PennyMac Mortgage Investment Trust

Thank you. Before we begin, please take a moment to review the forward-looking disclaimer statement on Slide 2.

Let's now turn to Slide 3 and review PMT's fourth quarter highlights. The fourth quarter benefited from a substantial leap in the activity of our correspondence mundane business.

PMT's corresponding capabilities position the company at the forefront of the emergence of non-bank financial intermediaries positioned to address the changing mortgage landscape. The growing contribution of this segment clearly demonstrates the validity of our strategy to build and develop a correspondent lending business.

The combination of the increase in correspondent volume and strong investment portfolio activity generated very good earnings performance. Our fourth quarter earnings per share have grown by over 60% from the comparative quarter a year ago and sequentially are strong given the third quarter results were driven primarily by considerable investment gains.

We are pleased with both the level and composition of the fourth quarter results and hope to continue the strong performance into 2012. For the fourth quarter PMT reported earnings per diluted share of $0.70 with an annualized return on equity of over 15%.

The board of directors increased the dividend by 10% to $0.55 per share for the quarter.

During the quarter PMT raised $8.7 million of equity to support the dramatic growth in our correspondent lending business. With fundings of almost $1 billion and locks of over $1.3 billion, additional capital was necessary to continue growing this business.

During the quarter we supported our growth with the reallocation of capital from our distressed mortgage business. We also expanded PMT's borrowing capacity with an addition of $375 million in correspondent credit facilities bringing PMT’s total secured credit facilities to over $1 billion.

This striking growth led to pre-tax gains from the correspondent segment of $7.4 million. Our ability to continue growing the significance of correspondent lending is dependent on numerous factors including expanding the number of approved correspondent partners, the level of market activity, continued development of operational systems to manage greater volumes, pricing competition and financial resources.

The company and its external manager PCM are highly focused on this opportunity and continue to invest on all fronts to realize additional growth. We also continue to seek opportunities in the distressed home loan market and during the fourth quarter entered into a forward trade to purchase $49 million in unpaid principal balance.

Let's turn to Slide 4 to take a look at PMT's growth opportunities for 2012. The opportunities for PMT to continue its strategic growth arise from 2 related opportunities.

Those resulting from legacy mortgage assets such as non-performing loans and existing mortgage servicing rights and those available in the new and re-emerging prime loan mortgage market. We estimate that over $420 billion of non-agency whole loans are currently in some form of delinquency.

Most of those loans are held by the large banks and are under varying levels of pressure to reduce the level of distressed loans. Today this is the market that PMT has focused on and we believe this investment opportunity should continue for at least the next 2 years and possibly longer.

We are also seeing large banks begin to sell or consider the sale of large blocks of mortgage servicing rights or MSRs. The desire by banks to reduce their investment in MSRs is driven by both operational considerations and capital requirements.

These same pressures and capital requirements are also creating a void in the correspondent lending space. Approximately $300 billion in new originations is flowing through the correspondent channel every year.

In addition to that, some of the large banks have announced plans to reduce their market share or exit the correspondent market entirely. PCM's work to build its correspondent lending capabilities through 2010 and 2011 has allowed it to capitalize on this specific opportunity.

Furthermore, as the markets develop one area that will become an increasing focus for PMT is non-agency jumbo loans. As the conventional limits begin to reduce, this broadens the overall size of the jumbo market.

Once the securitization market returns we expect the jumbo market to be one of the main beneficiaries.

Let's turn to Slide 5 and examine the opportunities to acquire MSRs in greater detail. We are increasingly seeing opportunities to acquire MSRs from large banks that are being pressured to move mortgage servicing off their platforms.

MSRs are a unique investment opportunity made possible by the company's access to PLS's mortgage servicing and origination capabilities. This slide shows the expected return profile for an MSR investment, which PCM has recently evaluated.

As you can see, the return on the MSR assets is highly dependent on the pre-payment rate or PPR of the underlying loan portfolio. However a servicer can significantly reduce the impact of prepayments and therefore enhance the return on MSR investment by recapturing or re-originating a portion of the loans that we financed.

