Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries PennyMac Financial Services, Inc. Reports Fourth Quarter and Full-Year 2022 Results By: PennyMac Financial Services, Inc. via Business Wire February 02, 2023 at 16:30 PM EST PennyMac Financial Services, Inc. (NYSE: PFSI) today reported net income of $37.6 million for the fourth quarter of 2022, or $0.71 per share on a diluted basis, on revenue of $340.4 million. Book value per share increased to $69.44 from $68.26 at September 30, 2022. PFSI’s Board of Directors declared a fourth quarter cash dividend of $0.20 per share, payable on February 24, 2023, to common stockholders of record as of February 14, 2023. Fourth Quarter 2022 Highlights Net income included non-recurring tax items of $(11.9) million primarily driven by a tax rate increase impacting PFSI’s net deferred tax liability; impact on earnings per share was $(0.22) Pretax income was $67.7 million, down 63 percent from the prior quarter and 71 percent from the fourth quarter of 2021 Repurchased 1.1 million shares of PFSI’s common stock at an average price of $46.99 per share for a cost of $51.3 million Production segment pretax loss of $9.0 million, down from pretax income of $38.6 million in the prior quarter and $106.5 million in the fourth quarter of 2021 Total loan acquisitions and originations, including those fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT) were $23.0 billion in unpaid principal balance (UPB), down 12 percent from the prior quarter and 51 percent from the fourth quarter of 2021 Consumer direct interest rate lock commitments (IRLCs) were $1.7 billion in UPB, down 56 percent from the prior quarter and 88 percent from the fourth quarter of 2021 Broker direct IRLCs were $2.0 billion in UPB, up 8 percent from the prior quarter and down 48 percent from the fourth quarter of 2021 Government correspondent IRLCs totaled $10.7 billion in UPB, down 14 percent from the prior quarter and 31 percent from the fourth quarter of 2021 Conventional correspondent IRLCs for PFSI’s account totaled $4.7 billion in UPB Correspondent acquisitions of conventional conforming loans fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT) were $6.8 billion in UPB, down 34 percent from the prior quarter and 61 percent from the fourth quarter of 2021 Servicing segment pretax income was $75.6 million, down from $145.3 million in the prior quarter and $126.1 million in the fourth quarter of 2021 Pretax income excluding valuation-related items was $79.1 million, up 14 percent from the prior quarter driven by increased earnings on custodial balances and deposits and decreased operating expenses Valuation items included: – $82.6 million in mortgage servicing rights (MSR) fair value gains largely offset by $72.9 million in hedging losses Net impact on pretax income related to these items was $9.7 million, or $0.13 in earnings per share $13.2 million provision for losses on active loans Servicing portfolio grew to $551.7 billion in UPB, up 2 percent from September 30, 2022, driven by production volumes which more than offset prepayment activity Investment Management segment pretax income was $1.2 million, down from $1.6 million in the prior quarter and $1.5 million in the fourth quarter of 2021 Net assets under management (AUM) were $2.0 billion, down 3 percent from September 30, 2022, and 17 percent from December 31, 2021 Notable activity after quarter end PFSI exercised its option to extend the maturity for $650 million in term notes secured by Ginnie Mae MSRs originally due in February 2023 for two years Full-Year 2022 Highlights Net income of $475.5 million, down from $1.0 billion in 2021; return on equity of 14 percent Pretax income of $665.2 million, down from $1.4 billion in 2021 Total net revenue of $2.0 billion, down from $3.2 billion in 2021 Repurchased approximately 7.8 million shares of PFSI’s common stock, or 14 percent of the total outstanding shares at the beginning of the year, for an approximate cost of $406 million Loan production of $109.0 billion in UPB, a decrease of 54 percent from 2021 $22.3 billion in UPB of originations in the direct lending channels, down 63 percent from 2021 Servicing portfolio UPB of $551.7 billion at year end, up 8 percent from December 31, 2021 Issued $500 million of 5-year term notes secured by Ginnie Mae MSRs “PennyMac Financial produced strong results in 2022, a year characterized by a rapid and significant increase in mortgage rates,” said Chairman and CEO David Spector. “The 14 percent return on equity achieved in 2022 can be attributed to the resilience and scale of our balanced business model and the decisive actions taken throughout the year to right-size our business for the much smaller origination market. While production activity fell in 2022 our servicing earnings were strong. In fact, the majority of PennyMac Financial’s income in 2022 was generated by our large and growing servicing portfolio, which totaled more than $550 billion in unpaid principal balance at year end, up 8 percent from the prior year. Strong financial performance not only enabled us to continue returning capital to stockholders and investing in innovative mortgage banking technology, but also resulted in solid growth in PFSI’s book value per share, which ended the year up 16 percent from year end 2021.” Mr. Spector continued, “More than 15 years ago, we founded Pennymac with a vision to help revitalize the mortgage market and become a trusted partner in home ownership. Since then, we have grown responsibly and profitably into one of the largest residential mortgage producers and servicers in the country with an industry-leading correspondent production business and a growing presence in the direct lending channels. Though 2023 is expected to be another challenging year for the mortgage industry, I remain confident in PennyMac Financial’s ability to continue executing given its balanced business model and long history of generating stockholder value through different mortgage market cycles and environments.” The following table presents the contributions of PennyMac Financial’s segments to pretax income: Quarter ended December 31, 2022 Mortgage Banking InvestmentManagement Production Servicing Total Total (in thousands) Revenue Net gains on loans held for sale at fair value $ 84,708 $ 17,205 $ 101,913 $ - $ 101,913 Loan origination fees 28,019 - 28,019 - 28,019 Fulfillment fees from PMT 12,184 - 12,184 - 12,184 Net loan servicing fees - 182,831 182,831 - 182,831 Management fees - - - 7,307 7,307 Net interest income (expense): Interest income 42,855 64,467 107,322 - 107,322 Interest expense 36,836 67,192 104,028 - 104,028 6,019 (2,725 ) 3,294 - 3,294 Other 661 1,655 2,316 2,582 4,898 Total net revenue 131,591 198,966 330,557 9,889 340,446 Expenses 140,607 123,401 264,008 8,709 272,717 Income before provision for income taxes $ (9,016 ) $ 75,565 $ 66,549 $ 1,180 $ 67,729 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 $23.0 billion in UPB, $16.2 billion of which was for its own account, and $6.8 billion of which was fee-based fulfillment activity for PMT. Correspondent locks for PFSI and direct lending IRLCs totaled $19.1 billion in UPB, up 6 percent from the prior quarter and down 43 percent from the fourth quarter of 2021. Production segment pretax loss was $9.0 million, down from pretax income of $38.6 million in the prior quarter and $106.5 million in the fourth quarter of 2021. Production segment revenue totaled $131.6 million, down 34 percent from the prior quarter and 69 percent from the fourth quarter of 2021. The quarter-over-quarter decrease was driven by a $56.0 million decrease in net gains on loans held for sale primarily as a result of lower volume in the consumer direct lending channel and lower overall margins. The components of net gains on loans held for sale are detailed in the following table: Quarter ended December 31,2022 September 30,2022 December 31,2021 (in thousands) Receipt of MSRs and recognition of MSLs in loan sale transactions $ 358,462 $ 345,077 $ 467,141 Mortgage servicing rights recapture payable to PennyMac Mortgage Investment Trust (512 ) (1,648 ) (12,701 ) (Provision for) reversal of liability for representations and warranties, net (444 ) 118 (315 ) Cash (loss) gain (1) (340,869 ) (16,795 ) 37,537 Fair value changes of pipeline, inventory and hedges 85,276 (158,058 ) 8,996 Net gains on mortgage loans held for sale $ 101,913 $ 168,694 $ 500,658 Net gains on mortgage loans held for sale by segment: Production $ 84,708 $ 140,683 $ 314,826 Servicing $ 17,205 $ 28,011 $ 185,832 (1) Including cash hedging results 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 $12.2 million in the fourth quarter, down 34 percent from the prior quarter and 40 percent from the fourth quarter of 2021. The quarter-over-quarter decrease in fulfillment fee revenue was driven by lower conventional acquisition volumes for PMT’s account as PFSI began to acquire certain of the conventional loans sourced by