Good afternoon and welcome to PennyMac Mortgage Investment Trust Fourth Quarter and Full Year 2024 Earnings Call. Additional earnings materials, including the presentation slides that will be referred to in this 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 reconciled to their GAAP equivalent in the earnings materials. 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.

Thank you, operator. PMT produced very strong results in the fourth quarter, generating a 10% return on equity, driven by strong levels of income, excluding market-driven value changes and excellent performance across all three investment strategies. Net income to common shareholders was $36 million or diluted earnings per share of $0.41 and PMT declared a fourth quarter common dividend of $0.40 per share. Book value per share at year end was $15.87, up from the end of the prior quarter. Importantly, the fourth quarter marked a return to the organic creation of credit investments for PMT, which I will expand on later. Turning to Slide 4, for the full year, PMT produced a return on common equity of 8%, with $119 million of net income attributable to common shareholders and income contributions from all three investment strategies. 2024 was a year characterized by significant interest rate volatility as evidenced by the yield on the 10-year treasury, which range from 3.6% to 4.7%. Even with this volatility, our dividend remained consistent and book value per share was stable throughout the year as the active hedging of mortgage servicing rights offset the majority of fair value changes in the interest rate-sensitive strategies. Also during 2024, we worked on multiple facets of the business to reposition PMT’s balance sheet for success in a higher interest rate environment. This included the opportunistic sale of certain investments as credit spreads tightening, a major rebalance of our Agency MBS portfolio and the issuance of $1.3 billion in term debt to address and extend upcoming maturities generally at tighter financing spreads. We also renewed PMT’s mortgage banking agreement with our manager, an industry leader, PFSI, solidify this unique synergistic partnership between the two companies for another half a decade. All of these activities position PMT with a…

Thank you, David. PMT earned $36 million in net income to common shareholders in the fourth quarter or $0.41 per diluted common share. The credit-sensitive strategies contributed $20 million in pre-tax income. The contribution from organically created CRT investments was $20 million while the contribution from opportunistic investments in cash and stacker bonds was offset by losses on non-agency subordinate MBS due to increasing interest rates and losses on other credit-sensitive strategies. As David mentioned, the outlook for our current investments in organically created CRT remains favorable, with a low underlying current weighted average loan-to-value ratio below 50% and a 60-day delinquency rate of 1.5%, both as of December 31. The interest rate sensitive strategies contributed pre-tax income of $25 million. Fair value increases on MSR investments were $184 million as the increase in mortgage rates drove a decrease in future prepayment projections. These fair value increases were offset by the combined impact of changes in the fair value of MBS, interest rate hedges and the related income tax effects. MBS fair value decreased by $140 million due to the increase in mortgage rates. Interest rate hedges decreased by $51 million. Income from correspondent production and gains on MSRs held in PMT’s taxable REIT subsidiary were the primary driver of the $9 million tax expense. The fair value of PMT’s MSR asset at the end of the quarter was $3.9 billion, up slightly from $3.8 billion at September 30, as fair value gains and newly originated MSR investments were slightly offset by runoff from prepayments. Delinquency rates for borrowers underlying PMT’s MSR portfolio remain low while servicing advances outstanding increased to $105 million from $71 million at September 30 due to seasonal property tax payments. No principal and interest advances are currently outstanding. Total correspondent loan acquisition volume was $28…

Thank you. I would like to remind everyone we will only take questions related to PennyMac Mortgage Investment Trust or PMT. [Operator Instructions] Your first question comes from the line of Bose George with KBW. Please go ahead.

Hey, guys. Good afternoon. So you mentioned if the yield curve steepens that helps the run-rate outlook. Again, does that matter if it’s – if we see a sell-off on the long end, does that kind of gets you there as well or do we need the Fed to cut a little bit?

No, that’s correct, Bose. If we see the long end go up, basically, if we see differentiation, the greater the spread between really truly short-term rates and longer dated rates really improves the outlook for the interest rate sensitive strategies to the overall steepness of the curve there. And from that perspective or somewhat ambivalent around whether the longer end goes up or the shorter end goes down.

