PennyMac Financial Services, Inc. Reports Third Quarter 2024 Results
PFSI’s Board of Directors declared a third quarter cash dividend of
Third Quarter 2024 Highlights
-
Pretax income was
$93.9 million , down from$133.9 million in the prior quarter and$126.8 million in the third quarter of 2023 -
Production segment pretax income was
$107.9 million , up from$41.3 million in the prior quarter and$25.2 million in the third quarter of 2023-
Total loan acquisitions and originations, including those fulfilled for
(NYSE: PMT), werePennyMac Mortgage Investment Trust $31.7 billion in unpaid principal balance (UPB), up 17 percent from the prior quarter and 26 percent from the third quarter of 2023 -
Broker direct interest rate lock commitments (IRLCs) were
$5.3 billion in UPB, up 24 percent from the prior quarter and 78 percent from the third quarter of 2023 -
Consumer direct IRLCs were
$5.2 billion in UPB, up 93 percent from the prior quarter and 206 percent from the third quarter of 2023 -
Government correspondent IRLCs totaled
$12.4 billion in UPB, up 12 percent from the prior quarter and 24 percent from the third quarter of 2023 -
Conventional correspondent IRLCs for PFSI’s account totaled
$8.2 billion in UPB, down 17 percent from the prior quarter and 20 percent from the third quarter of 2023 as PMT retained a higher percentage of its conventional correspondent production volumes -
Correspondent acquisitions of conventional conforming and jumbo loans fulfilled for PMT were
$5.9 billion in UPB, up 167 percent from the prior quarter and 116 percent from the third quarter of 2023
-
Total loan acquisitions and originations, including those fulfilled for
-
Servicing segment pretax loss was
$14.6 million , compared to pretax income of$88.5 million in the prior quarter and$101.2 million in the third quarter of 2023-
Pretax income excluding valuation-related items and non-recurring items was
$151.4 million , up from$149.0 million in the prior quarter -
Valuation-related items included:
$402.4 million in mortgage servicing rights (MSR) fair value declines, before recognition of realization of cash flows, partially offset by$242.1 million in hedging gains-
Net impact on pretax income related to these items was
$(160.4) million , or$(2.19) in diluted earnings per share
-
Net impact on pretax income related to these items was
$5.7 million provision for losses on active loans
-
Servicing portfolio grew to
$648.1 billion in UPB, up 2 percent fromJune 30, 2024 , and 10 percent fromSeptember 30, 2023 driven by production volumes which more than offset prepayment activity
-
Pretax income excluding valuation-related items and non-recurring items was
-
Investment Management segment pretax income was
$0.7 million , down from$4.0 million in the prior quarter and up from$0.4 million in the third quarter of 2023-
Net assets under management (AUM) were
$1.9 billion , essentially unchanged fromJune 30, 2024 andSeptember 30, 2023
-
Net assets under management (AUM) were
“PennyMac Financial reported outstanding results in the third quarter, with an annualized operating return on equity of 20 percent,” said Chairman and CEO
The following table presents the contributions of PennyMac Financial’s segments to pretax income:
