WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)--PennyMac Financial Services, Inc. (NYSE: PFSI) today reported net income of $53.0 million for the fourth quarter of 2018, on revenue of $251.2 million. Net income attributable to PFSI common stockholders was $38.7 million, or $0.63 per diluted share. Book value per share increased to $21.34 from $20.67 on a pro forma basis at September 30, 20181.
Fourth Quarter 2018 Highlights
-
Pretax income was $58.3 million, down 5 percent from the prior quarter
and 52 percent from the fourth quarter of 2017; diluted earnings per
share of $0.63
- Benefit from the remeasurement of tax-related items contributed $0.11 to diluted earnings per share; tax provision rate reduced to 26.9 percent from 27.4 percent
-
Production segment pretax income was $25.4 million, down 1 percent
from the prior quarter and 54 percent from the fourth quarter of 2017
- Total loan acquisitions and originations were $19.4 billion in unpaid principal balance (UPB), up 8 percent from the prior quarter and 14 percent from the fourth quarter of 2017
- Correspondent government, non-delegated and direct lending interest rate lock commitments (IRLCs) totaled $11.2 billion in UPB, down 1 percent from the prior quarter and 5 percent from the fourth quarter of 2017
- Correspondent conventional and jumbo acquisition volume fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT) of $9.1 billion in UPB, up 21 percent from the prior quarter and 54 percent from the fourth quarter of 2017
-
Servicing segment pretax income was $29.3 million, down 13 percent
from the prior quarter and 8 percent from the fourth quarter of 2017
- Servicing segment pretax income excluding valuation-related changes was $44.5 million, up 49 percent from the prior quarter and 57 percent from the fourth quarter of 20172
- The servicing portfolio grew to $299.3 billion in UPB, up 5 percent from September 30, 2018
- Completed $3.6 billion in UPB of previously announced bulk MSR portfolio acquisitions
-
Investment Management segment pretax income was $2.5 million,
essentially unchanged from the prior quarter and up from $1.5 million
in the fourth quarter of 2017
- Net assets under management were $1.6 billion, essentially unchanged from September 30, 2018, and from December 31, 2017
- As previously announced, the Company completed a corporate reorganization on November 1, 2018, that simplified its corporate structure and converted all equity ownership to a single class of publicly-traded common stock
Notable activity after quarter end
- Completed the acquisition of additional bulk Ginnie Mae MSR portfolios totaling $798 million in UPB
- Launched a Home Equity Line of Credit (HELOC) product offering to customers in our servicing portfolio, offering the opportunity to tap into the equity in their homes while keeping their existing first-mortgage interest rates
- Launched a prime non-qualified mortgage (non-QM) loan product to our correspondent clients
Full-Year 2018 Highlights
-
Pretax income was $267.7 million; down 20 percent from the prior year
- Diluted earnings per share of $2.59 includes a benefit of $0.20 resulting from the remeasurement of tax-related items
- Total net revenue of $984.6 million, up 3 percent from the prior year
- Loan production totaled $67.6 billion in UPB, a decrease of 1 percent from the prior year
- Servicing portfolio reached $299.3 billion in UPB, up 22 percent from December 31, 2017
|
1 |
$20.67 is the pro forma book value per share at September 30, 2018, adjusted for the impact of PennyMac Financial Services, Inc.’s corporate reorganization completed on November 1, 2018. Reported book value per share at September 30, 2018 was $21.47. |
|
|
2 |
Excludes changes in the fair value of MSRs and the ESS liability, (losses) gains on hedging which were $(67.3) million, $0.5 million, and $59.8 million, respectively, and a provision for credit losses on active loans of $(8.3) million in the fourth quarter of 2018. |
“Our fourth quarter and full-year 2018 results demonstrate the strength of the balanced mortgage banking platform we have built to deliver solid performance across a variety of market conditions,” said President and CEO David Spector. “We grew our servicing portfolio by over 20 percent in 2018 to nearly $300 billion, driven primarily by our own production activities, and continue to capture efficiencies and gain scale as the portfolio grows. Our effective risk management and disciplined hedging activities also contributed to our solid results. The unique execution capabilities in our production business helped drive the increases in our production volumes and market share during the quarter.”
