On this page of StockholderLetter.com we present the latest annual shareholder letter from PennyMac Mortgage Investment Trust — ticker symbol PMT. Reading current and past PMT letters to shareholders can bring important insights into the investment thesis.
2023
Annual Report
PennyMac Mortgage Investment Trust (NYSE: PMT) is a specialty finance company that invests
primarily in residential mortgage loans and mortgage-related assets. As a real estate
investment trust (REIT), our objective is to provide attractive risk-adjusted returns to our
shareholders over the long-term, primarily through dividends and secondarily through capital
appreciation.
Our investment focus is on mortgage-related assets that we create through our industry-leading
correspondent production activities, primarily mortgage servicing rights (MSRs). In
correspondent production, we acquire, pool and securitize or sell newly originated prime credit
quality loans. Our interest rate sensitive investments include the MSRs, mortgage-backed
securities and related hedge instruments. Our credit sensitive investments consist primarily of
credit risk transfer investments related to loans sourced through our correspondent production
that were delivered to Fannie Mae.
PMT is managed by PNMAC Capital Management, LLC, a wholly-owned subsidiary of PennyMac
Financial Services, Inc. (NYSE: PFSI), and an investment adviser registered with the Securities
and Exchange Commission that specializes in mortgage assets. Our correspondent production
operations are conducted on a fee-for-service basis by another PennyMac Financial subsidiary,
PennyMac Loan Services, LLC, which also services most of the loans in our investment and
MSR portfolios.
Dear Fellow Shareholders,
2023 was an outstanding year for PennyMac Mortgage Investment Trust (NYSE: PMT),
highlighting the underlying strength of its investments and risk management practices amidst
challenging market conditions for the mortgage industry and mortgage real estate investment
trusts (REITs). PMT was profitable every quarter in 2023, with annual income contributions from
all three of its investment strategies. Return on average common equity for the year was 11
percent, driven by fair value gains in the credit sensitive strategies as credit spreads tightened
throughout the year as well as strong levels of income excluding market-driven value changes.
These results were partially offset by net fair value declines in the interest rate sensitive
strategies and provisions for income tax expense. In total, net income attributable to common
shareholders was $158 million or $1.63 per diluted common share, higher than the $141 million
or $1.60 per share of dividends paid during the year, and, as a result, PMT   s book value per
share increased to $16.13 at year end from $15.78 at the end of 2022. PMT also returned $28
million to shareholders through its share repurchase program.
We believe PMT   s 2023 performance reflects its long-term return potential, supported by a
diversified portfolio of interest rate sensitive and credit assets with strong underlying
fundamentals, and a best-in-class management team. PMT   s assets include a conventional
mortgage servicing rights (MSR) portfolio which is hedged for interest rate risk; its unique,
seasoned investments in credit risk transfer (CRT); and a portfolio of other opportunistic
investments, all of which contributed meaningfully to profitability in 2023 and all of which we
expect to provide strong risk adjusted returns in the future.
We view the interest rate hedging and financing of these assets as a fundamental component of
the risk management discipline that has successfully differentiated PMT as a leading mortgage
REIT. The vast majority of financing in place for our CRT assets is in the form of term notes,
which do not contain margin call provisions, providing stable financing during more volatile
periods. Our MSR portfolio is financed with sophisticated revolving and term structures and is
hedged with Agency MBS and other interest rate instruments to mitigate fluctuations in value as
a result of interest rate movements. As a result, PMT   s book value remained stable throughout
the year and was not significantly impacted by the increased interest rate volatility that
negatively affected other mortgage REITs. During the year, our focus on optimizing PMT   s
balance sheet continued and we issued more than $650 million in new secured and unsecured
debt at attractive terms, while redeeming $450 million in secured term notes with upcoming
maturities.
The interest rate sensitive strategies segment produced solid results in 2023, with $45 million of
pretax income. These results demonstrate our ability to successfully hedge interest rate risk,
even in periods characterized by large interest rate movements that result in volatile MBS
markets and MSR prices. MSR investments currently represent approximately 50 percent of
PMT   s deployed equity and the underlying mortgage loans carried a weighted average coupon
of 3.7 percent at year-end. The vast majority of underlying borrowers are far out of the money
for a refinance, having locked in their mortgage payments at very low rates relative to today.
