PennyMac Mortgage Investment Trust Q4 Earnings Call Highlights

PennyMac Mortgage Investment Trust (NYSE:PMT) reported fourth-quarter 2025 results that management said reflected strong earnings momentum and growing scale in private label securitizations, while also highlighting pressure in its correspondent production business and the impact of faster prepayments on mortgage servicing rights (MSRs).

Quarterly earnings and book value

Chairman and CEO David Spector said PMT generated net income to common shareholders of $42 million in the fourth quarter, equal to a 13% annualized return on common equity. Diluted earnings per share was $0.48, which exceeded the company’s $0.40 quarterly dividend. Book value per share rose to $15.25 at year-end from $15.16 as of September 30.

CFO Dan Perotti added that PMT produced $21 million of net income across its strategies excluding market-driven value changes, down from the prior quarter. He attributed the decline primarily to lower contributions from the correspondent segment and increased runoff from MSRs.

Acceleration in private label securitizations

Management emphasized a sharp increase in organic investment creation driven by private label securitizations in 2025. Spector said PMT completed 19 securitizations during the year totaling $6.7 billion in unpaid principal balance (UPB), up from two securitizations in 2024. Retained investments from these transactions grew to $528 million, compared with $54 million in 2024. He said the company’s cadence of issuance established PMT as a top-three issuer of prime non-Agency MBS in 2025.

In the fourth quarter alone, PMT completed eight securitizations totaling $2.8 billion in UPB and retained $184 million of new investments. The quarter’s deals included three non-owner-occupied transactions, three jumbo transactions, and two Agency-eligible owner-occupied transactions. After quarter end, the company completed three additional securitizations totaling $1.1 billion in UPB.

Looking ahead, Spector said the company currently expects to complete approximately 30 securitizations in 2026, with targeted returns on equity for retained investments in the low- to mid-teens.

Portfolio positioning, MSRs, and credit investments

Spector said PMT rotated capital in 2025 to optimize its return profile, including the purchase of $876 million of Agency floating-rate MBS and the sale of $195 million of “opportunistic” GSE-issued credit risk transfer (CRT) investments where the company had realized significant gains. He said the CRT sales reflected forward-looking expected returns that fell below PMT’s targets and freed up capital for higher-expected-return assets created through securitizations.

PMT’s equity allocation remained heavily weighted toward seasoned investments, according to Spector. He said about 60% of shareholders’ equity is deployed to MSRs and the company’s GSE credit risk transfer investments:

• MSRs: 46% of shareholders’ equity, which management said provides stable cash flows given a 3.9% weighted average coupon on the underlying loans, described as “far out of the money.”
• GSE CRT: 13% of shareholders’ equity, consisting of seasoned loans originated from 2015 to 2020 with a 46% weighted average current loan-to-value ratio; management said it continues to expect realized lifetime losses to be limited.

Perotti said credit-sensitive strategies contributed $24 million to pre-tax income in the quarter, generating a 27% annualized return on equity. He cited $12 million of gains from organically created CRT investments (including $8 million of realized gains in carry and $4 million of market-driven value gains from spread tightening) and $11 million of gains from subordinate MBS retained from private label securitizations (including $9 million of market-driven value gains).

Interest rate-sensitive strategies contributed $28 million of pre-tax income, generating a 10% annualized ROE. Perotti said higher prepayment speeds increased MSR runoff, and income excluding market-driven value changes in the segment fell to $21 million from $36 million in the prior quarter. He added that hedging produced favorable results: MSR fair value rose $26 million, partially offset by $7 million of net declines in fair value of MBS and interest rate hedges (including related tax benefits).

At year-end, the MSR asset was valued at $3.6 billion, down slightly from the prior quarter, as gains from changes in valuation inputs and new MSRs from production were offset by higher runoff. Perotti said delinquency rates for PMT’s primarily conventional MSR portfolio remained steady. Servicing advances increased to $97 million from $63 million in the prior quarter due to seasonal property tax payments, and he said no principal and interest advances were outstanding.

Correspondent production headwinds and competitive landscape

The correspondent production segment posted a pre-tax loss of $1 million. Perotti said the loss was driven primarily by spread widening on jumbo loans during the aggregation period and lower channel margins amid increased competition.

During the quarter, the UPB of loans acquired from PennyMac Financial Services (PFSI) through PMT’s fulfillment agreement totaled $3.7 billion, including $2.9 billion of conventional conforming correspondent volume and $800 million of non-Agency-eligible correspondent volume. PMT purchased 17% of total conventional conforming correspondent production and 100% of non-Agency-eligible correspondent production from PFSI in the fourth quarter. For the first quarter of 2026, PMT expects to purchase 15% to 25% of conventional conforming correspondent production and 100% of non-Agency-eligible loan volume, consistent with recent periods. The weighted average fulfillment fee rate was unchanged at 18 basis points.

In response to a question about competition in non-Agency production, management cited activity from Rocket Mortgage on the retail side and UWM on the broker side, and noted Redwood Trust as an intermittent competitor in jumbo. Management also said it was not seeing “a lot of bank competition” at the time.

Financing, leverage, and other Q&A highlights

Perotti said PMT raised $150 million of new unsecured financing through opportunistic reopenings of its Exchangeable Senior Notes due in 2029. He also said the company expects to retire $345 million of Exchangeable Senior Notes due in 2026 using capacity from existing financing lines.

Total debt-to-equity increased to approximately 10-to-1 from 9-to-1 at September 30, which Perotti said reflected growth in non-recourse debt tied to securitizations that must be consolidated for accounting purposes. He emphasized that repayment sources are limited to cash flows from the associated loans in each securitization. Debt-to-equity excluding non-recourse debt—a metric management described as core leverage—remained at 6-to-1, within the company’s expected range.

During the Q&A, management discussed several topics, including expectations that non-Agency spreads in January were stable to tightening “in sympathy” with Agency spreads and that demand for securitizations remained robust. Management also said it would consider selling MSRs opportunistically or for risk management purposes, noting the team’s experience transferring servicing, and discussed balancing attractive securitization returns with aggregation risk from holding loans prior to securitization.

About PennyMac Mortgage Investment Trust (NYSE:PMT)

PennyMac Mortgage Investment Trust (NYSE: PMT) is a publicly traded real estate investment trust (REIT) that primarily acquires and manages residential mortgage loans and mortgage-related assets. The company focuses on generating attractive risk-adjusted returns through investment in agency and non-agency residential mortgage pools, credit risk transfer securities, and residential mortgage whole loans. As a mortgage REIT, PennyMac Investment Trust seeks to capture both interest rate spread and potential price appreciation in its portfolio holdings.

Established with external management by PennyMac Financial Services, Inc, the trust leverages the sponsor’s mortgage servicing, underwriting and capital markets expertise.