PennyMac Mortgage Investment Trust

risk identified on slide two of the earnings presentation that could cause the company's actual results to differ materially, as well as non-GAAP measures that have been reconciled to their GAAP equivalent in the earnings materials. Now, I'd like to introduce David Spector, Petty Mac Mortgage Investment Trust Chairman and Chief Executive Officer, and Dan Perotti, Petty Mac Mortgage Investment Trust's Chief Financial Officer.

Thank you, operator. For the first quarter, PMT produced a net loss to common shareholders of $1 million, or diluted earnings per share of negative one cent. Strong levels of income excluding market-driven value changes were offset by net fair value declines due to interest rate volatility and credit spread widening. PMT declared a first quarter common dividend of 40 cents per share. Book value per share at March 31st was $15.43, down modestly from December 31st. Current third-party estimates for industry origination averaged $2 trillion in 2025, reflecting projections for growth in overall volumes with moderate contributions from both refinance and purchase. Interest rates have been extremely volatile in recent periods, creating a challenging environment for most mortgage REITs. However, our diversified investment portfolio, efficient cost structure, and strong risk management practices enable us to effectively manage through these challenging market conditions. These risk management practices include a well-established interest rate hedging program and the establishment of unique non-market-to-market financing arrangements for the vast majority of our credit risk transfer investments, which enable us to effectively manage through volatile markets. Turning to slide five, our synergistic relationship with PFSI provides PMT with unique and proven competitive advantages. First, PMT leverages PFSI's best-in-class operating platform, including its deep and experienced management team, scaled servicing operations, and its large and agile multi-channel origination business, which provides PMT with a consistent and high-quality pipeline of loans for investment. Second, our structure allows PMT to efficiently deploy capital into long-term mortgage assets without the operational burdens associated with origination and servicing. And third, EFSI's deep access to the origination market, coupled with PMT's ability to execute private label securitizations and retain the related investments, positions P&T to capitalize on the evolving landscape for secondary market execution should the GSEs reduce their footprint. This provides us with access to unique investment opportunities that we believe will generate attractive risk-adjusted returns over time. Slide six highlights our ability to organically create investments from our own private label securitization activity and importantly, the significant opportunity presented by the broader loan pipeline. The increased volume of non-owner-occupied and jumbo loans underscores the potential for future investment, and this growing pipeline of loans provides us with flexibility and optionality, allowing us to strategically invest in assets that align with our long-term return objectives. In recent periods, PMT has been among the largest issuers of private label securitizations, demonstrating our expertise and leadership in this space. In the first quarter, we successfully completed three securitizations of investor loans, totaling $1 billion in unpaid principal balance, retaining $94 million in new investments with returns on equity expected to be in the mid-teens. We believe that our position as the producer of the underlying loans is a competitive advantage, providing us with the ability to review and diligence the loans for securitization and subsequent investment. Additionally, our position as the servicer of the underlying loans uniquely positions us to work directly with borrowers in times of stress to minimize losses, as evidenced by the strong historical performance of our investments in lender credit risk transfer. Looking ahead, we expect to continue closing approximately one securitization of non-owner-occupied loans per month, and we anticipate closing approximately one jumbo loan securitization per quarter beginning in the second quarter. This consistent cadence of securitizations underscores our commitment to leveraging our origination capabilities and actively participating in the private label securitization market. Turning to slide five, Approximately two-thirds of PMT shareholders' equity is currently invested in the seasoned portfolio of MSR and the unique GSE lender risk share transactions we invested in from 2015 to 2020. As the majority of mortgages underlying these assets will originate during periods of very low interest rates, we continue to believe these investments will perform well over the foreseeable future, as low expected prepayments have extended the expected lives of these assets. While credit spreads have widened in the current economic environment, delinquencies remain low. This can be attributed to the overall credit strength of the consumer combined with the substantial accumulation of home equity in recent years due to continued home price depreciation. Mortgages underlying P&T's large investment in lender-originated risk share have a low weighted average current loan-to-value ratio below 50%. As a result, we continue to expect that realized losses will be limited. MSR investments account for approximately half of PMT's deployed equity. The majority of the underlying mortgages of these MSRs remain far out of the money, and we expect the MSR asset to continue producing stable cash flows over an extended period of time. MSR values also continue to benefit from the higher interest rate environment as the placement fee income PMT receives on custodial balances is closely tied to short-term interest rates. Similarly, these characteristics are expected to support the performance of these assets over the long term. In closing, our risk-managing capabilities and diversified investment strategies, which include a seasoned MSR and CRT portfolio, combined with a growing securitization platform, positioned us very well to continue delivering attractive risk-adjusted returns to our shareholders in 2025 and beyond. And we remain confident in our ability to successfully navigate a volatile and evolving market. Now, I'll turn it over to Dan, who will review the drivers of PMT's first quarter financial performance and PMT's run rate return potential.

Thank you, David. TMT reported a net loss to common shareholders of $1 million in the first quarter, or negative one cent per diluted common share. The credit-sensitive strategies contributed $1 million to pre-tax income. Losses from organically created CRT investments were $5 million. Investments in non-agency subordinate MBS generated gains of $4 million, and investments in CAS and stacker bonds generated gains of $2 million. Other credit-sensitive strategies contributed losses of $.2 million. The interest rate-sensitive strategies contributed a pre-tax loss of $5 million. Fair value declines on MSR investments were $56 million as the decrease in mortgage rates drove an increase in future payment projections. These fair value declines were partially offset by the combined impact of changes in the fair value of MBS, interest rate hedges, and related income tax benefits. MBS fair value increased by $65 million due to the decline in market interest rates. Interest rate hedges decreased by $40 million. Declines on MSRs held in PMT's taxable REIT subsidiary were the primary driver of the $16 million tax benefit. The fair value of PMT's MSR asset at the end of the quarter was $3.8 billion, down slightly from December 31st as fair value declines and runoff were partially offset by newly originated MSR investments. Delinquency rates for borrowers underlying PMT's MSR portfolio remain low, while servicing advances outstanding decreased to $84 million from $105 million at December 31st. Note principal and interest advances are currently outstanding. Total correspondent loan acquisition volume was $23 billion in the first quarter, down 18% from the prior quarter and consistent with the overall decline in the size of the origination market. Correspondent loans acquired for PMT's account totaled $3 billion, down 20% from the prior quarter. PMT retained 21% of total conventional correspondent production in the first quarter, up from 19% in the fourth quarter. We expect this percentage to remain between 15 to 25% in the second quarter of 2025 as we continue pursuing investment opportunities in the private label securitization market. PMT also acquired $637 million in UPB of loans acquired or originated by TFSI for inclusion in private label securitizations, up from $437 million in the prior quarter. Income from PMT's correspondent production segment was $10 million, down from the prior quarter, which included gains on non-owner occupied loans due to credit spread tightening. The weighted average fulfillment fee rate was 19 basis points, up from 18 basis points in the prior quarter. Under the renewed Mortgage Banking Services Agreement with PFSI, effective July 1st, 2025, correspondent loans will initially be acquired by PFSI. However, PMT will retain the right to purchase up to 100% of non-government correspondent production from PFSI. In total, PMT reported $41 million of net income across its strategies. excluding market-driven value changes and the related tax impacts, down from $51 million in the prior quarter, driven primarily by decreased income from correspondent production and seasonally low placement fees on custodial balances and deposits. Slide 8 of our earnings presentation outlines the run rate return potential expected from PMT's investment strategies over the next four quarters. PMT's current run rate reflects a quarterly average of 35 cents per share, down from 37 cents per share in the prior quarter. The return potential for credit-sensitive strategies increased due to higher expected yields as credit spreads have widened. The return potential for interest rate-sensitive strategies declined due to compression between longer-dated asset yields and short-term financing rates since the beginning of the year. If the yield curve steepens further, we expect PMC's overall run rate would increase, driven by higher overall yields in the interest rate-sensitive strategy. Turning to capital, in February we issued $173 million in unsecured senior notes due in 2030, and we also retired $45 million of CRT term notes where the remaining assets were financed via repurchase agreements due to the size of the position. Through 2025, we will continue to seek opportunities to raise additional debt capital as we approach the maturity of our exchangeable note in 2026, as well as to provide additional funding for the potential expansion of our securitization efforts. We'll now open it up for questions. Operator?