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 2023 Results By: PennyMac Financial Services, Inc. via Business Wire February 01, 2024 at 16:15 PM EST PennyMac Financial Services, Inc. (NYSE: PFSI) today reported a net loss of $36.8 million for the fourth quarter of 2023, or $(0.74) per share on a diluted basis, on revenue of $361.9 million. Book value per share decreased to $70.52 from $71.56 at September 30, 2023. PFSI’s Board of Directors declared a fourth quarter cash dividend of $0.20 per share, payable on February 23, 2024, to common stockholders of record as of February 13, 2024. Fourth Quarter 2023 Highlights Pretax loss was $54.2 million, compared to pretax income of $126.8 million in the prior quarter and $67.7 million in the fourth quarter of 2022 Includes a non-recurring expense accrual of $158.4 million in the servicing segment as a result of the long-standing arbitration related to the development of our proprietary servicing software Issued 5-year $125 million term loan secured by Ginnie Mae MSR and servicing advances Issued $750 million of 6-year unsecured senior notes due in December 2029 Redeemed $875 million in secured term notes due in 2025 Production segment pretax income of $39.4 million, up from $25.2 million in the prior quarter and a pretax loss of $9.0 million in the fourth quarter of 2022 Total loan acquisitions and originations, including those fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT), were $26.7 billion in unpaid principal balance (UPB), up 6 percent from the prior quarter and 16 percent from the fourth quarter of 2022 Consumer direct interest rate lock commitments (IRLCs) were $1.6 billion in UPB, down 6 percent from the prior quarter and 5 percent from the fourth quarter of 2022 Broker direct IRLCs were $2.8 billion in UPB, down 7 percent from the prior quarter and up 38 percent from the fourth quarter of 2022 Government correspondent IRLCs totaled $11.2 billion in UPB, up 11 percent from the prior quarter and 5 percent from the fourth quarter of 2022 Conventional correspondent IRLCs for PFSI’s account totaled $10.0 billion in UPB, down 3 percent from the prior quarter and up 110 percent from the fourth quarter of 2022 Correspondent acquisitions of conventional conforming loans fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT) were $2.5 billion in UPB, down 10 percent from the prior quarter and 63 percent from the fourth quarter of 2022 Servicing segment pretax loss was $95.5 million, compared to pretax income of $101.2 million in the prior quarter and $75.6 million in the fourth quarter of 2022 Pretax income excluding valuation-related and non-recurring items was $144.4 million, up 20 percent from the prior quarter due to lower operating expenses, higher servicing fee revenue and decreased realization of MSR cash flows, partially offset by higher net interest expense Valuation-related and non-recurring items included: $370.7 million in mortgage servicing rights (MSR) fair value losses largely offset by $294.8 million in hedging gains $158.4 million arbitration accrual Net impact on pretax income related to these items was $(234.3) million, or $(3.25) in earnings per share $5.7 million provision for losses on active loans Servicing portfolio grew to $607.2 billion in UPB, up 3 percent from September 30, 2023 driven by production volumes which more than offset prepayment activity Investment Management segment pretax income was $1.9 million, up from $0.4 million in the prior quarter and $1.2 million in the fourth quarter of 2022 Net assets under management (AUM) were $2.0 billion, essentially unchanged from September 30, 2023 Full-Year 2023 Highlights Net income of $144.7 million, down from $475.5 million in 2022 Pretax income of $183.6 million, down from $665.2 million in 2022 Total net revenue of $1.4 billion, down from $2.0 billion in 2022 Repurchased 1.2 million shares of PFSI’s common stock for an approximate cost of $71 million Loan production of $99.4 billion in UPB, a decrease of 9 percent from 2022 Servicing portfolio UPB of $607.2 billion at year end, up 10 percent from December 31, 2022 “PennyMac Financial produced an annualized operating return on equity of 15%1 in the fourth quarter, marking the culmination of another outstanding year for the company and highlighting the strength of our balanced business model,” said Chairman and CEO David Spector. “The net loss in the fourth quarter was primarily driven by a one-time accrual related to the award in our long-running arbitration with Black Knight. While we disagree with the final ruling, we are very pleased to retain ownership of our industry-leading servicing system, as well as the ability to utilize it as we see fit to benefit our customers and stakeholders.” Mr. Spector continued, “2023 was one of the more challenging origination markets in recent history, with industry volumes down approximately 40 percent from 2022 and unit originations at their lowest levels since 1990. However, Pennymac, through its multi-channel production platform, produced nearly $100 billion in UPB of mortgage loans, down only 9 percent from 2022, demonstrating both our strong access to the purchase market and our ability to profitably support our customers and business partners. These production volumes continued to drive the organic growth of our servicing portfolio, which ended the year at more than $600 billion in UPB, up 10 percent from the end of last year. Our scaled and growing servicing business is key to the success we have achieved, driving earnings in higher interest rate environments and future opportunities as our customer base continues to expand.” Mr. Spector concluded, “I am extraordinarily proud of what we accomplished in 2023 and I am even more excited about PennyMac Financial’s future. Our long track record of strong operational and financial performance is unique in the mortgage industry and has been driven by the resilience of our balanced business model with industry-leading positions in both production and servicing, as well as our strong capital and risk management disciplines. I believe we are the most well-positioned company in the industry with proprietary, industry-leading technology, a strong balance sheet, and a growing population of servicing customers that stand to benefit from the products and services we offer to best fit their home ownership needs.” 1 See page 15 for a reconciliation of non-GAAP items The following table presents the contributions of PennyMac Financial’s segments to pretax income: Quarter ended December 31, 2023 Mortgage Banking InvestmentManagement Production Servicing Total Total (in thousands) Revenue Net gains on loans held for sale at fair value $ 124,267 $ 24,498 $ 148,765 $ - $ 148,765 Loan origination fees 38,059 - 38,059 - 38,059 Fulfillment fees from PMT 4,931 - 4,931 - 4,931 Net loan servicing fees - 162,311 162,311 - 162,311 Management fees - - - 7,252 7,252 Net interest income (expense): Interest income 73,370 91,569 164,939 3 164,942 Interest expense 65,199 105,302 170,501 - 170,501 8,171 (13,733 ) (5,562 ) 3 (5,559 ) Other 1,055 2,698 3,753 2,427 6,180 Total net revenue 176,483 175,774 352,257 9,682 361,939 Expenses 137,126 271,300 408,426 7,743 416,169 Income before provision for income taxes $ 39,357 $ (95,526 ) $ (56,169 ) $ 1,939 $ (54,230 ) 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 $26.7 billion in UPB, $24.2 billion of which was for its own account, and $2.5 billion of which was fee-based fulfillment activity for PMT. Correspondent locks for PFSI and direct lending IRLCs totaled $25.6 billion in UPB, up 2 percent from the prior quarter and 34 percent from the fourth quarter of 2022. Production segment pretax income was $39.4 million, up from pretax income of $25.2 million in the prior quarter and a pretax loss of $9.0 million in the fourth quarter of 2022. Production segment revenue totaled $176.5 million, essentially unchanged from the prior quarter and up 34 percent from the fourth quarter of 2022. The increase from the fourth quarter of 2022 was driven primarily by higher net gains on loans held for sale due to higher volumes and margins. The components of net gains on loans held for sale are detailed in the following table: Quarter ended December 31,2023 September 30,2023 December 31,2022 (in thousands) Receipt of MSRs $ 549,965 $ 450,936 $ 358,462 Mortgage servicing rights recapture payable to PennyMac Mortgage Investment Trust (290 ) (500 ) (512 ) Provision for liability for representations and warranties, net (1,002 ) (1,459 ) (444 ) Cash