PennyMac Mortgage Investment Trust (NYSE: PMT) saw its stock price plummet 5.15% in Wednesday's pre-market trading session following the release of disappointing first-quarter 2025 financial results. The mortgage real estate investment trust reported a net loss and lower returns, sparking investor concerns about its near-term outlook.

Key highlights from the earnings report include:

• Net loss of $1 million to common shareholders, resulting in negative $0.01 diluted earnings per share
• Book value per share declined to $15.43 as of March 31, down from December 31
• Run rate return potential decreased to a quarterly average of $0.35 per share, compared to $0.37 in the prior quarter
• Total correspondent loan acquisition volume fell 18% quarter-over-quarter to $23 billion
• Net income excluding market-driven changes was $41 million, down from $51 million in the previous quarter

The company attributed the weak performance to interest rate volatility and credit spread widening, which negatively impacted its interest rate sensitive strategies. Fair value declines on mortgage servicing rights (MSR) investments amounted to $56 million, contributing to a pretax loss of $5 million in these strategies.

Despite the challenges, PennyMac Mortgage Investment Trust maintained its quarterly dividend at $0.40 per share. Management emphasized the company's diversified investment portfolio and strong risk management practices, including a well-established interest rate hedging program, as key factors in navigating the challenging market conditions.

Looking ahead, the company faces headwinds from ongoing interest rate uncertainty and potential compression between longer-dated asset yields and short-term financing rates. However, management remains optimistic about opportunities in credit-sensitive strategies and the potential for stable cash flows from its MSR investments in the current higher interest rate environment.