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PM

PennyMac Mortgage Investment Trust (PMT)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered strong performance: net income to common of $47.8M and $0.55 diluted EPS, with a 14% annualized ROE and book value per share up to $15.16 .
  • Material beats vs S&P Global consensus: EPS $0.55 vs $0.38 consensus (+$0.17, +46%); Revenue $215.6M vs $97.9M consensus (+$117.7M, +120%). Values retrieved from S&P Global.*
  • Management raised medium-term earnings outlook, highlighting a ~$0.42 run-rate EPS per quarter and stated EPS over the next year should average above the $0.40 dividend; platform advantages in private-label securitization underpin growth .
  • Active capital rotation: sold $195M of opportunistic GSE CRT to fund higher ROE organic investments; purchased $876.4M agency floaters and completed four non-agency securitizations totaling $1.5B UPB with $140M retained; post-quarter, priced inaugural owner-occupied securitization .

What Went Well and What Went Wrong

What Went Well

  • Strong earnings power across strategies: pretax income of $32.3M in Interest Rate Sensitive and $18.8M in Credit Sensitive; correspondent pretax of $9.2M supported by jumbo and NOO pipelines .
  • Hedging and spread actions offset MSR fair value declines: $51M of fair value gains on Agency MBS/structured/non-agency senior MBS largely offset $27M MSR declines and $27.4M hedge losses as mortgage spreads tightened .
  • Private-label leadership accelerating organic investments: three investor loan securitizations ($1.2B UPB; $93M retained) and one jumbo securitization ($300M UPB; $45M retained) in quarter; targeted ROEs low-to-mid teens .

Management quotes:

  • “PMT produced outstanding results…with a 14 percent annualized return on common equity” .
  • “PMT’s current run rate reflects a quarterly average of $0.42 per share…higher than our $0.40 quarterly dividend” .
  • “Our relationship with PFSI…providing a key competitive advantage in the ability to organically create new investments” .

What Went Wrong

  • MSR valuation headwind: $27.0M fair value loss on MSRs amid rate moves; net loan servicing fees down to $15.4M vs $23.9M in Q2 .
  • Hedge losses persisted: $27.4M hedging losses within the interest rate sensitive segment, albeit largely offset by spread gains .
  • Leverage optics elevated from securitization accounting: total debt-to-equity 8.7x, though non-recourse nature and the 5.8x adjusted metric were emphasized to reflect true leverage .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD)$193.8M*$172.8M*$180.9M*$177.1M*
Net Investment Income ($USD)—$44.5M $70.2M $99.2M
Net Income ($USD)—$9.7M $7.5M $58.3M
Diluted EPS ($)$0.36*$(0.01)*$(0.04)*$0.55
Net Income Margin (%)15.6%*5.12%*5.18%*27.0%*

Note: Cells with * are Values retrieved from S&P Global.

Segment Pretax Income

SegmentQ2 2025Q3 2025
Credit Sensitive Strategies$21.8M $18.8M
Interest Rate Sensitive Strategies$(4.9)M $32.3M
Correspondent Production$13.7M $9.2M
Corporate$(13.7)M $(13.3)M
Total Pretax Income$17.0M $47.0M

Key KPIs

KPIQ2 2025Q3 2025
Book Value per Share ($)$15.00 $15.16
Common Dividend ($/share)$0.40 $0.40 (paid Oct 24, 2025)
Loans Acquired (Total UPB)—$4.6B
Conventional/Jumbo Acquired from PFSI (UPB)$3.1B $3.3B
Loans from PFSI Production (UPB)$1.0B $1.3B
Non-Agency Securitizations (UPB)$1.4B $1.5B
Retained Investments from Non-Agency>$150M (Q2) $140M (Q3)
Agency Floating-Rate MBS Purchased—$876.4M
Opportunistic GSE CRT Sold—$195M
MSR Fair Value$3.739B $3.669B
Servicing Advances Outstanding$70M $62M
Debt/Equity (Excl. Non-Recourse)5.6x 5.8x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Run-rate Diluted EPS per QuarterNext 4 quarters~$0.38 (Q2 slide avg.) ~$0.42 Raised
EPS vs DividendNext 12 monthsNot explicitEPS to average above $0.40 dividend Positive
Conventional Conforming RetentionQ4 202515–25% expected (Q3 forward look from Q2) 15–25% expected (maintained) Maintained
Jumbo RetentionQ4 2025100% 100% Maintained
Leverage (ex non-recourse)Near-termStable; divergence expected 5.8x; divergence to continue as more retention Maintained outlook
Securitization cadenceNear-term~1 NOO per month; ~1 jumbo per quarter Continued NOO/jumbo; inaugural owner-occupied PLS priced (post-Q3) Expanded to owner-occupied