loss, including cash hedging results (606,160 ) (251,245 ) (340,869 ) Fair value changes of pipeline, inventory and hedges 206,252 (46,358 ) 85,276 Net gains on mortgage loans held for sale $ 148,765 $ 151,374 $ 101,913 Net gains on mortgage loans held for sale by segment: Production $ 124,267 $ 127,821 $ 84,708 Servicing $ 24,498 $ 23,553 $ 17,205 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 $4.9 million in the fourth quarter, down 11 percent from the prior quarter and 60 percent from the fourth quarter of 2022. The quarter-over-quarter decrease was driven by lower conventional acquisition volumes for PMT’s account. Net interest income in the fourth quarter totaled $8.2 million, up from $2.5 million in the prior quarter. Interest income totaled $73.4 million, up from $62.2 million in the prior quarter, and interest expense totaled $65.2 million, up from $59.6 million in the prior quarter, both due to higher volumes and higher average note rates on newly originated loans. Production segment expenses were $137.1 million, down 8 percent from the prior quarter and 2 percent from the fourth quarter of 2022. Production expenses, net of loan origination expense, were lower than the prior quarter primarily due to lower compensation accruals related to financial performance. Servicing Segment The Servicing segment includes income from owned MSRs, subservicing and special servicing activities. The total servicing portfolio grew to $607.2 billion in UPB at December 31, 2023, an increase of 3 percent from September 30, 2023 and 10 percent from December 31, 2022. PennyMac Financial subservices and conducts special servicing for $232.7 billion in UPB. PennyMac Financial’s owned MSR portfolio grew to $374.6 billion in UPB, an increase of 5 percent from September 30, 2023 and 18 percent from December 31, 2022. The table below details PennyMac Financial’s servicing portfolio UPB: December 31,2023 September 30,2023 December 31,2022 (in thousands) Prime servicing: Owned Mortgage servicing rights and liabilities Originated $ 352,790,614 $ 333,372,910 $ 295,032,674 Purchased 17,478,397 17,924,005 19,568,122 370,269,011 351,296,915 314,600,796 Loans held for sale 4,294,689 5,181,866 3,498,214 374,563,700 356,478,781 318,099,010 Subserviced for PMT 232,643,144 232,903,327 233,554,875 Total prime servicing 607,206,844 589,382,108 551,653,885 Special servicing - subserviced for PMT 9,925 10,780 20,797 Total loans serviced $ 607,216,769 $ 589,392,888 $ 551,674,682 Servicing segment pretax loss was $95.5 million compared to pretax income of $101.2 million in the prior quarter and $75.6 million in the fourth quarter of 2022. Servicing segment pretax loss in the fourth quarter included a non-recurring arbitration accrual of $158.4 million. Servicing segment net revenues totaled $175.8 million, down from $217.1 million in the prior quarter and $199.0 million in the fourth quarter of 2022. The quarter-over-quarter decrease was driven primarily by lower net loan servicing fees and net interest expense in the fourth quarter versus net interest income in the prior quarter. Revenue from net loan servicing fees totaled $162.3 million, down from $185.4 million in the prior quarter primarily driven by increased net valuation related losses and partially offset by increased loan servicing fees due to a larger servicing portfolio and lower realization of cash flows. Net loan servicing fee revenues included $402.5 million in loan servicing fees, reduced by $164.3 million from the realization of MSR cash flows. Net valuation-related losses totaled $75.9 million, and included MSR fair value losses of $370.7 million driven by the decline in mortgage interest rates, and hedging gains of $294.8 million. The following table presents a breakdown of net loan servicing fees: Quarter ended December 31,2023 September 30,2023 December 31,2022 (in thousands) Loan servicing fees $ 402,484 $ 387,934 $ 321,949 Changes in fair value of MSRs and MSLs resulting from: Realization of cash flows (164,255 ) (177,775 ) (148,835 ) Change in fair value inputs (370,705 ) 398,871 82,587 Hedging gains (losses) 294,787 (423,656 ) (72,870 ) Net change in fair value of MSRs and MSLs (240,173 ) (202,560 ) (139,118 ) Net loan servicing fees $ 162,311 $ 185,374 $ 182,831 Servicing segment revenue included $24.5 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 up from $23.6 million in the prior quarter and $17.2 million in the fourth quarter of 2022. These EBOs are previously delinquent loans that were brought back to performing status through PennyMac Financial’s successful servicing efforts. Net interest expense totaled $13.7 million, versus net interest income of $7.2 million in the prior quarter and net interest expense of $2.7 million in the fourth quarter of 2022. Interest income was $91.6 million, down from $104.4 million in the prior quarter due to decreased placement fees on custodial balances from seasonally lower average balances. Interest expense was $105.3 million, up from $97.2 million in the prior quarter due to higher average balances of debt outstanding during the quarter. Servicing segment expenses totaled $271.3 million and included a non-recurring arbitration accrual of $158.4 million. Excluding this accrual, servicing segment expenses were $112.9 million, down slightly from the prior quarter. Investment Management Segment PennyMac Financial manages PMT for which it earns base management fees and may earn incentive compensation. Net AUM was $2.0 billion as of December 31, 2023, essentially unchanged from September 30, 2023 and December 31, 2022. Pretax income for the Investment Management segment was $1.9 million, up from $0.4 million in the prior quarter and $1.2 million in the fourth quarter of 2022. Base management fees from PMT were $7.3 million, essentially unchanged from the prior quarter and the fourth quarter of 2022. No performance incentive fees were earned in the fourth quarter. The following table presents a breakdown of management fees: Quarter ended December 31,2023 September 30,2023 December 31,2022 (in thousands) Management fees: Base $ 7,252 $ 7,175 $ 7,307 Performance incentive - - - Total management fees $ 7,252 $ 7,175 $ 7,307 Net assets of PennyMac Mortgage Investment Trust $ 1,957,090 $ 1,949,078 $ 1,962,815 Investment Management segment expenses totaled $7.7 million, down 8 percent from the prior quarter and 11 percent from the fourth quarter of 2022. Consolidated Expenses Total expenses were $416.2 million. Excluding the non-recurring arbitration accrual of $158.4 million, total expenses were $257.8 million, down from $273.5 million in the prior quarter and $272.7 million in the fourth quarter of 2022. Taxes PFSI recorded a benefit from income tax of $17.4 million in the fourth quarter, due to the pretax loss. 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 Thursday, February 1, 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. In 2023, PennyMac Financial’s production of newly originated loans totaled $99 billion in unpaid principal balance, making it the second largest mortgage lender in the nation. As of December 31, 2023, PennyMac Financial serviced loans totaling $607 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, 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; 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; 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 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; 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 adverse weather conditions, man-made or natural disasters, 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 Company’s earnings materials contain financial information calculated other than in accordance with U.S. generally accepted accounting principles (“GAAP”), such as pretax income and operating return on equity excluding valuation-related changes and a non-recurring legal accrual that provides 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 31,2023 September 30,2023 December 31,2022 (in thousands, except share amounts) ASSETS Cash $ 938,371 $ 1,177,304 $ 1,328,536 Short-term investment at fair value 10,268 5,553 12,194 Loans held for sale at fair value 4,420,691 5,186,656 3,509,300 Derivative assets 179,079 103,366 99,003 Servicing advances, net 694,038 399,281 696,753 Mortgage servicing rights at fair value 7,099,348 7,084,356 5,953,621 Investment in PennyMac Mortgage Investment Trust at fair value 1,121 930 929 Receivable from PennyMac Mortgage Investment Trust 29,262 27,613 36,372 Loans eligible for repurchase 4,889,925 