Q1 2017 PennyMac Mortgage Investment Trust Pre-Recorded Earnings Call
CALABASAS May 11, 2017 (Thomson StreetEvents) -- Edited Transcript of PennyMac Mortgage Investment Trust earnings conference call or presentation Thursday, May 4, 2017 at 8:30:00pm GMT
TEXT version of Transcript
* Andrew S. Chang
PennyMac Mortgage Investment Trust - CFO and Senior MD
* Christopher Oltmann
* David A. Spector
PennyMac Mortgage Investment Trust - CEO, President and Trustee
* Stanford L. Kurland
PennyMac Mortgage Investment Trust - Executive Chairman
Christopher Oltmann, 
Good afternoon, and welcome to the First Quarter 2017 Earnings Discussion for PennyMac Mortgage Investment Trust.
The slides that accompany this discussion are available from PennyMac Mortgage Investment Trust’s website at www.pennymac-reit.com.
Before we begin, please take a few moments to read the disclaimer on slide 2 of the presentation. Thank you.
Now I'd like to turn the discussion over to Stan Kurland, PMT's Executive Chairman.
Stanford L. Kurland, PennyMac Mortgage Investment Trust - Executive Chairman 
Thank you, Chris. Let's begin with Slide 3. PMT reported first quarter net income of $28.7 million on net investment income of $64.5 million or $0.40 per diluted share, representing an annualized return on equity of 8%.
PMT paid a dividend of $0.47 per share for the quarter and book value per share decreased to $20.14 at quarter end from $20.26 for the prior quarter.
Results were driven by significant gains in our unique GSE credit risk transfer investments as well as strong contributions from our Correspondent Production segment.
The quarter results also included an income tax benefit and a benefit from a reduction in the estimate of the liability for representations and warranties.
PMT now reports through 4 segments: Credit Sensitive Strategies; Interest Rate Sensitive Strategies; Correspondent Production; and Corporate.
Results from our distressed loan investments showed modest improvement from the prior quarter, but returns remained below our expectations. The distressed loan portfolio benefited from home prices that were better than prior forecasts and a strong market for performing loans, which were partially offset by elevated recidivism of previously modified performing loans.
We continued our investment activities in CRT and mortgage servicing rights resulting from PMT's Correspondent Production business. Conventional correspondent loan production totaled $4.6 billion in unpaid principal balance, down 38% from the prior quarter. CRT-eligible deliveries totaled $1.8 billion in UPB, which will result in approximately $64 million of new CRT investments once the aggregation period is complete.
We also added $59 million in new MSRs resulting from our Correspondent Production activities. Cash proceeds from the liquidation and paydown of distressed mortgage loans and REO were $87 million, reflecting steady progress in resolution activities around our distressed loan investments. We also completed the previously announced sale of $89 million in UPB of performing loans.
Turning to Slide 4, we continue the review of the first quarter's highlights. In March, PMT issued 4.6 million shares of 8.125% Series A preferred shares for gross proceeds of $115 million. Proceeds are being used to fund PMT's business and investment activities, repay indebtedness and for potential common share repurchases.
We also repurchased approximately 139,000 of PMT's common shares during the quarter at a cost of $2.3 million.
Now let's turn to Slide 5 and discuss our perspective on the current mortgage market. Mortgage rates during the first quarter were volatile, moving up and down within a relatively narrow range for most of the quarter, but ultimately, ended the quarter down 18 basis points from their recent high levels at the end of last year. Fixed rate mortgages ended the quarter at 4.1% and have declined further to 4% as of April 27.
The rapid onset of higher rates has slowed prepayment activity in Agency MBS. During the first quarter, prepayment speeds on 30-year Fannie Mae and Freddie Mac MBS averaged 11.8% CPR and 10.8%, respectively, compared to an average of 17.6% and 16.4%, respectively, for the full year 2016. The slowdown in prepayment speeds for Ginnie Mae MBS was similar to Fannie Mae and Freddie Mac MBS, down nearly 6 points to an average of 15.7% in the first quarter.
While home sales slowed in the first quarter due to typical seasonal factors, they remain at multiyear high levels. The recent decline in interest rates has supported affordability, although tight inventories continue to pose a challenge for homebuyers in much of the country. However, we are seeing a broad-based pickup in pending home sales, which suggests that the spring and summer home-buying season could be strong.
