管理層發言
Good afternoon, and welcome to PennyMac Mortgage Investment Trust First Quarter 2025 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 reconciled to their GAAP equivalent in the earnings materials. Now, I’d like to introduce David Spector, PennyMac Mortgage Investment Trust Chairman and Chief Executive Officer; and Dan Perotti, PennyMac Mortgage Investment Trust Chief Financial Officer. You may begin.
Thank you, operator. For the first quarter, PMT produced a net loss to common shareholders of $1 million or diluted earnings per share of negative $0.01. Strong levels of income, excluding market-driven value changes were offset by net fair value declines due to interest rate volatility and credit spread widening. PMT declared a first-quarter common dividend of $0.40 per share. Book value per share at March 31st was $15.43, down modestly from December 31st. Current third-party estimates for industry originations averaged $2 trillion in 2025, reflecting projections for growth in overall volumes with moderate contributions from both refinance and purchase. Interest rates have been extremely volatile in recent periods, creating a challenging environment for most mortgage REITs. However, our diversified investment portfolio, efficient cost structure, and strong risk management practices enabled us to effectively manage through these challenging market conditions.
These risk management practices include our well-established interest rate hedging program and the establishment of unique non-mark-to-market financing arrangements for the vast majority of our credit risk transfer investments, which enable us to effectively manage through volatile markets. Turning to slide 5. Our synergistic relationship with PFSI provides PMT with unique and proven competitive advantages. First, PMT leverages PFSI's best-in-class operating platform, including its deep and experienced management team, scaled servicing operations, and its large and agile multi-channel origination business which provides PMT with a consistent and high-quality pipeline of loans for investment. Second, our structure allows PMT to efficiently deploy capital into long-term mortgage assets without the operational burdens associated with origination and servicing. And third, PFSI's deep access to the origination market coupled with PMT's ability to execute private label securitizations and retain the related investments positions PMT to capitalize on the evolving landscape for secondary market execution should the GSEs reduce their footprint.
This provides us with access to unique investment opportunities that we believe will generate attractive risk-adjusted returns over time. Slide 6 highlights our ability to organically create investments from our own private-label securitization activity and importantly, the significant opportunity presented by the broader loan pipeline. The increased volume of non-owner-occupied and jumbo loans underscores the potential for future investments. And this growing pipeline of loans provides us with flexibility and optionality allowing us to strategically invest in assets that align with our long-term return objectives. In recent periods, PMT has been among the largest issuers of private label securitization, demonstrating our expertise and leadership in this space. In the first quarter, we successfully completed three securitizations of investor loans totaling $1 billion in unpaid principal balance.
Retaining $94 million in new investments with returns on equity expected to be in the mid-teens. We believe that our position as the producer of the underlying loans is a competitive advantage providing us with the ability to review and diligence the loans for securitization and subsequent investments. Additionally, our position as the servicer of the underlying loans uniquely positions us to work directly with borrowers during times of stress to minimize losses, as evidenced by the strong historical performance of our investments in lender credit risk transfer. Looking ahead, we expect to continue closing approximately one securitization of non-owner-occupied loans per month, and we anticipate closing approximately one jumbo loan securitization per quarter, beginning in the second quarter. This consistent cadence of securitization underscores our commitment to leveraging our origination capabilities and actively participating in the private label securitization market.
Turning to slide 5, approximately two-thirds of PMT shareholders' equity is currently invested in the seasoned portfolio of MSRs and the unique GSE lender risk share transactions we invested in from 2015 to 2020. As the majority of mortgages underlying these assets were originated during periods of very low interest rates, we continue to believe these investments will perform well over the foreseeable future, as low expected prepayments have extended the expected lives of these assets. While credit spreads have widened in the current economic environment, delinquencies remain low. This can be attributed to the overall credit strength of the consumer, combined with the substantial accumulation of home equity in recent years, due to continued home price appreciation. Mortgages underlying PMT's large investment in lender originated risk share have a low weighted average current loan-to-value ratio below 50%.