The following table presents the contribution of PennyMac Financial’s Production, Servicing and Investment Management segments to pretax income:
| Quarter ended December 31, 2018 | |||||||||||||||
| Mortgage Banking |
Investment |
||||||||||||||
| Production | Servicing | Total |
Management |
Total | |||||||||||
| (in thousands) | |||||||||||||||
| Revenue | |||||||||||||||
| Net gains on mortgage loans held for sale at fair value | $ | 36,848 | $ | 22,900 | $ | 59,748 | $ | - | $ | 59,748 | |||||
| Loan origination fees | 26,165 | - | 26,165 | - | 26,165 | ||||||||||
| Fulfillment fees from PMT | 28,591 | - | 28,591 | - | 28,591 | ||||||||||
| Net servicing fees | - | 105,212 | 105,212 | - | 105,212 | ||||||||||
| Management fees | - | - | - | 6,559 | 6,559 | ||||||||||
| Carried Interest from Investment Funds | - | - | - | - | - | ||||||||||
| Net interest income (expense): | - | - | |||||||||||||
| Interest income | 18,273 | 39,460 | 57,733 | - | 57,733 | ||||||||||
| Interest expense | 2,970 | 33,483 | 36,453 | 8 | 36,461 | ||||||||||
| 15,303 | 5,977 | 21,280 | (8 | ) | 21,272 | ||||||||||
| Other | 511 | 722 | 1,233 | 1,295 | 2,528 | ||||||||||
| Total net revenue | 107,418 | 134,811 | 242,229 | 7,846 | 250,075 | ||||||||||
| Expenses | 82,007 | 105,525 | 187,532 | 5,363 | 192,895 | ||||||||||
|
Income before provision for income taxes and
non-segment activities |
25,411 | 29,286 | 54,697 | 2,483 | 57,180 | ||||||||||
| Non-segment activities(1) | 1,126 | ||||||||||||||
| Pretax income | $ | 25,411 | $ | 29,286 | $ | 54,697 | $ | 2,483 | $ | 58,306 | |||||
Production Segment
Production includes the correspondent acquisition of newly originated government-insured mortgage loans for PennyMac Financial’s own account, the underwriting and acquisition of loans from correspondent sellers on a non-delegated basis, fulfillment services on behalf of PMT and direct lending through the consumer direct and broker direct channels.
PennyMac Financial’s loan production activity for the quarter totaled $19.4 billion in UPB, of which $10.4 billion in UPB was for its own account, and $9.1 billion in UPB was fee-based fulfillment activity for PMT. Correspondent government, non-delegated and direct lending IRLCs totaled $11.2 billion in UPB.
Production segment pretax income was $25.4 million, a decrease of 1 percent from the prior quarter and a decrease of 54 percent from the fourth quarter of 2017. Production revenue totaled $107.4 million, an increase of 3 percent from the prior quarter and a decrease of 18 percent from the fourth quarter of 2017.
The components of net gains on mortgage loans held for sale are detailed in the following table:
| Quarter ended | ||||||||||||
|
December 31,
2018 |
September 30,
2018 |
December 31,
2017 |
||||||||||
| (in thousands) | ||||||||||||
| Receipt of MSRs in loan sale transactions | $ | 141,100 | $ | 147,259 | $ | 143,904 | ||||||
|
Mortgage servicing rights recapture payable to
PennyMac Mortgage Investment Trust |
(1,259 | ) | (1,157 | ) | (1,553 | ) | ||||||
| Provision for representations and warranties, net | (229 | ) | (687 | ) | (381 | ) | ||||||
| Cash investment (1) | (46,260 | ) | (90,199 | ) | (69,001 | ) | ||||||
|
Fair value changes of pipeline, inventory and
hedges |
(33,604 | ) | 1,698 | 25,652 | ||||||||
| Net gains on mortgage loans held for sale | $ | 59,748 | $ | 56,914 | $ | 98,621 | ||||||
|
Net gains on mortgage loans held for sale
by segment: |
||||||||||||
| Production | $ | 36,848 | $ | 34,947 | $ | 68,716 | ||||||
| Servicing | $ | 22,900 | $ | 21,967 | $ | 29,905 | ||||||
| (1) Includes cash hedge expense | ||||||||||||
PennyMac Financial performs fulfillment services for conventional conforming and jumbo loans acquired by PMT from non-affiliates in its correspondent production business. These services include, but are not limited to: marketing; relationship management; the approval of correspondent sellers and the ongoing monitoring of their performance; reviewing loan data, documentation and appraisals to assess loan quality and risk; pricing; hedging and activities related to the subsequent sale and securitization of loans in the secondary mortgage markets for PMT.
