PMT - Earnings call transcript Q4 2024 | PennyMac Mortgage Investment Trust

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Operator

Good afternoon, and welcome to PennyMac Mortgage Investment Trust Fourth Quarter and Full Year 2024 Earnings Call.

Additional earnings materials, including the presentation slides that will be referred to in this call are available on PennyMac Mortgage Investment Trust 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 2 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 would like to introduce David Spector, PennyMac Mortgage Investment Trust's Chairman and Chief Executive Officer; and Dan Perotti, PennyMac Mortgage Investment Trust's Chief Financial Officer.

You may begin.

David Spector

operator. you, Thank all strong XX% very of the quarter, performance fourth excluding PMT on results equity, a across excellent and return value levels investment driven generating strategies. market-driven produced changes in X by income, strong was to a diluted declared earnings million income common quarter dividend of Net per $XX and share. share $X.XX, or shareholders common PMT fourth per of $X.XX end year-end of share Book at was $XX.XX, from value prior the the quarter. per up

creation marked a investments return Importantly, of the organic will later. credit PMT, the on fourth I which quarter for to expand

the X, was produced income income from and the yield Slide to was remained X% year and on strategies. interest significant a attributable common as fair book X.X% to value with our for in the return value of XXXX shareholders hedging majority rights X.X%. common contributions Turning characterized by of offset the by rate-sensitive from full Even throughout PMT equity as the volatility which XX-year share net to dividend rate a all treasury, this year, volatility, $XXX X evidenced of of mortgage consistent year changes million the per strategies. servicing on interest investment the active ranged with stable

MBS the we included Also our opportunistic financing term as for tighter upcoming and reposition spread generally PMT's debt sale success of certain on balance worked extend credit during This the of and XXXX, sheet Agency issuance portfolio address rate interest in facets multiple business environment. to a maturities, of investments higher spreads. a of rebalance billion to major the $X.X in tightened, at

for an X agreement PFSI, banking mortgage synergistic this half decade. leader, PMT's industry companies a partnership solidifying between renewed with our unique also manager, the another We

we enter of All as with strong activities very XXXX. position PMT foundation a these

believe range, trillion, periods up the expertise growth volatility origination its market the time. mortgage environment. the the of to X% recent are in strength managing of third-party XXXX heightened will rates from our overall back performance in rates assets, underlying investments current mortgage-related volatility in into in opportunities reflecting changing highlights in its volumes. and ongoing in to present averaged fundamentals origination time originations we for long-term market, mortgage PMT's estimates total stable $X the Though Turning

to review the credit the is the advantage Turning investments key to Slide a competitive a that and and PMT's production loans diligence throughout an believe producer providing for has X, with underlying own the volumes. its MSR of create to loans us position selected history competitive ability We as and subsequent from our been organically investment. ability advantage, securitization

our servicer lender ability of the to uniquely underlying investments stress performance as with by to borrowers minimize the are times evidenced credit strong the loans, with historical Additionally, positioned risk transfer. in we of as directly work the losses in of unique

PMT securitizations recent expected investments million demand and of correspondent of In million created end, we complete loans, volume and private certain investments investor investor quarter a where After of an for its is credit $XX own organically This production to increased additional loans, new we investments securitization credit limits in from mid-teens. bonds. be renewed investments Return production. nonowner-occupied retain $XX securitizations expertise on thus these securitization label periods, driven investor GSEs strong has loans, for low X to in bonds. and agency-eligible retained to the new in equity loans. subordinate completed pricing create second leveraged of subordinate of type our a such to the coupled or with for homes, franchise of strength has on opportunity development of the such We as credit third

activity these loans loans other market pipeline With securities, as securitization into well receptive jumbo with for products and XXXX, through the securitization loan grows. investment for opportunities levels market of private of increased label of a as potential such origination the similar for available growing we a expect

Slide portfolio of GSE to share in and to risk unique PMT's lender Turning X, XXXX. MSRs approximately seasoned invested in currently a X/X transactions we the is shareholders' from of equity XXXX invested

the these were future the prepayments very rates, majority perform originated of these these lives continue low during have As assets. low periods of of interest expected well underlying mortgages expected the over we will believe extended to foreseeable assets investments as

as of the due remain years delinquencies substantial in the Additionally, price home appreciation. due continued to well the of accumulation consumer low strength recent to overall as equity home

share majority the as mortgages equity. risk characteristics stable custodial money to originated low losses producing long the of continue values cash underlying receives and fee from we rate approximately far and extended will underlying the for limited. to PMT's large we the and MSRs low placement the of The over higher PMT MSR in expected interest on of is half continue PMT's lender account mortgages These Similarly, expect remain of continue to balances MSR these time. also current support investment environment to flows the investments period XX%. the asset of term a weighted that benefit the performance over to of of rates. deployed below average out income MSR short-term assets are to tied delinquencies to realized be have closely expect loan interest valuation these

and be a alongside for strong underlying am securitization to expectations I attractive the seasoned to confident will MSRs consistent company of fundamentals, a our issuer Given deliver XXXX beyond. in in and CRT investor label risk-adjusted returns with continue portfolio PMT private and

review PMT's rate to over Now and return financial run PMT's of I'll drivers potential. the turn will quarter fourth performance it who Dan,

