Pennymac Financial Services, Inc. · NYSE:PFSI
Pennymac Financial Services — Q4 2015 Earnings Presentation
27 slides from Pennymac Financial Services's earnings presentation, Feb 3, 2016
Slide 1: Fourth Quarter 2015 Earnings Report
Fourth 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: Fourth Quarter Highlights
Fourth Quarter Highlights Pretax income of $77.2 million; diluted earnings per common share of $0.58 – Segment pretax earnings: Production: $50.3 million; Servicing: $27.9 million; Investment Management: $0.7 million – Record pretax income driven by strong earnings contributions from both the Prod
Slide 4: Strong Earnings and Book Value Growth Expected to Continue
Strong Earnings and Book Value Growth Expected to Continue Earnings per Share +25% $2.17 $1.73 Growth Drivers in 2016 • Market share growth across (1) production channels, $0.82 accelerated by the exit or retreat of certain competitors N/A • Continued dedication to risk 2012 2013 2014 2015 managemen
Slide 5: Continued Growth in PFSI's Core Mortgage Banking Businesses
Continued Growth in PFSI’s Core Mortgage Banking Businesses Production(1) Servicing ($ in billions) ($ in billions) $50 $48.4 $180 $160.3 +67% +51% $40 $32.1 $120 $29.1 $106.0 $30 $78.2 $20 $60 $10 $0 $0 2013 2014 2015 December 31, December 31, December 31, 2013 2014 2015 • Sixth largest in the U.S.
Slide 6: Servicing Segment Profitability Improved in Q415
Servicing Segment Profitability Improved in Q415 4Q15 3Q15 • Pretax operating income basis basis $ in thousands points(1) $ in thousands points(1) increased to 4.8 bps from 4.3 bps Operating revenue $ 112,946 28.7 $ 106,173 29.2 Amortization and realization of MSR cash flows (47,403) (12.0) (41,594)
Slide 7: Current Market Environment and Outlook
Current Market Environment and Outlook • Concerns about the global economy and falling oil Average 30-year fixed rate mortgage(1) 5.0% prices have driven significant market volatility, Hundreds resulting in credit spread widening 4.5% 4.01% 3.85% • Mortgage rates remain low 4.0% – Increased slightly
Slide 8: Mortgage Origination Market Outlook for 2016
Mortgage Origination Market Outlook for 2016 Total U.S. Single Family Mortgage Originations ($ in billions) $1,636 $1,452 • Refinance volumes may be $761 stronger than forecast if $486 interest rates remain low • Purchase origination volumes Refinance have increased annually for Purchase each of the
Slide 9: PFSI Initiatives to Grow Production in 2016
PFSI Initiatives to Grow Production in 2016 Correspondent Consumer Direct Wholesale Production Lending Lending • Continuing market share • Infrastructure investments • Comprises 10% of the total gains driven by new seller provide greater fulfillment mortgage origination market relationships capacity
Slide 10: PFSI Continues to Deliver Strong Performance in the Mortgage Industry
PFSI Continues to Deliver Strong Performance in the Mortgage Industry Pre-Tax Return on Equity(1) 2015 through September 30 30.2% Our strong performance has been attributable to the considerable investments we have made in our industry-leading capabilities including: -0.1% • Best-in-class operating
Slide 11: Trends in PennyMac Financial's Businesses
Trends in PennyMac Financial’s Businesses Correspondent Production(1) Loan Servicing(1) Market Share Market Share 10% 1.8% 8.74% 1.56% 1.61% 7.89% 8% 1.5% 6% 1.2% 0.9% 4% 0.6% 2% 0.3% 0% 0.0% 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Consumer Direct Pr
Slide 12: Quarterly Highlights – Correspondent Production
Quarterly Highlights – Correspondent Production Operational Highlights Correspondent Volume and Mix Correspondent acquisitions by PMT in 4Q15 $16 (UPB in billions) $14.4 $13.6 totaled $10.0 billion, down 30% Q/Q – Primarily driven by a reduced market resulting from $12 $4.1 $10.6 higher rates, sea
Slide 13: Quarterly Highlights – Consumer Direct Production
Quarterly Highlights – Consumer Direct Production Operational Highlights Consumer Direct Production Volume Consumer direct production totaled $1.0 billion (UPB in millions) in 4Q15, down 1% Q/Q $1,200 $1,138 $1,042 – Strong volumes in spite of a reduced origination $1,028 market $1,000 $897 $800 –
Slide 14: Quarterly Highlights – Loan Servicing
Quarterly Highlights – Loan Servicing Operational Highlights Loan Servicing Portfolio Composition (UPB in billions) Servicing portfolio totaled $160.3 billion in UPB at $200 quarter end, up 4% from 3Q15 $155 $160 $150 $136 Expansion of servicing operations with a third site $115 $106 to open in
Slide 15: Quarterly Highlights – Investment Management
Quarterly Highlights – Investment Management Operational Highlights Investment Management Revenues Net assets under management were $1.7 billion $15 ($ in millions) at December 31, 2015 PMT’s book value decreased to $20.28 at quarter $12 $10.4 $10.0 end versus $20.52 at September 30, 2015 $9 $7.
