PennyMac Mortgage Investment Trust [PMT-PB] Filings

10-Q 1 pmt-20230930.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-34416

PennyMac Mortgage Investment Trust

(Exact name of registrant as specified in its charter)


Maryland		27-0186273
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

3043 Townsgate Road, Westlake Village, California		91361
(Address of principal executive offices)		(Zip Code)

(818) 224-7442

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol (s)	Name of Each Exchange on Which Registered
Common Shares of Beneficial Interest, $0.01 Par Value	PMT	New York Stock Exchange
8.125% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01 Par Value	PMT PRA	New York Stock Exchange
8.00% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01 Par Value	PMT PRB	New York Stock Exchange
6.75% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01 Par Value	PMT PRC	New York Stock Exchange
8.50% Senior Note Due 2028	PMTU	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.


Class		Outstanding at October 30, 2023
Common Shares of Beneficial Interest, $0.01 par value		86,624,044

PENNYMAC MORTGAGE INVESTMENT TRUST

FORM 10-Q

September 30, 2023

TABLE OF CONTENTS


		Page
Special Note Regarding Forward-Looking Statements		1
PART I. FINANCIAL INFORMATION		4
Item 1.	Financial Statements (Unaudited)	4
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations	6
	Consolidated Statements of Changes in Shareholders’ Equity	7
	Consolidated Statements of Cash Flows	9
	Notes to Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	58
	Our Company	58
	Results of Operations	61
	Net Investment Income	62
	Expenses	72
	Balance Sheet Analysis	74
	Asset Acquisitions	74
	Investment Portfolio Composition	75
	Cash Flows	78
	Liquidity and Capital Resources	79
	Off-Balance Sheet Arrangements and Aggregate Contractual Obligations	82
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	83
Item 4.	Controls and Procedures	84
PART II. OTHER INFORMATION		85
Item 1.	Legal Proceedings	85
Item 1A	Risk Factors	85
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85
Item 3.	Defaults Upon Senior Securities	85
Item 4.	Mine Safety Disclosures	85
Item 5.	Other Information	85
Item 6.	Exhibits	86

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Report”) contains certain forward-looking statements that are subject to various risks and uncertainties. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” “continue,” “plan” or other similar words or expressions.

Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward-looking information. Examples of forward-looking statements include the following:

•

projections of our revenues, income, earnings per share, capital structure or other financial items;

•

descriptions of our plans or objectives for future operations, products or services;

•

forecasts of our future economic performance, interest rates, profit margins and our share of future markets; and

•

descriptions of assumptions underlying or relating to any of the foregoing expectations regarding the timing of generating any revenues.

Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. There are a number of factors, many of which are beyond our control that could cause actual results to differ significantly from management’s expectations. Some of these factors are discussed below.

You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties discussed elsewhere in this Report and the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on February 24, 2023.

Factors that could cause actual results to differ materially from historical results or those anticipated include, but are not limited to:

•

changes in interest rates and other macroeconomic conditions;

•

our ability to comply with various federal, state and local laws and regulations that govern our business;

•

changes in our investment objectives or investment or operational strategies, including any new lines of business or new products and services that may subject us to additional risks;

•

changes in real estate values, housing prices and housing sales;

•

the degree and nature of our competition;

•

volatility in our industry, the debt or equity markets, the general economy or the real estate finance and real estate markets specifically, whether the result of market events or otherwise;

•

events or circumstances which undermine confidence in the financial and housing markets or otherwise have a broad impact on financial and housing markets, such as the sudden instability or collapse of large depository institutions or other significant corporations, terrorist attacks, natural or man-made disasters, or threatened or actual armed conflicts;

•

changes in general business, economic, market, employment and domestic and international political conditions, or in consumer confidence and spending habits from those expected;

•

the availability of, and level of competition for, attractive risk-adjusted investment opportunities in loans and mortgage-related assets that satisfy our investment objectives;

•

the inherent difficulty in winning bids to acquire loans, and our success in doing so;

•

the concentration of credit risks to which we are exposed;

•

our dependence on our Manager and servicer, potential conflicts of interest with such entities and their affiliates, and the performance of such entities;

•

changes in personnel and lack of availability of qualified personnel at our Manager, servicer or their affiliates;

•

the availability, terms and deployment of short-term and long-term capital;

•

the adequacy of our cash reserves and working capital;

•

our substantial amount of debt;

•

our ability to maintain the desired relationship between our financing and the interest rates and maturities of our assets;

•

the timing and amount of cash flows, if any, from our investments;

•

our exposure to risks of loss and disruptions in operations resulting from adverse weather conditions, man-made or natural disasters, climate change and pandemics such as the COVID-19 pandemic;

