# Dear Fellow Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/real-estate-reit-mortgage/NYSE_PMT_2018/NYSE_PMT_2018.mmd` · pages 2-8_

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Dear Fellow Shareholders,

PennyMac Mortgage Investment Trust (NYSE: PMT) is a real estate investment trust, or REIT, that invests in unique residential mortgage strategies made possible through the operational and investment management capabilities of its manager and service provider, PennyMac Financial Services, Inc. (NYSE: PFSI). Examples of these investments include credit risk transfer, or CRT, on newly originated loans delivered to Fannie Mae and mortgage servicing rights, or MSRs, both of which are generated organically from PMT's conventional conforming mortgage production.

In 2018, PMT earned \(128 million in net income attributable to common shareholders, an increase from \)102 million in the prior year, and representing a return on average common equity of 10 percent. This performance demonstrates our ability to navigate a challenging market environment characterized by increased volatility and headwinds in the U.S. mortgage origination market driven by higher mortgage rates. Diluted earnings were \(1.99 per common share, a year-over-year increase of 34 percent and exceeded declared dividends of \)1.88 per share for the year. Book value increased to \(20.61 per share from \)20.13 in the prior year. These results placed PMT among the top performing residential mortgage REITs for the year, with one- and three-year total shareholder returns of 28 percent and 17 percent, respectively.

We have a strong history as a prudent steward of shareholders' capital. During 2015, our Board of Trustees authorized a stock repurchase program, through which we repurchased a total of 14.7 million shares for \(217 million from the third quarter of 2015 to the first quarter of 2018. In 2017, as PMT's performance improved, we raised preferred equity to fund growth of CRT and MSRs and also used a portion of that capital to continue strategically repurchasing our common equity. As a result of these efforts, our book value and dividends per share have been relatively stable through these periods.

We continue to wind down our initial investment strategy of distressed mortgage loans, ending the year with approximately 8 percent of shareholders' equity allocated to this investment. PMT's transition to organically created CRT and MSR investments provides us with a more balanced portfolio and differentiated investment opportunities relative to our peers.

During 2018, PMT produced a total of \(63 billion in unpaid principal balance, or UPB, of newly originated mortgages, and we maintained our position as the second largest correspondent

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producer in the U.S., according to Inside Mortgage Finance. Of this, \(26 billion in UPB was conventional conforming mortgage loans from which PMT derives its investments in CRT and MSR. Our conventional conforming production volumes increased 14 percent from the prior year, a remarkable achievement considering the conventional conforming market overall declined 7 percent year-over-year.

PMT's production volumes drove significant growth of both CRT and MSR investments. During 2018, we made investments in CRT totaling \(719 million, and we ended the year with a total of \)1.9 billion in CRT investments on a pro forma basis, which includes our commitment to purchase real estate mortgage investment conduit, or REMIC, CRT securities. We believe that our CRT investments will continue to produce attractive returns while aligning with Fannie Mae's strategic goal to transfer a substantial portion of the credit risk in the loans it securitizes to private capital. During the second quarter of 2018, we entered into our fifth CRT commitment, and the first under a REMIC structure that allows a greater percentage of PMT's production to be eligible for investment and conforms structurally with Fannie Mae's CRT issuances in the broader market. Also fundamental to PMT's business is our investments in MSRs, and last year we deployed a total of $357 million into this strategy. We also seek to mitigate the impact of interest rate changes on the fair value of our MSRs through offsetting investments in mortgage-backed securities and derivative investments. The expertise we have managing interest rate risk is a key factor in PMT's track record of stable book value. Our strategy of owning the servicing relationship along with the credit risk on the loans we produce creates a strong alignment of interests and facilitates our ability to assist borrowers in financial difficulty through loan modifications or other means.

Looking forward to 2019, we are optimistic regarding our ability to accelerate growth of our CRT and MSR investments as new capital deployed into these strategies is expected to drive earnings growth and improve returns on equity. As a result, we issued 7 million common shares which generated proceeds of approximately $145 million in the first quarter of 2019.

We are also exploring opportunities beyond our core strategies to drive additional long-term growth. These opportunities are enabled by our synergistic partnership with PennyMac Financial and include a recently-launched Home Equity Line of Credit, or HELOC, product sourced through PennyMac Financial's consumer direct lending channel and a prime non-qualified mortgage, or non-QM, product introduced in our correspondent channel. Both of these products represent attractive investment opportunities for PMT, with the potential to invest in the subordinate credit tranches of future non-Agency securitizations and residual interests as these programs develop over time.

We remain focused on strengthening our balance sheet and diversifying our sources of liquidity. In April of last year, we implemented a securitization structure to finance our Fannie Mae MSRs. From this structure, we successfully issued $450 million of five-year secured term notes which were met with strong demand from a diverse group of institutional investors. This

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financing more closely aligns with the life of our MSR asset, and provides cost-effective financing with the flexibility to grow along with our MSR investments. More recently, we completed a similarly-structured CRT financing transaction, issuing three-year term notes securitized by certain of our CRT investments. These financing structures are cost-effective and capital efficient, while also providing the additional benefit of significantly reducing PMT's liquidity risk.

PMT's performance in 2018 demonstrated solid progress on our path to improved earnings with a solid platform for future growth and improved returns on equity through our organically created investments in CRT and MSRs. We are optimistic about our ability to deliver attractive risk-adjusted returns and meaningful growth in PMT's balance sheet over time. Thank you for your continued trust and confidence in PMT.

Sincerely,

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Stanford L. Kurland

Executive Chairman

April 22, 2019

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David A. Spector

President and Chief Executive Officer

April 22, 2019