As we have discussed since the presidential election, any regulatory or policy changes affecting the mortgage industry remain uncertain. While we continue to believe that a more balanced consideration of costs and benefits of regulation is needed, we believe that any significant near-term impact is likely to be limited.
Now let's turn to Slide 6 to discuss PMT's continuing transition to correspondent-related investments such as CRT and MSRs. PMT's equity allocation in its mortgage-related strategies has shifted as we have deployed capital into different strategies due to changes in mortgage opportunities and risk-adjusted returns available to PMT. As this chart indicates, our capital deployment continues to favor MSRs and GSE credit risk transfer transactions related to our Correspondent Production.
This chart also indicates the success we are having reducing the equity allocated to distressed mortgage loans. Today, less than 35% of PMT's equity is allocated to distressed loan investments compared with 65% 2 years ago, while 50% of its equity allocation is now comprised of CRT, MSR and ESS investments. We expect our equity allocation to continue to shift away from distressed loans over time as we redeploy capital into these new strategies.
Now let's turn to Slide 7 and discuss our progress in reducing PMT's distressed loan investments through liquidations and sales. The UPB of PMT's portfolio of nonperforming loans has decreased 39% from the same period a year ago, representing an average reduction of approximately $145 million per quarter. A major driver in resolving the distressed portfolio is the reperformance of loans, primarily through modifications.
PMT's portfolio of performing loans increases as nonperforming loans transition to performing status and decrease with loan sales, payoffs or recidivism.
Year-over-year, the UPB of our performing loans has also decreased significantly, dropping 39%, driven by 3 substantial bulk sales.
We remain focused on pursuing resolution activities to expedite the reduction of the nonperforming portfolio and continue the transition of PMT's capital into other unique opportunities.
Now let's turn to Slide 8 and discuss the first quarter's income and return contributions by strategy. PMT's investments in the first quarter generated an annualized return on common equity of 8.4%, net of expenses and overhead, compared to 9.2% in the prior quarter.
In total, Credit Sensitive Strategies contributed $19.4 million in pretax income and a 10.8% annualized return on equity during the first quarter compared to 3.3% annualized return on equity in the prior quarter.
Within the segment, distressed loan investments contributed pretax income of $2.1 million in the quarter, which equates to a 1.6% annualized return on equity.
Credit risk transfer investments contributed pretax income of $16.9 million, driven by a growing CRT investment and credit spreads tightening during the quarter.
Interest Rate Sensitive Strategies, which include the performance of our MSRs, excess servicing spread and Agency and non-Agency senior MBS positions and related interest rate hedges, together contributed $744,000 in pretax income and a 0.6% annualized return on equity in the first quarter compared with a 5.6% annualized return on equity in the prior quarter.
This segment underperformed primarily as a result of interest rate volatility on our hedging performance during the quarter. While we show the income contribution for each of these Interest Rate Sensitive Strategies separately, they are managed in aggregate as the interest-rate sensitivity of MSRs and ESS are inversely correlated with the MBS positions and many of our interest rate hedges.
The contribution from Correspondent Production represented $12.5 million in the first quarter, down from $12.9 million in the prior quarter, driven mainly by lower lock volumes and margins. The annualized return on equity was 80.5% compared with 45.5% in the prior quarter.
Correspondent Production results this quarter include a $4.6 million benefit from a reduction in the estimate of the liability for representation and warranties.
These contributions from PMT's strategies were offset by $10 million in pretax losses from the Corporate segment.
Now let's turn to Slide 9 and discuss the run-rate income potential for PMT's strategies. The income potential depicted here does not reflect any share repurchases, gains or losses related to fair value changes or bulk asset sales, such as distressed loans. We believe that the run rate potential from PMT's investment strategies is an annualized return on equity of 9.6%. Returns on net Credit Sensitive Strategies are expected to remain strong, driven by capital allocations to CRT investments.
Returns on net Interest Sensitive Strategies are expected to increase, driven in part by our expectation for improved hedge performance.
PMT's objective is to distribute a dividend consistent with earnings per share over time. In our evaluation of the earnings potential for PMT and the appropriate dividend, we consider the income required to be distributed for the year to maintain our tax-advantaged status as a REIT. REIT taxable income is a floor for dividend payments.
This concludes my overview of PMT's first quarter performance. Now I'd like to turn the discussion over to David Spector, PMT's President and Chief Executive Officer, who will review our mortgage Investment Activities.