PMT. Net interest income totaled $6.0 million, up slightly from $5.9 million in the prior quarter. Interest income in the fourth quarter totaled $42.9 million, up from $30.8 million in the prior quarter, and interest expense totaled $36.8 million, up from $25.0 million in the prior quarter, both due to increasing interest rates. Production segment expenses were $140.6 million, down 13 percent from the prior quarter and 56 percent from the fourth quarter of 2021. The decline from the prior quarter was driven by lower volumes in the direct lending channels and the expense management initiatives announced in prior quarters. Servicing Segment The Servicing segment includes income from owned MSRs, subservicing and special servicing activities. Servicing segment pretax income was $75.6 million, down from $145.3 million in the prior quarter and $126.1 million in the fourth quarter of 2021. Servicing segment net revenues totaled $199.0 million, down from $266.5 million in the prior quarter and $255.7 million in the fourth quarter of 2021. The quarter-over-quarter decrease was primarily driven by a $60.9 million decrease in net loan servicing fees and a $10.8 million decrease in net gains on loans held for sale related to early buyout (EBO) activity. Revenue from net loan servicing fees totaled $182.8 million, down from $243.7 million in the prior quarter primarily driven by lower net valuation related gains and partially offset by increased loan servicing fees due to a larger servicing portfolio. Revenue from loan servicing fees included $321.9 million in servicing fees, reduced by $148.8 million from the realization of MSR cash flows. Net valuation-related gains totaled $9.7 million, and included MSR fair value gains of $82.6 million, and hedging losses of $72.9 million. The hedging losses were largely driven by hedge costs and higher interest rates during the quarter. The following table presents a breakdown of net loan servicing fees: Quarter ended December 31,2022 September 30,2022 December 31,2021 (in thousands) Loan servicing fees $ 321,949 $ 313,080 $ 287,888 Changes in fair value of MSRs and MSLs resulting from: Realization of cash flows (148,835 ) (141,781 ) (97,025 ) Change in fair value inputs 82,587 237,192 (58,407 ) Hedging losses (72,870 ) (164,749 ) (37,723 ) Net change in fair value of MSRs and MSLs (139,118 ) (69,338 ) (193,155 ) Net loan servicing fees $ 182,831 $ 243,742 $ 94,733 Servicing segment revenue included $17.2 million in net gains on loans held for sale related to reperforming government-insured and guaranteed loans purchased out of Ginnie Mae securitizations, or EBOs. These gains were down from $28.0 million in the prior quarter and $185.8 million in the fourth quarter of 2021. These EBOs are previously delinquent loans that were brought back to performing status through PennyMac Financial’s successful servicing efforts. Net interest expense totaled $2.7 million, versus $5.8 million in the prior quarter and $25.2 million in the fourth quarter of 2021. Interest income was $64.5 million, up from $52.2 million in the prior quarter as increased placement fees on custodial balances more than offset the decline in interest income on EBO loans held for sale. Interest expense was $67.2 million, up from $58.0 million in the prior quarter due to higher interest rates. Servicing segment expenses totaled $123.4 million, up 2 percent from the prior quarter. Servicing segment expenses included $13.2 million in provisions for losses on active loans in the fourth quarter due to higher delinquency rates. The prior quarter included a reversal of the provision of $3.2 million. The total servicing portfolio grew to $551.7 billion in UPB at December 31, 2022, an increase of 2 percent from September 30, 2022 and 8 percent from December 31, 2021. PennyMac Financial subservices and conducts special servicing for $233.6 billion in UPB, an increase of 1 percent from September 30, 2022 and 5 percent from December 31, 2021. PennyMac Financial’s owned MSR portfolio grew to $318.1 billion in UPB, an increase of 3 percent from September 30, 2022 and 11 percent from December 31, 2021. The table below details PennyMac Financial’s servicing portfolio UPB: December 31,2022 September 30,2022 December 31,2021 (in thousands) Prime servicing: Owned Mortgage servicing rights and liabilities Originated $ 295,032,674 $ 283,653,037 $ 254,524,015 Acquisitions 19,568,122 20,182,332 23,861,358 314,600,796 303,835,369 278,385,373 Loans held for sale 3,498,214 4,287,585 9,430,766 318,099,010 308,122,954 287,816,139 Subserviced for PMT 233,554,875 230,959,804 221,864,120 Total prime servicing 551,653,885 539,082,758 509,680,259 Special servicing - subserviced for PMT 20,797 19,015 28,022 Total loans serviced $ 551,674,682 $ 539,101,773 $ 509,708,281 Investment Management Segment PennyMac Financial manages PMT for which it earns base management fees and may earn incentive compensation. Net AUM were $2.0 billion as of December 31, 2022, down 3 percent from September 30, 2022 and 17 percent from December 31, 2021. Pretax income for the Investment Management segment was $1.2 million, down from $1.6 million in the prior quarter and $1.5 million in the fourth quarter of 2021. Base management fees from PMT were $7.3 million, down from $7.7 million in the prior quarter and $8.9 million in the fourth quarter of 2021 due to the decline in AUM. No performance incentive fees were earned in the fourth quarter. The following table presents a breakdown of management fees: Quarter ended December 31,2022 September 30,2022 December 31,2021 (in thousands) Management fees: Base $ 7,307 $ 7,731 $ 8,919 Performance incentive - - - Total management fees $ 7,307 $ 7,731 $ 8,919 Net assets of PennyMac Mortgage Investment Trust $ 1,962,815 $ 2,017,331 $ 2,367,518 Investment Management segment expenses totaled $8.7 million, unchanged from the prior quarter and down 2 percent from the fourth quarter of 2021. Consolidated Expenses Total expenses were $272.7 million, down 6 percent from the prior quarter and 41 percent from the fourth quarter of 2021. The quarter-over-quarter decrease was primarily driven by lower production volumes in the direct lending channels, expense management activities and a reduction of performance-based compensation accruals. Taxes PFSI recorded a provision for tax expense of $30.1 million, resulting in an effective tax rate of 44.4 percent versus 27.1 percent in the prior quarter. The increase in the effective tax rate in the fourth quarter was primarily driven by an increase in the provision tax rate, which increased from 26.5 percent to 26.85 percent for 2022. The increase in tax rate resulted in the repricing of PFSI’s net deferred tax liability, which was the primary driver of a non-recurring tax expense of approximately $11.9 million in the quarter. Management’s slide presentation will be available in the Investor Relations section of the Company’s website at pfsi.pennymac.com after the market closes on Thursday, February 2, 2023. 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. In 2022, PennyMac Financial’s production of newly originated loans totaled $109 billion in unpaid principal balance, making it the third largest mortgage lender in the nation. As of December 31, 2022, PennyMac Financial serviced loans totaling $552 billion in unpaid principal balance, making it a top ten 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, the Company’s 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; declines in real estate or significant changes in U.S. housing prices or activity in the U.S. housing market; 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; changes to government mortgage modification programs; 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; changes in macroeconomic and U.S. real estate market conditions; difficulties inherent in adjusting the size of our operations to reflect changes in business levels; purchase opportunities for mortgage servicing rights and our success in winning bids; our substantial amount of indebtedness; the discontinuation of LIBOR; increases in loan delinquencies, defaults and forbearances; failure to modify, resell or refinance early buyout loans; 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 or characteristics or under other circumstances; our obligation to indemnify PMT if our services fail to meet certain criteria or characteristics or under other circumstances; decreases in investment management and incentive fees; conflicts of interest in allocating our services and investment opportunities among us and our advised entities; the effect of public opinion on our reputation; our exposure to risks of loss and disruptions in operations resulting from adverse weather conditions, man-made or natural disasters, climate change and pandemics such as COVID-19; 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 mitigate cybersecurity risks and cyber incidents; 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 Company’s