Okay, great. Thanks. And then in terms of your MSR hedge, is your strategy kind of similar at PMT versus PFSI or is it sort of a tighter hedge here, or just how would you characterize it?

Generally speaking, we run a tighter hedge at PMT over time where we have run a tighter hedge from a hedge ratio perspective. The composition of the MSR portfolio in PMT versus PFSI is somewhat different at this point since PMT’s MSR portfolio given that it has acquired fewer loans, more loans have been going to PFSI through the correspondent channel over the last few years than PMT has retained. It so has – it has a greater concentration of lower note rate loans, which are less – have less sensitivity to interest rates changing and refinance. And also PMT has less benefit on the other side from origination up-ticking because although it gets some of the recapture benefit due to its agreement with PFSI, if those loans are refinanced through PFSI, it only retains really a portion of the benefit, not the same amount of benefit that PFSI retains if it refinances its own loans. And so for those reasons, because – for those two reasons, we run generally a tighter hedge at PMT. But I think it’s also important to note that the sensitivity at PMT of the MSR portfolio is also lower.

Okay. Great. It makes sense. Thank you.

Thank you. And your next question comes from the line of Matthew Erdner with Jones Trading. Please go ahead.

Hey guys. Thanks for taking the question. I would like to touch on GSE reform and kind of how you guys are seeing it play out? And then kind of as a follow-up to it with the new FHFA Director coming in, what are you guys expecting? And do you expect their footprint to just kind of shrink as a whole? Thanks.

Well, thank you, Matthew. I think – look, I think that it’s still really early to really have a point of view on what the new FHFA Director is going to do via the prior one. I can tell you, we have always had a good relationship with FHFA and the GSEs, and I am excited to work with the new Director. I think my general sense is it’s going to be a little bit of a return to the way things were the last time we had this administration in place. I think as a pertinent GSE reform have a similar point of view, that it’s still really early to say one way or another how it’s going to play out. But I can tell you, since we started the company, number one, always managed to a range of outcomes. So, we are very much prepared to operate in an environment where 90% of the production goes to the GSEs like we saw during the Obama administration or we see GPs increase or continue to increase, thus removing loans from the GSEs in the private label market. And that’s what’s really exciting about what’s taking place in PMT because as we have seen guarantee fees go up, and we have seen credit spreads tighten, the ability to take investor loans and second home loans that we have historically delivered to the GSEs and securitize those has given us the ability to organically create investments for PMT at appropriate returns. And that’s how this company was set up to operate. It just took a long time for private label securitization to come back. We are on pace to do a deal a quarter, and I expect that to continue into the future. But obviously, that’s subject to things that we…

Got it. That’s great color. Thank you very much.

Thank you. And your next question comes from the line of Trevor Cranston with Citizens JMP. Please go ahead.

Hey. Thanks. A bit of a follow-up to the previous comments on the credit opportunities, when you say on Slide 6, you are on track for a securitization per month. Can you clarify that specifically just related to investor loans, or would that incorporate other products such as prime jumbo? And can you guys also maybe talk a little bit about kind of the product set and if there are other things you guys are thinking about for securitization beyond the investor loans and then...?

Yes. Look, we did two investor loans, second one securitization in Q4. We closed our first one of the year today as a matter of fact. And so I feel really good about maintaining that pace of activity. Having said that, we are also looking, as I said, at jumbo loans, which is another asset class under the residential umbrella that I am really encouraged about, as I mentioned, we will do – my plans to at least do at least one securitization in the first half of this year. I think we also just full disclosure, we PFSI is originating over $300 million a month of closed-end seconds. We have looked at securitizing those loans and retaining investment there. It doesn’t quite achieve our return targets, and so there, it doesn’t – it’s not on the radar yet. I mean it’s not on the radar, obviously, but it’s not something that I see as an opportunity in the first half of this year. And the only asset class that we are starting to look at a little bit as non-QM, particularly the prime non-QM where we kind of are intrigued about the returns there, but there is a lot of work to be done there before we do anything in that market. But it’s really – it’s a testament to the organization that in PMT, that they have built out this enterprise that can value and price and understand all of the different assets that they can invest in, and it’s something that as we see more and more opportunities we are going to seize upon. As it pertains to agency loans in particular, I mean look, obviously, if we see guarantee fees go up or low level price adjustments go up, or I don’t – if they don’t like high balance loans and they want to put an LLPA on that, obviously, we are going to use our capabilities and our robust best execution engines to optimize for the best execution for PMT.

