UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015March 31, 2016
Or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-35916
PennyMac Financial Services, Inc.
(Exact name of registrant as specified in its charter)
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Delaware |
| 80-0882793 |
(State or other jurisdiction of |
| (IRS Employer |
incorporation or organization) |
| Identification No.) |
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6101 Condor Drive, Moorpark, California |
| 93021 |
(Address of principal executive offices) |
| (Zip Code) |
(818) 224-7442
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):
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Large accelerated filer ☐ |
| Accelerated filer ☒ |
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Non-accelerated filer ☐ |
| Smaller reporting company ☐ |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
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Class |
| Outstanding at |
Class A Common Stock, $0.0001 par value |
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Class B Common Stock, $0.0001 par value |
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PENNYMAC FINANCIAL SERVICES, INC.
FORM 10-Q
June 30, 2015March 31, 2016
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||
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2
SPECIAL NOTE REGARDING FORWARD‑LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Report”) contains certain forward‑looking statements that are subject to various risks and uncertainties. Forward‑looking statements are generally identifiable by use of forward‑looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” “continue,” “plan” or other similar words or expressions.
Forward‑looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward‑looking information. Examples of forward‑looking statements include the following:
· | projections of our revenues, income, earnings per share, capital structure or other financial items; |
· | descriptions of our plans or objectives for future operations, products or services; |
· | forecasts of our future economic performance, interest rates, profit margins and our share of future markets; and |
· | descriptions of assumptions underlying or relating to any of the foregoing expectations regarding the timing of generating any revenues. |
Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward‑looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward‑looking statements. There are a number of factors, many of which are beyond our control that could cause actual results to differ significantly from management’s expectations. Some of these factors are discussed below.
You should not place undue reliance on any forward‑looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties discussed elsewhere in this Report and the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014,2015, filed with the SEC on March 13, 2015.10, 2016.
Factors that 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 if we do not comply with the laws and regulations applicable to our businesses; |
· | the mortgage lending and servicing-related regulations promulgated by the Consumer Financial Protection Bureau (“CFPB”) 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 our 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; |
· | our dependence on the multi-family and commercial real estate sectors for future originations and investments in commercial mortgage loans and other commercial real estate related loans; |
· | 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 (“MSRs”) and our success in winning bids; |
· | changes in prevailing interest rates; |
3
· | increases in loan delinquencies and defaults; |
· | our reliance on PennyMac Mortgage Investment Trust (“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 and certain investment funds if our services fail to meet certain criteria or characteristics or under other circumstances; |
· | decreases in the historical 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 ourselves and certain 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 expansion of existing business activities; |
· | our ability to detect misconduct and fraud; and |
· | our ability to mitigate cybersecurity risks and cyber incidents. |
Other factors that could also cause results to differ from our expectations may not be described in this Report or any other document. Each of these factors could by itself, or together with one or more other factors, adversely affect our business, results of operations and/or financial condition.
Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.
4
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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| June 30, |
| December 31, |
| March 31, |
| December 31, |
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| 2015 |
| 2014 |
| 2016 |
| 2015 |
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| (in thousands, except share data) |
| (in thousands, except share amounts) |
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ASSETS |
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Cash |
| $ | 74,728 |
| $ | 76,256 |
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Cash (includes $95,826 and $93,757 pledged to creditors) | $ | 116,560 |
| $ | 105,472 |
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Short-term investments at fair value |
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| 23,577 |
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| 21,687 |
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| 28,264 |
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| 46,319 |
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Mortgage loans held for sale at fair value (includes $1,369,324 and $976,772 pledged to secure mortgage loans sold under agreements to repurchase; and $202,076 and $148,133 pledged to secure mortgage loan participation and sale agreement) |
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| 1,594,262 |
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| 1,147,884 |
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Mortgage loans held for sale at fair value (includes $1,632,074 and $1,079,489 pledged to creditors) |
| 1,653,963 |
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| 1,101,204 |
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Derivative assets |
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| 43,568 |
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| 38,457 |
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| 90,054 |
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| 50,280 |
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Servicing advances, net (includes $21,589 and $18,686 valuation allowance) |
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| 244,806 |
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| 228,630 |
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Carried Interest due from Investment Funds |
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| 68,713 |
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| 67,298 |
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Servicing advances, net (includes $40,770 and $33,458 valuation allowance) |
| 284,140 |
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| 299,354 |
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Carried Interest due from Investment Funds pledged to creditors |
| 70,519 |
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| 69,926 |
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Investment in PennyMac Mortgage Investment Trust at fair value |
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| 1,307 |
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| 1,582 |
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| 1,023 |
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| 1,145 |
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Mortgage servicing rights (includes $581,269 and $325,383 at fair value; $536,172 and $392,254 pledged to secure note payable; and $359,102 and $191,166 subject to excess servicing spread financing) |
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| 1,135,510 |
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| 730,828 |
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Furniture, fixtures, equipment and building improvements, net |
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| 11,773 |
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| 11,339 |
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Capitalized software, net |
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| 1,250 |
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| 567 |
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Note receivable from PennyMac Mortgage Investment Trust—secured |
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| 52,526 |
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| — |
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Mortgage servicing rights (includes $594,403 and $660,247 at fair value; $1,332,775 and $803,560 pledged to creditors) |
| 1,337,082 |
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| 1,411,935 |
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Real estate acquired in settlement of loans |
| 2,320 |
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| — |
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Furniture, fixtures, equipment and building improvements, net (includes $11,356 and $14,034 pledged to creditors) |
| 23,855 |
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| 16,311 |
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Capitalized software, net (includes $541 and $783 pledged to creditors) |
| 4,323 |
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| 3,025 |
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Note receivable from PennyMac Mortgage Investment Trust |
| 150,000 |
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| 150,000 |
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Receivable from PennyMac Mortgage Investment Trust |
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| 16,245 |
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| 23,871 |
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| 17,647 |
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| 18,965 |
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Receivable from Investment Funds |
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| 2,148 |
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| 2,291 |
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| 1,119 |
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| 1,316 |
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Deferred tax asset |
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| 34,165 |
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| 46,038 |
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| 14,637 |
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| 18,378 |
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Loans eligible for repurchase |
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| 77,529 |
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| 72,539 |
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Mortgage loans eligible for repurchase |
| 139,009 |
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| 166,070 |
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Other |
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| 48,498 |
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| 37,419 |
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| 46,748 |
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| 45,594 |
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Total assets |
| $ | 3,430,605 |
| $ | 2,506,686 |
| $ | 3,981,263 |
| $ | 3,505,294 |
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LIABILITIES |
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Mortgage loans sold under agreements to repurchase |
| $ | 1,263,248 |
| $ | 822,182 |
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Mortgage loan participation and sale agreement |
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| 195,959 |
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| 143,638 |
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Note payable |
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| 246,456 |
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| 146,855 |
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Assets sold under agreements to repurchase | $ | 1,658,578 |
| $ | 1,166,731 |
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Mortgage loan participation and sale agreements |
| 246,636 |
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| 234,872 |
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Notes payable |
| 127,693 |
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| 61,136 |
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Obligations under capital lease |
| 12,070 |
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| 13,579 |
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Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust |
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| 359,102 |
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| 191,166 |
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| 321,976 |
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| 412,425 |
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Derivative liabilities |
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| 13,584 |
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| 6,513 |
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| 9,915 |
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| 9,083 |
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Accounts payable and accrued expenses |
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| 84,357 |
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| 62,715 |
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| 87,005 |
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| 89,915 |
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Mortgage servicing liabilities at fair value |
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| 11,791 |
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| 6,306 |
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| 6,747 |
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| 1,399 |
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Payable to Investment Funds |
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| 31,255 |
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| 35,908 |
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| 28,843 |
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| 30,429 |
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Payable to PennyMac Mortgage Investment Trust |
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| 139,699 |
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| 123,315 |
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| 153,094 |
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| 162,379 |
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Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement |
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| 71,895 |
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| 75,024 |
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| 74,275 |
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| 74,315 |
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Liability for loans eligible for repurchase |
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| 77,529 |
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| 72,539 |
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Liability for mortgage loans eligible for repurchase |
| 139,009 |
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| 166,070 |
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Liability for losses under representations and warranties |
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| 16,257 |
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| 13,259 |
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| 22,209 |
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| 20,611 |
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Total liabilities |
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| 2,511,132 |
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| 1,699,420 |
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| 2,888,050 |
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| 2,442,944 |
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Commitments and contingencies |
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STOCKHOLDERS’ EQUITY |
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Class A common stock—authorized 200,000,000 shares of $0.0001 par value; issued and outstanding, 21,790,666 and 21,577,686 shares, respectively |
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| 2 |
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| 2 |
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Class B common stock—authorized 1,000 shares of $0.0001 par value; issued and outstanding, 52 and 54 shares, respectively |
|
| — |
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| — |
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Class A common stock—authorized 200,000,000 shares of $0.0001 par value; issued and outstanding, 22,047,491 and 21,990,831 shares, respectively |
| 2 |
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| 2 |
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Class B common stock—authorized 1,000 shares of $0.0001 par value; issued and outstanding, 50 and 51 shares, respectively |
| — |
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| — |
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Additional paid-in capital |
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| 167,536 |
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| 162,720 |
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| 174,005 |
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| 172,354 |
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Retained earnings |
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| 73,019 |
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| 51,242 |
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| 103,645 |
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| 98,470 |
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Total stockholders' equity attributable to PennyMac Financial Services, Inc. common stockholders |
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| 240,557 |
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| 213,964 |
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| 277,652 |
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| 270,826 |
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Noncontrolling interest in Private National Mortgage Acceptance Company, LLC |
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| 678,916 |
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| 593,302 |
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| 815,561 |
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| 791,524 |
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Total stockholders' equity |
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| 919,473 |
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| 807,266 |
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| 1,093,213 |
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| 1,062,350 |
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Total liabilities and stockholders’ equity |
| $ | 3,430,605 |
| $ | 2,506,686 |
| $ | 3,981,263 |
| $ | 3,505,294 |
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The accompanying notes are an integral part of these financial statements.
