Executive Summary

Q1 2025 printed a net loss to common shareholders of $0.8M (diluted EPS $(0.01)) on net investment income of $44.5M; book value per share fell to $15.43 from $15.87 QoQ as interest rate volatility and credit spread widening drove MSR fair value declines partially offset by MBS gains and hedges .
EPS materially missed Wall Street consensus (actual $(0.01) vs $0.39*), while “Revenue” (S&P-defined) materially beat consensus (actual $189.1M* vs $92.3M*), highlighting the volatility of GAAP fair-value impacts versus analyst models; 8 estimates for EPS and 4 for revenue contributed to consensus* [GetEstimates].
Management lowered its run-rate EPS expectation to $0.35 per quarter (from $0.37 in Q4), citing yield-curve compression; dividend was maintained at $0.40 and expected to remain stable, supporting income investor sentiment .
Strategic activity stayed strong: three investor-loan securitizations ($1.0B UPB; $94M retained) and $173M unsecured notes issuance; CRT term notes retired ($45M), underscoring funding flexibility and growth in private-label securitization cadence (monthly investor deals; quarterly jumbo expected from Q2) .

What Went Well and What Went Wrong

What Went Well

Private-label securitization cadence and economics: three investor-loan deals ($1.0B UPB) with $94M retained; expected mid-teens ROE on subordinated bonds (and plan for one jumbo securitization per quarter beginning Q2) .
Strong “core” income excluding market-driven value changes and continued access to capital markets: issued $173M unsecured notes due 2030, extended maturities, and retired $45M CRT term notes; management highlighted differentiated non-mark-to-market CRT financing .
Correspondent platform and PFSI synergy: consistent pipeline, scalable fulfillment/servicing, and ability to organically create investments; retained 21% of conventional correspondent production in Q1 and expects 15–25% in Q2, enabling flexible capital allocation .

Selected quote: “PMT produced strong levels of income excluding market-driven value changes… offset by net fair value declines due to interest rate volatility and credit spread widening… firmly established PMT as a leading issuer of private label securitizations.” — David Spector, CEO .

What Went Wrong

Fair-value headwinds: MSR fair value declines of $55.8M and hedging losses of $39.9M drove segment pretax loss in Interest Rate Sensitive Strategies despite $62.4M MBS gains; net loan servicing fees swung to $(27.2)M vs $207.4M in Q4 .
Segment compression vs prior quarter: Credit Sensitive pretax fell to $1.1M (from $20.1M), driven by valuation losses on organically-created CRT ($14.5M) amid spread widening; Correspondent pretax decreased to $10.1M (from $22.5M), as Q4 benefited from stronger investor loan execution .
Book value down and run-rate trimmed: BVPS dropped to $15.43 and run-rate EPS reduced to $0.35; management cited yield-curve compression (longer-term asset yields vs short-term funding costs) and noted book value down ~2–3% in early Q2-to-date from volatility/spread widening .

Financial Results

GAAP Results vs Prior Periods

Metric	Q1 2024	Q4 2024	Q1 2025
Net Investment Income ($USD Millions)	$74.205	$107.927	$44.465
Net Income ($USD Millions)	$47.608	$46.535	$9.680
Net Income Attributable to Common ($USD Millions)	$37.153	$36.080	$(0.775)
Diluted EPS ($USD)	$0.39	$0.41	$(0.01)
Book Value per Share ($USD)	—	$15.87	$15.43

Actual vs Wall Street Consensus (S&P Global) – Q1 2025

Metric	Consensus	Actual
Primary EPS Consensus Mean ($USD)	$0.39*	$(0.01)*
Revenue Consensus Mean ($USD)	$92.3M*	$189.1M*
Primary EPS – # of Estimates	8*	—
Revenue – # of Estimates	4*	—

Values retrieved from S&P Global.
Note: PMT’s reported net investment income is $44.5M; S&P Global “Revenue” includes broader components of investment income and may not align to the company’s “net investment income” presentation [GetEstimates].

Segment Breakdown

Segment Pretax (Loss)/Income ($USD Millions)	Q4 2024	Q1 2025
Credit Sensitive Strategies	$20.1	$1.1
Interest Rate Sensitive Strategies	$25.5	$(5.5)
Correspondent Production	$22.5	$10.1
Corporate	—	$(12.1)

KPIs and Operating Metrics

KPI	Q4 2024	Q1 2025
Investor-Loan Securitizations Closed (UPB)	2 deals; $0.52B retained $52M; plus 1 deal post-Q4 retained $21M	3 deals; $1.0B UPB; retained $94M
CRT Term Notes Retired ($USD Millions)	$43	$45
Unsecured Senior Notes Issued ($USD Millions)	Repayed $210M exchangeable (Nov)	$173 issued due 2030
Correspondent Acquisitions (Total UPB)	$28.082B	$23.005B
PMT-Account Conventional/Jumbo Acquisitions (UPB)	$3.241B conventional; $0.256B jumbo	$2.437B conventional; $0.344B jumbo
Loans Acquired/Originated by PFSI Purchased by PMT (UPB)	$463M	$637M
Retention of Conventional Correspondent Production	19%	21% (Q1); guide 15–25% for Q2
MSR Fair Value ($USD Billions)	$3.867	$3.770
Servicing Advances Outstanding ($USD Millions)	$105	$84

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per common share	Q1/Q2 2025	$0.40 (maintained in Q4)	$0.40 and expected to remain stable	Maintained
Run-rate diluted EPS per quarter	Next 4 quarters	~$0.37 (Q4 2024 run-rate)	~$0.35 (Q1 2025 run-rate)	Lowered
Conventional correspondent retention	Q2 2025	~15–25% (anticipated in Q4 outlook)	15–25% expected; Q1 actual 21%	Maintained range
Investor-loan securitization cadence	2025	~1 per month (Q4 setup)	Continue ~1/month; jumbo ~1/quarter from Q2	Expanded to add quarterly jumbo
Capital actions	2025	Actively seek additional debt capital to address 2026 exchangeable notes	Issued $173M senior notes; continue seeking debt capital in 2025	Progressed

Earnings Call Themes & Trends

Topic	Q3 2024	Q4 2024	Q1 2025	Trend
Yield curve and run-rate earnings	Path toward $0.40 as curve de-inverts	Run-rate steady ~$0.37; upside if steepening	Run-rate trimmed to $0.35; upside if steepening/short rates decline	Moderation, cautious near-term
Private-label securitization strategy	Building investor-loan pipeline; first deal planned Q4/Q1	Two investor deals in Q4; aggregation ongoing; jumbo contemplated	Three investor deals in Q1; cadence monthly; jumbo quarterly from Q2	Scaling up
Capital structure and financing	Refinanced MSR/CRT notes; liquidity for maturities	Retired exchangeable notes; CRT notes	Issued $173M unsecured; retired $45M CRT notes; non-MTM CRT financing emphasized	Extended maturities; flexibility
Interest rate risk management	MSR hedging offsets; tighter hedge at PMT	MSR FV up with rates; hedges offset; tax impacts	MSR FV down with rates; hedging losses; global risk management reiterated	Volatility headwinds Q1
Regulatory/GSE footprint	Evolving footprint could favor PLS	PLS growth; jumbo/second liens assessed	Positioning to capitalize if GSEs reduce footprint; strong PFSI synergy	Structurally supportive

Management Commentary

“Strong core performance was offset by net fair value declines due to interest rate volatility and credit spread widening… we opportunistically issued $173 million in unsecured senior notes… and firmly established PMT as a leading issuer of private label securitizations.” — David Spector, CEO .
“Fair value declines on MSR investments were $56 million as the decrease in mortgage rates drove an increase in future prepayment projections… MBS fair value increased by $55 million… hedges decreased by $40 million.” — Daniel Perotti, CFO .
“We expect to continue closing approximately 1 securitization of nonowner-occupied loans per month, and… approximately 1 jumbo loan securitization per quarter beginning in the second quarter.” — David Spector .
“The combination of higher hedge costs… interest rate volatility and spread widening has decreased our book value by about 2% to 3% since the end of the quarter.” — Daniel Perotti .

Q&A Highlights

Book value and spread volatility: BV down ~2–3% QTD from volatility and spread widening; hedging helped contain impacts; non-mark-to-market CRT financing avoids forced selling in stress .
Capital allocation: Focus shifting toward credit-sensitive investments via securitizations; maintain some replenishment in interest-rate-sensitive strategies, balancing ROE and execution .
Dividend policy: Despite lower run-rate EPS ($0.35), dividend expected to remain stable at $0.40; visibility to improvement if the curve steepens or short rates decline .
Returns on new securitizations: Subordinate bond ROE mid-teens (~15%); limited secondary flow, PMT’s organic creation is key to scale .
Portfolio pairing: Retained senior mezz pieces can substitute for Agency MBS exposure; most retained pieces are credit-sensitive and not substitutes for TBA .

Estimates Context

EPS missed consensus: Q1 2025 diluted EPS $(0.01) vs $0.39*; driven by MSR fair-value declines and hedging losses tied to rate volatility and spread widening [GetEstimates] .
“Revenue” beat consensus: S&P Global revenue actual $189.1M* vs $92.3M*; highlights definitional differences from PMT’s net investment income ($44.5M) [GetEstimates].
Estimate coverage: 8 EPS estimates and 4 revenue estimates for Q1 2025*; forward consensus implies continued normalized quarterly EPS in the ~$0.37–$0.38* range, contingent on market conditions* [GetEstimates].

Values retrieved from S&P Global.

Key Takeaways for Investors

EPS miss vs consensus reflects fair-value mechanics: MSR sensitivity and hedging losses dominated Q1; “core” income remained solid and MBS gains offset part of the pressure .
Dividend stability remains a focal anchor: Management reiterated $0.40 and stability; near-term curve steepening or lower short rates would support run-rate recovery .
Private-label securitizations are the growth engine: Monthly investor-loan deals and quarterly jumbo expected to deliver mid-teens ROE credit investments; organic deal flow is a differentiator .
Balance sheet flexibility: New $173M unsecured notes and CRT term note retirements extend maturities and preserve optionality; non-MTM CRT financing reduces forced-selling risk during spread shocks .
Watch the yield curve: Run-rate EPS trimmed to $0.35 from $0.37; a steeper curve or lower short rates would improve interest-rate-sensitive earnings power .
Capital allocation tilting to credit-sensitive: Expect further deployment into sub-bonds; senior mezz retained selectively as Agency MBS substitutes .
Trading implications: Near term, headline EPS miss and BVPS decline can weigh on sentiment; medium term, stable dividend plus visible securitization cadence and credit ROEs provide catalysts as curve dynamics normalize .

PennyMac Mortgage Investment Trust (PMT)·Q1 2025 Earnings Summary