As a result, we continue to expect that realized losses will be limited. MSR investments account for approximately half of PMT's deployed equity. The majority of the underlying mortgages of these MSRs remain far out of the money and we expect the MSR asset to continue producing stable cash flow over an extended period of time. MSR values also continue to benefit from the higher interest rate environment as the placement fee income PMT receives on custodial balances is closely tied to short-term interest rates. Similarly, these characteristics are expected to support the performance of these assets over the long term. In closing, our risk management capabilities and diversified investment strategies, which include a seasoned MSR and CRT portfolio, combined with the growing securitization platform, position us very well to continue delivering attractive risk-adjusted returns to our shareholders in 2025 and beyond.
And we remain confident in our ability to successfully navigate a volatile and evolving market. Now I'll turn it over to Dan, who will review the drivers of PMT's first quarter financial performance and PMT's run rate return potential.
Thank you, David. PMT reported a net loss to common shareholders of $1 million in the first quarter or negative $0.01 per diluted common share. The credit-sensitive strategies contributed $1 million to pre-tax income. Losses from organically created CRT investments were $5 million. Investments in non-agency subordinate MBS generated gains of $4 million and investments in cash and stacker bonds generated gains of $2 million. Other credit-sensitive strategies contributed losses of $0.2 million. The interest rate sensitive strategies contributed a pre-tax loss of $5 million. Fair value declines on MSR investments were $56 million as the decrease in mortgage rates drove an increase in future prepayment projections. These fair value declines were partially offset by the combined impact of changes in the fair value of MBS, interest rate hedges, and related income tax benefits. MBS fair value increased by $65 million due to the decline in market interest rates.
Interest rate hedges decreased by $40 million. Declines on MSRs held in PMT's taxable REIT subsidiary were the primary driver of the $16 million tax benefit. The fair value of PMT's MSR asset at the end of the quarter was $3.8 billion, down slightly from December 31st as fair value declines and runoff were partially offset by newly originated MSR investments. Delinquency rates for borrowers underlying PMT's MSR portfolio remain low, while servicing advances outstanding decreased to $84 million from $105 million at December 31st. No principal and interest advances are currently outstanding. Total correspondent loan acquisition volume was $23 billion in the first quarter, down 18% from the prior quarter and consistent with the overall decline in the size of the origination market. Correspondent loans acquired for PMT's account totaled $3 billion, down 20% from the prior quarter. PMT retained 21% of total conventional correspondent production in the first quarter, up from 19% in the fourth quarter.
We expect this percentage to remain between 15% to 25% in the second quarter of 2025 as we continue pursuing investment opportunities in the private label securitization market. PMT also acquired $637 million in UPB of loans acquired or originated by PFSI for inclusion in private label securitization, up from $437 million in the prior quarter. Income from PMT's correspondent production segment was $10 million, down from the prior quarter, which included gains on non-owner-occupied loans due to credit spread tightening. The weighted average fulfillment fee rate was 19 basis points, up from 18 basis points in the prior quarter. Under the renewed mortgage banking services agreement with PFSI, effective July 1, 2025, correspondent loans will initially be acquired by PFSI. However, PMT will retain the right to purchase up to 100% of non-government correspondent production from PFSI. In total, PMT reported $41 million of net income across its strategies.
Excluding market-driven value changes and the related tax impacts, down from $51 million in the prior quarter, driven primarily by decreased income from correspondent production and seasonally low placement fees on custodial balances and deposits. Slide 8 of our earnings presentation outlines the run rate return potential expected from PMT's investment strategies over the next four quarters. PMT's current run rate reflects a quarterly average of $0.35 per share down from $0.37 per share in the prior quarter. The return potential for credit-sensitive strategies increased due to higher expected yields as credit spreads have widened. The return potential for interest rate-sensitive strategies declined due to compression between longer-dated asset yields and short-term financing rates since the beginning of the year. If the yield curve steepens further, we expect PMT's overall run rate would increase driven by higher overall yields in the interest rate-sensitive strategy.
Turning to capital. In February, we issued $173 million in unsecured senior notes due in 2030. And we also retired $45 million of CRT term notes where the remaining assets were financed via repurchase agreements due to the size of the position. Through 2025, we will continue to seek opportunities to raise additional debt capital as we approach the maturity of our exchangeable note in 2026 as well as to provide additional funding for the potential expansion of our securitization efforts.
分析師問答
I would like to remind everyone that we will only take questions related to PennyMac Mortgage Investment Trust or PMT. We also ask that you please limit your questions to one preliminary question and one follow-up question to ensure we can address as many questions as possible. Your first question comes from the line of Bose George with KBW. Please go ahead.