5
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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| Quarter ended March 31, |
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| 2016 |
| 2015 |
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| (in thousands, except earnings per share) |
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Revenues |
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Net gains on mortgage loans held for sale at fair value: |
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From non-affiliates |
| $ | 93,476 |
| $ | 76,667 |
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Recapture payable to PennyMac Mortgage Investment Trust |
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| (1,952) |
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| (1,289) |
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| 91,524 |
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| 75,378 |
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Mortgage loan origination fees |
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| 22,434 |
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| 16,682 |
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Fulfillment fees from PennyMac Mortgage Investment Trust |
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| 12,935 |
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| 12,866 |
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Net mortgage loan servicing fees: |
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Mortgage loan servicing fees |
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From non-affiliates |
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| 91,327 |
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| 50,101 |
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From PennyMac Mortgage Investment Trust |
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| 11,453 |
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| 10,670 |
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From Investment Funds |
|
| 701 |
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| 968 |
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Ancillary and other fees |
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| 11,452 |
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| 11,185 |
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| 114,933 |
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| 72,924 |
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Amortization, impairment and change in fair value of mortgage servicing rights |
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| (116,863) |
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| (53,684) |
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Change in fair value of excess servicing spread payable to PennyMac Mortgage Investment Trust |
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| 19,449 |
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| 7,536 |
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| (97,414) |
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| (46,148) |
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Net mortgage loan servicing fees |
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| 17,519 |
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| 26,776 |
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Management fees: |
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From PennyMac Mortgage Investment Trust |
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| 5,352 |
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| 7,003 |
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From Investment Funds |
|
| 560 |
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| 1,486 |
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| 5,912 |
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| 8,489 |
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Carried Interest from Investment Funds |
|
| 593 |
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| 1,233 |
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Net interest expense: |
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Interest income: |
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From non-affiliates |
|
| 11,927 |
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| 8,933 |
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From PennyMac Mortgage Investment Trust |
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| 1,602 |
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| — |
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| 13,529 |
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| 8,933 |
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Interest expense: |
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To non-affiliates |
|
| 13,972 |
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| 8,077 |
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To PennyMac Mortgage Investment Trust |
|
| 7,015 |
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| 3,752 |
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| 20,987 |
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| 11,829 |
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Net interest expense |
|
| (7,458) |
|
| (2,896) |
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Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust |
|
| (86) |
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| 107 |
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Result of real estate acquired in settlement of loans |
|
| (435) |
|
| — |
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Other |
|
| 463 |
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| 1,679 |
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Total net revenue |
|
| 143,401 |
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| 140,314 |
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Expenses |
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Compensation |
|
| 68,298 |
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| 58,144 |
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Servicing |
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| 20,887 |
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| 9,735 |
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Technology |
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| 6,847 |
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| 4,938 |
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Loan origination |
|
| 4,186 |
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| 4,351 |
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Professional services |
|
| 3,733 |
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| 2,833 |
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Other |
|
| 9,311 |
|
| 7,075 |
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Total expenses |
|
| 113,262 |
|
| 87,076 |
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Income before provision for income taxes |
|
| 30,139 |
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| 53,238 |
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Provision for income taxes |
|
| 3,596 |
|
| 6,114 |
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Net income |
|
| 26,543 |
|
| 47,124 |
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Less: Net income attributable to noncontrolling interest |
|
| 21,368 |
|
| 38,096 |
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Net income attributable to PennyMac Financial Services, Inc. common stockholders |
| $ | 5,175 |
| $ | 9,028 |
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Earnings per share |
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Basic |
| $ | 0.24 |
| $ | 0.42 |
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Diluted |
| $ | 0.23 |
| $ | 0.42 |
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Weighted average common shares outstanding |
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Basic |
|
| 22,006 |
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| 21,593 |
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Diluted |
|
| 76,194 |
|
| 76,050 |
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The accompanying notes are an integral part of these financial statements.
56
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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| Quarter ended June 30, |
| Six months ended June 30, |
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| 2015 |
| 2014 |
| 2015 |
| 2014 |
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| (in thousands, except earnings per share) |
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Revenues |
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Net gains on mortgage loans held for sale at fair value: |
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From non-affiliates |
| $ | 85,411 |
| $ | 42,230 |
| $ | 162,078 |
| $ | 78,666 |
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Recapture payable to PennyMac Mortgage Investment Trust |
|
| (1,456) |
|
| (2,526) |
|
| (2,745) |
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| (4,424) |
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|
| 83,955 |
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| 39,704 |
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| 159,333 |
|
| 74,242 |
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Loan origination fees |
|
| 24,421 |
|
| 10,345 |
|
| 41,103 |
|
| 17,225 |
