servicing fees                      6,565               605
Other                                        133                 (1        )
Net investment income                        119,052             241,701    
Expenses
Loan fulfillment fees                        29,222              31,809
Interest                                     11,236              9,983
Loan servicing^(1)                           8,090               5,000
Management fees                              6,492               4,472
Compensation                                 2,089               2,102
Professional services                        2,384               2,732
Other                                        3,604               3,516      
Total expenses                               63,117              59,614     
Income before provision for income           55,935              65,303
taxes
Provision for income taxes                   2,639               16,065     
Net income                                $  53,296          $   49,238     
                                                              
Earnings per share
Basic                                     $  0.90            $   0.83
Diluted                                   $  0.90            $   0.83
Weighted-average shares outstanding
Basic                                        58,927              58,904
Diluted                                      59,319              59,338
Dividends declared per share              $  0.57            $   0.57
                                                                            

      Servicing expenses include both specialty servicing for PMT’s distressed
(1)   portfolio and its subservicing costs associated with the mortgage
      servicing rights from its correspondent loans.

Contact:

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