PennyMac Mortgage Investment Trust (NYSE:PMT) Q1 2022 Earnings Conference Call May 5, 2022 5:00 PM ET

Company Participants

David Spector - Chairman and Chief Executive Officer

Dan Perotti - Senior Managing Director and Chief Financial Officer

Vandy Fartaj - Senior Managing Director and Chief Investment Officer

Operator

Good afternoon and welcome to the First Quarter Earnings Discussion for PennyMac Mortgage Investment Trust. The slides that accompany this discussion are available on PennyMac Mortgage Investment Trust website at www.pennymac-reit.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 first quarter 2022 results.

David Spector

Thank you, Isaac. For the first quarter 2022, PMT reported a net loss attributable to common shareholders of $29.6 million or $0.32 per common share as fair value declines in its credit sensitive strategies due to credit spread widening and a tax provision in its taxable REIT subsidiary more than offset strong performance from the interest rate sensitive strategies.

During the quarter, we repurchased 2 million shares of PMT’s common stock for $32 million. And in April, we repurchased an additional 990,000 shares for an approximate cost of $15 million. PMT paid a common dividend of $0.47 per share. Book value per share decreased to $17.87 from $19.05 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.

The strength of PMT’s is its ability to organically generate investments through our high-quality loan production sourced from corresponding sellers across the country. This quarter $9.8 billion in UPB of conventional correspondent production led to the creation of $195 million in new mortgage servicing rights. We continue to create new credit investments in the form of subordinate bonds from non-agency investor loan securitizations, also sourced from PMT’s loan production volumes. This quarter, PMT successfully completed a securitization, with an aggregate UPB of $420 million. In total, the fair value of PMT’s investments in investor loan securitizations was approximately $103 million at March 31, 2022.

The rapid and significant increases in mortgage interest rates, has impacted the origination market considerably. Current economic forecasts for 2022 total originations range from $2.6 trillion to $3.1 trillion. While there is potential for forecasted loan volumes to decrease further as the unprecedented increase in rates continue to be absorbed by the markets, PennyMac remains well-positioned as the largest correspondent aggregator and one of the largest producers of purchase money loans in the country. The higher interest rate environment and wider credit spreads have also created opportunities for PMT to deploy capital into investments with attractive long-term risk adjusted returns, which Vandy Fartaj, PMT’s Senior Managing Director and Chief Investment Officer will discuss later. Successfully navigating a challenging mortgage environment requires a strong balance sheet, expertise in the capital markets, and strong investment management and capital planning disciplines, things we have been emphasizing for years.