Form 8-K - Current report

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): October 22, 2024

 

PennyMac Financial Services, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware	001-38727	83-1098934
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

 

3043 Townsgate Road, Westlake Village, California	91361
(Address of principal executive offices)	(Zip Code)

 

[phone]

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	PFSI	New York Stock Exchange

  

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 

 

 

 

Item 2.02

Results of Operations and Financial Condition.

 

On October 22, 2024, PennyMac Financial Services, Inc. (the “Company”) issued a press release and a slide presentation announcing its financial results for the fiscal quarter ended September 30, 2024. A copy of the press release and the slide presentation used in connection with the Company’s presentation of financial results were made available on October 22, 2024 and are furnished as Exhibits 99.1 and Exhibit 99.2, respectively. In addition, the Company has made available other supplemental financial information for the fiscal quarter ended September 30, 2024 on its website at pfsi.pennymac.com.

 

The information in Item 2.02 of this report, including the exhibits hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of Section 18, nor shall it be deemed incorporated by reference into any disclosure document relating to the Company, except to the extent, if any, expressly set forth by specific reference in such filing.

 

Item 9.01

Financial Statements and Exhibits.

 

(d)  Exhibits.

 

Exhibit No.	Description
99.1	Press Release, dated October 22, 2024, issued by PennyMac Financial Services, Inc. pertaining to its financial results for the fiscal quarter ended September 30, 2024.
99.2	Slide Presentation for use beginning on October 22, 2024 in connection with a presentation of financial results for the fiscal quarter ended September 30, 2024.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	PENNYMAC FINANCIAL SERVICES, INC.
Dated: October 22, 2024	/s/ Daniel S. Perotti
	Daniel S. Perotti
	Senior Managing Director and Chief Financial Officer

 

 

 

Exhibit 99.1

 

 

PennyMac Financial Services, Inc. Reports

Third Quarter 2024 Results

 

WESTLAKE VILLAGE, Calif. – October 22, 2024 – PennyMac Financial Services, Inc. (NYSE: PFSI) today reported net income of $69.4 million for the third quarter of 2024, or $1.30 per share on a diluted basis, on revenue of $411.8 million. Book value per share increased to $72.95 from $71.76 at June 30, 2024.

 

PFSI’s Board of Directors declared a third quarter cash dividend of $0.30 per share, payable on November 27, 2024, to common stockholders of record as of November 18, 2024.

 

Third Quarter 2024 Highlights

 

·

Pretax income was $93.9 million, down from $133.9 million in the prior quarter and $126.8 million in the third quarter of 2023

 

·

Production segment pretax income was $107.9 million, up from $41.3 million in the prior quarter and $25.2 million in the third quarter of 2023

 

o

Total loan acquisitions and originations, including those fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT), were $31.7 billion in unpaid principal balance (UPB), up 17 percent from the prior quarter and 26 percent from the third quarter of 2023

 

o

Broker direct interest rate lock commitments (IRLCs) were $5.3 billion in UPB, up 24 percent from the prior quarter and 78 percent from the third quarter of 2023

 

o

Consumer direct IRLCs were $5.2 billion in UPB, up 93 percent from the prior quarter and 206 percent from the third quarter of 2023

 

o

Government correspondent IRLCs totaled $12.4 billion in UPB, up 12 percent from the prior quarter and 24 percent from the third quarter of 2023

 

o

Conventional correspondent IRLCs for PFSI’s account totaled $8.2 billion in UPB, down 17 percent from the prior quarter and 20 percent from the third quarter of 2023 as PMT retained a higher percentage of its conventional correspondent production volumes

 

o

Correspondent acquisitions of conventional conforming and jumbo loans fulfilled for PMT were $5.9 billion in UPB, up 167 percent from the prior quarter and 116 percent from the third quarter of 2023

 

 1

 

 

·

Servicing segment pretax loss was $14.6 million, compared to pretax income of $88.5 million in the prior quarter and $101.2 million in the third quarter of 2023

 

o

Pretax income excluding valuation-related items and non-recurring items was $151.4 million, up from $149.0 million in the prior quarter

 

o

Valuation-related items included:

 

–

$402.4 million in mortgage servicing rights (MSR) fair value declines, before recognition of realization of cash flows, partially offset by $242.1 million in hedging gains

 

·

Net impact on pretax income related to these items was $(160.4) million, or $(2.19) in diluted earnings per share

 

–

$5.7 million provision for losses on active loans

 

o

Servicing portfolio grew to $648.1 billion in UPB, up 2 percent from June 30, 2024, and 10 percent from September 30, 2023 driven by production volumes which more than offset prepayment activity

 

·

Investment Management segment pretax income was $0.7 million, down from $4.0 million in the prior quarter and up from $0.4 million in the third quarter of 2023

 

o

Net assets under management (AUM) were $1.9 billion, essentially unchanged from June 30, 2024 and September 30, 2023

 

“PennyMac Financial reported outstanding results in the third quarter, with an annualized operating return on equity of 20 percent,” said Chairman and CEO David Spector. “Our production segment pretax income nearly tripled from last quarter as lower mortgage rates provided us the opportunity to help many customers in our servicing portfolio lower their monthly mortgage payments through a refinance. At the same time, our servicing portfolio – now near $650 billion in unpaid principal balance and nearly 2.6 million customers – continues to grow, driving increased revenue and cash flow contributions, as well as low-cost leads for our consumer direct lending division.”

 

Mr. Spector continued, “We have built an operating platform that we believe is unmatched in the mortgage industry, able to handle large, growing volumes of loans at the highest quality standards while also delivering strong performance across various market environments. Our ability to swiftly react to the increased opportunity in the loan production market reflects our significant and ongoing investments in technology, the operational enhancements we have made, and ultimately the scale we have achieved. In this period of interest rate volatility, we expect to continue delivering strong financial results with annualized operating returns on equity in the high-teens to low-twenties, anchored by the continued growth of our servicing portfolio and low-cost structure.”

 

 2

 

 

The following table presents the contributions of PennyMac Financial’s segments to pretax income:

 

		Quarter ended September 30, 2024
		Mortgage Banking												Investment
		Production				Servicing				Total				Management				Total
		(in thousands)
Revenue
Net gains on loans held for sale at fair value		$	235,902			$	20,917			$	256,819			$	-			$	256,819
Loan origination fees			49,430				-				49,430				-				49,430
Fulfillment fees from PMT			11,492				-				11,492				-				11,492
Net loan servicing fees			-				75,830				75,830				-				75,830
Management fees			-				-				-				7,153				7,153
Net interest (expense) income:
Interest income			79,386				145,985				225,371				99				225,470
Interest expense			81,496				136,101				217,597				-				217,597
			(2,110	)			9,884				7,774				99				7,873
Other			625				512				1,137				2,100				3,237
Total net revenue			295,339				107,143				402,482				9,352				411,834
Expenses			187,486				121,765				309,251				8,658				317,909
Income (loss) before provision for income taxes		$	107,853			$	(14,622	)		$	93,231			$	694			$	93,925

 

Production Segment

 

The Production segment includes the correspondent acquisition of newly originated government- insured and certain conventional conforming loans for PennyMac Financial’s own account, fulfillment services on behalf of PMT and direct lending through the consumer direct and broker direct channels, including the underwriting and acquisition of loans from correspondent sellers on a non-delegated basis.

 

PennyMac Financial’s loan production activity for the quarter totaled $31.7 billion in UPB, $25.7 billion of which was for its own account and $5.9 billion of which was fee-based fulfillment activity for PMT. Correspondent locks for PFSI and direct lending IRLCs totaled $31.2 billion in UPB, up 12 percent from the prior quarter and 24 percent from the third quarter of 2023.

 

Production segment pretax income was $107.9 million, up from $41.3 million in the prior quarter and $25.2 million in the third quarter of 2023. Production segment revenue totaled $295.6 million, up 46 percent from the prior quarter and 69 percent from the third quarter of 2023. The increase from the prior quarter and third quarter of 2023 was primarily due to higher volumes across all channels, with the largest increase in the consumer direct channel.