Looking ahead, prepayment speeds are expected to remain low for the foreseeable future and
we expect the related servicing income to persist for an extended period. In the current higher
interest rate environment, PMT   s interest rate sensitive strategies also benefit from elevated
placement fee income related to the custodial deposits we manage on behalf of borrowers and
investors. Though expected returns from the interest rate sensitive strategies have declined in
recent periods due to increased financing costs tied to the higher short-term interest rates, we
expect the long-term performance to be strong as the yield curve de-inverts and interest rate
volatility returns to more historical levels.
PMT   s unique and seasoned investments in lender CRT performed very well in 2023, and
currently represent approximately 15 percent of PMT   s deployed equity. The underlying
collateral consists of conventional mortgage loans originated from 2015 to 2020 and we expect
these assets to perform well over the long-term for many of the same reasons as our MSRs:
substantially all of the underlying loans are at mortgage rates well below current mortgage rates
and many of these borrowers    mortgage debt service payments are historically low as a
percentage of their income. Additionally, strong home price appreciation in recent years has
created a substantial amount of home equity for the majority of these borrowers. All of these
factors drive our expectations for borrower performance to remain strong with continued low
levels of delinquencies and limited actual realized losses expected on our investments in credit
risk transfer.
Our management team has a long and successful track record of managing mortgage-related
investments and the associated risks. Historically, we have sourced PMT   s investment assets
from its own conventional correspondent production volumes. While this trend continued in
2023 with over $290 million in new MSR investments, we leveraged the synergistic partnership
with our manager and services provider, PFSI, to have greater flexibility in our capital allocation.
During 2023, we sold a large portion of our conventional correspondent production to PFSI,
enabling us to deploy capital opportunistically into an actively managed portfolio of investments
such as GSE-issued CRT bonds or mezzanine bonds from jumbo securitizations in the interest
rate sensitive strategies, investments that we believe present the opportunity for strong riskadjusted returns. Additionally, we continue to evaluate the purchase of bulk MSR portfolios with
low weighted-average coupons that complement our existing MSR portfolio.
In summary, 2023 was another strong year for PMT. Total returns to shareholders remain well
above those of industry peers and related indices over the long-term, and I am incredibly proud
of this management team   s patience and ability to continue executing across various interest
rate environments. PMT remains well-positioned to continue delivering strong risk-adjusted
returns to its shareholders given the strong fundamentals underlying its investment portfolio in
credit sensitive and interest rate sensitive assets. I would like to thank you, our shareholders, for
your continued trust and confidence in PMT.
Sincerely,
David A. Spector
Chairman and Chief Executive Officer
April 19, 2024
SHARE PERFORMANCE GRAPH
The following graph and table describe certain information comparing the cumulative total
return on our common shares of beneficial interest to the cumulative total return of the Russell
2000 Index and the Bloomberg REIT Mortgage Index. The comparison period is from December
31, 2018, to December 31, 2023, and the calculation assumes reinvestment of any dividends.
The graph and table illustrate the value of a hypothetical investment in our common shares of
beneficial interest and the two other indices on December 31, 2018.
$161
$137
$100
Dec-18
$98
Dec-19
PMT
Dec-20
Russell 2000
Dec-21
Dec-22
Dec-23
Bloomberg REIT Mortgage Index
12/31/18
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
PMT
$100
$130
$113
$123
$101
$137
Russell 2000
$100
$125
$150
$173
$137
$161
Bloomberg REIT Mortgage Index
$100
$124
$96
$113
$86
$98
Source: Bloomberg
The information in the performance graph and table has been obtained from sources believed
to be reliable, but neither its accuracy nor its completeness can be guaranteed. The historical
information set forth above is not necessarily indicative of future performance. Accordingly, we
do not make or endorse any predictions as to future share performance. The share performance
graph and table shall not be deemed, under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, to be (i)    soliciting material    or    filed    or (ii)
incorporated by reference by any general statement into any filing made by us with the
Securities and Exchange Commission, except to the extent that we specifically incorporate such
share performance graph and table by reference.
 • shareholder letter icon 4/19/2024 Letter Continued (Full PDF)
 • stockholder letter icon 4/21/2023 PMT Stockholder Letter
 • stockholder letter icon More "REITs" Category Stockholder Letters
 • Benford's Law Stocks icon PMT Benford's Law Stock Score = 94