Therefore having a new loan origination capability is essential to protecting and enhancing the value of an MSR. We are able to pursue this type of recapture strategy because PLS has a call center based origination group that is licensed to enable to originate loans for borrowers who are considering refinancing.

In acquiring any legacy bulk MSR for our investment portfolio we would expect to enter into an agreement with PLS to replace the MSR assets or any prepayments that are recaptured.

In addition, we believe that we would be able to structure an MSR acquisition in such a manner that will establish most of the investment as a good REIT asset and most of the income generated as qualifying REIT income.

As the tables in the slide illustrate using reasonable assumption for prepayments and recapture rates an MSR investment can generate extremely attractive returns, both on unlevered and leveraged basis and can be accretive to PMT’s overall return on equity. I would now like to turn it over to Anne McCallion, PMT’s Chief Financial Officer to discuss the quarterly financials in greater detail, Anne.

Thank you Stan. For the fourth quarter PMT reported net income of $19.6 million or $0.70 per diluted share on net investment income of $39.1 million.

Interest income increased 23% over the third quarter as modifications have increased the size of PMT’s portfolio of performing loans and the amount of correspondent loans earning net interest income while in inventories has increased.

Correspondent lending accounted for over 19% of net investment income mostly due to net gain on mortgage loans of $7.4 million. Valuation gains in our investments were 14.3 million down from 23.8 million for the third quarter.

Lastly as mentioned earlier the annualized return on average equity for the quarter was over 15%.

The Board of Trustees has approved a dividend of $0.55 per share for the quarter, a 10% increase over the third quarter. This dividend represents an annualized yield of over 13% based on the December 30 closing stock price.

I would like to spend a little bit of time discussing PMT’s valuation changes as they relate to our home loan investments. Turning to Slide 8 you can see the breakdown of our home loan investment income.

As I have done in previous quarters, I would like to discuss the composition of this line item. Of the total $19.9 million in changes reflected in loans carrying values, $14.3 million was due to valuation changes and $5.5 million was due to gain by this position.

Because we account for our portfolio of mortgage loans held for investment at fair values, changes in fair value are included in the results of our operation each period. Theoretically, if the entire portfolio was sold in its entirety on the first day of new quarter, we would report no gain or loss on that sale.

All other factors held constant, non-performing loans increase in value as they move closer to resolution due to the shorter time to monetization and the increased certainty of resolution. These changes in value are non-cash items when recognized in our operations.

However, when a loan is monetized, significant cash flows are generally realized often with a relatively small impact on income for that period. If you take a look at the graph on the right you can see an example of the appropriateness of our valuation.

One liquidation option for loans that reach their finalization is in REO of sale. As you can see from the graph, valuation changes have led to very little gain or loss from REO disposition over the year.

In 2011, approximately $64 million in fair value of REOs were sold with only a $1.1 million change in their fair value at sale, while 1.7% of their total proceeds.

Let’s now turn to Slide 9 and look at how our 2 segments, legacy home loan investing and correspondent lending, performed in the quarter. For the fourth quarter PMT had pretaxed income of $21.3 million with $7.4 million coming from the correspondent lending segment and $13.9 million coming from the investment activities primarily associated with our distressed mortgage loans and MBS [ph].

In the correspondent segment net income was driven largely by the net gain on mortgage loans. During the quarter the correspondent segment benefited from strong margins and we continue to see these margin levels as we head into the first quarter of 2012.

However as the markets evolve, margins may decline towards their historical norm.

Investment activities in our whole loans generated strong earnings from both their interest income and their gain on investments from valuation and payoffs. This was offset somewhat by our mortgage-backed securities, which lost $706,000 during the quarter, as valuation on non-agency securities declined.

Let’s now turn to Slide 10 and take a look at PMT’s full year highlights. The company continued its consistent and disciplined growth of assets throughout the year.

PMT’s mortgage assets have grown 135% since fourth quarter of 2010 or $518 million at the end of 2010, $1.2 billion at the end of this year.

