Pennymac Financial Services, Inc. · NYSE:PFSI
Pennymac Financial Services — Q1 2017 Earnings Presentation
26 slides from Pennymac Financial Services's earnings presentation, May 4, 2017
Slide 1: First Quarter 2017 Earnings Report
First Quarter 2017 Earnings Report
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation 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, f
Slide 3: First Quarter Highlights
First Quarter Highlights Pretax income was $62.0 million; diluted earnings per share of common stock were $0.47 – Results reflect lower production earnings driven by a reduction in refinance volumes due to higher mortgage rates and a seasonal slowdown in purchase-money volume – Book value per shar
Slide 4: First Quarter Highlights (continued)
First Quarter Highlights (continued) Investment Management pretax income was $1.1 million, up 167% from 4Q16 and down 3% from 1Q16 – Net assets under management were $1.6 billion, up modestly compared with $1.5 billion at December 31, 2016 and down 4% compared with $1.6 billion at March 31, 2016
Slide 5: Current Market Environment
Current Market Environment After rising sharply in the fourth quarter of 2016, Average 30-year fixed rate mortgage(1) mortgage rates declined modestly during the first quarter, with the average 30-year fixed rate down 5.0% from 4.32% at December 29th, 2016, to 4.14% at 4.32% 4.14% March 30th, 2017
Slide 6: Outlook for the Mortgage Origination Market
Outlook for the Mortgage Origination Market Estimates for Total U.S. Single Family 30-Year Fixed-Rate Mortgage Forecast(2) Mortgage Originations(1) Purchase Refinance ($ in billions) $1,986 Fannie Mae Freddie Mac MBA $1,572 $949 -50% 20-yr Average = 5.7% $479 4.7% Recent Peak (June 2013) = 4.6% 4.7%
Slide 7: Government MSR Financing – PNMAC GMSR Issuer Trust
Government MSR Financing – PNMAC GMSR Issuer Trust(1) In December 2016, we formed the PNMAC GMSR Issuer Trust, putting in place a structure that significantly increases the amount of Ginnie Mae MSR financing available to PFSI through two components: Financing Versus Ginnie Mae MSR ($ in millions)
Slide 8: Hedging Approach Continues to Moderate the Volatility of PFSI's Results
Hedging Approach Continues to Moderate the Volatility of PFSI’s Results PFSI seeks to moderate the MSR Valuation Changes and Offsets impact of interest rate changes ($ in millions) MSR value change through a comprehensive hedge Change in value of hedges and ESS liability strategy that also conside
Slide 9: Servicing Profitability Excluding Valuation-Related Changes
Servicing Profitability Excluding Valuation-Related Changes 1Q16 4Q16 1Q17 basis basis basis $ points(1) $ in millions points(1) $ in millions points(1) Operating revenue $ 115.8 28.5 $ 133.7 28.4 $ 134.9 27.2 Amortization and realization of MSR cash flows (46.7) (11.5) (50.2) (10.7) (48.5) (9.8) EB
Slide 10: Trends in PennyMac Financial's Businesses
Trends in PennyMac Financial’s Businesses Correspondent Production(1) Loan Servicing(1) Market Share Market Share 12% 11.29% 2.0% 1.89% 1.95% 10.76% 10% 1.64% 1.6% 7.94% 8% 6.30% 1.17% 1.2% 6% 4% 0.8% 2% 0.4% 0% 0.0% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17E 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q
Slide 11: Production Segment Highlights – Correspondent Channel
Production Segment Highlights – Correspondent Channel Correspondent acquisitions by PMT in 1Q17 totaled Correspondent Volume and Mix $13.9 billion, down 31% Q/Q and up 44% Y/Y (UPB in billions) – 67% government loans; 33% conventional loans $24 – 42% Y/Y growth in conventional conforming $19.2 $20
Slide 12: Production Segment Highlights – Consumer Direct Channel
Production Segment Highlights – Consumer Direct Channel Consumer direct production volume of Consumer Direct Production Volume $1.0 billion in 1Q17, down 49% Q/Q and (UPB in billions) down 14% Y/Y $2.1 $2.0 Committed pipeline totaled $705 million at the end of the first quarter April consumer
Slide 13: Servicing Segment Highlights
