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Share Name | Share Symbol | Market | Type |
---|---|---|---|
PennyMac Financial Services Inc | NYSE:PFSI | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
1.18 | 1.19% | 100.40 | 101.25 | 99.15 | 99.47 | 562,188 | 00:55:59 |
PennyMac Financial Services, Inc. (NYSE: PFSI) today reported net income of $98.3 million for the second quarter of 2024, or $1.85 per share on a diluted basis, on revenue of $406.1 million. Book value per share increased to $71.76 from $70.13 at March 31, 2024.
PFSI’s Board of Directors declared a second quarter cash dividend of $0.30 per share, a 50 percent increase from the prior quarter, payable on August 23, 2024, to common stockholders of record as of August 13, 2024.
Second Quarter 2024 Highlights
“PennyMac Financial generated strong earnings in the second quarter with an annualized operating return on equity of 16 percent,” said Chairman and CEO David Spector. “Given our continued strong financial results, I am pleased to note that PFSI’s Board of Directors approved a quarterly common cash dividend of $0.30 per share from $0.20 per share, an increase of 50 percent. Our large and growing servicing business continues to drive revenue and cash flow in this higher interest rate environment and notably, our per loan servicing expenses were at record low levels as we continue to leverage our proprietary technology and operational scale. In the second quarter, total acquisition and origination volumes were $27 billion, up 25 percent from the prior quarter, driving continued growth of our servicing portfolio to more than $630 billion in unpaid principal balance at quarter-end.”
Mr. Spector continued, “While our financial performance in recent periods has been strong, I continue to believe Pennymac’s best days are yet ahead. This quarter we successfully raised $650 million in unsecured senior notes at attractive terms, further strengthening our balance sheet and demonstrating our strong access to capital and liquidity. In this higher interest rate environment, we have gained considerable market share in our purchase-focused correspondent and broker-direct lending channels, and with nearly $115 billion in UPB of the loans in our servicing portfolio carrying a note rate greater than 6 percent, our consumer direct lending channel will have a tremendous opportunity to provide our customers with lower mortgage rates when interest rates decline. Our multi-channel approach to loan production drives strong competitive advantages for us and with our balanced business model, we remain one of the best-positioned in the industry to drive continued growth and financial returns.”
The following table presents the contributions of PennyMac Financial’s segments to pretax income:
Quarter ended June 30, 2024 Mortgage Banking InvestmentManagement Production Servicing Total Total (in thousands) Revenues Net gains on loans held for sale at fair value$
154,317
$
21,747
$
176,064
$
-
$
176,064
Loan origination fees
42,075
-
42,075
-
42,075
Fulfillment fees from PMT
4,427
-
4,427
-
4,427
Net loan servicing fees
-
167,604
167,604
-
167,604
Management fees
-
-
-
7,133
7,133
Net interest income (expense): Interest income
84,613
116,119
200,732
79
200,811
Interest expense
83,376
124,495
207,871
-
207,871
1,237
(8,376
)
(7,139
)
79
(7,060
)
Other
509
13,250
13,759
2,125
15,884
Total net revenues
202,565
194,225
396,790
9,337
406,127
Expenses
161,286
105,685
266,971
5,302
272,273
Income before provision for income taxes
$
41,279
$
88,540
$
129,819
$
4,035
$
133,854
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 $27.2 billion in UPB, $25.0 billion of which was for its own account and $2.2 billion of which was fee-based fulfillment activity for PMT. Correspondent locks for PFSI and direct lending IRLCs totaled $28.0 billion in UPB, up 24 percent from the prior quarter and 20 percent from the second quarter of 2023.
Production segment pretax income was $41.3 million, up from $35.9 million in the prior quarter and $24.4 million in the second quarter of 2023. Production segment revenue totaled $202.6 million, up 10 percent from the prior quarter and 19 percent from the second quarter of 2023. The increase from the prior quarter was primarily due to higher volumes across all channels, and the increase from the second quarter of 2023 was primarily due to higher overall volumes and higher margins in the direct lending channels.
The components of net gains on loans held for sale are detailed in the following table:
Quarter ended June 30,2024 March 31,2024 June 30,2023 (in thousands) Receipt of MSRs$
541,207
$
412,520
$
562,523
Mortgage servicing rights recapture payable to PennyMac Mortgage Investment Trust
(473
)
(353
)
(509
)
Provision for representations and warranties, net
(53
)
(632
)
(1,131
)
Cash loss, including cash hedging results
(321,270
)
(158,971
)
(308,199
)
Fair value changes of pipeline, inventory and hedges
(43,347
)
(90,123
)
(111,265
)
Net gains on loans held for sale$
176,064
$
162,441
$
141,419
Net gains on loans held for sale by segment: Production
$
154,317
$
141,431
$
126,249
Servicing
$
21,747
$
21,010
$
15,170
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 $4.4 million in the second quarter, up 10 percent from the prior quarter and down 19 percent from the second quarter of 2023. The increase from the prior quarter was primarily due to higher volumes acquired for PMT’s account. In the third quarter, PMT expects to retain approximately 30 to 50 percent of total conventional correspondent production, an increase from 18 percent in the second quarter.
Net interest income in the second quarter totaled $1.2 million, down from $2.0 million in the prior quarter. Interest income totaled $84.6 million, up from $63.9 million in the prior quarter, and interest expense totaled $83.4 million, up from $61.9 million in the prior quarter, both primarily due to higher average balance of loans held for sale and the associated financing during the quarter.
Production segment expenses were $161.3 million, up 8 percent from the prior quarter and 10 percent from the second quarter of 2023, both primarily due to higher overall volumes.
Servicing Segment
The Servicing segment includes income from owned MSRs and subservicing. The total servicing portfolio grew to $632.7 billion in UPB at June 30, 2024, an increase of 2 percent from March 31, 2024, and 10 percent from June 30, 2023. PennyMac Financial’s owned MSR portfolio grew to $402.6 billion in UPB, up 4 percent from March 31, 2024, and 18 percent from June 30, 2023. PennyMac Financial subservices $230.2 billion in UPB for PMT.
The table below details PennyMac Financial’s servicing portfolio UPB:
June 30,2024 March 31,2024 June 30,2023 (in thousands) Prime servicing: Owned Mortgage servicing rights and liabilities Originated$
379,882,952
$
364,441,567
$
319,257,805
Purchased
16,568,065
17,051,740
18,474,265
396,451,017
381,493,307
337,732,070
Loans held for sale
6,108,082
5,111,719
4,250,706
402,559,099
386,605,026
341,982,776
Subserviced for PMT
230,170,703
230,809,585
234,463,739
Total prime servicing
632,729,802
617,414,611
576,446,515
Special servicing - subserviced for PMT
8,810
9,427
12,780
Total loans serviced$
632,738,612
$
617,424,038
$
576,459,295
Servicing segment pretax income was $88.5 million, up from $4.9 million in the prior quarter and $46.5 million in the second quarter of 2023. Servicing segment net revenues totaled $194.2 million, up from $111.6 million in the prior quarter and $156.4 million in the second quarter of 2023.
Revenue from net loan servicing fees totaled $167.6 million, up from $101.0 million in the prior quarter and $146.1 million in the second quarter of 2023. Loan servicing fees were $440.7 million, up from $424.2 million in the prior quarter primarily due to growth in PFSI’s owned portfolio, reduced by $200.7 million in realization of cash flows. Net valuation related declines were $72.4 million, down from $124.7 million in the prior quarter. MSR fair value gains, before realization of cash flows, were $99.4 million and hedging losses were $171.8 million driven by high hedge costs and significant interest rate volatility during the quarter.
