PennyMac Mortgage Investment Trust — Third Quarter 2026 Earnings Summary

Financial Performance:

• Reported a net loss attributable to common shareholders of $36 million ($0.41 per share) on net investment income of $36 million.
• Adjusted net income attributable to common shareholders was $30 million, resulting in adjusted earnings per share (EPS) of $0.35.
• Net investment income decreased 50% quarter-over-quarter (Q/Q) and 63% year-over-year (Y/Y).
• Adjusted net income decreased 42% Q/Q and 5% Y/Y.
• Adjusted EPS decreased 42% Q/Q and 5% Y/Y.
• Book value per share was $14.03 at period end, down 5% Q/Q and 7% Y/Y.
• Annualized adjusted return on equity (ROE) was 9%, up 3% Q/Q and flat Y/Y.
• GAAP annualized ROE was (11)%, compared to 6% in the prior quarter and 14% in the prior year.
• Total expenses were $53 million, down 1% Y/Y.
• Net loan servicing fees were $242 million, up significantly from $40 million in the prior quarter.
• Net losses on investments and financings were $162 million, compared to a gain of $22 million in the prior quarter.
• Interest income was $314 million, up 37% Y/Y; interest expense was $364 million, up 60% Y/Y.

Guidance and Future Outlook:

• Projected run-rate return potential increased to $0.38 per share.
• Management expects to decrease the current dividend in favor of share repurchases due to the company trading at a steep discount to book value.
• Anticipates lower realization of MSR cash flows due to lower prepayments in the near term.
• Plans to continue rotating capital into organically created, higher-returning credit investments.

Business Segments and Product Lines:

• Credit Sensitive Strategies: Reported a pretax loss of $42 million (annualized ROE of (41)%). Income excluding market-driven value changes was $12 million. Fair value of organically-created CRT investments was $878 million (down 6% Q/Q). Fair value of subordinate MBS held in VIEs from private label securitizations was $930 million (up 9% Q/Q).
• Interest Rate Sensitive Strategies: Reported pretax income of $36 million (annualized ROE of 12%). Fair value of the MSR portfolio was $3.5 billion (down 2% Q/Q). Fair value of the MBS portfolio was $4.3 billion (up 6% Q/Q).
• Aggregation and Securitization: Reported pretax income of $2 million (annualized ROE of 5%). Total UPB of loans acquired was $3.276 billion, down 32% Q/Q.
• Corporate and Other: Reported a pretax loss of $13 million.
• Securitization Activity: Completed eight securitizations in the quarter with a combined UPB of $2.9 billion. Generated $167 million in net new investments from private label securitizations.
• MSR Sales: Sold $13 billion in UPB of Agency MSRs during the quarter. Entered agreements to sell an additional $10 billion (expected close Q4) and $12 billion (expected close Q4) in Agency MSRs.
• Loan Acquisitions: Acquired $1.2 billion in UPB through correspondent production (down 53% Q/Q) and $2.1 billion in UPB from PFSI production (down 7% Q/Q).

Market and Competitive Landscape:

• Navigated a challenging market backdrop characterized by widening mortgage spreads and sharply rising benchmark interest rates.
• Rising interest rates and wider spreads pressured the net fair value of portfolio assets and reduced book value by approximately 5%.
• Higher interest rates drove increased interest expense due to higher financing balances and non-recourse asset-backed financing from securitization activity.

Risks and Challenges:

• Market-driven value changes resulted in significant losses, particularly in the Credit Sensitive Strategies segment due to wider credit spreads and increasing interest rates.
• Net losses on investments in the Interest Rate Sensitive Strategies segment were primarily driven by losses on MBS due to higher interest rates.
• Realization of MSR cash flows decreased to $85 million from $100 million in the prior quarter due to prepayments.
• Forward-looking statements highlight risks including interest rate changes, changes in mortgage and credit spreads, macroeconomic conditions, housing affordability, regulatory changes, and cybersecurity risks.

Management Commentary and Tone:

• Chairman and CEO David Spector stated the underlying portfolio performed well despite market headwinds, generating an annualized adjusted ROE of 9%.
• Management expressed confidence in the leadership team's ability to drive long-term value and noted the company is "very fortunate" to have a deep bench of talent.
• Spector highlighted the strategy of releasing capital from lower-yielding assets (MSRs) to redeploy proceeds into private-label securitizations expected to deliver low-to-mid-teens ROEs.
• Chairman Spector expressed gratitude to outgoing executives Doug Jones and Daniel Perotti for their contributions to the company's growth.

Other Key Points:

• The Board of Trustees approved a $130 million increase to share repurchase authorization, bringing total available capacity to over $200 million.
• Leadership Changes: Doug Jones, President and Chief Mortgage Banking Officer, will retire on June 30, 2027. Kevin Ryan, currently Chief Strategy Officer, will assume the role of CFO effective January 1, 2027. Daniel Perotti will remain in his role through the end of the year and serve in an advisory role through Q1 2027.
• Post-Quarter Activity: Completed one investor loan and one owner-occupied loan securitization ($756 million UPB) generating $93 million in net new investments. Priced an inaugural non-QM debt service coverage ratio securitization ($298 million UPB) with an expected close in early November.
• Purchased $548 million of Agency floating-rate MBS during the quarter.
• Recorded a tax provision of $9 million, driven primarily by gains on MSRs held in the taxable REIT subsidiary.