Slides
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PennyMac Mortgage Investment Trust 4Q24 EARNINGS REPORT January 2025
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FORWARD LOOKING STATEMENTS 2 This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management’s beliefs, estimates, projections and assumptions with respect to, among other things, the Company’s financial results, future operations, business plans and investment strategies, as well as industry and market conditions, all of which are subject to change. Words like “believe,” “expect,” “anticipate,” “promise,” “plan,” and other expressions or words of similar meanings, as well as future or conditional verbs such as “will,” “would,” “should,” “could,” or “may” are generally intended to identify forward-looking statements. Actual results and operations for any future period may vary materially from those projected herein and from past results discussed herein. These forward-looking statements include, but are not limited to, statements regarding future changes in interest rates, housing, and prepayment rates; future loan originations and production; future loan delinquencies, defaults and forbearances; future investment and hedge expenses; future investment strategies, future earnings and return on equity as well as other business and financial expectations. Factors which could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: changes in interest rates; the Company’s ability to comply with various federal, state and local laws and regulations that govern its business; the general economy or the real estate finance and real estate markets; events or circumstances which undermine confidence in the financial and housing markets or otherwise have a broad impact on financial and housing markets; changes in real estate values, housing prices and housing sales; changes in macroeconomic, consumer and real estate market conditions; the degree and nature of the Company’s competition; the availability of, and level of competition for, attractive risk adjusted investment opportunities in mortgage loans and mortgage related assets that satisfy the Company’s investment objectives; the inherent difficulty in winning bids to acquire mortgage loans, and the Company’s success in doing so; the concentration of credit risks to which the Company is exposed; the Company’s dependence on its manager and servicer, potential conflicts of interest with such entities and their affiliates, and the performance of such entities; changes in personnel and lack of availability of qualified personnel at its manager, servicer or their affiliates; our ability to mitigate cybersecurity risks, cybersecurity incidents and technology disruptions; the development of artificial intelligence; the availability, terms and deployment of short term and long term capital; the adequacy of the Company’s cash reserves and working capital; the Company’s ability to maintain the desired relationship between its financing and the interest rates and maturities of its assets; the timing and amount of cash flows, if any, from the Company’ s investments; our substantial amount of indebtedness; the performance, financial condition and liquidity of borrowers; our exposure to risks of loss and disruptions in operations resulting from severe weather events, man-made or other natural conditions, including climate change and pandemics; the ability of the Company’s servicer, which also provides the Company with fulfillment services, to approve and monitor correspondent sellers and underwrite loans to investor standards; incomplete or inaccurate information or documentation provided by customers or counterparties, or adverse changes in the financial condition of the Company’s customers and counterparties; the Company’s indemnification and repurchase obligations in connection with mortgage loans it purchases and later sells or securitizes; the quality and enforceability of the collateral documentation evidencing the Company’ s ownership and rights in the assets in which it invests; increased rates of delinquency, defaults and forbearances and/or decreased recovery rates on the Company’s investments; the performance of mortgage loans underlying mortgage backed securities in which the Company retains credit risk; the Company’s ability to foreclose on its investments in a timely manner or at all; increased prepayments of the mortgages and other loans underlying the Company’s mortgage backed securities or relating to the Company’s mortgage servicing rights and other investments; risks associated with the discontinuation of LIBOR; the degree to which the Company’s hedging strategies may or may not protect it from interest rate volatility; the effect of the accuracy of or changes in the estimates the Company makes about uncertainties, contingencies and asset and liability valuations when measuring and reporting upon the Company’s financial condition and results of operations; the Company’s ability to maintain appropriate internal control over financial reporting; the Company’s ability to detect misconduct and fraud; developments in the secondary markets for the Company’s mortgage loan products; legislative and regulatory changes that impact the mortgage loan industry or housing market regulatory or other changes that impact government agencies or government sponsored entities, or such changes that increase the cost of doing business with such agencies or entities; the Consumer Financial Protection Bureau and its issued and future rules and the enforcement thereof; changes in government support of homeownership; changes in government or government sponsored home affordability programs; changes in the Company’s investment objectives or investment or operational strategies, including any new lines of business or new products and services that may subject it to additional risks volatility in the Company’s industry, the debt or equity markets; limitations imposed on the Company’s business and its ability to satisfy complex rules for it to qualify as a REIT for U.S. federal income tax purposes and qualify for an exclusion from the Investment Company Act of 1940 and the ability of certain of the Company’s subsidiaries to qualify as REITs or as taxable REIT subsidiaries for U.S. federal income tax purposes; changes in governmental regulations, accounting treatment, tax rates and similar matters; the Company’s ability to make distributions to its shareholders in the future; the Company’s failure to deal appropriately with issues that may give rise to reputational risk; and the Company’s organizational structure and certain requirements in its charter documents. You should not place undue reliance on any forward-looking statement and should consider all of the uncertainties and risks described above, as well as those more fully discussed in reports and other documents filed by the Company with the Securities and Exchange Commission from time to time. The Company undertakes no obligation to publicly update or revise any forward-looking statements or any other information contained herein, and the statements made in this presentation are current as of the date of this presentation only. This presentation contains financial information calculated other than in accordance with U.S. generally accepted accounting principles (“GAAP”), such as income excluding market driven value changes that provide a meaningful perspective on the Company’s business results since the Company utilizes this information to evaluate and manage the business. Non-GAAP disclosures have limitations as an analytical tool and should not be viewed as a substitute for financial information determined in accordance with GAAP .