•

unanticipated increases or volatility in financing and other costs, including a rise in interest rates;

•

the performance, financial condition and liquidity of borrowers;

•

the ability of our servicer, which also provides us with fulfillment services, to approve and monitor correspondent sellers and underwrite loans to investor standards;

•

incomplete or inaccurate information or documentation provided by customers or counterparties, or adverse changes in the financial condition of our customers and counterparties;

•

our indemnification and repurchase obligations in connection with loans we purchase and later sell or securitize;

•

the quality and enforceability of the collateral documentation evidencing our ownership and rights in the assets in which we invest;

•

increased rates of delinquency, default and/or decreased recovery rates on our investments;

•

the performance of loans underlying mortgage-backed securities in which we retain credit risk;

•

our ability to foreclose on our investments in a timely manner or at all;

•

the degree to which our hedging strategies may or may not protect us from interest rate volatility;

•

the effect of the accuracy of or changes in the estimates we make about uncertainties, contingencies and asset and liability valuations when measuring and reporting upon our financial condition and results of operations;

•

our ability to maintain appropriate internal control over financial reporting;

•

technology failures, cybersecurity risks and incidents, and our ability to mitigate cybersecurity risks and cyber intrusions;

•

our ability to obtain and/or maintain licenses and other approvals in those jurisdictions where required to conduct our business;

•

our ability to detect misconduct and fraud;

•

changes in our CRT arrangements and agreements;

•

developments in the secondary markets for our loan products;

•

legislative and regulatory changes that impact the loan industry or housing market;

•

changes in regulations that impact the business, operations or governance of mortgage lenders and/or publicly-traded companies or such changes that increase the cost of doing business with such entities;

•

the Consumer Financial Protection Bureau and its issued and future rules and the enforcement thereof;

•

changes in government support of homeownership;

•

our ability to effectively identify, manage and hedge our credit, interest rate, prepayment, liquidity and climate risks;

•

changes in government or government-sponsored home affordability programs;

•

limitations imposed on our business and our ability to satisfy complex rules for us to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes and qualify for an exclusion from the Investment Company Act of 1940 and the ability of certain of our subsidiaries to qualify as REITs or as taxable REIT subsidiaries for U.S. federal income tax purposes, as applicable, and our ability and the ability of our subsidiaries to operate effectively within the limitations imposed by these rules;

•

changes in governmental regulations, accounting treatment, tax rates and similar matters (including changes to laws governing the taxation of REITs, or the exclusions from registration as an investment company);

•

our ability to make distributions to our shareholders in the future;

•

our failure to deal appropriately with issues that may give rise to reputational risk; and

•

our organizational structure and certain requirements in our charter documents.

Other factors that could also cause results to differ from our expectations may not be described in this Report or any other document. Each of these factors could by itself, or together with one or more other factors, adversely affect our business, results of operations and/or financial condition.

Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	September 30,			December 31,
	2023			2022
	(in thousands, except share information)
ASSETS
Cash	$	236,396		$	111,866
Short-term investments at fair value		150,059			252,271
Mortgage-backed securities at fair value pledged to creditors		4,665,970			4,462,601
Loans acquired for sale at fair value ($1,019,247 and $1,801,368 pledged to creditors, respectively)		1,025,730			1,821,933
Loans at fair value ($1,370,220 and $1,510,148 pledged to creditors, respectively)		1,372,118			1,513,399
Derivative assets ($7,010 and $1,262 pledged to creditors, respectively)		29,750			84,940
Deposits securing credit risk transfer arrangements pledged to creditors		1,237,294			1,325,294
Mortgage servicing rights at fair value ($4,038,113 and $3,962,820 pledged to creditors, respectively)		4,108,661			4,012,737
Servicing advances ($76,740 and $100,888 pledged to creditors, respectively)		93,614			197,972
Due from PennyMac Financial Services, Inc.		2,252			3,560
Other ($2,466 and $3,297 pledged to creditors, respectively)		301,492			134,991
Total assets	$	13,223,336		$	13,921,564
LIABILITIES
Assets sold under agreements to repurchase	$	6,020,716		$	6,616,528
Mortgage loan participation purchase and sale agreements		23,991			—
Notes payable secured by credit risk transfer and mortgage servicing assets		2,825,591			2,804,028
Unsecured senior notes		599,754			546,254
Asset-backed financing of variable interest entities at fair value		1,279,059			1,414,955
Interest-only security payable at fair value		28,288			21,925
Derivative and credit risk transfer strip liabilities at fair value		140,494			167,226
Accounts payable and accrued liabilities		92,633			160,212
Due to PennyMac Financial Services, Inc.		27,613			36,372
Income taxes payable		202,967			151,778
Liability for losses under representations and warranties		33,152			39,471
Total liabilities		11,274,258			11,958,749

