Pennymac Financial Services, Inc. · NYSE:PFSI
Pennymac Financial Services — Investor Presentation (August 2015)
25 slides from Pennymac Financial Services's investor presentation, Aug 11, 2015
Slide 1: August 2015 Investor Presentation
August 2015 Investor Presentation
Slide 2: Forward-Looking Statements
Forward - Looking Statements 2 This presentation contains forward - looking statements within the meaning of Section 21 E 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 fin
Slide 3: Corporate Overview
: Corporate Overview
Slide 4: PennyMac Financial's Business Model Is Well Positioned for Growth
PennyMac Financial’s Business Model Is Well Positioned for Growth • Complex and highly regulated mortgage industry requires effective governance, compliance, and operating systems • PFSI’s platform has been developed organically and is highly scalable • Commitment to strong corporate governance, com
Slide 5: PFSI Has Developed in a Sustainable Manner for Long-Term Growth
PFSI Has Developed in a Sustainable Manner for Long - Term Growth 72 128 230 435 1,008 1, 373 1,816 2,354 (1) • Operations launched • De novo build of legacy - free mortgage servicer 2008 Employees at year end 5 2009 2010 2011 2012 2013 2014 2015 • Correspondent group established with a focus on ope
Slide 6: PFSI Continues to Deliver Strong Earnings and Earnings Growth
$0.83 $1.01 1H14 1H15 $107 $ 128 1H14 1H15 +20% +22% PFSI Continues to Deliver Strong Earnings and Earnings Growth Pretax Income ($ in millions) 6 Earnings per Share (1) Represents partial year. PFSI completed its IPO on May 5 th , 2013 (1) $1.73 $ 2.02 $0.82 2012 2013 2014 2015 YTD Annualized $ 256
Slide 7: Trends in PennyMac Financial's Businesses
7.69% 9.22% 0% 2% 4% 6% 8% 10% 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Trends in PennyMac Financial’s Businesses Correspondent Production (1) Market Share 0.41% 0.43% 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Market Share Consumer Direct Production (1) $1.
Slide 8: Growth Strategy Enabled by PennyMac Financial's Unique Platform
Growth Strategy Enabled by PennyMac Financial’s Unique Platform 8 ▪ Best - in - class mortgage banking platform designed for today’s market and regulatory environment – Operations built and grown organically – not through acquisitions – Highly scalable to support continued growth ▪ Largest non - ban
Slide 9: Seasoned Leadership and Deep Management Team
Seasoned Leadership and Deep Management Team 9 Note: Information as of July 31, 2015. Name Position Previous Experience Years of Mortgage & Banking Experience Stanford Kurland Chairman & Chief Executive Officer President & Chief Operating Officer, Countrywide Financial Corp. 40 David Spector Preside
Slide 10: Governance Structure & Policies
Governance Structure & Policies 10 Note: Information as of July 31, 2015. Entity Boards Internal Audit Governance Committee Structure Revision Date: 6/2015 Executive Committee Asset Liability Committee (ALCO) Credit Committee Mortgage Regulatory Compliance Committee Operations Committee Strategic Pl
Slide 11: Production Overview
| Production Overview
Slide 12: Production Market Opportunity
Approximately 70% of PennyMac’s 2014 loan production Production Market Opportunity 12 • Purchase originations have historically been more stable and have a natural “floor” due to moves/relocations, household formation, etc. • Post - financial crisis purchase originations fell to generational lows, s
Slide 13: 2Q15 Highlights – Correspondent Production
2Q15 1Q15 Correspondent seller relationships 377 356 Purchase money loans, as a % of total 64% 60% acquisitions Government-insured Conventional Selected Operational Metrics Selected Credit Metrics for 2Q15 WA FICO 690 747 13 $4.0 $4.4 $4.4 $5.1 $8.3 $3.0 $3.7 $2.9 $2.9 $3.6 $8.1 $8.4 $7.5 $9.5 $14.4
Slide 14: PennyMac Is the Largest Non-Bank Correspondent Aggregator