Fees earned from the fulfillment of correspondent loans on behalf of PMT totaled $28.6 million in the fourth quarter, up 9 percent from the prior quarter and 49 percent from the fourth quarter of 2017. The quarter-over-quarter increase in fulfillment fee revenue was driven by a 21 percent increase in acquisition volumes by PMT, partially offset by a lower weighted average fulfillment fee rate which was 32 basis points in the fourth quarter, down from 35 basis points in the third quarter. The weighted average fulfillment fee rate in the fourth quarter reflects discretionary reductions to facilitate successful loan acquisitions by PMT.
Net interest income totaled $15.3 million which included $12.6 million in incentives which the Company is currently entitled to receive under one of its master repurchase agreements to finance mortgage loans that satisfy certain consumer relief characteristics, compared with $12.8 million in the third quarter. The Company expects that it will cease to accrue the incentives under the repurchase agreement beginning in the second quarter of 2019. While there can be no assurance, the Company expects that the loss of such incentives will be partially offset by an improvement in pricing margins.
Production segment expenses were $82.0 million, a 5 percent increase from the prior quarter and an 8 percent increase from the fourth quarter of 2017. The quarter-over-quarter increase was primarily driven by production volume growth.
Servicing Segment
Servicing includes income from owned MSRs, subservicing and special servicing activities. Servicing segment pretax income was $29.3 million compared with $33.6 million in the prior quarter and $32.0 million in the fourth quarter of 2017. Servicing segment revenues totaled $134.8 million, down 3 percent from the prior quarter and up 5 percent from the fourth quarter of 2017. The quarter-over-quarter decrease primarily reflects valuation-related losses, partially offset by increased servicing fees driven by a larger portfolio.
Net loan servicing fees totaled $105.2 million and included $194.4 million in servicing fees reduced by $82.3 million in realization of MSR cash flows. Valuation-related losses totaled $6.9 million, which included MSR fair value losses of $67.3 million, associated hedging gains of $59.8 million and changes in fair value of the excess servicing spread (ESS) liability resulting in a $0.5 million gain. The MSR fair value losses primarily resulted from expectations for a modest increase in prepayment activity driven by the decrease in mortgage rates near quarter end. Before January 1, 2018, PennyMac Financial carried the majority of its MSRs at the lower of amortized cost or fair value. Beginning January 1, 2018, and prospectively, the Company accounts for all MSRs at fair value.
The following table presents a breakdown of net loan servicing fees:
| Quarter ended | ||||||||||||
|
December 31,
2018 |
September 30,
2018 |
December 31,
2017 |
||||||||||
| (in thousands) | ||||||||||||
| Servicing fees (1) | $ | 194,405 | $ | 174,262 | $ | 162,008 | ||||||
| Effect of MSRs: | ||||||||||||
| Amortization and realization of cash flows | (82,250 | ) | (71,362 | ) | (66,891 | ) | ||||||
| Change in fair value and provision for/reversal of impairment of MSRs carried at lower of amortized cost or fair value | (67,277 | ) | 60,883 | 28,029 | ||||||||
|
Change in fair value of excess servicing spread
financing |
526 | (1,109 | ) | 4,593 | ||||||||
| Hedging gains (losses) | 59,808 | (52,971 | ) | (20,837 | ) | |||||||
|
Total amortization, impairment and change in fair
value of MSRs |
(89,193 | ) | (64,559 | ) | (55,106 | ) | ||||||
| Net loan servicing fees | $ | 105,212 | $ | 109,703 | $ | 106,902 | ||||||
| (1) Includes contractually-specified servicing fees | ||||||||||||
Servicing segment revenue also included $22.9 million in net gains on mortgage loans held for sale from the securitization of reperforming government-insured and guaranteed loans, compared to $22.0 million in the prior quarter and $29.9 million in the fourth quarter of 2017. These loans were previously purchased out of Ginnie Mae securitizations as early buyout (EBO) loans and brought back to performing status through PennyMac Financial’s successful servicing efforts, primarily with the use of loan modifications. Net interest income totaled $6.0 million, down from $6.4 million in the prior quarter and up from net interest expense of $8.2 million in the fourth quarter of 2017. Interest income decreased by $4.5 million from the prior quarter, primarily driven by lower interest income from EBO activities as well as a seasonal decrease in income from custodial deposits. Interest expense decreased by $4.0 million quarter-over-quarter; interest expense was elevated in the third quarter due to an accelerated recognition of issuance costs related to MSR-backed term notes that were refinanced in that period.
Servicing segment expenses totaled $105.5 million, essentially unchanged from the prior quarter and up 9 percent from the fourth quarter of 2017.