David A. Spector, PennyMac Mortgage Investment Trust - CEO, President and Trustee 
Thank you, Stan.
Let's turn to Slide 11 and discuss the resolution activity on PMT's distressed whole loan investments. Here, we show the 5-quarter trend for distressed loan resolutions, which include liquidation and modification activities, and which totaled $222 million in UPB during the first quarter. As a percentage of the nonperforming loans and REO, quarterly resolution activity increased to 17% in the first quarter of 2017, up from 12% in the first quarter of 2016.
The increase in REO property sales reflects successful efforts to resolve the foreclosure pipeline, with REO inventory declining to $225 million at March 31 from $274 million at December 31, 2016.
Modifications totaled $92 million in UPB during the quarter and comprised 42% of total resolution activity, compared with 48% in the prior quarter and 46% in the first quarter of 2016. Modifications were down, reflecting a slowdown in the turnover of our pipeline. By the end of the quarter, PennyMac Financial directed additional resources to these critical activities to assist with the increased modification activity. We also recently introduced a new modification program to replace the expired HAMP program.
For the first quarter, streamlined modifications totaled $76 million in UPB, down from $82 million in the prior quarter. Streamlined modification programs are helpful because they have less cumbersome income documentation requirements and move borrowers into a trial modification once they make their first modified payment.
Liquidation activities totaled $120 million in UPB, essentially unchanged from the prior quarter, and comprised 54% of total resolutions. Liquidation activities include payoffs, foreclosure sales to third parties, short sales and sale of REO properties to third parties.
Now let's turn to Slide 12 and discuss judicial state resolution trends for distressed loan investments. This slide depicts our steady progress over the last 2 years in resolving distressed loan investments in 5 judicial states where resolutions are often subject to extended time lines: New York, New Jersey, Florida, Massachusetts and Illinois. Combined, these states represent more than 80% of PMT's judicial state exposure. Over the last 24 months, 56% of the distressed loans in these 5 states were resolved, with a remaining balance of $567 million in UPB in the process of being resolved.
Our primary resolution paths have been foreclosure and modification. We also implemented a Fresh Start program a year ago to help subperforming borrowers with sporadic payment histories, and we have made good incremental progress in bringing these borrowers back to performing status through this program.
We are making steady progress resolving judicial state loans and remain focused on resolving the rest of this portfolio.
Now let's turn to Slide 13 for a look at Correspondent Production highlights. Correspondent acquisitions by PMT in the first quarter totaled $13.9 billion in UPB, a 31% decrease from the prior quarter and up 44% from the first quarter of 2016.
Government loan acquisitions accounted for 67% of total correspondent acquisitions or $9.3 billion in the first quarter, down 26% from the prior quarter and up 44% from the first quarter of 2016.
Conventional conforming acquisitions totaled $4.6 billion in the first quarter, down 38% from the prior quarter and up 42% from the first quarter of 2016.
Total lock volume was $14.5 billion, down 25% from the prior quarter while up 39% from the first quarter of 2016. The decline in PMT's acquisition volumes from the prior quarter primarily resulted from a market reduction in refinance volumes due to higher mortgage rates and a seasonally slow purchase-money market.
The increase in mortgage rates occurred at the same time mortgage activity typically begins to slow in the winter months. Combined, these 2 factors contributed to a 34% quarter-over-quarter decrease in total mortgage market production according to Inside Mortgage Finance.
PennyMac's correspondent channel fared a little better than the market overall, and we believe gained some market share as a result.
Looking at April volumes, correspondent loan acquisitions totaled $4.4 billion in UPB, while interest rate lock commitments totaled $4.8 billion in UPB. The modest decline in mortgage rates after quarter end has helped boost mortgage refinance activity from first quarter levels, and we see increased purchase-money activity as well.
Purchase-money loans accounted for 73% of our total Correspondent Production during the quarter, up from 62% in the prior quarter. The purchase-money orientation of our Correspondent Production volume is an important differentiating factor and one that positions us well for the anticipated origination mix in 2017.
We continued to grow our seller relationships during the quarter, driven by success in expanding our nondelegated correspondent program and smaller seller relationships, which utilize more of the platform's extensive capabilities. At the end of the first quarter, we had 557 seller relationships, up from 522 in the prior quarter.