4,445,814 4,702,103 Other 582,460 518,441 483,773 Total assets $ 18,844,563 $ 18,949,314 $ 16,822,584 LIABILITIES Assets sold under agreements to repurchase $ 3,763,956 $ 4,411,747 $ 3,001,283 Mortgage loan participation purchase and sale agreements 446,054 498,392 287,592 Notes payable secured by mortgage servicing assets 1,873,415 2,673,402 1,942,646 Unsecured senior notes 2,519,651 1,782,689 1,779,920 Derivative liabilities 53,275 41,200 21,712 Mortgage servicing liabilities at fair value 1,805 1,818 2,096 Accounts payable and accrued expenses 449,896 306,821 347,908 Payable to PennyMac Mortgage Investment Trust 208,210 97,975 205,011 Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement 26,099 26,099 26,099 Income taxes payable 1,042,886 1,059,993 1,002,744 Liability for loans eligible for repurchase 4,889,925 4,445,814 4,702,103 Liability for losses under representations and warranties 30,788 30,491 32,421 Total liabilities 15,305,960 15,376,441 13,351,535 STOCKHOLDERS' EQUITY Common stock—authorized 200,000,000 shares of $0.0001 par value; issued and outstanding 50,178,963, 49,925,752, and 49,988,492 shares, respectively 5 5 5 Additional paid-in capital 24,287 11,475 - Retained earnings 3,514,311 3,561,393 3,471,044 Total stockholders' equity 3,538,603 3,572,873 3,471,049 Total liabilities and stockholders’ equity $ 18,844,563 $ 18,949,314 $ 16,822,584 PENNYMAC FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Quarter ended December 31, 2023 September 30, 2023 December 31, 2022 (in thousands, except per share amounts) Revenues Net gains on loans held for sale at fair value $ 148,765 $ 151,374 $ 101,913 Loan origination fees 38,059 37,701 28,019 Fulfillment fees from PennyMac Mortgage Investment Trust 4,931 5,531 12,184 Net loan servicing fees: Loan servicing fees 402,484 387,934 321,949 Change in fair value of mortgage servicing rights and mortgage servicing liabilities (534,960 ) 221,096 (66,248 ) Mortgage servicing rights hedging results 294,787 (423,656 ) (72,870 ) Net loan servicing fees 162,311 185,374 182,831 Net interest (expense) income : Interest income 164,942 166,552 107,322 Interest expense 170,501 156,863 104,028 (5,559 ) 9,689 3,294 Management fees from PennyMac Mortgage Investment Trust 7,252 7,175 7,307 Other 6,180 3,464 4,898 Total net revenues 361,939 400,308 340,446 Expenses Compensation 135,138 156,909 133,699 Legal settlements 160,025 (171 ) (427 ) Technology 32,870 39,000 34,896 Servicing 28,907 13,242 37,424 Loan origination 26,879 28,889 25,002 Professional services 9,684 11,942 16,144 Occupancy and equipment 8,772 8,900 9,985 Marketing and advertising 4,180 4,632 3,751 Other 9,714 10,168 12,243 Total expenses 416,169 273,511 272,717 (Loss) income before (benefit from) provision for income taxes (54,230 ) 126,797 67,729 (Benefit from) provision for income taxes (17,388 ) 33,927 30,112 Net (loss) income $ (36,842 ) $ 92,870 $ 37,617 (Loss) earnings per share Basic $ (0.74 ) $ 1.86 $ 0.75 Diluted $ (0.74 ) $ 1.77 $ 0.71 Weighted-average common shares outstanding Basic 49,987 49,902 50,164 Diluted 49,987 52,561 53,088 Dividend declared per share $ 0.20 $ 0.20 $ 0.20 PENNYMAC FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Year ended December 31, 2023 2022 2021 (in thousands, except earnings per share) Revenue Net gains on loans held for sale at fair value $ 545,943 $ 791,633 $ 2,464,401 Loan origination fees 146,118 169,859 384,154 Fulfillment fees from PennyMac Mortgage Investment Trust 27,826 67,991 178,927 Net loan servicing fees: Loan servicing fees: From non-affiliates 1,268,650 1,054,828 875,570 From PennyMac Mortgage Investment Trust 81,347 81,915 80,658 Other fees 134,949 91,894 118,884 1,484,946 1,228,637 1,075,112 Change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread financing (605,568 ) 354,176 (416,943 ) Hedging results (236,778 ) (631,484 ) (475,215 ) Net loan servicing fees 642,600 951,329 182,954 Net interest expense: Interest income 632,924 294,062 300,169 Interest expense 637,777 335,427 390,699 (4,853 ) (41,365 ) (90,530 ) Management fees from PennyMac Mortgage Investment Trust 28,762 31,065 37,801 Other 15,260 15,243 9,654 Total net revenue 1,401,656 1,985,755 3,167,361 Expenses Compensation 576,964 735,231 999,802 Legal settlements 162,770 4,649 (4 ) Technology 143,152 139,950 141,426 Loan origination 114,500 173,622 330,788 Servicing 69,433 59,628 109,835 Professional services 60,521 73,270 94,283 Occupancy and equipment 36,558 40,124 35,810 Marketing and advertising 17,631 46,762 44,806 Other 36,496 47,272 51,432 Total expenses 1,218,025 1,320,508 1,808,178 Income before provision for income taxes 183,631 665,247 1,359,183 Provision for income taxes 38,975 189,740 355,693 Net income $ 144,656 $ 475,507 $ 1,003,490 Earnings per share Basic $ 2.89 $ 8.96 $ 15.73 Diluted $ 2.74 $ 8.50 $ 14.87 Weighted average shares outstanding Basic 49,978 53,065 63,799 Diluted 52,733 55,950 67,471 PENNYMAC FINANCIAL SERVICES, INC. RECONCILIATION OF PRETAX LOSS TO OPERATING NET INCOME Quarter ended December 31, 2023 (in thousands, except annualized operating return on equity) Loss before benefit from income taxes $ (54,230 ) Decrease in fair value of MSRs and MSLs due to changes in valuation inputs used in the valuation model 370,705 Hedging gains associated with MSRs (294,787 ) Non-recurring item - accrual for arbitration result 158,368 Operating pretax income $ 180,056 Tax expense(1) 48,345 Operating net income $ 131,711 Average stockholders' equity $ 3,555,398 Annualized operating return on equity 15 % (1) Assumes a tax rate of 26.85% View source version on businesswire.com: https://www.businesswire.com/news/home/20240201302460/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. 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PennyMac Financial Services, Inc. Reports Fourth Quarter and Full-Year 2023 Results By: PennyMac Financial Services, Inc. via Business Wire February 01, 2024 at 16:15 PM EST PennyMac Financial Services, Inc. (NYSE: PFSI) today reported a net loss of $36.8 million for the fourth quarter of 2023, or $(0.74) per share on a diluted basis, on revenue of $361.9 million. Book value per share decreased to $70.52 from $71.56 at September 30, 2023. PFSI’s Board of Directors declared a fourth quarter cash dividend of $0.20 per share, payable on February 23, 2024, to common stockholders of record as of February 13, 2024. Fourth Quarter 2023 Highlights Pretax loss was $54.2 million, compared to pretax income of $126.8 million in the prior quarter and $67.7 million in the fourth quarter of 2022 Includes a non-recurring expense accrual of $158.4 million in the servicing segment as a result of the long-standing arbitration related to the development of our proprietary servicing software Issued 5-year $125 million term loan secured by Ginnie Mae MSR and servicing advances Issued $750 million of 6-year unsecured senior notes due in December 2029 Redeemed $875 million in secured term notes due in 2025 Production segment pretax income of $39.4 million, up from $25.2 million in the prior quarter and a pretax loss of $9.0 million in the fourth quarter of 2022 Total loan acquisitions and originations, including those fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT), were $26.7 billion in unpaid principal balance (UPB), up 6 percent from the prior quarter and 16 percent from the fourth quarter of 2022 Consumer direct interest rate lock commitments (IRLCs) were $1.6 billion in UPB, down 6 percent from the prior quarter and 5 percent from the fourth quarter of 2022 Broker direct IRLCs were $2.8 billion in UPB, down 7 percent from the prior quarter and up 38 percent from the fourth quarter of 2022 Government correspondent IRLCs totaled $11.2 billion in UPB, up 11 percent from the prior quarter and 5 percent from the fourth quarter of 2022 Conventional correspondent IRLCs for PFSI’s account totaled $10.0 billion in UPB, down 3 percent from the prior quarter and up 110 percent from the fourth quarter of 2022 Correspondent acquisitions of conventional conforming loans fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT) were $2.5 billion in UPB, down 10 percent from the prior quarter and 63 percent from the fourth quarter of 2022 Servicing segment pretax loss was $95.5 million, compared to pretax income of $101.2 million in the prior quarter and $75.6 million in the fourth quarter of 2022 Pretax income excluding valuation-related and non-recurring items was $144.4 million, up 20 percent from the prior quarter due to lower operating expenses, higher servicing