Daniel Perotti

and increasing the on earned in net diluted the from was investments $X.XX in common while was due CRT contributed million quarter losses rates, on opportunistic CAS credit-sensitive MBS PMT The in contribution $XX stacker in interest common bonds strategies. losses you, created offset investments subordinate fourth from and $XX shareholders million, income or other organically by per non-agency to strategies $XX pretax David. contribution to The Thank credit-sensitive income. share. million

As below XX-day weighted ratio X.X%, XX% outlook remains organically low December current rate of mentioned, a of our the David investments loan-to-value a underlying CRT both XX. average and with created for in favorable, as current delinquency

were the The offset rate from the of $XXX million. tax by held increase MSRs MSR $XX production taxable on million strategies interest increase in primary investments a $X and gains by pretax projections. value decrease were to Income by fair changes driver in runoff mortgage increases decreased sensitive value were originated the the expense. value of correspondent combined PMT's the in REIT income due were the and decreased value was slightly end asset related tax billion Interest value increases by rates. in future The MSR $X.X the up as from billion, rate the offset $X.X rate newly hedges, drove hedges MBS $XXX of slightly the at rates on million MBS, September investments impact at fair and from These quarter Fair MSR million as PMT's fair $XX income fair contributed in value gains of fair subsidiary mortgage interest XX, effects. million. prepayments. of of prepayment

due $XXX remain rates increased servicing tax Delinquency million currently outstanding. XX, payments. to portfolio outstanding principal while at seasonal borrowers MSR September interest low, underlying from property advances No to and for $XX million PMT's are advances

quarter. the X% PMT's the from $XX down overall fourth quarter, loans acquisition correspondent prior loan by quarter conventional PMT due of market. in production was the up in retained total quarter, from acquired the $X.X smaller totaled XX% volume fourth a prior loan the correspondent to billion XX% retaining larger XX% down driven billion, of correspondent from the production. account quarter, PMT third percentage conventional Total in Correspondent for conforming the

XXXX, continue label quarter investment market. in pursuing percentage We the remain we the securitization this XX% to in as XX% expect to private between opportunities first of

of and demand million. minimal private window $X Income from and segment contribution label from with our related of during loans Production related for related strong whole repurchase periods label the as XXXX, the of that's to the Profitability warranties segment violations recent time to at driven representations from to provided pretax X-year private loans release approximately liabilities The of increased investor securitization volumes securitizations by PMT's in high the losses. quarter the benefited was XXXX loan has the the also quarter. quarter, for execution was produced Correspondent of in income execution the for last securitization in from up

correspondent average fulfillment quarter. from prior was points, weighted down Under the initially basis PFSI. XXXX, services acquired will agreement The rate be banking loans in fee points effective XX X, XX July the mortgage with PFSI, by renewed basis

$XX value of to retain driven million PMT of PFSI. flows changes right the its reported primarily However, strategies, to impacts, of up income. tax million total, cash decreased production from excluding and in income across realization net correspondent XXX% prior MSR the related purchase market-driven by $XX PMT from the will up In and quarter, production nongovernment corresponding

higher outlines potential as prior the Slide are run longer. the for unchanged quarter. potential remain the see ahead, the share, $X.XX for X over return reflects investment expected average per PMT's quarters. We a increased strategies rate current next rates from PMT's Looking quarterly run to slightly X strategies return credit-sensitive expected short-term rate of from interest

the PMT's rate in environment. interest-sensitive somewhat return driven the in yields range, improvement strategies. further, is would production, If by see improvements these the overall rate-sensitive the overall $X.XX expect by decreased closer was in segment steepened. margin current yield expected a steepens the The potential also strategy increase, We to slightly the as curve yield correspondent we in given curve offset run higher interest segments

in of mature via full the the XXXX, that well where capital position. million due notes to retired funding securitization October, of CRT to Turning to were efforts. opportunities to address raise for we in size notes were additional senior exchangeable we debt maturity million for to to our November. in potential of of capital in the Also, our as matured repaid exchangeable will our XXXX, remaining look additional that note provide expansion $XX repurchase Through to due agreement assets $XXX position, term as of financed continue the we

up for questions. Operator? it open now We'll

Operator

Investment question to PMT. everyone Bose or from comes like with to the George Your would questions PennyMac only take line KBW. Trust Instructions] I [Operator first remind we of will related Mortgage

Bose George

as so does the there the we see we well? you Dan, a if get steepens Again, that rate Fed you mentioned kind the Or that need curve off bit? a that matter to yield of do does little outlook. run helps long end, sell the cut on

Daniel Perotti

sensitive up, if we that's and for really the really greater between the longer strategies improves If goes down. end end end overall see steepness we goes somewhat or shorter longer-dated Bose. And long the differentiation, the outlook rates curve whether spread or truly short-term perspective to No, around the ambivalent of that interest basically, correct, the the there. rate from see go rates the the up

Bose George

hedge, MSR similar would at sort you is strategy your of your of how it is just here? And kind tighter terms PFSI? then characterize Or in a it? PMT hedge versus of Or

Daniel Perotti

tighter and speaking, MSR gets PMT's it from benefit less its where that from this has MSR really a it Generally few ratio same recapture portfolio composition through other own hedge PMT agreement more refinances the years run run somewhat -- less those to portion of have not fewer have only have due PMT correspondent because retains last in PFSI it time PFSI, the the loans, it retains the interest versus is tighter loans over of to And side at refinanced loans some has less since PFSI, retained. rates that amount It rate we through also its concentration benefit a note a benefit, over origination perspective. of although PFSI the hedge we point PMT PFSI the than given if The to loans. going changing been upticking a at different hedge which acquired a has on greater channel are of with loans, the if has sensitivity portfolio benefit lower refinance. of PMT are

the it's MSR hedge because that PMT. -- at to for And lower. also sensitivity run X But note I those so portfolio for think PMT is generally those at also tighter the important reasons reasons, of a we

Operator

Erdner JonesTrading. And line your from next of comes with Matthew question the

Matthew Erdner

to on guys kind And touch of to the like follow-up and you what expect as coming a just a you how to with are kind their then Director seeing it of it play in, I'd you out? FHFA shrink footprint guys do GSE reform of whole? expecting? new And are kind as

David Spector

a the to vis-a-vis early what with thank that view Look, I point think really FHFA Matthew. the really good Well, one. Director to you, can and a of had GSEs, new new still excited FHFA with I the going you, prior always work is relationship it's Director. and tell to have we've the on do I'm

a were last my little time to it's going way is this things we be administration general to the of bit had I return in sense a think the place.

pertains reform, range out. of to always you, early a started But say think it really to play have number I X I to of GSE we to another it's that the or as way company, I going outcomes. managed since point a still tell can similar how one, view, it's

just tighten, in increase very where of expect credit because a But the that's GSEs in that what's or we've loans the label is to that increase, to in second securitization and we're private about fees operate ability given historically GSEs a up, organically the the to obviously, see operate. a was to up this loans to the excited things home an delivered back. we ability private We're taking on thus we've for spreads administration control. has pace company those very about. that like investor take to during investor production goes It loans much go time I loan that prepared [ But to long took and set we create seen come I environment place PMT to So GSEs seen the do to can't think or deal from us how for securitization saw label And as continue guarantee subject XX% and quarter, to exciting And we're we've that's at continue returns. to market the securitize removing that ] GSEs future. X market. really appropriate the the the that's Obama what's and PMT into we investments

organization is the Similarly, as other at looking investments well.

originations of over in and Our $X lot are those loan sold this PMT whole to billion the loans to of create are year. pace mid-teens a low PFSI plan is to will first on quarter of but jumbo do well. between a and in And the this they're securitization be being -- has sometime that that it, investment -- my year, first as half an call loan,

be in we that's the so would haven't of role time. to repositioning to very good the in shrink. in a kind to range, about that's to just last in a to to and very going the to been continue create very, assets in if mid-teens year were I'm over we're PMT a PMT ability position we that and -- important with ability do work the I been low And grow. done long think I the as GSE the to its securitization footprint see meaningful very play market excited really continue investments And for a as that

I Having will said fees that, have can PMT quo we And guarantee in fine. be don't decline. status see

generally, for I'm where So set I feel -- not opportunity about what the about is good and really generally very we're PMT. I'm at bullish

Operator

of line Cranston from question with comes next the your Trevor JMP. And Citizens

Trevor Cranston

When investor track as you a say X, about products And beyond loans the of and just can jumbo? of specifically loans? to follow-up per you're are comments securitization a thinking little for prime maybe would other clarify for Slide set guys guys to Or the such then opportunities. you on on talk also the credit month. previous things bit the you on that you are other that product securitization investor Can bit about jumbo? if a prime A there incorporate kind related and

