PennyMac Mortgage Investment Trust (NYSE:PMT) Q4 2022 Earnings Conference Call February 2, 2023 5:30 PM ET

Company Participants

Isaac Garden - Investor Relations

David Spector - Chairman & Chief Executive Officer

Vandy Fartaj - Senior Managing Director & Chief Investment Officer

Dan Perotti - Senior Managing Director & Chief Financial Officer

Conference Call Participants

Isaac Garden

Good afternoon, and welcome to the Fourth Quarter and Full Year 2022 Earnings Discussion for PennyMac Mortgage Investment Trust. The slides that accompany this discussion are available on PennyMac Mortgage Investment Trust’s website at pmt.pennymac.com.

Before we begin, let me remind you that our discussion contains forward-looking statements that are subject to the risks identified on slide 2 that could cause our actual results to differ materially.

Now, I’d like to introduce David Spector, PMT’s Chairman and Chief Executive Officer, who will discuss the Company’s fourth quarter and full year 2022 results.

David Spector

Thank you, Isaac. For the fourth quarter 2022, PMT reported a net loss attributable to common shareholders of $5.8 million, or $0.07 per common share, as solid income excluding the impacts of market driven fair value changes was more than offset by fair value declines in PMT’s interest rate and credit sensitive strategies.

PMT paid a common dividend of $0.40 per share. Book value per share decreased to $15.78 from $16.18 at the end of the prior quarter. Dan Perotti, Senior Managing Director and Chief Financial Officer will review additional details of PMT’s financial performance later on in this discussion.

During the quarter, PMT repurchased 1.2 million shares of common stock for $14 million at an average price of $11.80, significantly below current book value per share; and through January 31st, PMT repurchased an additional 22,000 shares, for an approximate cost of $278,000 at $12.63 per share.

One of PMT’s greatest strengths is its ability to organically generate investments through our high-quality loan production sourced from correspondent sellers across the country. This quarter, $6.8 billion in UPB of PMT conventional correspondent production led to the creation of $127 million in high-quality mortgage servicing rights. With mortgage interest rates currently still above 6%, the most recent third-party forecasts for 2023 originations range from $1.6 trillion to $1.9 trillion, down meaningfully from 2022.

While many industry participants have taken the appropriate steps to reduce capacity, it has been happening slowly and we believe overcapacity still remains. It is our expectation that mortgage REITs with diversified investment portfolios, efficient cost structures and strong risk management practices such as PMT are best positioned to manage through the volatility presented by the current market environment.