The following table presents a breakdown of net loan servicing fees:
Quarter ended June 30,2024 March 31,2024 June 30,2023 (in thousands) Loan servicing fees$
440,696
$
424,184
$
356,471
Changes in fair value of MSRs and MSLs resulting from: Realization of cash flows
(200,740
)
(198,564
)
(174,162
)
Change in fair value inputs
99,425
169,979
118,905
Hedging losses
(171,777
)
(294,645
)
(155,136
)
Net change in fair value of MSRs and MSLs
(273,092
)
(323,230
)
(210,393
)
Net loan servicing fees$
167,604
$
100,954
$
146,078
Servicing segment revenue included $21.7 million in net gains on loans held for sale related to early buyout loans (EBOs), up slightly from the prior quarter and up from $15.2 million in the second 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 expense totaled $8.4 million, compared to $11.5 million in the prior quarter and $5.1 million in the second quarter of 2023. Interest income was $116.1 million, up from $92.4 million in the prior quarter due to increased earnings from placement fees on custodial balances. Interest expense was $124.5 million, up from $103.9 million in the prior quarter due to higher average balances of debt outstanding during the quarter.
Servicing segment expenses totaled $105.7 million, down slightly from $106.7 million in the prior quarter.
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 June 30, 2024, essentially unchanged from March 31, 2024 and June 30, 2023.
Pretax income for the Investment Management segment was $4.0 million, up from $3.1 million in the prior quarter and $2.0 million in the second quarter of 2023. Base management fees from PMT were $7.1 million, essentially unchanged from the prior quarter and second quarter of 2023. No performance incentive fees were earned in the first quarter.
The following table presents a breakdown of management fees:
Quarter ended June 30,2024 March 31,2024 June 30,2023 (in thousands) Management fees: Base$
7,133
$
7,188
$
7,078
Performance incentive
-
-
-
Total management fees$
7,133
$
7,188
$
7,078
Net assets of PennyMac Mortgage Investment Trust at quarter end$
1,939,869
$
1,958,914
$
1,931,496
Investment Management segment expenses totaled $5.3 million, down from $6.3 million in the prior quarter and $7.5 million in the second quarter of 2023.
Consolidated Expenses
Total expenses were $272.3 million, up from $261.8 million in the prior quarter primarily due to increased production segment expenses due to higher volumes.
Taxes
PFSI recorded a provision for tax expense of $35.6 million, resulting in an effective tax rate of 26.6 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, July 23, 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 3,900 people across the country. For the twelve months ended June 30, 2024, PennyMac Financial’s production of newly originated loans totaled $101 billion in unpaid principal balance, making it a top lender in the nation. As of June 30, 2024, PennyMac Financial serviced loans totaling $633 billion in unpaid principal balance, making it a top five mortgage servicer in the nation. Additional information about PennyMac Financial Services, Inc. is available at pfsi.pennymac.com.
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 and U.S. 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; our dependence on U.S. government-sponsored entities and changes in their current roles or their guarantees or guidelines; 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 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 entities; 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, 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.
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30,2024 March 31,2024 June 30,2023 (in thousands, except share amounts) ASSETS Cash$
595,336
$
927,394
$
1,532,399
Short-term investment at fair value
188,772
69
8,088
Principal-only stripped mortgage-backed securities at fair value
914,223
524,576
-
Loans held for sale at fair value
6,238,959
5,200,350
4,270,494
Derivative assets
145,887
108,987
85,517
Servicing advances, net
414,235
499,955
500,122
Mortgage servicing rights at fair value
7,923,078
7,483,210
