PennyMac Financial Services, Inc. Reports First Quarter 2024 Results
PFSI’s Board of Directors declared a first quarter cash dividend of
First Quarter 2024 Highlights
-
Pretax income was
$43.9 million , compared to a pretax loss of$54.2 million from the prior quarter and pretax income of$38.1 million from the first quarter of 2023 -
Production segment pretax income was
$35.9 million , down slightly from$39.4 million in the prior quarter and up from a pretax loss of$19.6 million in the first quarter of 2023-
Total loan acquisitions and originations, including those fulfilled for
(NYSE: PMT), werePennyMac Mortgage Investment Trust $21.7 billion in unpaid principal balance (UPB), down 19 percent from the prior quarter and 5 percent from the first quarter of 2023 -
Broker direct interest rate lock commitments (IRLCs) were
$3.4 billion in UPB, up 20 percent from the prior quarter and 31 percent from the first quarter of 2023 -
Consumer direct IRLCs were
$2.2 billion in UPB, up 35 percent from the prior quarter and down 2 percent from the first quarter of 2023 -
Government correspondent IRLCs totaled
$8.5 billion in UPB, down 24 percent from the prior quarter and 18 percent from the first quarter of 2023 -
Conventional correspondent IRLCs for PFSI’s account totaled
$8.6 billion in UPB, down 14 percent from the prior quarter and up 128 percent from the first quarter of 2023 -
Correspondent acquisitions of conventional conforming loans fulfilled for PMT were
$1.8 billion in UPB, down 29 percent from the prior quarter and 73 percent from the first quarter of 2023
-
Total loan acquisitions and originations, including those fulfilled for
-
Servicing segment pretax income was
$4.9 million , compared to a pretax loss of$95.5 million in the prior quarter and pretax income of$57.4 million in the first quarter of 2023-
Pretax income excluding valuation-related items and non-recurring items was
$124.7 million , down 14 percent from the prior quarter as higher net loan servicing fees was more than offset by increased recognition of realization of cash flows -
Valuation-related and non-recurring items included:
$170.0 million in mortgage servicing rights (MSR) fair value gains, before recognition of realization of cash flows, more than offset by$294.6 million in hedging declines$1.6 million arbitration accrual-
Net impact on pretax income related to these items was
$(126.3) million , or$(1.74) in diluted earnings per share
-
Net impact on pretax income related to these items was
$6.6 million of reversals of provisions for losses on active loans
-
Servicing portfolio grew to
$617.4 billion in UPB, up 2 percent fromDecember 31, 2023 , and 9 percent fromMarch 31, 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
$3.1 million , up from$1.9 million in the prior quarter and$0.3 million in the first quarter of 2023-
Net assets under management (AUM) were
$2.0 billion , essentially unchanged fromDecember 31, 2023 , andMarch 31, 2023
-
Net assets under management (AUM) were
-
Issued new, 5-year
$425 million term notes secured by Ginnie Mae MSR and servicing advances-
Redeemed
$425 million of term notes dueAugust 2025
-
Redeemed
“PennyMac Financial reported strong operating earnings in the first quarter, with an annualized operating return on equity of 15 percent in what is expected to be the one of the smallest quarterly origination markets of this cycle,” 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 |
$ |
141,431 |
$ |
21,010 |
|
$ |