fee revenue and decreased realization of MSR cash flows, partially offset by higher net interest expense Valuation-related and non-recurring items included: $370.7 million in mortgage servicing rights (MSR) fair value losses largely offset by $294.8 million in hedging gains $158.4 million arbitration accrual Net impact on pretax income related to these items was $(234.3) million, or $(3.25) in earnings per share $5.7 million provision for losses on active loans Servicing portfolio grew to $607.2 billion in UPB, up 3 percent from September 30, 2023 driven by production volumes which more than offset prepayment activity Investment Management segment pretax income was $1.9 million, up from $0.4 million in the prior quarter and $1.2 million in the fourth quarter of 2022 Net assets under management (AUM) were $2.0 billion, essentially unchanged from September 30, 2023 Full-Year 2023 Highlights Net income of $144.7 million, down from $475.5 million in 2022 Pretax income of $183.6 million, down from $665.2 million in 2022 Total net revenue of $1.4 billion, down from $2.0 billion in 2022 Repurchased 1.2 million shares of PFSI’s common stock for an approximate cost of $71 million Loan production of $99.4 billion in UPB, a decrease of 9 percent from 2022 Servicing portfolio UPB of $607.2 billion at year end, up 10 percent from December 31, 2022 “PennyMac Financial produced an annualized operating return on equity of 15%1 in the fourth quarter, marking the culmination of another outstanding year for the company and highlighting the strength of our balanced business model,” said Chairman and CEO David Spector. “The net loss in the fourth quarter was primarily driven by a one-time accrual related to the award in our long-running arbitration with Black Knight. While we disagree with the final ruling, we are very pleased to retain ownership of our industry-leading servicing system, as well as the ability to utilize it as we see fit to benefit our customers and stakeholders.” Mr. Spector continued, “2023 was one of the more challenging origination markets in recent history, with industry volumes down approximately 40 percent from 2022 and unit originations at their lowest levels since 1990. However, Pennymac, through its multi-channel production platform, produced nearly $100 billion in UPB of mortgage loans, down only 9 percent from 2022, demonstrating both our strong access to the purchase market and our ability to profitably support our customers and business partners. These production volumes continued to drive the organic growth of our servicing portfolio, which ended the year at more than $600 billion in UPB, up 10 percent from the end of last year. Our scaled and growing servicing business is key to the success we have achieved, driving earnings in higher interest rate environments and future opportunities as our customer base continues to expand.” Mr. Spector concluded, “I am extraordinarily proud of what we accomplished in 2023 and I am even more excited about PennyMac Financial’s future. Our long track record of strong operational and financial performance is unique in the mortgage industry and has been driven by the resilience of our balanced business model with industry-leading positions in both production and servicing, as well as our strong capital and risk management disciplines. I believe we are the most well-positioned company in the industry with proprietary, industry-leading technology, a strong balance sheet, and a growing population of servicing customers that stand to benefit from the products and services we offer to best fit their home ownership needs.” 1 See page 15 for a reconciliation of non-GAAP items The following table presents the contributions of PennyMac Financial’s segments to pretax income: Quarter ended December 31, 2023 Mortgage Banking InvestmentManagement Production Servicing Total Total (in thousands) Revenue Net gains on loans held for sale at fair value $ 124,267 $ 24,498 $ 148,765 $ - $ 148,765 Loan origination fees 38,059 - 38,059 - 38,059 Fulfillment fees from PMT 4,931 - 4,931 - 4,931 Net loan servicing fees - 162,311 162,311 - 162,311 Management fees - - - 7,252 7,252 Net interest income (expense): Interest income 73,370 91,569 164,939 3 164,942 Interest expense 65,199 105,302 170,501 - 170,501 8,171 (13,733 ) (5,562 ) 3 (5,559 ) Other 1,055 2,698 3,753 2,427 6,180 Total net revenue 176,483 175,774 352,257 9,682 361,939 Expenses 137,126 271,300 408,426 7,743 416,169 Income before provision for income taxes $ 39,357 $ (95,526 ) $ (56,169 ) $ 1,939 $ (54,230 ) 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 $26.7 billion in UPB, $24.2 billion of which was for its own account, and $2.5 billion of which was fee-based fulfillment activity for PMT. Correspondent locks for PFSI and direct lending IRLCs totaled $25.6 billion in UPB, up 2 percent from the prior quarter and 34 percent from the fourth quarter of 2022. Production segment pretax income was $39.4 million, up from pretax income of $25.2 million in the prior quarter and a pretax loss of $9.0 million in the fourth quarter of 2022. Production segment revenue totaled $176.5 million, essentially unchanged from the prior quarter and up 34 percent from the fourth quarter of 2022. The increase from the fourth quarter of 2022 was driven primarily by higher net gains on loans held for sale due to higher volumes and margins. The components of net gains on loans held for sale are detailed in the following table: Quarter ended December 31,2023 September 30,2023 December 31,2022 (in thousands) Receipt of MSRs $ 549,965 $ 450,936 $ 358,462 Mortgage servicing rights recapture payable to PennyMac Mortgage Investment Trust (290 ) (500 ) (512 ) Provision for liability for representations and warranties, net (1,002 ) (1,459 ) (444 ) Cash loss, including cash hedging results (606,160 ) (251,245 ) (340,869 ) Fair value changes of pipeline, inventory and hedges 206,252 (46,358 ) 85,276 Net gains on mortgage loans held for sale $ 148,765 $ 151,374 $ 101,913 Net gains on mortgage loans held for sale by segment: Production $ 124,267 $ 127,821 $ 84,708 Servicing $ 24,498 $ 23,553 $ 17,205 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 $4.9 million in the fourth quarter, down 11 percent from the prior quarter and 60 percent from the fourth quarter of 2022. The quarter-over-quarter decrease was driven by lower conventional acquisition volumes for PMT’s account. Net interest income in the fourth quarter totaled $8.2 million, up from $2.5 million in the prior quarter. Interest income totaled $73.4 million, up from $62.2 million in the prior quarter, and interest expense totaled $65.2 million, up from $59.6 million in the prior quarter, both due to higher volumes and higher average note rates on newly originated loans. Production segment expenses were $137.1 million, down 8 percent from the prior quarter and 2 percent from the fourth quarter of 2022. Production expenses, net of loan origination expense, were lower than the prior quarter primarily due to lower compensation accruals related to financial performance. Servicing Segment The Servicing segment includes income from owned MSRs, subservicing and special servicing activities. The total servicing portfolio grew to $607.2 billion in UPB at December 31, 2023, an increase of 3 percent from September 30, 2023 and 10 percent from December 31, 2022. PennyMac Financial subservices and conducts special servicing for $232.7 billion in UPB. PennyMac Financial’s owned MSR portfolio grew to $374.6 billion in UPB, an increase of 5 percent from September 30, 2023 and 18 percent from December 31, 2022. The table below details PennyMac Financial’s servicing portfolio UPB: December 31,2023 September 30,2023 December 31,2022 (in thousands) Prime servicing: Owned Mortgage servicing rights and liabilities Originated $ 352,790,614 $ 333,372,910 $ 295,032,674 Purchased 17,478,397 17,924,005 19,568,122 370,269,011 351,296,915 314,600,796 Loans held for sale 4,294,689 5,181,866 3,498,214 374,563,700 356,478,781 318,099,010 Subserviced for PMT 232,643,144 232,903,327 233,554,875 Total prime servicing 607,206,844 589,382,108 551,653,885 Special servicing - subserviced for PMT 9,925 10,780 20,797 Total loans serviced $ 607,216,769 $ 589,392,888 $ 551,674,682 Servicing segment pretax loss was $95.5 million compared to pretax income of $101.2 million in the prior quarter and $75.6 million in the fourth quarter of 2022. Servicing segment pretax loss in the fourth quarter included a non-recurring arbitration accrual of $158.4 