earnings materials contain financial information calculated other than in accordance with U.S. generally accepted accounting principles (“GAAP”), such as pretax income excluding valuation-related items 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 disclosure has 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) December 31,2022 September 30,2022 December 31,2021 (in thousands, except share amounts) ASSETS Cash $ 1,328,536 $ 1,558,679 $ 340,069 Short-term investments at fair value 12,194 36,098 6,873 Loans held for sale at fair value 3,509,300 4,149,726 9,742,483 Derivative assets 99,003 164,160 333,695 Servicing advances, net 696,753 455,083 702,160 Mortgage servicing rights at fair value 5,953,621 5,661,672 3,878,078 Operating lease right-of-use assets 65,866 72,138 89,040 Investment in PennyMac Mortgage Investment Trust at fair value 929 884 1,300 Receivable from PennyMac Mortgage Investment Trust 36,372 32,306 40,091 Loans eligible for repurchase 4,702,103 3,757,538 3,026,207 Other 417,907 473,527 616,616 Total assets $ 16,822,584 $ 16,361,811 $ 18,776,612 LIABILITIES Assets sold under agreements to repurchase $ 3,001,283 $ 3,487,335 $ 7,292,735 Mortgage loan participation purchase and sale agreements 287,592 367,473 479,845 Obligations under capital lease - - 3,489 Notes payable secured by mortgage servicing assets 1,942,646 1,793,972 1,297,622 Unsecured senior notes 1,779,920 1,778,988 1,776,219 Derivative liabilities 21,712 125,487 22,606 Mortgage servicing liabilities at fair value 2,096 2,214 2,816 Accounts payable and accrued expenses 262,358 358,187 359,413 Operating lease liabilities 85,550 92,380 110,003 Payable to PennyMac Mortgage Investment Trust 205,011 87,978 228,019 Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement 26,099 26,675 30,530 Income taxes payable 1,002,744 964,307 685,262 Liability for loans eligible for repurchase 4,702,103 3,757,538 3,026,207 Liability for losses under representations and warranties 32,421 37,187 43,521 Total liabilities 13,351,535 12,879,721 15,358,287 STOCKHOLDERS' EQUITY Common stock--authorized 200,000,000 shares of $0.0001 par value; issued and outstanding 49,988,492, 51,011,021, and 56,867,202 shares, respectively 5 5 6 Additional paid-in capital - - 125,396 Retained earnings 3,471,044 3,482,085 3,292,923 Total stockholders' equity 3,471,049 3,482,090 3,418,325 Total liabilities and stockholders’ equity $ 16,822,584 $ 16,361,811 $ 18,776,612 PENNYMAC FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Quarter ended December 31,2022 September 30,2022 December 31,2021 (in thousands, except per share amounts) Revenue Net gains on loans held for sale at fair value $ 101,913 $ 168,694 $ 500,658 Loan origination fees 28,019 34,037 88,245 Fulfillment fees from PennyMac Mortgage Investment Trust 12,184 18,407 20,150 Net loan servicing fees: Loan servicing fees 321,949 313,080 287,888 Change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread financing (66,248 ) 95,411 (155,432 ) Mortgage servicing rights hedging results (72,870 ) (164,749 ) (37,723 ) Net loan servicing fees 182,831 243,742 94,733 Net interest income: Interest income 107,322 82,994 68,979 Interest expense 104,028 82,965 89,844 3,294 29 (20,865 ) Management fees from PennyMac Mortgage Investment Trust 7,307 7,731 8,919 Other 4,898 3,650 1,971 Total net revenue 340,446 476,290 693,811 Expenses Compensation 133,699 157,793 226,723 Servicing 37,424 20,399 31,470 Technology 34,896 35,647 41,112 Loan origination 25,002 28,356 86,789 Professional services 16,144 16,230 31,734 Occupancy and equipment 9,985 11,299 8,354 Marketing and advertising 3,751 7,601 16,568 Other 11,816 13,493 16,950 Total expenses 272,717 290,818 459,700 Income before provision for income taxes 67,729 185,472 234,111 Provision for income taxes 30,112 50,338 61,028 Net income $ 37,617 $ 135,134 $ 173,083 Earnings per share Basic $ 0.75 $ 2.59 $ 2.97 Diluted $ 0.71 $ 2.46 $ 2.79 Weighted-average common shares outstanding Basic 50,164 52,170 58,247 Diluted 53,088 54,968 61,944 Dividend declared per share $ 0.20 $ 0.20 $ 0.20 PENNYMAC FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Year ended December 31, 2022 2021 2020 (in thousands, except earnings per share) Revenue Net gains on loans held for sale at fair value $ 791,633 $ 2,464,401 $ 2,740,785 Loan origination fees 169,859 384,154 285,551 Fulfillment fees from PennyMac Mortgage Investment Trust 67,991 178,927 222,200 Net loan servicing fees: Loan servicing fees: From non-affiliates 1,054,828 875,570 814,646 From PennyMac Mortgage Investment Trust 81,915 80,658 67,181 Other fees 91,894 118,884 116,464 1,228,637 1,075,112 998,291 Change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread financing 354,176 (416,943 ) (1,477,023 ) Hedging results (631,484 ) (475,215 ) 918,180 Net loan servicing fees 951,329 182,954 439,448 Net interest expense: Interest income 294,062 300,169 247,026 Interest expense 335,427 390,699 271,551 (41,365 ) (90,530 ) (24,525 ) Management fees from PennyMac Mortgage Investment Trust 31,065 37,801 34,538 Other 15,243 9,654 7,600 Total net revenue 1,985,755 3,167,361 3,705,597 Expenses Compensation 735,231 999,802 738,569 Loan origination 173,622 330,788 219,746 Technology 139,950 141,426 112,570 Professional services 73,270 94,283 64,064 Servicing 59,628 109,835 256,934 Marketing and advertising 46,762 44,806 8,658 Occupancy and equipment 40,124 35,810 33,357 Other 51,921 51,428 31,090 Total expenses 1,320,508 1,808,178 1,464,988 Income before provision for income taxes 665,247 1,359,183 2,240,609 Provision for income taxes 189,740 355,693 593,725 Net income $ 475,507 $ 1,003,490 $ 1,646,884 Earnings per share Basic $ 8.96 $ 15.73 $ 21.91 Diluted $ 8.50 $ 14.87 $ 20.92 Weighted average shares outstanding Basic 53,065 63,799 75,161 Diluted 55,950 67,471 78,728 View source version on businesswire.com: https://www.businesswire.com/news/home/20230202005766/en/Contacts Media Kristyn Clark kristyn.clark@pennymac.com (805) 395-9943 Investors Kevin Chamberlain Isaac Garden PFSI_IR@pennymac.com (818) 224-7028 Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
PennyMac Financial Services, Inc. Reports Fourth Quarter and Full-Year 2022 Results By: PennyMac Financial Services, Inc. via Business Wire February 02, 2023 at 16:30 PM EST PennyMac Financial Services, Inc. (NYSE: PFSI) today reported net income of $37.6 million for the fourth quarter of 2022, or $0.71 per share on a diluted basis, on revenue of $340.4 million. Book value per share increased to $69.44 from $68.26 at September 30, 2022. PFSI’s Board of Directors declared a fourth quarter cash dividend of $0.20 per share, payable on February 24, 2023, to common stockholders of record as of February 14, 2023. Fourth Quarter 2022 Highlights Net income included non-recurring tax items of $(11.9) million primarily driven by a tax rate increase impacting PFSI’s net deferred tax liability; impact on earnings per share was $(0.22) Pretax income was $67.7 million, down 63 percent from the prior quarter and 71 percent from the fourth quarter of 2021 Repurchased 1.1 million shares of PFSI’s common stock at an average price of $46.99 per share for a cost of $51.3 million Production segment pretax loss of $9.0 million, down from pretax income of $38.6 million in the prior quarter and $106.5 million in the fourth quarter of 2021 Total loan acquisitions and originations, including those fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT) were $23.0 billion in unpaid principal balance (UPB), down 12 percent from the prior quarter and 51 percent from the fourth quarter of 2021 Consumer direct interest rate lock commitments (IRLCs) were $1.7 billion in UPB, down 56 percent from the prior quarter and 88 percent from the fourth quarter of 2021 Broker direct IRLCs were $2.0 billion in UPB, up 8 percent from the prior quarter and down 48 percent from the fourth quarter of 2021 Government correspondent IRLCs totaled $10.7 billion in UPB, down 14 percent from the prior quarter and 31 percent from the fourth quarter of 2021 Conventional correspondent IRLCs for PFSI’s account totaled $4.7 billion in UPB Correspondent acquisitions of conventional conforming loans fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT) were $6.8 billion in UPB, down 34 percent from the prior quarter and 61 percent from the fourth quarter of 2021 Servicing segment pretax income was $75.6 million, down from $145.3 million in the prior quarter and $126.1 million in the fourth quarter of 2021 Pretax income excluding valuation-related items was $79.1 million, up 14 percent from the prior quarter driven by increased earnings on custodial balances and deposits and decreased operating expenses Valuation items included: – $82.6 million in mortgage servicing rights (MSR) fair value gains largely offset by $72.9 million in hedging losses Net impact on pretax income related to these items was $9.7 million, or $0.13 in earnings per share $13.2 million provision for losses on