Good afternoon and welcome to PennyMac Mortgage Investment Trust's third quarter 2026 earnings call. Additional earnings materials, including the presentation slides that will be referred to in the call, as well as an Excel file with supplemental information, are available on PennyMac Mortgage Investment Trust's website at pmt.pennymac.com. Before we begin... David Spector, Penny Mac Mortgage Investment Trust Chairman and Chief Executive Officer. Please go ahead.

Thank you, Operator. Good afternoon and thank you to everyone for participating in our third quarter 2026 earnings call. Before discussing our financial results, I want to take a few moments to address the important leadership transitions we announced earlier today. Thank you for joining us. Over the next several months, Doug's roles and responsibilities will transition smoothly to other senior leaders across our organization. Second, effective January 1st, 2027, Kevin Ryan, currently our Chief Strategy Officer, will assume the role of Chief Financial Officer. Dan Perotti, our current CFO, will remain in his current role through the end of this year and will continue supporting the company in an advisory role through the first quarter of 2027. Kevin will continue to lead our strategy and business development teams alongside his financial leadership responsibilities. I want to express my extraordinary gratitude to both Doug and Dan for their long service to PennyMac, their relentless dedication and their enduring passion for our business. Both served in critical leadership positions, guiding PennyMac through dynamic market cycles and helping transform our organization to the premier mortgage company it is today. Their countless contributions have shaped our foundation and they will be greatly missed. Having said that, we have an exceptional leadership team and a deep bench of talent that is fully prepared to lead PMT into its next chapter. I have absolute confidence in this management team's ability to carry our strategy forward seamlessly while driving long-term value for our shareholders. Turning to our third quarter results on slide three, PMT reported a third quarter net loss attributable to common shareholders of $36 million or a loss of 41 cents per common share. These results were primarily impacted by market-driven value declines driven by mortgage spread widening and rate volatility. Excluding market-driven value changes, our investment strategies generated adjusted net income attributable to common shareholders, and many more. PMT's Board of Trustees approved a $130 million increase to our share repurchase authorization, bringing our total available capacity to over $200 million currently. On slide four, we summarize our three key capital allocation priorities. In recent periods, we have sold or committed to sell approximately $35 billion in UPB of agency MSRs, including a meaningful amount of higher no-rate MSRs and we will continue to evaluate additional sales opportunities to free up capital for redeployment into higher yielding investments. Next, PMT's upcoming fourth quarter common dividend is expected to be reduced in order to maximize the potential for book value accretion and support the ongoing rotation of capital into higher returning assets. and finally, PMT's common shares continue to trade at substantial discount to book value per share. In response, we are opportunistically looking to repurchase outstanding common shares where these repurchases meet our return hurdles, driving long-term value for our shareholders. Now turning to slide five, as I mentioned earlier, Thank you for joining us. This wider mortgage basis drove asset price declines and sector-wide headwinds related to hedging and pipeline management. Turning to slide six, we highlight why PMT is differentiated from peers and why our diversified model helped insulate us from these sector-wide headwinds. First, prepayment risk on our MSR asset remains very low with the portfolio carrying a weighted average coupon of 3.9%. Meanwhile, agency MBS and credit sensitive investments provide a natural hedge to our MSR portfolio with residual exposure actively managed through interest rate derivatives. Second, as discussed last quarter, PMT's correspondent acquisitions are now limited to non-agency loans. and finally, PMT's synergistic relationship with its manager, PennyMac Financial Services, Inc., gives it unique access to PFSI's capacity to organically create investments in the residential mortgage market. Further, PFSI's best-in-class servicing platform ensures proactive delinquency management and loss mitigation, which is expected to enhance the long-term performance of our investments. To discuss our portfolio sensitivity, the execution of our MSR sales and private label securitizations, and our updated run rate return potential, I am pleased to introduce Marshall Sebring, PMT's Chief Investment Officer.

Thank you, David. On slide seven, you can see how PMT carries significantly less sensitivity to both interest rate and spread changes compared to other mortgage rates. And during the third quarter, our modeled book value sensitivity to an instantaneous 50 basis point parallel rate shot was just 0.7%, less than one-fourth of the 3.6% average across a peer group of four publicly traded mortgage rates. Similarly, under a 10 basis point spread widening shot, PMT's modeled book value loss was 1.3% compared to 4.4% for the peer group. This lower sensitivity is a direct result of our portfolio diversification. Because fair value changes on our MSRs are naturally offset by our investments in agency MBS and credit assets, PMP's duration and spread exposures are partially mitigated before hedging activities. While mortgage spreads widen aggressively across the market, 85% or $56 million of our $66 million in net market-driven value declines was attributable to spread widening. At the same time, excluding market-driven value changes, our strategy is generating stable cash flows with our credit-sensitive and interest-rate-sensitive strategies producing $12 million and $37 million of pre-tax income, respectively. Looking ahead, our strategic roadmap is clear. We are actively rotating capital away from certain lower-yielding MSR assets and reinvesting into accretive, organically-created credit investments with expected ROEs in the low to mid-teens. This deliberate rotation expands our run rate earnings power, reinforces our book value stability, and positions PMT to deliver attractive, sustainable total returns to shareholders. Moving now to slide eight, we continue to actively rotate equity away from lower yielding MSR investments and redeploy that capital into higher returning, organically created credit investments from our private label securitization activity. During the third quarter, we sold $13 billion in UPV of agency MSRs and entered into an agreement to sell an additional $10 billion in UPV. After quarter end, we entered into an agreement to sell another $12 billion in UPV, bringing our total closed and committed MSR sales to approximately $35 billion. Importantly, these transactions were executed at prices at or near fair value. and we will continue to evaluate additional sales opportunities as they arise in order to optimize our return on capital and create a more balanced weighting between credit and interest rate offensive strategies. In our private label securitization business, we completed eight transactions in the third quarter across non-owner occupied jumbo and owner occupied collateral, retaining $167 million of accretive investments with expected ROEs in the mid-teens. As shown on slide nine, this ongoing capital rotation combined with the current rate environment has increased our projected run rate return potential over the next four quarters to 38 cents per common share, up 15% from 33 cents in the prior quarter. This translates to an expected average annualized return on common equity of 10.6%. This expansion in our forward-looking returns is driven by two key dynamics. First, higher interest rates as well as recent sales of MSRs have driven prepayment expectations lower, which substantially reduces our projections for amortization. As a result, our MSR asset is projected to deliver an annualized return on equity of 12.8% over the next four quarters. And as discussed previously, we are accelerating the deployment of capital released from MSR sales and to organically created investments from our private label securitizations. These investments carry targeted ROEs in the low to mid teens, which compares favorably to run rate returns on certain MSIs. Overall, we expect improved performance across all three of our primary investment strategies. As David highlighted earlier, we will continue actively monitoring our equity allocations with PMT's upcoming fourth quarter dividend expected to be adjusted to maximize book value accretion while also considering projections of taxable income. Now I'd like to introduce our current chief strategy officer and incoming CFO, Kevin Ryan.

Thank you, Marshall. I am honored and excited to assume the CFO role at PMT. And I want to thank David and the board for their trust and confidence. Thank you so much for joining us today. Thank you, Kevin.

On slide 11, net loss to common shareholders was $36 million or 41 cents per diluted common share in the third quarter. Our credit sensitive strategies contributed $42 million to pre-tax loss. Organically created CRT contributed $6 million of pre-tax income, primarily consisting of realized gains in carry. Investments in subordinate MBS from our private label securitizations generated losses of $48 million, a $6 million of income excluding market-driven value changes, was more than offset by a $54 million decline in market-driven value declines from the impact of increasing interest rates, which are managed as a part of our global hedge programs. The interest rate sensitive strategies contributed pre-tax income of $36 million for an annualized ROE of 12%. Income excluding market-driven value changes for this segment was $37 million, up from $20 million in the prior quarter, as decreased prepayment speeds during the quarter drove slower runoff of our MSR asset. During the quarter, we purchased $548 million of agency floating rate MBS and the fair value of our MBS portfolio and many more. The aggregation and securitization segment reported a pre-tax income of $2 million, down from $11 million in the prior quarter. Net gains on loans acquired for sale declined from the prior quarter, primarily due to the impact of spread widening on jumbo and non-QM loans during aggregation for securitization and lower volumes. In total, PMT reported 35 cents in adjusted earnings per share, or a 9% adjusted ROE, up from 25 cents, Slide 13 highlights the continued success of our organic investment creation engine. During the quarter, we completed eight private label securitizations, totaling $2.9 billion in UPV. This activity resulted in the retention of $167 million of new senior and subordinate investments. We also generated $17 million of new MSR investments. Our momentum has continued after quarter end. We completed two additional securitizations and priced PMT's inaugural non-QM DSCR securitization for a total of $1.1 billion in UPV with $119 million of expected retained investments. We remain on pace to complete approximately 30 securitizations in 2026. In total, through 2026, we expect we will have added more than $600 million of retained investments, building a substantial foundation of investments with returns on equity in the low to mid-teens to support future earnings. On slide 14, we have provided a snapshot of the high-quality investments we are creating through our private label securitization programs. at quarter end, the fair value of retained investments from this program was over $1 billion. 58% of this portfolio is comprised of investments from non-owner occupied loan securitizations. 20% is comprised of jumbo loan securitizations with the remainder from owner occupied loan securitizations. As you can see, these investments feature exceptional credit characteristics, including a weighted average FICO at origination of 775, a weighted average LTV at origination of 73%, and negligible delinquencies. Credit quality of these organically created assets underscores our ability to produce attractive, high-yielding investments in the current market. Turning to slide 16, we highlight the flexible and sophisticated financing structures PMT has in place to support its diversified portfolio of investments, with only $50 million in maturities of unsecured financing prior to 2029. And finally, on slide 17, our core debt-to-equity metric, debt-to-equity excluding non-recourse debt, increased to 6.5 times at quarter end from 6.2 times at the prior quarter end, within the range of our expectations. The increase in our total debt to equity ratio reflects growth in non-recourse debt associated with these transactions where all securitized loans are required to be consolidated on our balance sheet for accounting purposes. As a reminder, the source of repayment for this debt is limited to the cash flows from the associated loans in each private label securitization, mitigating any additional exposure to PMT. We expect the divergence between these two metrics to continue increasing as our securitization program continues to grow. On a more personal note, I want to take a moment to express my sincere gratitude to David, our board of directors, and my colleagues for their trust, partnership, and shared dedication throughout my time at PennyMac. I'm extraordinarily proud of what we've accomplished in my 18 years with the company, my six years in the CFO role, and in particular, I'm proud of the world-class finance organization and the resilient balance sheet we've built. Having worked alongside Kevin for the past year, I have the utmost confidence in his leadership and vision to steer our financial and strategic execution going forward as he assumes the CFO role. And finally, to our shareholders and the investment community, thank you for your thoughtful engagement, rigorous questions, and constructive partnership over the years. It has been a privilege working with you. And now we'll open it up for questions. Operator?

I would like to remind everyone we will only take questions related to PennyMac Mortgage Investment Trust or PMT. We also ask that you keep your questions limited to one preliminary question and one follow-up question. If you would like to ask a question, please raise your hand or press star 1. To withdraw your question, please press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Doug Harder from VTIG. Your line is open. Please go ahead.

Thank you. I was hoping as you talk about potentially reducing the dividend, what are the key factors you're going to be thinking about as you look to size capital return between dividend and share repurchase?

Well, look, I think that as we've talked about, In our opening remarks, the dividend is likely going to be reduced in the fourth quarter. And really my focus is to maximize the potential for book value accretion with consideration given to the taxable income projections. So if you look at the run rate of 30 cents, that kind of kicks out a dividend of about 30 cents a share and implies 8 cents per quarter of growth in book value per share. Now as it pertains to stock buybacks that we're going to look at vis-a-vis other alternative investments. And I think, you know, that's, we're going to look to deploy capital into, you know, other, you know, other residential mortgage assets of which then we will look at that versus the stock buyback.

and how do you weigh in determining stock buyback, wanting to retain as much capital as possible at PMT to be able to help with the scale of growing and scaling the business and helping with efficiencies over time versus the near-term financial benefit of accretion of buying back stock at these levels?

I think where we are today, I think that the scale issue, which is one that's always on my mind, I think that's a secondary issue to the fact that we believe that there's real value within the company that's not being recognized or reflected in the stock price. And when you look at the return of buying back stock versus other alternative investments, it's a pretty compelling case to make in terms of buying back stock. And it was evidenced by the fact that we sold MSRs at the market Thank you for joining us. Great, thank you. Thanks, Doug.

The next question is from Bose George with KBW. Your line is open. Please go ahead.

Hey, guys. Good afternoon again. So just to follow up on the dividend. So I guess you said the dividend is probably going to be around 30 cents. And so do we compare that your operating EPS is likely to continue in the high 30s? And so the dividend looks well covered by that. Is that kind of a fair way to think about it?

Exactly. Exactly. you know dividend stability is very very important to us I think that you know we've we have historically tied it to gap earnings and I think as Dan pointed out we're giving more consideration to taxable income projections and so I do think that that the 30 cent amount it has to be approved you know at the next board meeting but I don't I don't foresee it not and I think that we believe that the 30 cent Thank you for joining us.

Does that capital get redeployed quickly enough or is there any drag on the EPS?

Hey, Boz, it's Marshall. No, we look to redeploy that capital quickly rather than allowed to sit on the balance sheet uninvested.

and you can see that the strategy we've taken over the past few quarters obviously over time we're investing into the subordinate tranches but we bought over $500 million of CMO floaters during the quarter our agency investments in the interest rate sensitive strategies are obviously very liquid and that's a place where we can deploy capital quickly upon sales of the MSRs in addition to, as David mentioned, repurchasing stock.

Okay, great. Thanks.

The next question is from the line of Jason Weaver with Jones Trading. Your line is open. Please go ahead.

Hey, guys. Thanks for taking my question. First of all, I want to Dovetail off of Doug's second question there regarding the buyback. Look, I realize how attractive this is given the discounts in the marketplace right now versus deploying into other investments. But help us understand how you think about sizing that relative to your overall leverage level, given the amount of capital that you could build up within the course of four quarters or so. Would that be a limitation for you to push leverage higher by virtue of just repurchasing the stock?

Any activity we do as it pertains to asset investing or stock buyback, we're going to factor in the effect it's going to have on leverage. So it's not going to be repurchased at any leverage level. I think we are very mindful, we have a history of it, of really focusing on leverage and in particular non-recourse debt to equity. leverage. And I think it's just something that as we sell MSRs, we're going to look to, you know, we're obviously going to look to continue to invest, but there's a portion of those sales that's going to go into buying back stock. And that's how we've historically done it. It's not an all or none decisioning, and it's not one that, you know, we take lightly, but I do think that it's something that running an investment vehicle, you just look at the return When you look at the returns of the investments, you can't ignore the return opportunity that our investors are looking at in the stock buyback.

Got it. Thank you for that. And then to follow up, the 13 billion in sales during the quarter, as well as the ones you've executed in October, can you talk about what sort of valuation levels you were able to move those at and how that compared with your carrying values?

Yeah, without getting into the actual levels at which they traded, I can tell you that we sold them at our carrying values. And this was a mix of both high note rate and low note rate MSR holdings. So hopefully that answers your question.

Yeah, yeah. Thank you very much. Take care, guys.

Thanks, Jason. The next question is from the line of Crispin Love with Piper Sandler. Your line is open and please go ahead.

Thank you. I appreciate taking the question. Adjusted EPS improved in the quarter and your run rate potential on slide nine did as well. I think you're looking at ROEs of nearly 11% now. Can you just discuss some of the puts and takes there? The major drivers for the improved outlook, even with a more challenging rate environment, rate backdrop. Is it really the diversification, the strategic shift here? But I'm just curious on some of the puts and takes. Thank you.

It's a combination of the diversification and the rotation of the capital out of MSR into some of the higher returning investments, as Marshall talked about, as well as the higher interest rate environment for PMT is not actually necessarily a more challenging environment. Some of the challenges for PMT over the past few quarters have been the speeds on the MSR portfolio that obviously is mitigated with interest rates at higher levels. And so the combination of those two factors are really the primary drivers between driving the run rate higher through the next four quarters compared to the last one.

Great. Thank you. And then just one follow up on securitization demand today. I think on slide 13, you're still saying expect approximately 30 securitizations in 2026. Just curious if you, just how demand is today, if you've seen any differences kind of recently or just how's that trending?

Yeah, Ms. Marshall, I would say that demand continues to be to be strong. Certainly there was, I think, some amount of modest repricing wider within the non-agency space. I would say modest compared to the amount of spreadlining that we saw in agency MBS. You know, we were able to already price two deals so far this quarter. And yeah, so I think that demand continues to remain strong. I think the frequency by which we are in the market and a consistent issuer also allows us to price favorably compared to competitors. And I think that helps us in terms of overall subscription as well.

Great. Thank you.

Appreciate you taking the questions. The next question is from the line of Trevor Cranston from Citizens JPM. Your line is open. Please go ahead. Trevor Cranston, your line is open. Please go ahead. You may be muted on your end, Trevor. There we go.

Okay. Sorry about that. Thanks. Can you guys talk about how you're thinking about the impact of higher rates on your pace of loan acquisition and securitization activity? I guess in particular, I'm thinking about some of the more rate-sensitive products like the Prime Jumbo loans.

Thanks. Sure. I think based off of PMTs not only taking in the Correspondent non-agency origination, but also the ability and its practice of acquiring loans from PFSI. Despite the fact that we've seen, you know, obviously a drop off in origination volumes, you know, relative to the size of the monthly deals that we're doing kind of bilateral type, you know, we still see sufficient origination to support those efforts.

Got it. Okay. And then on the bulk MSR market, I mean, you guys have obviously announced some transactions. You know, we've heard from some peers the intent to sell some MSRs in 4Q. Can you maybe provide some color on kind of how much supply you guys are seeing come to market on the bulk MSR side? And if you think there's enough depth in the buyer base to kind of support continued opportunistic sales there in the near term? Thanks.

Yeah, I think the short answer is that we do think that there's enough depth to support, you know, at least what has kind of been indicated in terms of supply. Perspective Sales. There was one servicer that was out talking about selling upwards of $80 billion. We understand that a large amount of that is already transacted. So our thinking is that certainly it depends on the type of MSR asset. PMT has a large amount of low note rate MSR. Okay, that's helpful. Thank you.

There are no further questions at this time. I will now turn the call back to David Spector for closing remarks.

Thank you, operator. Thank you all for joining us at this late hour. We really appreciate it. If you have any additional questions, please reach out to our investor relations team. And again, have a good evening and thank you.

This concludes today's call. Thank you for attending. You may now disconnect.