million. Servicing segment net revenues totaled $175.8 million, down from $217.1 million in the prior quarter and $199.0 million in the fourth quarter of 2022. The quarter-over-quarter decrease was driven primarily by lower net loan servicing fees and net interest expense in the fourth quarter versus net interest income in the prior quarter. Revenue from net loan servicing fees totaled $162.3 million, down from $185.4 million in the prior quarter primarily driven by increased net valuation related losses and partially offset by increased loan servicing fees due to a larger servicing portfolio and lower realization of cash flows. Net loan servicing fee revenues included $402.5 million in loan servicing fees, reduced by $164.3 million from the realization of MSR cash flows. Net valuation-related losses totaled $75.9 million, and included MSR fair value losses of $370.7 million driven by the decline in mortgage interest rates, and hedging gains of $294.8 million. The following table presents a breakdown of net loan servicing fees: Quarter ended December 31,2023 September 30,2023 December 31,2022 (in thousands) Loan servicing fees $ 402,484 $ 387,934 $ 321,949 Changes in fair value of MSRs and MSLs resulting from: Realization of cash flows (164,255 ) (177,775 ) (148,835 ) Change in fair value inputs (370,705 ) 398,871 82,587 Hedging gains (losses) 294,787 (423,656 ) (72,870 ) Net change in fair value of MSRs and MSLs (240,173 ) (202,560 ) (139,118 ) Net loan servicing fees $ 162,311 $ 185,374 $ 182,831 Servicing segment revenue included $24.5 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 up from $23.6 million in the prior quarter and $17.2 million in the fourth quarter of 2022. These EBOs are previously delinquent loans that were brought back to performing status through PennyMac Financial’s successful servicing efforts. Net interest expense totaled $13.7 million, versus net interest income of $7.2 million in the prior quarter and net interest expense of $2.7 million in the fourth quarter of 2022. Interest income was $91.6 million, down from $104.4 million in the prior quarter due to decreased placement fees on custodial balances from seasonally lower average balances. Interest expense was $105.3 million, up from $97.2 million in the prior quarter due to higher average balances of debt outstanding during the quarter. Servicing segment expenses totaled $271.3 million and included a non-recurring arbitration accrual of $158.4 million. Excluding this accrual, servicing segment expenses were $112.9 million, down slightly from the prior quarter. Investment Management Segment PennyMac Financial manages PMT for which it earns base management fees and may earn incentive compensation. Net AUM was $2.0 billion as of December 31, 2023, essentially unchanged from September 30, 2023 and December 31, 2022. Pretax income for the Investment Management segment was $1.9 million, up from $0.4 million in the prior quarter and $1.2 million in the fourth quarter of 2022. Base management fees from PMT were $7.3 million, essentially unchanged from the prior quarter and the fourth quarter of 2022. No performance incentive fees were earned in the fourth quarter. The following table presents a breakdown of management fees: Quarter ended December 31,2023 September 30,2023 December 31,2022 (in thousands) Management fees: Base $ 7,252 $ 7,175 $ 7,307 Performance incentive - - - Total management fees $ 7,252 $ 7,175 $ 7,307 Net assets of PennyMac Mortgage Investment Trust $ 1,957,090 $ 1,949,078 $ 1,962,815 Investment Management segment expenses totaled $7.7 million, down 8 percent from the prior quarter and 11 percent from the fourth quarter of 2022. Consolidated Expenses Total expenses were $416.2 million. Excluding the non-recurring arbitration accrual of $158.4 million, total expenses were $257.8 million, down from $273.5 million in the prior quarter and $272.7 million in the fourth quarter of 2022. Taxes PFSI recorded a benefit from income tax of $17.4 million in the fourth quarter, due to the pretax loss. 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 Thursday, February 1, 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. In 2023, PennyMac Financial’s production of newly originated loans totaled $99 billion in unpaid principal balance, making it the second largest mortgage lender in the nation. As of December 31, 2023, PennyMac Financial serviced loans totaling $607 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, 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; 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; 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 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; 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 adverse weather conditions, man-made or natural disasters, 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 Company’s earnings materials contain financial information calculated other than in accordance with U.S. generally accepted accounting principles (“GAAP”), such as pretax income and operating return on equity excluding valuation-related changes and a non-recurring legal accrual that provides 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 31,2023 September 30,2023 December 31,2022 (in thousands, except share amounts) ASSETS Cash $ 938,371 $ 1,177,304 $ 1,328,536 Short-term investment at fair value 10,268 5,553 12,194 Loans held for sale at fair value 4,420,691 5,186,656 3,509,300 Derivative assets 179,079 103,366 99,003 Servicing advances, net 694,038 399,281 696,753 Mortgage servicing rights at fair value 7,099,348 7,084,356 5,953,621 Investment in PennyMac Mortgage Investment Trust at fair value 1,121 930 929 Receivable from PennyMac Mortgage Investment Trust 29,262 27,613 36,372 Loans eligible for repurchase 4,889,925 4,445,814 4,702,103 Other 582,460 518,441 483,773 Total assets $ 18,844,563 $ 18,949,314 $ 16,822,584 LIABILITIES Assets sold under agreements to repurchase $ 3,763,956 $ 4,411,747 $ 3,001,283 Mortgage loan participation purchase and sale agreements 446,054 498,392 287,592 Notes payable secured by mortgage servicing assets 1,873,415 2,673,402 1,942,646 Unsecured senior notes 2,519,651 1,782,689 1,779,920 Derivative liabilities 53,275 41,200 21,712 Mortgage servicing liabilities at fair value 1,805 1,818 2,096 Accounts payable and accrued expenses 449,896 306,821 347,908 Payable to PennyMac Mortgage Investment Trust 208,210 97,975 205,011 Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement 26,099 26,099 26,099 Income taxes payable 1,042,886 1,059,993 1,002,744 Liability for loans eligible for repurchase 4,889,925 4,445,814 4,702,103 Liability for losses under representations and warranties 30,788 30,491 32,421 Total liabilities 15,305,960 15,376,441 13,351,535 STOCKHOLDERS' EQUITY Common stock—authorized 200,000,000 shares of $0.0001 par value; issued and outstanding 50,178,963, 49,925,752, and 49,988,492 shares, respectively 5 5 5 Additional paid-in capital 24,287 11,475 - Retained earnings 3,514,311 3,561,393 3,471,044 Total stockholders' equity 3,538,603 3,572,873 3,471,049 Total liabilities and stockholders’ equity $ 18,844,563 $ 18,949,314 $ 16,822,584 PENNYMAC FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Quarter ended December 31, 2023 September 30, 2023 December 31, 2022 (in thousands, except per share amounts) Revenues Net gains on loans held for sale at fair value $ 148,765 $ 151,374 $ 101,913 Loan origination fees 38,059 37,701 28,019 Fulfillment fees from PennyMac Mortgage Investment Trust 4,931 5,531 12,184 Net loan servicing fees: Loan servicing fees 402,484 387,934 321,949 Change in fair value of mortgage servicing rights and mortgage servicing liabilities (534,960 ) 221,096 (66,248 ) Mortgage servicing rights hedging results 294,787 (423,656 ) (72,870 ) Net loan servicing fees 162,311 185,374 182,831 Net interest (expense) income : Interest income 164,942 166,552 107,322 Interest expense 170,501 156,863 104,028 (5,559 ) 9,689 3,294 Management fees from PennyMac Mortgage Investment Trust 7,252 7,175 7,307 Other 6,180 3,464 4,898 Total net revenues 361,939 400,308 340,446 Expenses Compensation 135,138 156,909 133,699 Legal settlements 160,025 (171 ) (427 ) Technology 32,870 39,000 34,896 Servicing 28,907 13,242 37,424 Loan origination 26,879 28,889 25,002 Professional services 9,684 11,942 16,144 Occupancy and equipment 8,772 8,900 9,985 Marketing and advertising 4,180 4,632 3,751 Other 9,714 10,168 12,243 Total expenses 416,169 273,511 272,717 (Loss) income before (benefit from) provision for