Now let's turn to Slide 14 and discuss the continued development of our unique investments in GSE credit risk transfer relating to our Correspondent Production activity. At the end of the first quarter, PMT's CRT investments totaled $464 million, which, after leverage, resulted in an equity allocation of $160 million.
During the quarter, we completed $1.8 billion in UPB of deliveries to Fannie Mae, which will result in approximately $64 million of new CRT investments once the aggregation period is complete.
Our CRT returns reflect strong underlying investment income and market-driven value changes due to credit spread tightening.
The total income contribution from CRT investments in the first quarter represented an annualized return on equity of 38%, including market-driven gains from credit spread tightening. Excluding these market-driven value changes, the annualized return on equity was 19.4%, driven by the strong performance of the underlying loans.
We have included additional performance and credit metrics on CRT on Slides 20 and 33.
Now let's turn to Slide 15 and discuss our MSR and ESS investments. PMT's current investment in MSRs and ESS was $974 million, up 3% compared with $946 million as of December 31. Investments in MSRs, which result from PMT's Correspondent Production activities, increased to $697 million, up from $657 million at December 31, reflecting strong Correspondent Production volumes.
At the end of the first quarter, our ESS investments decreased to $277 million, down 4% from $289 million at December 31.
Now I'd like to turn the discussion over to Andy Chang, PMT's Chief Financial Officer, to review the first quarter's financial results.
Andrew S. Chang, PennyMac Mortgage Investment Trust - CFO and Senior MD 
Thank you, David.
On Slide 17, we show the pretax income contributions from each of PMT's segments over the last 5 quarters. As Stan noted earlier, we now report results in 4 segments, which reflect the evolution of PMT's activities and the strategies that drive its financial results.
PMT's pretax income in the first quarter totaled $22.6 million, comprised of $19.4 million from Credit Sensitive Strategies, $744,000 from Interest Rate Sensitive Strategies, $12.5 million from Correspondent Production and a pretax loss of $10 million from Corporate.
Now let's turn to Slide 18 and review the results of the Credit Sensitive Strategies segment. The Credit Sensitive Strategies segment includes results from PMT's distressed loans, CRT, non-Agency subordinate bonds and multifamily commercial real estate investments.
In the first quarter, segment revenues totaled $25.8 million, an increase of 82% from the prior quarter. The increase in revenues was driven by an increase in net gains on investments and a reduction in other losses.
Net gain on investments in the first quarter was $22 million, up 144% from $9 million in the prior quarter. The increase in net gain on investments was primarily due to strong gains on CRT, which totaled $18.6 million.
Net interest income for Credit Sensitive Strategies was $6 million in the quarter, down 44% from the prior quarter. Interest income in the first quarter was $20.3 million, a 23% decrease from the prior quarter, and included $9.9 million of capitalized interest from loan modifications, which declined from $22 million in the prior quarter due to lower modification activity.
Capitalized interest increases interest income and reduces loan valuation gains. Interest expense decreased 9% from the prior quarter to $14.3 million.
Other investment losses were $2.3 million compared with losses of $5.4 million in the prior quarter, primarily due to trailing recoveries on previously sold REO.
Segment expenses were $6.4 million in the first quarter, a 19% decrease from $7.9 million in the prior quarter, primarily as a result of lower loan liquidation fees from the sale of reperforming loans relative to the prior quarter.
Now let's turn to Slide 19 and discuss the revenue and cash flows related to PMT's distressed loan portfolio. PMT's distressed mortgage loan portfolio generated realized and unrealized gains on mortgage loans totaling $3.2 million in the first quarter versus losses of $1 million in the prior quarter. Combining the net gains or losses with net interest income, revenue from distressed loans was $12.3 million in the first quarter compared with $13.1 million in the prior quarter.
Valuation gains on distressed loans totaled $2.8 million in the first quarter compared with losses of $2.1 million in the prior quarter.
Positively impacting valuation gains for the distressed loan portfolio were actual and forecasted home prices, which were better than prior forecasts as well as a strong market for performing loans. The impacts were partially offset by somewhat higher-than-expected recidivism of previously modified performing loans.
Gains from the payoff of distressed loans totaled $415,000, compared with $174,000 in the prior quarter.
Liquidation and paydown activity on distressed loans decreased from the prior quarter. Gross cash proceeds from the liquidation of mortgage loans and REO before debt repayment and payment of related expenses totaled $89 million, down from $92 million in the prior quarter.