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Fulfillment fees from PennyMac Mortgage Investment Trust |
|
| 15,333 |
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| 12,433 |
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| 28,199 |
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| 21,335 |
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Net loan servicing fees: |
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Loan servicing fees |
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From non-affiliates |
|
| 66,867 |
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| 43,314 |
|
| 116,968 |
|
| 79,414 |
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From PennyMac Mortgage Investment Trust |
|
| 12,136 |
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| 14,180 |
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| 22,806 |
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| 28,771 |
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From Investment Funds |
|
| 153 |
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| 4,161 |
|
| 1,121 |
|
| 5,638 |
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Ancillary and other fees |
|
| 11,850 |
|
| 4,838 |
|
| 23,035 |
|
| 9,989 |
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|
|
| 91,006 |
|
| 66,493 |
|
| 163,930 |
|
| 123,812 |
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Amortization, impairment and change in fair value of mortgage servicing rights |
|
| (15,324) |
|
| (19,586) |
|
| (69,008) |
|
| (37,933) |
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Change in fair value of excess servicing spread payable to PennyMac Mortgage Investment Trust |
|
| (7,133) |
|
| 10,062 |
|
| 403 |
|
| 14,854 |
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|
|
| (22,457) |
|
| (9,524) |
|
| (68,605) |
|
| (23,079) |
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Net loan servicing fees |
|
| 68,549 |
|
| 56,969 |
|
| 95,325 |
|
| 100,733 |
|
Management fees: |
|
|
|
|
|
|
|
|
|
|
|
|
|
From PennyMac Mortgage Investment Trust |
|
| 5,779 |
|
| 8,912 |
|
| 12,782 |
|
| 16,986 |
|
From Investment Funds |
|
| 1,184 |
|
| 2,086 |
|
| 2,670 |
|
| 4,121 |
|
|
|
| 6,963 |
|
| 10,998 |
|
| 15,452 |
|
| 21,107 |
|
Carried Interest from Investment Funds |
|
| 182 |
|
| 1,834 |
|
| 1,415 |
|
| 3,991 |
|
Net interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
To non-affiliates |
|
| 12,651 |
|
| 6,252 |
|
| 21,584 |
|
| 10,362 |
|
To PennyMac Mortgage Investment Trust |
|
| 533 |
|
| — |
|
| 533 |
|
| — |
|
|
|
| 13,184 |
|
| 6,252 |
|
| 22,117 |
|
| 10,362 |
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
To non-affiliates |
|
| 10,531 |
|
| 5,593 |
|
| 18,608 |
|
| 9,117 |
|
To PennyMac Mortgage Investment Trust |
|
| 5,818 |
|
| 3,139 |
|
| 9,570 |
|
| 6,001 |
|
|
|
| 16,349 |
|
| 8,732 |
|
| 28,178 |
|
| 15,118 |
|
Net interest expense |
|
| (3,165) |
|
| (2,480) |
|
| (6,061) |
|
| (4,756) |
|
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust |
|
| (244) |
|
| (103) |
|
| (137) |
|
| 12 |
|
Other |
|
| 357 |
|
| 735 |
|
| 2,036 |
|
| 2,038 |
|
Total net revenue |
|
| 196,351 |
|
| 130,435 |
|
| 336,665 |
|
| 235,927 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation |
|
| 70,422 |
|
| 46,971 |
|
| 128,566 |
|
| 89,857 |
|
Servicing |
|
| 28,603 |
|
| 11,694 |
|
| 38,338 |
|
| 14,784 |
|
Technology |
|
| 6,490 |
|
| 3,741 |
|
| 11,428 |
|
| 6,564 |
|
Loan origination |
|
| 4,148 |
|
| 1,998 |
|
| 8,499 |
|
| 3,415 |
|
Professional services |
|
| 4,074 |
|
| 2,661 |
|
| 6,907 |
|
| 4,860 |
|
Other |
|
| 7,815 |
|
| 5,323 |
|
| 14,890 |
|
| 9,339 |
|
Total expenses |
|
| 121,552 |
|
| 72,388 |
|
| 208,628 |
|
| 128,819 |
|
Income before provision for income taxes |
|
| 74,799 |
|
| 58,047 |
|
| 128,037 |
|
| 107,108 |
|
Provision for income taxes |
|
| 8,619 |
|
| 6,630 |
|
| 14,733 |
|
| 12,153 |
|
Net income |
|
| 66,180 |
|
| 51,417 |
|
| 113,304 |
|
| 94,955 |
|
Less: Net income attributable to noncontrolling interest |
|
| 53,431 |
|
| 41,799 |
|
| 91,527 |
|
| 77,365 |
|
Net income attributable to PennyMac Financial Services, Inc. common stockholders |
| $ | 12,749 |
| $ | 9,618 |
| $ | 21,777 |
| $ | 17,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.59 |
| $ | 0.45 |
| $ | 1.01 |
| $ | 0.84 |
|
Diluted |
| $ | 0.59 |
| $ | 0.45 |
| $ | 1.01 |
| $ | 0.83 |
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 21,700 |
|
| 21,142 |
|
| 21,647 |
|
| 21,005 |
|
Diluted |
|
| 76,105 |
|
| 75,915 |
|
| 76,063 |
|
| 75,895 |
|
The accompanying notes are an integral part of these financial statements.
6
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| PennyMac Financial Services, Inc. Stockholders |
| Noncontrolling |
|
|
|
|
| Class A Common Stock |
| Noncontrolling |
|
|
| |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| interest in Private |
|
|
|
|
|
|
|
|
|
|
|
|
|
| interest in Private |
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
| National Mortgage |
| Total |
|
|
|
|
|
| Additional |
|
|
|
| National Mortgage |
| Total |
| ||||||||
|
| Number of shares |
| Common stock |
| paid-in |
| Retained |
| Acceptance |
| stockholders' |
|
| Number of |
| Par |
| paid-in |
| Retained |
| Acceptance |
| stockholders' |
| ||||||||||||||||
|
| Class A |
| Class B |
| Class A |
| Class B |
| capital |
| earnings |
| Company, LLC |
| equity |
|
| shares |
| value |
| capital |
| earnings |
| Company, LLC |
| equity |
| ||||||||||||
|
| (in thousands) |
| |||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2013 |
| 20,813 |
| — |
| $ | 2 |
| $ | — |
| $ | 153,000 |
| $ | 14,400 |
| $ | 461,802 |
| $ | 629,204 |
| |||||||||||||||||||
Net income |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| 17,590 |
|
| 77,365 |
|
| 94,955 |
| |||||||||||||||||||
Stock and unit-based compensation |
| 32 |
| — |
|
| — |
|
| — |
|
| 1,596 |
|
| — |
|
| 3,886 |
|
| 5,482 |
| |||||||||||||||||||
Distributions |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (7,731) |
|
| (7,731) |
| |||||||||||||||||||
Issuance of common stock in settlement of directors' fees |
| 4 |
| — |
|
| — |
|
| — |
|
| 74 |
|
| — |
|
| — |
|
| 74 |
| |||||||||||||||||||
Exchange of Class A units of Private National Mortgage Acceptance Company, LLC to Class A common stock of PennyMac Financial Services, Inc. |
| 479 |
| — |
|
| — |
|
| — |
|
| 4,598 |
|
| — |
|
| (4,598) |
|
| — |
| |||||||||||||||||||
Tax effect of exchange of Class A units of Private National Mortgage Acceptance Company, LLC to Class A common stock of PennyMac Financial Services, Inc. |
| — |
| — |
|
| — |
|
| — |
|
| (291) |
|
| — |
|
| — |
|
| (291) |
| |||||||||||||||||||
Balance at June 30, 2014 |
| 21,328 |
| — |
| $ | 2 |
| $ | — |
| $ | 158,977 |
| $ | 31,990 |
| $ | 530,724 |
| $ | 721,693 |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
| ||||||||||||||||
Balance at December 31, 2014 |
| 21,578 |
| — |
| $ | 2 |
| $ | — |
| $ | 162,720 |
| $ | 51,242 |
| $ | 593,302 |
| $ | 807,266 |
|
| 21,578 |
| $ | 2 |
| $ | 162,720 |
| $ | 51,242 |
| $ | 593,302 |
| $ | 807,266 |
| |
Net income |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| 21,777 |
|
| 91,527 |
|
| 113,304 |
|
| — |
| — |
|
| — |
| 9,028 |
| 38,096 |
| 47,124 |
| |||||
Stock and unit-based compensation |
| 72 |
| — |
|
| — |
|
| — |
|
| 2,452 |
|
| — |
|
| 6,146 |
|
| 8,598 |
|
| 31 |
| — |
|
| 1,124 |
| — |
| 2,824 |
| 3,948 |
| |||||
Distributions |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (9,627) |
|
| (9,627) |
|
| — |
| — |
|
| — |
| — |
| (5,522) |
| (5,522) |
| |||||
Issuance of common stock in settlement of directors' fees |
| 8 |
| — |
|
| — |
|
| — |
|
| 149 |
|
| — |
|
| — |
|
| 149 |
|
| 4 |
| — |
|
| 74 |
| — |
| — |
| 74 |
| |||||
Exchange of Class A units of Private National Mortgage Acceptance Company, LLC to Class A common stock of PennyMac Financial Services, Inc. |
| 133 |
| — |
|
| — |
|
| — |
|
| 2,432 |
|
| — |
|
| (2,432) |
|
| — |
|
| 44 |
| — |
|
| 792 |
| — |
| (792) |
| — |
| |||||
Tax effect of exchange of Class A units of Private National Mortgage Acceptance Company, LLC to Class A common stock of PennyMac Financial Services, Inc. |
| — |
| — |
|
| — |
|
| — |
|
| (217) |
|
| — |
|
| — |
|
| (217) |
|
| — |
|
| — |
|
|
| (54) |
|
| — |
|
| — |
|
| (54) |
|
Balance at June 30, 2015 |
| 21,791 |
| — |
| $ | 2 |
| $ | — |
| $ | 167,536 |
| $ | 73,019 |
| $ | 678,916 |
| $ | 919,473 |
| |||||||||||||||||||
Balance at March 31, 2015 |
| 21,657 |
| $ | 2 |
| $ | 164,656 |
| $ | 60,270 |
| $ | 627,908 |
| $ | 852,836 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Balance at December 31, 2015 |
| 21,991 |
| $ | 2 |
| $ | 172,354 |
| $ | 98,470 |
| $ | 791,524 |
| $ | 1,062,350 |
| ||||||||||||||||||||||||
Net income |
| — |
| — |
|
| — |
| 5,175 |
| 21,368 |
| 26,543 |
| ||||||||||||||||||||||||||||
Stock and unit-based compensation |
| 47 |
| — |
|
| 1,107 |
| — |
| 3,270 |
| 4,377 |
| ||||||||||||||||||||||||||||
Issuance of common stock in settlement of directors' fees |
| 6 |
| — |
|
| 74 |
| — |
| — |
| 74 |
| ||||||||||||||||||||||||||||
Exchange of Class A units of Private National Mortgage Acceptance Company, LLC to |
| 3 |
| — |
|
| 601 |
| — |
| (601) |
| — |
| ||||||||||||||||||||||||||||
Tax effect of exchange of Class A units of Private National Mortgage Acceptance Company, LLC to |
| — |
|
| — |
|
|
| (131) |
|
| — |
|
| — |
|
| (131) |
| |||||||||||||||||||||||
Balance at March 31, 2016 |
| 22,047 |
| $ | 2 |
| $ | 174,005 |
| $ | 103,645 |
| $ | 815,561 |
| $ | 1,093,213 |
|
The accompanying notes are an integral part of these financial statements.