active loans Servicing portfolio grew to $551.7 billion in UPB, up 2 percent from September 30, 2022, driven by production volumes which more than offset prepayment activity Investment Management segment pretax income was $1.2 million, down from $1.6 million in the prior quarter and $1.5 million in the fourth quarter of 2021 Net assets under management (AUM) were $2.0 billion, down 3 percent from September 30, 2022, and 17 percent from December 31, 2021 Notable activity after quarter end PFSI exercised its option to extend the maturity for $650 million in term notes secured by Ginnie Mae MSRs originally due in February 2023 for two years Full-Year 2022 Highlights Net income of $475.5 million, down from $1.0 billion in 2021; return on equity of 14 percent Pretax income of $665.2 million, down from $1.4 billion in 2021 Total net revenue of $2.0 billion, down from $3.2 billion in 2021 Repurchased approximately 7.8 million shares of PFSI’s common stock, or 14 percent of the total outstanding shares at the beginning of the year, for an approximate cost of $406 million Loan production of $109.0 billion in UPB, a decrease of 54 percent from 2021 $22.3 billion in UPB of originations in the direct lending channels, down 63 percent from 2021 Servicing portfolio UPB of $551.7 billion at year end, up 8 percent from December 31, 2021 Issued $500 million of 5-year term notes secured by Ginnie Mae MSRs “PennyMac Financial produced strong results in 2022, a year characterized by a rapid and significant increase in mortgage rates,” said Chairman and CEO David Spector. “The 14 percent return on equity achieved in 2022 can be attributed to the resilience and scale of our balanced business model and the decisive actions taken throughout the year to right-size our business for the much smaller origination market. While production activity fell in 2022 our servicing earnings were strong. In fact, the majority of PennyMac Financial’s income in 2022 was generated by our large and growing servicing portfolio, which totaled more than $550 billion in unpaid principal balance at year end, up 8 percent from the prior year. Strong financial performance not only enabled us to continue returning capital to stockholders and investing in innovative mortgage banking technology, but also resulted in solid growth in PFSI’s book value per share, which ended the year up 16 percent from year end 2021.” Mr. Spector continued, “More than 15 years ago, we founded Pennymac with a vision to help revitalize the mortgage market and become a trusted partner in home ownership. Since then, we have grown responsibly and profitably into one of the largest residential mortgage producers and servicers in the country with an industry-leading correspondent production business and a growing presence in the direct lending channels. Though 2023 is expected to be another challenging year for the mortgage industry, I remain confident in PennyMac Financial’s ability to continue executing given its balanced business model and long history of generating stockholder value through different mortgage market cycles and environments.” The following table presents the contributions of PennyMac Financial’s segments to pretax income: Quarter ended December 31, 2022 Mortgage Banking InvestmentManagement Production Servicing Total Total (in thousands) Revenue Net gains on loans held for sale at fair value $ 84,708 $ 17,205 $ 101,913 $ - $ 101,913 Loan origination fees 28,019 - 28,019 - 28,019 Fulfillment fees from PMT 12,184 - 12,184 - 12,184 Net loan servicing fees - 182,831 182,831 - 182,831 Management fees - - - 7,307 7,307 Net interest income (expense): Interest income 42,855 64,467 107,322 - 107,322 Interest expense 36,836 67,192 104,028 - 104,028 6,019 (2,725 ) 3,294 - 3,294 Other 661 1,655 2,316 2,582 4,898 Total net revenue 131,591 198,966 330,557 9,889 340,446 Expenses 140,607 123,401 264,008 8,709 272,717 Income before provision for income taxes $ (9,016 ) $ 75,565 $ 66,549 $ 1,180 $ 67,729 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 $23.0 billion in UPB, $16.2 billion of which was for its own account, and $6.8 billion of which was fee-based fulfillment activity for PMT. Correspondent locks for PFSI and direct lending IRLCs totaled $19.1 billion in UPB, up 6 percent from the prior quarter and down 43 percent from the fourth quarter of 2021. Production segment pretax loss was $9.0 million, down from pretax income of $38.6 million in the prior quarter and $106.5 million in the fourth quarter of 2021. Production segment revenue totaled $131.6 million, down 34 percent from the prior quarter and 69 percent from the fourth quarter of 2021. The quarter-over-quarter decrease was driven by a $56.0 million decrease in net gains on loans held for sale primarily as a result of lower volume in the consumer direct lending channel and lower overall margins. The components of net gains on loans held for sale are detailed in the following table: Quarter ended December 31,2022 September 30,2022 December 31,2021 (in thousands) Receipt of MSRs and recognition of MSLs in loan sale transactions $ 358,462 $ 345,077 $ 467,141 Mortgage servicing rights recapture payable to PennyMac Mortgage Investment Trust (512 ) (1,648 ) (12,701 ) (Provision for) reversal of liability for representations and warranties, net (444 ) 118 (315 ) Cash (loss) gain (1) (340,869 ) (16,795 ) 37,537 Fair value changes of pipeline, inventory and hedges 85,276 (158,058 ) 8,996 Net gains on mortgage loans held for sale $ 101,913 $ 168,694 $ 500,658 Net gains on mortgage loans held for sale by segment: Production $ 84,708 $ 140,683 $ 314,826 Servicing $ 17,205 $ 28,011 $ 185,832 (1) Including cash hedging results 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 $12.2 million in the fourth quarter, down 34 percent from the prior quarter and 40 percent from the fourth quarter of 2021. The quarter-over-quarter decrease in fulfillment fee revenue was driven by lower conventional acquisition volumes for PMT’s account as PFSI began to acquire certain of the conventional loans sourced by PMT. Net interest income totaled $6.0 million, up slightly from $5.9 million in the prior quarter. Interest income in the fourth quarter totaled $42.9 million, up from $30.8 million in the prior quarter, and interest expense totaled $36.8 million, up from $25.0 million in the prior quarter, both due to increasing interest rates. Production segment expenses were $140.6 million, down 13 percent from the prior quarter and 56 percent from the fourth quarter of 2021. The decline from the prior quarter was driven by lower volumes in the direct lending channels and the expense management initiatives announced in prior quarters. Servicing Segment The Servicing segment includes income from owned MSRs, subservicing and special servicing activities. Servicing segment pretax income was $75.6 million, down from $145.3 million in the prior quarter and $126.1 million in the fourth quarter of 2021. Servicing segment net revenues totaled $199.0 million, down from $266.5 million in the prior quarter and $255.7 million in the fourth quarter of 2021. The quarter-over-quarter decrease was primarily driven by a $60.9 million decrease in net loan servicing fees and a $10.8 million decrease in net gains on loans held for sale related to early buyout (EBO) activity. Revenue from net loan servicing fees totaled $182.8 million, down from $243.7 million in the prior quarter primarily driven by lower net valuation related gains and partially offset by increased loan servicing fees due to a larger servicing portfolio. Revenue from loan servicing fees included $321.9 million in servicing fees, reduced by $148.8 million from the realization of MSR cash flows. Net valuation-related gains totaled $9.7 million, and included MSR fair value gains of $82.6 million, and hedging losses of $72.9 million. The hedging losses were largely driven by hedge costs and higher interest rates during the quarter. The following table presents a breakdown of net loan servicing fees: Quarter ended December 31,2022 September 30,2022 December 31,2021 (in thousands) Loan servicing fees $ 321,949 $ 313,080 $ 287,888 Changes in fair value of MSRs and MSLs resulting from: Realization of cash flows (148,835 ) (141,781 ) (97,025 ) Change in fair value inputs 82,587 237,192 (58,407 ) Hedging losses (72,870 ) (164,749 ) (37,723 ) Net change in fair value of MSRs and MSLs (139,118 ) (69,338 ) (193,155 ) Net loan servicing fees $ 182,831 $ 243,742 $ 94,733 Servicing segment revenue included $17.2 million in net gains on loans held for sale related to reperforming government-insured and guaranteed loans purchased out of Ginnie Mae securitizations, or EBOs. These gains were down from $28.0 million in the prior quarter and $185.8 million in the fourth quarter of 2021. These EBOs are previously delinquent loans that were brought back to performing status through PennyMac Financial’s successful servicing efforts. Net interest expense totaled $2.7 