Slide 16: Financial Results by Operating Segment
Financial Results by Operating Segment Investment Total Pretax ($ in millions) Production Servicing Management Income 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 3Q15 $ 77.7 $ (6.1) $ 2.2 $ 73.9 4Q15 $ 50.3 $ 27.9 $ 0.7 $ 78.9 Note: Figures may
Slide 17: Mortgage Banking – Production Segment Results
Mortgage Banking – Production Segment Results Gains on production for PFSI’s own account (net gains on Production Segment Quarter ended Quarter ended mortgage loans held for sale, loan September December 31, 30, 2015 September June 30, 30, 20152015 origination fees, and net interest Unaudited ($ i
Slide 18: Mortgage Banking – Servicing Segment Results
Mortgage Banking – Servicing Segment Results Servicing segment revenue increased 70% Servicing Segment Quarter ended Quarter ended September December 31, 30, 2015 2015 September June 30, 30, 20152015 Q/Q, primarily driven by a Unaudited ($ in thousands) $11.7 million fair value Revenue gain in the
Slide 19: Mortgage Servicing Rights (MSR) Asset Valuation
Mortgage Servicing Rights (MSR) Asset Valuation PFSI carries most of its Lower of Fair value not Fair value subject December 31, 2015 amortized cost subject to excess to excess originated MSRs at the Unaudited ($ in millions) or fair value servicing spread servicing spread lower of amortized cost
Slide 20: Investment Management Segment Results
Investment Management Segment Results Quarter ended Unaudited ($ in thousands) Quarter ended December 31, 2015 Quarter ended September 30, 2015 Segment revenue December decreased 21% Q/Q to Revenue Management fees: $6.2 million From PennyMac Mortgage Investment Trust $ 5,670 $ 5,742 From Investmen
Slide 21: Appendix
Appendix PennyMa ac inancia | Services, Inc.
Slide 22: 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 23: 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 24: 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 25: 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 ($10+ billion in UPB) which P
Slide 26: PFSI's Mortgage Servicing Rights Investments in Partnership with PMT
PFSI’s Mortgage Servicing Rights Investments in Partnership with PMT PMT co-invests in Agency MSRs acquired from third-party sellers by PFSI PMT acquires the right to receive the excess servicing spread cash flows over the life of the underlying loans PFSI owns the MSRs, and services the loans
Slide 27: Acquisitions, Originations, and Locks by Product
Acquisitions, Originations, and Locks by Product Unaudited ($ in millions) 4Q14 1Q15 2Q15 3Q15 4Q15 Correspondent Acquisitions Conventional $ 2,772 $ 2,831 $ 3,553 $ 4,055 $ 3,460 Government 4,389 5,106 8,316 10,348 6,558 Jumbo 116 59 26 19 12 Total $ 7,276 $ 7,996 $ 11,895 $ 14,421 $ 10,030 Corresp
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