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33 CREDIT SENSITIVE STRATEGIES INTEREST RATE SENSITIVE STRATEGIES CORRESPONDENT PRODUCTION Pretax income Pretax income excluding market driven value changes⁽⁴⁾ New investments in MSR⁽³⁾ Fair value of MSR investments $25mm $33mm $60mm $3.9bn Pretax income PMT correspondent production volume (UPB)⁽³⁾⁽⁵⁾ Correspondent seller relationships $23mm $3.5bn 789 Pretax income Pretax income excluding market driven value changes⁽⁴⁾ Net new investments in credit sub-bonds from PMT securitizations Fair value of organically-created CRT⁽³⁾ investments $20mm $13mm $52mm $1.1bn Return on average common equity⁽²⁾ Book value per share 10% $15.87 Net income attributable to common shareholders⁽¹⁾ Diluted EPS⁽³⁾ $36mm $0.41 Dividend per common share $0.40 4Q24 Results FOURTH QUARTER HIGHLIGHTS Results driven by strong levels of income excluding market driven value changes Note: All figures are for 4Q24 or are as of 12/31/24 (1) Net income attributable to common shareholders includes a provision for tax expense of $9 million (2) Return on average common equity is calculated based on net income attributable to common shareholders as a percentage of monthly average common equity during the quarter (3) EPS = earnings per share; CRT = credit risk transfer; MSR = mortgage servicing rights; GSE = government-sponsored enterprise; UPB = unpaid principal balance (4) Excludes $7 million of market-driven value gains in the credit sensitive strategies and $7 million of market-driven value losses in the interest rate sensitive strategies - see slide 12 (5) Excludes $14 billion in UPB of conventional loan production which was for PFSI’s account
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4 PMT’S 2024 PERFORMANCE ESTABLISHES STRONG FOUNDATION FOR 2025 Diverse strategies provided multiple sources of returns Hedging strategy protected book value despite significant interest rate volatility Strengthened and repositioned balance sheet for higher rates Expanding on our proven track record of organic credit investments Credit sensitive Interest rate sensitive Correspondent production $123mm $16mm $57mm Pretax income contribution by strategy: 10-Year Treasury Yield Book Value per Share 3.88% 4.70% 3.62% 4.57% ● Completed two securitizations of Agency-eligible investor loans from PMT production ‒ Generated $52 million of net new credit investments with attractive expected returns ‒ Strong investor demand and significant opportunity to leverage PMT’s production and securitization expertise ● Sold $833 million of low coupon MBS and $111 million of opportunistic investments in GSE CRT as credit spreads tightened ● New MSR investments of $219 million ● Issued $1.3 billion of term debt to address and extend maturities, generally at tighter financing spreads
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ORIGINATION MARKET EXPECTATIONS REFLECT GROWTH 5 U.S. Mortgage Origination Market(1) ($ in trillions) Mortgage Rates Remain Elevated • Current third-party estimates for industry originations average $1.7 trillion in 2024 and $2.0 trillion in 2025, reflecting projections for rates to decline and growth in overall volumes • Mortgage REITs with diversified investment portfolios, efficient cost structures and strong risk management practices such as PMT are best-positioned to manage through volatility presented by the current market environment Purchase Average 30-year fixed rate mortgage(2)Refinance Note: Figures may not sum due to rounding (1) Actual originations: Inside Mortgage Finance. Forecast originations: Average of Mortgage Bankers Association (1/19/25) and Fannie Mae (1/10/25) forecasts. (2) Freddie Mac Primary Mortgage Market Survey. 6.96% as of 1/23/25