The total servicing portfolio reached $299.3 billion in UPB at December 31, 2018, an increase of 5 percent from September 30, 2018, and 22 percent from December 31, 2017. Servicing portfolio growth during the quarter was driven by the Company’s loan production activities and the completion of $3.6 billion in UPB of MSR acquisitions. Of the total servicing portfolio, prime servicing was $298.7 billion in UPB, and special servicing was $0.6 billion in UPB. PennyMac Financial subservices and conducts special servicing for $94.7 billion in UPB, an increase of 9 percent from September 30, 2018 and 26 percent from December 31, 2017. PennyMac Financial’s owned MSR portfolio grew to $201.1 billion in UPB, an increase of 4 percent from the prior quarter end.
The table below details PennyMac Financial’s servicing portfolio UPB:
|
December 31,
2018 |
September 30,
2018 |
December 31,
2017 |
|||||||
| (in thousands) | |||||||||
| Loans serviced at period end: | |||||||||
| Prime servicing: | |||||||||
| Owned | |||||||||
| Mortgage servicing rights | |||||||||
| Originated | $ | 144,296,544 | $ | 138,311,827 | $ | 119,673,403 | |||
| Acquisitions | 56,757,600 | 55,347,551 | 46,575,834 | ||||||
| 201,054,144 | 193,659,378 | 166,249,237 | |||||||
| Mortgage servicing liabilities | 1,160,938 | 1,265,461 | 1,620,609 | ||||||
| Mortgage loans held for sale | 2,420,636 | 2,352,771 | 2,998,377 | ||||||
| 204,635,718 | 197,277,610 | 170,868,223 | |||||||
| Subserviced for Advised Entities | 94,074,625 | 86,389,458 | 73,651,608 | ||||||
| Total prime servicing | 298,710,343 | 283,667,068 | 244,519,831 | ||||||
| Special servicing: | |||||||||
| Subserviced for Advised Entities | 583,529 | 837,003 | 1,328,660 | ||||||
| Total special servicing | 583,529 | 837,003 | 1,328,660 | ||||||
| Total loans serviced | $ | 299,293,872 | $ | 284,504,071 | $ | 245,848,491 | |||
| Mortgage loans serviced: | |||||||||
| Owned | |||||||||
| Mortgage servicing rights | $ | 201,054,144 | $ | 193,659,378 | $ | 166,249,237 | |||
| Mortgage servicing liabilities | 1,160,938 | 1,265,461 | 1,620,609 | ||||||
| Mortgage loans held for sale | 2,420,636 | 2,352,771 | 2,998,377 | ||||||
| 204,635,718 | 197,277,610 | 170,868,223 | |||||||
| Subserviced | 94,658,154 | 87,226,461 | 74,980,268 | ||||||
| Total mortgage loans serviced | $ | 299,293,872 | $ | 284,504,071 | $ | 245,848,491 | |||
Investment Management Segment
PennyMac Financial manages PMT for which it earns base management fees and may earn incentive compensation. Net assets under management were $1.6 billion as of December 31, 2018, essentially unchanged from September 30, 2018, and December 31, 2017.
Pretax income for the Investment Management segment was $2.5 million, in line with the prior quarter and up from $1.5 million in the fourth quarter of 2017. Management fees, which include base management fees from PMT, increased 1 percent from the prior quarter and 10 percent from the fourth quarter of 2017. Management fees also included incentive fees of $0.7 million based on PMT’s performance.
The following table presents a breakdown of management fees and carried interest:
| Quarter ended | ||||||||||
|
December 31,
2018 |
September 30,
2018 |
December 31,
2017 |
||||||||
| (in thousands) | ||||||||||
| Management fees: | ||||||||||
| PennyMac Mortgage Investment Trust | ||||||||||
| Base | $ | 5,810 | $ | 5,799 | $ | 5,900 | ||||
| Performance incentive | 749 | 683 | - | |||||||
| 6,559 | 6,482 | 5,900 | ||||||||
| Investment Funds | - | (11 | ) | 88 | ||||||
| Total management fees | 6,559 | 6,471 | 5,988 | |||||||
| Carried Interest | - | (17 | ) | 5 | ||||||
| Total management fees and Carried Interest | $ | 6,559 | $ | 6,454 | $ | 5,993 | ||||
| Net assets of Advised Entities: | ||||||||||
| PennyMac Mortgage Investment Trust | $ | 1,566,132 | $ | 1,558,563 | $ | 1,544,585 | ||||
| Investment Funds | - | - | 29,329 | |||||||
| $ | 1,566,132 | $ | 1,558,563 | $ | 1,573,914 | |||||
Investment Management segment expenses totaled $5.4 million, down 2 percent from the prior quarter and up 21 percent from the fourth quarter of 2017. The increase from the prior year was primarily due to a change in accounting for expenses reimbursed by PMT under the Company’s management agreement with PMT. As the result of adopting the new accounting standard for revenue recognition, beginning January 1, 2018, PennyMac Financial is required to include such expense reimbursements in its net revenue and the expenses reimbursed in its expenses. Previously, PennyMac Financial reduced its expenses by the amount of such reimbursements.