During the year, PMT fully deployed all of its capital from its equity raise of early 2011 and continuously invested in mortgage assets through cash generated from the portfolio and various forms of debt financing. The growth of the correspondent lending business also contributed to the growth of assets in the second half of the year.

This consistent growth of mortgage assets throughout the year produced strong results. In 2011 PMT earned net income of $64.4 million or $2.41 per diluted share on net investment income of $129 million.

All of the company’s activities helped us deliver an annual return on average equity of over 15%. I would now like to turn it over to David Spector, PMT’s President and Chief Operating Officer.

He will go over the operational activities of the fourth quarter.

Thanks Anne. Let’s now turn to Slide 12 to discuss our correspondent lending business in greater detail.

Our correspondent lending segment funded $991 million in prime loans during the fourth quarter compared to $211 million in the third quarter. Conventional conforming prime loans was the leading loan product during the quarter representing over 1/2 of all fundings.

For the month of January 2012, fundings were 450 million with locks eclipsing the $600 million mark. We are targeting to reach approximately 1.8 billion in locks for the first quarter of which 1.1 billion are estimated to come from conventional and jumbo loans.

The company raised $8.7 million in equity through PMT’s controlled equity offering program in the fourth quarter. This equity was added to support the dramatic growth of the correspondent lending business.

Capital was also allocated from liquidations of our distressed whole loans to further support this growth. As the business continues to expand we will continue to allocate capital aimed at providing the highest return to our shareholders.

Let’s now take a closer look at the jumbo and conventional fundings on Slide 13. On this slide we segregate the conventional and jumbo loans from our FHA fundings.

From an economic standpoint our conventional and jumbo production is the primary source of value in PMT's correspondent lending segment. As we discussed previously PMT has a relationship with PLS, PMT's servicer who is also a Judy May [ph] seller servicer.

And PMT enjoys a servicing fee and the net interest income for the period we hold these loans.

Also on our product menu that includes FHA and VA loans or correspondent customers is critical to our growth strategy. By offering a full product compliment including FHA and VA mortgages, we are able to establish relationships with more correspondent lenders in that we only offer conventional and jumbo products.

In addition offering the full-product range supports our initiative of becoming a national correspondent lender. For the quarter the correspondent lending segment funded $581 million in conventional and jumbo loans.

Locks for the same products were $727 million for the quarter with conventional loans being the bulk of those locks.

The current characteristics of loans being funded are some of the strongest in years. Our fourth quarter conventional and jumbo fundings had average cycles of 772 and weighted average cumulative loan to value ratios of under 70%.

This should benefit the value of the MSRs being created from these loans.

Let's now take a look at how our investment activities in distressed mortgage assets performed during the quarter, on Slide 15. Volumes of whole loans available for purchase were fairly steady throughout the year.

Over $14 billion in unpaid principal balance was reviewed by PMT's investment manager, PCM during the year.

PMT purchased over $1 billion in UPB throughout the year, with the largest acquisition occurring in the first quarter in conjunction with its equity raise. In the fourth quarter, PCM reviewed $3 billion in UPB and entered into a forward purchase agreement to purchase $49 million in unpaid principal balance.

Prices paid on acquisitions throughout the year have on average ranged from the mid to high 40s. While the prices have fluctuated throughout the year, the yield-only assets has remained in the mid teens.

Let’s turn to Slide 16 and take a look at how our portfolio of distressed mortgage assets performed during the fourth quarter. During the fourth quarter PMT invested $22.5 million in whole loans and REO properties.

Overall distressed mortgage assets declined 3% in the quarter as some of the liquidation capital was allocated to accommodate the growth in the correspondent segment. As I discussed in the previous slide there are ample opportunities to invest in distressed whole loans.

At present, loans are over 90 days delinquent or in foreclosure make up 75% of the unpaid principal balance in our home loan pools. This is down from the third quarter figure of 78%.

The 3% decrease in the percentage of our delinquent portfolio has moved to the current bucket as PLS, our servicer, has been able to modify and cure loans into current paying loans. Of those loans 18% of properties are geographically located in California and 11% of the properties are in Florida.