 

 3

 

 

The components of net gains on loans held for sale are detailed in the following table:

 

		Quarter ended
		September 30, 2024				June 30, 2024				September 30, 2023
		(in thousands)
Receipt of MSRs		$	578,982			$	541,207			$	450,936
Gain on sale of loans and mortgage servicing rights recapture payable to PennyMac Mortgage Investment Trust			2,506				(473	)			(500	)
Provision for representations and warranties, net			(589	)			(53	)			(1,459	)
Cash loss, including cash hedging results			(382,148	)			(321,270	)			(251,245	)
Fair value changes of pipeline, inventory and hedges			58,068				(43,347	)			(46,358	)
Net gains on mortgage loans held for sale		$	256,819			$	176,064			$	151,374
Net gains on mortgage loans held for sale by segment:
Production		$	235,902			$	154,317			$	127,821
Servicing		$	20,917			$	21,747			$	23,553

 

PennyMac Financial performs fulfillment services for certain conventional conforming and jumbo loans acquired by PMT from non-affiliates in its correspondent production business. These services include, but are not limited to, marketing, relationship management, correspondent seller approval and monitoring, loan file review, underwriting, pricing, hedging and activities related to the subsequent sale and securitization of loans in the secondary mortgage markets for PMT.

 

Fees earned from the fulfillment of correspondent loans on behalf of PMT totaled $11.5 million in the third quarter, up 160 percent from the prior quarter and 108 percent from the third quarter of 2023. The increase from the prior quarter was primarily due to higher volumes of conventional correspondent loans retained by PMT. In the fourth quarter, we expect PMT to retain approximately 15 to 25 percent of total conventional correspondent production, a decline from 42 percent in the third quarter.

 

Net interest expense in the third quarter was $2.1 million, compared to net interest income of $1.2 million in the prior quarter. Interest income totaled $79.4 million, down from $84.6 million in the prior quarter, and interest expense totaled $81.5 million, down from $83.4 million in the prior quarter, both primarily due to lower market interest rates.

 

 4

 

 

Production segment expenses were $187.5 million, up 16 percent from the prior quarter and 26 percent from the third quarter of 2023, both primarily due to higher volumes in the direct lending channels.

 

Servicing Segment

 

The Servicing segment includes income from owned MSRs and subservicing. The total servicing portfolio grew to $648.1 billion in UPB at September 30, 2024, an increase of 2 percent from June 30, 2024 and 10 percent from September 30, 2023. PennyMac Financial’s owned MSR portfolio grew to $416.4 billion in UPB, up 3 percent from June 30, 2024, and 17 percent from September 30, 2023. PennyMac Financial subservices $231.4 billion in UPB for PMT and subservices on an interim basis $258 million in UPB of previously owned loans that have been repurchased by the United States Veterans Affairs (VA) pursuant to the Veterans Affairs Servicing Purchase (VASP) program.

 

The table below details PennyMac Financial’s servicing portfolio UPB:

 

		September 30, 2024				June 30, 2024				September 30, 2023
		(in thousands)
Prime servicing:
Owned
Mortgage servicing rights and liabilities
Originated		$	393,947,146			$	379,882,952			$	333,372,910
Purchased			16,104,333				16,568,065				17,924,005
			410,051,479				396,451,017				351,296,915
Loans held for sale			6,366,787				6,108,082				5,181,866
			416,418,266				402,559,099				356,478,781
Subserviced for PMT			231,369,983				230,170,703				232,903,327
Subserviced for U.S. Department of Veterans Affairs			257,696				-				-
Total prime servicing			648,045,945				632,729,802				589,382,108
Special servicing - subserviced for PMT			8,340				8,810				10,780
Total loans serviced		$	648,054,285			$	632,738,612			$	589,392,888

 

Servicing segment pretax loss was $14.6 million, down from pretax income of $88.5 million in the prior quarter and $101.2 million in the third quarter of 2023. Servicing segment net revenues totaled $107.1 million, down from $194.2 million in the prior quarter and $217.1 million in the third quarter of 2023.

 

Revenue from net loan servicing fees totaled $75.8 million, down from $167.6 million in the prior quarter and $185.4 million in the third quarter of 2023. Loan servicing fees were $462.0 million, up from $440.7 million in the prior quarter primarily due to growth in PFSI’s owned portfolio, reduced by $225.8 million in realization of cash flows, which was up from last quarter due to higher prepayment expectations as a result of lower market interest rates. Net valuation related declines were $160.4 million, compared to $72.4 million of such losses in the prior quarter. MSR fair value losses, before realization of cash flows, were $402.4 million due to lower market interest rates and hedging gains were $242.1 million, also driven by declining interest rates.

 

 5

 

 

The following table presents a breakdown of net loan servicing fees:

 

		Quarter ended
		September 30, 2024				June 30, 2024				September 30, 2023
		(in thousands)
Loan servicing fees		$	462,037			$	440,696			$	387,934
Changes in fair value of MSRs and MSLs resulting from:
Realization of cash flows			(225,836	)			(200,740	)			(177,775	)
Change in fair value inputs			(402,422	)			99,425				398,871
Hedging gains (losses)			242,051				(171,777	)			(423,656	)
Net change in fair value of MSRs and MSLs			(386,207	)			(273,092	)			(202,560	)
Net loan servicing fees		$	75,830			$	167,604			$	185,374

 

Servicing segment revenue included $20.9 million in net gains on loans held for sale related to early buyout loans (EBOs), down slightly from $21.7 million in the prior quarter and $23.6 million in the third quarter of 2023. These EBOs are previously delinquent loans that were brought back to performing status through PennyMac Financial’s successful servicing efforts.

 

Net interest income totaled $9.9 million, compared to net interest expense of $8.4 million in the prior quarter and net interest income of $7.2 million in the third quarter of 2023. Interest income was $146.0 million, up from $116.1 million in the prior quarter due to increased earnings from placement fees on custodial balances due to higher average balances outstanding. Interest expense was $136.1 million, up from $124.5 million in the prior quarter due to higher average balances of debt outstanding during the quarter.

 

Servicing segment expenses totaled $121.8 million, up from $105.7 million in the prior quarter primarily due to higher stock-based compensation, which had declined in the last quarter and increased in the current quarter related to the projected payout of certain share-based awards.

 

Investment Management Segment

 

PennyMac Financial manages PMT for which it earns base management fees and may earn incentive compensation. Net AUM were $1.9 billion as of September 30, 2024, essentially unchanged from June 30, 2024 and September 30, 2023.

 

 6

 

 

Pretax income for the Investment Management segment was $0.7 million, down from $4.0 million in the prior quarter and up from $0.4 million in the third quarter of 2023. Base management fees from PMT were $7.2 million, essentially unchanged from the prior quarter and third quarter of 2023. No performance incentive fees were earned in the third quarter.

 

The following table presents a breakdown of management fees:

 

		Quarter ended
		September 30, 2024				June 30, 2024				September 30, 2023
		(in thousands)
Management fees:
Base		$	7,153			$	7,133			$	7,175
Performance incentive			-				-				-
Total management fees		$	7,153			$	7,133			$	7,175
Net assets of PennyMac Mortgage Investment Trust at quarter end		$	1,936,787			$	1,939,869			$	1,949,078

 

Investment Management segment expenses totaled $8.7 million, up from $5.3 million in the prior quarter and $8.4 million in the third quarter of 2023.

 

 7

 

 

Consolidated Expenses

 

Total expenses were $317.9 million, up from $272.3 million in the prior quarter primarily due to increased production segment expenses due to higher volumes and stock-based compensation expense as mentioned above.

 

Taxes

 

PFSI recorded a provision for tax expense of $24.6 million, resulting in an effective tax rate of 26.1 percent.

 

***

 

Management’s slide presentation and accompanying material will be available in the Investor Relations section of the Company’s website at pfsi.pennymac.com after the market closes on Tuesday, October 22, 2024. Management will also host a conference call and live audio webcast at 5:00 p.m. Eastern Time to review the Company’s financial results. The webcast can be accessed at pfsi.pennymac.com, and a replay will be available shortly after its conclusion.