PMT Shareholder/Stockholder Letter Transcript:

2023
Annual Report

PennyMac Mortgage Investment Trust (NYSE: PMT) is a specialty finance company that invests
primarily in residential mortgage loans and mortgage-related assets. As a real estate
investment trust (REIT), our objective is to provide attractive risk-adjusted returns to our
shareholders over the long-term, primarily through dividends and secondarily through capital
appreciation.
Our investment focus is on mortgage-related assets that we create through our industry-leading
correspondent production activities, primarily mortgage servicing rights (MSRs). In
correspondent production, we acquire, pool and securitize or sell newly originated prime credit
quality loans. Our interest rate sensitive investments include the MSRs, mortgage-backed
securities and related hedge instruments. Our credit sensitive investments consist primarily of
credit risk transfer investments related to loans sourced through our correspondent production
that were delivered to Fannie Mae.
PMT is managed by PNMAC Capital Management, LLC, a wholly-owned subsidiary of PennyMac
Financial Services, Inc. (NYSE: PFSI), and an investment adviser registered with the Securities
and Exchange Commission that specializes in mortgage assets. Our correspondent production
operations are conducted on a fee-for-service basis by another PennyMac Financial subsidiary,
PennyMac Loan Services, LLC, which also services most of the loans in our investment and
MSR portfolios.

Dear Fellow Shareholders,
2023 was an outstanding year for PennyMac Mortgage Investment Trust (NYSE: PMT),
highlighting the underlying strength of its investments and risk management practices amidst
challenging market conditions for the mortgage industry and mortgage real estate investment
trusts (REITs). PMT was profitable every quarter in 2023, with annual income contributions from
all three of its investment strategies. Return on average common equity for the year was 11
percent, driven by fair value gains in the credit sensitive strategies as credit spreads tightened
throughout the year as well as strong levels of income excluding market-driven value changes.
These results were partially offset by net fair value declines in the interest rate sensitive
strategies and provisions for income tax expense. In total, net income attributable to common
shareholders was $158 million or $1.63 per diluted common share, higher than the $141 million
or $1.60 per share of dividends paid during the year, and, as a result, PMT   s book value per
share increased to $16.13 at year end from $15.78 at the end of 2022. PMT also returned $28
million to shareholders through its share repurchase program.
We believe PMT   s 2023 performance reflects its long-term return potential, supported by a
diversified portfolio of interest rate sensitive and credit assets with strong underlying
fundamentals, and a best-in-class management team. PMT   s assets include a conventional
mortgage servicing rights (MSR) portfolio which is hedged for interest rate risk; its unique,
seasoned investments in credit risk transfer (CRT); and a portfolio of other opportunistic
investments, all of which contributed meaningfully to profitability in 2023 and all of which we
expect to provide strong risk adjusted returns in the future.
We view the interest rate hedging and financing of these assets as a fundamental component of
the risk management discipline that has successfully differentiated PMT as a leading mortgage
REIT. The vast majority of financing in place for our CRT assets is in the form of term notes,
which do not contain margin call provisions, providing stable financing during more volatile
periods. Our MSR portfolio is financed with sophisticated revolving and term structures and is
hedged with Agency MBS and other interest rate instruments to mitigate fluctuations in value as
a result of interest rate movements. As a result, PMT   s book value remained stable throughout
the year and was not significantly impacted by the increased interest rate volatility that
negatively affected other mortgage REITs. During the year, our focus on optimizing PMT   s
balance sheet continued and we issued more than $650 million in new secured and unsecured
debt at attractive terms, while redeeming $450 million in secured term notes with upcoming
maturities.
The interest rate sensitive strategies segment produced solid results in 2023, with $45 million of
pretax income. These results demonstrate our ability to successfully hedge interest rate risk,
even in periods characterized by large interest rate movements that result in volatile MBS
markets and MSR prices. MSR investments currently represent approximately 50 percent of
PMT   s deployed equity and the underlying mortgage loans carried a weighted average coupon
of 3.7 percent at year-end. The vast majority of underlying borrowers are far out of the money
for a refinance, having locked in their mortgage payments at very low rates relative to today.
Looking ahead, prepayment speeds are expected to remain low for the foreseeable future and