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● Focus on organic creation of credit investments from Pennymac production, leveraging our securitization expertise and correspondent platform ● Strong investor demand for private-label MBS ● Begins with investor loans; potential for securitizations of other loan products emerging ORGANIC INVESTMENT CREATION DRIVEN BY PRIVATE LABEL SECURITIZATION ACTIVITY 6 UPB of loans securitized Q4 2024 2 $822mm completed securitizations of Agency-eligible investor loans from PMT’s production $52mm net new investments in credit sub-bonds UPB of loans securitized Jan 2025 1 $341mm completed securitization of Agency-eligible investor loans from PMT’s production $21mm 2025 Expectations Current acquisition volumes are on track to close approximately one securitization per month Potential for continued growth in activity as the origination and private label securitization markets grow Targeted returns on equity for these investments in the low-to-mid teens, with the ability to influence the credit outcome for borrowers given our position as servicer of the underlying loans net new investments in credit sub-bonds
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SEASONED INVESTMENTS TO CONTINUE PERFORMING WELL 7 Nearly two-thirds of PMT’s shareholders’ equity is deployed to seasoned investments in MSRs and PMT’s unique GSE credit risk transfer investments with strong underlying fundamentals Strong long-term expected risk-adjusted returns supported by: • Underlying, high-quality conventional loan borrowers • Low delinquencies and L TV(1) ratios, driven by mortgages with low rates and substantial accumulation of home equity • Higher interest rates, implying slower runoff and extended asset life • PFSI’s industry-leading servicing capabilities Mortgage Servicing Rights (47% of shareholders’ equity) PMT GSE Credit Risk Transfer (16% of shareholders’ equity) • Stable cash flows over extended expected life ‒ WAC(1) of 3.8%; majority of loans significantly out of the money • Decreased sensitivity of fair values at higher market interest rates • Elevated placement fee income from higher short-term rates • Seasoned loans originated from 2015 – 2020 at low WACs • Realized lifetime losses expected to be limited (1) WAC = Weighted average coupon; L TV = Loan-to-value
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8 RUN-RATE RETURN POTENTIAL FROM PMT’S INVESTMENT STRATEGIES Note: This slide presents estimates for illustrative purposes only, using PMT’s base case assumptions (e.g., for credit performance, prepayment speeds, financing economics, and loss treatment for CRT transactions), and does not contemplate market-driven value changes other than realization of cash flows and hedge costs, or significant changes or shocks to current market conditions; actual results may differ materially (1) Equity allocated represents management’s internal allocation; certain financing balances and associated interest expenses are allocated between investments based on management’s assessment of target leverage ratios and required capital or liquidity to support the investment (2) ROE calculated as a percentage of segment equity (3) ROE calculated as a percentage of total equity Annualized Return on Equity (ROE) WA Equity Allocated (%)(1) Credit sensitive strategies: PMT GSE credit risk transfer 13.1% 15% Other GSE Credit Risk Transfer (CAS & STACR) 14.4% 5% Non-Agency Subordinate MBS 12.0% 3% Other credit sensitive strategies 1.0% 0% Net credit sensitive strategies 13.1% 23% Interest rate sensitive strategies: MSRs (incl. recapture) 14.0% 49% Agency MBS (incl. IO Securitization) 34.0% 7% Non-Agency Senior MBS 15.3% 3% Interest rate hedges(2) -2.5% 0% Net interest rate sensitive strategies 14.0% 59% Correspondent production 15.6% 6% Cash, short term investments, and other 1.9% 12% Management fees & corporate expenses(3) -3.4% 0% Net Corporate(3) -3.2% 12% Provision for income tax expense -0.3% Net income 8.7% 100% Dividends on preferred stock 7.7% 28% Net income attributable to common shareholders 9.1% 72% Average Diluted EPS Per Quarter $ 0.37 • Represents the average annualized return and quarterly earnings potential expected from its strategies over the next four quarters • Reflects performance expectations in the current mortgage market ‒ Return potential for the credit sensitive strategies increased slightly due to expectations for higher short term rates over the next year ‒ Return potential for the interest rate sensitive strategies increased as the yield curve has steepened ‒ Expected returns on interest rate sensitive assets have potential to continue improving if the yield curve steepens further, which would drive an increase in the overall run rate