income taxes (54,230 ) 126,797 67,729 (Benefit from) provision for income taxes (17,388 ) 33,927 30,112 Net (loss) income $ (36,842 ) $ 92,870 $ 37,617 (Loss) earnings per share Basic $ (0.74 ) $ 1.86 $ 0.75 Diluted $ (0.74 ) $ 1.77 $ 0.71 Weighted-average common shares outstanding Basic 49,987 49,902 50,164 Diluted 49,987 52,561 53,088 Dividend declared per share $ 0.20 $ 0.20 $ 0.20 PENNYMAC FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Year ended December 31, 2023 2022 2021 (in thousands, except earnings per share) Revenue Net gains on loans held for sale at fair value $ 545,943 $ 791,633 $ 2,464,401 Loan origination fees 146,118 169,859 384,154 Fulfillment fees from PennyMac Mortgage Investment Trust 27,826 67,991 178,927 Net loan servicing fees: Loan servicing fees: From non-affiliates 1,268,650 1,054,828 875,570 From PennyMac Mortgage Investment Trust 81,347 81,915 80,658 Other fees 134,949 91,894 118,884 1,484,946 1,228,637 1,075,112 Change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread financing (605,568 ) 354,176 (416,943 ) Hedging results (236,778 ) (631,484 ) (475,215 ) Net loan servicing fees 642,600 951,329 182,954 Net interest expense: Interest income 632,924 294,062 300,169 Interest expense 637,777 335,427 390,699 (4,853 ) (41,365 ) (90,530 ) Management fees from PennyMac Mortgage Investment Trust 28,762 31,065 37,801 Other 15,260 15,243 9,654 Total net revenue 1,401,656 1,985,755 3,167,361 Expenses Compensation 576,964 735,231 999,802 Legal settlements 162,770 4,649 (4 ) Technology 143,152 139,950 141,426 Loan origination 114,500 173,622 330,788 Servicing 69,433 59,628 109,835 Professional services 60,521 73,270 94,283 Occupancy and equipment 36,558 40,124 35,810 Marketing and advertising 17,631 46,762 44,806 Other 36,496 47,272 51,432 Total expenses 1,218,025 1,320,508 1,808,178 Income before provision for income taxes 183,631 665,247 1,359,183 Provision for income taxes 38,975 189,740 355,693 Net income $ 144,656 $ 475,507 $ 1,003,490 Earnings per share Basic $ 2.89 $ 8.96 $ 15.73 Diluted $ 2.74 $ 8.50 $ 14.87 Weighted average shares outstanding Basic 49,978 53,065 63,799 Diluted 52,733 55,950 67,471 PENNYMAC FINANCIAL SERVICES, INC. RECONCILIATION OF PRETAX LOSS TO OPERATING NET INCOME Quarter ended December 31, 2023 (in thousands, except annualized operating return on equity) Loss before benefit from income taxes $ (54,230 ) Decrease in fair value of MSRs and MSLs due to changes in valuation inputs used in the valuation model 370,705 Hedging gains associated with MSRs (294,787 ) Non-recurring item - accrual for arbitration result 158,368 Operating pretax income $ 180,056 Tax expense(1) 48,345 Operating net income $ 131,711 Average stockholders' equity $ 3,555,398 Annualized operating return on equity 15 % (1) Assumes a tax rate of 26.85% View source version on businesswire.com: https://www.businesswire.com/news/home/20240201302460/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 a net loss of $36.8 million for the fourth quarter of 2023, or $(0.74) per share on a diluted basis, on revenue of $361.9 million. Book value per share decreased to $70.52 from $71.56 at September 30, 2023. PFSI’s Board of Directors declared a fourth quarter cash dividend of $0.20 per share, payable on February 23, 2024, to common stockholders of record as of February 13, 2024. Fourth Quarter 2023 Highlights Pretax loss was $54.2 million, compared to pretax income of $126.8 million in the prior quarter and $67.7 million in the fourth quarter of 2022 Includes a non-recurring expense accrual of $158.4 million in the servicing segment as a result of the long-standing arbitration related to the development of our proprietary servicing software Issued 5-year $125 million term loan secured by Ginnie Mae MSR and servicing advances Issued $750 million of 6-year unsecured senior notes due in December 2029 Redeemed $875 million in secured term notes due in 2025 Production segment pretax income of $39.4 million, up from $25.2 million in the prior quarter and a pretax loss of $9.0 million in the fourth quarter of 2022 Total loan acquisitions and originations, including those fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT), were $26.7 billion in unpaid principal balance (UPB), up 6 percent from the prior quarter and 16 percent from the fourth quarter of 2022 Consumer direct interest rate lock commitments (IRLCs) were $1.6 billion in UPB, down 6 percent from the prior quarter and 5 percent from the fourth quarter of 2022 Broker direct IRLCs were $2.8 billion in UPB, down 7 percent from the prior quarter and up 38 percent from the fourth quarter of 2022 Government correspondent IRLCs totaled $11.2 billion in UPB, up 11 percent from the prior quarter and 5 percent from the fourth quarter of 2022 Conventional correspondent IRLCs for PFSI’s account totaled $10.0 billion in UPB, down 3 percent from the prior quarter and up 110 percent from the fourth quarter of 2022 Correspondent acquisitions of conventional conforming loans fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT) were $2.5 billion in UPB, down 10 percent from the prior quarter and 63 percent from the fourth quarter of 2022 Servicing segment pretax loss was $95.5 million, compared to pretax income of $101.2 million in the prior quarter and $75.6 million in the fourth quarter of 2022 Pretax income excluding valuation-related and non-recurring items was $144.4 million, up 20 percent from the prior quarter due to lower operating expenses, higher servicing fee revenue and decreased realization of MSR cash flows, partially offset by higher net interest expense Valuation-related and non-recurring items included: $370.7 million in mortgage servicing rights (MSR) fair value losses largely offset by $294.8 million in hedging gains $158.4 million arbitration accrual Net impact on pretax income related to these items was $(234.3) million, or $(3.25) in earnings per share $5.7 million provision for losses on active loans Servicing portfolio grew to $607.2 billion in UPB, up 3 percent from September 30, 2023 driven by production volumes which more than offset prepayment activity Investment Management segment pretax income was $1.9 million, up from $0.4 million in the prior quarter and $1.2 million in the fourth quarter of 2022 Net assets under management (AUM) were $2.0 billion, essentially unchanged from September 30, 2023 Full-Year 2023 Highlights Net income of $144.7 million, down from $475.5 million in 2022 Pretax income of $183.6 million, down from $665.2 million in 2022 Total net revenue of $1.4 billion, down from $2.0 billion in 2022 Repurchased 1.2 million shares of PFSI’s common stock for an approximate cost of $71 million Loan production of $99.4 billion in UPB, a decrease of 9 percent from 2022 Servicing portfolio UPB of $607.2 billion at year end, up 10 percent from December 31, 2022 “PennyMac Financial produced an annualized operating return on equity of 15%1 in the fourth quarter, marking the culmination of another outstanding year for the company and highlighting the strength of our balanced business model,” said Chairman and CEO David Spector. “The net loss in the fourth quarter was primarily driven by a one-time accrual related to the award in our long-running arbitration with Black Knight. While we disagree with the final ruling, we are very pleased to retain ownership of our industry-leading servicing system, as well as the ability to utilize it as we see fit to benefit our customers and stakeholders.” Mr. Spector continued, “2023 was one of the more challenging origination markets in recent history, with industry volumes down approximately 40 percent from 2022 and unit originations at their lowest levels since 1990. However, Pennymac, through its multi-channel production platform, produced nearly $100 billion in UPB of mortgage loans, down only 9 percent from 2022, demonstrating both our strong access to the purchase market and our ability to profitably support our customers and business partners. These production volumes continued to drive the organic growth of our servicing portfolio, which ended the year at more than $600 billion in UPB, up 10 percent from the end of last year. Our scaled and growing servicing business is key to the success we have achieved, driving earnings in higher interest rate environments and future opportunities as our customer base continues to expand.” Mr. Spector concluded, “I am extraordinarily proud of what we accomplished in 2023 and I am even more excited about PennyMac Financial’s future. Our long track record of strong operational and financial performance is unique in the mortgage industry and has been driven by the resilience of our balanced business model with industry-leading positions in both production and servicing, as well as our strong capital and risk management disciplines. I believe we are the most well-positioned company in the industry with proprietary, industry-leading technology, a strong balance sheet, and a growing population of servicing customers that stand to benefit from the products and services we offer to best fit their home ownership needs.” 