162,441 |
|
$ |
- |
$ |
162,441 |
|
||||||
Loan origination fees |
|
36,371 |
|
|
- |
|
|
36,371 |
|
|
- |
|
|
36,371 |
|
||||
Fulfillment fees from PMT |
|
4,016 |
|
|
- |
|
|
4,016 |
|
|
- |
|
|
4,016 |
|
||||
Net loan servicing fees |
|
- |
|
|
100,954 |
|
|
100,954 |
|
|
- |
|
|
100,954 |
|
||||
Management fees |
|
- |
|
|
- |
|
|
- |
|
|
7,188 |
|
|
7,188 |
|
||||
Net interest expense: | |||||||||||||||||||
Interest income |
|
63,931 |
|
|
92,411 |
|
|
156,342 |
|
|
84 |
|
|
156,426 |
|
||||
Interest expense |
|
61,896 |
|
|
103,873 |
|
|
165,769 |
|
|
- |
|
|
165,769 |
|
||||
|
2,035 |
|
|
(11,462 |
) |
|
(9,427 |
) |
|
84 |
|
|
(9,343 |
) |
|||||
Other |
|
818 |
|
|
1,096 |
|
|
1,914 |
|
|
2,119 |
|
|
4,033 |
|
||||
Total net revenue |
|
184,671 |
|
|
111,598 |
|
|
296,269 |
|
|
9,391 |
|
|
305,660 |
|
||||
Expenses |
|
148,779 |
|
|
106,662 |
|
|
255,441 |
|
|
6,336 |
|
|
261,777 |
|
||||
Income before provision for income taxes |
$ |
35,892 |
|
$ |
4,936 |
|
$ |
40,828 |
|
$ |
3,055 |
|
$ |
43,883 |
|
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 |
2023 |
2023 |
|||||||||
(in thousands) | |||||||||||
Receipt of MSRs |
$ |
412,520 |
|
$ |
549,965 |
|
$ |
286,533 |
|
||
Mortgage servicing rights recapture payable to |
|
(353 |
) |
|
(290 |
) |
|
(485 |
) |
||
Provision for representations and warranties, net |
|
(632 |
) |
|
(1,002 |
) |
|
(290 |
) |
||
Cash loss, including cash hedging results |
|
(158,971 |
) |
|
(606,160 |
) |
|
(271,524 |
) |
||
Fair value changes of pipeline, inventory and hedges |
|
(90,123 |
) |
|
206,252 |
|
|
90,151 |
|
||
Net gains on mortgage loans held for sale |
$ |
162,441 |
|
$ |
148,765 |
|
$ |
104,385 |
|
||
Net gains on mortgage loans held for sale by segment: | |||||||||||
Production |
$ |
141,431 |
|
$ |
124,267 |
|
$ |
74,726 |
|
||
Servicing |
$ |
21,010 |
|
$ |
24,498 |
|
$ |
29,659 |
|
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 income in the first quarter totaled
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 |
2023 |
2023 |
|||||||||
(in thousands) | |||||||||||
Prime servicing: | |||||||||||
Owned | |||||||||||
Mortgage servicing rights and liabilities | |||||||||||
Originated |
$ |
364,441,567 |
$ |
352,790,614 |
$ |
302,265,588 |
|||||
Purchased |
|
17,051,740 |
|
|
17,478,397 |
|
|
19,026,774 |
|
||
|
381,493,307 |
|
|
370,269,011 |
|
|
321,292,362 |
|
|||
Loans held for sale |
|
5,111,719 |
|
|
4,294,689 |
|
|
6,692,155 |
|
||
|
386,605,026 |
|
|
374,563,700 |
|
|
327,984,517 |
|
|||
Subserviced for PMT |
|
230,809,585 |
|
|
232,643,144 |
|
|
236,476,714 |
|
||
Total prime servicing |
|
617,414,611 |
|
|
607,206,844 |
|
|
564,461,231 |
|
||
Special servicing - subserviced for PMT |
|
9,427 |
|
|
9,925 |
|
|
13,167 |
|
||
Total loans serviced |
$ |
617,424,038 |
|
$ |
607,216,769 |
|
$ |
564,474,398 |
|
Servicing segment pretax income was
Revenue from net loan servicing fees totaled
The following table presents a breakdown of net loan servicing fees:
Quarter ended | |||||||||||
2024 |
2023 |
2023 |
|||||||||
(in thousands) | |||||||||||
Loan servicing fees |
$ |
424,184 |
|
$ |
402,484 |
|
$ |
338,057 |
|
||
Changes in fair value of MSRs and MSLs resulting from: | |||||||||||
Realization of cash flows |
|
(198,564 |
) |
|
(164,255 |
) |
|
(146,183 |
) |
||
Change in fair value inputs |
|
169,979 |
|
|
(370,705 |
) |
|
(90,264 |
) |
||
Hedging (losses) gains |
|
(294,645 |
) |
|
294,787 |
|
|
47,227 |
|
||
Net change in fair value of MSRs and MSLs |