With respect to the distressed loans and REO liquidated during the quarter, $1.2 million in net valuation losses were recognized over the holding period of the assets, while $5.4 million of gains were realized at liquidation.
PMT also completed its previously announced bulk sale of performing loans during the first quarter, which generated $74 million in gross cash proceeds and approximately $31 million in net proceeds after debt repayment and related expenses.
Let's now turn to Slide 20 and discuss the income statement and balance sheet treatment for the GSE credit risk transfer transactions. Our investments in CRT are evidenced by M1 bonds, which we own and pledge as collateral in financing transactions. However, under GAAP, our investments in CRT are depicted as the components of the M1 bonds, cash deposits and a net derivative consisting of the expected future cash inflows related to our assumption of the credit risk and expected future losses of the credit guarantee.
This slide illustrates how the CRT transactions are carried on the balance sheet and flow through the income statement. From inception of the CRT investment program through March 31, a total of $17.6 billion in UPB of residential mortgage loans has been delivered to Fannie Mae through the CRT special purpose vehicles. We have deposited cash into the SPVs, and it is recorded as a separate line item on our balance sheet.
Realized gains and losses recognized on the CRT investment represent cash income or loss to PMT from the SPVs. Gains and losses represented by fair value changes, which in the first quarter were gains resulting from credit spread tightening, are noncash. Payments made to Fannie Mae to settle our contractual losses are made in cash delivered from the SPVs.
To date, PMT's CRT investments have paid $239,000 for credit losses, including payment to settle losses totaling $149,000 this quarter. The losses reflect the seasoning of the CRT loans.
The bottom table provides information related to the outstanding balance of our CRT investments. The current UPB of the underlying loans totaled $16 billion at March 31.
The delinquency summary is divided into 3 categories: loans that, as of March 31, are current to 89 days delinquent; loans that are 90 days or more delinquent; and loans in foreclosure. More detail on the performance of the loans underlying the CRT investment is presented on Slide 33 of this presentation.
Restricted cash included in deposits securing credit risk transfer agreements on the balance sheet was $464 million on March 31, and the net derivative position was an asset of $25.6 million at quarter end.
As we have mentioned previously, the latest CRT agreement contained a structural change, which adjusts the timing of cash due to the cash collateral account, allowing PMT to more efficiently deploy capital during the aggregation period.
As a result, the schedule includes a line item titled Commitments to fund Deposits securing CRT Agreements, which represents the amount that is due to the cash collateral account upon completion of the loan aggregation period.
Now let's turn to Slide 21 and discuss the results of the Interest Rate Sensitive Strategies segment. The Interest Rate Sensitive Strategies segment includes results from investments that have offsetting exposures to interest rates, including MSRs, ESS, Agency MBS, non-Agency senior MBS and interest rate hedges.
Segment revenues totaled $7.6 million, a decrease of 36% from the prior quarter. The decrease in revenues was primarily a result of losses on interest rate hedges.
Net gain on investments included $292,000 of gains on mortgage loans held by a variable interest entity, net of the related asset-backed secured funding. These gains were offset by net losses of $4.1 million on hedging derivatives, $1.4 million on -- of losses on ESS and $51,000 of losses on mortgage-backed securities.
Net interest income for the segment was $1.1 million in the quarter, a 31% increase from the prior quarter, driven by growth in our MBS investments.
Interest income in the first quarter was $16.1 million, an 11% increase from the prior quarter. Interest expense totaled $15 million, a 10% increase from the prior quarter.
Net mortgage loan servicing fees were $11.7 million, up 51% from the prior quarter and included $38.5 million in servicing fees, reduced by $17.9 million of amortization and realization of MSR cash flows.
Net loan servicing fees also included $1.5 million of impairment reversal for MSRs carried at the lower of amortized cost or fair value, a $2 million valuation loss on MSRs carried at fair value and $8.7 million of related hedging losses. Net loan servicing fees also included approximately $300,000 of MSR recapture income.
Significant volatility during the first quarter drove increased hedge costs and inconsistent movements of the swaps, treasury and mortgage markets led to mismatches between asset and hedge performance. The fair value of our MSR investments benefited from lower-than-expected prepayment activity. However, for the portion carried at fair value, the realization of cash flows offset the valuation gains.
