PennyMac Mortgage Investment Trust (NYSE:PMT) Q3 2023 Earnings Conference Call October 26, 2023 6:00 PM ET

Company Participants

David Spector - Chairman and Chief Executive Officer

Daniel Perotti - Senior Managing Director and Chief Financial Officer

Conference Call Participants

Bose George - Keefe, Bruyette, & Woods, Inc.

Kevin Barker - Piper Sandler & Co.

Eric Hagen - BTIG

Matthew Erdner - JonesTrading Institutional Services, LLC

Operator

Good afternoon, and welcome to PennyMac Mortgage Investment Trust Third Quarter 2023 Earnings Call. Additional earning material including the presentation slides that will be referred to in the 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 been reconciled to their GAAP equivalent in the earning material.

I would like to remind everyone we will only take questions related to PennyMac Mortgage Investment Trust or PMT. We also ask that you please keep your questions limited to one preliminary question and one follow-up question as we'd like to ensure we can answer as many questions as possible.

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.

David Spector

Thank you, operator. PMT had an outstanding third quarter. Annualized ROE was 14%, reflecting very strong financial results and growth in book value per share from the prior quarter due to meaningful income contributions from all three of its investment strategies. As a result, book value per share net of the $0.40 dividend increased to $16.01.

As you can see on Slide 4 of the presentation, mortgage rates have continued to increase from record lows in recent years and are now near 8%. As a result, many borrowers who locked in a low fixed rate mortgage in recent years have been incentivized to stay in their homes given their low mortgage payments. This has resulted in an extremely low inventory of homes for sale, driving expectations for the lowest unit origination volume since 1990. Additionally, we believe quarterly run rate origination volumes are trending lower than the average estimate from third parties for this year of $1.6 trillion.

Turning to Slide 5. Though the current origination market remains constrained, I'm very enthusiastic about PMT's opportunities in this environment. Approximately two-thirds of PMT's shareholders' equity is currently invested in a seasoned portfolio of MSRs and the unique GSE lender risk share transactions which we invested in from 2015 to 2020.