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1–Q2 2025)Current Period (Q3 2025)Trend
Private-label securitization growthQ1: three NOO deals, $1.0B UPB; targeting low-mid teens ROE ; Q2: four PLS totaling $1.4B Q3: three investor + one jumbo ($1.5B UPB), $140M retained; post-Q3 owner-occupied deal priced Accelerating; expanded into owner-occupied
PFSI synergyReiterated as unique advantage across origination/servicing Emphasized as cornerstone for organic investment creation Consistent, central to thesis
Hedging and spread managementQ1: hedges partially offset MSR declines ; Q2: hedging losses amid volatility Q3: spread gains offset MSR/hedge losses; net gains across MBS Improved execution; spreads tightening helpful
Leverage optics & non-recourse framingQ2: divergence between total and ex non-recourse leverage Q3: 5.8x ex non-recourse; continued divergence expected Ongoing education; balance sheet quality focus
Regulatory/GSE footprintQ2 slides note ability to adapt if GSEs reduce footprint Management: any GSE changes shouldn’t harm consumers; platform can deliver ~15% of production outside GSEs Preparedness narrative strengthened
Prepayment dynamicsQ1: higher prepayment projections pressured MSR Jumbo prepayments likely beneficial on subordinate tranches; hedge program mitigates MSR prepay risk Risk managed; potential upside on subordinate bonds

Management Commentary

  • Strategic positioning: “By leveraging this integrated structure, PMT is exceptionally well positioned to substantially grow its earnings potential and deliver superior risk adjusted returns to our shareholders” .
  • Portfolio rotation: “We sold $195,000,000 of opportunistic investments in GSE issued CRT…freeing up capital for PMT to invest in newly created assets with higher expected returns” .
  • Securitization strategy: Owner-occupied execution “was superior to delivering the loans to the GSEs…provided us with an investment in kind of the mid teens range for the long term” .
  • Run-rate and dividend: “PMT’s current run rate reflects a quarterly average of $0.42 per share…higher than our $0.40 quarterly dividend” .

Q&A Highlights

  • Conventional vs GSE delivery: Owner-occupied deals now execute better than GSE delivery given tighter spreads and higher GSE guarantee fees; pace will be managed, not fully replacing GSEs .
  • Run-rate trajectory: Core earnings around ~$0.42 per quarter “out of the gate,” with seasonal variations; curve steepening would further benefit .
  • Prepayment sensitivity: Jumbo subordinate tranches benefit from prepayments (discount accretion); MSR prepay risk muted via active hedging .
  • Capital allocation focus: Best near-term ROEs in credit-sensitive strategies (NOO/owner-occupied/jumbo), with interest-rate sensitive opportunities (agency floaters) tactically added .
  • Leverage framing: Debt tied to securitizations is non-recourse; ex non-recourse debt-to-equity was 5.8x; divergence expected as retention continues .

Estimates Context

  • EPS: Actual $0.55 vs consensus $0.3765; beat by $0.1735 (+46%). Primary EPS – # of Estimates = 7. Values retrieved from S&P Global.*
  • Revenue: Actual $215.6M vs consensus $97.9M; beat by $117.7M (+120%). Revenue – # of Estimates = 4. Values retrieved from S&P Global.*
  • Interpretation: Significant beats and improved run-rate suggest upward estimate revisions for EPS and, to a lesser extent, revenue given evolving mix and securitization cadence; non-GAAP run-rate and segment contributions support sustainability .

Estimates vs Actuals

MetricConsensusActualSurprise
EPS ($)$0.3765*$0.55 +$0.1735 (+46%)*
Revenue ($USD)$97.9M*$215.6M*+$117.7M (+120%)*
# EPS Estimates7*——
# Revenue Estimates4*——

Note: Cells with * are Values retrieved from S&P Global.

Key Takeaways for Investors

  • Earnings inflection supported by organic credit-sensitive investments and disciplined hedging; run-rate ~$0.42/quarter exceeds dividend, implying capacity to grow book value and sustain distributions .
  • Private-label securitization engine is scaling (NOO, jumbo, owner-occupied), with retained tranches targeting low-to-mid teens ROEs; platform control over credit and servicing enhances risk-adjusted returns .
  • Active capital rotation out of lower-go-forward-return CRT into higher-ROE organic assets, plus tactical agency floaters, improves portfolio return profile .
  • MSR valuation headwinds remain a swing factor with rates, but spread tightening and hedge program provided effective offsets this quarter .
  • Leverage headline metrics will rise with consolidated securitizations, but investor focus should remain on ex non-recourse leverage (5.8x) and asset quality .
  • Near-term trading: Strong beats and positive outlook are catalysts; monitor mortgage spread momentum, securitization volumes, and curve steepening for incremental upside .
  • Medium-term thesis: PFSI synergy, private-label leadership, and diversified strategy across credit- and interest-rate-sensitive assets position PMT to compound earnings and book value through cycle .