PennyMac Mortgage Investment Trust(PMT) - 2025 Q3 - Quarterly Results

Executive Summary / Q3 2025 Results Overview PennyMac Mortgage Investment Trust delivered strong Q3 2025 financial results, marked by significant net income, increased book value, and strategic investment activities Third Quarter 2025 Highlights PennyMac Mortgage Investment Trust reported strong financial results for Q3 2025, with significant net income and an increase in book value per common share Q3 2025 Key Financial Highlights | Metric | Q3 2025 Value | | :---------------------------------- | :------------ | | Net income attributable to common shareholders | $47.8 million | | Net income per common share | $0.55 | | Annualized return on average common shareholders' equity | 14% | | Book value per common share (Sep 30, 2025) | $15.16 | | Book value per common share (Jun 30, 2025) | $15.00 | | Total loans acquired (UPB) | $4.6 billion | | Loans from PFSI fulfillment (UPB) | $3.3 billion | | Loans from PFSI production (UPB) | $1.3 billion | - Book value per common share increased to $15.16 at September 30, 2025, from $15.00 at June 30, 2025[4] - Loans acquired totaled $4.6 billion in unpaid principal balance (UPB), up 13 percent from the prior quarter[4] - Acquired $3.3 billion in UPB of conventional conforming and jumbo loan volume from PFSI through their fulfillment agreement, up 8 percent from the prior quarter[4] - Acquired $1.3 billion in UPB of loans from PennyMac Financial Services, Inc.'s (PFSI) production, up 28 percent from the prior quarter[4] CEO Commentary Chairman and CEO David Spector highlighted outstanding Q3 results, driven by strong income excluding market-driven value changes and effective interest rate risk hedging - Q3 results were primarily driven by strong income excluding market-driven value changes combined with strong interest rate risk hedging results[7] - Sold $195 million of opportunistic investments in GSE-issued CRT, realizing significant gains and freeing up capital for newly created assets with higher projected returns from private label securitization efforts[7] - Successfully completed four non-Agency securitizations totaling $1.5 billion in UPB and retained $140 million of newly created securities[7] - Anticipates earnings per share over the next year to average above the current dividend level, with continued strong performance and modest growth in book value per share[10] Notable Activity After Quarter End After the quarter end, PMT engaged in significant activities including the creation of new mortgage servicing rights, closing multiple securitizations, and generating new investments - Resulted in the creation of $46 million in new mortgage servicing rights (MSRs)[9] - Closed three Agency-eligible investor loan securitizations and one Jumbo loan securitization with a combined UPB of $1.5 billion[9] - Generated $84 million of net new investments in non-Agency subordinate bonds and $50 million in non-Agency senior bonds[9] - Purchased $876.4 million of Agency floating rate mortgage-backed securities (MBS)[9] - Sold the remainder of opportunistic investments in government sponsored enterprise (GSE)-issued credit risk transfer (CRT) for $195 million, realizing significant gains[9] Segment Performance Analysis An analysis of PMT's Credit Sensitive, Interest Rate Sensitive, Correspondent Production, and Corporate segments reveals varied financial performance and strategic activities in Q3 2025 Credit Sensitive Strategies Segment The Credit Sensitive Strategies segment reported a decrease in pretax income and net investment income quarter-over-quarter, with declining net gains on investments Credit Sensitive Strategies Segment Performance (in thousands) | Metric | Q3 2025 (in thousands) | Q2 2025 (in thousands) | Change (QoQ) | | :-------------------------- | :--------------------- | :--------------------- | :------------- | | Pretax income | $18,754 | $21,800 | -14.0% | | Net investment income | $18,849 | $21,900 | -14.0% | | Net gains on investments | $17,580 | $19,800 | -11.2% | | Net interest income | $1,297 | $2,100 | -38.2% | - Net gains on investments included $13.7 million from organically-created GSE CRT investments and $4.7 million from non-Agency subordinate bonds, offset by $0.8 