Pennymac Financial Services, Inc. · NYSE:PFSI
Pennymac Financial Services — Q1 2015 Earnings Presentation
25 slides from Pennymac Financial Services's earnings presentation, May 6, 2015
Slide 1: First Quarter 2015 Earnings Report
First Quarter 2015 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: First Quarter Highlights
First Quarter Highlights Pretax income of $53.2 million; diluted earnings per common share of $0.42 – Segment pretax earnings: Production: $70.7 million; Servicing: $(18.5) million; Investment Management: $1.1 million – Servicing results negatively impacted by MSR value reduction due to higher pre
Slide 4: Activity After Quarter End
Activity After Quarter End Completed the previously announced acquisition of $15 billion in UPB of Agency MSRs with associated ESS sold to PMT; servicing transfers in 2Q15 Entered into a letter of intent to acquire approximately $9 billion in UPB of Ginnie Mae MSRs; expect to close and transfer
Slide 5: Current Market Environment and Outlook
Current Market Environment and Outlook Interest rates in 1Q15 reached their lowest levels Average 30-year fixed rate mortgage(1) since mid-2013, driving higher refinancing volume 5.0% Hundreds – Industry forecasts now predict a $1.3 trillion 4.5% mortgage origination market for 2015 3.87% 3.69% 4.
Slide 6: Trends in PFSI Earnings and Revenue Composition
Trends in PFSI Earnings and Revenue Composition Earnings per Share $0.60 EPS increased to $0.42 per share driven by $0.49 $0.45 $0.41 $0.42 strong contribution from production, partially $0.45 $0.38 offset by loss from servicing and lower $0.30 investment management income $0.15 $0.00 1Q14 2Q14 3Q
Slide 7: Key Strategic Initiatives PFSI Is Pursuing
Key Strategic Initiatives PFSI Is Pursuing Capturing Increasing Economies of Scale • Larger portfolio (>$140bn in UPB after recent and pending acquisitions) drives operational efficiencies in loan servicing – Expansion of Ft. Worth facility with access to an experienced workforce • Technology invest
Slide 8: Trends in PennyMac Financial’s Businesses
Trends in PennyMac Financial’s Businesses Correspondent Production(1) Loan Servicing(1) Market Share Market Share 10% 1.17% 1.2% 1.08% 7.83% 7.45% 8% 1.0% 6% 0.8% 0.6% 4% 0.4% 2% 0.2% 0% 0.0% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 Consumer Direct Pr
Slide 9: Quarterly Highlights – Correspondent Production
Quarterly Highlights – Correspondent Production Operational Highlights Correspondent Volume and Mix Correspondent acquisitions by PMT in 1Q15 totaled (UPB in billions) $9.5 $10 $8.0 billion $8.4 $8.1 $7.5 – 64% government-insured loans; 36% conventional loans $8 April correspondent acquisitions
Slide 10: Quarterly Highlights – Consumer Direct Production
Quarterly Highlights – Consumer Direct Production Operational Highlights Consumer Direct Production Volume Consumer direct production totaled $897 million (UPB in millions) in 1Q15, up 31% from 4Q14 $1,000 $897 – Government-insured and guaranteed loans continue to drive growth $800 April consume
Slide 11: Quarterly Highlights – Loan Servicing
Quarterly Highlights – Loan Servicing Operational Highlights Loan Servicing Portfolio Composition (UPB in billions) Servicing portfolio totaled $115.2 billion in UPB $120 $106.0 $115.2 $100.1 at quarter end, up 9% from 4Q14 $100 $93.6 $83.8 Mini-bulk and flow MSR acquisitions totaled $80 $6.4 bi
Slide 12: Recent and New Investments in Agency MSRs
Recent and New Investments in Agency MSRs New pending acquisition similar to previous acquisitions of high-quality, seasoned Ginnie Mae MSRs – Loans with above-market average note rates – low mortgage rate environment results in refinance recapture opportunities – Relatively low delinquency rates