7
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||
|
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||
Cash flow from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 113,304 |
| $ | 94,955 |
|
| $ | 26,543 |
| $ | 47,124 |
|
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains on mortgage loans held for sale at fair value |
|
| (159,333) |
|
| (74,242) |
|
|
| (91,524) |
|
| (75,378) |
|
Accrual of servicing rebate to Investment Funds |
|
| 1,114 |
|
| 563 |
| |||||||
Accrual of servicing rebate payable to Investment Funds |
|
| 75 |
|
| 104 |
| |||||||
Amortization, impairment and change in fair value of mortgage servicing rights and excess servicing spread |
|
| 68,605 |
|
| 23,079 |
|
|
| 97,414 |
|
| 46,148 |
|
Carried Interest from Investment Funds |
|
| (1,415) |
|
| (3,991) |
|
|
| (593) |
|
| (1,233) |
|
Amortization of debt issuance costs and commitment fees relating to financing facilities |
|
| 2,537 |
|
| 1,708 |
| |||||||
Capitalization of interest on mortgage loans held for sale at fair value |
|
| (5,827) |
|
| (1,154) |
| |||||||
Accrual of interest on excess servicing spread financing |
|
| 9,570 |
|
| 6,001 |
|
|
| 7,015 |
|
| 3,752 |
|
Amortization of debt issuance costs and commitment fees relating to financing facilities |
|
| 3,631 |
|
| 2,646 |
| |||||||
Change in fair value of investment in common shares of PennyMac Mortgage Investment Trust |
|
| 275 |
|
| 76 |
|
|
| 122 |
|
| (15) |
|
Change in fair value of real estate acquired in settlement in loans |
|
| 435 |
|
| — |
| |||||||
Stock and unit-based compensation expense |
|
| 8,598 |
|
| 5,482 |
|
|
| 4,377 |
|
| 3,948 |
|
Provision for servicing advance losses |
|
| 16,013 |
|
| — |
|
|
| 10,562 |
|
| 1,510 |
|
Depreciation and amortization |
|
| 911 |
|
| 612 |
|
|
| 1,076 |
|
| 394 |
|
Purchase of mortgage loans held for sale from PennyMac Mortgage Investment Trust |
|
| (13,523,345) |
|
| (7,085,859) |
|
|
| (6,854,876) |
|
| (4,989,838) |
|
Originations of mortgage loans held for sale |
|
| (2,052,648) |
|
| (728,040) |
|
|
| (1,218,163) |
|
| (904,213) |
|
Purchase of mortgage loans from Ginnie Mae securities for modification and subsequent sale |
|
| (531,842) |
|
| (679,882) |
| |||||||
Capitalization of interest on mortgage loans held for sale at fair value |
|
| (4,745) |
|
| — |
| |||||||
Purchase of mortgage loans from Ginnie Mae securities and early buyout investors for modification and subsequent sale |
|
| (424,813) |
|
| (84,488) |
| |||||||
Sale and principal payments of mortgage loans held for sale |
|
| 15,619,191 |
|
| 8,022,045 |
|
|
| 7,942,200 |
|
| 5,763,272 |
|
Sale of mortgage loans held for sale to PennyMac Mortgage Investment Trust |
|
| 10,828 |
|
| — |
| |||||||
Repurchase of mortgage loans by PennyMac Mortgage Investment Trust |
|
| 8,777 |
|
| — |
| |||||||
Repurchase of mortgage loans subject to representations and warranties |
|
| (11,567) |
|
| (1,784) |
| |||||||
Increase in servicing advances |
|
| (32,189) |
|
| (30,254) |
| |||||||
Increase in receivable from Investment Funds |
|
| (971) |
|
| (2,302) |
| |||||||
Sale of loans held for sale to PennyMac Mortgage Investment Trust |
|
| 4,715 |
|
| 8,405 |
| |||||||
Repurchase of mortgage loans and real estate acquired in settlement of loans subject to representations and warranties |
|
| (6,913) |
|
| (1,294) |
| |||||||
Decrease (increase) in servicing advances |
|
| 1,897 |
|
| (15,277) |
| |||||||
Decrease (increase) in receivable from Investment Funds |
|
| 122 |
|
| (301) |
| |||||||
Decrease in receivable from PennyMac Mortgage Investment Trust |
|
| 9,175 |
|
| 343 |
|
|
| 1,843 |
|
| 5,878 |
|
Decrease in deferred tax asset |
|
| 12,826 |
|
| 10,721 |
|
|
| 3,570 |
|
| 4,212 |
|
Decrease in payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement |
|
| (4,299) |
|
| — |
| |||||||
Payments to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement |
|
| — |
|
| (4,299) |
| |||||||
Increase in other assets |
|
| (14,282) |
|
| (27,005) |
|
|
| (3,692) |
|
| (5,315) |
|
Increase in accounts payable and accrued expenses |
|
| 20,941 |
|
| 24,040 |
| |||||||
(Decrease) increase in accounts payable and accrued expenses |
|
| (3,680) |
|
| 24,307 |
| |||||||
Decrease in payable to Investment Funds |
|
| (4,653) |
|
| (2,008) |
|
|
| (1,586) |
|
| (3,897) |
|
Increase in payable to PennyMac Mortgage Investment Trust |
|
| 16,120 |
|
| 13,360 |
| |||||||
(Decrease) increase in payable to PennyMac Mortgage Investment Trust |
|
| (9,698) |
|
| 7,446 |
| |||||||
Net cash used in operating activities |
|
| (421,410) |
|
| (431,444) |
|
|
| (516,862) |
|
| (168,494) |
|
Cash flow from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in short-term investments |
|
| (1,890) |
|
| 96,191 |
| |||||||
Advance on note receivable from PennyMac Mortgage Investment Trust—secured |
|
| (71,072) |
|
| — |
| |||||||
Repayment of note receivable from PennyMac Mortgage Investment Trust—secured |
|
| 18,546 |
|
| — |
| |||||||
Decrease (increase) in short-term investments |
|
| 18,055 |
|
| (8,588) |
| |||||||
Purchase of mortgage servicing rights |
|
| (270,133) |
|
| (97,644) |
|
|
| (11) |
|
| (63,137) |
|
Sale of mortgage servicing rights |
|
| — |
|
| 10,881 |
| |||||||
Settlement of derivative financial instruments used for hedging |
|
| (8,293) |
|
| 7,023 |
| |||||||
Net settlement of derivative financial instruments used for hedging |
|
| 38,579 |
|
| 15,404 |
| |||||||
Purchase of furniture, fixtures, equipment and building improvements |
|
| (2,277) |
|
| (3,054) |
|
|
| (8,939) |
|
| (660) |
|
Acquisition of capitalized software |
|
| (860) |
|
| (52) |
|
|
| (1,378) |
|
| (77) |
|
Decrease (increase) in margin deposits and restricted cash |
|
| 19,932 |
|
| (7,733) |
| |||||||
Net cash (used in) provided by investing activities |
|
| (316,047) |
|
| 5,612 |
| |||||||
Increase in margin deposits and restricted cash |
|
| (4,551) |
|
| (1,328) |
| |||||||
Net cash provided by (used in) investing activities |
|
| 41,755 |
|
| (58,386) |
| |||||||
Cash flow from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of loans under agreements to repurchase |
|
| 14,379,136 |
|
| 7,453,139 |
| |||||||
Repurchase of loans sold under agreements to repurchase |
|
| (13,937,711) |
|
| (7,099,464) |
| |||||||
Sale of assets under agreements to repurchase |
|
| 7,614,302 |
|
| 5,431,114 |
| |||||||
Repurchase of assets sold under agreements to repurchase |
|
| (7,122,979) |
|
| (5,261,548) |
| |||||||
Issuance of mortgage loan participation certificates |
|
| 7,937,026 |
|
| — |
|
|
| 4,838,963 |
|
| 3,387,582 |
|
Repayment of mortgage loan participation certificates |
|
| (7,884,705) |
|
| — |
|
|
| (4,827,226) |
|
| (3,340,458) |
|
Borrowing on note payable |
|
| 129,012 |
|
| 63,160 |
| |||||||
Repayment of note payable |
|
| (29,411) |
|
| — |
| |||||||
Advances on notes payable |
|
| 68,000 |
|
| — |
| |||||||
Repayment of notes payable |
|
| (1,828) |
|
| (12,190) |
| |||||||
Issuance of excess servicing spread financing |
|
| 187,287 |
|
| 73,393 |