Let's now take a deeper look at the quarterly resolution activity in the distressed loan portfolio on Slide 17. In the fourth quarter, PMT liquidated a total of $94 million as compared to $91 million in UBP for the third quarter.

Short sale activity was by far the most active with almost $49 million in UPB getting resolved over the quarter. REO sales resolved $33 million in UPB, an increase of 27% over the previous quarter.

Short sale liquidation and full payoffs decreased slightly as compared to the third quarter but overall remained fairly strong. We'll take a closer look at the REO inventory a little later.

As of the end of the quarter 90% of PMT's nonperforming loans were on an active resolution path with 35% of the portfolio in the active stages of a modification, short sale or deed in lieu of foreclosure.

47% of the portfolio is currently on a path to foreclosure sale and 10% of the loans are in pre-foreclosure and solicitation. These loans include delinquent mortgages that have not yet reached the foreclosure stage as well as those in process for foreclosure referral.

PLS actively solicits borrowers for modification even during short sale activities by telephone, direct mail and property visits.

The pipeline of foreclosure activity increased slightly in the fourth quarter. As some of the older portfolios exhaust their possible modification options, the progression of loans towards foreclosure is expected.

Our modification pipeline continues to remain strong and PLS continues to actively engage borrowers for possible modifications.

In addition to return some timely payment of principal and interest, we can achieve greater returns on certain modified loans. For example qualified modifications that remain current for some period of time may be refinanced and sold by their FHA refinance programs.

This program is a highly effective loan resolution as it reduces the borrower's payment, provides the borrower with a permanent reduction in the size of their loan and provides a liquidation event for PMT's investment.

Let's now turn to Slide 18 for an in-depth look at how PMT's loan acquisitions have progressed since the beginning of 2010. The tables in this slide take all of PMT's loan acquisitions completed in a specific quarter and track their progress.

For example, the chart on the top left of the slide looks at the loans acquired in the first quarter of 2010 and shows the status of those loans at acquisition at the end of the fourth quarter.

As you can see 52% of the loans PMT acquired in the first quarter of 2010 remain in the portfolio, meaning that 47% have been liquidated. Of the remaining loans approximately 26% are current, up to 6% of acquisition.

This results in an increase in UPB of almost $14 million for current loans in that Q1 2010 bucket.

This is the result of PLS working diligently to collect payments as well as providing our borrowers with modifications when possible. The amount of loans that PLS is able to convert to current performing loans has been higher than expected and can provide greater returns over time.

As you can see, the portfolios are typically progressing as we would expect with an average life of approximately two years. I would like to point out that the pools of loans acquired in the second quarter of 2011 appear to be progressing slowly than the other pools.

The loans within these purchases have certain characteristics that lend them to slower liquidation speeds. For instance approximately 40% of the loans in these pools are in judicial states such as New York with very long foreclosure to REO transition timelines.

These characteristics will all take into effect when purchased and would reflect in a lower purchase price to accommodate the longer resolution timeframe.

Now let's turn to Slide 19 for a closer look at our REO inventory. $14.4 million or 21% of the value of our REO property at the end of the third quarter were liquidated in the fourth quarter.

As you can see from the highlighted column in the middle of the table most of the liquidations were aged more than 3 months.

Our REO inventory continues to increase as we progress through our portfolios and non-performing loans however REO properties older than 180 days in inventory increased in the third quarter. This was largely due to a decision by PLS to strategically lengthen the timeline of certain REO properties.

This is because there are certain areas where PLS is determined that the all-in value of leaving properties in the market longer while providing additional improvements to the properties result in higher returns to PMT. Some states such as California have a healthy supply of real estate investors whose most important objective is to get access to the properties quickly.

We continue to progress with these properties as we have before. We continue to closely monitor PMT's REO inventory from both an aged inventory perspective and a return perspective.

I'll now turn it back over to you, Stan.

Thanks David. We would like to thank all of our current and future shareholders for listening to this earnings presentation.

I would like to invite all those investors who have questions to please submit them to our Investor Relations department by e-mail or call us directly. If we receive a substantial number of questions we will post a question-and-answer document on our website.

We thank you again for your time.