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Conventional loans for PFSI(1) Government loans for PFSI(1) 9 CORRESPONDENT PRODUCTION HIGHLIGHTS Note: May not sum due to rounding (1) For all government loans and conventional loans sourced for PFSI, PMT earns a sourcing fee and interest income for its holding period and does not pay a fulfillment fee to PFSI (2) Conventional conforming interest rate lock commitments for PMT’s own account (3) Based on funded loans subject to fulfillment fees Key Financial Metrics 3Q24 4Q24 Segment pretax income as a percentage of interest rate lock commitments(2) 0.17% 0.70% Fulfillment fee as a percentage of acquisitions funded(3) 0.19% 0.18% Selected Operational Metrics 3Q24 4Q24 Correspondent seller relationships 794 789 Purchase money loans as a percentage of total acquisitions 91% 87% Correspondent Acquisition Volume and Mix (UPB in billions) Conventional loans for PMT Total locks ● Segment pretax income included gains from increased demand for private label securitization and whole loan execution for non-owner occupied loans during the quarter ● Under a renewed mortgage banking services agreement with PFSI, effective July 1, 2025, correspondent loans will initially be acquired by PFSI; PMT will retain the right to purchase up to 100% of non-government loan production ● PMT expects to retain all jumbo production and 15 - 25% of total conventional conforming correspondent production in 1Q25, compared to 19% in 4Q24
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10 TRENDS IN MSR INVESTMENTS MSR Investments(1) ($ in millions) (1) Owned MSR portfolio and excludes loans acquired for sale at fair value • MSR assets were $3.9 billion as of December 31, 2024 up slightly from September 30, 2024 ‒ Fair value gains and newly originated MSR investments partially offset by runoff from prepayments ‒ UPB underlying PMT’s MSR investments decreased slightly
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11 TRENDS IN PMT’S UNIQUE INVESTMENTS IN GSE CREDIT RISK TRANSFER • Fair value of PMT’s organically-created CRT investments was down slightly from September 30, 2024 primarily due to prepayments • The 60+ day delinquency rate increased from September 30, 2024 • Cumulative lifetime losses increased slightly; we ultimately expect realized losses over the life of these investments to be limited, given the substantial build-up of equity for underlying borrowers due to home price appreciation in recent years (1) The fair value of PMT’s organically created GSE CRT investments is reflected on PMT’s balance sheet as deposits securing CRT arrangements, and derivative and credit risk transfer strip assets or liabilities, net of the interest-only security payable (2) Weighted average FICO and L TV metrics at origination for the population of loans remaining as of the date presented; current L TVs were refreshed using the latest home price information available as of the reporting period ($ in millions) Organically-Created GSE CRT Investments(1) Selected metrics for quarter ended(2): Underlying UPB of loans ($ in billions) $ 23.2 $ 22.7 $ 22.2 $ 21.7 $ 21.2 WA FICO at origination 753 753 753 753 753 WA L TV at origination 82.4% 82.4% 82.4% 82.4% 82.4% WA current L TV 50.1% 50.1% 48.5% 47.5% 47.4% 60+ days delinquent as a % of outstanding UPB 1.23% 1.11% 1.11% 1.23% 1.48% Net realized principal losses ($ in millions) $ 1.3 $ 0.2 $ 0.1 $ 0.8 $ 0.5 Cumulative lifetime principal losses ($ in millions) $ 46.4 $ 46.6 $ 46.7 $ 47.5 $ 48.0 Interest reduction ($ in millions) $ 3.3 $ 3.2 $ 3.2 $ 3.2 $ 3.1 Cumulative interest reduction ($ in millions) $ 26.5 $ 29.7 $ 32.9 $ 36.1 $ 39.2
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Note: Figures may not sum due to rounding (1) Income contribution and the annualized return on equity calculated net of any direct expenses associated with investments (e.g., loan fulfillment fees and loan servicing fees), but before tax expenses; some of the income associated with the investment strategies may be subject to taxation (2) Categorization of income as market-driven value changes based on management assessment; income excluding market-driven value changes does not represent REIT taxable income and is a non-GAAP figure (3) Equity allocated represents management’s internal allocation; certain financing balances and associated interest expenses are allocated between investments based on management’s assessment of target leverage ratios and required capital or liquidity to support the investment (4) Primarily consists of legacy distressed loan portfolio; net new investments also reflect sales in performing and non-performing loans as a part of PMT’s strategy to exit the investments; includes $2.5 million in carrying value of real estate acquired in settlement of loans at 12/31/24 (5) ROE calculated as a percentage of total equity 12 FOURTH QUARTER RESULTS AND RETURN CONTRIBUTIONS BY STRATEGY ($ in millions, except EPS) Total Income Contribution(1) Market-Driven Value Changes(2) Income Excluding Market-Driven Value Changes(1)(2) WA Equity Allocated(3) Annualized Return on Equity (ROE)(1) Credit sensitive strategies: PMT GSE credit risk transfer $ 20.1 $ 10.2 $ 9.9 $ 307 26% Other GSE Credit Risk Transfer (CAS & STACR) 4.0 0.2 3.8 98 16% PMT Non-Agency Subordinate MBS (3.3) (3.8) 0.5 24 -56% Other credit sensitive strategies(4) (0.6) 0.0 (0.6) 6 -40% Net credit sensitive strategies $ 20.1 $ 6.6 $ 13.5 $ 435 18% Interest rate sensitive strategies: MSRs (incl. recapture) $ 210.4 $ 183.9 $ 26.5 Agency MBS (incl. IO Securitization) (131.1) (136.6) 5.6 Non-Agency Senior MBS (2.7) (3.4) 0.8 Interest rate hedges (51.2) (51.2) Net interest rate sensitive strategies $ 25.5 $ (7.4) $ 32.8 $ 1,100 9% Correspondent production $ 22.5 $ 0.0 $ 22.5 $ 150 60% Cash, short term investments, and other $ 2.2 $ 2.2 $ 259 3% Management fees & corporate expenses(5) (15.2) n/a (15.2) -3% Corporate(5) $ (13.0) n/a $ (13.0) $ 259 -3% Benefit / (Provision) for income tax expense $ (8.6) $ (4.2) $ (4.4) Net income $ 46.5 $ (4.9) $ 51.5 $ 1,943 10% Dividends on preferred stock $ 10.5 $ 541 8% Net income attributable to common shareholders $ 36.1 $ 1,402 10% Diluted EPS $ 0.41
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13 HEDGING APPROACH CENTRAL TO PMT’S INTEREST RATE SENSITIVE INVESTMENTS • PMT seeks to manage interest rate risk exposure on a “global” basis, recognizing interest rate sensitivities across its investment strategies • In 4Q24, MSR fair value increased ‒ Higher interest rates decreased future prepayment projections • Net fair value declines on MBS, interest rate hedges, and related tax impacts more than offset MSR fair value gains MSR Valuation Changes and Offsets ($ in millions) Change in MSR fair value before realization of cash flows Change in fair value of MBS, interest rate hedges, and related tax impacts
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● Vast majority of our CRT financing is in the form of term notes, which do not contain mark-to-market (margin call) provisions ● Retired $43 million of CRT term notes that were due to mature in October ● $45 million in CRT term notes due in February will be refinanced with securities repurchase agreements 1414 FLEXIBLE AND SOPHISTICATED FINANCING STRUCTURES MSR Term Notes and Loans Note: All figures are as of December 31, 2024 (1) By principal amount. CRT term notes amortize with principal paydowns. Excludes securities repurchase agreements financing our investments in MBS and a small portion of our investments in CRT. Unsecured and Exchangeable Senior Notes CRT Term Notes $1,414mm drawn Debt Schedule by Year of Maturity(1) (in millions) Unsecured and Exchangeable Senior Notes MSR Financing CRT Financing ● Provides flexibility and complements asset-backed structures ● Repaid in full $210 million of exchangeable senior notes that matured in November ● Maturity of MSR term notes and loans aligns more closely with the expected life of the MSR asset than short-term borrowings Financing capacity across multiple banks / flexibility to finance fluctuating MSR and advance balances
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APPENDIX
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16 PMT IS FOCUSED ON UNIQUE INVESTMENT STRATEGIES IN THREE SEGMENTS • Leading acquirer and producer of conventional conforming mortgage loans • Significant growth in market share over PMT’s more than 15-year history driven by PFSI’s operational excellence and high service levels • Provides unique ability to produce investment assets organically • Investments in credit risk on PMT’s high-quality loan production with ability to influence performance through active servicing • Expanding opportunity for investments in subordinate bonds from private label securitizations, supported by increasing investor demand • Approximately $21.2 billion in UPB of loans underlying PMT’s front-end GSE CRT investments at December 31, 2024 • MSR investments created through the securitization of conventional correspondent loan production • Hedged with Agency MBS and interest rate derivatives • Strong track record and discipline in hedging interest rate risk Correspondent Production Interest Rate Sensitive Strategies Credit Sensitive Strategies
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17 HISTORICAL EARNINGS, DIVIDENDS AND BOOK VALUE PER SHARE • Repurchased 29.1 million common shares from 3Q15 through 2Q24 (1) At period end (2) Return on average common equity is calculated based on annualized quarterly net income attributable to common shareholders as a percentage of monthly average common equity during the period (1) ROE⁽²⁾ -2% 14% 4% 15% 12% 10% 4% 9% 10%
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CURRENT MARKET ENVIRONMENT AND MACROECONOMIC TRENDS 18 Average 30-year fixed rate mortgage(1) 10-year Treasury Bond Yield(2) Macroeconomic Metrics(3) Footnotes 6.08% 6.85% 3.78% 4.57% (1) Freddie Mac Primary Mortgage Market Survey. 6.96% as of 1/23/25 (2) U.S. Department of the Treasury. 4.64% as of 1/23/25 (3) 10-year Treasury bond yield and 2/10 year Treasury yield spread: Bloomberg Average 30-year fixed rate mortgage: Freddie Mac Primary Mortgage Market Survey Average secondary mortgage rate: 30-Year FNCL Par Coupon Index (MTGEFNCL), Bloomberg U.S. home price appreciation: S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index (SPCSUSA); data is as of 10/31/24 Residential mortgage originations are for the quarterly period ended; source: Inside Mortgage Finance 12/31/23 3/31/24 6/30/24 9/30/24 12/31/24 10-year Treasury bond yield 3.9% 4.2% 4.4% 3.8% 4.6% 2/10 year Treasury yield spread -0.4% -0.4% -0.4% 0.1% 0.3% 30-year fixed rate mortgage 6.6% 6.8% 6.9% 6.1% 6.9% Secondary mortgage rate 5.3% 5.6% 5.8% 4.9% 5.8% U.S. home price appreciation (Y/Y% change) 5.7% 6.5% 5.5% 3.9% 3.6% Residential mortgage originations (in billions) $315 $320 $430 $455 $460
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19 PMT’S INVESTMENT ACTIVITY BY STRATEGY DURING THE QUARTER Credit Sensitive Strategies Interest Rate Sensitive Strategies ($ in millions) Long-term mortgage asset Assets carrying value at 9/30/24 Change in Investments(5) Fair value changes Assets carrying value at 12/31/24 PMT GSE credit risk transfer(1) $ 1,117 $ (25) $ 10 $ 1,102 Other GSE Credit Risk Transfer (CAS & STACR) $ 196 $ - $ - $ 196 Non-Agency Subordinate MBS(2) $ 84 $ 51 $ (4) $ 131 Other Credit Sensitive Strategies(3) $ 7 $ (1) $ - $ 6 MSR $ 3,809 $ (126) $ 184 $ 3,867 Non-Agency Senior MBS(4) $ 120 $ 9 $ (3) $ 125 Agency MBS(4) $ 3,875 $ 24 $ (137) $ 3,762 Total $ 9,208 $ (67) $ 50 $ 9,190 Note: Figures may not sum due to rounding (1) The fair value of PMT’s organically-created GSE CRT investments is reflected on PMT’s balance sheet as deposits securing CRT arrangements, and derivative and credit risk transfer strip assets or liabilities, net of the interest-only security payable (2) As discussed in Note 6 – Variable Interest Entities to our Quarterly Report on Form 10-Q for the quarter ended 9/30/24 we consolidate the assets and liabilities in the trust that issued the subordinate bonds; accordingly, this investment is shown as Loans at fair value and Asset-backed financing of variable interest entities on our consolidated balance sheet (3) Primarily consists of legacy distressed loan portfolio; net new investments also reflect sales in performing and non-performing loans as a part of PMT’s strategy to exit the investments; includes $2.5 million in carrying value of real estate acquired in settlement of loans at 12/31/24 (4) MBS = Mortgage-backed securities; net new investments in Agency MBS represents rebalancing of the MBS portfolio (considered along with to be announced hedges in managing PMT’s interest rate risk) and runoff (5) Change in investments represents new investments net of sales, liquidations, and runoff
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December 31, 2024 Mortgage Unaudited ($ in millions) Servicing Rights Pool UPB(1) $226,238 Weighted average coupon 3.8% Weighted average servicing fee 0.27% Weighted average prepayment speed assumption (CPR) 6.7% Fair value $3,867 As a multiple of servicing fee 6.3 20 MSR ASSET VALUATION (1) Owned MSR portfolio and excludes loans acquired for sale at fair value
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21 DELINQUENCY TRENDS AND SERVICING ADVANCES OUTSTANDING 30-60 Day 60-90 Day 90+ Day In foreclosure (1) Owned MSR portfolio and includes loans acquired for sale at fair value; delinquency and foreclosure rates based on UPB; as of 12/31/24, the UPB of mortgage servicing rights owned by PMT and loans held for sale totaled $231 billion ● Overall mortgage delinquency rates increased slightly from the prior quarter ● Servicing advances outstanding for PMT’s MSR portfolio increased to approximately $105 million at December 31, 2024 from $71 million at September 30, 2024 due to seasonal property tax payments ‒ No principal and interest advances are outstanding Historical Trends in Delinquency and Foreclosure Rates(1)
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As of December 31, 2024 Segment UPB ($ in billions)(2) % of Total UPB Loan count (in thousands) Note rate Seasoning (months) Remaining maturity (months) Loan size ($ in thousands) FICO credit score at origination Original LTV Current LTV(3) 60+ Delinquency (by UPB) GSE FNMA $111.7 49.4% 431 3.8% 50 299 $259 757 75% 52% 1.0% FHLMC $110.3 48.8% 393 3.8% 40 307 $281 761 75% 56% 0.6% Other(1) Other $4.2 1.8% 16 5.0% 37 320 $268 761 72% 57% 0.7% Grand Total $226.2 100.0% 839 3.8% 45 303 $270 759 75% 54% 0.8% 22 PMT’S OWNED MSR PORTFOLIO CHARACTERISTICS Note: Figures may not sum due to rounding (1) Other represents MSRs collateralized by conventional loans sold to private investors (2) Excludes loans held for sale at fair value (3) Excludes any additional second lien on property
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23 INTEREST RATE SENSITIVE STRATEGIES DESIGNED TO MITIGATE INTEREST RATE VOLATILITY Estimated Sensitivity to Changes in Interest Rates at December 31, 2024 % change in PMT’s shareholders’ equity • PMT’s interest rate risk exposure is managed on a “global” basis – Multiple mortgage-related investment strategies with complementary interest rate sensitivities – Utilization of financial hedge instruments – Contributes to stability of book value (1) Includes loans acquired for sale and interest rate lock commitments (net of associated hedges), Agency and Non-Agency MBS assets (2) Includes MSRs and hedges which includes or may include put and call options on MBS, Eurodollar futures, treasury futures, and exchange-traded swaps (3) Net exposure represents the net position of the “Long” assets and the MSRs and hedges Gain in value with increasing rates Gain in value with decreasing rates MSRs Agency MBS Interest Rate Hedges (1) (2) (3)
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24 PERFORMANCE OF ORGANICALLY-CREATED INVESTMENTS IN GSE CREDIT RISK TRANSFER INVESTMENTS IN 4Q24 ($ in millions) Income (Loss) Contribution Comments Market-driven value changes: Valuation-related changes included in Net gain (loss) on investment $ 10.2 • Reflects impact of credit spread tightening Income excluding market-driven value changes: Realized gains and carry included in Net gain (loss) on investment 14.8 • Spread income earned on CRT investments Losses recognized during period (0.5) Interest income 13.2 • Interest income on cash deposits securing CRT investments Interest expense (17.7) • Financing expense related to CRT investments Subtotal 9.9 Total income contribution: $ 20.1 Note: Figures may not sum due to rounding
