Pennymac Financial Services, Inc. · NYSE:PFSI
Pennymac Financial Services — Q2 2015 Earnings Presentation
23 slides from Pennymac Financial Services's earnings presentation, Aug 5, 2015
Slide 1: Second Quarter 2015 Earnings Report
Second 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: Second Quarter Highlights
Second Quarter Highlights Pretax income of $74.8 million; diluted earnings per common share of $0.59 – Record earnings driven by significant revenue growth of 40% over 1Q15 Loan production totaled $13.0 billion in unpaid principal balance (UPB), up 47% from 1Q15, driven by market share gains in
Slide 4: Current Market Environment and Outlook
Current Market Environment and Outlook • Low mortgage rates prevailed through most of Average 30-year fixed rate mortgage(1) 2Q15 before rising in recent weeks 5.0% Hundreds – Continued strong refinance activity drove an 4.02% increase in industry-wide origination volumes for 4.5% 3.69% 2Q15 and spe
Slide 5: PFSI Continues to Deliver Strong Earnings and Earnings Growth
PFSI Continues to Deliver Strong Earnings and Earnings Growth Earnings per Share $2.02 $1.73 +22% $1.01 $0.83 $0.82 N/A (1) 2012 2013 2014 2015 YTD 1H14 1H15 Annualized Pretax Income ($ in millions) $256 +20% $128 $196 $172 $107 $118 2012 2013 2014 2015 YTD 1H14 1H15 Annualized (1) Represents partia
Slide 6: Growth Strategy Enabled by PennyMac Financial’s Unique Platform
Growth Strategy Enabled by PennyMac Financial’s Unique Platform Best-in-class mortgage banking platform designed for today’s market and regulatory environment – Operations built and grown organically – not through acquisitions – Highly scalable to support continued growth Largest non-bank corres
Slide 7: Trends in PennyMac Financial’s Businesses
Trends in PennyMac Financial’s Businesses Correspondent Production(1) Loan Servicing(1) Market Share Market Share 10% 9.22% 1.5% 1.38% 7.69% 1.17% 8% 1.2% 6% 0.9% 4% 0.6% 2% 0.3% 0% 0.0% 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Consumer Direct Product
Slide 8: Quarterly Highlights – Correspondent Production
Quarterly Highlights – Correspondent Production Operational Highlights Correspondent Volume and Mix Correspondent acquisitions by PMT in 2Q15 totaled $16 (UPB in billions) $11.9 billion $14.4 – 70% government-insured loans; 30% conventional loans $12 July correspondent acquisitions totaled $5.6
Slide 9: Quarterly Highlights – Consumer Direct Production
Quarterly Highlights – Consumer Direct Production Operational Highlights Consumer Direct Production Volume Consumer direct production totaled $1.1 billion (UPB in millions) in 2Q15, up 27% from 1Q15 – Government-insured and guaranteed loans continue $1,200 $1,138 to drive growth $1,000 July cons
Slide 10: Quarterly Highlights – Loan Servicing
Quarterly Highlights – Loan Servicing Operational Highlights Loan Servicing Portfolio Composition (UPB in billions) Servicing portfolio totaled $136.2 billion in UPB at $150 $136 quarter end, up 18% from 1Q15 $115 $120 $106 Bulk and flow MSR acquisitions totaled $94 $100 $15.4 billion in UPB dur
Slide 11: Quarterly Highlights – Investment Management
Quarterly Highlights – Investment Management Operational Highlights Investment Management Revenues ($ in millions) Net assets under management declined to $1.8 $15 billion at June 30, 2015 as the private investment $12.8 $13.3 funds continue planned return of capital and $12 distribution of earnin
Slide 12: Financial Results by Operating Segment
Financial Results by Operating Segment Investment Total Pretax ($ in millions) Production Servicing Management Income 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 $ 67.4 $ (18.1) $ 3.9 $ 53.2 2Q15 $ 76.3 $ (2.4) $ 1.0 $ 74.8 Note: 1Q15 segment
Slide 13: Mortgage Banking – Production Segment Results
Mortgage Banking – Production Segment Results Production gains (net Production Segment Quarter ended Quarter ended gains on mortgage loans June 30, 2015 March 31, 2015 Unaudited ($ in thousands) held for sale, loan Revenue origination fees, and net Net gains on mortgage loans held for sale at fair
Slide 14: Mortgage Banking – Servicing Segment Results
Mortgage Banking – Servicing Segment Results Net servicing fee revenue Servicing Segment Quarter ended Quarter ended June 30, 2015 March 31, 2015 increased 156% Q/Q, driven Unaudited ($ in thousands) by a larger servicing Revenue portfolio and MSR valuation Net loan servicing fees $ 68,549 $ 26,77
Slide 15: 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 June 30, 2015 amortized cost subject to excess to excess originated MSRs at the Unaudited ($ in millions) or fair value servicing spread servicing spread lower of amortized cost or f
Slide 16: Investment Management Segment Results
Investment Management Segment Results Investment Management Segment Quarter ended Quarter ended Segment revenue June 30, 2015 March 31, 2015 Unaudited ($ in thousands) decreased 31% Q/Q to Revenue $6.9 million Management fees: From PennyMac Mortgage Investment Trust $ 5,779 $ 7,003 From Investment
Slide 17: Appendix
Appendix PennyMa ac inancia | Services, Inc.
Slide 18: 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 19: 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 20: 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 21: 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 may sell • Intermittent large bulk portfolio • GSE and Ginnie Mae servicing in MSRs due to continuing sales ($10+ billion in UPB) which P
Slide 22: PFSI’s Mortgage Servicing Rights Investments in Partnership with PMT
PFSI’s Mortgage Servicing Rights Investments in Partnership with PMT PMT co-invests in Agency MSRs acquired from third-party sellers by PFSI PMT acquires the right to receive the excess servicing spread cash flows over the life of the underlying loans PFSI owns the MSRs, and services the loans
Slide 23: Acquisitions, Originations, and Locks by Product
Acquisitions, Originations, and Locks by Product Unaudited ($ in millions) 2Q14 3Q14 4Q14 1Q15 2Q15 Correspondent Acquisitions Conventional $ 2,911 $ 3,509 $ 2,772 $ 2,831 $ 3,553 Government 3,991 4,378 4,389 5,106 8,316 Jumbo 81 169 116 59 26 Total $ 6,983 $ 8,056 $ 7,276 $ 7,996 $ 11,895 Correspon
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