Pennymac Financial Services, Inc. · NYSE:PFSI
Pennymac Financial Services — Q3 2014 Earnings Presentation
23 slides from Pennymac Financial Services's earnings presentation, Nov 5, 2014
Slide 1: Third Quarter 2014 Earnings Report
Third Quarter 2014 Earnings Report
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation 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 r
Slide 3: Third Quarter Highlights
Third Quarter Highlights Record earnings driven by continued revenue growth, enabled by PFSI’s operational foundation Pretax income of $62.7 million; diluted earnings per common share of $0.49 – Strong pretax earnings contributions from each of PFSI’s segments: Production: $39.1 million; Servicing
Slide 4: Top-Line Growth Drives Continued Increase in PFSI Earnings
Top-Line Growth Drives Continued Increase in PFSI Earnings Earnings per Share $0.60 These trends reflect organic growth $0.49 $0.45 that is enabled by PFSI’s solid $0.45 $0.38 $0.32 operational platform and is not $0.28 dependent on large bulk acquisitions $0.30 that are opportunistic $0.15 $0.00
Slide 5: Significant Opportunity and Role for a Non-Bank Mortgage Leader
Significant Opportunity and Role for a Non-Bank Mortgage Leader Share of Total U.S. Mortgage The heightened requirements for a mortgage business in Production Market the current environment demand focus, expert management, and dedicated resources in order to Top 5 Banks(1) operate successfully 53.
Slide 6: Consumer Direct Production Is Becoming a Major Growth Driver
Consumer Direct Production Is Becoming a Major Growth Driver 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 shifti
Slide 7: Value of a Correspondent Aggregator in the U.S. Mortgage Market
Value of a Correspondent Aggregator in the U.S. Mortgage Market Aggregator $ Well-capitalized firm with many sources of financing Sophisticated capital markets $ $ expertise to manage pipeline and Agencies and interest rate risk other Investors Capabilities and scale to service loans and retai
Slide 8: Current Market Environment and Outlook
Current Market Environment and Outlook • Interest rates have remained low, driven by global Average 30-year fixed rate mortgage(1) economic weakness and geopolitical concerns 5.0% Hundreds ‒ Mortgage rates remain very low in a historical context 4.5% ‒ Continue to aid refinance activity • While home
Slide 9: Growth Trends in PennyMac Financial’s Businesses
Growth Trends in PennyMac Financial’s Businesses Correspondent Production(1) Loan Servicing(1) Market Share Market Share 10% 1.2% 7.95% 8.02% 1.02% 8% 1.0% 0.95% 6% 0.8% 0.6% 4% 0.4% 2% 0.2% 0% 0.0% 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 Consumer Di
Slide 10: Quarterly Highlights – Correspondent Production
Quarterly Highlights – Correspondent Production Operational Highlights Correspondent Volume and Mix (UPB in billions) Correspondent acquisitions by PMT in 3Q14 $12 totaled $8.1 billion $10 $8.1 $8.4 – 54% government-insured loans – PFSI earns gain $8 $6.7 on mortgage loans $6.0 $5.5 $3.7 $6 $3.7 –
Slide 11: Quarterly Highlights – Consumer Direct Production
Quarterly Highlights – Consumer Direct Production Operational Highlights Consumer Direct Production Volume Consumer direct production totaled $527 million $1,200 (UPB in millions) in 3Q14, up 31% from 2Q14 $1,024 $1,000 Strong portfolio-sourced recapture volume – Growing servicing portfolio driv
Slide 12: Quarterly Highlights – Loan Servicing
Quarterly Highlights – Loan Servicing Operational Highlights Loan Servicing Portfolio Composition (UPB in billions) Servicing portfolio totaled $100.1 billion in UPB $120 at quarter-end, up 7% from 2Q14 $100.1 $100 $93.6 Mini-bulk and flow MSR acquisitions totaled $78.2 $83.8 $1.6 billion in UPB
