Pennymac Financial Services, Inc. · NYSE:PFSI
Pennymac Financial Services — Q1 2025 Earnings Presentation
37 slides from Pennymac Financial Services's earnings presentation, Apr 22, 2025
Slide 1: 1Q25 Earnings Report
1Q25 EARNINGS REPORT PennyMac Financial Services, Inc. April 2025
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, our financial results, fut
Slide 3: First Quarter Highlights
FIRST QUARTER HIGHLIGHTS Strong operating results partially offset by net fair value declines on hedged mortgage servicing rights 1Q25 Production Servicing Results Segment Segment Net Diluted Pretax Pretax income EPS⁽¹⁾ income income $76mm $1.42 $62mm $76mm Pretax income Annualized excluding MSR⁽¹⁾
Slide 4: Official Mortgage Supporter of the 2026 and 2028 U.S. Olympic and Paralympic Teams
PENNYMAC IS PROUD TO BE THE OFFICIAL MORTGAGE SUPPORTER OF THE 2026 AND 2028 U.S. OLYMPIC AND PARALYMPIC TEAMS, AND A PROUD SUPPORTER OF TEAM USA AND THE LA28 GAMES With recent investments in technology and capacity, we are primed for a sustained investment in our brand; this highly respected partne
Slide 5: Team USA and the Olympic and Paralympic Games Represent the Best of Live Sports
TEAM USA AND THE OLYMPIC AND PARALYMPIC GAMES REPRESENT THE BEST OF LIVE SPORTS Our commitment aligns with the spirit of Team USA and the values they serve: pursuit of excellence, leading courageously, serving others, and fostering belonging US fan base of over 170 million, larger than all Increased
Slide 6: Origination Market Expectations Reflect Growth
ORIGINATION MARKET EXPECTATIONS REFLECT GROWTH U.S. Mortgage Origination Market(1) Mortgage Rates Remain Elevated ($ in trillions) Purchase Refinance Average 30-year fixed rate mortgage(2) • Current third-party estimates for industry originations average $2.0 trillion in 2025, reflecting projections fo
Slide 7: Synergistic Relationship with PMT Is a Unique and Proven Competitive Advantage
SYNERGISTIC RELATIONSHIP WITH PMT IS A UNIQUE AND PROVEN COMPETITIVE ADVANTAGE Scaled and efficient Strategically well-positioned in a cost structure market characterized by consolidation and shifts in the regulatory environment ● PMT provides a tax-advantaged Best-in-class operating platform Tax-effic
Slide 8: High-Teens Operating Returns on Equity
HIGH-TEENS OPERATING RETURNS ON EQUITY Annualized Operating ROE(1) Mortgage Banking Operating Pretax Income ($ in millions) Servicing net of valuation related changes(1) Production • 15 - 20% operating return on equity in recent periods of elevated mortgage rates ‒ Servicing expected to continue pro
Slide 9: Earnings Growth Potential in Refinance Recapture Opportunity
EARNINGS GROWTH POTENTIAL IN REFINANCE RECAPTURE OPPORTUNITY Gov’t. Loans: Note Rates >5%(1) Gov’t. Loan Refinance Recapture Rates (UPB in billions) Refinance recapture(2) > 7.00% Refinance recapture (inc. CES)(3) 6.50 - 6.99% • Large opportunity when 6.00 - 6.49% borrowers with loans originated at hig
Slide 10: Organic Servicing Portfolio Growth Is a Key Differentiator
ORGANIC SERVICING PORTFOLIO GROWTH IS A KEY DIFFERENTIATOR Correspondent Production Correspondent Production Broker Direct Broker Consumer Direct Direct Consumer Direct Multi-channel origination Active underwriting and High quality servicing market access credit management portfolio growth ● Ability
Slide 11: Servicing Provides Growing Cash Flow and Scale Benefits
SERVICING PROVIDES GROWING CASH FLOW AND SCALE BENEFITS Revenue From Servicing & Placement Fees Operating Expenses ($ in millions) (bps of average servicing portfolio UPB) Loan servicing, ancillary, and other fees Earnings on custodial balances and deposits and other income • Increasing revenue cont
Slide 12: Committed to Unlocking Additional Value Through Sub-Servicing
COMMITTED TO UNLOCKING ADDITIONAL VALUE THROUGH SUB-SERVICING ● Performing loan servicing: proprietary, industry-leading servicing PENNYMAC technology with extensive customer self-service capabilities and a Top 3 FINANCIAL’S VALUE ranking as a servicer for CFPB complaint avoidance PROPOSITION: ● Non
Slide 13: PennyMac's Market Share Over Time Across Its Businesses
PENNYMAC’S MARKET SHARE OVER TIME ACROSS ITS BUSINESSES Correspondent Production Market Share(1) Loan Servicing Market Share(1) Broker Direct Market Share(1) Consumer Direct Market Share(1) Note: All figures are for PFSI and include volume fulfilled or subserviced for PMT (1) Historical market share:
Slide 14: Production Segment Highlights – Volume by Channel
PRODUCTION SEGMENT HIGHLIGHTS – VOLUME BY CHANNEL Correspondent Broker Direct Consumer Direct (UPB in billions) (UPB in billions) (UPB in billions) Conv. Acquisitions - for PFSI(1) Originations Originations Gov’t. Acquisitions - for PFSI(1) Locks Locks Conv. and Jumbo Acquisitions - for PMT(2) Total
Slide 15: Drivers of Production Segment Results
DRIVERS OF PRODUCTION SEGMENT RESULTS 1Q24 4Q24 1Q25 Revenue Revenue Revenue Fallout Margin / Contribution % of Fallout Margin / Contribution % of Fallout Margin / Contribution % of ($ in millions) Adjusted Fulfillment (net of Loan Production Adjusted Fulfillment (net of Loan Production Adjusted Fulfil
Slide 16: Production Segment Highlights – Business Trends by Channel
PRODUCTION SEGMENT HIGHLIGHTS – BUSINESS TRENDS BY CHANNEL Multi-channel approach provides flexibility and has proven to be a competitive advantage, supporting profitability and pricing discipline while driving growth of the servicing portfolio Correspondent Broker Direct Consumer Direct ● Pennymac re
Slide 17: Servicing Segment Highlights
SERVICING SEGMENT HIGHLIGHTS Loan Servicing Portfolio Composition • Servicing portfolio totaled $680.2 billion in UPB at March 31, (UPB in billions) 2025, up 2% Q/Q and 10% Y/Y • Production volumes more than offset prepayment activity, leading to continued portfolio growth • 60+ day delinquency rate
Slide 18: Servicing Profitability Excluding Valuation-Related Changes
SERVICING PROFITABILITY EXCLUDING VALUATION-RELATED CHANGES 1Q24 4Q24 1Q25 basis basis basis $ in millions points⁽¹⁾ $ in millions points⁽¹⁾ $ in millions points⁽¹⁾ Loan servicing fees $ 424.2 27.7 $ 472.6 28.8 $ 488.5 29.0 Earnings on custodial balances and deposits and other income 87.2 5.7 109.7
Slide 19: Hedging Approach Moderates the Volatility of PFSI's Results
HEDGING APPROACH MODERATES THE VOLATILITY OF PFSI’S RESULTS MSR Valuation Changes and Offsets • PFSI seeks to moderate the impact of interest rate ($ in millions) changes on the fair value of its MSR asset through a comprehensive hedging strategy that also considers MSR fair value change before real
Slide 20: Appendix
APPENDIX ™ PENNYMAC
Slide 21: PMT: Established Leader with Substantial Long-Term Growth Potential
ESTABLISHED LEADER WITH SUBSTANTIAL LONG-TERM GROWTH POTENTIAL $1.9 billion in assets under management 15-year track record $123 billion in LTM 1Q25 #2 IN PRODUCTION (1) PMT IS A LEADING RESIDENTIAL $680 billion outstanding #6 MORTGAGE • CORRESPONDENT REIT 2.7 million customers PRODUCTION • BROKER D
Slide 22: Overview of PennyMac Financial's Businesses
OVERVIEW OF PENNYMAC FINANCIAL’S BUSINESSES LOAN PRODUCTION LOAN SERVICING INVESTMENT MANAGEMENT Correspondent aggregation of newly Servicing for owned MSRs and External manager and synergistic originated loans from third-party sellers subservicing for MSRs owned by PMT partnership with PMT, which i
Slide 23: PFSI's Balanced Business Model Is a Flywheel
PFSI’S BALANCED BUSINESS MODEL IS A FLYWHEEL Large volumes of production grow servicing portfolio Loan Production Loan Servicing 2 largest in the U.S.(1) nd 6 largest in the U.S.(1) th • Diversified business through correspondent, • Recurring fee income business captured over the broker direct and co
Slide 24: Top Lender with Comprehensive and Efficient Multi-Channel Platform
TOP LENDER WITH COMPREHENSIVE AND EFFICIENT MULTI-CHANNEL PLATFORM #2 Significant and ongoing investments producer of residential in mortgage-banking mortgage loans in 2024⁽¹⁾ technology provide an exceptional loan Scalable technology platform providing our consumers, brokers and correspondent origin
Slide 25: Technology Innovation to Unlock Additional Stakeholder Value
TECHNOLOGY INNOVATION TO UNLOCK ADDITIONAL STAKEHOLDER VALUE With our SSE technology free and clear of any restrictions on use or development, we are actively exploring a continuum of potential opportunities with benefits for our many stakeholders Proven, low-cost servicing system with Drive efficienc
Slide 26: Track Record of Strong Performance Across Market Environments
TRACK RECORD OF STRONG PERFORMANCE ACROSS MARKET ENVIRONMENTS PFSI's Annualized Return on Average Common Stockholders' Equity (ROE) Proven ability to generate attractive Average: 20% ROEs… U.S. Origination Market(3) 10-Year Treasury Yield(4) (in trillions) …across different market environments… PFSI
Slide 27: PFSI's Strong Balance Sheet and Diverse Capital Structures
PFSI’S STRONG BALANCE SHEET AND DIVERSE CAPITAL STRUCTURES Low Debt-to-Equity (D/E) Ratio • Targeted debt-to-equity ratio near 3.5x with fluctuations largely driven by the origination environment or other market opportunities • Targeted non-funding debt-to-equity ratio near 1.5x; may be modestly abov
Slide 28: Current Market Environment and Macroeconomic Trends
CURRENT MARKET ENVIRONMENT AND MACROECONOMIC TRENDS Average 30-year fixed rate mortgage(1) 10-year Treasury Bond Yield(2) 6.85% 6.65% 4.57% 4.21% Macroeconomic Metrics(3) Footnotes 3/31/24 6/30/24 9/30/24 12/31/24 3/31/25 (1) Freddie Mac Primary Mortgage Market Survey. 6.83% as of 4/17/25 (2) U.S. De
Slide 29: MSR Asset Valuation
MSR ASSET VALUATION March 31, 2025 Mortgage Unaudited ($ in millions) Servicing Rights Pool UPB(1) $442,208 Weighted average coupon 4.6% Weighted average servicing fee/spread 0.38% Weighted average prepayment speed assumption (CPR) 8.8% Fair value $8,964 As a multiple of servicing fee 5.3 29 (1) Exc
Slide 30: Delinquency Trends and Servicing Advances Outstanding
DELINQUENCY TRENDS AND SERVICING ADVANCES OUTSTANDING Trends in Delinquency and Foreclosure Rates(1) 60+ Day Delinquency Rates for Recently Originated FHA and VA Loans(2) 30-60 Day 60-90 Day 90+ Day In foreclosure FHA 2023 Vintage FHA 2024 Vintage VA 2023 Vintage VA 2024 Vintage ● As expected due to
Slide 31: PFSI's Owned MSR Portfolio Characteristics
PFSI’S OWNED MSR PORTFOLIO CHARACTERISTICS As of March 31, 2025 Loan Remaining Loan size FICO credit 60+ UPB % of Note Seasoning Original Current Segment count maturity ($ in score at Delinquency ($ in billions)⁽⁴⁾ Total UPB rate (months) LTV LTV (in thousands) (months) thousands) origination (by UP
Slide 32: Acquisitions and Originations by Product
ACQUISITIONS AND ORIGINATIONS BY PRODUCT Unaudited ($ in millions) 1Q24 2Q24 3Q24 4Q24 1Q25 Correspondent Acquisitions Conventional Conforming - for PMT $ 1,769 $ 2,195 $ 5,851 $ 3,241 $ 2,437 Conventional Conforming - for PFSI 8,190 10,007 8,092 13,567 8,961 Government - for PFSI 8,167 10,301 11,78
Slide 33: Interest Rate Locks by Product
INTEREST RATE LOCKS BY PRODUCT Unaudited ($ in millions) 1Q24 2Q24 3Q24 4Q24 1Q25 Correspondent Locks Conventional Conforming - for PMT $ 2,472 $ 2,602 $ 7,373 $ 2,741 $ 2,210 Conventional Conforming - for PFSI 8,614 9,914 8,229 13,810 9,988 Government - for PFSI 8,467 11,100 12,448 11,088 12,107 Ju
Slide 34: Credit Characteristics by Acquisition/Origination Period
CREDIT CHARACTERISTICS BY ACQUISITION/ORIGINATION PERIOD Correspondent Weighted Average FICO Weighted Average DTI 1Q24 2Q24 3Q24 4Q24 1Q25 1Q24 2Q24 3Q24 4Q24 1Q25 Government-insured 719 715 715 719 718 Government-insured 44 44 44 44 45 Conventional 765 765 770 770 768 Conventional 38 38 38 38 38 Br
Slide 35: Reconciliation of GAAP Net Income to Adjusted EBITDA
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA ($ in millions) 1Q24 4Q24 1Q25 Net income $ 39.3 $ 104.5 $ 76.3 Provision for income taxes 4.6 24.9 27.9 Income before provision for income taxes 43.9 129.4 104.2 Depreciation and amortization 14.2 13.8 13.9 Decrease (increase) in the fair value o
Slide 36: Reconciliation of GAAP Items to Non-GAAP Items
RECONCILIATION OF GAAP ITEMS TO NON-GAAP ITEMS Reconciliation of GAAP net income (loss) to operating net income and annualized operating return on equity ($ in millions) 1Q24 2Q24 3Q24 4Q24 1Q25 Net income $ 39.3 $ 98.3 $ 69.4 $ 104.5 $ 76.3 Decrease (increase) in the fair value of MSRs and MSLs due
Slide 37: PennyMac Financial Services
™ PENNYMAC FINANCIAL SERVICES,
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