PennyMac Mortgage Investment Trust (PMT) Q2 2025 Earnings Call Highlights: Navigating ...

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23-07-2025

Net Loss: $3 million net loss to common shareholders, or $0.04 loss per share.
Dividend: $0.40 per share common dividend for the second quarter.
Book Value Per Share: $15 as of June 30.
Securitizations: Completed three securitizations totaling $1.1 billion UPB, retaining $71 million of new investments.
Jumbo Loan Securitization: First since 2013, totaling $339 million UPB, retaining $82 million.
MSR Investments: Account for approximately 47% of deployed equity.
Correspondent Loan Acquisition Volume: $30 billion in the second quarter, up 30% from the prior quarter.
Income Tax Expense: $9 million, primarily due to a $14 million non-recurring tax adjustment.
Senior Notes Issuance: $105 million in unsecured senior notes due in 2030.
Debt to Equity Ratio: 5.6 times, excluding non-recourse debt.
Warning! GuruFocus has detected 9 Warning Signs with PMT.
Release Date: July 22, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
PennyMac Mortgage Investment Trust (NYSE:PMT) successfully completed three securitizations of agency eligible investor loans totaling $1.1 billion UPB, retaining $71 million of new investments.
PMT's diversified investment portfolio and strong risk management practices enabled effective management through volatile market conditions.
The company has a synergistic partnership with PFSI, leveraging its best-in-class operating platform and large multi-channel origination business.
PMT's MSR investments are expected to continue producing stable cash flows due to low refinancing incentives for borrowers.
The company reported gains from organically created CRT investments and expects continued mid- to low-teens returns from these investments.
Negative Points
PMT reported a net loss to common shareholders of $3 million in the second quarter, or negative $0.04 per diluted common share.
Interest rate sensitive strategies contributed to a pre-tax loss of $5 million, with fair value increases on MSR investments offset by losses in MBS and interest rate hedges.
The company faced a $14 million non-recurring tax adjustment due to state apportionment changes.
PMT's debt to equity ratio has increased, primarily due to growth in non-recourse debt related to private label securitization activity.
The operating earnings run rate, although improved, remains slightly below the $0.40 dividend level, raising concerns about its sustainability.
Q & A Highlights
Q: Can you discuss the non-agency securitization opportunity and how returns progressed over the quarter? A: David Spector, CEO, explained that despite significant rate and spread volatility, non-agency subordinate MBS saw credit spread tightening. The returns remained stable in the mid- to low-teens, and these investments are expected to continue providing stable and accretive returns over time.
Q: Why was the retained interest on the jumbo securitization higher compared to non-owner occupied loans? A: Daniel Perotti, CFO, noted that the decision to retain a higher percentage was based on available capital and occurred after raising additional unsecured debt. The company plans to retain more interest in future securitizations, depending on capital deployment needs.
Q: Any insights on the potential GSE privatization and its impact on credit risk transfer? A: David Spector stated that there is little movement in DC regarding GSE reformulation. However, PennyMac's non-agency securitization program allows them to create comparable investments, maintaining mid-teen returns and leveraging their credit investment strategy.
Q: What are the drivers behind the increase in run rate ROE? A: Daniel Perotti highlighted increases in net interest rate sensitive strategies due to non-agency senior MBS investments and improved correspondent production margins. Additional investments in non-agency subordinate pieces also contributed positively.
Q: Is the $0.40 dividend sustainable given the current earnings run rate? A: Daniel Perotti expressed confidence in maintaining the $0.40 dividend, citing improved run rate potential and supportive taxable income levels. The company values dividend stability and expects further improvements in earnings to support this level.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.