|
(323,230 |
) |
|
(240,173 |
) |
|
(189,220 |
) |
||
Net loan servicing fees |
$ |
100,954 |
|
$ |
162,311 |
|
$ |
148,837 |
|
Servicing segment revenue included
Net interest expense 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 |
2023 |
2023 |
|||||||||
(in thousands) | |||||||||||
Management fees: | |||||||||||
Base |
$ |
7,188 |
$ |
7,252 |
$ |
7,257 |
|||||
Performance incentive |
|
- |
|
|
- |
|
|
- |
|
||
Total management fees |
$ |
7,188 |
|
$ |
7,252 |
|
$ |
7,257 |
|
||
Net assets of |
$ |
1,958,914 |
|
$ |
1,957,090 |
|
$ |
1,970,734 |
|
Investment Management segment expenses totaled
Consolidated Expenses
Total expenses were
Taxes and Other
PFSI recorded a provision for tax expense of
Book value per share decreased to
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, 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; changes in real estate values, housing prices and housing sales; 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 Company’s earnings materials contain financial information calculated other than in accordance with
|
|||||||||||
CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
|||||||||||
2024 |
2023 |
2023 |
|||||||||
(in thousands, except share amounts) | |||||||||||
ASSETS | |||||||||||
Cash |
$ |
927,394 |
$ |
938,371 |
$ |
1,497,903 |
|||||
Short-term investment at fair value |
|
69 |
|
|
10,268 |
|
|
3,584 |
|
||
Principal-only stripped mortgage-backed securities at fair value pledged to creditors |
|
524,576 |
|
|
- |
|
|
- |
|
||
Loans held for sale at fair value |
|
5,200,350 |
|
|
4,420,691 |
|
|
6,772,423 |
|
||
Derivative assets |
|
108,987 |
|
|
179,079 |
|
|
110,664 |
|
||
Servicing advances, net |
|
499,955 |
|
|
694,038 |
|
|
547,158 |
|
||
Mortgage servicing rights at fair value |
|
7,483,210 |
|
|
7,099,348 |
|
|
6,003,390 |
|
||
Investment in |
|
1,101 |
|
|
1,121 |
|
|
925 |
|
||
Receivable from |
|
30,835 |
|
|
29,262 |
|
|
35,166 |
|
||
Loans eligible for repurchase |
|
4,401,896 |
|
|
4,889,925 |
|
|
4,557,325 |
|
||
Other |
|
623,368 |
|
|
582,460 |
|
|
574,647 |
|
||
Total assets |
$ |
19,801,741 |
|
$ |
18,844,563 |
|
$ |
20,103,185 |
|
||
LIABILITIES | |||||||||||
Assets sold under agreements to repurchase |
$ |
5,435,354 |
|
$ |
3,763,956 |
|
$ |
5,764,157 |
|
||
Mortgage loan participation purchase and sale agreements |
|
363,798 |
|
|
446,054 |
|
|
515,358 |
|
||
Notes payable secured by mortgage servicing assets |
|
1,972,020 |
|
|
1,873,415 |
|
|
2,471,930 |
|
||
Unsecured senior notes |
|
2,521,031 |
|
|
2,519,651 |
|
|
1,780,833 |
|
||
Derivative liabilities |
|
40,784 |
|
|
53,275 |
|
|
49,087 |
|
||
Mortgage servicing liabilities at fair value |
|
1,732 |
|
|
1,805 |
|
|
2,011 |
|
||
Accounts payable and accrued expenses |
|
263,338 |
|
|
449,896 |
|
|
300,157 |
|
||
Payable to |
|
127,993 |
|
|
208,210 |
|
|
142,007 |
|
||
Payable to exchanged |
|
26,099 |
|
|
26,099 |
|
|
26,099 |
|
||
Income taxes payable |
|
1,047,337 |
|
|
1,042,886 |
|
|
1,010,928 |
|
||
Liability for loans eligible for repurchase |
|
4,401,896 |
|
|
4,889,925 |
|
|
4,557,325 |
|
||
Liability for losses under representations and warranties |
|
29,976 |
|
|
30,788 |
|
|
31,103 |
|
||
Total liabilities |
|
16,231,358 |
|
|
15,305,960 |
|
|
16,650,995 |
|
||
STOCKHOLDERS' EQUITY | |||||||||||
Common stock—authorized 200,000,000 shares of |
|
5 |
|
|
5 |
|
|
5 |
|
||
Additional paid-in capital |
|
27,179 |
|
|
24,287 |
|
|
- |
|
||
Retained earnings |
|