Slide 13: Quarterly Highlights – Investment Management
Quarterly Highlights – Investment Management Operational Highlights Investment Management Revenues ($ in millions) Net assets under management remained $2.0 $15 billion at March 31, 2015 $12.8 $13.3 $12.5 Several new initiatives that enable long-term $12 $10.4 $10.0 growth for PMT $9 – FHLB memb
Slide 14: Financial Results by Operating Segment
Financial Results by Operating Segment Investment Total Pretax ($ in millions) Production Servicing Management Income 1Q14 $ 26.0 $ 17.1 $ 6.0 $ 49.1 2Q14 $ 32.8 $ 20.0 $ 5.3 $ 58.0 3Q14 $ 39.1 $ 17.4 $ 6.2 $ 62.7 4Q14 $ 37.8 $ 11.4 $ 2.6 $ 51.9 1Q15 $ 70.7 $ (18.5) $ 1.1 $ 53.2 14
Slide 15: Mortgage Banking – Production Segment Results
Mortgage Banking – Production Segment Results Significant increase in net Production Segment Quarter ended Quarter ended March 31, 2015 December 31, 2014 gains on mortgage loans Unaudited ($ in thousands) held for sale, loan Revenue Net gains on mortgage loans held for sale at fair value $ 76,979
Slide 16: Mortgage Banking – Servicing Segment Results
Mortgage Banking – Servicing Segment Results Servicing Segment Net servicing fee revenue Quarter ended Quarter ended March 31, 2015 December 31, 2014 declined 57% Q/Q Unaudited ($ in thousands) Revenue Change in net servicing Net loan servicing fees $ 26,776 $ 62,278 Net interest expense (6,271)
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 amortized cost subject to excess to excess originated MSRs at the March 31, 2015 Unaudited ($ in millions) or fair value servicing spread servicing spread lower of amortized cost or
Slide 18: Investment Management Segment Results
Investment Management Segment Results Segment revenue Unaudited – (in thousands) Quarter ended Quarter ended March 31, 2015 December 31, 2014 decreased 4% Q/Q to Revenue $10.0 million Management fees: From PennyMac Mortgage Investment Trust $ 7,003 $ 8,426 From Investment Funds 1,486 1,596 Segme
Slide 19: Appendix
Appendix PennyMa ac inancia | Services, Inc.
Slide 20: PennyMac Financial’s Business Model Is Well Positioned for Growth
PennyMac Financial’s Business Model Is Well Positioned for Growth 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 thi
Slide 21: 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 GSEs, Agencies, regulators and our financing partners 2015 - Since inception, PennyMac has focused on building and testing processes and systems before adding • Launched Commercial sign
Slide 22: 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 23: 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 servicers are selling • Intermittent large bulk portfolio • GSE and Ginnie Mae servicing in MSRs due to continuing sales ($10+ billion in UPB) whic
Slide 24: PFSI’s Mortgage Servicing Rights Investments in Partnership with PMT
PFSI’s Mortgage Servicing Rights Investments in Partnership with PMT PMT co-invests in Agency MSRs acquired from third-party sellers by PFSI PMT acquires the right to receive the excess servicing spread cash flows over the life of the underlying loans PFSI owns the MSRs, and services the loans
Slide 25: Acquisitions, Originations, and Locks by Product
Acquisitions, Originations, and Locks by Product Unaudited ($ in millions) 1Q14 2Q14 3Q14 4Q14 1Q15 Correspondent Acquisitions Conventional $ 1,907 $ 2,911 $ 3,509 $ 2,772 $ 2,831 Government 2,913 3,991 4,378 4,389 5,106 Jumbo 13 81 169 116 59 Total $ 4,833 $ 6,983 $ 8,056 $ 7,276 $ 7,996 Correspond
PennyMac Financial Services — Q1 2015 Earnings Presentation on 6ix