Servicing Segment Highlights Servicing portfolio totaled $202.9 billion in UPB at the Loan Servicing Portfolio Composition end of the first quarter, up 4% from 4Q16 and up 23% (UPB in billions) from 1Q16 $250 Prepayment activity slowed considerably in 1Q17 $194.2 $202.9 $200 – CPRs of PFSI’s own
Slide 14: Investment Management Segment Highlights
Investment Management Segment Highlights Net assets under management were $1.6 billion Investment Management Revenues compared with $1.5 billion at December 31, 2016 ($ in millions) – PMT equity increase due to preferred issuance largely $9 offset by Investment Fund distributions to investors $6.4
Slide 15: Financial Results by Operating Segment
Financial Results by Operating Segment Unaudited ($ in millions) Investment Non-Segment Total Pretax Production Servicing Management Activities(1) Activities Income 1Q16 $ 68.4 $ (39.5) $ 1.1 $ 0.0 $ 30.1 2Q16 $ 104.5 $ (20.9) $ 0.7 $ - $ 84.3 3Q16 $ 149.8 $ (10.7) $ 0.2 $ - $ 139.3 (1) 4Q16 $ 93.4
Slide 16: Mortgage Banking – Production Segment Results
Mortgage Banking – Production Segment Results Production revenues for PFSI’s own account (net gains on Production Segment Quarter Quarter ended ended Quarter Quarter ended ended December September 31, 30, 2016 2015 March 31,2015 June 30, 2017 mortgage loans held for sale at Unaudited ($ in thousan
Slide 17: Mortgage Banking – Servicing Segment Results
Mortgage Banking – Servicing Segment Results(1) Servicing Segment Servicing segment revenue Quarter ended ended Quarter ended ended Unaudited ($ in thousands) Quarter Quarter decreased 18% Q/Q driven December 31, 2016 March 31, 2017 Revenue by a $21.4 million decrease Net loan servicing fees $ 95,
Slide 18: Mortgage Servicing Rights (MSR) Asset Valuation
Mortgage Servicing Rights (MSR) Asset Valuation Fair value not Fair value subject Lower of subject to excess to excess amortized cost or Total March 31, 2017 servicing spread servicing spread fair value Unaudited ($ in millions) liability liability UPB $93,210 $11,688 $30,451 $135,349 Weighted avera
Slide 19: Investment Management Segment Results
Investment Management Segment Results Segment revenue decreased Quarter ended Unaudited – ($ in thousands) Quarter ended Quarter ended 6% Q/Q to $5.4 million Dec. 31, 2016 March 31, 2017 December – Carried interest loss of Revenue $128,000 due to Management fees: underperformance of the From Penny
Slide 20: Appendix
Appendix PennyMa ac inancia | Services, Inc.
Slide 21: 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 • Serve as external manager for newly originated loans from and subservicing for Advised investment vehicles focused on third-party sellers Entit
Slide 22: PFSI Has Developed in a Sustainable Manner for Long-Term Growth
PFSI Has Developed in a Sustainable Manner for Long-Term Growth 2017 • Disciplined growth to address the demands of the • Issued MSR- GSEs, Agencies, regulators and our financing backed term 2016 notes partners • Substantial growth in - Since inception, PennyMac has focused on building and consumer
Slide 23: 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 24: Opportunity in MSR Acquisitions
Opportunity in MSR Acquisitions Why Are MSR Which MSR Transactions How Do MSRs Come to Market? Sales Occurring? Are Attractive? • Large servicers may sell • Intermittent large bulk portfolio • GSE and Ginnie Mae servicing in MSRs due to continuing sales ($10+ billion in UPB) which PFSI has distincti
Slide 25: PFSI's Mortgage Servicing Rights Investments in Partnership with PMT
PFSI’s Mortgage Servicing Rights Investments in Partnership with PMT PMT has co-invested in Agency MSRs acquired from third-party sellers by PFSI; presently only related to certain Ginnie Mae MSRs PMT acquires the right to receive the ESS cash flows over the life of the underlying loans PFSI o
Slide 26: Acquisitions, Originations, and Locks by Product
Acquisitions, Originations, and Locks by Product Unaudited ($ in millions) 1Q16 2Q16 3Q16 2Q16 4Q16 1Q17 Correspondent Acquisitions Conventional $ 3,253 $ 5,171 $ 7,263 $ 7,492 $ 4,632 Government 6,423 9,433 11,657 12,544 9,280 Jumbo 7 3 1 - - Total $ 9,683 $ 14,607 $ 18,920 $ 20,036 $ 13,912 Corres
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