David Spector

closed our matter in a the fact. we Look, of home QX. securitization investor loans, first today year of X Yes. second did X We as

maintaining I class at feel to said, which asset mentioned, I first -- loans, we're that, another of in least X that do at really of the umbrella also that securitization year. Having do this is pace as about, activity. plans -- good we'll And residential really jumbo looking, said I'm least at about half under the so I encouraged my as

disclosure, month full PFSI return also seconds. achieve quite investments closed-end loans we million targets. originating -- those $XXX there, looked and at over securitizing our We've it think I doesn't just of is a retaining

not half yet. in year. something of on see not mean, radar obviously, it's I it's there, the an the this as so radar, not I And opportunity that but first it's on the

it's the -- bit the market. where non-QM, class this really ] to kind we're invest before [ it's of are we anything look see more to a that prime particularly can And only something we in can different asset assets as we opportunities in, and a returns do a built going that But and at starting little be value price and seize that they've work of the about the organization there's enterprise non-QM we're testament they as but intrigued there lot of there, that done PMT all that it's in understand the to upon. that more and that out to

it mean, high I don't guarantee they balance going adjustments and loans for or up if an to up, fees execution we PMT. the capabilities best particular, don't low execution I best in to price go As LLPA put and robust they obviously, -- like our engines go pertains to to want agency or if that, look, optimize we're see level use loans our on for obviously,

Operator

comes with Hagen BTIG. of line next Eric Your the question from

Jake Katsikas

you to You of currently your is And liquidity for more have Katsikas of have, upon you Eric. against closer unsecured? get room you source the you to draw as here on to share guys what readily much MSRs? Jake including Can how most liquidity the the borrow maturity have available the

Daniel Perotti

Sure.

end $XXX of sheet you outstanding the the had, the balance we liquidity direct we quarter that in the if the terms million. at about of was liquidity look at So had that

have that also current against we of to quarter. able the at available dollars our end facilities, million we have the of hundred a collateral terms outstanding be financing to In draw the few

going toward a early prepared replace as potentially looking opportunities, that we're debt portion the the we're or at replace debt. of as As the the to the of we convertible, -- next maturity to year of upcoming remarks, markets or moving are capital maturity in XXXX, in mentioned -- I access that

offset So bond at, But we that convertible access did to to couple something that markets last would as us. actively done again, we a year to as be baby available year. area accessing potentially -- opportunities replace had an we we of to back or at move debt of issuance, also the look some that's is a that's XXXX, next market of maturity that's upcoming through will the that we looking some years

Operator

And from your comes with of UBS. the line next Harter Doug question

Douglas Harter

Dan, I from appreciate about think business? compared details to that we should the you giving around the of non-agency traditional gain How us conventional profitability the the correspondent securitization. business the

Daniel Perotti

overall in the gains the bit business better of correspondent margin terms section influence the a gains So aggregation in help generally or upwards. are the the of correspondent

business. that However, upward although necessarily time, have those correspondent has quarters. engaged historical whole been impact in the versus prior building it's the I few in -- our we to And although channels the going over for necessarily performance mean, business loan margin that not selling been not significantly loans past securitizing, this several quarter through or channel. overall to

see was that reflects as if an in GSE we spreads securitization. And over was the true typical run I And as which terms that. rate at actually well at sort quarter of our you of did could loan -- execute in look loans those both think it improvement execution. in whole this What

the aggregation doing quarters, we tightening have correspondent we we on we saw or level aggregating more same that month we've these contribution as contribution can to to been we were overall bit in this That's we that channel over that be improvement aggregating. necessarily a in in see saw expect that for market don't specific that saw you that from given to been so was a future that to as of months, what these each execute pipeline. deals did this quarter. rate, the that to the period our the past have run a But that And quarter a X that our deals, X in of of benefit it able led time

David Spector

of that many homes for the not nice loans having strong. securitization bid But homes said the holding very really the is are now deep. Doug, part second of in And is and the that, the those investor is right investors securitizing loans execution them. really

away market those in private event to to markets if were that there's GSE. And label then see an So deliverable you widen spreads from a rather finally, pretty securitization robust the caused dramatically. are the to loans

third there so And is that avenue.

like multiple seen to not that label past solely securitization, paths on it's be it's that for avenues product we've where and private reliant so in And other there's product delivered. the

Operator

it And at we questions remarks. back like have I would no to David for Spector to closing time. further turn this

David Spector

Well, Relations phone, I all of out. for with afternoon. you you Dan, to I and want an available -- Investor day. to us please contact don't hesitate for joining. if or Thank questions our additional to any or any Bye-bye. up to joining e-mail you by thank follow want to team every all everyone this they're want likewise reach And encourage with me

Operator

And concludes all for conference you, presenters. call. this participating. Thank you Thank today's

You disconnect. may now

PennyMac Mortgage Investment Trust (PMT) 30 Jan 252024 Q4 Earnings call transcript