Summary of PennyMac Mortgage Investment Trust (PMT) 2025 Conference Call Company Overview - **Company**: PennyMac Mortgage Investment Trust (PMT) - **Date**: June 03, 2025 - **Key Partner**: PennyMac Financial Services, Inc. (PFSI) Core Strategies 1. **Credit Sensitive Strategies** - Focus on mortgage investments primarily exposed to credit risk, particularly subordinate pieces of securitizations [2][3] - Current focus on generating new securitizations of high credit quality loans, comprising about 15% of PMT's total equity [3][4] 2. **Interest Rate Sensitive Strategies** - Investments sensitive to interest rate changes, with a sophisticated hedge program to mitigate risks [4][5] - Mortgage servicing rights (MSRs) make up approximately 45% of PMT's total equity, benefiting from lower prepayment sensitivity due to their origination in 2020-2021 [20][21] 3. **Correspondent Aggregation** - Aggregation of loans from smaller originators, with a focus on both agency-eligible and non-agency loans [6][8] - PMT collaborates with PFSI to adjust correspondent activity based on capital availability and objectives [7] Financial Metrics - **Total Equity**: Approximately $1.9 billion, with $1.3 billion in common equity [9] - **Total Assets**: About $15 billion, with $3 billion in non-recourse debt [10] - **Monthly Securitization Size**: Ranges from $300 million to $400 million, retaining $25 million to $30 million of first loss pieces [12][13] Market Position and Competitive Landscape - PMT is capturing significant market share in the investor and second home collateral space, with one main competitor in non-agency deals [18] - The prime jumbo space is more competitive, with higher origination activity and more players involved [19] Risk Management - PMT employs a dual-pronged risk management strategy focusing on interest rate hedging and stable funding sources [25][28] - The company maintains a mid-single-digit leverage ratio and utilizes non-mark-to-market debt to avoid forced asset sales during market downturns [29][30] Dividend Policy - PMT has maintained a stable dividend of $0.40 per share, reflecting confidence in future earnings potential from both interest rate sensitive and credit sensitive strategies [31] Additional Insights - The company is not currently focused on significantly growing its MSR portfolio, preferring stability and predictability in cash flows [22] - The overall return expectations for interest rate sensitive strategies are currently lower due to an inverted yield curve, but there is potential for improvement if the curve steepens [23][24]

Financial Data and Key Metrics Changes - The company reported net income of $21,500,000 for the first quarter of 2025, resulting in diluted earnings per share of $0.71, with an annualized return on average assets of 1.03% and an annualized return on average tangible common equity of 14.14% [5][14] - There was a linked quarter decrease in loans of $94,400,000 or 2%, primarily due to payoff activity in the commercial real estate (CRE) portfolio [5][14] - The net interest margin increased by three basis points to 2.86%, and net interest income rose by $145,000 or 0.3% compared to the linked quarter [6][20] Business Line Data and Key Metrics Changes - First quarter commercial loan production totaled approximately $142,000,000, representing a 46% increase over the first quarter of 2024, with only $52,000,000 funded during the quarter [9][10] - The average rate of loans funded during the first quarter was approximately 7.3% [15] - Nonperforming assets remained low at 0.39% of total assets, with classified loans totaling $67,000,000 as of March 31, compared to $48,000,000 on December 31 [12][15] Market Data and Key Metrics Changes - The company noted that the Texas economy is anticipated to grow at a faster pace than the overall projected U.S. growth rate [6] - The securities portfolio decreased by $76,900,000 or 2.7% from the previous quarter, driven primarily by maturities and principal payments [16] Company Strategy and Development Direction - The company anticipates mid-single digit loan growth for the year despite the first quarter's loan reduction, with a loan pipeline exceeding $1,900,000,000, the largest in the last 24 to 36 months [5][10] - The company is expanding its commercial and industrial (C and I) initiatives, which now represent approximately 25% of the total pipeline [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the current market conditions and the potential for loan growth, despite recent uncertainties related to tariff announcements and negotiations [6] - The company expects to see a positive impact on margins due to anticipated repricing of the CD portfolio and new swaps implemented in the second quarter [33][34] Other Important Information - The company did not purchase any shares of common stock during the first quarter but has repurchased 196,419 shares at an average price of $26.82 per share after the quarter ended [19] - The effective tax rate for the first quarter was 18%, with an estimated annual effective tax rate of 18% for 2025 [22] Q&A Session Summary Question: Can you discuss the loan pipeline and guidance for loan growth? - Management confirmed that the loan pipeline is the largest seen in a while, with expectations of 25% to 30% pull-through historically [28] Question: What is the outlook for the margin given the CD portfolio? - Management anticipates a positive impact on the margin as a portion of the CD portfolio matures and reprices lower [33] Question: Can you provide context on the recent expense reductions? - The decrease in expenses was not due to targeted reductions but rather a result of lower salaries and employee benefits, along with other factors [39] Question: What is the status of the restructured CRE credit? - The restructured loan is located in Austin, Texas, and while it was moved to nonperforming status, the borrower has not missed any payments and leasing activity is positive [41] Question: What is the outlook for swap fee income? - Management expects swap fee income to increase in the upcoming quarters, projecting it to be several times higher than the first quarter [51]