1 See page 15 for a reconciliation of non-GAAP items The following table presents the contributions of PennyMac Financial’s segments to pretax income: Quarter ended December 31, 2023 Mortgage Banking InvestmentManagement Production Servicing Total Total (in thousands) Revenue Net gains on loans held for sale at fair value $ 124,267 $ 24,498 $ 148,765 $ - $ 148,765 Loan origination fees 38,059 - 38,059 - 38,059 Fulfillment fees from PMT 4,931 - 4,931 - 4,931 Net loan servicing fees - 162,311 162,311 - 162,311 Management fees - - - 7,252 7,252 Net interest income (expense): Interest income 73,370 91,569 164,939 3 164,942 Interest expense 65,199 105,302 170,501 - 170,501 8,171 (13,733 ) (5,562 ) 3 (5,559 ) Other 1,055 2,698 3,753 2,427 6,180 Total net revenue 176,483 175,774 352,257 9,682 361,939 Expenses 137,126 271,300 408,426 7,743 416,169 Income before provision for income taxes $ 39,357 $ (95,526 ) $ (56,169 ) $ 1,939 $ (54,230 ) 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 $26.7 billion in UPB, $24.2 billion of which was for its own account, and $2.5 billion of which was fee-based fulfillment activity for PMT. Correspondent locks for PFSI and direct lending IRLCs totaled $25.6 billion in UPB, up 2 percent from the prior quarter and 34 percent from the fourth quarter of 2022. Production segment pretax income was $39.4 million, up from pretax income of $25.2 million in the prior quarter and a pretax loss of $9.0 million in the fourth quarter of 2022. Production segment revenue totaled $176.5 million, essentially unchanged from the prior quarter and up 34 percent from the fourth quarter of 2022. The increase from the fourth quarter of 2022 was driven primarily by higher net gains on loans held for sale due to higher volumes and margins. The components of net gains on loans held for sale are detailed in the following table: Quarter ended December 31,2023 September 30,2023 December 31,2022 (in thousands) Receipt of MSRs $ 549,965 $ 450,936 $ 358,462 Mortgage servicing rights recapture payable to PennyMac Mortgage Investment Trust (290 ) (500 ) (512 ) Provision for liability for representations and warranties, net (1,002 ) (1,459 ) (444 ) Cash loss, including cash hedging results (606,160 ) (251,245 ) (340,869 ) Fair value changes of pipeline, inventory and hedges 206,252 (46,358 ) 85,276 Net gains on mortgage loans held for sale $ 148,765 $ 151,374 $ 101,913 Net gains on mortgage loans held for sale by segment: Production $ 124,267 $ 127,821 $ 84,708 Servicing $ 24,498 $ 23,553 $ 17,205 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 $4.9 million in the fourth quarter, down 11 percent from the prior quarter and 60 percent from the fourth quarter of 2022. The quarter-over-quarter decrease was driven by lower conventional acquisition volumes for PMT’s account. Net interest income in the fourth quarter totaled $8.2 million, up from $2.5 million in the prior quarter. Interest income totaled $73.4 million, up from $62.2 million in the prior quarter, and interest expense totaled $65.2 million, up from $59.6 million in the prior quarter, both due to higher volumes and higher average note rates on newly originated loans. Production segment expenses were $137.1 million, down 8 percent from the prior quarter and 2 percent from the fourth quarter of 2022. Production expenses, net of loan origination expense, were lower than the prior quarter primarily due to lower compensation accruals related to financial performance. Servicing Segment The Servicing segment includes income from owned MSRs, subservicing and special servicing activities. The total servicing portfolio grew to $607.2 billion in UPB at December 31, 2023, an increase of 3 percent from September 30, 2023 and 10 percent from December 31, 2022. PennyMac Financial subservices and conducts special servicing for $232.7 billion in UPB. PennyMac Financial’s owned MSR portfolio grew to $374.6 billion in UPB, an increase of 5 percent from September 30, 2023 and 18 percent from December 31, 2022. The table below details PennyMac Financial’s servicing portfolio UPB: December 31,2023 September 30,2023 December 31,2022 (in thousands) Prime servicing: Owned Mortgage servicing rights and liabilities Originated $ 352,790,614 $ 333,372,910 $ 295,032,674 Purchased 17,478,397 17,924,005 19,568,122 370,269,011 351,296,915 314,600,796 Loans held for sale 4,294,689 5,181,866 3,498,214 374,563,700 356,478,781 318,099,010 Subserviced for PMT 232,643,144 232,903,327 233,554,875 Total prime servicing 607,206,844 589,382,108 551,653,885 Special servicing - subserviced for PMT 9,925 10,780 20,797 Total loans serviced $ 607,216,769 $ 589,392,888 $ 551,674,682 Servicing segment pretax loss was $95.5 million compared to pretax income of $101.2 million in the prior quarter and $75.6 million in the fourth quarter of 2022. Servicing segment pretax loss in the fourth quarter included a non-recurring arbitration accrual of $158.4 million. Servicing segment net revenues totaled $175.8 million, down from $217.1 million in the prior quarter and $199.0 million in the fourth quarter of 2022. The quarter-over-quarter decrease was driven primarily by lower net loan servicing fees and net interest expense in the fourth quarter versus net interest income in the prior quarter. Revenue from net loan servicing fees totaled $162.3 million, down from $185.4 million in the prior quarter primarily driven by increased net valuation related losses and partially offset by increased loan servicing fees due to a larger servicing portfolio and lower realization of cash flows. Net loan servicing fee revenues included $402.5 million in loan servicing fees, reduced by $164.3 million from the realization of MSR cash flows. Net valuation-related losses totaled $75.9 million, and included MSR fair value losses of $370.7 million driven by the decline in mortgage interest rates, and hedging gains of $294.8 million. The following table presents a breakdown of net loan servicing fees: Quarter ended December 31,2023 September 30,2023 December 31,2022 (in thousands) Loan servicing fees $ 402,484 $ 387,934 $ 321,949 Changes in fair value of MSRs and MSLs resulting from: Realization of cash flows (164,255 ) (177,775 ) (148,835 ) Change in fair value inputs (370,705 ) 398,871 82,587 Hedging gains (losses) 294,787 (423,656 ) (72,870 ) Net change in fair value of MSRs and MSLs (240,173 ) (202,560 ) (139,118 ) Net loan servicing fees $ 162,311 $ 185,374 $ 182,831 Servicing segment revenue included $24.5 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 up from $23.6 million in the prior quarter and $17.2 million in the fourth quarter of 2022. These EBOs are previously delinquent loans that were brought back to performing status through PennyMac Financial’s successful servicing efforts. Net interest expense totaled $13.7 million, versus net interest income of $7.2 million in the prior quarter and net interest expense of $2.7 million in the fourth quarter of 2022. Interest income was $91.6 million, down from $104.4 million in the prior quarter due to decreased placement fees on custodial balances from seasonally lower average balances. Interest expense was $105.3 million, up from $97.2 million in the prior quarter due to higher average balances of debt outstanding during the quarter. Servicing segment expenses totaled $271.3 million and included a non-recurring arbitration accrual of $158.4 million. Excluding this accrual, servicing segment expenses were $112.9 million, down slightly from the prior quarter. Investment Management Segment PennyMac Financial manages PMT for which it earns base management fees and may earn incentive compensation. Net AUM was $2.0 billion as of December 31, 2023, essentially unchanged from September 30, 2023 and December 31, 2022. Pretax income for the Investment Management segment was $1.9 million, up from $0.4 million in the prior quarter and $1.2 million in the fourth quarter of 2022. Base management fees from PMT were $7.3 million, essentially unchanged from the prior quarter and the fourth quarter of 2022. No performance incentive fees were earned in the fourth quarter. The following table presents a breakdown of management fees: Quarter ended December 31,2023 September 30,2023 December 31,2022 (in thousands) Management fees: Base $ 7,252 $ 7,175 $ 7,307 Performance incentive - - - Total management fees $ 7,252 $ 7,175 $ 7,307 Net assets of PennyMac Mortgage Investment Trust $ 1,957,090 $ 1,949,078 $ 1,962,815 Investment Management segment expenses totaled $7.7 million, down 8 percent from the prior quarter and 11 percent from the fourth quarter of 2022. Consolidated Expenses Total expenses were $416.2 million. Excluding the non-recurring arbitration accrual of $158.4 million, total expenses were $257.8 million, down from $273.5 million in the prior quarter and $272.7 million in the fourth quarter of 2022. Taxes PFSI recorded a benefit from income tax of $17.4 million in the fourth quarter, due to the pretax loss. 