PennyMac Mortgage Investment Trust

Our expenses are summarized below:

Expenses increased $8.9 million, or 21%, during the quarter ended March 31, 2025, as compared to the same period in 2024, as discussed below.

Loan Servicing Fees

Loan servicing fees payable to PLS are summarized below:

Loan servicing fees increased by $1.5 million during the quarter ended March 31, 2025, as compared to the same period in 2024, due to an increase in supplemental fees relating to loan modifications and servicing of delinquent loans.

Management Fees

Management fees payable to PCM are summarized below:

Management fees decreased by $176,000 during the quarter ended March 31, 2025, as compared to the same period in 2024. This decrease reflects lower average shareholders’ equity during the quarter ended March 31, 2025, as compared to the quarter ended March 31, 2024.

Loan Fulfillment Fees

Loan fulfillment fees represent fees we pay to PLS for the services it performs on our behalf in connection with our acquisition, packaging and sale of loans. Fulfillment fees increased$1.3 million duringthe quarter ended March 31, 2025, as compared to the same period in 2024. The increasewasdue to an increase in the volume of loans purchased for sale to nonaffiliates. Our loan fulfillment feestructure is described in Note 4 –Transactions with Related Partiesto the consolidated financial statements included in this Report.

Professional services

Professional services expense increased by $5.2 million duringthe quarter ended March 31, 2025, as compared to the same period in 2024, due to increased legal and consulting fees as a result of our securitization activities duringthe quarter ended March 31, 2025.

Compensation

Compensation expense increased $1.1 million duringthe quarter ended March 31, 2025, as compared to the same period in 2024, primarily due to an increased allocation of compensation relating to support staff based on the updated terms of the management agreement as described in Note 4 –Transactions with Related Partiesto the consolidated financial statements included in this Report. This increase was partially offset by a $1.0 million decrease in common overhead allocation from PFSI, which is included in Other expense.

Loan collection and liquidation

Loan collection and liquidation expenses increased by $600,000 duringthe quarter ended March 31, 2025, as compared to the same period in 2024, due to increased servicing costs related to delinquent loans serviced for the Agencies' foreclosure avoidance programs.

Other Expenses

Other expenses are summarized below:

Common overhead allocation from PFSI declined by $1.0 million duringthe quarter ended March 31, 2025, as compared to the same period in 2024, due to changes to the allocation method included in the management agreement, described in Note 4 –Transactions with Related Parties to the consolidated financial statements included in this Report.

Income Taxes

We have elected to treat PennyMac Corp. (“PMC”), as a taxable REIT subsidiary (“TRS”). Income from a TRS is only included as a component of REIT taxable income to the extent that the TRS makes dividend distributions of income to us. A TRS is subject to corporate federal and state income tax. Accordingly, a provision for income taxes for PMC is included in the accompanying consolidated statements of income.

The Company’s effective tax rate was 253.7% and (47.0)% with consolidated pretax loss of $6.3 million and consolidated pretax income of $32.4 million for the quarters ended March 31, 2025 and March 31,2024, respectively. The Company’s TRS recognized a tax benefit of $17.2 million on a pretax loss of $75.3 million for the quarter ended March 31, 2025. The TRS loss was primarily due to decreases in MSR fair market values. For the same period in 2024, the TRS recognized a tax benefit of $15.0 million on a pretax loss of $60.9 million. The primary difference between the Company’s effective tax rate and the statutory tax rate is generally attributable to nontaxable REIT income resulting from the dividends paid deduction.

The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. On the basis of this evaluation, as of March 31, 2025, the valuation allowance remains zero as a result of cumulative GAAP income at the TRS for the three-year period ended March 31, 2025. The amount of deferred tax assets considered realizable could be adjusted in future periods based on future income.

In general, cash dividends declared by the Company will be considered ordinary income to the shareholders for income tax purposes. Some portion of the dividends may be characterized as capital gain distributions or a return of capital. For tax years beginning after December 31, 2017, the 2017 Tax Cuts and Jobs Act (subject to certain limitations) provides a 20% deduction from taxable income for ordinary REIT dividends.