million losses from other GSE CRT investments[12] - Net gains on organically-created CRT investments were $13.7 million, down from $20.3 million in the prior quarter, with valuation-related gains of $1.5 million reflecting relatively flat credit spreads[13] Interest Rate Sensitive Strategies Segment The Interest Rate Sensitive Strategies segment saw a significant turnaround to pretax income in Q3 2025, driven by higher net investment income and substantial net gains on MBS Interest Rate Sensitive Strategies Segment Performance (in thousands) | Metric | Q3 2025 (in thousands) | Q2 2025 (in thousands) | Change (QoQ) | | :-------------------------- | :--------------------- | :--------------------- | :------------- | | Pretax income (loss) | $32,346 | $(4,900) | N/A (swing to profit) | | Net investment income | $56,540 | $20,700 | +173.1% | | Net loan servicing fees | $15,429 | $23,947 | -35.6% | | Net gains on investments | $46,507 | N/A (not explicitly stated for Q2) | N/A | | Net interest expense | $5,396 | $17,100 | -68.4% | | Segment expenses | $24,194 | $25,600 | -5.5% | - Net loan servicing fees included $27.0 million in fair value losses on MSRs and $27.4 million in hedging losses, partially offset by $3.3 million of MSR recapture income[17] - Interest income increased to $173.8 million from $137.5 million in the prior quarter, primarily due to higher retained investments from Agency-eligible investor loan securitizations and the addition of $876.4 million of Agency floating rate MBS[19] Correspondent Production Segment The Correspondent Production segment experienced a decrease in pretax income in Q3 2025, despite increased acquisition of conventional conforming and jumbo loans Correspondent Production Segment Performance (in thousands) | Metric | Q3 2025 (in thousands) | Q2 2025 (in thousands) | Change (QoQ) | | :----------------------------------- | :--------------------- | :--------------------- | :------------- | | Pretax income | $9,244 | $13,700 | -32.6% | | Loans purchased (UPB) from PFSI fulfillment | $3.3 billion | $3.1 billion | +6.5% | | Loans acquired from PFSI production (UPB) | $1.3 billion | $1.0 billion | +30.0% | | Segment revenues | $22,907 | N/A (not explicitly stated for Q2) | N/A | | Net gains on loans acquired for sale | $14,857 | $17,806 | -16.6% | | Net interest income | $4,857 | N/A (not explicitly stated for Q2) | N/A | | Segment expenses | $13,663 | $13,100 | +4.3% | | Weighted average fulfillment fee rate | 18 basis points | 19 basis points | -1 bp | - PMT purchased $3.3 billion in UPB of conventional conforming and jumbo loans through its fulfillment agreement, up 8 percent compared to the prior quarter[23] - Acquired $1.3 billion in UPB of loans from PFSI's production for inclusion in private label securitizations, up from $1.0 billion in the prior quarter[23] - Net gains on loans acquired for sale decreased $2.9 million from the prior quarter, but included gains from increased demand for private label securitization and whole loan execution[24] Corporate Segment The Corporate segment reported a pretax loss of $13.3 million, with a slight increase in corporate revenues and relatively stable corporate expenses Corporate Segment Performance (in thousands) | Metric | Q3 2025 (in thousands) | Q2 2025 (in thousands) | Change (QoQ) | | :---------------- | :--------------------- | :--------------------- | :------------- | | Pretax loss | $(13,346) | N/A (not explicitly stated for Q2) | N/A | | Corporate revenues | $936 | $700 | +33.7% | | Corporate expenses | $14,282 | $14,400 | -0.8% | | Management fees | $6,912 | N/A (not explicitly stated for Q2) | N/A | - Corporate expenses consisted of management fees of $6.9 million and $7.4 million of remaining expenses[27] Financial Statements The financial statements provide a detailed overview of the company's balance sheet and operational performance, highlighting significant changes in assets, liabilities, and net income Consolidated Balance Sheets The consolidated balance sheet shows a significant increase in total assets and liabilities quarter-over-quarter and year-over-year, primarily driven by growth in mortgage-backed securities and loans held for investment Consolidated Balance Sheet Highlights (in thousands) | Metric (in thousands) | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | YoY Change | | :-------------------------- | :----------- | :----------- | :----------- | :--------- | :--------- | | Total assets | $18,525,671 | $16,801,119 | $13,055,654 | +10.38% | +41.90% | | Total liabilities | $16,646,362 | $14,935,474 | $11,118,867 | +11.46% | +49.72% | | Total shareholders' equity | $1,879,309 | $1,865,645 | $1,936,787 | +0.73% | -3.00% | | Mortgage-backed securities at fair value | $4,609,164 | $3,967,045 | $4,182,382 | +16.19% | +10.20% | | Loans held for investment at fair value | $5,983,197 | $4,566,532 | $1,429,525 | +31.04% | +318.55% | | Mortgage servicing rights at fair value | $3,668,755 | $3,739,106 | $3,809,047 | -1.88% | -3.68% | | Assets sold under agreements to repurchase | $7,708,183 | $6,826,855 | $5,748,461 | +12.91% | +34.10% | | Asset-backed financing of variable interest entities at fair value | $5,439,582 | $4,176,128 | $1,334,797 | +30.25% | +307.54% | Consolidated Statements of Operations The consolidated statements of operations show a significant improvement in net income attributable to common shareholders, swinging from a loss to a profit in Q3 2025 Consolidated Statements of Operations Highlights (in thousands, except per share) | Metric (in thousands, except per share) | Q3 2025 | Q2 2025 | Q3 2024 | QoQ Change | YoY Change | | :-------------------------------------- | :------ | :------ | :------ | :--------- | :--------- | | Net investment income | $99,232 | $70,201 | $80,864 | +41.35% | +22.71% | | Total expenses | $52,234 | $53,195 | $54,330 | -1.81% | -3.86% | | Income before (benefit from) provision for income taxes | $46,998 | $17,006 | $26,534 | +176.37% | +77.19% | | (Benefit from) provision for income taxes | $(11,298) | $9,472 | $(14,873) | N/A (swing to benefit) | N/A (swing to benefit) | | Net income | $58,296 | $7,534 | $41,407 | +673.79% | +40.07% | | Net income (loss) attributable to common shareholders | $47,841 | $(2,921) | $30,952 | N/A (swing to profit) | +54.57% | | Basic earnings (loss) per common share | $0.55 | $(0.04) | $0.36 | N/A (swing to profit) | +52.78% | - Net gains on investments and financings increased significantly to $64.1 million in Q3 2025 from $33.7 million in Q2 2025 and $146.7 million in Q3 2024[38] - Net interest income turned positive at $1.7 million in Q3 2025, compared to a net interest expense of $(8.7) million in Q2 2025 and $(7.4) million in Q3 2024[38] Additional Information This section provides supplementary details on the company's tax position, its corporate profile, and important disclaimers regarding forward-looking statements Taxes PMT recorded a tax benefit of $11.3 million for the quarter, primarily due to fair value declines on MSRs and interest rate hedges held in its taxable REIT subsidiary - Recorded a tax benefit of $11.3 million[28] - The tax benefit was driven primarily by fair value declines on MSRs and interest rate hedges held in PMT's taxable REIT subsidiary[28] About PennyMac Mortgage Investment Trust PennyMac Mortgage Investment Trust is a mortgage real estate investment trust (REIT) that primarily invests in residential mortgage loans and mortgage-related assets - PennyMac Mortgage Investment Trust is a mortgage real estate investment trust (REIT)[31] - Invests primarily in residential mortgage loans and mortgage-related assets[31] - Externally managed by PNMAC Capital Management, LLC, a wholly-owned subsidiary of PennyMac Financial Services, Inc. (PFSI)[31] Forward-Looking Statements This section serves as a disclaimer, indicating that the press release contains forward-looking statements subject to change due to various risk factors - The press release contains forward-looking statements regarding financial results, future operations, business plans, and investment strategies, which are subject to change[33] - Factors that could cause actual results to differ materially include changes in interest rates, housing prices, macroeconomic conditions, compliance with laws and regulations, competition, availability of capital, cybersecurity risks, and the development of artificial intelligence[33] - The Company undertakes no obligation to publicly update or revise any forward-looking statements[34]