Quarter ended |
||||||||||||||||
Mortgage Banking |
Investment Management |
|||||||||||||||
Production | Servicing | Total | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Revenue | ||||||||||||||||
Net gains on loans held for sale at fair value |
$ |
235,902 |
|
$ |
20,917 |
|
$ |
256,819 |
$ |
- |
$ |
256,819 |
||||
Loan origination fees |
|
49,430 |
|
|
- |
|
|
49,430 |
|
- |
|
49,430 |
||||
Fulfillment fees from PMT |
|
11,492 |
|
|
- |
|
|
11,492 |
|
- |
|
11,492 |
||||
Net loan servicing fees |
|
- |
|
|
75,830 |
|
|
75,830 |
|
- |
|
75,830 |
||||
Management fees |
|
- |
|
|
- |
|
|
- |
|
7,153 |
|
7,153 |
||||
Net interest (expense) income: | ||||||||||||||||
Interest income |
|
79,386 |
|
|
145,985 |
|
|
225,371 |
|
99 |
|
225,470 |
||||
Interest expense |
|
81,496 |
|
|
136,101 |
|
|
217,597 |
|
- |
|
217,597 |
||||
|
(2,110 |
) |
|
9,884 |
|
|
7,774 |
|
99 |
|
7,873 |
|||||
Other |
|
625 |
|
|
512 |
|
|
1,137 |
|
2,100 |
|
3,237 |
||||
Total net revenue |
|
295,339 |
|
|
107,143 |
|
|
402,482 |
|
9,352 |
|
411,834 |
||||
Expenses |
|
187,486 |
|
|
121,765 |
|
|
309,251 |
|
8,658 |
|
317,909 |
||||
Income (loss) before provision for income taxes |
$ |
107,853 |
|
$ |
(14,622 |
) |
$ |
93,231 |
$ |
694 |
$ |
93,925 |
Production Segment
The Production segment includes the correspondent acquisition of newly originated government- insured and certain conventional conforming loans for PennyMac Financial’s own account, fulfillment services on behalf of PMT and direct lending through the consumer direct and broker direct channels, including the underwriting and acquisition of loans from correspondent sellers on a non-delegated basis.
PennyMac Financial’s loan production activity for the quarter totaled
Production segment pretax income was
The components of net gains on loans held for sale are detailed in the following table:
Quarter ended | |||||||||||
2024 |
2024 |
2023 |
|||||||||
(in thousands) | |||||||||||
Receipt of MSRs |
$ |
578,982 |
|
$ |
541,207 |
|
$ |
450,936 |
|
||
Gain on sale of loans and mortgage servicing rights recapture payable to |
|
2,506 |
|
|
(473 |
) |
|
(500 |
) |
||
Provision for representations and warranties, net |
|
(589 |
) |
|
(53 |
) |
|
(1,459 |
) |
||
Cash loss, including cash hedging results |
|
(382,148 |
) |
|
(321,270 |
) |
|
(251,245 |
) |
||
Fair value changes of pipeline, inventory and hedges |
|
58,068 |
|
|
(43,347 |
) |
|
(46,358 |
) |
||
Net gains on mortgage loans held for sale |
$ |
256,819 |
|
$ |
176,064 |
|
$ |
151,374 |
|
||
Net gains on mortgage loans held for sale by segment: | |||||||||||
Production |
$ |
235,902 |
|
$ |
154,317 |
|
$ |
127,821 |
|
||
Servicing |
$ |
20,917 |
|
$ |
21,747 |
|
$ |
23,553 |
|
PennyMac Financial performs fulfillment services for certain conventional conforming and jumbo loans acquired by PMT from non-affiliates in its correspondent production business. These services include, but are not limited to, marketing, relationship management, correspondent seller approval and monitoring, loan file review, underwriting, pricing, hedging and activities related to the subsequent sale and securitization of loans in the secondary mortgage markets for PMT.