Slide 13: Quarterly Highlights – Investment Management
Quarterly Highlights – Investment Management Operational Highlights Investment Management Revenues ($ in millions) Investment management revenues were $13.3 $15 $14.4 million, up 4% from 2Q14 $14.0 $13.3 $12.8 – Incentive fees from PMT increased 17% Q/Q, from $12.5 PMT’s continued strong performan
Slide 14: Third Quarter Financial Review
Third Quarter Financial Review Diluted earnings per common share of $0.49 Pretax income of $62.7 million, up 8% from 2Q14 Total net revenue of $140.6 million, up 8% from 2Q14 Total expenses of $77.9 million, up 8% from 2Q14 Business Segment Results Total pretax income from mortgage banking
Slide 15: Mortgage Banking – Production Segment Results
Mortgage Banking – Production Segment Results Production Segment Quarter ended Quarter ended Gain related to September 30, 2014 June 30, 2014 Unaudited ($ in thousands) consumer direct locks Revenue was approximately Net gains on mortgage loans held for sale at fair value $ 41,308 $ 38,101 305 bps
Slide 16: Mortgage Banking – Servicing Segment Results
Mortgage Banking – Servicing Segment Results Servicing Segment Quarter ended Quarter ended September 30, 2014 June 30, 2014 Unaudited ($ in thousands) Revenue Net gains on mortgage loans held for sale at fair value $ 6,825 $ 1,603 Net servicing fees 53,908 56,969 Net interest expense (5,246) (5,106)
Slide 17: Mortgage Servicing Rights (MSR) Asset Valuation
Mortgage Servicing Rights (MSR) Asset Valuation PFSI carries most of its Lower of Fair value not Fair value subject September 30, 2014 amortized cost subject to excess to excess originated MSRs at the or fair value servicing spread servicing spread Unaudited ($ in millions) lower of amortized cost
Slide 18: Investment Management Segment Results
Investment Management Segment Results Unaudited – ($ in thousands) Quarter ended Quarter ended September 30, 2014 June 30, 2014 Revenue Management fees: From PennyMac Mortgage Investment Trust $ 9,623 $ 8,912 From Investment Funds 1,756 2,086 11,379 10,998 Carried Interest from Investment Funds 1,90
Slide 19: Appendix
Appendix PennyMa ac inancia | Services, Inc.
Slide 20: PFSI Has Developed in a Sustainable Manner for Long-Term Growth
PFSI Has Developed in a Sustainable Manner for Long-Term Growth • Disciplined growth to address the demands of the 2014 GSEs, Agencies, regulators and our financing partners • Continued organic growth - Since inception, PennyMac has focused on building • Servicing UPB reaches and testing processes a
Slide 21: PennyMac Financial Is in a Unique Position Among Mortgage Specialists
PennyMac Financial Is in a Unique Position Among Mortgage Specialists Industry-leading platform built organically – not Distinctive expertise and full range of through acquisitions capabilities across mortgage banking and • Not distracted by legacy/regulatory issues investment management • Disciplin
Slide 22: Opportunity for PFSI and PMT in MSR Acquisitions
Opportunity for PFSI and PMT in MSR Acquisitions Why Are MSR Which MSR Transactions How Do MSRs Come to Market? Sales Occurring? Are Attractive? • Large banks are selling MSRs • Intermittent large bulk portfolio • GSE and Ginnie Mae servicing in due to continuing operational sales ($10+ billion in U
Slide 23: Acquisitions, Originations, and Locks by Product
Acquisitions, Originations, and Locks by Product Unaudited ($ in millions) 3Q13 4Q13 1Q14 2Q14 3Q14 Correspondent Acquisitions Conventional $ 3,608 $ 2,419 $ 1,907 $ 2,911 $ 3,509 Government 3,992 3,340 2,913 3,991 4,378 Jumbo 74 14 13 81 169 Total $ 7,674 $ 5,773 $ 4,833 $ 6,983 $ 8,056 Corresponde
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