3,543,199 |
|
|
3,514,311 |
|
|
3,452,185 |
|
||
Total stockholders' equity |
|
3,570,383 |
|
|
3,538,603 |
|
|
3,452,190 |
|
||
Total liabilities and stockholders’ equity |
$ |
19,801,741 |
|
$ |
18,844,563 |
|
$ |
20,103,185 |
|
|
|||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) |
|||||||||||
Quarter ended | |||||||||||
2024 |
2023 |
2023 |
|||||||||
(in thousands, except per share amounts) | |||||||||||
Revenues | |||||||||||
Net gains on loans held for sale at fair value |
$ |
162,441 |
|
$ |
148,765 |
|
$ |
104,385 |
|
||
Loan origination fees |
|
36,371 |
|
|
38,059 |
|
|
31,390 |
|
||
Fulfillment fees from |
|
4,016 |
|
|
4,931 |
|
|
11,923 |
|
||
Net loan servicing fees: | |||||||||||
Loan servicing fees |
|
424,184 |
|
|
402,484 |
|
|
338,057 |
|
||
Change in fair value of mortgage servicing rights and mortgage servicing liabilities |
|
(28,585 |
) |
|
(534,960 |
) |
|
(236,447 |
) |
||
Mortgage servicing rights hedging results |
|
(294,645 |
) |
|
294,787 |
|
|
47,227 |
|
||
Net loan servicing fees |
|
100,954 |
|
|
162,311 |
|
|
148,837 |
|
||
Net interest expense: | |||||||||||
Interest income |
|
156,426 |
|
|
164,942 |
|
|
128,478 |
|
||
Interest expense |
|
165,769 |
|
|
170,501 |
|
|
131,771 |
|
||
|
(9,343 |
) |
|
(5,559 |
) |
|
(3,293 |
) |
|||
Management fees from |
|
7,188 |
|
|
7,252 |
|
|
7,257 |
|
||
Other |
|
4,033 |
|
|
6,180 |
|
|
2,363 |
|
||
Total net revenues |
|
305,660 |
|
|
361,939 |
|
|
302,862 |
|
||
Expenses | |||||||||||
Compensation |
|
146,376 |
|
|
135,138 |
|
|
147,935 |
|
||
Technology |
|
35,967 |
|
|
32,870 |
|
|
36,038 |
|
||
Loan origination |
|
30,568 |
|
|
26,879 |
|
|
27,086 |
|
||
Servicing |
|
16,104 |
|
|
28,907 |
|
|
12,632 |
|
||
Professional services |
|
9,262 |
|
|
9,684 |
|
|
21,007 |
|
||
Occupancy and equipment |
|
8,676 |
|
|
8,772 |
|
|
8,820 |
|
||
Marketing and advertising |
|
3,671 |
|
|
4,180 |
|
|
3,241 |
|
||
Legal settlements |
|
1,542 |
|
|
160,025 |
|
|
(4,742 |
) |
||
Other |
|
9,611 |
|
|
9,714 |
|
|
12,698 |
|
||
Total expenses |
|
261,777 |
|
|
416,169 |
|
|
264,715 |
|
||
Income (loss) before provision for (benefit from) income taxes |
|
43,883 |
|
|
(54,230 |
) |
|
38,147 |
|
||
Provision for (benefit from) income taxes |
|
4,575 |
|
|
(17,388 |
) |
|
7,769 |
|
||
Net income (loss) |
$ |
39,308 |
|
$ |
(36,842 |
) |
$ |
30,378 |
|
||
Earnings (loss) per share | |||||||||||
Basic |
$ |
0.78 |
|
$ |
(0.74 |
) |
$ |
0.61 |
|
||
Diluted |
$ |
0.74 |
|
$ |
(0.74 |
) |
$ |
0.57 |
|
||
Weighted-average common shares outstanding | |||||||||||
Basic |
|
50,547 |
|
|
49,987 |
|
|
50,154 |
|
||
Diluted |
|
53,100 |
|
|
49,987 |
|
|
53,352 |
|
||
Dividend declared per share |
$ |
0.20 |
|
$ |
0.20 |
|
$ |
0.20 |
|
|
|||
NET INCOME TO OPERATING NET INCOME |
|||
Quarter ended | |||
|
|||
(in thousands, except annualized operating return on equity) |
|||
Net income |
$ |
39,308 |
|
Increase in fair value of MSRs and MSLs due to changes in valuation inputs used in the valuation model |
|
(169,979 |
) |
Hedging losses associated with MSRs |
|
294,645 |
|
Non-recurring item - accrual for arbitration result |
|
1,600 |
|
Adjustments |
$ |
126,266 |
|
Tax impacts of adjustments(1) |
|
33,902 |
|
Operating net income |
$ |
131,672 |
|
Average stockholders' equity |
$ |
3,552,273 |
|
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/20240424827926/en/
Media
mediarelations@pennymac.com
805.225.8224
Investors
Isaac Garden
PFSI_IR@pennymac.com
818.224.7028
Source: