PennyMac Mortgage Investment Trust

Good afternoon and welcome to PennyMac Mortgage Investment Trust's first quarter 2026 earnings call. Additional earnings materials, including presentation slides that will be referred to in the call, as well as an Excel file with supplemental information, are available on PennyMac Mortgage Investment Trust's website at pmt.pennymac.com. Before we begin, let me remind you that this call may contain forward-looking statements that are subject to certain risks 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, PennyMac Mortgage Investment Trust Chairman and Chief Executive Officer, and Dan Perotti, PennyMac Mortgage Investment Trust Chief Financial Officer.

Thank you, Operator. Good afternoon, and thank you to everyone for participating in our first quarter 2026 earnings call. Starting on slide three, PMT's first quarter net income was $14 million, or 16 cents per diluted common share, representing a 4% annualized return on common equity. These results were impacted by a lower contribution from our interest rate-sensitive strategies primarily due to a decrease in servicing fees as a result of seasonality and a larger-than-expected MSR runoff related to higher note rate loans. These impacts were partially offset by improved results in our aggregation and securitization segment. PMT paid a quarterly dividend of $0.40 per share, and book value per share March 31st was $14.98, down 2% from the end of the prior quarter. Turning to slide five, I would like to note we have renamed what was previously the Correspondent Production segment to the Aggregation Securitization segment. We believe this name more accurately captures the breadth of PMT's participation in the mortgage ecosystem, specifically our focus on aggregating high-quality loans for execution in the secondary market to drive organic asset creation. In total, During the first quarter, PMT purchased $4.3 billion in UPV of loans from PFSI. $2.8 billion in UPV was through its correspondent purchase agreement with PFSI, for which PMT pays fulfillment fees. The remaining $1.5 billion represented loan sales from PFSI to PMT outside of their loan purchase agreement, where PMT's private label securitization platform provided optimal secondary market execution for PFSI. Slide 6 highlights the continued success of our organic investment creation engine. Similar to last quarter, we completed eight private label securitizations totaling $2.8 billion in UPB. This activity resulted in the retention of $190 million of new subordinate bond investments in the credit-sensitive strategies and $12 million of new senior bond investments in the interest rate-sensitive strategies. We also generated $40 million of new MSR investments. Our momentum has continued after quarter end, with two additional securitizations completed and another one priced, totaling $1.1 billion in UPV. And we remain on pace to complete approximately 30 securitizations in 2026, which we expect will build us substantial foundation of investments with returns on equity in the low to mid-teens to support future earnings. On slide seven, we have provided a snapshot of the high-quality investments we are creating through our private label securitization program. At quarter end, the fair value of subordinate bonds within our credit-sensitive strategies totaled $744 million. 26% of this portfolio is comprised of bonds from non-owner-occupied loan securitizations. 20% is comprised of bonds from jumbo loan securitizations, with the remainder primarily from agency-eligible owner-occupied loan securitizations. As you can see, these investments feature exceptional credit characteristics, including a weighted average FICO at origination of 774, a weighted average LTV and origination of 72, and negligible delinquencies. Within our interest rate-sensitive strategies, as a quarter end, we held $94 million in fair value of senior and mezzanine bonds. These investments are diversified across our jumbo, non-owner-occupied and agency-eligible owner-occupied loan securitizations, and similar to our credit-sensitive bonds, these investments are backed by high-quality collateral with weighted average original FICO scores in the 770 range and original loan-to-value ratios in the low 70s. This consisting credit quality across these organically created assets underscores our ability to produce attractive, high-yielding investments. On slide 8, approximately 60% of PMT shareholders' equity remains deployed to longstanding investments in MSRs and our unique GSE credit risk transfer investments. Mortgage servicing rights account for nearly half of shareholders' equity, providing stable cash flows from a portfolio with a low weighted average coupon of 3.9%. Our organically created GSE CRT investments represent 12% of shareholders' equity and consist of season loans with a weighted average current LTV of 46%. Turning to slide nine, While our diversified portfolio is constructed of investments with strong underlying fundamentals, we acknowledge our earnings excluding market-driven value changes have been below our dividend level for the past several quarters. As you can see, we are showing an average run rate return of $0.31 per quarter for the next year. In focusing on the interest rate-sensitive strategies, increased amortization on higher coupon loans, as well as reduced expectations for declines in short-term interest rates, which drive financing costs, has lowered expected returns on MSRs in the near term. As is our longstanding practice, we continue to actively evaluate our overall equity allocation and investment opportunities to refine and optimize our returns on a go-forward basis. We are working diligently to reposition PMT to capture the opportunities more aligned to our long-term return hurdles. Our momentum in organic investment creation remains strong, and we have successfully positioned PMT as a leader in the private label securitization market. By leveraging our unique ability to create credit-sensitive, high-quality assets and drive our overall returns higher through disciplined capital allocation, I remain confident in our strategy to support our dividend and create long-term value for our shareholders. Now I'll turn it over to Dan to review the first quarter financial performance.

Thank you, David. Net income to common shareholders was $14 million, or $0.16 per diluted common share in the first quarter, or a 4% annualized return on equity to common shareholders. Our credit-sensitive strategies contributed $16 million to pre-tax income, generating an annualized return on equity of 17%. Gains from organically created CRT investments were $10 million, which included $7 million of realized gains in carry and $3 million of market-driven value gains from credit spread tightening. Investments in subordinate MBS from our private label securitizations generated gains of $6 million, $2 million of which were market-driven value gains. The interest rate-sensitive strategies contributed pre-tax income of $8 million for an annualized ROE of 3%. Income excluding market-driven value changes for this segment was $11 million, down from $21 million in the prior quarter, impacted by increased prepayment speeds during the quarter, particularly on higher note rate MSRs, which drove higher runoff of our MSR assets, as well as lower servicing fees from seasonality and lower placement fees on custodial balances as a result of lower short-term interest rates. Regarding market-driven value changes, our hedging activities during the quarter yielded a small net decline as the $40 million MSR fair value increase was more than offset by $46 million of net declines in fair value of MBS and interest rate hedges, including the related tax expense. Additionally, during the quarter, we sold $477 million of agency fixed-rate MBS to capitalize on intra-quarter spread tightening resulting from the GFC MBS purchase announcement, and we redeployed the capital into retained investments from our private label securitizations. The aggregation and securitization segment reported pre-tax income of $16 million compared to a pre-tax loss of $1 million in the prior quarter. prior quarter amount was primarily driven by spread widening on jumbo loans during the aggregation period and lower overall margins. In total, PMT reported $28 million of net income across its strategies, excluding market-driven value changes, up from $21 million in the prior quarter primarily due to an increased contribution from the aggregation and secured addition cycle. I want to address our dividend in the context of our current results and the updated run rate return potential. While projections for income excluding market-driven value changes remain below the dividend level, it is important to note that we expect to maintain the common share dividend at $0.40 per share, which is supported by our taxable income, and which we expect to be sufficient to fully cover the dividend at its current level. Turning to slide 13, we highlight the flexible and sophisticated financing structures PNP has in place to support its diversified portfolio of investors. During the quarter, we received $345 million of exchangeable senior notes originally due in March of 2026 using capacity from existing financing lines. And finally, on slide 14, we continue to believe that debt-to-equity excluding non-recourse debt is the best metric for measuring our core leverage, and that ratio declined to 5.6 times at quarter end from 6 times at the prior quarter end within our expected range. P&T's total debt-to-equity increased to approximately 11 to 1 from 10 to 1 at December 31st as we continue to retain investments from securitizations. The increase in our total debt-to-equity ratio reflects growth in non-recourse debt associated with these transactions, where all securitized loans are required to be consolidated on our balance sheet for accounting purposes. As a reminder, the source of repayment for this debt is limited to the cash flows from the associated loans in each private-label securitization mitigating any additional exposure to PMT. We expect the divergence between these two metrics to continue increasing as our securitization program grows. We'll now open it up for questions. Operator?