Pennymac Financial Services, Inc. · NYSE:PFSI

Pennymac Financial Services — Q1 2021 Earnings Presentation

25 slides from Pennymac Financial Services's earnings presentation, May 6, 2021

  1. Slide 1: First Quarter 2021 Earnings Report

    First Quarter 2021 Earnings Report

  2. 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

  3. Slide 3: First Quarter Highlights

    First Quarter Highlights  Net income was $376.9 million; diluted earnings per share (EPS) were $5.15 – Earnings reflect continued strong production and core servicing results partially offset by the performance of our hedged mortgage servicing rights – Repurchased approximately 4.7 million shares o

  4. Slide 4: First Quarter Highlights (continued)

    First Quarter Highlights (continued)  Servicing segment pretax income was $141.7 million, up from $42.0 million in 4Q20 and down from $170.8 million in 1Q20 – Pretax income excluding valuation-related items was $258.4 million(1), up 10% from 4Q20 and up 511% from 1Q20, driven by continued loss miti

  5. Slide 5: Origination Market Remains Historically Strong

    Origination Market Remains Historically Strong U.S. Mortgage Origination Market(1) Mortgage Rates Remain Historically Low (UPB in trillions) 5.0% $4.0 $3.6 4.0% $2.6 3.0% $2.3 $2.5 $1.9 $0.8 2.0% $1.1 1.0% $1.5 $1.7 $1.7 $1.3 0.0% 2019 2020 2021E 2022E Purchase Refinance (2) (3) Average 30-year fixe

  6. Slide 6: Profitability and Value Creation Across Various Market Environments

    Profitability and Value Creation Across Various Market Environments PFSI's Annualized Return on Average Common Stockholders’ Equity… 61% PFSI’s proven ability 43% to generate Average: 19% 20% 22% 26% 22% attractive ROEs… 26% 11% 13% (1) 2013 2014 2015 2016 2017 2018 2019 2020 1Q21 (2) 10-Year Treasu

  7. Slide 7: Direct Lending and Servicing Are Driving PFSI's Profitability

    Direct Lending and Servicing Are Driving PFSI’s Profitability Production Pretax Income Servicing Pretax Income ($ in millions) ($ in millions) $258 Estimated Contribution from Direct Lending (CDL & BDL) $234 $573 $171 $363 $142 $240 $42 $42 1Q20 4Q20 1Q21 1Q20 4Q20 1Q21 (1) Pretax Income Pretax Inco

  8. Slide 8: Sustained Market Share Growth Across PFSI's Businesses

    Sustained Market Share Growth Across PFSI’s Businesses Correspondent Production(1) Loan Servicing(1) 17.7% 3.8% 16.6% 3.7% 15.5% 3.3% 11.9% 2.7% 10.5% 2.3% 2017 2018 2019 2020 1Q21 12/31/17 12/31/18 12/31/19 12/31/20 3/31/21 Consumer Direct Production(1) Broker Direct Production(1) 1.3% 2.9% 1.0% 2.

  9. Slide 9: Production Segment Highlights – Volume by Channel

    Production Segment Highlights – Volume by Channel Correspondent Consumer Direct Broker Direct (UPB in billions) (UPB in billions) (UPB in billions) $12.8 $13.4 $5.7 $5.7 $59.2 $56.9 $5.1 $51.2 $10.7 $4.5 $51.1 $34.0 $8.0 $4.6 $29.8 $38.0 $2.8 $33.8 $7.2 $4.0 $3.7 $3.5 $4.0 $1.6 $16.2 $1.7 $6.1 $18.9

  10. Slide 10: Production Segment Highlights – Business Trends by Channel

    Production Segment Highlights – Business Trends by Channel Correspondent Consumer Direct Broker Direct  PennyMac maintained its  Continued to originate record  Continued growth Q/Q in funding leadership position as the largest volumes volumes as a result of the correspondent aggregator in the inc

  11. Slide 11: Drivers of Production Segment Profitability

    Drivers of Production Segment Profitability 1Q20 4Q20 1Q21 Revenue Revenue Revenue Fallout Margin / Contribution % of Fallout Margin / Contribution % of Fallout Margin / Contribution % of Adjusted Fulfillment (net of Loan Production Adjusted Fulfillment (net of Loan Production Adjusted Fulfillment (

  12. Slide 12: Servicing Segment Highlights

    Servicing Segment Highlights  Servicing portfolio totaled $448.8 billion in UPB Loan Servicing Portfolio Composition at March 31, 2021, up 5% Q/Q and 17% Y/Y (UPB in billions) $448.8  Strong production volumes led to portfolio growth $426.8 $384.2 despite elevated prepayment activity  Decrease in

