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Item 7.01
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Regulation FD Disclosure.
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On March 17, 2020, PennyMac Mortgage Investment Trust (the “Company”) provided an update on its expected financial performance for the quarter ending March 31, 2020. The Company expects to report a loss per share in the range of $1.50 to $2.00. The Company estimates that its book value per common share, as of the market close on March 16, 2020, is approximately $19.50. The major drivers of the Company’s expected loss for the quarter ending March 31, 2020, are fair value losses on its investments in government-sponsored enterprise (“GSE”) credit risk transfer (“CRT”) and mortgage servicing rights (“MSRs”), largely offset by fair value gains on its interest rate hedges and mortgage-backed securities (“MBS”). The fair value losses on GSE CRT investments are primarily due to the overall widening of market credit spreads, which has increased in recent days. The Company notes that the fair value losses on its GSE CRT investments and MSRs are non-cash items. The Company expects record quarterly results from its Correspondent Production segment due to elevated acquisition volumes and margins that the Company expects to persist for the foreseeable future. The Company also reiterates the strength of its liquidity and capital position as more fully described in the slide presentation posted on the “Presentations” section of the Company’s Investor Relations website at http://www.pennymacmortgageinvestmenttrust.com and furnished on Form 8-K on March 16, 2020.
The information in Item 7.01 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of Section 18, nor shall it be deemed incorporated by reference into any disclosure document relating to the Company, except to the extent, if any, expressly set forth by specific reference in such filing.
Cautionary Statement Regarding Forward-Looking Statements
The estimates set forth above are based solely on currently available information, which is subject to change. The discussion above constitutes forward-looking statements regarding the Company’s future business expectations, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are predictions based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward-looking information, and our actual results and performance could differ materially from those set forth in the forward-looking statements due to a variety of factors including: 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; 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; declines in real estate or significant changes in U.S. housing prices or activity in the U.S. housing market; 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; the degree and nature of our competition; our dependence on our manager and servicer, potential conflicts of interest with such entities and their affiliates, and the performance of such entities; the availability, terms and deployment of short-term and long-term capital; the adequacy of our cash reserves and working capital; 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; 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 (“MBS”) in which we retain credit risk; our ability to foreclose on our investments in a timely manner or at all; increased prepayments of the mortgages and other loans underlying our MBS or relating to our mortgage servicing rights (“MSRs”), excess servicing spread (“ESS”) and other investments; 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; our exposure to risks of loss and disruptions in operations resulting from adverse weather conditions, man-made or natural disasters, the effects of climate change, or other events; 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; our ability to comply with
various federal, state and local laws and regulations that govern our business; developments in the secondary markets for our loan products; legislative and regulatory changes that impact the loan industry or housing market; changes in regulations or the occurrence of other events that impact the business, operations or prospects of government agencies such as the Government National Mortgage Association, the Federal Housing Administration or the Veterans Administration, the U.S. Department of Agriculture, or government-sponsored entities (“GSEs”) such as the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, or such changes that increase the cost of doing business with such entities; the Dodd-Frank Wall Street Reform and Consumer Protection Act and its implementing regulations and regulatory agencies, and any other legislative and regulatory changes that impact the business, operations or governance of mortgage lenders and/or publicly-traded companies; the Consumer Financial Protection Bureau and its issued and future rules and the enforcement thereof; changes in government support of homeownership; 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; and our failure to deal appropriately with issues that may give rise to reputational risk. These and other potential factors and uncertainties that could cause actual results to differ from the results predicted are described in more detail in the Company’s public reports filed with the Securities and Exchange Commission (the “SEC”), including the risks discussed in the “Risk Factors” section in the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and in the Company’s prior press releases, which are available on the Company’s Investor Relations website. In addition, any forward-looking statements contained herein are based on assumptions that the Company believes to be reasonable as of the date hereof. The Company undertakes no obligation to update these statements as a result of new information or future events.