Fees earned from the fulfillment of correspondent loans on behalf of PMT totaled
Net interest expense in the third quarter was
Production segment expenses were
Servicing Segment
The Servicing segment includes income from owned MSRs and subservicing. The total servicing portfolio grew to
The table below details PennyMac Financial’s servicing portfolio UPB:
2024 |
2024 |
2023 |
||||||
(in thousands) | ||||||||
Prime servicing: | ||||||||
Owned | ||||||||
Mortgage servicing rights and liabilities | ||||||||
Originated |
$ |
393,947,146 |
$ |
379,882,952 |
$ |
333,372,910 |
||
Purchased |
|
16,104,333 |
|
16,568,065 |
|
17,924,005 |
||
|
410,051,479 |
|
396,451,017 |
|
351,296,915 |
|||
Loans held for sale |
|
6,366,787 |
|
6,108,082 |
|
5,181,866 |
||
|
416,418,266 |
|
402,559,099 |
|
356,478,781 |
|||
Subserviced for PMT |
|
231,369,983 |
|
230,170,703 |
|
232,903,327 |
||
Subserviced for |
|
257,696 |
|
- |
|
- |
||
Total prime servicing |
|
648,045,945 |
|
632,729,802 |
|
589,382,108 |
||
Special servicing - subserviced for PMT |
|
8,340 |
|
8,810 |
|
10,780 |
||
Total loans serviced |
$ |
648,054,285 |
$ |
632,738,612 |
$ |
589,392,888 |
Servicing segment pretax loss was
Revenue from net loan servicing fees totaled
The following table presents a breakdown of net loan servicing fees:
Quarter ended | ||||||||||||
2024 |
2024 |
2023 |
||||||||||
(in thousands) | ||||||||||||
Loan servicing fees |
$ |
462,037 |
|
$ |
440,696 |
|
$ |
387,934 |
|
|||
Changes in fair value of MSRs and MSLs resulting from: | ||||||||||||
Realization of cash flows |
|
(225,836 |
) |
|
(200,740 |
) |
|
(177,775 |
) |
|||
Change in fair value inputs |
|
(402,422 |
) |
|
99,425 |
|
|
398,871 |
|
|||
Hedging gains (losses) |
|
242,051 |
|
|
(171,777 |
) |
|
(423,656 |
) |
|||
Net change in fair value of MSRs and MSLs |
|
(386,207 |
) |
|
(273,092 |
) |
|
(202,560 |
) |
|||
Net loan servicing fees |
$ |
75,830 |
|
$ |
167,604 |
|
$ |
185,374 |
|
Servicing segment revenue included
Net interest income totaled
Servicing segment expenses totaled
Investment Management Segment
PennyMac Financial manages PMT for which it earns base management fees and may earn incentive compensation. Net AUM were
Pretax income for the Investment Management segment was
The following table presents a breakdown of management fees:
Quarter ended | ||||||||
2024 |
2024 |
2023 |
||||||
(in thousands) | ||||||||
Management fees: | ||||||||
Base |
$ |
7,153 |
$ |
7,133 |
$ |
7,175 |
||
Performance incentive |
|
- |
|
- |
|
- |
||
Total management fees |
$ |
7,153 |
$ |
7,133 |
$ |
7,175 |
||
Net assets of |
$ |
1,936,787 |
$ |
1,939,869 |
$ |
1,949,078 |
Investment Management segment expenses totaled
Consolidated Expenses
Total expenses were
Taxes
PFSI recorded a provision for tax expense of
***
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
About
Forward Looking Statements