million, versus $5.8 million in the prior quarter and $25.2 million in the fourth quarter of 2021. Interest income was $64.5 million, up from $52.2 million in the prior quarter as increased placement fees on custodial balances more than offset the decline in interest income on EBO loans held for sale. Interest expense was $67.2 million, up from $58.0 million in the prior quarter due to higher interest rates. Servicing segment expenses totaled $123.4 million, up 2 percent from the prior quarter. Servicing segment expenses included $13.2 million in provisions for losses on active loans in the fourth quarter due to higher delinquency rates. The prior quarter included a reversal of the provision of $3.2 million. The total servicing portfolio grew to $551.7 billion in UPB at December 31, 2022, an increase of 2 percent from September 30, 2022 and 8 percent from December 31, 2021. PennyMac Financial subservices and conducts special servicing for $233.6 billion in UPB, an increase of 1 percent from September 30, 2022 and 5 percent from December 31, 2021. PennyMac Financial’s owned MSR portfolio grew to $318.1 billion in UPB, an increase of 3 percent from September 30, 2022 and 11 percent from December 31, 2021. The table below details PennyMac Financial’s servicing portfolio UPB: December 31,2022 September 30,2022 December 31,2021 (in thousands) Prime servicing: Owned Mortgage servicing rights and liabilities Originated $ 295,032,674 $ 283,653,037 $ 254,524,015 Acquisitions 19,568,122 20,182,332 23,861,358 314,600,796 303,835,369 278,385,373 Loans held for sale 3,498,214 4,287,585 9,430,766 318,099,010 308,122,954 287,816,139 Subserviced for PMT 233,554,875 230,959,804 221,864,120 Total prime servicing 551,653,885 539,082,758 509,680,259 Special servicing - subserviced for PMT 20,797 19,015 28,022 Total loans serviced $ 551,674,682 $ 539,101,773 $ 509,708,281 Investment Management Segment PennyMac Financial manages PMT for which it earns base management fees and may earn incentive compensation. Net AUM were $2.0 billion as of December 31, 2022, down 3 percent from September 30, 2022 and 17 percent from December 31, 2021. Pretax income for the Investment Management segment was $1.2 million, down from $1.6 million in the prior quarter and $1.5 million in the fourth quarter of 2021. Base management fees from PMT were $7.3 million, down from $7.7 million in the prior quarter and $8.9 million in the fourth quarter of 2021 due to the decline in AUM. No performance incentive fees were earned in the fourth quarter. The following table presents a breakdown of management fees: Quarter ended December 31,2022 September 30,2022 December 31,2021 (in thousands) Management fees: Base $ 7,307 $ 7,731 $ 8,919 Performance incentive - - - Total management fees $ 7,307 $ 7,731 $ 8,919 Net assets of PennyMac Mortgage Investment Trust $ 1,962,815 $ 2,017,331 $ 2,367,518 Investment Management segment expenses totaled $8.7 million, unchanged from the prior quarter and down 2 percent from the fourth quarter of 2021. Consolidated Expenses Total expenses were $272.7 million, down 6 percent from the prior quarter and 41 percent from the fourth quarter of 2021. The quarter-over-quarter decrease was primarily driven by lower production volumes in the direct lending channels, expense management activities and a reduction of performance-based compensation accruals. Taxes PFSI recorded a provision for tax expense of $30.1 million, resulting in an effective tax rate of 44.4 percent versus 27.1 percent in the prior quarter. The increase in the effective tax rate in the fourth quarter was primarily driven by an increase in the provision tax rate, which increased from 26.5 percent to 26.85 percent for 2022. The increase in tax rate resulted in the repricing of PFSI’s net deferred tax liability, which was the primary driver of a non-recurring tax expense of approximately $11.9 million in the quarter. Management’s slide presentation will be available in the Investor Relations section of the Company’s website at pfsi.pennymac.com after the market closes on Thursday, February 2, 2023. 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. In 2022, PennyMac Financial’s production of newly originated loans totaled $109 billion in unpaid principal balance, making it the third largest mortgage lender in the nation. As of December 31, 2022, PennyMac Financial serviced loans totaling $552 billion in unpaid principal balance, making it a top ten 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, the Company’s 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; declines in real estate or significant changes in U.S. housing prices or activity in the U.S. housing market; 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; changes to government mortgage modification programs; 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; changes in macroeconomic and U.S. real estate market conditions; difficulties inherent in adjusting the size of our operations to reflect changes in business levels; purchase opportunities for mortgage servicing rights and our success in winning bids; our substantial amount of indebtedness; the discontinuation of LIBOR; increases in loan delinquencies, defaults and forbearances; failure to modify, resell or refinance early buyout loans; 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 or characteristics or under other circumstances; our obligation to indemnify PMT if our services fail to meet certain criteria or characteristics or under other circumstances; decreases in investment management and incentive fees; conflicts of interest in allocating our services and investment opportunities among us and our advised entities; the effect of public opinion on our reputation; our exposure to risks of loss and disruptions in operations resulting from adverse weather conditions, man-made or natural disasters, climate change and pandemics such as COVID-19; 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 mitigate cybersecurity risks and cyber incidents; 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 Company’s earnings materials contain financial information calculated other than in accordance with U.S. generally accepted accounting principles (“GAAP”), such as pretax income excluding valuation-related items 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 disclosure has 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) December 31,2022 September 30,2022 December 31,2021 (in thousands, except share amounts) ASSETS Cash $ 1,328,536 $ 1,558,679 $ 340,069 Short-term investments at fair value 12,194 36,098 6,873 Loans held for sale at fair value 3,509,300 4,149,726 9,742,483 Derivative assets 99,003 164,160 333,695 Servicing advances, net 696,753 455,083 702,160 Mortgage servicing rights at fair value 5,953,621 5,661,672 3,878,078 Operating lease right-of-use assets 65,866 72,138 89,040 Investment in PennyMac Mortgage Investment Trust at fair value 929 884 1,300 Receivable from PennyMac Mortgage Investment Trust 36,372 32,306 40,091 Loans eligible for repurchase 4,702,103 3,757,538 3,026,207 Other 417,907 473,527 616,616 Total assets $ 16,822,584 $ 16,361,811 $ 18,776,612 LIABILITIES Assets sold under agreements to repurchase $ 3,001,283 $ 3,487,335 $ 7,292,735 Mortgage loan participation purchase and sale agreements 287,592 367,473 479,845 Obligations under capital lease - - 3,489 Notes payable secured by mortgage servicing assets 1,942,646 1,793,972 1,297,622 Unsecured senior notes 1,779,920 1,778,988 1,776,219 Derivative liabilities 21,712 125,487 22,606 Mortgage servicing liabilities at fair value 2,096 2,214 2,816 Accounts payable and accrued expenses 262,358 358,187 359,413 Operating lease liabilities 85,550 92,380 110,003 Payable to PennyMac Mortgage Investment Trust 205,011 87,978 228,019 Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement 26,099 26,675 30,530 Income taxes payable 1,002,744 964,307 685,262 Liability for loans eligible for repurchase 4,702,103 3,757,538 3,026,207 Liability for losses under representations and warranties 32,421 37,187 43,521 Total liabilities 13,351,535 12,879,721 15,358,287 STOCKHOLDERS' EQUITY Common stock--authorized 200,000,000 shares of $0.0001 par value; issued and outstanding 49,988,492, 51,011,021, and 56,867,202 shares, respectively 5 5 6 Additional paid-in capital - - 125,396 Retained earnings 3,471,044 3,482,085 3,292,923 Total stockholders' equity 3,471,049 3,482,090 3,418,325 Total liabilities and stockholders’ equity $ 16,822,584 $ 16,361,811 $ 18,776,612 PENNYMAC FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Quarter ended December 31,2022 September 30,2022 December 31,2021 (in thousands, except per share amounts) Revenue Net gains on loans held for sale at fair value $ 101,913 $ 168,694 $ 500,658 Loan origination fees 28,019 34,037 88,245 Fulfillment fees from PennyMac Mortgage Investment Trust 12,184 18,407 20,150 Net loan servicing fees: Loan servicing fees 321,949 313,080 287,888 Change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread financing (66,248 ) 95,411 (155,432 ) Mortgage servicing rights hedging results (72,870 ) (164,749 ) (37,723 ) Net loan servicing fees 182,831 243,742 94,733 Net interest income: Interest income 107,322 82,994 68,979 Interest expense 104,028 82,965 89,844 3,294 29 (20,865 ) Management fees from PennyMac Mortgage Investment Trust 7,307 7,731 8,919 Other 4,898 3,650 1,971 Total net revenue 340,446 476,290 693,811 Expenses Compensation 133,699 157,793 226,723 Servicing 37,424 20,399 31,470 Technology 34,896 35,647 41,112 Loan origination 25,002 28,356 86,789 Professional services 16,144 16,230 31,734 Occupancy and equipment 9,985 11,299 8,354 Marketing and advertising 3,751 7,601 16,568 Other 11,816 13,493 16,950 Total expenses 272,717 290,818 459,700 Income before provision for income taxes 67,729 185,472 234,111 Provision for income taxes 30,112 50,338 61,028 Net income $ 37,617 $ 135,134 $ 173,083 Earnings per share Basic $ 0.75 $ 2.59 $ 2.97 Diluted $ 0.71 $ 2.46 $ 2.79 Weighted-average common shares outstanding Basic 50,164 52,170 58,247 Diluted 53,088 54,968 61,944 Dividend declared per share $ 0.20 $ 0.20 $ 0.20 PENNYMAC FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Year ended December 31, 2022 2021 2020 (in thousands, except earnings per share) Revenue Net gains on loans held for sale at fair value $ 791,633 $ 2,464,401 $ 2,740,785 Loan origination fees 169,859 384,154 285,551 Fulfillment fees from PennyMac Mortgage Investment Trust 67,991 178,927 222,200 Net loan servicing fees: Loan servicing fees: From non-affiliates 1,054,828 875,570 814,646 From PennyMac Mortgage Investment Trust 81,915 80,658 67,181 Other fees 91,894 118,884 116,464 1,228,637 1,075,112 998,291 Change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread financing 354,176 (416,943 ) (1,477,023 ) Hedging results (631,484 ) (475,215 ) 918,180 Net loan servicing fees 951,329 182,954 439,448 Net interest expense: Interest income 294,062 300,169 247,026 Interest expense 335,427 390,699 271,551 (41,365 ) (90,530 ) (24,525 ) Management fees from PennyMac Mortgage Investment Trust 31,065 37,801 34,538 Other 15,243 9,654 7,600 Total net revenue 1,985,755 3,167,361 3,705,597 Expenses Compensation 735,231 999,802 738,569 Loan origination 173,622 330,788 219,746 Technology 139,950 141,426 112,570 Professional services 73,270 94,283 64,064 Servicing 59,628 109,835 256,934 Marketing and advertising 46,762 44,806 8,658 Occupancy and equipment 40,124 35,810 33,357 Other 51,921 51,428 31,090 Total expenses 1,320,508 1,808,178 1,464,988 Income before provision for income taxes 665,247 1,359,183 2,240,609 Provision for income taxes 189,740 355,693 593,725 Net income $ 475,507 $ 1,003,490 $ 1,646,884 Earnings per share Basic $ 8.96 $ 15.73 $ 21.91 Diluted $ 8.50 $ 14.87 $ 20.92 Weighted average shares outstanding Basic 53,065 63,799 75,161 Diluted 55,950 67,471 78,728 View source version on businesswire.com: https://www.businesswire.com/news/home/20230202005766/en/Contacts Media Kristyn Clark kristyn.clark@pennymac.com (805) 395-9943 Investors Kevin Chamberlain Isaac Garden PFSI_IR@pennymac.com (818) 224-7028
PennyMac Financial Services, Inc. (NYSE: PFSI) today reported net income of $37.6 million for the fourth quarter of 2022, or $0.71 per share on a diluted basis, on revenue of $340.4 million. Book value per share increased to $69.44 from $68.26 at September 30, 2022. PFSI’s Board of Directors declared a fourth quarter cash dividend of $0.20 per share, payable on February 24, 2023, to common stockholders of record as of February 14, 2023. Fourth Quarter 2022 Highlights Net income included non-recurring tax items of $(11.9) million primarily driven by a tax rate increase impacting PFSI’s net deferred tax liability; impact on earnings per share was $(0.22) Pretax income was $67.7 million, down 63 percent from the prior quarter and 71 percent from the fourth quarter of 2021 Repurchased 1.1 million shares of PFSI’s common stock at an average price of $46.99 per share for a cost of $51.3 million Production segment pretax loss of $9.0 million, down from pretax income of $38.6 million in the prior quarter and $106.5 million in the fourth quarter of 2021 Total loan acquisitions and originations, including those fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT) were $23.0 billion in unpaid principal balance (UPB), down 12 percent from the prior quarter and 51 percent from the fourth quarter of 2021 Consumer direct interest rate lock commitments (IRLCs) were $1.7 billion in UPB, down 56 percent from the prior quarter and 88 percent from the fourth quarter of 2021 Broker direct IRLCs were $2.0 billion in UPB, up 8 percent from the prior quarter and down 48 percent from the fourth quarter of 2021 Government correspondent IRLCs totaled $10.7 billion in UPB, down 14 percent from the prior quarter and 31 percent from the fourth quarter of 2021 Conventional correspondent IRLCs for PFSI’s account totaled $4.7 billion in UPB Correspondent acquisitions of conventional conforming loans fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT) were $6.8 billion in UPB, down 34 percent from the prior quarter and 61 percent from the fourth quarter of 2021 Servicing segment pretax income was $75.6 million, down from $145.3 million in the prior quarter and $126.1 million in the fourth quarter of 2021 Pretax income excluding valuation-related items was $79.1 million, up 14 percent from the prior quarter driven by increased earnings on custodial balances and deposits and decreased operating expenses Valuation items included: – $82.6 million in mortgage servicing rights (MSR) fair value gains largely offset by $72.9 million in hedging losses Net impact on pretax income related to these items was $9.7 million, or $0.13 in earnings per share $13.2 million provision for losses on active loans Servicing portfolio grew to $551.7 billion in UPB, up 2 percent from September 30, 2022, driven by production volumes which more than offset prepayment activity Investment Management segment pretax income was $1.2 million, down from $1.6 million in the prior quarter and $1.5 million in the fourth quarter of 2021 Net assets under management (AUM) were $2.0 billion, down 3 percent from September 30, 2022, and 17 percent from December 31, 2021 Notable activity after quarter end PFSI exercised its option to extend the maturity for $650 million in term notes secured by Ginnie Mae MSRs originally due in February 2023 for two years Full-Year 2022 Highlights Net income of $475.5 million, down from $1.0 billion in 2021; return on equity of 14 percent Pretax income of $665.2 million, down from $1.4 billion in 2021 Total net revenue of $2.0 billion, down from $3.2 billion in 2021 Repurchased approximately 7.8 million shares of PFSI’s common stock, or 14 percent of the total outstanding shares at the beginning of the year, for an approximate cost of $406 million Loan production of $109.0 billion in UPB, a decrease of 54 percent from 2021 $22.3 billion in UPB of originations in the direct lending channels, down 63 percent from 2021 Servicing portfolio UPB of $551.7 billion at year end, up 8 percent from December 31, 2021 Issued $500 million of 5-year term notes secured by Ginnie Mae MSRs “PennyMac Financial produced strong results in 2022, a year characterized by a rapid and significant increase in mortgage rates,” said Chairman and CEO David Spector. “The 14 percent return on equity achieved in 2022 can be attributed to the resilience and scale of our balanced business model and the decisive actions taken throughout the year to right-size our business for the much smaller origination market. While production activity fell in 2022 our servicing earnings were strong. In fact, the majority of PennyMac Financial’s income in 2022 was generated by our large and growing servicing portfolio, which totaled more than $550 billion in unpaid principal balance at year end, up 8 percent from the prior year. Strong financial performance not only enabled us to continue returning capital to stockholders and investing in innovative mortgage banking technology, but also resulted in solid growth in PFSI’s book value per share, which ended the year up 16 percent from year end 2021.” Mr. Spector continued, “More than 15 years ago, we founded Pennymac with a vision to help revitalize the mortgage market and become a trusted partner in home ownership. Since then, we have grown responsibly and profitably into one of the largest residential mortgage producers and servicers in the country with an industry-leading correspondent production business and a growing presence in the direct lending channels. Though 2023 is expected to be another challenging year for the mortgage industry, I remain confident in PennyMac Financial’s ability to continue executing given its balanced business model and long history of generating stockholder value through different mortgage market cycles and environments.” The following table presents the