|
|
| — |
|
| 46,412 |
|
Repayment of excess servicing spread financing |
|
| (31,083) |
|
| (16,494) |
|
|
| (20,881) |
|
| (12,731) |
|
Repayment of leases payable |
|
| (5) |
|
| — |
| |||||||
Repurchase of excess servicing spread financing |
|
| (59,045) |
|
| — |
| |||||||
Repayments of obligations under capital lease |
|
| (1,509) |
|
| (3) |
| |||||||
Payment of debt issuance costs |
|
| (3,990) |
|
| — |
|
|
| (1,602) |
|
| — |
|
Distribution to Private National Mortgage Acceptance Company, LLC partners |
|
| (9,627) |
|
| (7,731) |
| |||||||
Distribution to Private National Mortgage Acceptance Company, LLC members |
|
| — |
|
| (5,522) |
| |||||||
Net cash provided by financing activities |
|
| 735,929 |
|
| 466,003 |
|
|
| 486,195 |
|
| 232,656 |
|
Net (decrease) increase in cash |
|
| (1,528) |
|
| 40,171 |
| |||||||
Net increase in cash |
|
| 11,088 |
|
| 5,776 |
| |||||||
Cash at beginning of period |
|
| 76,256 |
|
| 30,639 |
|
|
| 105,472 |
|
| 76,256 |
|
Cash at end of period |
| $ | 74,728 |
| $ | 70,810 |
|
| $ | 116,560 |
| $ | 82,032 |
|
The accompanying notes are an integral part of these financial statements.
8
PENNYMAC FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1—Organization and Basis of Presentation
PennyMac Financial Services, Inc. (“PFSI” or the “Company”) was formed as a Delaware corporation on December 31, 2012. Pursuant to a reorganization, the Company became a holding corporation and its primary asset is an equity interest in Private National Mortgage Acceptance Company, LLC (“PennyMac”). The Company is the managing member of PennyMac and operates and controls all of the businesses and affairs of PennyMac subject to the consent rights of other members under certain circumstances, and consolidates the financial results of PennyMac and its subsidiaries.
PennyMac is a Delaware limited liability company which, through its subsidiaries, engages in mortgage banking and investment management activities. PennyMac’s mortgage banking activities consist of residential mortgage loan production (including correspondent production and consumer direct lending) and mortgage loan servicing. PennyMac’s investment management activities and a portion of its mortgage loan servicing activities are conducted on behalf of investment vehicles that invest in residential mortgage loans and related assets. PennyMac’s primary wholly owned subsidiaries are:
· | PNMAC Capital Management, LLC (“PCM”)—a Delaware limited liability company registered with the Securities and Exchange Commission (“SEC”) as an investment adviser under the Investment Advisers Act of 1940, as amended. PCM enters into investment management agreements with entities that invest in residential mortgage loans and related assets. |
Presently, PCM has management agreements with PennyMac Mortgage Investment Trust (“PMT”), a publicly held real estate investment trust (“REIT”), PNMAC Mortgage Opportunity Fund, LLC and PNMAC Mortgage Opportunity Fund, L.P., (the “Master Fund”), both registered under the Investment Company Act of 1940, as amended, an affiliate of these registered funds and PNMAC Mortgage Opportunity Fund Investors, LLC (collectively, the “Investment Funds”). Together, the Investment Funds and PMT are referred to as the “Advised Entities.”
· | PennyMac Loan Services, LLC (“PLS”)—a Delaware limited liability company that services |
PLS is approved as a seller/servicer of mortgage loans by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and as an issuer of securities guaranteed by the Government National Mortgage Association (“Ginnie Mae”). PLS is a licensed Federal Housing Administration Nonsupervised Title II Lender with the U.S. Department of Housing and Urban Development (“HUD”) and a lender/servicer with the Veterans Administration (“VA”) and U.S. Department of Agriculture. We refer to each of Fannie Mae, Freddie Mac and Ginnie Mae asAgriculture (“USDA”) (each an “Agency” and collectively the “Agencies.”“Agencies”).
· | PNMAC Opportunity Fund Associates, LLC (“PMOFA”)—a Delaware limited liability company and the general partner of |
The accompanying consolidated financial statements have been prepared in compliance with accounting principles generally accepted in the United States (“GAAP”) as codified in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information and with the SEC’s instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements and notes do not include all of the information required by GAAP for complete financial statements. The interim consolidated information should be read together with the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.2015.
The accompanying unaudited consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, income, and cash flows for the interim periods, but are not necessarily
9
indicative of the results of operations to be anticipated for the full year ending December 31, 2015.2016. Intercompany accounts and transactions have been eliminated.
9
Preparation of financial statements in compliance with GAAP requires management to make estimates and assumptionsjudgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results will likely differ from those estimates.
Reclassification of previously presented balances
In April of 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-03, InterestImputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability.
ASU 2015-03 specifies that its adoption be made on a retrospective basis. Accordingly, the Company has reclassified its debt issuance costs from Other assets as previously presented to Mortgage loans sold under agreements to repurchase to conform its December 31, 2014 balance sheet to the current presentation. The adoption of ASU 2015-03 did not result in changes to the Company’s previously presented consolidated statements of income or consolidated statements of cash flows.
Following is a summary of the balance sheet reclassifications:
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2014 |
| |||||||
|
| As reported |
| As previously |
| Reclassification |
| |||
|
| (in thousands) |
| |||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
Other |
| $ | 37,419 |
| $ | 37,858 |
| $ | (439) |
|
Total assets |
| $ | 2,506,686 |
| $ | 2,507,125 |
| $ | (439) |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
Mortgage loans sold under agreements to repurchase |
| $ | 822,182 |
| $ | 822,621 |
| $ | (439) |
|
Total liabilities |
| $ | 1,699,420 |
| $ | 1,699,859 |
| $ | (439) |
|
Total liabilities and stockholders' equity |
| $ | 2,506,686 |
| $ | 2,507,125 |
| $ | (439) |
|
Note 2—Concentration of Risk
A substantial portion of the Company’s activities relate to the Advised Entities. Fees charged to these entities (generally comprised of fulfillment fees, mortgage loan servicing fees, management fees and Carried Interest) totaled 10%30% and 37%26% of total net revenuesrevenue for the quarters ended June 30,March 31, 2016 and 2015, and 2014, respectively, and 17% and 36% for the six months ended June 30, 2015 and 2014, respectively.
10
Note 3—Transactions with Affiliates
Transactions with PMT
CorrespondentOperating Activities
Mortgage Loan Production Activities
Following is a summary of mortgage lending and sourcing activity between the Company and PMT:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| ||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| ||||
|
| (in thousands) |
|
| ||||||||||
Fulfillment fee revenue |
| $ | 15,333 |
| $ | 12,433 |
| $ | 28,199 |
| $ | 21,335 |
|
|
Unpaid principal balance of loans fulfilled for PennyMac Mortgage Investment Trust |
| $ | 3,579,078 |
| $ | 2,991,764 |
| $ | 6,469,210 |
| $ | 4,911,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sourcing fees paid |
| $ | 2,427 |
| $ | 1,125 |
| $ | 3,848 |
| $ | 2,017 |
|
|
Unpaid principal balance of loans purchased from PennyMac Mortgage Investment Trust |
| $ | 8,082,764 |
| $ | 3,748,874 |
| $ | 12,818,138 |
| $ | 6,722,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of mortgage loans held for sale to PennyMac Mortgage Investment Trust |
| $ | 2,423 |
| $ | 1,985 |
| $ | 10,828 |
| $ | 1,985 |
|
|
Tax service fee receivable from PennyMac Mortgage Investment Trust |
| $ | 1,113 |
| $ | 684 |
| $ | 2,002 |
| $ | 1,050 |
|
|
Mortgage servicing rights recapture recognized |
| $ | — |
| $ | 1 |
| $ | — |
| $ | 9 |
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, |
| ||||
|
| 2016 |
| 2015 |
| ||
|
| (in thousands) |
| ||||
|
|
|
|
|
|
|
|
Fulfillment fee revenue |
| $ | 12,935 |
| $ | 12,866 |
|
Unpaid principal balance of mortgage loans fulfilled for PennyMac Mortgage Investment Trust |
| $ | 3,259,363 |
| $ | 2,890,132 |
|
|
|
|
|
|
|
|
|
Sourcing fees paid |
| $ | 1,950 |
| $ | 1,421 |
|
Unpaid principal balance of mortgage loans purchased from PennyMac Mortgage Investment Trust |
| $ | 6,495,722 |
| $ | 4,735,374 |
|
|
|
|
|
|
|
|
|
Proceeds from sale of mortgage loans held for sale to PennyMac Mortgage Investment Trust |
| $ | 4,715 |
| $ | 8,405 |
|
Tax service fee from PennyMac Mortgage Investment Trust |
| $ | 1,007 |
| $ | 782 |
|
Mortgage servicing rights and excess servicing spread recapture recognized |
| $ | 1,952 |
| $ | 1,289 |
|
Mortgage banking and warehouse service fees paid by PMT |
| $ | 1 |
| $ | — |
|
10
Mortgage Loan Servicing Activities
Following is a summary of mortgage loan servicing fees earned from PMT:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||
|
| (in thousands) |
|
| (in thousands) | |||||||||||||||
Loan servicing fees relating to PennyMac Mortgage Investment Trust: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Mortgage loan servicing fees relating to PennyMac Mortgage Investment Trust: |
|
|
|
|
|
| ||||||||||||||
Mortgage loans acquired for sale at fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Base and supplemental |
| $ | 42 |
| $ | 29 |
| $ | 68 |
| $ | 46 |
|
| $ | 56 |
| $ | 26 |
|
Activity-based |
|
| 59 |
|
| 51 |
|
| 90 |
|
| 77 |
|
|
| 115 |
|
| 31 |
|
|
|
| 101 |
|
| 80 |
|
| 158 |
|
| 123 |
|
|
| 171 |
|
| 57 |
|
Mortgage loans at fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Base and supplemental |
|
| 4,183 |
|
| 4,975 |
|
| 8,215 |
|
| 9,941 |
|
| 3,359 |
|
| 4,032 |
| |
Activity-based |
|
| 3,093 |
|
| 5,746 |
|
| 5,987 |
|
| 12,132 |
|
|
| 3,449 |
|
| 2,894 |
|
|
|
| 7,276 |
|
| 10,721 |
|
| 14,202 |
|
| 22,073 |
|
|
| 6,808 |
|
| 6,926 |
|
Mortgage servicing rights: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Base and supplemental |
|
| 4,654 |
|
| 3,323 |
|
| 8,310 |
|
| 6,471 |
|
| 4,385 |
|
| 3,656 |
| |
Activity-based |
|
| 105 |
|
| 56 |
|
| 136 |
|
| 104 |
|
|
| 89 |
|
| 31 |
|
|
|
| 4,759 |
|
| 3,379 |
|
| 8,446 |
|
| 6,575 |
|
|
| 4,474 |
|
| 3,687 |
|
|
| $ | 12,136 |
| $ | 14,180 |
| $ | 22,806 |
| $ | 28,771 |
|
| $ | 11,453 |
| $ | 10,670 |
|
Investment Management Activities
11
Management Feescash and PMT’s common shares (subject to a limit of no more than 50% paid in common shares), at PMT’s option.
Following is a summary of the base management and performance incentive fees earned from PMT:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||
|
| (in thousands) |
|
| (in thousands) | |||||||||||||||
Management fees: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Base |
| $ | 5,709 |
| $ | 5,838 |
| $ | 11,439 |
| $ | 11,359 |
|
| $ | 5,352 |
| $ | 5,730 |
|
Performance incentive |
|
| 70 |
|
| 3,074 |
|
| 1,343 |
|
| 5,627 |
|
|
| — |
|
| 1,273 |
|
|
| $ | 5,779 |
| $ | 8,912 |
| $ | 12,782 |
| $ | 16,986 |
|
| $ | 5,352 |
| $ | 7,003 |
|
The term of the management agreement, as amended, expires on February 1, 2017, subject to automatic renewal for additional 18‑month periods, unless terminated earlier in accordance with the terms of the management agreement.
In the event of termination of the management agreement bybetween PMT and the Company, the Company may be entitled to a termination fee in certain circumstances. The termination fee is equal to three times the sum of (a) the average annual base management fee, and (b) the average annual performance incentive fee earned by the Company, in each case during the 24-month period before termination.
Investing and Financing Activities
11
Expense Reimbursement
Following is a summary of investing and financing activity betweenPMT reimburses the Company and PMT:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended June 30, |
| Six months ended June 30, |
| ||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
| ||||
|
| (in thousands) |
| ||||||||||
Issuance of excess servicing spread |
| $ | 140,875 |
| $ | 52,867 |
| $ | 187,287 |
| $ | 73,393 |
|
Repayment of excess servicing spread |
| $ | 18,352 |
| $ | 9,081 |
| $ | 31,083 |
| $ | 16,494 |
|
Change in fair value of excess servicing spread (gain) loss |
| $ | (7,133) |
| $ | 10,062 |
| $ | 403 |
| $ | 14,854 |
|
Interest expense from excess servicing spread |
| $ | 5,818 |
| $ | 3,139 |
| $ | 9,570 |
| $ | 6,001 |
|
Excess servicing spread recapture recognized |
| $ | 1,456 |
| $ | 2,525 |
| $ | 2,745 |
| $ | 4,415 |
|
Advance on note receivable from PennyMac Mortgage Investment Trust |
| $ | 71,072 |
| $ | — |
| $ | 71,072 |
| $ | — |
|
Repayment of note receivable from PennyMac Mortgage Investment Trust |
| $ | 18,546 |
| $ | — |
| $ | 18,546 |
| $ | — |
|
Interest income on note receivable from PennyMac Mortgage Investment Trust |
| $ | 535 |
| $ | — |
| $ | 535 |
| $ | — |
|
On April 30, 2015,for other expenses, including common overhead expenses incurred on its behalf by the Company, entered into an amendment to its Third Amended and Restated Loan and Security Agreement, dated as of March 27, 2015, pursuant to which it may finance certain of its mortgage servicing rights (“MSRs”) and servicing advance receivablesin accordance with Credit Suisse First Boston Mortgage Capital LLC (“CSFB”) (the “Loan and Security Agreement”).