  13. Slide 13: Servicing Profitability Excluding Valuation-Related Changes

    Servicing Profitability Excluding Valuation-Related Changes 1Q20 4Q20 1Q21 basis basis basis $ in millions points(1) $ in millions points(1) $ in millions points(1) Operating revenue $ 266.5 28.3 $ 272.2 26.3 $ 266.7 24.4 Realization of MSR cash flows (114.9) (12.2) (89.6) (8.7) (82.7) (7.6) EBO loa

  14. Slide 14: Hedging Approach Continues to Moderate the Volatility of PFSI's Results

    Hedging Approach Continues to Moderate the Volatility of PFSI’s Results MSR Valuation Changes and Offsets  PFSI seeks to moderate the impact of interest rate changes on the fair value of its ($ in millions) MSR asset through a comprehensive hedge MSR fair value change before recognition of realizat

  15. Slide 15: Trends in Delinquencies, Forbearance and Loss Mitigation

    Trends in Delinquencies, Forbearance and Loss Mitigation 30+ Day Delinquency Rate and Forbearance Trend(1)  In PFSI’s predominately government MSR portfolio, approximately 243,000 borrowers have been enrolled in 15.1% 14.1% a forbearance plan related to COVID-19 12.4% 12.6% 1.9% 10.1% 10.2% – Throu

  16. Slide 16: Investment Management Segment Highlights

    Investment Management Segment Highlights  Net AUM as of March 31, 2021 were $2.4 billion, up 3% from December 31, 2020, and 29% from March 31, 2020 – Investment management revenues were $9.6 million, down 1% from the prior quarter Investment Management AUM Investment Management Revenues ($ in billi

  17. Slide 17: Appendix

    Appendix PennyMa ac inancia | Services, Inc.

  18. Slide 18: Overview of PennyMac Financial's Businesses

    Overview of PennyMac Financial’s Businesses Loan Production Loan Servicing Investment Management  Correspondent aggregation of  Servicing for owned MSRs  External manager of PMT, newly originated loans from and subservicing for PMT which invests in mortgage- third-party sellers  Major loan servi

  19. Slide 19: PFSI's Mortgage Banking Franchise Has Substantial Long-Term Value

    PFSI’s Mortgage Banking Franchise Has Substantial Long-Term Value Large volumes of production create “flywheel” to grow servicing portfolio Loan Production Loan Servicing 2nd largest in the U.S.(1) 6th largest in the U.S.(2) ($228 billion in UPB in the last 12 months) ($449 billion in UPB)(3)  Subs

  20. Slide 20: Technology Initiatives In Place for Growth in Direct Lending

    Technology Initiatives In Place for Growth in Direct Lending  Enhance lead generation capabilities and use of data analytics Consumer  Increase use of digital Direct marketing to drive non-  Improves experience for the portfolio originations consumer and broker  Improve ability for borrowers to

  21. Slide 21: PFSI Has Developed in a Sustainable Manner for Long-Term Growth

    PFSI Has Developed in a Sustainable Manner for Long-Term Growth 2021  Disciplined growth to address the demands of the  2 million servicing GSEs, Agencies, regulators and our financing partners 2020 customers - Since inception, PennyMac has focused on building and  Issued $650 million of Senior 2

  22. Slide 22: MSR Asset Valuation

    MSR Asset Valuation March 31, 2021 MSR Unaudited ($ in millions) Pool UPB $244,368 Coupon 3.5% Servicing fee/spread 0.34% Prepayment speed assumption (CPR) 9.8% Fair value $3,268.9 As a multiple of servicing fee 3.89 22

  23. Slide 23: Acquisitions and Originations by Product

    Acquisitions and Originations by Product First Lien Acquisitions/Originations Unaudited ($ in millions) 1Q20 2Q20 3Q20 4Q20 1Q21 Correspondent Acquisitions Conventional Conforming $ 16,153 $ 18,900 $ 27,351 $ 37,986 $ 33,762 Government 13,616 10,991 16,977 18,923 17,440 Total $ 29,768 $ 29,890 $ 44,

  24. Slide 24: Interest Rate Locks by Product

    Interest Rate Locks by Product First Lien Locks Unaudited ($ in millions) 1Q20 2Q20 3Q20 4Q20 1Q21 Correspondent Locks Conventional Conforming $ 19,109 $ 24,804 $ 34,363 $ 39,451 $ 33,998 Government 14,871 12,920 20,167 19,728 17,064 Total $ 33,980 $ 37,725 $ 54,531 $ 59,179 $ 51,062 Consumer Direct

  25. Slide 25: Credit Characteristics by Acquisition / Origination Period

    Credit Characteristics by Acquisition / Origination Period Correspondent Weighted Average FICO Weighted Average DTI 1Q20 2Q20 3Q20 4Q20 1Q21 1Q20 2Q20 3Q20 4Q20 1Q21 Government-insured 700 719 715 714 707 Government-insured 42 37 37 36 37 Conventional 763 769 772 768 761 Conventional 34 32 32 33 34

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