contributions of PennyMac Financial’s segments to pretax income: Quarter ended December 31, 2022 Mortgage Banking InvestmentManagement Production Servicing Total Total (in thousands) Revenue Net gains on loans held for sale at fair value $ 84,708 $ 17,205 $ 101,913 $ - $ 101,913 Loan origination fees 28,019 - 28,019 - 28,019 Fulfillment fees from PMT 12,184 - 12,184 - 12,184 Net loan servicing fees - 182,831 182,831 - 182,831 Management fees - - - 7,307 7,307 Net interest income (expense): Interest income 42,855 64,467 107,322 - 107,322 Interest expense 36,836 67,192 104,028 - 104,028 6,019 (2,725 ) 3,294 - 3,294 Other 661 1,655 2,316 2,582 4,898 Total net revenue 131,591 198,966 330,557 9,889 340,446 Expenses 140,607 123,401 264,008 8,709 272,717 Income before provision for income taxes $ (9,016 ) $ 75,565 $ 66,549 $ 1,180 $ 67,729 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 $23.0 billion in UPB, $16.2 billion of which was for its own account, and $6.8 billion of which was fee-based fulfillment activity for PMT. Correspondent locks for PFSI and direct lending IRLCs totaled $19.1 billion in UPB, up 6 percent from the prior quarter and down 43 percent from the fourth quarter of 2021. Production segment pretax loss was $9.0 million, down from pretax income of $38.6 million in the prior quarter and $106.5 million in the fourth quarter of 2021. Production segment revenue totaled $131.6 million, down 34 percent from the prior quarter and 69 percent from the fourth quarter of 2021. The quarter-over-quarter decrease was driven by a $56.0 million decrease in net gains on loans held for sale primarily as a result of lower volume in the consumer direct lending channel and lower overall margins. The components of net gains on loans held for sale are detailed in the following table: Quarter ended December 31,2022 September 30,2022 December 31,2021 (in thousands) Receipt of MSRs and recognition of MSLs in loan sale transactions $ 358,462 $ 345,077 $ 467,141 Mortgage servicing rights recapture payable to PennyMac Mortgage Investment Trust (512 ) (1,648 ) (12,701 ) (Provision for) reversal of liability for representations and warranties, net (444 ) 118 (315 ) Cash (loss) gain (1) (340,869 ) (16,795 ) 37,537 Fair value changes of pipeline, inventory and hedges 85,276 (158,058 ) 8,996 Net gains on mortgage loans held for sale $ 101,913 $ 168,694 $ 500,658 Net gains on mortgage loans held for sale by segment: Production $ 84,708 $ 140,683 $ 314,826 Servicing $ 17,205 $ 28,011 $ 185,832 (1) Including cash hedging results 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 $12.2 million in the fourth quarter, down 34 percent from the prior quarter and 40 percent from the fourth quarter of 2021. The quarter-over-quarter decrease in fulfillment fee revenue was driven by lower conventional acquisition volumes for PMT’s account as PFSI began to acquire certain of the conventional loans sourced by PMT. Net interest income totaled $6.0 million, up slightly from $5.9 million in the prior quarter. Interest income in the fourth quarter totaled $42.9 million, up from $30.8 million in the prior quarter, and interest expense totaled $36.8 million, up from $25.0 million in the prior quarter, both due to increasing interest rates. Production segment expenses were $140.6 million, down 13 percent from the prior quarter and 56 percent from the fourth quarter of 2021. The decline from the prior quarter was driven by lower volumes in the direct lending channels and the expense management initiatives announced in prior quarters. Servicing Segment The Servicing segment includes income from owned MSRs, subservicing and special servicing activities. Servicing segment pretax income was $75.6 million, down from $145.3 million in the prior quarter and $126.1 million in the fourth quarter of 2021. Servicing segment net revenues totaled $199.0 million, down from $266.5 million in the prior quarter and $255.7 million in the fourth quarter of 2021. The quarter-over-quarter decrease was primarily driven by a $60.9 million decrease in net loan servicing fees and a $10.8 million decrease in net gains on loans held for sale related to early buyout (EBO) activity. Revenue from net loan servicing fees totaled $182.8 million, down from $243.7 million in the prior quarter primarily driven by lower net valuation related gains and partially offset by increased loan servicing fees due to a larger servicing portfolio. Revenue from loan servicing fees included $321.9 million in servicing fees, reduced by $148.8 million from the realization of MSR cash flows. Net valuation-related gains totaled $9.7 million, and included MSR fair value gains of $82.6 million, and hedging losses of $72.9 million. The hedging losses were largely driven by hedge costs and higher interest rates during the quarter. The following table presents a breakdown of net loan servicing fees: Quarter ended December 31,2022 September 30,2022 December 31,2021 (in thousands) Loan servicing fees $ 321,949 $ 313,080 $ 287,888 Changes in fair value of MSRs and MSLs resulting from: Realization of cash flows (148,835 ) (141,781 ) (97,025 ) Change in fair value inputs 82,587 237,192 (58,407 ) Hedging losses (72,870 ) (164,749 ) (37,723 ) Net change in fair value of MSRs and MSLs (139,118 ) (69,338 ) (193,155 ) Net loan servicing fees $ 182,831 $ 243,742 $ 94,733 Servicing segment revenue included $17.2 million in net gains on loans held for sale related to reperforming government-insured and guaranteed loans purchased out of Ginnie Mae securitizations, or EBOs. These gains were down from $28.0 million in the prior quarter and $185.8 million in the fourth quarter of 2021. These EBOs are previously delinquent loans that were brought back to performing status through PennyMac Financial’s successful servicing efforts. Net interest expense totaled $2.7 million, versus $5.8 million in the prior quarter and $25.2 million in the fourth quarter of 2021. Interest income was $64.5 million, up from $52.2 million in the prior quarter as increased placement fees on custodial balances more than offset the decline in interest income on EBO loans held for sale. Interest expense was $67.2 million, up from $58.0 million in the prior quarter due to higher interest rates. Servicing segment expenses totaled $123.4 million, up 2 percent from the prior quarter. Servicing segment expenses included $13.2 million in provisions for losses on active loans in the fourth quarter due to higher delinquency rates. The prior quarter included a reversal of the provision of $3.2 million. The total servicing portfolio grew to $551.7 billion in UPB at December 31, 2022, an increase of 2 percent from September 30, 2022 and 8 percent from December 31, 2021. PennyMac Financial subservices and conducts special servicing for $233.6 billion in UPB, an increase of 1 percent from September 30, 2022 and 5 percent from December 31, 2021. PennyMac Financial’s owned MSR portfolio grew to $318.1 billion in UPB, an increase of 3 percent from September 30, 2022 and 11 percent from December 31, 2021. The table below details PennyMac Financial’s servicing portfolio UPB: December 31,2022 September 30,2022 December 31,2021 (in thousands) Prime servicing: Owned Mortgage servicing rights and liabilities Originated $ 295,032,674 $ 283,653,037 $ 254,524,015 Acquisitions 19,568,122 20,182,332 23,861,358 314,600,796 303,835,369 278,385,373 Loans held for sale 3,498,214 4,287,585 9,430,766 318,099,010 308,122,954 287,816,139 Subserviced for PMT 233,554,875 230,959,804 221,864,120 Total prime servicing 551,653,885 539,082,758 509,680,259 Special servicing - subserviced for PMT 20,797 19,015 28,022 Total loans serviced $ 551,674,682 $ 539,101,773 $ 509,708,281 Investment Management Segment PennyMac Financial manages PMT for which it earns base management fees and may earn incentive compensation. Net AUM were $2.0 billion as of December 31, 2022, down 3 percent from September 30, 2022 and 17 percent from December 31, 2021. Pretax income for the Investment Management segment was $1.2 million, down from $1.6 million in the prior quarter and $1.5 million in the fourth quarter of 2021. Base management fees from PMT were $7.3 million, down from $7.7 million in the prior quarter and $8.9 million in the fourth quarter of 2021 due to the decline in AUM. No performance incentive fees were earned in the fourth quarter. The following table presents a breakdown of management fees: Quarter ended December 31,2022 September 30,2022 December 31,2021 (in thousands) Management fees: Base $ 7,307 $ 7,731 $ 8,919 Performance incentive - - - Total management fees $ 7,307 $ 7,731 $ 8,919 Net assets of PennyMac Mortgage Investment Trust $ 1,962,815 $ 2,017,331 $ 2,367,518 Investment Management segment expenses totaled $8.7 million, unchanged from the prior quarter and down 2 percent from the fourth quarter of 2021. Consolidated Expenses Total expenses were $272.7 million, down 6 percent from the prior quarter and 41 percent from the fourth quarter of 2021. The quarter-over-quarter decrease was primarily driven by lower production volumes in the direct lending channels, expense management activities and a reduction of performance-based compensation accruals. Taxes PFSI recorded a provision for tax expense of $30.1 million, resulting in an effective tax rate of 44.4 percent versus 27.1 percent in the prior quarter. The increase in the effective tax rate in the fourth quarter was primarily driven by an increase in the provision tax rate, which increased from 26.5 percent to 26.85 percent for 2022. The increase in tax rate resulted in the repricing of PFSI’s net deferred tax liability, which was the primary driver of a non-recurring tax expense of approximately $11.9 million in the quarter. Management’s slide presentation will be available in the Investor Relations section of the Company’s website at pfsi.pennymac.com after the market closes on Thursday, February 2, 2023. 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. In 2022, PennyMac Financial’s production of newly originated loans totaled $109 billion in unpaid principal balance, making it the third largest mortgage lender in the nation. As of December 31, 2022, PennyMac Financial serviced loans totaling $552 billion in unpaid principal balance, making it a top ten 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, the Company’s 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; declines in real estate or significant changes in U.S. housing prices or activity in the U.S. housing market; 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; changes to government mortgage modification programs; 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; changes in macroeconomic and U.S. real estate market conditions; difficulties inherent in adjusting the size of our operations to reflect changes in business levels; purchase opportunities for mortgage servicing rights and our success in winning bids; our substantial amount of indebtedness; the discontinuation of LIBOR; increases in loan delinquencies, defaults and forbearances; failure to modify, resell or refinance early buyout loans; 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 or characteristics or under other circumstances; our obligation to indemnify PMT if our services fail to meet certain criteria or characteristics or under other circumstances; decreases in investment management and incentive fees; conflicts of interest in allocating our services and investment opportunities among us and our advised entities; the effect of public opinion on our reputation; our exposure to risks of loss and disruptions in operations resulting from adverse weather conditions, man-made or natural disasters, climate change and pandemics such as COVID-19; 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 mitigate cybersecurity risks and cyber incidents; 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 Company’s earnings materials contain financial information calculated other than in accordance with U.S. generally accepted accounting principles (“GAAP”), such as pretax income excluding valuation-related items 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 disclosure has 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) December 31,2022 September 30,2022 December 31,2021 (in thousands, except share amounts) ASSETS Cash $ 1,328,536 $ 1,558,679 $ 340,069 Short-term investments at fair value 12,194 36,098 6,873 Loans held for sale at fair value 3,509,300 4,149,726 9,742,483 Derivative assets 99,003 164,160 333,695 Servicing advances, net 696,753 455,083 702,160 Mortgage servicing rights at fair value 5,953,621 5,661,672 3,878,078 Operating lease right-of-use assets 65,866 72,138 89,040 Investment in PennyMac Mortgage Investment Trust at fair value 929 884 1,300 Receivable from PennyMac Mortgage Investment Trust 36,372 32,306 40,091 Loans eligible for repurchase 4,702,103 3,757,538 3,026,207 Other 417,907 473,527 616,616 Total assets $ 16,822,584 $ 16,361,811 $ 18,776,612 LIABILITIES Assets sold under agreements to repurchase $ 3,001,283 $ 3,487,335 $ 7,292,735 Mortgage loan participation purchase and sale agreements 287,592 367,473 479,845 Obligations under capital lease - - 3,489 Notes payable secured by mortgage servicing assets 1,942,646 1,793,972 1,297,622 Unsecured senior notes 1,779,920 1,778,988 1,776,219 Derivative liabilities 21,712 125,487 22,606 Mortgage servicing liabilities at fair value 2,096 2,214 2,816 Accounts payable and accrued expenses 262,358 358,187 359,413 Operating lease liabilities 85,550 92,380 110,003 Payable to PennyMac Mortgage Investment Trust 205,011 87,978 228,019 Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement 26,099 26,675 30,530 Income taxes payable 1,002,744 964,307 685,262 Liability for loans eligible for repurchase 4,702,103 3,757,538 3,026,207 Liability for losses under representations and warranties 32,421 37,187 43,521 Total liabilities 13,351,535 12,879,721 15,358,287 STOCKHOLDERS' EQUITY Common stock--authorized 200,000,000 shares of $0.0001 par value; issued and outstanding 49,988,492, 51,011,021, and 56,867,202 shares, respectively 5 5 6 Additional paid-in capital - - 125,396 Retained earnings 3,471,044 3,482,085 3,292,923 Total stockholders' equity 3,471,049 3,482,090 3,418,325 Total liabilities and stockholders’ equity $ 16,822,584 $ 16,361,811 $ 18,776,612 PENNYMAC FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Quarter ended December 31,2022 September 30,2022 December 31,2021 (in thousands, except per share amounts) Revenue Net gains on loans held for sale at fair value $ 101,913 $ 168,694 $ 500,658 Loan origination fees 28,019 34,037 88,245 Fulfillment fees from PennyMac Mortgage Investment Trust 12,184 18,407 20,150 Net loan servicing fees: Loan servicing fees 321,949 313,080 287,888 Change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread financing (66,248 ) 95,411 (155,432 ) Mortgage servicing rights hedging results (72,870 ) (164,749 ) (37,723 ) Net loan servicing fees 182,831 243,742 94,733 Net interest income: Interest income 107,322 82,994 68,979 Interest expense 104,028 82,965 89,844 3,294 29 (20,865 ) Management fees from PennyMac Mortgage Investment Trust 7,307 7,731 8,919 Other 4,898 3,650 1,971 Total net revenue 340,446 476,290 693,811 Expenses Compensation 133,699 157,793 226,723 Servicing 37,424 20,399 31,470 Technology 34,896 35,647 41,112 Loan origination 25,002 28,356 86,789 Professional services 16,144 16,230 31,734 Occupancy and equipment 9,985 11,299 8,354 Marketing and advertising 3,751 7,601 16,568 Other 11,816 13,493 16,950 Total expenses 272,717 290,818 459,700 Income before provision for income taxes 67,729 185,472 234,111 Provision for income taxes 30,112 50,338 61,028 Net income $ 37,617 $ 135,134 $ 173,083 Earnings per share Basic $ 0.75 $ 2.59 $ 2.97 Diluted $ 0.71 $ 2.46 $ 2.79 Weighted-average common shares outstanding Basic 50,164 52,170 58,247 Diluted 53,088 54,968 61,944 Dividend declared per share $ 0.20 $ 0.20 $ 0.20 PENNYMAC FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Year ended December 31, 2022 2021 2020 (in thousands, except earnings per share) Revenue Net gains on loans held for sale at fair value $ 791,633 $ 2,464,401 $ 2,740,785 Loan origination fees 169,859 384,154 285,551 Fulfillment fees from PennyMac Mortgage Investment Trust 67,991 178,927 222,200 Net loan servicing fees: Loan servicing fees: From non-affiliates 1,054,828 875,570 814,646 From PennyMac Mortgage Investment Trust 81,915 80,658 67,181 Other fees 91,894 118,884 116,464 1,228,637 1,075,112 998,291 Change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread financing 354,176 (416,943 ) (1,477,023 ) Hedging results (631,484 ) (475,215 ) 918,180 Net loan servicing fees 951,329 182,954 439,448 Net interest expense: Interest income 294,062 300,169 247,026 Interest expense 335,427 390,699 271,551 (41,365 ) (90,530 ) (24,525 ) Management fees from PennyMac Mortgage Investment Trust 31,065 37,801 34,538 Other 15,243 9,654 7,600 Total net revenue 1,985,755 3,167,361 3,705,597 Expenses Compensation 735,231 999,802 738,569 Loan origination 173,622 330,788 219,746 Technology 139,950 141,426 112,570 Professional services 73,270 94,283 64,064 Servicing 59,628 109,835 256,934 Marketing and advertising 46,762 44,806 8,658 Occupancy and equipment 40,124 35,810 33,357 Other 51,921 51,428 31,090 Total expenses 1,320,508 1,808,178 1,464,988 Income before provision for income taxes 665,247 1,359,183 2,240,609 Provision for income taxes 189,740 355,693 593,725 Net income $ 475,507 $ 1,003,490 $ 1,646,884 Earnings per share Basic $ 8.96 $ 15.73 $ 21.91 Diluted $ 8.50 $ 14.87 $ 20.92 Weighted average shares outstanding Basic 53,065 63,799 75,161 Diluted 55,950 67,471 78,728 View source version on businesswire.com: https://www.businesswire.com/news/home/20230202005766/en/
Media Kristyn Clark kristyn.clark@pennymac.com (805) 395-9943 Investors Kevin Chamberlain Isaac Garden PFSI_IR@pennymac.com (818) 224-7028