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 Thursday, February 1, 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. In 2023, PennyMac Financial’s production of newly originated loans totaled $99 billion in unpaid principal balance, making it the second largest mortgage lender in the nation. As of December 31, 2023, PennyMac Financial serviced loans totaling $607 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, 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; 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; 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 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; 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 adverse weather conditions, man-made or natural disasters, 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 Company’s earnings materials contain financial information calculated other than in accordance with U.S. generally accepted accounting principles (“GAAP”), such as pretax income and operating return on equity excluding valuation-related changes and a non-recurring legal accrual that provides 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 31,2023 September 30,2023 December 31,2022 (in thousands, except share amounts) ASSETS Cash $ 938,371 $ 1,177,304 $ 1,328,536 Short-term investment at fair value 10,268 5,553 12,194 Loans held for sale at fair value 4,420,691 5,186,656 3,509,300 Derivative assets 179,079 103,366 99,003 Servicing advances, net 694,038 399,281 696,753 Mortgage servicing rights at fair value 7,099,348 7,084,356 5,953,621 Investment in PennyMac Mortgage Investment Trust at fair value 1,121 930 929 Receivable from PennyMac Mortgage Investment Trust 29,262 27,613 36,372 Loans eligible for repurchase 4,889,925 4,445,814 4,702,103 Other 582,460 518,441 483,773 Total assets $ 18,844,563 $ 18,949,314 $ 16,822,584 LIABILITIES Assets sold under agreements to repurchase $ 3,763,956 $ 4,411,747 $ 3,001,283 Mortgage loan participation purchase and sale agreements 446,054 498,392 287,592 Notes payable secured by mortgage servicing assets 1,873,415 2,673,402 1,942,646 Unsecured senior notes 2,519,651 1,782,689 1,779,920 Derivative liabilities 53,275 41,200 21,712 Mortgage servicing liabilities at fair value 1,805 1,818 2,096 Accounts payable and accrued expenses 449,896 306,821 347,908 Payable to PennyMac Mortgage Investment Trust 208,210 97,975 205,011 Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement 26,099 26,099 26,099 Income taxes payable 1,042,886 1,059,993 1,002,744 Liability for loans eligible for repurchase 4,889,925 4,445,814 4,702,103 Liability for losses under representations and warranties 30,788 30,491 32,421 Total liabilities 15,305,960 15,376,441 13,351,535 STOCKHOLDERS' EQUITY Common stock—authorized 200,000,000 shares of $0.0001 par value; issued and outstanding 50,178,963, 49,925,752, and 49,988,492 shares, respectively 5 5 5 Additional paid-in capital 24,287 11,475 - Retained earnings 3,514,311 3,561,393 3,471,044 Total stockholders' equity 3,538,603 3,572,873 3,471,049 Total liabilities and stockholders’ equity $ 18,844,563 $ 18,949,314 $ 16,822,584 PENNYMAC FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Quarter ended December 31, 2023 September 30, 2023 December 31, 2022 (in thousands, except per share amounts) Revenues Net gains on loans held for sale at fair value $ 148,765 $ 151,374 $ 101,913 Loan origination fees 38,059 37,701 28,019 Fulfillment fees from PennyMac Mortgage Investment Trust 4,931 5,531 12,184 Net loan servicing fees: Loan servicing fees 402,484 387,934 321,949 Change in fair value of mortgage servicing rights and mortgage servicing liabilities (534,960 ) 221,096 (66,248 ) Mortgage servicing rights hedging results 294,787 (423,656 ) (72,870 ) Net loan servicing fees 162,311 185,374 182,831 Net interest (expense) income : Interest income 164,942 166,552 107,322 Interest expense 170,501 156,863 104,028 (5,559 ) 9,689 3,294 Management fees from PennyMac Mortgage Investment Trust 7,252 7,175 7,307 Other 6,180 3,464 4,898 Total net revenues 361,939 400,308 340,446 Expenses Compensation 135,138 156,909 133,699 Legal settlements 160,025 (171 ) (427 ) Technology 32,870 39,000 34,896 Servicing 28,907 13,242 37,424 Loan origination 26,879 28,889 25,002 Professional services 9,684 11,942 16,144 Occupancy and equipment 8,772 8,900 9,985 Marketing and advertising 4,180 4,632 3,751 Other 9,714 10,168 12,243 Total expenses 416,169 273,511 272,717 (Loss) income before (benefit from) provision for income taxes (54,230 ) 126,797 67,729 (Benefit from) provision for income taxes (17,388 ) 33,927 30,112 Net (loss) income $ (36,842 ) $ 92,870 $ 37,617 (Loss) earnings per share Basic $ (0.74 ) $ 1.86 $ 0.75 Diluted $ (0.74 ) $ 1.77 $ 0.71 Weighted-average common shares outstanding Basic 49,987 49,902 50,164 Diluted 49,987 52,561 53,088 Dividend declared per share $ 0.20 $ 0.20 $ 0.20 PENNYMAC FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Year ended December 31, 2023 2022 2021 (in thousands, except earnings per share) Revenue Net gains on loans held for sale at fair value $ 545,943 $ 791,633 $ 2,464,401 Loan origination fees 146,118 169,859 384,154 Fulfillment fees from PennyMac Mortgage Investment Trust 27,826 67,991 178,927 Net loan servicing fees: Loan servicing fees: From non-affiliates 1,268,650 1,054,828 875,570 From PennyMac Mortgage Investment Trust 81,347 81,915 80,658 Other fees 134,949 91,894 118,884 1,484,946 1,228,637 1,075,112 Change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread financing (605,568 ) 354,176 (416,943 ) Hedging results (236,778 ) (631,484 ) (475,215 ) Net loan servicing fees 642,600 951,329 182,954 Net interest expense: Interest income 632,924 294,062 300,169 Interest expense 637,777 335,427 390,699 (4,853 ) (41,365 ) (90,530 ) Management fees from PennyMac Mortgage Investment Trust 28,762 31,065 37,801 Other 15,260 15,243 9,654 Total net revenue 1,401,656 1,985,755 3,167,361 Expenses Compensation 576,964 735,231 999,802 Legal settlements 162,770 4,649 (4 ) Technology 143,152 139,950 141,426 Loan origination 114,500 173,622 330,788 Servicing 69,433 59,628 109,835 Professional services 60,521 73,270 94,283 Occupancy and equipment 36,558 40,124 35,810 Marketing and advertising 17,631 46,762 44,806 Other 36,496 47,272 51,432 Total expenses 1,218,025 1,320,508 1,808,178 Income before provision for income taxes 183,631 665,247 1,359,183 Provision for income taxes 38,975 189,740 355,693 Net income $ 144,656 $ 475,507 $ 1,003,490 Earnings per share Basic $ 2.89 $ 8.96 $ 15.73 Diluted $ 2.74 $ 8.50 $ 14.87 Weighted average shares outstanding Basic 49,978 53,065 63,799 Diluted 52,733 55,950 67,471 PENNYMAC FINANCIAL SERVICES, INC. RECONCILIATION OF PRETAX LOSS TO OPERATING NET INCOME Quarter ended December 31, 2023 (in thousands, except annualized operating return on equity) Loss before benefit from income taxes $ (54,230 ) Decrease in fair value of MSRs and MSLs due to changes in valuation inputs used in the valuation model 370,705 Hedging gains associated with MSRs (294,787 ) Non-recurring item - accrual for arbitration result 158,368 Operating pretax income $ 180,056 Tax expense(1) 48,345 Operating net income $ 131,711 Average stockholders' equity $ 3,555,398 Annualized operating return on equity 15 % (1) Assumes a tax rate of 26.85% View source version on businesswire.com: https://www.businesswire.com/news/home/20240201302460/en/
Media Kristyn Clark kristyn.clark@pennymac.com (805) 395-9943 Investors Kevin Chamberlain Isaac Garden PFSI_IR@pennymac.com (818) 224-7028