PennyMac Mortgage Investment Trust Q1 FY2026 earnings call

David Spector mentioned PMT's first quarter net income was $14 million or $0.16 per diluted common share, impacted by lower contribution from interest rate sensitive strategies but offset by improved results in aggregation and securitization segment. Renamed Correspondent Production segment to aggregation and securitization segment. Completed 8 private label securitizations totaling $2.8 billion in UPB, resulting in retention of $190 million of new subordinate bond investments and $12 million of new senior bond investments, and generated $40 million of new MSR investments. Momentum continued after quarter end with additional securitizations. Fair value of subordinate bonds in credit-sensitive strategies totaled $744 million with specific composition. Interest rate-sensitive strategies held $94 million in fair value of senior and mezzanine bonds. Approximately 60% of shareholders' equity deployed to MSRs and GSE credit risk transfer investments. Earnings excluding market-driven value changes below dividend level for past several quarters. Actively evaluating asset allocation and investment opportunities. Dan Perotti reviewed financial performance, including contributions from different strategies, impact of market-driven value changes, sale of agency fixed rate MBS, and redemption of exchangeable senior notes. Debt to equity ratio details.

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. Credit-sensitive strategies contributed $16 million to pretax income, generating an annualized return on equity of 17%. Gains from organically created CRT investments were $10 million, including $7 million of realized gains and carry and $3 million of market-driven value gains from credit spread tightening. Investments in subordinate MBS from private label securitizations generated gains of $6 million, $2 million of which were market-driven value gains. Interest rate-sensitive strategies contributed pretax income of $8 million for an annualized ROE of 3%. Income excluding market-driven value changes for the segment was $11 million, down from $21 million in the prior quarter. Aggregation and securitization segment reported pretax income of $16 million compared to a pretax loss of $1 million in the prior quarter. PMT reported $28 million of net income across strategies, excluding market-driven value changes, up from $21 million in the prior quarter, primarily due to increased contribution from aggregation and securitization segment. Book value per share on March 31 was $14.98, down 2% from the end of the prior quarter. PMT paid a quarterly dividend of $0.40 per share.

Expect to maintain common share dividend of $0.40 per share. Projected average run rate return of $0.31 per quarter for next year. Expect to continue securitization activity with pace to complete approximately 30 securitizations in 2026. Evaluate overall equity allocation and investment opportunities to refine and optimize returns.

Q: Question related to comments on Slide 9 about actively evaluating asset allocation and new investment opportunities, including non-QM or home equity and sales of lower returning assets.

A: David Spector said it's all of the above, evaluating MSR portfolio, considering non-QM securitization, and recycling out of lower returning assets into higher returning ones.

Q: Just the change in ROE expectation from $0.40 to $0.31, drivers.

A: Daniel Perotti said bigger driver on MSRs due to increased prepayment speeds, higher runoff of MSR assets, lower servicing fees, and Agency MBS decline related to short-term rate expectations.

Q: Bridge from $0.16 per share this quarter to normalized.

A: Daniel Perotti said rates increased, slower prepayments on MSRs but still elevated, and allocation out of MSRs and into other investments.

Q: Sale of roughly $0.5 billion of MBS on tightening to redeploy towards retained securitization, glide path or tactical.

A: Daniel Perotti said tactical, not necessarily continuous wind down of portfolio but continuously evaluate based on market spreads.

Q: Unsecured corporate debt stack for next 24 months, opportunistic refinancing.

A: Daniel Perotti said issued additional convertible debt and baby bonds, no immediate plans but will be opportunistic.

Q: Opportunity in non-agency securitization, limited opportunity or capital constrained.

A: David Spector said capital constrained, more opportunity to scale credit-sensitive strategies, grow equity allocation in credit-sensitive strategies.

Q: Increased non-QM volume, crossover in traditional agency originator correspondent partner.

A: David Spector said good amount of correspondent getting into non-QM lending, seeing good receptivity with broker partners, and being diligent in selling/forward selling non-QM product.