PennyMac Mortgage Investment Trust 8.50% Senior Notes due 2028

PMTU

Market cap $54.8M

PennyMac Mortgage Investment Trust (NYSE:PMT ) Q3 2025 Earnings Call October 21, 2025 6:00 PM EDT Company Participants David Spector - Chairman of the Board & CEO Daniel Perotti - Senior MD & CFO Conference Call Participants Douglas Harter - UBS Investment Bank, Research Division Bose George - Keefe, Bruyette, & Woods, Inc., Research Division Trevor Cranston - Citizens JMP Securities, LLC, Research Division Crispin Love - Piper Sandler & Co., Research Division Presentation Operator Good afternoon and welcome to PennyMac Mortgage Investment Trust's Third Quarter 2025 Earnings Call. Additional earnings materials, including the presentation slides that will be referred to in the call, are available on PennyMac Mortgage Investment Trust's website at pmt.pennymac.com.

PennyMac Mortgage Investment Trust offers baby bonds with competitive yields and lower duration risk compared to preferred stocks. PMT boasts a 14-year streak of consecutive dividend payments, currently yielding 13.6% based on a $1.60 dividend and $11.79 share price. Credit risk metrics are strong: PMT's shares provide a 9x buffer over bonds, and dividend coverage of bond interest is robust at 12.65x.

PennyMac Mortgage Investment Trust (NYSE:PMT ) Barclays 23rd Annual Global Financial Services Conference September 8, 2025 2:45 PM EDT Company Participants David Spector - CEO & Chairman Daniel Perotti - Senior MD & CFO Conference Call Participants Terry Ma - Barclays Bank PLC, Research Division Presentation Terry Ma Research Analyst All right. I think we'll get started.

Some of the most enduring inventions in history continue to be adopted and function as intended. I don't like to babysit my investments; fixed-income makes an excellent fit for my no-drama income needs. We discuss our top picks from both ends of the spectrum of preferred securities with yields of +9%.

We tracked three new preferred stock and ETD offerings this month, with yields from 6.875% to 10%, highlighting KKR, MicroStrategy, and PennyMac. KKR's new subordinated notes stand out with a perfect compliance score, BBB+ rating, and a 6.875% yield, making it a top-quality pick. MicroStrategy's new non-cumulative preferred offers a high yield but lacks mandatory dividends, while insider buying signals confidence.

Floating rate preferreds, initially created in a zero interest rate environment, now yield around 10% due to the timing phenomenon and changes in interest rates. Key factors for analysis include company stability, size of preferred issue relative to common equity, discount/premium to par value, and adjustment above SOFR. Risks include rapid yield curve fluctuations and potential Fed rate cuts, which could lower SOFR and subsequently reduce yields on floating rate preferreds.

We take a look at the action in preferreds and baby bonds through the first week of March and highlight some of the key themes we are watching. Most preferreds sectors declined due to rising Treasury yields and wider spreads, reflecting weaker risk sentiment and lower equity prices. PennyMac Mortgage Investment Trust issued a new 9% 2030 bond, trading at an 8.35% yield, offering a stable book value profile.

Yield to maturity is crucial in baby bond analysis. Yield to call can also be relevant when call risk is more relevant. We're starting with a hypothetical for demonstrating a key point, then we'll look at two baby bonds as they are trading today. Market inefficiencies can arise from liquidity issues, creating trading opportunities between similar preferred shares or baby bonds.

PennyMac Mortgage Investment Trust offers a diversified investment strategy, balancing loans, mortgage-backed securities, servicing, and CRT investments, mitigating risks from interest rate fluctuations. Despite a tempting 11.75% dividend yield on common shares, rising delinquency rates and high interest rates pose unique risks. The Series C preferred shares offer a more attractive and stable 8.5% yield, making them a superior option for income investors.

Recent macroeconomic changes, including the yield curve uninverting and Fed rate cuts, have significantly impacted REIT preferreds, leading to price increases and varied forward return potentials. Despite overall price rises, select REIT preferreds remain deeply discounted, offering high yields and substantial capital appreciation potential. Mispricing due to accrued dividends and variable rate conversions presents lucrative opportunities in preferreds.