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management’s beliefs, estimates, projections, and assumptions with respect to, among other things, our financial results, future operations, business plans and investment strategies, as well as industry and market conditions, all of which are subject to change. Words like “believe,” “expect,” “anticipate,” “promise,” “project,” “plan,” and other expressions or words of similar meanings, as well as future or conditional verbs such as “will,” “would,” “should,” “could,” or “may” are generally intended to identify forward-looking statements. Actual results and operations for any future period may vary materially from those projected herein and from past results discussed herein. Factors which could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: interest rate changes; changes in real estate values, housing prices and housing sales; changes in macroeconomic, consumer and real estate market conditions; the continually changing federal, state and local laws and regulations applicable to the highly regulated industry in which we operate; lawsuits or governmental actions that may result from any noncompliance with the laws and regulations applicable to our business; the mortgage lending and servicing-related regulations promulgated by the
The press release contains financial information calculated other than in accordance with
CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
||||||||
2024 |
2024 |
2023 |
||||||
(in thousands, except share amounts) | ||||||||
ASSETS | ||||||||
Cash |
$ |
145,814 |
$ |
595,336 |
$ |
1,177,304 |
||
Short-term investment at fair value |
|
667,934 |
|
188,772 |
|
5,553 |
||
Principal-only stripped mortgage-backed securities at fair value |
|
960,267 |
|
914,223 |
|
- |
||
Loans held for sale at fair value |
|
6,565,704 |
|
6,238,959 |
|
5,186,656 |
||
Derivative assets |
|
190,612 |
|
145,887 |
|
103,366 |
||
Servicing advances, net |
|
400,764 |
|
414,235 |
|
399,281 |
||
Mortgage servicing rights at fair value |
|
7,752,292 |
|
7,923,078 |
|
7,084,356 |
||
Investment in |
|
1,070 |
|
1,031 |
|
930 |
||
Receivable from |
|
32,603 |
|
29,413 |
|
27,613 |
||
Loans eligible for repurchase |
|
5,512,289 |
|
4,560,058 |
|
4,445,814 |
||
Other |
|
642,189 |
|
566,573 |
|
518,441 |
||
Total assets |
$ |
22,871,538 |
$ |
21,577,565 |
$ |
18,949,314 |
||
LIABILITIES | ||||||||
Assets sold under agreements to repurchase |
$ |
6,600,997 |
$ |
6,408,428 |
$ |
4,411,747 |
||
Mortgage loan participation purchase and sale agreements |
|
517,527 |
|
511,837 |
|
498,392 |
||
Notes payable secured by mortgage servicing assets |
|
1,723,632 |
|
1,723,144 |
|
2,673,402 |
||
Unsecured senior notes |
|
3,162,239 |
|
3,160,226 |
|
1,782,689 |
||
Derivative liabilities |
|
41,471 |
|
18,830 |
|
41,200 |
||
Mortgage servicing liabilities at fair value |
|
1,718 |
|
1,708 |
|
1,818 |
||
Accounts payable and accrued expenses |
|
331,512 |
|
294,812 |
|
306,821 |
||
Payable to |
|
81,040 |
|
100,220 |
|
97,975 |
||
Payable to exchanged |
|
26,099 |
|
26,099 |
|
26,099 |
||
Income taxes payable |
|
1,105,550 |
|
1,082,397 |
|
1,059,993 |
||
Liability for loans eligible for repurchase |
|
5,512,289 |
|
4,560,058 |
|
4,445,814 |
||
Liability for losses under representations and warranties |
|
28,286 |
|
28,688 |
|
30,491 |
||
Total liabilities |
|
19,132,360 |
|
17,916,447 |
|
15,376,441 |
||
STOCKHOLDERS' EQUITY | ||||||||
Common stock—authorized 200,000,000 shares of issued and outstanding 51,257,630, 51,017,418, and 49,925,752 shares, respectively |
|
5 |
|
5 |
|
5 |
||
Additional paid-in capital |
|
54,415 |
|
30,053 |
|
11,475 |
||
Retained earnings |
|
3,684,758 |
|
3,631,060 |
|
3,561,393 |
||
Total stockholders' equity |
|
3,739,178 |