Under the terms of the amendment, the maximum loan amount under the Loanits management agreement. Such amounts are summarized below:
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, |
| ||||
|
| 2016 |
| 2015 |
| ||
|
| (in thousands) |
| ||||
Reimbursement of: |
|
|
|
|
|
|
|
Common overhead incurred by the Company (1) |
| $ | 2,561 |
| $ | 2,729 |
|
Expenses incurred on PMT's behalf |
|
| 55 |
|
| 379 |
|
|
| $ | 2,616 |
| $ | 3,108 |
|
Payments and settlements during the period (2) |
| $ | 27,661 |
| $ | 22,752 |
|
(1) | On December 15, 2015, the Company and PMT amended their management agreement to provide that the total costs and expenses incurred by the Company in any quarter and reimbursable by PMT is capped at an amount equal to the product of (A) 70 basis points (0.0070), multiplied by (B) PMT’s shareholders’ equity (as defined in the management agreement) as of the last day of such quarter, divided by four (4). |
(2) | Payments and settlements include payments for operating, investment and financing activities itemized in this Note and netting settlements made pursuant to master netting agreements between the Company and PMT. |
Amounts due from and Security Agreement was increased from $257 millionpayable to $407 million. The $150 million increase was implemented for the purposePMT are summarized below:
|
|
|
|
|
|
|
|
|
| March 31, |
| December 31, |
| ||
|
| 2016 |
| 2015 |
| ||
|
| (in thousands) |
| ||||
Receivable from PMT: |
|
|
|
|
|
|
|
Management fees |
| $ | 5,352 |
| $ | 5,670 |
|
Servicing fees |
|
| 4,601 |
|
| 3,682 |
|
Correspondent production fees |
|
| 2,898 |
|
| 2,729 |
|
Fulfillment fees |
|
| 1,631 |
|
| 1,082 |
|
Allocated expenses |
|
| 1,254 |
|
| 1,043 |
|
Conditional reimbursement |
|
| 900 |
|
| 900 |
|
Expenses incurred on PMT's behalf |
|
| 576 |
|
| 3,447 |
|
Interest on note receivable |
|
| 435 |
|
| 412 |
|
|
| $ | 17,647 |
| $ | 18,965 |
|
Payable to PMT: |
|
|
|
|
|
|
|
Deposits made by PMT to fund servicing advances |
| $ | 146,563 |
|
| 153,573 |
|
MSR recapture payable |
|
| 691 |
|
| 781 |
|
Other |
|
| 5,840 |
|
| 8,025 |
|
|
| $ | 153,094 |
| $ | 162,379 |
|
Conditional Reimbursement of facilitating the financing of excess servicing spread (“ESS”) by PMT. The aggregate loan amount outstanding under the Loan and Security Agreement and relating to advances outstanding with PMT is guaranteed in full by PMT.Underwriting Fees
In connection with the amendment to the Loan and Security Agreement, the Company and PMT entered into an underlying loan and security agreement, dated as of April 30, 2015, pursuant to which PMT may borrow up to $150 million from the Company for the purpose of financing ESS.
The principal amount of the borrowings under the Loan and Security Agreement is based upon a percentage of the market value of the ESS pledged by PMT, subject to the maximum loan amount described above. Pursuant to the underlying loan and security agreement, PMT granted to the Company a security interest in all of its right, title and interest in, to and under the ESS pledged to secure loans.
The Company and PMT have agreed that PMT is required to repay the Company the principal amount of such borrowings plus accrued interest to the date of such repayment, and the Company is required to repay CSFB the corresponding amount under the Loan and Security Agreement. PMT is also required to pay the Company a fee for the
12
structuring of the Loan and Security Agreement in an amount equal to the portion of the corresponding fee paid by the Company to CSFB under the Loan and Security Agreement and allocable to the increase in the maximum loan amount resulting from the ESS financing.
The note matures on October 30, 2015 and interest accrues at a rate based on the lender’s cost of funds. As of June 30, 2015, $52.5 million of principal and interest was outstanding and included in Note receivable from PennyMac Mortgage Investment Trustsecured on the accompanying consolidated balance sheets.
Other Transactions
In connection with the initial public offering (“IPO”) of PMT’s common shares on August 4, 2009 the Company entered into an agreement with(“IPO”), PMT pursuant to which PMTconditionally agreed to reimburse PennyMac for the Company up to $2.9 million payment that it madefor underwriting fees paid to the IPO underwriters in such offering (the “Conditional Reimbursement”) if PMT satisfied certain performance measures over a specified period of time. Effective February 1, 2013, the parties amended the terms of the reimbursement agreement to provide for the reimbursement toby the Company of the Conditional Reimbursement if PMT is required to pay the Company performance incentive fees under the management agreement at a rate of $10 in reimbursement for every $100 of performance incentive fees earned. The reimbursement of the Conditional Reimbursement is subject to a maximum reimbursement in any particular 12 month period of $1.0 million and the maximum amount that may be reimbursed under the agreement is $2.9 million.on PMT’s behalf. The Company received reimbursement payments from PMT totaling $73,000 and $230,000$157,000 for the quarter and six months ended June 30, 2015, respectively, and $0 and $36,000March 31, 2015. The Company received no reimbursement from PMT during the quarter and six months ended June 30, 2014, respectively.March 31, 2016.
In the event thea termination fee is payable to the Company under the management agreement, and the Company has not received the full amount of the reimbursements and payments under the reimbursement agreement, such amount will be paid in full. The term of the reimbursement agreement expires on February 1, 2019.
PMT reimburses the Company for other expenses, including common overhead expenses incurred on its behalf by the Company, in accordance with the terms of its management agreement. Such amounts are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended June 30, |
| Six months ended June 30, |
| ||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
| ||||
|
| (in thousands) |
| ||||||||||
Reimbursement of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common overhead incurred by the Company (1) |
| $ | 2,702 |
| $ | 2,691 |
| $ | 5,431 |
| $ | 5,269 |
|
Expenses incurred on PMT's behalf |
|
| 83 |
|
| 104 |
|
| 462 |
|
| 549 |
|
|
| $ | 2,785 |
| $ | 2,795 |
| $ | 5,893 |
| $ | 5,818 |
|
Payments and settlements during the period (2) |
| $ | 24,114 |
| $ | 22,968 |
| $ | 46,866 |
| $ | 41,354 |
|
|
|
|
|
Amounts due from PMT are summarized below:
|
|
|
|
|
|
|
|
|
| June 30, |
| December 31, |
| ||
|
| 2015 |
| 2014 |
| ||
|
| (in thousands) |
| ||||
Management fees |
| $ | 5,779 |
| $ | 8,426 |
|
Allocated expenses |
|
| 5,893 |
|
| 7,087 |
|
Servicing fees |
|
| 3,666 |
|
| 3,385 |
|
Conditional Reimbursement |
|
| 907 |
|
| 1,137 |
|
Unsettled excess servicing spread issuance |
|
| — |
|
| 3,836 |
|
|
| $ | 16,245 |
| $ | 23,871 |
|
1312
The Company holds an investment in PMT in the form of 75,000 common shares of beneficial interest as of June 30, 2015 and December 31, 2014. The common shares of beneficial interest had fair values of $1.3 million and $1.6 million as of June 30, 2015 and December 31, 2014, respectively.Investing Activities
Of the $139.7 million payable to PMT asFollowing is a summary of June 30, 2015, $130.4 million represents deposits made by PMT to fund servicing advances made byinvesting activities between the Company $8.7 million represents other expenses and unsettled ESS financing activity, and $640,000 represents MSR recapture payable to PMT.PMT:
|
|
|
|
|
|
|
| Quarter ended March 31, |
| ||||
| 2016 |
| 2015 |
| ||
| (in thousands) |
| ||||
Note receivable from PennyMac Mortgage Investment Trust: |
|
|
|
|
|
|
Interest income | $ | 1,602 |
| $ | — |
|
|
|
|
|
|
|
|
Common shares of beneficial interest of PennyMac Mortgage Investment Trust : |
|
|
|
|
|
|
Activity during the period: |
|
|
|
|
|
|
Dividends received from PennyMac Mortgage Investment Trust | $ | 35 |
| $ | 92 |
|
Change in fair value of investment in PennyMac Mortgage Investment Trust |
| (121) |
|
| 15 |
|
| $ | (86) |
| $ | 107 |
|
|
|
|
|
|
|
|
|
| March 31, |
| December 31, | ||
|
| 2016 |
| 2015 | ||
|
| (in thousands) | ||||
|
|
|
|
|
|
|
Note receivable from PennyMac Mortgage Investment Trust: | $ | 150,000 |
| $ | 150,000 |
|
Common shares of beneficial interest of PennyMac Mortgage Investment Trust : |
|
|
|
|
|
|
Fair value | $ | 1,023 |
| $ | 1,145 |
|
Number of shares |
| 75 |
|
| 75 |
|
|
|
|
|
|
|
|
Financing Activities
Of the $123.3 million payable to PMT asFollowing is a summary of December 31, 2014, $116.7 million represents deposits made by PMT to fund servicing advances made byfinancing activities between the Company $6.2 million represents other expenses and unsettled ESS financing activity, and $460,000 represents MSR recapture payable to PMT.PMT:
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, |
| ||||
|
| 2016 |
| 2015 |
| ||
|
| (in thousands) |
| ||||
|
|
|
|
|
|
|
|
Excess servicing spread financing: |
|
|
|
|
|
|
|
Issuance: |
|
|
|
|
|
|
|
Cash |
| $ | — |
| $ | 46,412 |
|
Pursuant to recapture agreement |
| $ | 1,911 |
| $ | 1,246 |
|
Repayment |
| $ | (20,881) |
| $ | (12,731) |
|
Repurchase |
| $ | (59,045) |
| $ | — |
|
Change in fair value |
| $ | (19,449) |
| $ | (7,536) |
|
Interest expense |
| $ | 7,015 |
| $ | 3,752 |
|
Excess servicing spread recapture |
| $ | 1,822 |
| $ | 1,289 |
|
13
Investment Funds
Amounts due from and payable to the Investment Funds are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| June 30, |
| December 31, |
|
| March 31, |
| December 31, |
| ||||
|
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||
Carried Interest due from Investment Funds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PNMAC Mortgage Opportunity Fund, LLC |
| $ | 41,240 |
| $ | 40,771 |
|
| $ | 42,187 |
| $ | 41,893 |
|
PNMAC Mortgage Opportunity Fund Investors, LLC |
|
| 27,473 |
|
| 26,527 |
|
|
| 28,332 |
|
| 28,033 |
|
|
| $ | 68,713 |
| $ | 67,298 |
|
| $ | 70,519 |
| $ | 69,926 |
|
Receivable from Investment Funds: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Management fees |
| $ | 1,180 |
| $ | 1,596 |
|
| $ | 560 |
| $ | 655 |
|
Loan servicing rebate |
|
| 526 |
|
| 189 |
| |||||||
Loan servicing fees |
|
| 308 |
|
| 476 |
| |||||||
Mortgage loan servicing fees |
| 256 |
|
| 392 |
| ||||||||
Mortgage loan servicing rebate |
| 225 |
|
| 224 |
| ||||||||
Expense reimbursements |
|
| 134 |
|
| 30 |
|
|
| 78 |
|
| 45 |
|
|
| $ | 2,148 |
| $ | 2,291 |
|
| $ | 1,119 |
| $ | 1,316 |
|
Payable to Investment Funds—Servicing advances |
| $ | 28,843 |
| $ | 30,429 |
|
Amounts due to the Investment Funds totaling $31.3 million and $35.9 million represent amounts advanced by the Investment Funds to fund servicing advances made by the Company as of June 30, 2015 and December 31, 2014, respectively.