Commitments and contingencies ─ Note 17

SHAREHOLDERS’ EQUITY
Preferred shares of beneficial interest, $0.01 par value per share, authorized 100,000,000 shares, issued and outstanding 22,400,000, liquidation preference $560,000,000		541,482			541,482
Common shares of beneficial interest—authorized, 500,000,000 common shares of $0.01 par value; issued and outstanding, 86,760,408 and 88,888,889 common shares, respectively		868			889
Additional paid-in capital		1,923,130			1,947,266
Accumulated deficit		(516,402	)		(526,822	)
Total shareholders’ equity		1,949,078			1,962,815
Total liabilities and shareholders’ equity	$	13,223,336		$	13,921,564

The accompanying notes are an integral part of these consolidated financial statements.

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

Assets and liabilities of consolidated variable interest entities (“VIEs”) included in total assets and liabilities (the assets of each VIE can only be used to settle liabilities of that VIE) are summarized below:


	September 30,		December 31,
	2023		2022
	(in thousands)
ASSETS
Loans at fair value	$	1,370,021	$	1,509,942
Derivative assets at fair value		7,010		1,262
Deposits securing credit risk transfer arrangements		1,237,294		1,325,294
Other—interest receivable		4,160		4,343
	$	2,618,485	$	2,840,841
LIABILITIES
Asset-backed financings at fair value	$	1,279,059	$	1,414,955
Derivative and credit risk transfer strip liabilities at fair value		70,860		160,553
Interest-only security payable at fair value		28,288		21,925
Accounts payable and accrued liabilities—interest payable		4,160		4,343
	$	1,382,367	$	1,601,776

The accompanying notes are an integral part of these consolidated financial statements.

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


	Quarter ended September 30,					Nine months ended September 30,
	2023			2022		2023			2022
	(in thousands, except per common share amounts)
Net investment income
Net loan servicing fees:
From nonaffiliates
Contractually specified	$	166,809		$	162,987	$	496,522		$	461,021
Other		3,752			4,246		14,521			20,539
		170,561			167,233		511,043			481,560
Change in fair value of mortgage servicing rights		160,926			66,974		(64,515	)		504,474
Mortgage servicing rights hedging results		(50,689	)		154,269		(81,584	)		(87,651	)
		280,798

PennyMac Mortgage Investment Trust [PMT-PB] Filings
PennyMac Mortgage Investment Trust [PMT] Filings
PennyMac Mortgage Investment Trust [PMT-PA] Filings
PennyMac Mortgage Investment Trust [PMTU] Filings
PennyMac Mortgage Investment Trust [PMT-PC] Filings
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10-Q	[2023-08-03]
10-Q	[2023-05-04]
10-K	[2023-02-24]
10-Q	[2022-11-03]
10-Q	[2022-08-05]
10-Q	[2022-05-06]
10-K	[2022-02-25]
10-Q	[2021-11-05]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-02-26]
10-Q	[2020-11-06]
10-Q	[2020-08-07]
10-Q	[2020-05-08]
10-K	[2020-02-21]
10-Q	[2019-11-01]
10-Q	[2019-08-05]
10-Q	[2019-05-03]
10-K	[2019-02-26]
10-Q	[2018-11-07]
10-Q	[2018-08-07]
10-Q	[2018-05-07]
10-K	[2018-03-01]
10-Q	[2017-11-08]
10-Q	[2017-08-08]
10-Q	[2017-05-09]
10-K	[2017-02-28]
10-Q	[2016-11-04]
10-Q	[2016-08-05]
10-Q	[2016-05-06]
10-K	[2016-02-29]
10-Q	[2015-11-06]
10-Q	[2015-08-10]
10-Q	[2015-05-08]
10-K	[2015-03-02]
10-Q	[2014-11-07]
10-Q	[2014-08-11]
10-Q	[2014-05-09]
10-K	[2014-02-28]
10-Q	[2013-11-12]
10-Q	[2013-08-09]
10-Q	[2013-05-10]
10-K	[2013-02-28]
10-Q	[2012-11-09]
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PennyMac Mortgage Investment Trust [PMT-PB] Filings

PennyMac Mortgage Investment Trust [PMT] Filings

PennyMac Mortgage Investment Trust [PMT-PA] Filings

PennyMac Mortgage Investment Trust [PMTU] Filings

PennyMac Mortgage Investment Trust [PMT-PC] Filings