|
3,661,118 |
|
3,572,873 |
||
Total liabilities and stockholders’ equity |
$ |
22,871,538 |
$ |
21,577,565 |
$ |
18,949,314 |
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) |
|||||||||||
Quarter ended | |||||||||||
2024 |
2024 |
2023 |
|||||||||
(in thousands, except per share amounts) | |||||||||||
Revenues | |||||||||||
Net gains on loans held for sale at fair value |
$ |
256,819 |
|
$ |
176,064 |
|
$ |
151,374 |
|
||
Loan origination fees |
|
49,430 |
|
|
42,075 |
|
|
37,701 |
|
||
Fulfillment fees from |
|
11,492 |
|
|
4,427 |
|
|
5,531 |
|
||
Net loan servicing fees: | |||||||||||
Loan servicing fees |
|
462,037 |
|
|
440,696 |
|
|
387,934 |
|
||
Change in fair value of mortgage servicing rights and mortgage servicing liabilities |
|
(628,258 |
) |
|
(101,315 |
) |
|
221,096 |
|
||
Mortgage servicing rights hedging results |
|
242,051 |
|
|
(171,777 |
) |
|
(423,656 |
) |
||
Net loan servicing fees |
|
75,830 |
|
|
167,604 |
|
|
185,374 |
|
||
Net interest income (expense): | |||||||||||
Interest income |
|
225,470 |
|
|
200,811 |
|
|
166,552 |
|
||
Interest expense |
|
217,597 |
|
|
207,871 |
|
|
156,863 |
|
||
|
7,873 |
|
|
(7,060 |
) |
|
9,689 |
|
|||
Management fees from |
|
7,153 |
|
|
7,133 |
|
|
7,175 |
|
||
Other |
|
3,237 |
|
|
15,884 |
|
|
3,464 |
|
||
Total net revenues |
|
411,834 |
|
|
406,127 |
|
|
400,308 |
|
||
Expenses | |||||||||||
Compensation |
|
171,316 |
|
|
141,956 |
|
|
156,909 |
|
||
Loan origination |
|
45,208 |
|
|
40,270 |
|
|
28,889 |
|
||
Technology |
|
37,059 |
|
|
35,690 |
|
|
39,000 |
|
||
Servicing |
|
28,885 |
|
|
22,920 |
|
|
13,242 |
|
||
Professional services |
|
9,339 |
|
|
9,404 |
|
|
11,942 |
|
||
Occupancy and equipment |
|
8,156 |
|
|
7,893 |
|
|
8,900 |
|
||
Marketing and advertising |
|
5,088 |
|
|
5,445 |
|
|
4,632 |
|
||
Other |
|
12,858 |
|
|
8,695 |
|
|
9,997 |
|
||
Total expenses |
|
317,909 |
|
|
272,273 |
|
|
273,511 |
|
||
Income before provision for income taxes |
|
93,925 |
|
|
133,854 |
|
|
126,797 |
|
||
Provision for income taxes |
|
24,557 |
|
|
35,596 |
|
|
33,927 |
|
||
Net income |
$ |
69,368 |
|
$ |
98,258 |
|
$ |
92,870 |
|
||
Earnings per share | |||||||||||
Basic |
$ |
1.36 |
|
$ |
1.93 |
|
$ |
1.86 |
|
||
Diluted |
$ |
1.30 |
|
$ |
1.85 |
|
$ |
1.77 |
|
||
Weighted-average common shares outstanding | |||||||||||
Basic |
|
51,180 |
|
|
50,955 |
|
|
49,902 |
|
||
Diluted |
|
53,495 |
|
|
53,204 |
|
|
52,561 |
|
||
Dividend declared per share |
$ |
0.30 |
|
$ |
0.20 |
|
$ |
0.20 |
|
GAAP NET INCOME TO OPERATING NET INCOME AND ANNUALIZED OPERATING RETURN ON EQUITY |
|||
Quarter Ended | |||
2024 |
|||
(in thousands, except annualized operating return on equity) | |||
Net income |
$ |
69,368 |
|
Decrease in fair value of MSRs and MSLs due to changes in valuation inputs used in the valuation model |
|
402,422 |
|
Hedging gains associated with MSRs |
|
(242,051 |
) |
Tax impacts of adjustments(1) |
|
43,060 |
|
Operating net income |
$ |
186,679 |
|
Average stockholders' equity |
$ |
3,694,831 |
|
Annualized operating return on equity |
|
20 |
% |
(1) Assumes a tax rate of 26.85%
View source version on businesswire.com: https://www.businesswire.com/news/home/20241022618341/en/
Media
mediarelations@pennymac.com
805.225.8224
Investors
Isaac Garden
PFSI_IR@pennymac.com
818.224.7028
Source: