Pennymac Financial Services, Inc. · NYSE:PFSI
Pennymac Financial Services — Q2 2014 Earnings Presentation
22 slides from Pennymac Financial Services's earnings presentation, Aug 6, 2014
Slide 1: Second Quarter 2014 Earnings Report
Second Quarter 2014 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 Continued revenue and earnings growth, enabled by PFSI’s solid operational foundation Pretax income of $58.0 million; diluted earnings per common share of $0.45 – Strong pretax earnings contributions from each of PFSI’s segments: Production: $32.8 million; Servicing: $20.
Slide 4: PennyMac Financial's Strategic Mission
PennyMac Financial’s Strategic Mission Be the Premier U.S. Mortgage Specialist Firm Consumer direct and correspondent PennyMac will achieve production leadership distinction in Loan servicing its core businesses: Investment management Return on equity and earnings growth Demonstrated over ti
Slide 5: PFSI's Earnings Continue to Grow and Revenues Continue to Diversify
PFSI’s Earnings Continue to Grow and Revenues Continue to Diversify Earnings per Share $0.50 (1) $0.45 Earnings growth reflects PFSI’s $0.38 $0.38 continued success in profitably $0.40 $0.32 $0.30 $0.28 expanding market share across our businesses $0.20 – Organic growth through the execution $0.10
Slide 6: Current Market Environment and Outlook
Current Market Environment and Outlook Interest rates and mortgage rates remain low in a % Average 30-year fixed rate mortgage historical context 10 – Lower rates in Q2 aided refinance activity 8 6 ‒ Higher rates anticipated long-term 4 Continued improvement in home prices across the U.S., 4.14%
Slide 7: Growth Continues in Each of PennyMac Financial's Businesses
Growth Continues in Each of PennyMac Financial’s Businesses Correspondent Production(1) Loan Servicing(1) Market Share Market Share 8% 7.42% 0.95% 1.0% 6.62% 0.85% 6% 0.8% 0.6% 4% 0.4% 2% 0.2% 0% 0.0% 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 Consumer
Slide 8: Quarterly Highlights – Correspondent Production
Quarterly Highlights – Correspondent Production Operational Highlights Correspondent Volume and Mix (UPB in billions) Correspondent acquisitions by PMT in 2Q14 $12 $10.0 totaled $7.0 billion $10 $8.1 – 57% government-insured loans – PFSI earns gain $8 $6.7 on mortgage loans $6.0 $4.3 $5.5 $6 $3.7
Slide 9: Quarterly Highlights – Consumer Direct Production
Quarterly Highlights – Consumer Direct Production Operational Highlights Consumer Direct Production Volume Consumer direct production totaled $403 million $500 (UPB in millions) in 2Q14, up 29% from 1Q14 $403 $400 Strong portfolio-sourced recapture volume $345 $314 $283 – Refinance activity incr
Slide 10: Quarterly Highlights – Loan Servicing
Quarterly Highlights – Loan Servicing Operational Highlights Loan Servicing Portfolio Composition Servicing portfolio totaled $93.6 billion in UPB (UPB in billions) $93.6 $100 at quarter-end, up 12% from 1Q14 $83.8 $78.2 $80 – Prime servicing and subservicing net growth of $11.1 billion in UPB fro
Slide 11: Early Buy-Outs (EBOs) from Pools Serviced for Ginnie Mae
Early Buy-Outs (EBOs) from Pools Serviced for Ginnie Mae Initiated EBO program for defaulted loans (90+ days delinquent) in Ginnie Mae pools, as is Interest cost for defaulted loans customary for well-capitalized servicers – illustrative example only – $575 million in UPB of buyouts during the qua
Slide 12: Quarterly Highlights – Investment Management
Quarterly Highlights – Investment Management Operational Highlights Investment Management Revenues ($ in millions) Investment management revenues were $12.8 $15 $14.4 million, up 2% from 1Q14 $14.0 $13.1 $12.8 $12.5 – Incentive fees from PMT increased 20% Q/Q, $12 from improved performance – Carri
Slide 13: Second Quarter Financial Review
Second Quarter Financial Review Diluted earnings per common share of $0.45 Pretax income of $58.0 million, up 18% from 1Q14 Total net revenue of $130.4 million, up 24% from 1Q14 Total expenses of $72.4 million, up 28% from 1Q14 Business Segment Results Total pretax income from mortgage ban
Slide 14: Mortgage Banking – Production Segment Results
Mortgage Banking – Production Segment Results Production Segment Quarter ended Quarter ended Gain related to June 30, 2014 March 31, 2014 Unaudited ($ in thousands) consumer-direct locks Revenue was approximately Net gains on mortgage loans held for sale at fair value $ 38,101 $ 34,538 320 bps in
Slide 15: Mortgage Banking – Servicing Segment Results
Mortgage Banking – Servicing Segment Results Initiated EBO program Servicing Segment Quarter ended Quarter ended June 30, 2014 March 31, 2014 for defaulted loans Unaudited ($ in thousands) Revenue Purchase of loans out of Net gains on mortgage loans held for sale at fair value $ 1,603 $ - Ginnie
Slide 16: Mortgage Servicing Rights (MSR) Asset Valuation
Mortgage Servicing Rights (MSR) Asset Valuation Lower of Fair value not Fair value subject PFSI carries most of its amortized cost subject to excess to excess June 30, 2014 or fair value servicing spread servicing spread originated MSRs at the ($ in millions) lower of amortized cost or UPB $27,357
Slide 17: Investment Management Segment Results
Investment Management Segment Results ($ in thousands) Quarter ended Quarter ended June 30, 2014 March 31, 2014 Revenue Management fees: From PennyMac Mortgage Investment Trust $ 8,912 $ 8,074 From Investment Funds 2,086 2,035 10,998 10,109 Carried Interest from Investment Funds 1,834 2,157 Net inte
Slide 18: Appendix
Appendix Financial Services, Inc.
Slide 19: 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 20: 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 2014 GSEs, Agencies, regulators and our financing partners • Continued organic growth of loan - Since inception, PennyMac has focused on building production and and testing processes an
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 banks are selling MSRs • Intermittent large bulk portfolio • GSE and Ginnie Mae servicing in due to continuing operational sales ($10+ billion in U
Slide 22: Acquisitions, Originations, and Locks by Product
Acquisitions, Originations, and Locks by Product ($ in millions) 2Q13 3Q13 4Q13 1Q14 2Q14 Correspondent Acquisitions Conventional $ 4,216 $ 3,608 $ 2,419 $ 1,907 $ 2,911 Government 4,262 3,992 3,340 2,913 3,991 Jumbo 107 74 14 13 81 Total $ 8,586 $ 7,674 $ 5,773 $ 4,833 $ 6,983 Correspondent Locks C
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