PennyMac Is the Largest Non - Bank Correspondent Aggregator 14 (1) Inside Mortgage Finance Originators: small and mid - sized mortgage lenders across the U.S. Agencies and other Investors ▪ Estimated 32 % of the mortgage market, or $ 370 billion in new originations, flowed through the correspondent
Slide 15: Correspondent Production – Counterparty Management
15 Correspondent Production – Counterparty Management • PennyMac Correspondent Group (“PCG”) selects mortgage companies or banks that have the potential to be a good fit for Agency and/or Jumbo loan acquisitions . Applications are completed by prospective clients and submitted to the Client Administ
Slide 16: Correspondent Production – Loan Acquisition Process Prior to Delivery
16 Correspondent Production – Loan Acquisition Process Prior to Delivery • Correspondent lenders process, underwrite and close loans for delivery to PennyMac • Business rules and the pricing engine prevent lock and delivery if loan is outside of PennyMac’s guidelines ▪ Data Extraction & Indexing ▪ D
Slide 17: 2Q15 Highlights – Consumer Direct Production
WA FICO Government-insured 691 Conventional (2) 751 Selected Credit Metrics for 2Q15 (UPB in millions) ▪ Consumer direct production totaled $1.1 billion in 2Q15, up 27% from 1Q15 – Government - insured and guaranteed loans continue to drive growth ▪ July consumer direct production totaled $336 milli
Slide 18: Consumer Direct Production – PennyMac's Strategy and Approach
Consumer Direct Production – PennyMac’s Strategy and Approach 18 Consumer direct lending has significant advantages over the branch - based model: • Direct model has taken over other consumer financial services markets, e.g., banking, brokerage, credit cards, insurance • Refinance market is already
Slide 19: Loan Production – Limited GSE Repurchases Since Inception
Loan Production – Limited GSE Repurchases Since Inception 19 • As of June 30 , 2015 , the outstanding UPB of loans subject to R epresentations and Warranties was $ 44 . 8 billion and the Reserve against these loans was $ 16 . 3 million ( 3 . 6 bps) • Life - to - date losses for PFSI from repurchases
Slide 20: Servicing Overview
: Servicing Overview
Slide 21: 2Q15 Highlights – Loan Servicing
$115.2 $136.2 At 3/31/15 Runoff Additions from loan production MSR acquisitions At 6/30/15 (UPB in billions) ▪ Servicing portfolio totaled $136.2 billion in UPB at quarter end, up 18% from 1Q15 ▪ Bulk and flow MSR acquisitions totaled $15.4 billion in UPB during 2Q15 – Excess servicing spread (ESS)
Slide 22: Loan Servicing Portfolio and Approach to Growth
Loan Servicing Portfolio and Approach to Growth 22 • We have grown our servicing portfolio primarily through organic loan production from our correspondent and consumer direct channels, supplemented by MSR acquisitions and the acquisition of whole loan pools by our Advised Entities (1) As of 6/30/20
Slide 23: Recent Servicing Transfer Experience
23 Recent Servicing Transfer Experience • Recently completed bulk and co - issue servicing acquisitions, totaling over $41.7 billion in UPB across more than 250,000 loans Seller Type UPB ($ Millions) Loan Count Settlement Date Product Mortgage Bank Bulk 337 1,752 3/2/2014 GNMA Mortgage Bank Bulk 521
Slide 24: CFPB Complaints vs. Non-Bank Servicers
24 CFPB Complaints vs. Non - Bank Servicers: CFPB Inception – 3/31/15 Complaint Source: PennyMac analysis based on data from the Consumer Finance Protection Bureau Portal as of 1Q15. UPB Source: PennyMac analysis based on data from Inside Mortgage Finance “Top 30 Mortgage Servicers” as of 1Q15. # of
Slide 25: Opportunity for PFSI and PMT in MSR Acquisitions
Opportunity for PFSI and PMT in MSR Acquisitions 25 Why Are MSR Sales Occurring? How Do MSRs Come to Market? • Large servicers may sell MSRs due to continuing operational pressures, higher regulatory capital requirements for banks (treatment under Basel III) and a re - focus on core customers/busine
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