Got it. Okay. That makes sense. Thanks a lot.

Your next question comes from the line of Eric Hagen with BTIG. Please go ahead.

Hi guys. You have Jude Desicues [ph] on here for Eric. Can you guys share how much liquidity you currently have, including the room you have to borrow more against the MSRs? And what is your most readily available source of liquidity to draw upon as you get closer to the maturity of the unsecured? Thanks.

Sure. So, if you look at the balance sheet in terms of the liquidity that we had, the direct liquidity that we had outstanding at the end of the quarter was about $430 million. In terms of our financing facilities, we have a few hundred million dollars also available to be able to draw against the current collateral that we have outstanding at the end of the quarter. As we are going, as we are moving towards the maturity upcoming of – the maturity probably in next year in 2026 of the convertible, we are looking at opportunities that I mentioned in the prepared remarks to act as the capital markets to potentially replace that debt or replace a portion of that debt. So, we – a couple of years back, had done a baby bond issuance, that’s an area that we would look at, again, potentially accessing the convertible debt markets as we did last year is also something that’s available to us. But as we move through 2025, we will actively be looking at opportunities to add us to the market to offset some of that or to replace some of that maturity that’s upcoming next year.

Great. Thank you, guys.

Thank you. And your next question comes from the line of Doug Harter with UBS. Please go ahead.

Thanks. Dan, I appreciate you giving us some details around the gain from the non-agency securitization. How should we think about the profitability of that business compared to the traditional conventional correspondent business?

So, the gains overall in the correspondent section in terms of the aggregation gains, are generally a bit better or help to influence the margin of the correspondent business upwards. However, we have been engaged in that business. And although not necessarily securitizing, selling those loans through whole loan channels for the past few or several quarters, and although that business has been building over time, it’s not necessarily going to significantly impact upward versus our historical performance prior to this quarter – the overall margin in the correspondent channel. And I think if you look at our run rate sort of it reflects that. What we did see in this quarter was actually an improvement in the spreads – the spreads at which those loans could execute over typical GSE execution. And that was true both in terms of whole loan as well as securitization. And so given that we have been aggregating over a period of time to be able to execute these deals, these deals that we have been doing one a month for the past three months, that did have a benefit on our overall aggregation pipeline. That’s what led to that improvement that we saw or that contribution that we saw to the correspondent channel in this quarter. But as you can see from our run rate, we don’t necessarily expect that same level of contribution in each of the future quarters was a bit more specific to the tightening in that market that we saw in this quarter as we were aggregating.

Doug, the really nice part of the investor loans in second homes is that right now the securitization execution is really strong. By having said that, the bid for homes is very deep. And many of those investors are holding the loans and not securitizing them. So, there is a pretty robust market away from securitization. If you were to see an event in the private label markets that caused spreads to widen rather dramatically. And then finally, those loans are deliverable to the GSE. And so there is that third avenue. And so it’s not like other private label product that we have seen in the past where it’s solely reliant on securitization, there is multiple avenues and pads for that product to be delivered.

Great. I appreciate the answers. Thank you.

Thanks Doug.

And we have no further questions at this time. I would like to turn it back to David Spector for closing remarks.

Well, I want to thank everyone for joining us this afternoon. I want to encourage any of you with any additional questions to contact our Investor Relations team by an e-mail or phone, and they are available every day. And suppose if you want to follow-up with me or Dan, please don’t hesitate to reach out. Thank you all for joining. Bye-bye.

Thank you, presenters. And this concludes today’s conference call. Thank you all for participating. You may now disconnect.