ESS valuation losses primarily resulted from higher-than-projected prepayment activity during the quarter.
Segment expenses were $6.8 million in the first quarter, a 4% increase from the prior quarter and reflect a larger servicing portfolio.
Now let's turn to Slide 22 and discuss the value of PMT's mortgage servicing rights and excess servicing spread assets. PMT's mortgage servicing rights portfolio, which is subserviced by PennyMac Financial, grew to $59.6 billion in UPB, up from $56.3 billion at the end of the prior quarter. PMT also owns investments in ESS with a UPB on the underlying loans of $31.2 billion.
The chart on Slide 22 shows some of the key metrics for PMT's MSR and ESS portfolio, including pool characteristics, such as average coupon of the underlying loans and average servicing fee or spread of the investment, the lifetime prepayment speed assumption and valuation metrics such as the multiple of the servicing fee.
We account for most of PMT's MSRs at the lower of amortized cost or fair value, or LOCOM. For MSRs accounted for at LOCOM, the slide also highlights the difference between the carrying value of PMT's MSRs and their fair value. At the end of the quarter, the fair value of PMT's LOCOM MSRs was $35.3 million greater than their carrying value on the balance sheet.
Now let's move to Slide 23 and review the results of the Correspondent Production segment. As we mentioned previously, Correspondent Production pretax income was $12.5 million in the first quarter compared with $12.9 million in the prior quarter. Segment revenues totaled $30.8 million in the first quarter compared with $42.7 million in the prior quarter.
Net gain on mortgage loans acquired for sale totaled $19 million, a 19% decline from the prior quarter, driven by a 25% decline in conventional lock volume and lower margins. This decrease reflects increased competition in a smaller market due to the significant decline in refinancing activity from higher mortgage rates and a seasonally slow purchase market.
The first quarter results also include a $4.6 million benefit from a reduction in the estimate of the liability for representations and warranties.
Net interest income for the segment was $3.5 million, down 32% from the prior quarter. Other income, which is primarily comprised of loan origination fees, was $8.3 million, a 40% decrease from the prior quarter. Both declines reflect the quarter-over-quarter decrease in loan funding volumes.
Expenses in the Correspondent Production segment decreased 38% from the prior quarter to $18.3 million, driven by lower volume-based fulfillment fee expense. The weighted average fulfillment fee paid for the quarter was 36 basis points, unchanged from the prior quarter.
Now let's move to Slide 24 and review the results of the Corporate segment. The Corporate segment includes interest income from certain cash and short-term investments, management fees and corporate expenses. Segment revenues were $326,000 in the first quarter compared with $201,000 in the prior quarter. The increase was driven by higher interest income due to higher cash balances in the first quarter.
The Corporate segment generated a pretax loss of $10 million compared with a loss of $10.7 million in the prior quarter.
Management fees were $5 million, down 1% compared with $5.1 million in the prior quarter. There were no incentive fees due for the first quarter.
Other segment expenses were $5.4 million compared with $5.8 million in the prior quarter, driven by a modest decline in each expense category from the prior quarter.
Total expenses in the segment decreased 5% to $10.4 million in the first quarter.
And with that, I'll turn the discussion back over to Stan for some closing remarks.
Stanford L. Kurland, PennyMac Mortgage Investment Trust - Executive Chairman 
Thank you, Andy. We have made significant progress transitioning capital towards more attractive opportunities and away from distressed loan investments, which now represent 1/3 of PMT's equity. The strong performance of CRT and Correspondent Production this quarter validate our plan to continue transitioning PMT's balance sheet to these investments.
As we anticipated, higher interest rates during the quarter resulted in a mortgage market that is normalizing from the elevated margins and volumes seen in 2016. However, we have seen improvements in April due to a decline in interest rates and a pickup in home-buying activity that we expect to extend through the spring and summer home-buying season.
As a result, we believe that PMT remains well positioned to access investment opportunities that result from our correspondent-related production activities. We believe that these strategies have the potential to produce earnings in line with our dividend level.
Lastly, we encourage investors with any questions to reach out to our Investor Relations team by email or phone. Thank you.
Christopher Oltmann, 
This concludes PennyMac Mortgage Investment Trust's first quarter earnings discussion. For any questions, please visit our website at www.pennymac-reit.com or call our Investor Relations department at (818) 224-7028. Thank you.