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Current outstanding UPB of loans delivered to the CRT SPVs and sold to Fannie Mae or delivered subject to agreements to purchase REMIC CRT securities 25 BALANCE SHEET TREATMENT OF PMT’S ORGANICALLY-CREATED CREDIT RISK TRANSFER INVESTMENTS Current cash collateralizing guarantee included in “Deposits securing credit risk transfer arrangements” Represents the fair value of expected future cash inflows related to assumption of credit risk net of expected future losses Fair value of non-recourse liability issued by CRT trusts; represents value of interest-only payment after the maturity of PMT’s investments ($ in thousands) December 31, 2024 UPB of loans subject to guarantee obligation....................................... $ 21,249,304 Carrying value of CRT arrangements: Deposits securing CRT arrangements......................................................... $ 1,110,708 Derivative assets and credit risk transfer strip liabilities, net.................. $ 25,317 Interest-only stripped security payable at fair value................................... $ (34,222) Fair value of CRT investments ………...................................................... $ 1,101,803 Note: Figures may not sum due to rounding
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26 PMT’S ORGANICALLY-CREATED INVESTMENTS IN CREDIT RISK TRANSFER Note: Figures may not sum due to rounding (1) FICO and L TV metrics at origination (2) Losses due to liquidation of reference pool collateral (3) Interest reduction due to modification of reference pool collateral PMTT1 (May 2015 - Jul 2015) PMTT2 (Aug 2015 - Feb 2016) PMTT3 (Feb 2016 - Aug 2016) L Street Securities 2017-PM1 (Aug 2016 - May 2018) L Street Securities 2019-PMT1 (Jun 2018 - Mar 2019) L Street Securities 2020-PMT1 (Apr 2019 - Sep 2020) Total At Inception 12/31/24 At Inception 12/31/24 At Inception 12/31/24 At Inception 12/31/24 At Inception 12/31/24 At Inception 12/31/24 At Inception 12/31/24 UPB in billions $1.2 $0.1 $4.2 $0.5 $6.5 $0.9 $22.8 $3.4 $23.6 $2.6 $58.3 $13.7 $116.5 $21.2 Loan Count 4,113 695 15,146 2,547 21,467 4,373 82,086 16,834 84,521 11,943 193,310 57,730 400,643 94,122 % Purchase 67.6% 68.0% 71.4% 71.8% 68.6% 70.5% 73.6% 73.1% 81.7% 79.9% 61.6% 61.1% 69.1% 66.0% WA FICO(1) 742 744 742 743 749 750 746 745 746 736 758 758 752 753 WA LTV(1) 81.3% 80.6% 81.8% 80.9% 81.4% 80.8% 82.5% 81.9% 83.8% 84.1% 82.5% 82.4% 82.7% 82.4% 60+ Days Delinquent by Loan Count 5 16 36 152 338 606 1,153 60+ Days Delinquent by UPB 0.529% 0.658% 0.993% 1.128% 3.706% 1.225% 1.480% 180+ Days Delinquent Loan Count - 4 2 16 95 138 255 Actual and Principal Losses ($k)(2) $2,109 $6,107 $9,119 $29,191 $684 $802 $48,012 Interest Reduction ($k)(3) $19,792 $19,456 $39,248
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27 CORRESPONDENT PRODUCTION ACQUISITIONS AND LOCKS BY PRODUCT Note: Figures may not sum due to rounding (1) PMT sells government-insured and guaranteed loans, and certain conventional loans that it purchases from correspondent sellers to PennyMac Loan Services, LLC, and earns a sourcing fee and interest income for its holding period; PMT does not pay a fulfillment fee for government-insured or guaranteed loans or conventional loans subsequently sold to PFSI Unaudited ($ in millions) 4Q23 1Q24 2Q24 3Q24 4Q24 Correspondent Acquisitions Conventional Conforming - for PMT $ 2,477 $ 1,769 $ 2,195 $ 5,851 $ 3,241 Conventional Conforming - for PFSI(1) 10,129 8,190 10,007 8,092 13,567 Government - for PFSI(1) 11,011 8,167 10,301 11,788 11,018 Jumbo - for PMT 3 3 34 97 256 Total $ 23,620 18,128 22,537 25,829 28,082 Correspondent Locks Conventional Conforming - for PMT $ 2,737 $ 2,472 $ 2,602 $ 7,373 $ 2,741 Conventional Conforming - for PFSI(1) 9,977 8,614 9,914 8,229 13,810 Government - for PFSI(1) 11,197 8,467 11,100 12,448 11,088 Jumbo - for PMT 5 10 90 253 454 Total $ 23,916 19,563 23,706 28,304 28,093
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