Consolidated Expenses
Total expenses for the fourth quarter were $192.9 million, a 2 percent increase from the prior quarter and a 9 percent increase from the fourth quarter of 2017. The quarter-over-quarter change was primarily driven by higher expenses in the Production segment due to higher volumes of activity.
Executive Chairman Stanford L. Kurland concluded, “PennyMac Financial is well positioned for growth in 2019 as we continue to pursue opportunities we find attractive. We are proud of both a firm-wide effort that resulted in the Company becoming the first non-bank lender to directly offer its customers a HELOC product, and the launch of a prime non-QM loan product in our correspondent channel. We continue to realize operational efficiencies across our enterprise, such as in our Servicing business as our investments in technology and portfolio growth add to greater efficiency and scale driving improved operating profits. We remain focused on further development of our direct lending channels and building out our product menu to provide mortgage solutions that meet our customers’ evolving financial needs. Our scale, platform and ability to adapt to a changing market environment are the reasons why we expect to be a beneficiary of market consolidation and to continue delivering strong financial performance in the future.”
Management’s slide presentation will be available in the Investor Relations section of the Company’s website at www.ir.pennymacfinancial.com beginning at 1:30 p.m. (Pacific Standard Time) on Thursday, February 7, 2019.
About PennyMac Financial Services, Inc.
PennyMac Financial Services, Inc. is a specialty financial services firm with a comprehensive mortgage platform and integrated business focused on the production and servicing of U.S. mortgage loans and the management of investments related to the U.S. mortgage market. Additional information about PennyMac Financial Services, Inc. is available at www.ir.pennymacfinancial.com.
This press release 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, the recently completed corporate reorganization, the expected benefits and market and financial impact of the reorganization and assumptions with respect to, among other things, the Company’s financial results, future operations, business plans and investment strategies, as well as industry and market conditions, all of which are subject to change. Words like “believe,” “expect,” “anticipate,” “promise,” “plan,” and other expressions or words of similar meanings, as well as future or conditional verbs such as “will,” “would,” “should,” “could,” or “may” are generally intended to identify forward-looking statements. Actual results and operations for any future period may vary materially from those projected herein and from past results discussed herein. Factors which could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: the continually changing federal, state and local laws and regulations applicable to the highly regulated industry in which we operate; lawsuits or governmental actions that may result from any noncompliance with the laws and regulations applicable to our businesses; the mortgage lending and servicing-related regulations promulgated by the Consumer Financial Protection Bureau and its enforcement of these regulations; our dependence on U.S. government-sponsored entities and changes in their current roles or their guarantees or guidelines; changes to government mortgage modification programs; the licensing and operational requirements of states and other jurisdictions applicable to the Company’s businesses, to which our bank competitors are not subject; foreclosure delays and changes in foreclosure practices; certain banking regulations that may limit our business activities; changes in macroeconomic and U.S. real estate market conditions; difficulties inherent in growing loan production volume; difficulties inherent in adjusting the size of our operations to reflect changes in business levels; purchase opportunities for mortgage servicing rights and our success in winning bids; changes in prevailing interest rates; increases in loan delinquencies and defaults; our reliance on PennyMac Mortgage Investment Trust (NYSE: PMT) as a significant source of financing for, and revenue related to, our mortgage banking business; any required additional capital and liquidity to support business growth that may not be available on acceptable terms, if at all; our obligation to indemnify third-party purchasers or repurchase loans if loans that we originate, acquire, service or assist in the fulfillment of, fail to meet certain criteria or characteristics or under other circumstances; our obligation to indemnify PMT if its services fail to meet certain criteria or characteristics or under other circumstances; decreases in the returns on the assets that we select and manage for our clients, and our resulting management and incentive fees; the extensive amount of regulation applicable to our investment management segment; conflicts of interest in allocating our services and investment opportunities among us and our advised entities; the effect of public opinion on our reputation; our recent growth; our ability to effectively identify, manage, monitor and mitigate financial risks; our initiation of new business activities or investment strategies or expansion of existing business activities or investment strategies; our ability to detect misconduct and fraud; our ability to mitigate cybersecurity risks and cyber incidents; our exposure to risks of loss with real estate investments resulting from adverse weather conditions and man-made or natural disasters; and our organizational structure and certain requirements in our charter documents. You should not place undue reliance on any forward- looking statement and should consider all of the uncertainties and risks described above, as well as those more fully discussed in reports and other documents filed by the Company with the Securities and Exchange Commission from time to time. The Company undertakes no obligation to publicly update or revise any forward-looking statements or any other information contained herein, and the statements made in this press release are current as of the date of this release only.
|
PENNYMAC FINANCIAL SERVICES, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
|||||||||
|
December 31,
2018 |
September 30,
2018 |
December 31,
2017 |
|||||||
| (in thousands, except share amounts) | |||||||||
| ASSETS | |||||||||
| Cash | $ | 155,289 | $ | 102,627 | $ | 37,725 | |||
| Short-term investments at fair value | 117,824 | 145,476 | 170,080 | ||||||
| Mortgage loans held for sale at fair value | 2,521,647 | 2,416,955 | 3,099,103 | ||||||
|
Assets purchased from PennyMac Mortgage Investment Trust under
agreements
to resell pledged to creditors |
131,025 | 133,128 | 144,128 | ||||||
| Derivative assets | 96,347 | 73,618 | 78,179 | ||||||
| Servicing advances, net | 313,197 | 259,609 | 318,066 | ||||||
| Investment in PennyMac Mortgage Investment Trust at fair value | 1,397 | 1,518 | 1,205 | ||||||
| Mortgage servicing rights | 2,820,612 | 2,785,964 | 2,119,588 | ||||||
| Real estate acquired in settlement of loans | 2,250 | 2,493 | 2,447 | ||||||
| Furniture, fixtures, equipment and building improvements, net | 33,374 | 31,662 | 29,453 | ||||||
| Capitalized software, net | 39,748 | 36,484 | 25,729 | ||||||
| Receivable from PennyMac Mortgage Investment Trust | 33,464 | 27,467 | 27,119 | ||||||
| Loans eligible for repurchase | 1,102,840 | 889,335 | 1,208,195 | ||||||
| Other | 109,559 | 86,194 | 107,076 | ||||||
| Total assets | $ | 7,478,573 | $ | 6,992,530 | $ | 7,368,093 | |||
| LIABILITIES | |||||||||
| Assets sold under agreements to repurchase | $ | 1,933,859 | $ | 1,739,638 | $ | 2,381,538 | |||
| Mortgage loan participation and sale agreements | 532,251 | 524,667 | 527,395 | ||||||
| Notes payable | 1,292,291 | 1,291,847 | 891,505 | ||||||
| Obligations under capital lease | 6,605 | 9,630 | 20,971 | ||||||
|
Excess servicing spread financing payable to PennyMac Mortgage
Investment
Trust at fair value |
216,110 | 223,275 | 236,534 | ||||||
| Derivative liabilities | 3,064 | 12,693 | 5,796 | ||||||
| Mortgage servicing liabilities at fair value | 8,681 | 9,769 | 14,120 | ||||||
| Accounts payable and accrued expenses | 156,212 | 140,363 | 109,143 | ||||||
| Payable to PennyMac Mortgage Investment Trust | 104,631 | 91,818 | 136,998 | ||||||
|
Payable to exchanged Private National Mortgage Acceptance Company,
LLC
unitholders under tax receivable agreement |
46,537 | 47,605 | 44,011 | ||||||
| Income taxes payable | 400,546 | 74,158 | 52,160 | ||||||
| Liability for loans eligible for repurchase | 1,102,840 | 889,335 | 1,208,195 | ||||||
| Liability for losses under representations and warranties | 21,155 | 21,022 | 20,053 | ||||||
| Total liabilities | 5,824,782 | 5,075,820 | 5,648,419 | ||||||
| STOCKHOLDERS' EQUITY | |||||||||
|
Common stock---authorized 200,000,000 shares of $0.0001 par value;
issued and outstanding, 77,480,172 , 25,195,436, and 23,529970 shares, respectively |
8 | 3 | 2 | ||||||
|
Class B common stock---authorized 1,000 shares of $0.0001 par value;
issued and outstanding, 0, 45 and 46 shares, respectively |
- | - | - | ||||||
| Additional paid-in capital | 1,310,648 | 236,457 | 204,103 | ||||||
| Retained earnings | 343,135 | 304,386 | 265,306 | ||||||
|
Total stockholders' equity attributable to PennyMac Financial
Services, Inc.
common stockholders |
1,653,791 | 540,846 | 469,411 | ||||||
|
Noncontrolling interests in Private National Mortgage Acceptance
Company, LLC |
- | 1,375,864 | 1,250,263 | ||||||
| Total stockholders' equity | 1,653,791 | 1,916,710 | 1,719,674 | ||||||
| Total liabilities and stockholders’ equity | $ | 7,478,573 | $ | 6,992,530 | $ | 7,368,093 | |||
|
PENNYMAC FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) |
||||||||||||
| Quarter ended | ||||||||||||
|
December 31,
2018 |
September 30,
2018 |
December 31,
2017 |
||||||||||
| (in thousands, except earnings per share) | ||||||||||||
| Revenue | ||||||||||||
| Net mortgage loan servicing fees: | ||||||||||||
| Mortgage loan servicing fees | ||||||||||||
| From non-affiliates | $ | 163,565 | $ | 147,182 | $ | 130,617 | ||||||
| From PennyMac Mortgage Investment Trust | 11,524 | 10,071 | 11,077 | |||||||||
| From Investment Funds | - | - | 6 | |||||||||
| Ancillary and other fees | 19,316 | 17,009 | 20,308 | |||||||||
| 194,405 | 174,262 | 162,008 | ||||||||||
|
Amortization, impairment and change in estimated fair value of
mortgage
servicing rights and excess servicing spread financing |
(89,193 | ) | (64,559 | ) | (55,106 | ) | ||||||
| Net mortgage loan servicing fees | 105,212 | 109,703 | 106,902 | |||||||||
| Net gains on mortgage loans held for sale at fair value | 59,748 | 56,914 | 98,621 | |||||||||
| Mortgage loan origination fees | 26,165 | 26,485 | 30,267 | |||||||||
| Fulfillment fees from PennyMac Mortgage Investment Trust | 28,591 | 26,256 | 19,175 | |||||||||
| Net interest income: | ||||||||||||
| Interest income | 57,733 | 60,964 | 39,905 | |||||||||
| Interest expense | 36,461 | 38,775 | 35,677 | |||||||||
| 21,272 | 22,189 | 4,228 | ||||||||||
| Management fees, net: | ||||||||||||
| From PennyMac Mortgage Investment Trust | 6,559 | 6,482 | 5,900 | |||||||||
| From Investment Funds | - | (11 | ) | 88 | ||||||||
| 6,559 | 6,471 | 5,988 | ||||||||||
| Carried Interest from Investment Funds | - | (17 | ) | 5 | ||||||||
|
Change in fair value of investment in and dividends received from
PennyMac
Mortgage Investment Trust |
(87 | ) | 129 | (63 | ) | |||||||
| Results of real estate acquired in settlement of loans | 410 | 194 | (43 | ) | ||||||||
|
Revaluation of payable to exchanged Private National Mortgage
Acceptance
Company, LLC unitholders under tax receivable agreement |
1,126 | - | 32,940 | |||||||||
| Other | 2,205 | 2,605 | 614 | |||||||||
| Total net revenue | 251,201 | 250,929 | 298,634 | |||||||||
| Expenses | ||||||||||||
| Compensation | 99,353 | 103,364 | 97,097 | |||||||||
| Servicing | 41,518 | 40,797 | 41,183 | |||||||||
| Technology | 15,056 | 15,273 | 13,993 | |||||||||
| Loan origination | 12,936 | 7,203 | 5,599 | |||||||||
| Professional services | 9,173 | 7,117 | 4,868 | |||||||||
| Occupancy and equipment | 7,151 | 7,117 | 5,675 | |||||||||
| Marketing | 1,553 | 2,275 | 2,524 | |||||||||
| Other | 6,155 | 6,086 | 5,922 | |||||||||
| Total expenses | 192,895 | 189,232 | 176,861 | |||||||||
| Income before provision for (benefit from) income taxes | 58,306 | 61,697 | 121,773 | |||||||||
| Provision for (benefit from) income taxes | 5,346 | 5,545 | (2,125 | ) | ||||||||
| Net income | 52,960 | 56,152 | 123,898 | |||||||||
| Less: Net income attributable to noncontrolling interest | 14,211 | 41,663 | 61,580 | |||||||||
|
Net income attributable to PennyMac Financial Services, Inc.
common stockholders |
$ | 38,749 | $ | 14,489 | $ | 62,318 | ||||||
| Earnings per share | ||||||||||||
| Basic | $ | 0.65 | $ | 0.58 | $ | 2.67 | ||||||
| Diluted | $ | 0.63 | $ | 0.57 | $ | 2.44 | ||||||
| Weighted-average common shares outstanding | ||||||||||||
| Basic | 59,876 | 25,125 | 23,354 | |||||||||
| Diluted | 61,468 | 78,913 | 25,565 | |||||||||
|
PENNYMAC FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) |
|||||||||||
| Year ended December 31, | |||||||||||
| 2018 | 2017 | 2016 | |||||||||
| (in thousands, except earnings per share) | |||||||||||
| Revenues | |||||||||||
| Net mortgage loan servicing fees: | |||||||||||
| Mortgage loan servicing fees: | |||||||||||
| From non-affiliates | $ | 585,101 | $ | 475,848 | $ | 385,633 | |||||
| From PennyMac Mortgage Investment Trust | 42,045 | 43,064 | 50,615 | ||||||||
| From Investment Funds | 3 | 1,461 | 2,583 | ||||||||
| Ancillary and other fees | 64,133 | 58,924 | 46,910 | ||||||||
| 691,282 | 579,297 | 485,741 | |||||||||
|
Amortization, impairment and change in fair value of mortgage
servicing rights and excess servicing spread |
(245,889 | ) | (273,238 | ) | (300,275 | ) | |||||
| Net mortgage loan servicing fees | 445,393 | 306,059 | 185,466 | ||||||||
| Net gains on mortgage loans held for sale at fair value: | 249,022 | 391,804 | 531,780 | ||||||||
| Mortgage loan origination fees: | 101,641 | 119,202 | 125,534 | ||||||||
| Fulfillment fees from PennyMac Mortgage Investment Trust | 81,350 | 80,359 | 86,465 | ||||||||
| Net interest income (expense): | |||||||||||
| Interest income | 216,416 | 143,179 | 81,127 | ||||||||
| Interest expense | 144,597 | 144,520 | 106,206 | ||||||||
| 71,819 | (1,341 | ) | (25,079 | ) | |||||||
| Management fees, net: | |||||||||||
| From PennyMac Mortgage Investment Trust | 24,465 | 22,584 | 20,657 | ||||||||
| From Investment Funds | 4 | 1,001 | 2,089 | ||||||||
| 24,469 | 23,585 | 22,746 | |||||||||
| Carried Interest from Investment Funds | (365 | ) | (1,040 | ) | 980 | ||||||
|
Change in fair value of investment in and dividends received from
PennyMac
Mortgage Investment Trust |
332 | 118 | 224 | ||||||||
| Results of real estate acquired in settlement of loans | 589 | 94 | (82 | ) | |||||||
|
Revaluation of payable to exchanged Private National Mortgage
Acceptance
Company, LLC unitholders under tax receivable agreement |
1,126 | 32,940 | 551 | ||||||||
| Other | 9,253 | 3,683 | 3,302 | ||||||||
| Total net revenues | 984,629 | 955,463 | 931,887 | ||||||||
| Expenses | |||||||||||
| Compensation | 403,270 | 358,721 | 342,153 | ||||||||
| Servicing | 137,104 | 117,696 | 85,857 | ||||||||
| Technology | 60,103 | 52,013 | 35,322 | ||||||||
| Professional services | 27,615 | 17,845 | 18,078 | ||||||||
| Loan origination | 27,398 | 20,429 | 22,528 | ||||||||
| Occupancy and equipment | 27,152 | 22,615 | 17,140 | ||||||||
| Marketing | 8,207 | 9,118 | 5,264 | ||||||||
| Other | 26,083 | 21,117 | 22,462 | ||||||||
| Total expenses | 716,932 | 619,554 | 548,804 | ||||||||
| Income before provision for income taxes | 267,697 | 335,909 | 383,083 | ||||||||
| Provision for income taxes | 23,254 | 24,387 | 46,103 | ||||||||
| Net income | 244,443 | 311,522 | 336,980 | ||||||||
| Less: Net income attributable to noncontrolling interest | 156,749 | 210,765 | 270,901 | ||||||||
|
Net income attributable to PennyMac Financial Services, Inc.
common stockholders |
$ | 87,694 | $ | 100,757 | $ | 66,079 | |||||
| Earnings per share | |||||||||||
| Basic | $ | 2.62 | $ | 4.34 | $ | 2.98 | |||||
| Diluted | $ | 2.59 | $ | 4.03 | $ | 2.94 | |||||
| Weighted average shares outstanding | |||||||||||
| Basic | 33,524 | 23,199 | 22,161 | ||||||||
| Diluted | 35,322 | 24,999 | 76,629 | ||||||||
