PennyMac Mortgage Investment Trust (PMT) Earnings

Management highlights

- Overall Financial Results * Q2 2026 net income was $20 million, or 23 cents per diluted share, equal to a 6% annualized return on common equity * Book value per share at quarter-end was $14.83, a 1% decline from the end of Q1 2026; the quarterly common dividend remained at $0.40 per share * Total loan acquisitions in Q2 2026 were $4.8 billion UPB, consisting of $2.6 billion from correspondent production (down 8% QoQ, 17% YoY) and $2.2 billion for private label securitizations (up 44% QoQ, 123% YoY) - Strategic Portfolio Realignment * Beginning in June 2026, PMT stopped acquiring agency-eligible conventional conforming loans via correspondent production, and will now acquire 100% of all non-agency loan volume from PFSI * This strategic shift optimizes capital allocation by moving away from low-return MSR investments facing headwinds, and redeploys capital into higher-yielding credit-sensitive investments from the private label securitization program * Post-quarter-end, PMT entered an agreement to sell $13 billion UPB of low-coupon agency MSRs, expected to close at the end of August 2026 - Private Label Securitization Program Progress * Completed six private label securitizations totaling $2.2 billion UPB in Q2 2026, retaining $120 million in new subordinate bond investments for credit-sensitive strategies and generating $31 million in new MSR investments * Two additional securitizations totaling $692 million UPB were completed post-quarter-end, putting PMT on track to complete ~30 securitizations in 2026 * At quarter-end, the fair value of retained bonds from the program totaled $936 million, with 63% coming from non-owner-occupied loan securitizations * PMT expects to add more than $600 million in new retained investments in 2026, with expected return on equity in the low to mid-teens - Current Portfolio Composition * Approximately 50% of shareholder equity is deployed to long-standing MSR investments, which have a low 3.9% weighted average coupon and generate stable cash flows * 13% of equity is in seasoned GFC-era credit risk transfer investments, with a current average loan-to-value of 45% * Core leverage (debt-to-equity excluding non-recourse debt) was 6.2x at quarter-end, up from 5.6x QoQ due to growth in loans held for sale, and remains in line with expected levels; total debt-to-equity was 12x, up from 11x QoQ, driven by non-recourse consolidated debt for securitizations that is repaid only via associated loan cash flows

Guidance

- PMT maintained its current common share dividend at $0.40 per share, supported by expected sufficient taxable income to cover the dividend in coming periods - The projected average run rate return (income excluding market-driven value changes) is $0.33 per share per quarter over the next year, up from the prior quarter's projection of $0.31, with improvements driven by capital reallocation to higher-yielding subordinate bonds and higher expected MSR returns in a higher rate environment - PMT reaffirmed guidance of approximately 30 total private label securitizations completed in 2026, with more than $600 million in total new retained investments added across the full year - Management expects the gap between core leverage and total leverage metrics to continue growing as the private label securitization program expands

Segment performance

Credit-sensitive strategies: Contributed $11 million in pre-tax income, representing a 11% annualized return on equity. Organically created CRT investments contributed $6 million pre-tax, while private label securitization subordinate bond investments generated $5 million pre-tax in gains. This segment accounts for ~34% of total pre-tax income across all segments. Interest rate-sensitive strategies: Contributed $9 million in pre-tax income, representing a 3% annualized return on equity. Income excluding market-driven value changes was $20 million, up from $11 million in Q1 2026. The MBS portfolio fair value grew to $4.1 billion at quarter-end, up from $3.8 billion at the end of Q1. This segment accounts for ~28% of total pre-tax income across all segments. Aggregation and securitization segment: Reported $11 million in pre-tax income, down from $16 million in the prior quarter. Net gains on loans acquired for sale fell by approximately $8 million quarter-over-quarter, primarily due to lower acquisition volumes. This segment accounts for ~34% of total pre-tax income across all segments. Total company: Net income to common shareholders was $20 million, or 23 cents per diluted common share, with a 6% annualized return on common equity. Total net income excluding market-driven value changes across all segments was $32 million, up from $28 million in Q1 2026.

Risks & headwinds

- Earnings excluding market-driven value changes have remained below the current dividend level for multiple consecutive quarters - Higher interest rates slow overall mortgage origination activity, which can reduce the volume of loans available for PMT's securitization program - MSR returns face offsetting impacts from rising short-term rates, partially offsetting the benefits of slower prepayment speeds driven by higher long-term rates - Market-driven value declines can negatively impact near-term net income for credit-sensitive strategies, as seen in Q2 2026 results

Analyst Q&A

• Q: How have post-quarter-end interest rate increases impacted run rate earnings, particularly for MSR returns? /

  A: Higher long-term and mortgage rates are beneficial for MSR returns, as they slow prepayment speeds, which increases expected MSR earnings. Offsetting this, rising short-term rates create a partial headwind for returns. Net-net, the recent faster increase in long rates than short rates is a net positive, and could push run rate earnings a few pennies higher than the current $0.33 per quarter projection.

• Q: Will there be additional MSR sales after the announced $13 billion transaction, and could proceeds be parked in agency MBS? /

  A: PMT is now much more actively managing its portfolio to optimize returns. Management evaluates opportunities consistently, and will continue to pivot away from low-coupon, low-return MSRs as attractive sale opportunities arise to free up capital for higher-yielding redeployment.

• Q: How does the shift to only acquiring non-agency loans alter PMT's economic and contractual relationship with PFSI? /

  A: The underlying management agreement with PFSI remains unchanged. The main impact is lower total gain on sale at PMT, alongside lower fulfillment fees paid to PFSI, aligned with the core goal of reallocating equity away from lower-return agency MSR investments.

• Q: Will PMT deploy capital from MSR sales into third-party securitizations, or remain focused on organic investment creation? /

  A: PMT occasionally buys small positions in third-party securitizations when returns meet requirements, but prioritizes organic securitizations because it has direct insight into underlying loan quality via PFSI's servicing and due diligence. Organic creation remains the best path for capital redeployment from a return and risk perspective.

• Q: Will additional capital from MSR sales accelerate securitization pacing, and how do higher rates impact securitization execution? /

  A: Additional capital can support larger securitizations rather than a higher frequency of deals; there is substantial available opportunity across non-agency, jumbo, and non-QM loan segments to deploy all freed-up capital. Higher rates will slow overall origination volume, but lower market supply also increases investor demand for PMT's securitizations, creating a partial offsetting tailwind for execution.