we expect the related servicing income to persist for an extended period. In the current higher
interest rate environment, PMT   s interest rate sensitive strategies also benefit from elevated
placement fee income related to the custodial deposits we manage on behalf of borrowers and
investors. Though expected returns from the interest rate sensitive strategies have declined in
recent periods due to increased financing costs tied to the higher short-term interest rates, we
expect the long-term performance to be strong as the yield curve de-inverts and interest rate
volatility returns to more historical levels.
PMT   s unique and seasoned investments in lender CRT performed very well in 2023, and
currently represent approximately 15 percent of PMT   s deployed equity. The underlying
collateral consists of conventional mortgage loans originated from 2015 to 2020 and we expect
these assets to perform well over the long-term for many of the same reasons as our MSRs:
substantially all of the underlying loans are at mortgage rates well below current mortgage rates
and many of these borrowers    mortgage debt service payments are historically low as a
percentage of their income. Additionally, strong home price appreciation in recent years has
created a substantial amount of home equity for the majority of these borrowers. All of these
factors drive our expectations for borrower performance to remain strong with continued low
levels of delinquencies and limited actual realized losses expected on our investments in credit
risk transfer.
Our management team has a long and successful track record of managing mortgage-related
investments and the associated risks. Historically, we have sourced PMT   s investment assets
from its own conventional correspondent production volumes. While this trend continued in
2023 with over $290 million in new MSR investments, we leveraged the synergistic partnership
with our manager and services provider, PFSI, to have greater flexibility in our capital allocation.
During 2023, we sold a large portion of our conventional correspondent production to PFSI,
enabling us to deploy capital opportunistically into an actively managed portfolio of investments
such as GSE-issued CRT bonds or mezzanine bonds from jumbo securitizations in the interest
rate sensitive strategies, investments that we believe present the opportunity for strong riskadjusted returns. Additionally, we continue to evaluate the purchase of bulk MSR portfolios with
low weighted-average coupons that complement our existing MSR portfolio.
In summary, 2023 was another strong year for PMT. Total returns to shareholders remain well
above those of industry peers and related indices over the long-term, and I am incredibly proud
of this management team   s patience and ability to continue executing across various interest
rate environments. PMT remains well-positioned to continue delivering strong risk-adjusted
returns to its shareholders given the strong fundamentals underlying its investment portfolio in
credit sensitive and interest rate sensitive assets. I would like to thank you, our shareholders, for
your continued trust and confidence in PMT.
Sincerely,
David A. Spector
Chairman and Chief Executive Officer
April 19, 2024

SHARE PERFORMANCE GRAPH
The following graph and table describe certain information comparing the cumulative total
return on our common shares of beneficial interest to the cumulative total return of the Russell
2000 Index and the Bloomberg REIT Mortgage Index. The comparison period is from December
31, 2018, to December 31, 2023, and the calculation assumes reinvestment of any dividends.
The graph and table illustrate the value of a hypothetical investment in our common shares of
beneficial interest and the two other indices on December 31, 2018.
$161
$137
$100
Dec-18
$98
Dec-19
PMT
Dec-20
Russell 2000
Dec-21
Dec-22
Dec-23
Bloomberg REIT Mortgage Index
12/31/18
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
PMT
$100
$130
$113
$123
$101
$137
Russell 2000
$100
$125
$150
$173
$137
$161
Bloomberg REIT Mortgage Index
$100
$124
$96
$113
$86
$98
Source: Bloomberg
The information in the performance graph and table has been obtained from sources believed
to be reliable, but neither its accuracy nor its completeness can be guaranteed. The historical
information set forth above is not necessarily indicative of future performance. Accordingly, we
do not make or endorse any predictions as to future share performance. The share performance
graph and table shall not be deemed, under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, to be (i)    soliciting material    or    filed    or (ii)
incorporated by reference by any general statement into any filing made by us with the
Securities and Exchange Commission, except to the extent that we specifically incorporate such
share performance graph and table by reference.



shareholder letter icon 4/19/2024 Letter Continued (Full PDF)
 

PMT Stockholder/Shareholder Letter (PennyMac Mortgage Investment Trust) | www.StockholderLetter.com
Copyright © 2023 - 2024, All Rights Reserved

Nothing in StockholderLetter.com is intended to be investment advice, nor does it represent the opinion of, counsel from, or recommendations by BNK Invest Inc. or any of its affiliates, subsidiaries or partners. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All viewers agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. By visiting, using or viewing this site, you agree to the following Full Disclaimer & Terms of Use and Privacy Policy.