Pennymac Financial Services, Inc. · NYSE:PFSI

Pennymac Financial Services — Q3 2013 Earnings Presentation

22 slides from Pennymac Financial Services's earnings presentation, Nov 6, 2013

  1. Slide 1: Third Quarter 2013 Earnings Report

    Third Quarter 2013 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: Third Quarter Highlights and Recent Activity

    Third Quarter Highlights and Recent Activity Third Quarter Highlights  Pretax income of $34.9 million; diluted earnings per common share of $0.28 – Total net revenues totaled $87.2 million, down 18% from 2Q13 – Expenses totaled $52.3 million, down 7% from 2Q13  Loan production totaled $8.0 billion

  4. Slide 4: Q3 Results Were Aided by Stability of Servicing and Investment Management

    Q3 Results Were Aided by Stability of Servicing and Investment Management Loan Production Correspondent Lending Retail Lending Aggregates newly originated loans from Originates loans to consumers for the purchase approved third-party sellers or refinance of a home Revenue sources: Revenue sources: 

  5. Slide 5: The Third Quarter Was a Transitional Period for the Mortgage Market

    The Third Quarter Was a Transitional Period for the Mortgage Market Origination Market Estimates(1) ($ in billions)  The large increase in mortgage rates since $1,000 $843 $836 May has resulted in a significant contraction of $800 $750 the origination market $685 $678 $680 $581 $605 $600 $564  The

  6. Slide 6: Expense Reduction While Realigning Operations for Servicing Growth

    Expense Reduction While Realigning Operations for Servicing Growth  Total expenses fell 7% from 2Q13 Total Expenses  Headcount reductions to align operations $80 ($ in millions) with size of the market opportunity in loan production $60 $56 $52 – 186 FTEs reduced during 3Q13 and $47 shortly after

  7. Slide 7: PMT's Excess Servicing Spread Investments in Partnership with PFSI

    PMT's Excess Servicing Spread Investments in Partnership with PFSI  PMT co-invests in Agency MSR 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 MSR and services the loans Acqu

  8. Slide 8: Bulk MSR Acquisitions Add Scale and Provide Refinance Opportunities

    Bulk MSR Acquisitions Add Scale and Provide Refinance Opportunities (1) Pool 1 Pool 2 Unpaid Principal Balance $10.3 billion Unpaid Principal Balance $10.8 billion Weighted Avg. Note Rate 3.52% Weighted Avg. Note Rate 5.44% Delinquent Loans 0.10% Delinquent Loans 11.30% Total Servicing Fee 25.2 bp T

  9. Slide 9: Market Environment and Outlook

    Market Environment and Outlook  Changes in interest rates drive outlook for mortgage origination market; $1.3 trillion in originations forecast Mortgage for 2014, >60% expected to be purchase money(1) Originations  Home purchase demand is anticipated to remain robust, though some seasonal slowing

  10. Slide 10: Growth Trends Across PFSI’s Businesses

    Growth Trends Across PFSI’s Businesses Mortgage Banking Loan Production UPB(1)  Origination market challenged by higher rates ($ in billions) (For the quarterly period) and increased competition $12 $10.2  In correspondent lending, initiatives in place to $8.8 $8.9 resume growth as market conditio

  11. Slide 11: PennyMac’s Businesses – Correspondent Lending

    PennyMac’s Businesses – Correspondent Lending Operational Highlights  $7.7 billion in total correspondent acquisitions by PMT in 3Q13 – 52% government-insured loans (gain on mortgage loans); 48% fulfillment for PMT (fee revenue)  Significant declines in margins on government-insured loans during 3

  12. Slide 12: PennyMac’s Businesses – Retail Lending

    PennyMac’s Businesses – Retail Lending Operational Highlights  Retail originations totaled $283 million in 3Q13, down 18% from 2Q13 – Consumer direct (non-portfolio) originations up 43% from 2Q13; comprised 57% of total retail originations – Portfolio-sourced originations declined due to lower refi

  13. Slide 13: PennyMac’s Businesses – Loan Servicing

    PennyMac’s Businesses – Loan Servicing Operational Highlights  Servicing portfolio totaled $52.9 billion in UPB at quarter-end, up 19% from 2Q13 – Net growth in prime servicing and subservicing of $8.5 billion in UPB from organic loan production activities – Special servicing growth of over $1 bill

  14. Slide 14: PennyMac’s Businesses – Investment Management

    PennyMac’s Businesses – Investment Management Operational Highlights  Net assets under management grew to $2.1 billion as a result of PMT’s $250 million equity raise in August  Investment management revenues were up 6% from 2Q13 – Higher base management fees were partially offset by lower incentiv

  15. Slide 15: Third Quarter Financial Review

    Third Quarter Financial Review  Diluted earnings per common share of $0.28  Net income of $31.4 million, down 35% from 2Q13 – Net income attributable to PFSI shareholders of $5.2 million  Total net revenue of $87.2 million, down 18% from 2Q13 Business Segment Results  Mortgage Banking segment pr

  16. Slide 16: Consolidated Balance Sheet

    Consolidated Balance Sheet ($ in thousands except per share data) Quarter Ended Quarter Ended September 30, 2013 June 30, 2013 Assets Cash $ 56,398 $ 38,468 Short-term investments at fair value 127,487 156,148 Mortgage loans held for sale at fair value 530,248 656,341 Servicing advances 105,344 94,7

  17. Slide 17: Consolidated Income Statement

    Consolidated Income Statement Quarter Ended Quarter Ended ($ in thousands except per share data) Quarter Ended Quarter Ended(1) September 30, 2013 June 30, 2013(1) September 30, 2013 June 30, 2013 Revenue Net gains on mortgage loans held for sale at fair value $ 25,949 $ 42,654 Loan origination fees

  18. Slide 18: Mortgage Banking Segment Results

    Mortgage Banking Segment Results ($ in thousands) Quarter Ended Quarter Ended September 30, 2013 June 30, 2013 Revenues Net gains on mortgage loans held for sale at fair value $ 25,949 $ 42,654 Loan origination fees 6,280 6,312 Fulfillment fees from PMT 18,327 22,054 Net servicing fees 21,399 22,069

  19. Slide 19: Investment Management Segment Results

    Investment Management Segment Results ($ in thousands) Quarter Ended Quarter Ended September 30, 2013 June 30, 2013 Revenues Management fees $ 10,540 $ 10,429 Carried interest from investment funds 2,812 2,862 Net interest income 4 5 Other 972 243 14,328 13,539 Expenses Compensation 1,861 3,046 Othe

  20. Slide 20: Mortgage Servicing Rights (MSR) Asset Valuation

    Mortgage Servicing Rights (MSR) Asset Valuation  PFSI accounts for most of its Lower of amortized cost or fair value Fair value originated MSRs under the Quarter ended September 30, 2013 lower of amortized cost or fair value method UPB ($ in millions) $20,025 $2,752 – MSRs where the note rate on We

  21. Slide 21: Appendix

    Appendix

  22. Slide 22: Fundings & Locks by Product

    Fundings & Locks by Product ($ in millions) 3Q12 4Q12 1Q13 2Q13 3Q13 Correspondent Acquisitions Conventional $ 3,729 $ 6,526 $ 4,779 $ 4,216 $ 3,608 Government 2,576 3,485 3,739 4,262 3,992 Jumbo 1 2 8 107 74 Total $ 6,306 $ 10,013 $ 8,526 $ 8,586 $ 7,674 Correspondent Locks Conventional $ 5,460 $ 7

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