 

About PennyMac Financial Services, Inc.

 

PennyMac Financial Services, Inc. is a specialty financial services firm focused on the production and servicing of U.S. mortgage loans and the management of investments related to the U.S. mortgage market. Founded in 2008, the company is recognized as a leader in the U.S. residential mortgage industry and employs approximately 4,000 people across the country. For the twelve months ended September 30, 2024, PennyMac Financial’s production of newly originated loans totaled $107 billion in unpaid principal balance, making it a top lender in the nation. As of September 30, 2024, PennyMac Financial serviced loans totaling $648 billion in unpaid principal balance, making it a top mortgage servicer in the nation. Additional information about PennyMac Financial Services, Inc. is available at pfsi.pennymac.com.

 

Media		Investors
Kristyn Clark		Kevin Chamberlain
[e-mail]		Isaac Garden 805.225.8224
		[e-mail]
		818.224.7028

 

 8

 

 

Forward Looking Statements

 

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management’s beliefs, estimates, projections, and assumptions with respect to, among other things, our financial results, future operations, business plans and investment strategies, as well as industry and market conditions, all of which are subject to change. Words like “believe,” “expect,” “anticipate,” “promise,” “project,” “plan,” and other expressions or words of similar meanings, as well as future or conditional verbs such as “will,” “would,” “should,” “could,” or “may” are generally intended to identify forward-looking statements. Actual results and operations for any future period may vary materially from those projected herein and from past results discussed herein. Factors which could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: interest rate changes; changes in real estate values, housing prices and housing sales; changes in macroeconomic, consumer and real estate market conditions; the continually changing federal, state and local laws and regulations applicable to the highly regulated industry in which we operate; lawsuits or governmental actions that may result from any noncompliance with the laws and regulations applicable to our business; the mortgage lending and servicing-related regulations promulgated by the Consumer Financial Protection Bureau and its enforcement of these regulations; the licensing and operational requirements of states and other jurisdictions applicable to our business, to which our bank competitors are not subject; foreclosure delays and changes in foreclosure practices; difficulties inherent in adjusting the size of our operations to reflect changes in business levels; purchase opportunities for mortgage servicing rights; our substantial amount of indebtedness; increases in loan delinquencies, defaults and forbearances; our dependence on U.S. government-sponsored entities and changes in their current roles or their guarantees or guidelines; our reliance on PennyMac Mortgage Investment Trust (NYSE: PMT) as a significant contributor to our mortgage banking business; maintaining sufficient capital and liquidity and compliance with financial covenants; our obligation to indemnify third-party purchasers or repurchase loans if loans that we originate, acquire, service or assist in the fulfillment of fail to meet certain criteria; our obligation to indemnify PMT if our services fail to meet certain criteria or characteristics or under other circumstances; investment management and incentive fees; conflicts of interest in allocating our services and investment opportunities among us and our advised entity; our ability to mitigate cybersecurity risks, cyber incidents and technology disruptions; the effect of public opinion on our reputation; our exposure to risks of loss and disruptions in operations resulting from severe weather events, man-made or other natural conditions, including climate change and pandemics; our ability to effectively identify, manage and hedge our credit, interest rate, prepayment, liquidity and climate risks; our initiation or expansion of new business activities or strategies; our ability to detect misconduct and fraud; our ability to pay dividends to our stockholders; and our organizational structure and certain requirements in our charter documents. You should not place undue reliance on any forward- looking statement and should consider all of the uncertainties and risks described above, as well as those more fully discussed in reports and other documents filed by the Company with the Securities and Exchange Commission from time to time. The Company undertakes no obligation to publicly update or revise any forward-looking statements or any other information contained herein, and the statements made in this press release are current as of the date of this release only.

 

The press release contains financial information calculated other than in accordance with U.S. generally accepted accounting principles (“GAAP”), such as pretax income excluding valuation-related items and operating net income that provide a meaningful perspective on the Company’s business results since the Company utilizes this information to evaluate and manage the business. Non-GAAP disclosures have limitations as an analytical tool and should not be viewed as a substitute for financial information determined in accordance with GAAP.

 

 9

 

 

PENNYMAC FINANCIAL SERVICES, INC. 

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

		September 30, 2024				June 30, 2024				September 30, 2023
		(in thousands, except share amounts)
ASSETS
Cash		$	145,814			$	595,336			$	1,177,304
Short-term investment at fair value			667,934				188,772				5,553
Principal-only stripped mortgage-backed securities at fair value			960,267				914,223				-
Loans held for sale at fair value			6,565,704				6,238,959				5,186,656
Derivative assets			190,612				145,887				103,366
Servicing advances, net			400,764				414,235				399,281
Mortgage servicing rights at fair value			7,752,292				7,923,078				7,084,356
Investment in PennyMac Mortgage Investment Trust at fair value			1,070				1,031				930
Receivable from PennyMac Mortgage Investment Trust			32,603				29,413				27,613
Loans eligible for repurchase			5,512,289				4,560,058				4,445,814
Other			642,189				566,573				518,441
Total assets		$	22,871,538			$	21,577,565			$	18,949,314
LIABILITIES
Assets sold under agreements to repurchase		$	6,600,997			$	6,408,428			$	4,411,747
Mortgage loan participation purchase and sale agreements			517,527				511,837				498,392
Notes payable secured by mortgage servicing assets			1,723,632				1,723,144				2,673,402
Unsecured senior notes			3,162,239				3,160,226				1,782,689
Derivative liabilities			41,471				18,830				41,200
Mortgage servicing liabilities at fair value			1,718				1,708				1,818
Accounts payable and accrued expenses			331,512				294,812				306,821
Payable to PennyMac Mortgage Investment Trust			81,040				100,220				97,975
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement			26,099				26,099				26,099
Income taxes payable			1,105,550				1,082,397				1,059,993
Liability for loans eligible for repurchase			5,512,289				4,560,058				4,445,814
Liability for losses under representations and warranties			28,286				28,688				30,491
Total liabilities			19,132,360				17,916,447				15,376,441
STOCKHOLDERS' EQUITY
Common stock¾authorized 200,000,000 shares of $0.0001 par value; issued and outstanding 51,257,630, 51,017,418, and 49,925,752 shares, respectively			5				5				5
Additional paid-in capital			54,415				30,053				11,475
Retained earnings			3,684,758				3,631,060				3,561,393
Total stockholders' equity			3,739,178				3,661,118				3,572,873
Total liabilities and stockholders’ equity		$	22,871,538			$	21,577,565			$	18,949,314

 

 10

 

 

PENNYMAC FINANCIAL SERVICES, INC. 

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

 

		Quarter ended
		September 30, 2024				June 30, 2024				September 30, 2023
		(in thousands, except per share amounts)
Revenues
Net gains on loans held for sale at fair value		$	256,819			$	176,064			$	151,374
Loan origination fees			49,430				42,075				37,701
Fulfillment fees from PennyMac Mortgage Investment Trust			11,492				4,427				5,531
Net loan servicing fees:
Loan servicing fees			462,037				440,696				387,934
Change in fair value of mortgage servicing rights and mortgage servicing liabilities			(628,258	)			(101,315	)			221,096
Mortgage servicing rights hedging results			242,051				(171,777	)			(423,656	)
Net loan servicing fees			75,830				167,604				185,374
Net interest income (expense):
Interest income			225,470				200,811				166,552
Interest expense			217,597				207,871				156,863
			7,873				(7,060	)			9,689
Management fees from PennyMac Mortgage Investment Trust			7,153				7,133				7,175
Other			3,237				15,884				3,464
Total net revenues			411,834				406,127				400,308
Expenses
Compensation			171,316				141,956				156,909
Loan origination			45,208				40,270				28,889
Technology			37,059				35,690				39,000
Servicing			28,885				22,920				13,242
Professional services			9,339				9,404				11,942
Occupancy and equipment			8,156				7,893				8,900
Marketing and advertising			5,088				5,445				4,632
Other			12,858				8,695				9,997
Total expenses			317,909				272,273				273,511
Income before provision for income taxes			93,925				133,854				126,797
Provision for income taxes			24,557				35,596				33,927
Net income		$	69,368			$	98,258			$	92,870
Earnings per share
Basic		$	1.36			$	1.93			$	1.86
Diluted		$	1.30			$	1.85			$	1.77
Weighted-average common shares outstanding
Basic			51,180				50,955				49,902
Diluted			53,495				53,204				52,561
Dividend declared per share		$	0.30			$	0.20			$	0.20