Hey, guys. Good afternoon. Just given the movement in rates since quarter end, can you just talk about any changes in your book value and also changes in the expected ROE since quarter end?
So overall, there's been significant interest rate volatility since the end of the quarter as well as additional credit spread widening since the end of the first quarter. And we've had impacts from both of those during the quarter thus far. Overall, we're very pleased with the installation that we've had from our hedging program with respect to the interest rate volatility. But the combination of some of the higher hedge costs, some of the interest rate volatility, and the spread widening has decreased our book value by about 2% to 3% since the end of the quarter but that remains fairly contained. And obviously, there's a significant amount of the quarter left to run. With respect to the ongoing ROE other than those fair value impacts in the second quarter, the ongoing ROE, our run rate return potential reflects really where we've landed since through the quarter-to-date and what our expectations are going forward with respect to that.
I would like to emphasize that considering the nature of our debt, particularly in CRT, we are not affected by mark-to-market fluctuations or margin calls. During times when spreads widen, it is crucial that we do not possess assets we would need to sell under unfavorable conditions. It is essential to focus on our liability structure, which remains solid as the underlying fundamentals of the loans have not changed. Our CRT portfolio consists of numerous borrowers with substantial equity and high credit quality, and they are well-established, meaning it would require a significant issue to impact them. The same applies to our MSRs, where we hold a considerable amount of low-rate servicing alongside equity in the properties. The fundamental conditions remain stable, and in volatile times, our hedging practices are vital. Additionally, the fact that we have extended our debt maturity without relying on mark-to-market assets that we cannot hedge is equally important.
Yes, I appreciate the strength of the capital structure. Regarding mortgage banking, considering the update to the agreement between PennyMac and PFSI, is there an expectation that PMT could acquire a larger percentage of loans from PFSI in the latter half of the year?
The PMT's acquisition amount really goes to where we see it as most advantageous to deploy capital. So currently, we've been more focused on increasing our investment in the credit-sensitive strategies and overall, in terms of the interest rate-sensitive strategies with the amount that's going through the correspondent channel and the MSR that's retained there. That has been roughly holding constant in terms of the interest rate-sensitive strategies. And so in terms of our outlook is currently, we wouldn't necessarily expect an increase in the proportion of loans that PMT is retaining or keeping in the back half of the year since we are more focused on building up the credit-sensitive strategies as opposed to creating more MSR that would go into the interest rate sensitive strategies.
Okay, great. Makes sense. Thank you.
Your next question comes from the line of Jason Weaver with Jones Trading. Please go ahead.
Hi, guys. Good afternoon.
Good afternoon.
Thanks for taking my question. So just a bridge onto the end of Bose's question there. Last quarter, we were obviously discussing moving more towards credit-focused investments and less interest rate-sensitive strategies. It seems we've incrementally shifted somewhat of that wave during the first quarter. Can you update on a little bit on your thinking given the current dislocation into 2Q right now about where you want to commit capital and what looks most attractive right now?
I’m not sure about the current conditions in the mortgage market. Generally, we are satisfied with our capital allocation as it stands. It’s crucial for PMT to expand its credit-sensitive strategy and remain an active issuer, which is proving beneficial for us, particularly seen in our securitizations and the tightening spreads of the senior bonds we issue. I want to aim for a jumbo securitization every quarter, with our first scheduled for this quarter. If the origination market stabilizes and the GSEs scale back their involvement through heightened pricing adjustments, we could increase our securitizations. At the same time, I would like PMT to continue capitalizing on correspondent activities. Although we experience natural declines in our interest rate-sensitive strategies, I want to avoid putting that segment into a decline phase while also ensuring we replenish it. Ultimately, our focus depends on the amount of capital available for investment and ensuring we achieve the best outcomes for that capital. This marks a significant shift in our approach to PMT compared to two years ago, emphasizing the importance of enhancing returns and managing investments more strategically to secure optimal execution for all our investments.
Thank you. That's helpful. And then on correspondent specifically, just given the decline in mortgage rates that was apparent during the second half of the first quarter, what kind of visibility do you have coming into 2Q about volumes just from those loans closing?
