Pennymac Financial Services, Inc. · NYSE:PFSI
Pennymac Financial Services — Investor Day (June 2021)
76 slides from Pennymac Financial Services's investor day presentation, Jun 17, 2021
Slide 1: Investor Day June 2021
PennyMac (PannyMac’ Financial Services, Inc. Mortgage Investment Trust INVESTOR DAY June 202 »
Slide 2: Forward-looking statements
2 This presentation contains information from PennyMac Financial Services, Inc.’s (“PFSI”) and PennyMac Mortgage Investment Trust’s (“PMT”) joint investor day held on June 17, 2021 (collectively, “PennyMac,” “our” or “we”) and contains forward-looking statements within the meaning of Section 21E of
Slide 3: Agenda
3 AGENDA 1. Overview – David Spector, Andy Chang 2. Mortgage Banking Overview – Doug Jones 3. Consumer Direct Lending – Scott Bridges 4. Broker Direct Lending – Kim Nichols 5. Correspondent Production – Abbie Tidmore 6. Mortgage Fulfillment – Jim Follette 7. Loan Servicing – Steve Bailey 8. PMT – Va
Slide 4: Overview
OVERVIEW DAVID SPECTOR Chairman and Chief Executive Officer ANDY CHANG Senior Managing Director Chief Operating Officer
Slide 5: PennyMac is an established leader in the U.S. mortgage market
5 $197 billion in 2020 $465 billion outstanding(2) IN SERVICING(1) YEARS FOR PFSI AS A PUBLIC COMPANY 8 14 YEARS OF OPERATIONS PMT #2 § CORRESPONDENT PRODUCTION § CONSUMER DIRECT § BROKER DIRECT IN PRODUCTION(1) IS A LEADING RESIDENTIAL MORTGAGE REIT PENNYMAC IS AN ESTABLISHED LEADER IN THE U.S. MOR
Slide 6: Superior long-term returns to investors
6 THE PENNYMAC COMPANIES HAVE DELIVERED SUPERIOR LONG-TERM RETURNS TO INVESTORS Led by a deep management team with significant mortgage banking expertise and a robust, sophisticated risk management program. PFSI Annualized Total Return to Stockholders(1) PMT Annualized Total Return to Shareholders(1
Slide 7: U.S. mortgage origination volume and debt outstanding
7 $0.7 $0.8 $0.9 $1.0 $1.1 $1.1 $1.3 $1.5 $1.7 $1.8 $1.8 $1.3 $1.7 $2.1 $1.8 $1.6 $2.3 $4.1 $3.7 $2.6 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E Purchase Refinance $10.0 $9.9 $10.1 $10.3 $10.6 $10.9 $11.2 $11.7 $11.8 $12.4 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E U.S. Mortgage De
Slide 8: PennyMac has consistently gained share across its businesses
8 10.5% 11.9% 15.5% 17.7% 17.8% 2017 2018 2019 2020 1Q21 0.3% 0.9% 2.2% 2.7% 2017 2018 2019 2020 1Q21 PENNYMAC HAS CONSISTENTLY GAINED SHARE ACROSS ITS BUSINESSES Correspondent Production(1) Loan Servicing(1) Consumer Direct Production(1) Broker Direct Production(1) 0.5% 0.5% 0.7% 1.0% 1.3% 2017 201
Slide 9: Extensive risk-governance platform
9 Second Line First Line Third Line Risk management disciplines fully integrated throughout the organization are the foundation of PennyMac’s sustained success. PENNYMAC’S EXTENSIVE RISK-GOVERNANCE PLATFORM BUILT TO ADDRESS THE EVOLVING MORTGAGE MARKET Internal Audit Management Committees & Enterpri
Slide 10: Significant technology investments drive growth, efficiency and scale
10 SIGNIFICANT TECHNOLOGY INVESTMENTS DRIVE GROWTH, EFFICIENCY AND SCALE Investments in technology, processes, and data management to-date have resulted in PennyMac’s integrated and scalable platform Invested $165 MILLION in transformational technology initiatives from 2018 through 2020; plan to inv
Slide 11: Investments in marketing to drive new customer growth
11 INVESTMENTS IN MARKETING TO DRIVE NEW CUSTOMER GROWTH PennyMac’s outstanding growth since its inception has been achieved with limited marketing expense or branding. CONSUMER DIRECT Grow new customer acquisition via lead generation strategies Drive portfolio retention by leveraging data science a
Slide 12: Vision for success in the medium-term
12 Targeting an annual ROE of 20%+ as we accomplish these business goals Consumer Direct Lender Broker Direct Lender Servicer TOP 5 TOP 3 TOP 3 PENNYMAC FINANCIAL’S VISION FOR SUCCESS IN THE MEDIUM-TERM Correspondent Aggregator #1 GROW SHARE as the
Slide 13: PennyMac is well-positioned for long-term success
13 BALANCED PRODUCTION AND SERVICING BUSINESS MODEL EFFECTIVE MULTI-CHANNEL STRATEGY SCALABLE AND EFFICIENT PLATFORM INNOVATIVE AND PROPRIETARY TECHNOLOGY LARGE-SCALE RISK MANAGEMENT AND HEDGING EXPERTISE STRONG AND SOPHISTICATED CAPITAL STRUCTURE DEEP AND EXPERIENCED MANAGEMENT TEAM PENNYMAC IS WEL
Slide 14: Strong independent mortgage banks are leading the market
14 STRONG INDEPENDENT MORTGAGE BANKS ARE LEADING THE MARKET $10.6 $11.7 2010 2020 Non-banks Banks $1.6 $4.1 2010 2020 Non-banks Banks • Non-banks have gained significant share as a result of specialized focus and dedicated resources including technology for the mortgage business • Many banks have re
Slide 15: Leader with scale in a large, fragmented market
15 (market share) (market share) (1) Inside Mortgage Finance for the year ended or as of March 31, 2021 Loan Production(1) Loan Servicing(1) PENNYMAC IS A LEADER WITH SUBSTANTIAL OPERATING SCALE IN A LARGE, FRAGMENTED MARKET Others, 63.6% Wells Fargo, 4.8% PennyMac, 4.8% PennyMac, 3.8% Rocket, 7.9%
Slide 16: Balanced business model is a flywheel
16 PFSI’s BALANCED BUSINESS MODEL IS A FLYWHEEL In both businesses, scale and efficiency are critical for success. • Diversified business through correspondent, consumer direct and broker direct channels • Correspondent and broker direct channels in particular allow PFSI to access purchase-money vol
Slide 17: Synergistic relationship between PFSI and PMT
17 SYNERGISTIC RELATIONSHIP PROVIDES A COMPETITIVE ADVANTAGE FOR BOTH COMPANIES Oversight from independent PFSI directors and PMT trustees Mortgage company with industry-leading operations and technology Tax-efficient vehicle with long track record of success investing in residential mortgage assets
Slide 18: Track record across various market environments
18 $1.3 $2.1 $1.6 $2.3 $4.1 $3.7 2013 2014 2015 2016 2017 2018 2019 2020 2021E U.S. Origination Market (in trillions) 0.0% 1.0% 2.0% 3.0% 4.0% 10-Year Treasury Yield 48% 75% 64% 61% 73% 80% 63% 40% 34% 40% 58% 53% 49% 63% 71% 54% 36% 29% 2013 2014 2015 2016 2017 2018 2019 2020 1Q21 PFSI Purchase Mix
Slide 19: Strong and growing purchase market driven by demographics
19 5.7 6.1 6.8 7.8 9.6 10.2 11.0 12.1 10.6 13.1 13.8 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Increasing demand expected to support the purchase mortgage market as Millennial generation hits key average age for first time home buyers. STRONG AND GROWING PURCHASE MARKET DRIVEN BY DEMOGR
Slide 20: Positioned to succeed regardless of future trends
20 PENNYMAC IS POSITIONED TO SUCCEED REGARDLESS OF FUTURE TRENDS INDUSTRY CONSOLIDATION AND GROWING IMPORTANCE OF SCALE INCREASED HOME PURCHASES DRIVING THE ORIGINATION MARKET HIGHER MORTGAGE RATES OVER TIME AND INCREASED VALUE IN SERVICING INCREASED RELEVANCE OF NON-AGENCY PRODUCTS CONTINUED ADVANC
Slide 21: Mortgage Banking Overview
MORTGAGE BANKING OVERVIEW DOUG JONES President and Chief Mortgage Banking Officer
Slide 22: A leader across the massive mortgage market
22 1% 2% 2% 2% 3% 3% 4% 4% 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 3/31/21 2% 3% 3% 4% 4% 5% 5% 5% 2014 2015 2016 2017 2018 2019 2020 1Q21 Correspondent Consumer-Direct Broker-Direct PENNYMAC IS A LEADER ACROSS THE MASSIVE MORTGAGE MARKET Channel Where we are today(1) Medium-
Slide 23: Scalable platform supports long-term growth plans
23 PENNYMAC’s PLATFORM IS SCALABLE AND SUPPORTS LONG-TERM GROWTH PLANS $1 $4 $12 2016 2017 2018 2019 2020 $63 $63 $62 $104 $161 2016 2017 2018 2019 2020 (UPB in billions) $194 $246 $299 $369 $427 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 $6 $5 $5 $10 $23 2016 2017 2018 2019 2020 (UPB in billions)
Slide 24: Participation across all three origination channels
24 PENNYMAC’s PARTICIPATION ACROSS ALL THREE ORIGINATION CHANNELS IS A STRATEGIC ADVANTAGE • Operational consistency and low cost structure • Independent mortgage banks, community banks and credit unions • Access to the growing purchase market via branch offices and loan officers with local relation
Slide 25: Investing in transformative mortgage banking technology
25 Proprietary Fulfillment Capabilities Servicing Platform (SSE) Digital Lending Platform PENNYMAC CONTINUES TO INVEST IN TRANSFORMATIVE MORTGAGE BANKING TECHNOLOGY Data Services Customer Self-Service Default Servicing Core Servicing • Suite of 25 purpose-built, integrated applications • Modern user
Slide 26: Consumer Direct Lending
CONSUMER DIRECT LENDING SCOTT BRIDGES Managing Director Consumer Direct Lending
Slide 27: Investments expected to drive consumer direct growth
27 $33 $33 $64 $141 $45 $5 $5 $10 $23 $11 2017 2018 2019 2020 1Q21 Servicing Portfolio Runoff Consumer Direct Originations • Current market share of approximately 1.3% represents significant opportunity for growth in the channel • Marketing and technology initiatives to pursue growth in purchase and
Slide 28: Uniquely positioned to grow new customer acquisition
28 UNIQUELY POSITIONED TO GROW NEW CUSTOMER ACQUISITION CHANNEL Pre-screened calls via a centralized call center maximizes efficiency and loan officer capacity Specialized team dedicated to non-portfolio originations maximizes lead conversion Customer retention leads to ongoing application of data s
Slide 29: Technology, data science and marketing drive production
29 TECHNOLOGY, DATA SCIENCE AND MARKETING DRIVE IMPROVED PRODUCTION PERFORMANCE Servicing Portfolio Customers 275M DATA ENRICHMENT 900K DATA SCIENCE AND ANALYTICS End2End Analytics MULTI-CHANNEL MARKETING PennyMac is uniquely positioned to capture sales opportunities at every customer touch point. I
Slide 30: Data and analytics drive growth in purchase originations
30 DATA AND ANALYTICS DRIVE PATH TO GROWTH IN PURCHASE ORIGINATIONS Advanced data analytics to anticipate home buying activity Marketing to consumers in consideration phase, far in advance of decision making Aggressive pre-approval strategy to maximize opportunity Communication strategies to keep al
Slide 31: Transformational technology implementation in progress
31 Leads to increased operational efficiency and industry-leading approval times TRANSFORMATIONAL TECHNOLOGY IMPLEMENTATION IN PROGRESS • Co-piloting: PennyMac loan officers can view and assist a customer with an application in real time • Faster and more accurate collection of customer data Optimiz
Slide 32: Path to becoming a top retail originator
32 PATH TO BECOMING A TOP 5 RETAIL ORIGINATOR CONTINUE IMPLEMENTATION OF TECHNOLOGY SUPPORTED BY ROBUST DATA ANALYTICS FOCUS ON ENHANCING THE CUSTOMER EXPERIENCE EXECUTE BRAND STRATEGIES FOR RECAPTURE GROWTH BUILD A BEST-IN-CLASS MARKETING PLATFORM
Slide 33: Broker Direct Lending
BROKER DIRECT LENDING KIM NICHOLS Senior Managing Director Broker Direct Lending
Slide 34: A rapidly-growing wholesale lender
34 PENNYMAC FINANCIAL IS A RAPIDLY-GROWING WHOLESALE LENDER 671 1,091 1,693 1,982 12/31/2017 12/31/2018 12/31/2019 12/31/2020 3/31/2021 N/A Strong market share growth since our entrance into the channel in 2018 • Rapid increase in brokers and non-delegated sellers • Growing presence in the non-deleg
Slide 35: Proprietary technology and tools distinguish PennyMac
35 PROPRIETARY TECHNOLOGY AND TOOLS DISTINGUISH PENNYMAC • PennyMac’s POWER portal provides brokers with full transparency and access to their pipelines and loan data to transact around the clock • Extends best-in-class tools and solutions to brokers with ease of use via a single, digital platform •
Slide 36: Technology and tools supported by a great team
36 TECHNOLOGY AND TOOLS SUPPORTED BY A GREAT TEAM OF ENGAGED PEOPLE Dedicated National Sales Team Who Serve as Trusted Partners Single Point of Operational Contact Trust and Consistency of Execution Culture of Partnership and Customer Focus Brokers Technology Trust Relationships As much as brokers n
Slide 37: Supporting our B2B relationships
37 PennyMac can be a long-term partner for brokers and emerging bankers to support their business goals, whatever they may be. Non-Delegated Emerging Mortgage Banker Delegated Best Efforts Delegated Mandatory Independent Mortgage Broker THE MORTGAGE PROFESSIONAL CONTINUUM… SUPPORTING OUR B2B RELATIO
Slide 38: Path to becoming a top wholesale originator
38 PATH TO BECOMING A TOP 3 WHOLESALE ORIGINATOR EXPAND NON-DELEGATED SERVICE OFFERING GROW OUR BASE OF BROKERS AND NON-DELEGATED SELLERS CONTINUE INVESTMENT IN TECHNOLOGY TO HELP BUSINESS PARTNERS GROW FOCUS ON THE CLIENT EXPERIENCE AND RELATIONSHIPS
Slide 39: Correspondent Production
CORRESPONDENT PRODUCTION ABBIE TIDMORE Senior Managing Director Correspondent Production
Slide 40: The leader in correspondent production
40 PennyMac has become the largest correspondent aggregator in the U.S. with a transparent business model well-aligned with customer and shareholder desires. • Consistent execution • Relationship-based model • Strong capital base • Unmatched commitment Innovative technology • Seamless integration wi
Slide 41: Correspondent production opportunity expected to remain robust
41 $77 $122 $170 $166 $168 $301 $379 $420 $409 $109 $161 $203 $212 $179 $185 $255 $288 $288 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 Marketwide survey of correspondent origination volume (in billions) Correspondent channel funded volume (in billions) Changes implemented to the GSEs’ preferred st
Slide 42: What changed for correspondent aggregators
42 (1) https://home.treasury.gov/news/press-releases/sm1236 WHAT CHANGED FOR CORRESPONDENT AGGREGATORS? HOW PENNYMAC WILL HELP Each GSE will limit volume purchased through the cash window to $1.5 billion per lender during any period comprising four calendar quarters(1) PennyMac’s infrastructure and
Slide 43: Sustaining leadership in correspondent production
43 SUSTAINING PENNYMAC’S LEADERSHIP POSITION IN CORRESPONDENT PRODUCTION PROVIDE INNOVATIVE SOLUTIONS FOR CORRESPONDENTS CURRENTLY DELIVERING TO THE GSE CASH WINDOW CONTINUE TO INCREASE SHARE OF EXISTING CLIENT PRODUCTION CONTINUE TO DELIVER AN UNMATCHED CUSTOMER EXPERIENCE WITH CONSISTENTLY COMPETI
Slide 44: Mortgage Fulfillment
MORTGAGE FULFILLMENT JIM FOLLETTE Senior Managing Director Chief Mortgage Fulfillment Officer
Slide 45: Fulfillment operations are a key differentiator
45 FULFILLMENT OPERATIONS ARE A KEY DIFFERENTIATOR FOR PENNYMAC CONSUMER DIRECT CORRESPONDENT PRODUCTION Mortgage Fulfillment Division • Innovative End2End, data driven, task-based workflow for all channels • Loan origination process divided into 17 specific functions, assigned to specialists for im
Slide 46: Supporting production goals for the long term
46 SUPPORTING PENNYMAC’s PRODUCTION GOALS FOR THE LONG TERM DEVELOP TECHNOLOGY WITH A COMMITMENT AND FOCUS ON OMNI-CHANNEL SOLUTIONS SUPPORT THE PLANNED GROWTH OF ALL THREE PRODUCTION CHANNELS WITH A SCALABLE AND EFFICIENT FULFILLMENT PROCESS CONTINUE TO FOCUS ON SOLVING FOR THE CUSTOMER LEVERAGE VA
Slide 47: Loan Servicing
LOAN SERVICING STEVE BAILEY Senior Managing Director Chief Servicing Officer
Slide 48: A low cost and profitable mortgage servicer
48 $130 $136 $144 $160 $167 $193 $205 $414 PennyMac Large Banks Large IMBs Prime Mid-Sized Banks Mid-Sized IMBs Total Specialty % Government Portfolio PENNYMAC FINANCIAL IS A LOW COST AND PROFITABLE MORTGAGE SERVICER ($ per loan) (basis points) (1) MBA 2021 Servicing Operations Study (2020 data). Pe
Slide 49: Efficiency and high service standards drive customer satisfaction
49 3.36 1.45 1.10 1.05 0.83 0.66 0.62 0.44 0.39 0.27 EFFICIENCY AND HIGH SERVICE STANDARDS DRIVE CUSTOMER SATISFACTION (1) Data Sources: Inside Mortgage Finance and consumerfinance.gov for the year ended March 31, 2021 Rocket Chase Wells Fargo US Bank Flagstar Bank Mr. Cooper Freedom Mortgage Bank o
Slide 50: Proprietary servicing platform (SSE)
50 PROPRIETARY SERVICING PLATFORM (SSE) DRIVES COMPETITIVE ADVANTAGE SSE is a suite of proprietary PennyMac applications and processes integrated with key partners’ applications and PennyMac’s data warehouse for increased efficiency in servicing, tracking and reporting. PRIME SERVICING Loan administ
Slide 51: Quick resolutions for borrowers with COVID-19 hardships
51 TECHNOLOGY ENABLED QUICK RESOLUTIONS FOR BORROWERS WITH HARDSHIPS RELATED TO COVID-19 Delinquency rates declining faster than the overall industry reflects our expertise in loan servicing, including loss mitigation activities related to COVID-19 Forbearance Enrollment: Forbearance Check Ins: Forb
Slide 52: Early buyout activities in servicing Ginnie Mae loans
52 $1.6 $2.9 $2.9 $5.2 $9.7 $4.2 EBO loan volume (UPB in billions) $133 $171 $205 $233 $252 $261 2016 2017 2018 2019 2020 1Q21 Owned Servicing Portfolio Balance at Period End (UPB in billions) Hurricanes Harvey and Irma EARLY BUYOUT ACTIVITIES ARE AN IMPORTANT COMPONENT OF SERVICING GINNIE MAE LOANS
Slide 53: Expects to become a top 3 servicer in the medium-term
53 Top 3 UPB of Residential Mortgage Debt Held by Top 10 Mortgage Servicers(1) PENNYMAC EXPECTS TO BECOME A TOP 3 SERVICER IN THE MEDIUM-TERM • Strong, growing origination capability • Strong management team with mature enterprise risk management to ensure controlled growth 12/31/15 12/31/18 PennyMa
Slide 54: Servicing is a key component of the balanced business model
54 LARGE SERVICING BUSINESS IS A KEY COMPONENT OF PENNYMAC’S BALANCED BUSINESS MODEL DRIVER OF LOW- COST, HIGH-QUALITY LEADS FOR OUR CONSUMER-DIRECT LENDING BUSINESS SUCCESSFUL EXECUTION OF LOSS MITIGATION ACTIVITIES KEEPS BORROWERS IN THEIR HOMES AND ENHANCES LIFETIME RELATIONSHIPS SERVES AS A NATU
Slide 55: PMT
PMT VANDY FARTAJ Senior Managing Director Chief Investment Officer WILL CHANG Senior Managing Director Deputy Chief Investment Officer
Slide 56: PMT is a unique and successful residential mortgage REIT
56 • Leading producer of conventional mortgage loans to Fannie Mae and Freddie Mac • Leverages the unique capabilities and industry-leading operational platform provided by its manager and services provider, PFSI • Strong balance sheet with sophisticated financing structures for the efficient manage
Slide 57: Focused on unique investment strategies in three segments
57 $1,163 $1,878 $3,727 $2,618 $2,581 12/31/17 12/31/18 12/31/19 12/31/20 3/31/21 Conventional Correspondent Production PMT IS FOCUSED ON UNIQUE INVESTMENT STRATEGIES IN THREE SEGMENTS $23 $26 $61 $102 $34 2017 2018 2019 2020 1Q21 • Leading producer of conventional conforming mortgage loans • Consis
Slide 58: Outlook for credit sensitive strategies
58 OUTLOOK FOR RETURNS FROM PMT’s CREDIT SENSITIVE STRATEGIES REMAINS STRONG STRONG ALIGNMENT OF INTERESTS • Conventional borrowers with weighted average FICOs of over 750 • Forbearance and delinquency rates continue to decline • 60+ day delinquency rate of 5.5% as of March 31, 2021 • CRT investment
Slide 59: Correspondent production generates investments for PMT
59 CORRESPONDENT PRODUCTION HAS ORGANICALLY GENERATED SIGNIFICANT INVESTMENTS FOR PMT LTM Correspondent Production $182bn 727 $2.4bn $2.6bn Correspondent Clients MSR Investments Credit Risk Transfer Investments Correspondent Production Investments Note: All figures at or as of 3/31/21
Slide 60: Interest rate sensitive strategies return profile
60 • Agency MBS and interest rate hedges to offset the interest rate sensitivity of MSRs • Over time, our results have demonstrated successful hedging of mortgage servicing rights in volatile markets • Primarily newly originated loans with low interest rates given PMT’s record volumes of loan produc
Slide 61: Hedging approach for interest rate sensitive investments
61 Gain in value with increasing rates Gain in value with decreasing rates MSRs AGENCY MBS INTEREST RATE HEDGES • PMT seeks to manage interest rate risk exposure on a “global” basis, recognizing interest rate sensitivities across its investment strategies • Multiple mortgage-related investment strat
Slide 62: Technology investments made by PFSI
62 • Single system for all trades, including options, futures and other derivative instruments • Supports confirmations for counterparty trades • Compares best-execution pooling results against internally developed results • Automated quality control support deployed to track loans pooled differentl
Slide 63: PMT is well-positioned for a changing mortgage market
63 PMT is uniquely positioned to capitalize on current and evolving investment environments given its scale and importance in the home ownership ecosystem Mortgage rates remain near historic lows Conventional mortgage origination market remains especially robust Strong demographic and secular trends
Slide 64: Continuing to organically create investments
64 PMT IS WELL-POSITIONED TO CONTINUE ORGANICALLY CREATING INVESTMENTS Current Production New Opportunity Fannie Mae Loans Freddie Mac Loans Current Investments Potential Investments MSR Investments CRT Investments Increased non-owner occupied originations as a result of PSPA amendments MSR and subo
Slide 65: PMT financing and funding capacity
65 $800 $2,009 $555 MSR & Servicing Advance Financing CRT Financing Exchangeable Senior Notes $350 mm FMSR Term Notes due March 2026 $788 mm CRT Term Notes due 2022 $564 mm CRT Term Notes due 2023 $657 mm CRT Term Notes due 2024 • Exchangeable Senior Notes provide stable, long-term funding for the b
Slide 66: PMT represents an attractive investment opportunity
66 TRACK RECORD OF STRONG RISK- ADJUSTED RETURNS, INCLUDING COMMON DIVIDENDS STRONG OPPORTUNITY IN CONVENTIONAL CORRESPONDENT PRODUCTION AND THE RESULTING INVESTMENTS STRONG BALANCE SHEET PAIRED WITH SECURITIZATION INFRASTRUCTURE AND EXPERTISE LEVERAGES PENNYMAC FINANCIAL’S INVESTMENTS IN TECHNOLOGY
Slide 67: Capital Management & Financial Outlook
CAPITAL MANAGEMENT & FINANCIAL OUTLOOK PAM MARSH Senior Managing Director Treasurer DAN PEROTTI Senior Managing Director Chief Financial Officer
Slide 68: Prudent financial management with low leverage
68 0.7x 0.9x 0.7x 0.6x 0.8x 2.4x 2.4x 3.0x 3.6x 4.0x 1.9x 2.2x 2.8x 2.3x 2.7x 12/31/17 12/31/18 12/31/19 12/31/20 3/31/21 PFSI’s PRUDENT FINANCIAL MANAGEMENT WITH LOW LEVERAGE AND RISK MANAGEMENT EXPERTISE Robust process to monitor and forecast liquidity, hedge results and reserves ensure a strong c
Slide 69: Strong and sophisticated capital structure
69 PFSI HAS DEVELOPED A STRONG AND SOPHISTICATED CAPITAL STRUCTURE OVER ITS HISTORY Financing for loan inventory supported by multiple strong bank partners, structured with flexible excess capacity to support business needs at optimal cost • Unsecured term notes provide stable, long-term funding for
Slide 70: Opportunities for capital deployment
70 PFSI’s OPPORTUNITIES FOR CAPITAL DEPLOYMENT Ongoing investments in the business to ensure long-term success, including major technology enhancements and growing the direct lending platform Capital required to address opportunities arising from different market environments (MSRs, EBO) Continue to
Slide 71: Consistently increased book value while returning capital
71 PFSI HAS CONSISTENTLY INCREASED BOOK VALUE WHILE RETURNING CAPITAL $7.27 $9.92 $15.49 $21.34 $47.80 $51.78 6/30/13 12/31/14 12/31/16 12/31/18 12/31/20 3/31/21 CAPITAL RETURN • Quarterly dividend instituted in 2019 – have increased twice since • Repurchased shares totaling $738 million throughout
Slide 72: Direct lending and servicing driving profitability
72 $59 $172 -$15 $262 $142 $103 $147 $147 $543 $258 2017 2018 2019 2020 1Q21 Pretax Income Pretax Income Excluding Valuation Related Changes $239 $87 $528 $1,964 $363 2017 2018 2019 2020 1Q21 Estimated Contribution from Direct Lending (CDL & BDL) DIRECT LENDING AND SERVICING ARE DRIVING PFSI’s PROFI
Slide 73: Medium-term targets drive financial outlook
73 PFSI’s MEDIUM-TERM TARGETS DRIVE ITS FINANCIAL OUTLOOK IN A NORMALIZED MARKET • Illustration assumes normalized market volumes and margins, as well as share repurchases over the expected time frame • Strong normalized returns on equity and earnings per share achieved with adherence to prudent fin
Slide 74: Illustrative medium-term outlook for PFSI
74 ILLUSTRATIVE MEDIUM-TERM OUTLOOK FOR PFSI IN A NORMALIZED MARKET ENVIRONMENT $4.1 $2.3 2020 Medium Term $161 $130 2020 Medium Term $23 $50 2020 Medium Term $12 $40 2020 Medium Term $427 $800 2020 Medium Term 2020 Assumptions Correspondent Consumer Direct Broker Direct Servicing Portfolio (UPB in
Slide 75: Appendix
PénnyMac’ APPENDIX »
Slide 76: Servicing segment supplemental table
76 2017 2018 2019 2020 1Q21 (1) Of average portfolio UPB (2) Comprised of net gains on loans held for sale at fair value and net interest income related to EBO loans (3) Consists of interest shortfall and recording and release fees (4) Changes in fair value do not include realization of MSR cash flo
PennyMac Financial Services — Investor Day (June 2021) on 6ix