6,510,585
Investment in PennyMac Mortgage Investment Trust at fair value
1,031
1,101
1,011
Receivable from PennyMac Mortgage Investment Trust
29,413
30,835
25,046
Loans eligible for repurchase
4,560,058
4,401,896
4,401,098
Other
566,573
623,368
650,108
Total assets$
21,577,565
$
19,801,741
$
17,984,468
LIABILITIES Assets sold under agreements to repurchase$
6,408,428
$
5,435,354
$
3,780,524
Mortgage loan participation purchase and sale agreements
511,837
363,798
505,712
Notes payable secured by mortgage servicing assets
1,723,144
1,972,020
2,472,726
Unsecured senior notes
3,160,226
2,521,031
1,781,756
Derivative liabilities
18,830
40,784
22,039
Mortgage servicing liabilities at fair value
1,708
1,732
1,940
Accounts payable and accrued expenses
294,812
263,338
334,234
Payable to PennyMac Mortgage Investment Trust
100,220
127,993
123,287
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement
26,099
26,099
26,099
Income taxes payable
1,082,397
1,047,337
1,026,147
Liability for loans eligible for repurchase
4,560,058
4,401,896
4,401,098
Liability for losses under representations and warranties
28,688
29,976
30,146
Total liabilities
17,916,447
16,231,358
14,505,708
STOCKHOLDERS' EQUITY Common stock -- authorized 200,000,000 shares of $0.0001 par value; issued and outstanding 51,017,418, 50,907,865, and 49,857,588 shares, respectively
5
5
5
Additional paid-in capital
30,053
27,179
-
Retained earnings
3,631,060
3,543,199
3,478,755
Total stockholders' equity
3,661,118
3,570,383
3,478,760
Total liabilities and stockholders’ equity$
21,577,565
$
19,801,741
$
17,984,468
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Quarter ended June 30,2024 March 31,2024 June 30,2023 (in thousands, except per share amounts) Revenues Net gains on loans held for sale at fair value$
176,064
$
162,441
$
141,419
Loan origination fees
42,075
36,371
38,968
Fulfillment fees from PennyMac Mortgage Investment Trust
4,427
4,016
5,441
Net loan servicing fees: Loan servicing fees
440,696
424,184
356,471
Change in fair value of mortgage servicing rights and mortgage servicing liabilities
(101,315
)
(28,585
)
(55,257
)
Mortgage servicing rights hedging results
(171,777
)
(294,645
)
(155,136
)
Net loan servicing fees
167,604
100,954
146,078
Net interest expense: Interest income
200,811
156,426
172,952
Interest expense
207,871
165,769
178,642
(7,060
)
(9,343
)
(5,690
)
Management fees from PennyMac Mortgage Investment Trust
7,133
7,188
7,078
Other
15,884
4,033
3,253
Total net revenues
406,127
305,660
336,547
Expenses Compensation
141,956
146,376
136,982
Technology
35,690
35,967
35,244
Loan origination
40,270
30,568
31,646
Servicing
22,920
16,104
14,652
Professional services
9,404
9,262
17,888
Occupancy and equipment
7,893
8,676
10,066
Marketing and advertising
5,445
3,671
5,578
Other
8,695
11,153
11,574
Total expenses
272,273
261,777
263,630
Income before provision for income taxes
133,854
43,883
72,917
Provision for income taxes
35,596
4,575
14,667
Net income
$
98,258
$
39,308
$
58,250
Earnings per share Basic
$
1.93
$
0.78
$
1.17
Diluted
$
1.85
$
0.74
$
1.11
Weighted-average common shares outstanding Basic
50,955
50,547
49,874
Diluted
53,204
53,100
52,264
Dividend declared per share
$
0.20
$
0.20
$
0.20
PENNYMAC FINANCIAL SERVICES, INC. RECONCILIATION OF
GAAP NET INCOME TO OPERATING NET INCOME AND ANNUALIZED OPERATING RETURN ON EQUITY
Quarter ended June 30, 2024 (in thousands, except annualizedoperating return on equity) Net income$
98,258
Increase in fair value of MSRs and MSLs due to changes in valuation inputs used in the valuation model
(99,425
)
Hedging losses associated with MSRs
171,777
Non-recurring items
(12,484
)
Adjustments$
59,868
Tax impacts of adjustments(1)
16,075
Operating net income
$
142,051
Average stockholders' equity
$
3,614,238
Annualized operating return on equity
16
%
(1) Assumes a tax rate of 26.85%
View source version on businesswire.com: https://www.businesswire.com/news/home/20240723806615/en/
Media Lauren Padilla mediarelations@pennymac.com 805.225.8224
Investors Kevin Chamberlain Isaac Garden PFSI_IR@pennymac.com 818.224.7028
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