I think to your point, correspondent, I expect to see increased correspondent activity starting at the end of this month and running into May. As the loans that were locked into our correspondent pipelines fund. But I think, look, the market is right now centered on a $2 trillion origination market. Obviously, with that being rate dependent. I do think we're in a more traditional mortgage banking environment where you have greater volatility and you're going to be short periods of refinance activity followed by longer periods, or perhaps short periods of higher rates. And so with this volatility, the total originations can move as well. But I think we're all still convinced that we're in a $2 trillion market, but we're only in April as we speak.
Agreed. Okay. Well, thank you for that color, and helpful as always.
Thanks so much.
Your next question comes from Doug Harter with UBS. Please go ahead.
Can you discuss your outlook for the dividend in light of the lower run rate earnings? Also, how does retaining as much capital for future growth influence the role of the dividend in your total return strategy?
So consistent with what we've seen previously, as the run rate has fluctuated a bit, we do expect the dividend to remain stable. We believe there is value in maintaining dividend stability. The primary reason for the decline in the run rate quarter-over-quarter is related to the shape of the yield curve and its effect on interest rate sensitive strategies as long-term yields decline, while overall short-term financing rates have not increased further. The Fed is currently on pause, which puts some pressure on these strategies and the net returns generated from them. We anticipate that the yield curve will normalize over time, which should increase expected returns from interest rate-sensitive strategies. This decline in the run rate falls within the range we've observed before and does not change our current view on maintaining the dividend at the level we have set at $0.40.
Great. Dan, I'd like to follow up on the yield curve. It appears that in April, despite some volatility, the yield curve has steepened a bit. Additionally, looking at the forward curve suggests it may become even steeper. I want to clarify what elements of either April or the forward curve are included in your run rate expectations, or if that’s what you’re currently seeing.
It’s a bit uncertain, but we still believe we are within that range. If yields rise a bit more or stay at the current elevated levels, or if short-term rates drop slightly, either scenario would confirm an increase in our expectations regarding the potential returns from our interest rate-sensitive strategies.
Okay. I appreciate that, Dan. Thank you.
Your next question comes from the line of Trevor Cranston with Citizens JMP. Please go ahead.
All right. Thanks. Good afternoon. You guys talk about the return expectations you're seeing on new loan securitizations, and if there's been any material change there with the spread widening we've seen so far in April kind of versus where you were seeing expected returns in the first quarter. Thanks.
With the widening of the credit spread, the return targets on the subordinate bonds in our portfolio have naturally increased. Currently, these return targets for sub-bonds are around the mid-teens, approximately 15%. This aspect has caught our attention and is one of the driving factors behind our securitization efforts. For us to achieve these returns, being involved in the organic creation of the security is crucial. We are not observing significant secondary market activity at the moment. Therefore, to effectively deploy capital into these returns, having our current structure and the capability to utilize loans for securitization is a distinct advantage for PMT.
Got it. Okay. Appreciate the timing. Thank you.
Your next question comes from the line of Eric Hagen with BTIG. Please go ahead.
Hey, thanks. A follow-up on the interest rate strategies, I mean you typically manage an agency MBS portfolio alongside the MSR portfolio, sort of, paring or kind of a hedge, if you will. I mean, would you say that the jumbo and investor property loans are somewhat of a substitute for the agency MBS portfolio since the risk profile is kind of similar, or is that really not the way you guys are just thinking about?
It depends on the parts of the capital structure that we keep, and we assess that based on the anticipated contribution from each segment and the expected return potential. To date, in our securitizations, we have held onto a portion of the senior mezzanine, which has interest rate sensitivity similar to TBA positions but generally involves a wider spread. We consider these as a substitute for some agency MBS positions. However, as we mentioned in our earnings release, we also highlighted our investments in credit-sensitive versus interest rate-sensitive assets. Last quarter, we retained $66 million in credit-sensitive or subordinate bonds, which we do not see as a substitute since they serve as first-loss pieces. Additionally, we held about $29 million in somewhat more senior bonds that act as better substitutes for TBA. While part of our investments serves as a TBA substitute, much of what we’re investing in from securitizations is not directly comparable and aligns more with credit investments akin to CRT.
Got it.
We have no further questions at this time. I will turn it back to David Spector for closing remarks.
Thank you, operator. I'd like to thank everyone for joining us today. Please don't hesitate to reach out to our Investor Relations team if you have any follow-up questions. And again, thank you all very much.