 

 11

 

 

PENNYMAC FINANCIAL SERVICES, INC. RECONCILIATION OF 

GAAP NET INCOME TO OPERATING NET INCOME AND ANNUALIZED OPERATING RETURN ON EQUITY

 

		Quarter Ended
		September 30, 2024
			(in thousands, except annualized operating return on equity)
Net income		$	69,368
Decrease in fair value of MSRs and MSLs due to changes in valuation inputs used in the valuation model			402,422
Hedging gains associated with MSRs			(242,051	)
Tax impacts of adjustments(1)			43,060
Operating net income		$	186,679
Average stockholders' equity		$	3,694,831
Annualized operating return on equity			20	%

 

(1)

Assumes a tax rate of 26.85%

 

 12

 

 

Exhibit 99.2

PennyMac Financial Services, Inc. 3Q24 EARNINGS REPORT October 2024

This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management’s beliefs, estimates, projections and assumptions with respect to, among other things, our financial results, future operations, business plans and investment strategies, as well as industry and market conditions, all of which are subject to change. Words like “believe,” “expect,” “anticipate,” “promise,” “project,” “plan,” and other expressions or words of similar meanings, as well as future or conditional verbs such as “will,” “would,” “should,” “could,” or “may” are generally intended to identify forward-looking statements. Actual results and operations for any future period may vary materially from those projected herein and from past results discussed herein. These forward-looking statements include, but are not limited to, statements regarding future changes in interest rates, prepayment rates and the housing market; future loan origination, servicing and production, including future production, operating and hedge expenses; future loan delinquencies, defaults and forbearances; future earnings and return on equity as well as other business and financial expectations. Factors which could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: interest rate changes; changes in real estate values, housing prices and housing sales; changes in macroeconomic, consumer and real estate market conditions; the continually changing federal, state and local laws and regulations applicable to the highly regulated industry in which we operate; lawsuits or governmental actions that may result from any noncompliance with the laws and regulations applicable to our business; the mortgage lending and servicing-related regulations promulgated by the Consumer Financial Protection Bureau and its enforcement of these regulations; the licensing and operational requirements of states and other jurisdictions applicable to our business, to which our bank competitors are not subject; foreclosure delays and changes in foreclosure practices; difficulties inherent in adjusting the size of our operations to reflect changes in business levels; purchase opportunities for mortgage servicing rights; our substantial amount of indebtedness; increases in loan delinquencies, defaults and forbearances; our dependence on U.S. government-sponsored entities and changes in their current roles or their guarantees or guidelines; our reliance on PennyMac Mortgage Investment Trust (NYSE: PMT) as a significant contributor to our mortgage banking business; maintaining sufficient capital and liquidity and compliance with financial covenants; our obligation to indemnify third-party purchasers or repurchase loans if loans that we originate, acquire, service or assist in the fulfillment of, fail to meet certain criteria; our obligation to indemnify PMT if our services fail to meet certain criteria or characteristics or under other circumstances; investment management and incentive fees; conflicts of interest in allocating our services and investment opportunities among us and our advised entity; our ability to mitigate cybersecurity risks, cyber incidents and technology disruptions; the effect of public opinion on our reputation; our exposure to risks of loss and disruptions in operations resulting from severe weather events, man-made or other natural conditions, including climate change and pandemics; our ability to effectively identify, manage and hedge our credit, interest rate, prepayment, liquidity and climate risks; our initiation or expansion of new business activities or strategies; our ability to detect misconduct and fraud; our ability to pay dividends to our stockholders; and our organizational structure and certain requirements in our charter documents. You should not place undue reliance on any forward-looking statement and should consider all of the uncertainties and risks described above, as well as those more fully discussed in reports and other documents filed by the Company with the Securities and Exchange Commission from time to time. The Company undertakes no obligation to publicly update or revise any forward-looking statements or any other information contained herein, and the statements made in this press release are current as of the date of this release only. This presentation contains financial information calculated other than in accordance with U.S. generally accepted accounting principles (“GAAP”), such as pretax income excluding valuation-related items and operating net income that provide a meaningful perspective on the Company’s business results since the Company utilizes this information to evaluate and manage the business. Non-GAAP disclosures have limitations as an analytical tool and should not be viewed as a substitute for financial information determined in accordance with GAAP. 2 FORWARD-LOOKING STATEMENTS

3 PRODUCTION INVESTMENT MANAGEMENT Annualized SERVICING return on equity Annualized operating return on equity⁽³⁾ 8% 20% Net income Diluted EPS⁽¹⁾ $69mm $1.30 Pretax income Total loan acquisitions and originations⁽²⁾ PFSI correspondent lock volume Broker direct lock volume Consumer direct lock volume $108mm $31.7bn $20.7bn $5.3bn $5.2bn Pretax income MSR⁽¹⁾ fair value changes, and hedging results MSR fair value changes and hedging impact to diluted EPS Pretax income excluding valuation-related items⁽⁴⁾ Total servicing portfolio UPB⁽¹⁾⁽²⁾ $(15)mm $(160)mm $(2.19) $151mm $648bn Pretax income Net AUM⁽¹⁾ Revenue $1mm $1.9bn $9.4mm THIRD QUARTER HIGHLIGHTS 3Q24 Results Book value per share Dividend per common share $72.95 $0.30 Note: All figures are for 3Q24 or are as of 9/30/24 (1) EPS = earnings per share; MSR = mortgage servicing rights; UPB = unpaid principal balance, includes loans held for sale at fair value; AUM = assets under management (2) Includes volume fulfilled or subserviced for PennyMac Mortgage Investment Trust (NYSE: PMT) (3) See slide 32 for a reconciliation of GAAP net income to non-GAAP annualized operating return on equity (4) Excludes $402 million in MSR fair value declines, $242 million in hedging gains, and a $6 million provision for losses on active loans - see slide 13 for additional details Strong operating results partially offset by net fair value declines on hedged mortgage servicing rights

4 ORIGINATION MARKET EXPECTATIONS REFLECT GROWTH U.S. Mortgage Origination Market(1) ($ in trillions) Mortgage Rates Have Declined Note: Figures may not sum due to rounding (1) Actual originations: Inside Mortgage Finance. Forecast originations: Average of Mortgage Bankers Association (9/23/24) and Fannie Mae (10/10/24) forecasts. (2) Freddie Mac Primary Mortgage Market Survey. 6.44% as of 10/17/24 • Current third-party estimates for industry originations average $1.7 trillion in 2024 and $2.3 trillion in 2025, reflecting projections for rates to decline and growth in overall volumes • Mortgage banking companies with large servicing portfolios and diversified business models are positioned to generate meaningful profitability as the mortgage markets decrease or increase in size Purchase Average 30-year fixed rate mortgage Refinance (2)

Mortgage Banking Operating Pretax Income ($ in millions) Production Servicing net of valuation related changes and non-recurring items(1) • Continued increase in operating return on equity in recent periods as the mortgage market improves ‒ Production pretax income was up 161% from the prior quarter, driven by strong contributions from the direct lending channels ‒ Servicing to continue providing a strong base level of operating earnings, with additional upside potential for the production segment as the origination market grows 5 BUILDING ON DOUBLE DIGIT OPERATING RETURNS IN 2024 Annualized Operating ROE(1) Note: Figures may not sum due to rounding (1) See slide 32 for a reconciliation of GAAP to non-GAAP items

6 EARNINGS GROWTH TO BE DRIVEN BY REFINANCE RECAPTURE OPPORTUNITY Gov’t. Loan Refinance Recapture Rates Conv. Loans Refinance Recapture Rates > 7.00% 6.50 - 6.99% 6.00 - 6.49% 5.50 - 5.99% 5.00 - 5.49% > 7.00% 6.50 - 6.99% 6.00 - 6.49% 5.50 - 5.99% 5.00 - 5.49% • Large opportunity as borrowers with loans originated at higher note rates seek to refinance ‒ Higher recapture rates for government-insured or guaranteed loans versus conventional loans due to streamlined refinance programs ‒ Introduction of closed-end second liens in 2022 for customers to access home equity while retaining their low-rate, first lien mortgage • We currently expect annualized operating returns on equity in the high-teens to low-twenties (1) Includes first-lien conventional and other loans serviced for PFSI’s own account as well as those subserviced loans for PMT in 2025 (2) Numerator = UPB of new consumer direct first lien refinance originations; denominator = UPB of payoffs with no transfer of title or MLS listing identified (3) Numerator = UPB of new consumer direct first lien refinance originations + UPB of new consumer direct closed-end second lien (CES) originations from portfolio customers + UPB of retained first-liens for associated CES originations; denominator = UPB of payoffs with no transfer of title or MLS listing identified + UPB of retained first-liens for associated CES originations Refinance recapture(2) Refinance recapture (inc. CES)(3) Refinance recapture(2) Refinance recapture (inc. CES)(3) Gov’t. Loans: Note Rates >5% (UPB in billions) Conv. Loans: Note Rates >5%(1) (UPB in billions) 9/30/24 9/30/24

7 Operating Expenses (bps of average servicing portfolio UPB) Revenue From Servicing & Placement Fees ($ in millions) SERVICING PROVIDES GROWING CASH FLOW AND SCALE BENEFITS • Increasing revenue contribution due to portfolio growth over time • Higher proportion of owned servicing in more recent periods drives increased servicing fees • Increasing contribution from placement fees driven by higher short-term rates in the current market environment • Increased scale and efficiency as the portfolio grows • Lower variable costs due to the implementation of SSE, our proprietary servicing system in 2019 • Continuing to increase efficiency through the use of emerging technologies, including capabilities of generative artificial intelligence • Delinquencies remain low in the current market environment, further reducing operating expenses (1) (1) (1) LTM = Last Twelve Months Loan servicing, ancillary, and other fees Earnings on custodial balances and deposits and other income

PENNYMAC’S MARKET SHARE OVER TIME ACROSS ITS BUSINESSES 8 Loan Servicing Market Share Correspondent Production Market Share(1) (1) Broker Direct Market Share(1) Consumer Direct Market Share(1) Note: All figures are for PFSI and include volume fulfilled or subserviced for PMT (1) Historical market share: Inside Mortgage Finance; excludes second lien originations. For LTM 3Q24, we estimate $1.5 trillion in total origination volume, and that the correspondent channel represented 29% of the overall origination market, retail represented 53%, and broker represented 18%. Loan servicing market share is based on PFSI’s servicing portfolio UPB of $648 billion divided by $14.2 trillion in mortgage debt outstanding

9 PRODUCTION SEGMENT HIGHLIGHTS – VOLUME BY CHANNEL Broker Direct (UPB in billions) Consumer Direct (UPB in billions) Note: Figures may not sum due to rounding (1) Government-insured or guaranteed loans and certain conventional loans acquired through PMT’s correspondent production business and subsequently sold to PFSI; PFSI earns income from holding and selling or securitizing the loans (2) Loans fulfilled for PMT; for these loans, PFSI earns a fulfillment fee from PMT rather than income from holding and selling or securitizing the loans (3) Includes locks related to both PFSI and PMT loan acquisitions (4) Commitments to originate mortgage loans at specified terms at period end Correspondent (UPB in billions) Conv. and Jumbo Acquisitions - for PMT(2) Total Locks(3) Originations Locks Locks: (UPB in billions) $9.1 Acquisitions: (UPB in billions) $9.2 Locks: (UPB in billions) $1.9 Originations: (UPB in billions) $1.6 Committed pipeline(4): (UPB in billions) $2.0 Locks: (UPB in billions) $1.6 Originations: (UPB in billions) $1.2 Committed pipeline(4): (UPB in billions) $2.7 Originations Locks Conv. Acquisitions - for PFSI(1) Gov’t. Acquisitions - for PFSI(1) October 2024 (Estimated) October 2024 (Estimated) October 2024 (Estimated)

• Revenue per fallout adjusted lock for PFSI’s own account was 88 basis points in 3Q24, up from 62 basis points in 2Q24 ‒ Higher volumes across all three channels, with the largest increase in consumer direct; lower margins in consumer direct due to a higher percentage of refinance loans versus lower-balance closed end second liens • Production expenses (net of loan origination expense) increased 18% from the prior quarter due to higher volumes in the direct lending channels 10 DRIVERS OF PRODUCTION SEGMENT RESULTS (1) Expected revenue net of direct origination costs at time of lock (2) Includes government-insured or guaranteed loans and certain conventional loans for PFSI’s own account (3) Reflects timing of revenue and loan origination expense recognition, hedging, pricing & execution changes, and other items 3Q23 2Q24 3Q24 ($ in millions) Fallout Adjusted Locks Margin / Fulfillment Fee (bps)(1) Revenue Contribution (net of Loan origination expense) % of Production Revenue Fallout Adjusted Locks Margin / Fulfillment Fee (bps)(1) Revenue Contribution (net of Loan origination expense) % of Production Revenue Fallout Adjusted Locks Margin / Fulfillment Fee (bps)(1) Revenue Contribution (net of Loan origination expense) % of Production Revenue PFSI Correspondent(2) $ 20,060 33 $ 66.6 46% $ 20,503 30 $ 61.3 38% $ 19,887 33 $ 65.3 26% Broker Direct 2,267 97 22.0 15% 3,105 103 32.0 20% 3,763 97 36.4 15% Consumer Direct 1,065 474 50.4 35% 1,764 393 69.3 43% 3,421 323 110.4 44% Other(3) n/a n/a 1.0 1% n/a n/a (4.7) (3)% n/a n/a 26.6 11% Total PFSI account revenues (net of Loan origination expense) $ 23,392 60 $ 140.0 96% $ 25,372 62 $ 157.8 97% $ 27,071 88 $ 238.6 95% PMT Conventional Correspondent 2,667 21 5.5 4% 2,148 21 4.4 3% 6,894 17 11.5 5% Total Production revenues (net of Loan origination expense) 56 $ 145.6 100% 59 $ 162.3 100% 74 $ 250.1 100% Production expenses (less Loan origination expense) $ 26,059 46 $ 120.4 83% $ 27,520 44 $ 121.0 75% $ 33,964 42 $ 142.3 57% Production segment pretax income 10 $ 25.2 17% 15 $ 41.3 25% 32 $ 107.9 43%

Correspondent Broker Direct PRODUCTION SEGMENT HIGHLIGHTS – BUSINESS TRENDS BY CHANNEL 11 Consumer Direct ● Pennymac remains the largest correspondent aggregator in the U.S. ● Lock and acquisition volumes for PFSI’s account were down 2% from 2Q24 as PMT retained approximately 42% of total conventional correspondent production in 3Q24 compared to 18% in 2Q24 ‒ We expect PMT to retain approximately 15 - 25% of total conventional correspondent production in 4Q24 ● 794 correspondent sellers at September 30, 2024, essentially unchanged from June 30, 2024 ● Purchase volume in 3Q24 was 91% of total acquisitions Multi-channel approach provides flexibility and has proven to be a competitive advantage, supporting profitability and pricing discipline while driving growth of the servicing portfolio ● Lock volumes were up 24% and originations were up 8% from 2Q24 ● Approved brokers totaled 4,411 at September 30, 2024, up 3% from June 30, 2024 and 25% from September 30, 2023, representing approximately a quarter of the total population of brokers ‒ Top brokers see Pennymac as a strong alternative to the top two channel lenders ● Purchase volume in 3Q24 was 82% of total originations ● Strong trends in jumbo originations, which were 11% of total originations in 3Q24 ● Lock volumes were up 93% and originations were up 69% from 2Q24 ‒ Increase due primarily to higher refinance volumes ● Continue to provide for the spectrum of needs of the nearly 2.6 million customers in our servicing portfolio ‒ Refinance lock volume in 3Q24 was $4.8 billion, or 92% of total locks, up from $2.2 billion, or 83% of total locks in 2Q24 ‒ 97% of total origination volume, including both first and second-lien, was sourced from our large and growing servicing portfolio ‒ $278 million of closed-end second lien mortgage loans funded in 3Q24, up from $257 million in 2Q24

Selected Operational Metrics 2Q24 3Q24 Loans serviced (in thousands) 2,513 2,558 60+ day delinquency rate - owned portfolio(1) 3.0% 3.4% 60+ day delinquency rate - sub-serviced portfolio(2) 0.6% 0.6% Actual CPR - owned portfolio(1) 6.7% 8.5% Actual CPR - sub-serviced portfolio(2) 5.6% 5.7% UPB of completed modifications ($ in millions)(3) $3,213 $3,186 EBO loan volume ($ in millions)(4) $665 $694 Prime owned Prime subserviced and other SERVICING SEGMENT HIGHLIGHTS 12 Loan Servicing Portfolio Composition (UPB in billions) Net Portfolio Growth (UPB in billions) (1) Owned portfolio is predominantly government-insured and guaranteed loans – see Appendix slide 27 for additional details; delinquency data based on loan count (i.e., not UPB); CPR = Conditional Prepayment Rate (2) Represents PMT’s MSRs that we service (3) UPB of completed modifications includes loss mitigation efforts associated with partial claims programs (4) Early buyouts of delinquent loans from Ginnie Mae pools during the period (5) Also includes loans sold with servicing released in connection with any asset sales by PMT (6) Includes consumer and broker direct production, government and conventional correspondent acquisitions, and conventional conforming and jumbo loan acquisitions subserviced for PMT (5) (6) • Servicing portfolio totaled $648.1 billion in UPB at September 30, 2024, up 2% Q/Q and 10% Y/Y • Production volumes more than offset prepayment activity, leading to continued portfolio growth • 60+ day delinquency rates for owned MSR increased slightly from the end of the prior quarter • Modification and EBO loan volume were relatively unchanged from the prior quarter

SERVICING PROFITABILITY EXCLUDING VALUATION-RELATED CHANGES 13 (1) Of average portfolio UPB, annualized (2) Comprised of net gains on mortgage loans held for sale at fair value and interest income related to EBO loans (3) Consists of interest shortfall and recording and release fees (4) Changes in fair value do not include realization of MSR cash flows (5) Considered in the assessment of MSR fair value changes • Loan servicing fees increased from the prior quarter due to growth in the owned portfolio; operating expenses increased slightly • Earnings on custodial balances and deposits increased from the prior quarter due to higher average balances – Custodial funds managed for PFSI’s owned servicing portfolio averaged $6.9 billion in 3Q24, up from $5.7 billion in 2Q24 • Realization of cash flows increased $25 million from the prior quarter due to continued growth of the owned portfolio and higher prepayment expectations due to lower mortgage rates 3Q23 2Q24 3Q24 $ in millions basis points⁽¹⁾ $ in millions basis points⁽¹⁾ $ in millions basis points⁽¹⁾ Loan servicing fees $ 387.9 26.7 $ 440.7 28.2 $ 462.0 28.9 Earnings on custodial balances and deposits and other income 99.4 6.8 111.6 7.1 137.9 8.6 Realization of MSR cash flows (177.8) (12.2) (200.7) (12.9) (225.8) (14.1) EBO loan-related revenue⁽²⁾ 29.0 2.0 26.8 1.7 29.7 1.9 Servicing expenses: Operating expenses (111.2) (7.6) (91.4) (5.9) (102.9) (6.4) Payoff-related expense⁽³⁾ (9.4) (0.6) (10.4) (0.7) (18.5) (1.2) Losses and provisions for defaulted loans (10.3) (0.7) (13.3) (0.9) (13.4) (0.8) EBO loan transaction-related expense (0.2) (0.0) (0.6) (0.0) (0.7) (0.0) Interest expense (87.5) (6.0) (113.6) (7.3) (116.9) (7.3) Non-GAAP: Pretax income excluding fair value changes and non-recurring items $ 120.0 8.2 $ 149.0 9.5 $ 151.4 9.5 Valuation-related changes MSR fair value⁽⁴⁾ 398.9 99.4 (402.4) Hedging derivatives gains (losses) (423.7) (171.8) 242.1 (Provision for) reversal of losses on active loans⁽⁵⁾ 6.0 (0.6) (5.7) Non-GAAP: Servicing segment pretax income excluding non-recurring items $ 101.2 $ 76.1 $ (14.6) Non-recurring items - 12.5 - GAAP: Servicing segment pretax income $ 101.2 $ 88.5 $ (14.6) Average servicing portfolio UPB $ 582,262 $ 624,746 $ 640,492

14 HEDGING APPROACH MODERATES THE VOLATILITY OF PFSI’S RESULTS MSR Valuation Changes and Offsets ($ in millions) MSR fair value change before realization of cash flows Hedging and related gains (losses) Production pretax income • PFSI seeks to moderate the impact of interest rate changes on the fair value of its MSR asset through a comprehensive hedging strategy that also considers production-related income • In 3Q24, MSR fair value decreased due to lower market interest rates • Hedging gains, excluding hedge costs, offset 78% of MSR fair value declines – Hedge costs were significantly elevated during the quarter given interest rate volatility and the inverted yield curve • Production pretax income was $108 million, up from $41 million in the prior quarter

INVESTMENT MANAGEMENT SEGMENT HIGHLIGHTS 15 Investment Management AUM ($ in billions) Investment Management Revenues ($ in millions) ● Net AUM as of September 30, 2024 were $1.9 billion, essentially unchanged from June 30, 2024 and September 30, 2023 ● Investment Management segment revenues were $9.4 million, essentially unchanged from 2Q24 and up 7% from 3Q23

APPENDIX

17 ESTABLISHED LEADER WITH SUBSTANTIAL LONG-TERM GROWTH POTENTIAL IN SERVICING(1) YEARS FOR PFSI AS A PUBLIC COMPANY YEARS OF OPERATIONS PMT • CORRESPONDENT PRODUCTION • BROKER DIRECT • CONSUMER DIRECT IN PRODUCTION(1) IS A LEADING RESIDENTIAL MORTGAGE REIT # $648 billion outstanding 16 11 $107 billion in LTM 3Q24 Note: All figures are for PFSI and include volume fulfilled or subserviced for PMT; all figures are as of 9/30/24 unless otherwise noted (1) Inside Mortgage Finance for the 12 months ended 6/30/24 or as of 6/30/24 $1.9 billion in assets under management 6 15-year track record #2 2.6 million customers

OVERVIEW OF PENNYMAC FINANCIAL’S BUSINESSES 18 LOAN PRODUCTION Correspondent aggregation of newly originated loans from third-party sellers Fulfillment fees for PMT’s delegated conventional loans PFSI earns gains on all loan production with the exception of loans fulfilled for PMT Broker direct and consumer direct origination of conventional and government-insured loans LOAN SERVICING Servicing for owned MSRs and subservicing for MSRs owned by PMT Major loan servicer for Fannie Mae, Freddie Mac and Ginnie Mae Industry-leading capabilities in special servicing Organic growth results from loan production, supplemented by MSR acquisitions and PMT investment activity INVESTMENT MANAGEMENT External manager of PMT, which invests in mortgage-related assets: GSE credit risk transfer investments MSR investments Investments in agency MBS, senior non-agency MBS and asset-backed securities Synergistic partnership with PMT Complex and highly regulated mortgage industry requires effective governance, compliance and operating systems Operating platform has been developed organically and is highly scalable Commitment to strong corporate governance, compliance and risk management since inception PFSI is well-positioned to navigate the current market and regulatory environment

19 PFSI’S BALANCED BUSINESS MODEL IS A FLYWHEEL • Diversified business through correspondent, broker direct and consumer direct channels • Correspondent and broker direct channels in particular allow PFSI to access purchase-money volume • Lacks the fixed overhead of the traditional, retail origination model • Recurring fee income business captured over the life of the loan • With higher interest rates, expected life of the loan increases resulting in a more valuable MSR asset • Creates a natural hedge to production income Large volumes of production grow servicing portfolio Loan Production nd largest in the U.S.(1) Loan Servicing th largest in the U.S.(1) In both businesses, scale and efficiency are critical for success 2 6 Customer base of 2.6 million drives leads for consumer direct Note: All figures are for PFSI and include volume fulfilled or subserviced for PMT; all figures are as of 9/30/24 unless otherwise noted (1) Inside Mortgage Finance for the 12 months ended 6/30/24 or as of 6/30/24

20 TOP LENDER WITH COMPREHENSIVE AND EFFICIENT MULTI-CHANNEL PLATFORM Centralized, cost-efficient fulfillment division supports all channels Multiple access points to the origination market with a proven ability to allocate resources towards channels with opportunity in the current environment Significant and ongoing investments in mortgage-banking technology provide an exceptional loan origination experience for our customers and business partners Scalable technology platform providing our consumers, brokers and correspondent partners with the liquidity, tools and products they need to succeed (1) Inside Mortgage Finance; includes volumes fulfilled for PMT Strong access to purchase market Drives organic servicing portfolio growth Strong access to purchase market Positive and consistent execution for brokers Internet and call-center based Cost-efficient leads from our large servicing portfolio Correspondent Broker Direct Consumer Direct #2 producer of residential mortgage loans in LTM 2Q24⁽¹⁾ 20

21 TECHNOLOGY INNOVATION TO UNLOCK ADDITIONAL STAKEHOLDER VALUE Servicing Systems Environment Direct and white label subservicing Partnerships with third parties Commercialization Drive efficiencies for our core businesses Leverage SSE to expand our current sub-servicing business beyond PMT Commercialize SSE into a multi-tenant, industry-leading servicing software platform Partner with innovative technologists to develop a comprehensive marketplace of next generation mortgage banking technology Proven, low-cost servicing system with multiple competitive advantages versus others in the market With our SSE technology free and clear of any restrictions on use or development, we are actively exploring a continuum of potential opportunities with benefits for our many stakeholders

PFSI Purchase Mix Industry Purchase Mix(5) 22 TRACK RECORD OF STRONG PERFORMANCE ACROSS MARKET ENVIRONMENTS Proven ability to generate attractive ROEs… …across different market environments… …with a strong orientation towards purchase money mortgages. (1) Represents partial year; initial public offering was May 8, 2013 (2) Adjusted return on equity was 7% excluding arbitration accrual of $158 million and related tax impact (3) Inside Mortgage Finance Average: 21% U.S. Origination Market(3) (in trillions) PFSI's Annualized Return on Average Common Stockholders' Equity (ROE) 10-Year Treasury Yield(4) (4) Bloomberg (5) Inside Mortgage Finance for historical industry purchase mix, 3Q24 is an estimate of Mortgage Bankers Association (9/23/24) and Fannie Mae (10/10/24) forecasts

MSR & Servicing Advance Financing PFSI’S STRONG BALANCE SHEET AND DIVERSE CAPITAL STRUCTURES 23 Low Debt-to-Equity (D/E) Ratio Diverse Financing Sources High Tangible Net Worth (TNW)(2)/Assets • High tangible net worth (TNW) / assets excluding loans eligible for repurchase • Targeted debt-to-equity ratio near or below 3.5x with fluctuations largely driven by the origination environment or other market opportunities • Targeted non-funding debt-to-equity ratio below 1.5x • Unsecured senior notes provide low, fixed interest rates; first maturity in October 2025 • As of September 30, 2024 total liquidity including cash and amounts available to draw with collateral pledged was $3.8 billion Non-funding D/E(1) Total D/E TNW / Assets TNW / Assets ex. Loans eligible for repurchase Financing capacity across multiple banks Note: All figures are as of September 30, 2024 (1) Non-funding debt includes face value of unsecured senior notes and notes payable secured by MSR, in addition to the amount drawn on the variable funding note (2) Tangible net worth excludes capitalized software

CURRENT MARKET ENVIRONMENT AND MACROECONOMIC TRENDS 24 Average 30-year fixed rate mortgage(1) Macroeconomic Metrics(3) Footnotes 10-year Treasury Bond Yield(2) 9/30/23 12/31/23 3/31/24 6/30/24 9/30/24 10-year Treasury bond yield 4.6% 3.9% 4.2% 4.4% 3.8% 2/10 year Treasury yield spread -0.5% -0.4% -0.4% -0.4% 0.1% 30-year fixed rate mortgage 7.3% 6.6% 6.8% 6.9% 6.1% Secondary mortgage rate 6.3% 5.3% 5.6% 5.8% 5.0% U.S. home price appreciation (Y/Y% change) 4.1% 5.7% 6.5% 5.5% 5.0% Residential mortgage originations (in billions) $405 $315 $325 $435 $470 6.86% 6.08% 4.40% 3.78% (1) Freddie Mac Primary Mortgage Market Survey. 6.44% as of 10/17/24 (2) U.S. Department of the Treasury. 4.09% as of 10/17/24 (3) 10-year Treasury bond yield and 2/10 year Treasury yield spread: Bloomberg Average 30-year fixed rate mortgage: Freddie Mac Primary Mortgage Market Survey Average secondary mortgage rate: 30-Year FNCL Par Coupon Index (MTGEFNCL), Bloomberg U.S. home price appreciation: S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index (SPCSUSA); data is as of 7/31/24 Residential mortgage originations are for the quarterly period ended; source: Inside Mortgage Finance

September 30, 2024 Mortgage Servicing Rights Unaudited ($ in millions) Pool UPB(1) $410,031 Weighted average coupon 4.4% Weighted average servicing fee/spread 0.38% Weighted average prepayment speed assumption (CPR) 9.1% Fair value $7,752 As a multiple of servicing fee 4.9 25 MSR ASSET VALUATION (1) Excludes loans held for sale at fair value

DELINQUENCY TRENDS AND SERVICING ADVANCES OUTSTANDING 26 Historical Trends in Delinquency and Foreclosure Rates(1) 30-60 Day 60-90 Day 90+ Day In foreclosure Footnote ● Overall mortgage delinquency rates increased from the prior quarter but remain within expected levels for a predominately government-insured or guaranteed loan portfolio ● Servicing advances outstanding for PFSI’s MSR portfolio were approximately $331 million at September 30, 2024, essentially unchanged from June 30, 2024 ‒ No principal and interest advances are outstanding

27 PFSI’S OWNED MSR PORTFOLIO CHARACTERISTICS Note: Figures may not sum due to rounding (1) Government loans include loans securitized in Ginnie Mae pools as well as loans sold to private investors (2) Other represents MSRs collateralized by conventional loans sold to private investors (3) Loan-to-values for closed-end seconds include only the second lien balance (4) Excludes loans held for sale at fair value As of September 30, 2024 Segment UPB ($ in billions)⁽⁴⁾ % of Total UPB Loan count (in thousands) Note rate Seasoning (months) Remaining maturity (months) Loan size ($ in thousands) FICO credit score at origination Original LTV Current LTV 60+ Delinquency (by UPB) Government⁽¹⁾ FHA $144.8 35.3% 699 4.4% 46 317 $207 680 93% 68% 5.5% VA $124.4 30.3% 455 3.8% 38 321 $274 729 90% 69% 2.3% USDA $20.8 5.1% 141 4.0% 57 307 $148 699 98% 65% 5.3% GSE FNMA $50.5 12.3% 162 4.9% 27 317 $312 762 74% 61% 0.5% FHLMC $62.8 15.3% 195 5.2% 21 325 $321 758 75% 65% 0.5% Other and Closed-End Seconds Other⁽²⁾ $5.6 1.4% 15 6.8% 11 348 $366 771 74% 69% 0.2% Closed-End Seconds⁽³⁾ $1.1 0.3% 14 10.1% 9 248 $78 743 18% 17% 0.2% Grand Total $410.1 100.0% 1,681 4.4% 37 319 $244 719 87% 67% 3.1%

ACQUISITIONS AND ORIGINATIONS BY PRODUCT 28 Note: Figures may not sum due to rounding Unaudited ($ in millions) 3Q23 4Q23 1Q24 2Q24 3Q24 Correspondent Acquisitions Conventional Conforming - for PMT $ 2,759 $ 2,477 $ 1,769 $ 2,195 $ 5,851 Conventional Conforming - for PFSI 9,933 10,129 8,190 10,007 8,092 Government - for PFSI 8,848 11,011 8,167 10,301 11,788 Jumbo - for PMT 1 3 3 34 97 Total $ 21,541 $ 23,620 $ 18,128 $ 22,537 $ 25,829 Broker Direct Originations - for PFSI Conventional Conforming $ 1,591 $ 1,560 $ 1,524 $ 2,059 $ 1,844 Government 621 623 619 865 1,183 Jumbo 10 18 42 241 368 Closed-end second liens - - 9 15 28 Total $ 2,223 $ 2,201 $ 2,193 $ 3,179 $ 3,424 Consumer Direct Originations - for PFSI Conventional Conforming $ 378 $ 264 $ 265 $ 374 $ 365 Government 741 372 931 804 1,786 Jumbo 3 2 - 12 15 Closed-end second liens 199 226 204 257 278 Total $ 1,322 $ 864 $ 1,400 $ 1,447 $ 2,444 Total acquisitions / originations $ 25,085 $ 26,685 $ 21,721 $ 27,163 $ 31,696 UPB of loans fulfilled for PMT (included in correspondent acquisitions $ 2,760 $ 2,480 $ 1,772 $ 2,229 $ 5,948

INTEREST RATE LOCKS BY PRODUCT 29 Note: Figures may not sum due to rounding Unaudited ($ in millions) 3Q23 4Q23 1Q24 2Q24 3Q24 Correspondent Locks Conventional Conforming - for PMT $ 3,493 $ 2,737 $ 2,472 $ 2,602 $ 7,373 Conventional Conforming - for PFSI 10,333 9,977 8,614 9,914 8,229 Government - for PFSI 10,063 11,197 8,467 11,100 12,448 Jumbo - for PMT 2 5 10 90 253 Total $ 23,891 $ 23,916 $ 19,563 $ 23,706 $ 28,304 Broker Direct Locks - for PFSI Conventional Conforming $ 2,146 $ 1,910 $ 2,234 $ 2,559 $ 2,533 Government 828 844 989 1,266 2,039 Jumbo 15 30 116 433 720 Closed-end second liens - 3 14 29 43 Total $ 2,989 $ 2,787 $ 3,352 $ 4,287 $ 5,335 Consumer Direct Locks - for PFSI Conventional Conforming $ 559 $ 371 $ 474 $ 551 $ 785 Government 817 887 1,338 1,698 3,972 Jumbo 5 3 12 21 26 Closed-end second liens 326 335 328 428 435 Total $ 1,707 $ 1,597 $ 2,152 $ 2,698 $ 5,218 Total locks $ 28,586 $ 28,300 $ 25,068 $ 30,691 $ 38,856

CREDIT CHARACTERISTICS BY ACQUISITION/ORIGINATION PERIOD 30 Correspondent Broker Direct Consumer Direct Weighted Average FICO Weighted Average DTI 3Q23 4Q23 1Q24 2Q24 3Q24 3Q23 4Q23 1Q24 2Q24 3Q24 Government-insured 712 714 719 715 715 Government-insured 45 46 44 44 44 Conventional 762 762 765 765 770 Conventional 38 39 38 38 38 Weighted Average FICO Weighted Average DTI 3Q23 4Q23 1Q24 2Q24 3Q24 3Q23 4Q23 1Q24 2Q24 3Q24 Government-insured 711 715 723 714 716 Government-insured 46 47 46 46 46 Conventional 761 763 762 764 765 Conventional 39 39 39 39 38 Weighted Average FICO Weighted Average DTI 3Q23 4Q23 1Q24 2Q24 3Q24 3Q23 4Q23 1Q24 2Q24 3Q24 Government-insured 683 674 688 692 702 Government-insured 45 45 45 45 45 Conventional 743 747 746 747 752 Conventional 38 38 38 39 38

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA 31 Note: Figures may not sum due to rounding ($ in millions) 3Q23 2Q24 3Q24 Net income $ 92.9 $ 98.3 $ 69.4 Provision for income taxes 33.9 35.6 24.6 Income before provision for income taxes 126.8 133.9 93.9 Depreciation and amortization 13.2 14.2 13.8 Decrease (increase) in the fair value of MSRs and MSLs due to changes in valuation inputs used in the valuation model (398.9) (99.4) 402.4 Hedging (gains) losses associated with MSRs 423.7 171.8 (242.1) Stock-based compensation 8.8 (2.2) 18.9 Non-recurring items - (12.5) - Interest expense on corporate debt and capital lease $ 23.9 $ 44.0 $ 51.1 Adjusted EBITDA $ 197.5 $ 249.7 $ 338.1

($ in millions) 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 Net income (loss) $ 58.3 $ 92.9 $ (36.8) $ 39.3 $ 98.3 $ 69.4 Decrease (increase) in the fair value of MSRs and MSLs due to changes in valuation inputs used in the valuation model (118.9) (398.9) 370.7 (170.0) (99.4) 402.4 Hedging (gains) losses associated with MSRs 155.1 423.7 (294.8) 294.6 171.8 (242.1) Non-recurring items - - 158.4 1.6 (12.5) - Tax impacts of adjustments⁽¹⁾ 9.7 6.7 62.9 33.9 16.1 43.1 Operating net income $ 84.8 $ 111.0 $ 134.5 $ 131.7 $ 142.1 $ 186.7 Average stockholders' equity $ 3,440.9 $ 3,517.5 $ 3,555.4 $ 3,552.3 $ 3,614.2 $ 3,694.8 Annualized operating return on equity 10% 13% 15% 15% 16% 20% ($ in millions) 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 Servicing pretax income (loss) $ 46.5 $ 101.2 $ (95.5) $ 4.9 $ 88.5 $ (14.6) Decrease (increase) in the fair value of MSRs and MSLs due to changes in valuation inputs used in the valuation model (118.9) (398.9) 370.7 (170.0) (99.4) 402.4 Hedging (gains) losses associated with MSRs 155.1 423.7 (294.8) 294.6 171.8 (242.1) Non-recurring items - - 158.4 1.6 (12.5) - Provision for credit losses on active loans (7.5) (6.0) 5.7 (6.6) 0.6 5.7 Servicing pretax income net of valuation related changes and non-recurring items $ 75.3 $ 120.0 $ 144.4 $ 124.7 $ 149.0 $ 151.4 RECONCILIATION OF GAAP ITEMS TO NON-GAAP ITEMS Note: Figures may not sum due to rounding 32 (1) Assumes a tax rate of 26.85% Reconciliation of GAAP net income (loss) to operating net income and annualized operating return on equity Reconciliation of GAAP servicing pretax income (loss) to servicing pretax income net of valuation related changes and non-recurring items

Cover	Oct. 22, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Oct. 22, 2024
Entity File Number	001-38727
Entity Registrant Name	PennyMac Financial Services, Inc.
Entity Central Index Key	0001745916
Entity Tax Identification Number	83-1098934
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	3043 Townsgate Road
Entity Address, City or Town	Westlake Village
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	91361
City Area Code	818
Local Phone Number	224-7442
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $0.0001 par value
Trading Symbol	PFSI
Security Exchange Name	NYSE
Entity Emerging Growth Company	false

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