Exchanged Private National Mortgage Acceptance Company, LLC Unitholders
The Company entered into a tax receivable agreement with PennyMac’s existing unitholders on the date of the IPO that will provide for the payment by PFSI to PennyMac’s exchanged unitholders an amount equal to 85% of the amount of the benefits, if any, that PFSI is deemed to realize as a result of (i) increases in tax basis of PennyMac’s assets resulting from such unitholders’ exchanges and (ii) certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. Based on the PennyMac unitholder exchanges to date, the Company has recorded a $71.9$74.3 million Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement as of June 30,March 31, 2016 and December 31, 2015. The Company made payments under the tax receivable agreement totaling $0 and $4.3 million during the quarter and six months ended June 30,March 31, 2015. There were no payments made during the period ended March 31, 2016.
Note 4—Earnings Per Share of Common Stock
Basic earnings per share of common stock is determined using net income attributable to the Company’s common stockholders divided by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share of common stock is determined by dividing diluted net income attributable to the Company’s common stockholders by the weighted average number of shares of common stock outstanding, assuming all potentially dilutive shares of common stock were issued.
The Company applies the treasury stock method to determine the dilutive weighted average shares of common stock represented by the unvestednon-vested unit and stock-based compensation awards and the exchangeable PennyMac Class A units.awards. The diluted earnings per share calculation assumes the exchange of these PennyMac Class A units for shares of common stock. Accordingly, earnings attributable to the Company’s common stockholders is also adjusted to include the earnings
14
allocated to the PennyMac Class A units after taking into account the income taxes that would be applicable to the shares of common stock assumed to be exchanged.
14
The following table summarizes the basic and diluted earnings per share calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||
|
| (in thousands, except per share data) |
|
| (in thousands, except per share amounts) |
| ||||||||||||||
Basic earnings per share of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income attributable to PennyMac Financial Services, Inc. common stockholders |
| $ | 12,749 |
| $ | 9,618 |
| $ | 21,777 |
| $ | 17,590 |
|
| $ | 5,175 |
| $ | 9,028 |
|
Weighted average shares of common stock outstanding |
|
| 21,700 |
|
| 21,142 |
|
| 21,647 |
|
| 21,005 |
|
|
| 22,006 |
|
| 21,593 |
|
Basic earnings per share of common stock |
| $ | 0.59 |
| $ | 0.45 |
| $ | 1.01 |
| $ | 0.84 |
|
| $ | 0.24 |
| $ | 0.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Diluted earnings per share of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income |
| $ | 12,749 |
| $ | 9,618 |
| $ | 21,777 |
| $ | 17,590 |
| |||||||
Effect of net income attributable to noncontrolling interest, net of income taxes |
|
| 31,925 |
|
| 24,743 |
|
| 54,688 |
|
| 45,754 |
| |||||||
Net income attributable to PennyMac Financial Services, Inc. common stockholders |
| $ | 5,175 |
| $ | 9,028 |
| |||||||||||||
Effect of net income attributable to PennyMac Class A units exchangeable to common stock, net of income taxes |
|
| 12,671 |
|
| 22,762 |
| |||||||||||||
Diluted net income attributable to common stockholders |
| $ | 44,674 |
| $ | 34,361 |
| $ | 76,465 |
| $ | 63,344 |
|
| $ | 17,846 |
| $ | 31,790 |
|
Weighted average shares of common stock outstanding |
|
| 21,700 |
|
| 21,142 |
|
| 21,647 |
|
| 21,005 |
|
|
| 22,006 |
| 21,593 |
| |
Dilutive shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
PennyMac Class A units exchangeable to common stock |
|
| 53,620 |
|
| 53,509 |
|
| 53,592 |
|
| 53,609 |
|
|
| 54,043 |
| 53,562 |
| |
Non-vested PennyMac Class A units issuable under unit-based stock compensation plan and exchangeable to common stock |
|
| 650 |
|
| 1,216 |
|
| 714 |
|
| 1,247 |
|
|
| — |
| 779 |
| |
Shares issuable under stock-based compensation plans |
|
| 135 |
|
| 48 |
|
| 110 |
|
| 34 |
| |||||||
Common shares issuable under stock-based compensation plan |
|
| 145 |
|
| 116 |
| |||||||||||||
Diluted weighted average shares of common stock outstanding |
|
| 76,105 |
|
| 75,915 |
|
| 76,063 |
|
| 75,895 |
|
|
| 76,194 |
|
| 76,050 |
|
Diluted earnings per share of common stock |
| $ | 0.59 |
| $ | 0.45 |
| $ | 1.01 |
| $ | 0.83 |
|
| $ | 0.23 |
| $ | 0.42 |
|
The following table summarizes the anti-dilutive weighted-average number of outstanding stock options and performance-based restricted stock units (“RSUs”):
|
|
|
|
|
|
| Quarter ended March 31, |
| |||
| 2016 |
| 2015 |
| |
| (in thousands) |
| |||
Stock options (1) |
| 2,106 |
| 1,397 |
|
Performance-based RSUs (2) |
| 2,567 |
| 1,870 |
|
Total potentially dilutive common stock equivalents |
| 4,673 |
| 3,267 |
|
(1) | During the quarters ended March 31, 2016 and 2015, certain stock options were outstanding but not included in the computation of diluted earnings per share because the weighted-average exercise prices of $15.80 and $18.39 per share respectively, were anti-dilutive. |
(2) | During the quarters ended March 31, 2016 and 2015, certain performance-based RSUs were outstanding but not included in the computation of earnings per share because the performance thresholds had not been achieved. |
Note 5—Loan Sales and Servicing Activities
The Company originates or purchases and sells mortgage loans in the secondary mortgage market without recourse for credit losses. However, the Company maintains continuing involvement with the mortgage loans sold in the form of servicing arrangements and the liability under representations and warranties it makes to purchasers and insurers of the mortgage loans.loans sold.
15
The following table summarizes cash flows between the Company and transferees as a result of the sale of mortgage loans in transactions where the Company maintains continuing involvement with the mortgage loans in the form of loan servicing arrangements and a liability for representations and warranties it makes to purchases and insurers of the mortgage loans as well as unpaid principal balance information at period end.loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Cash flows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales proceeds |
| $ | 9,853,346 |
| $ | 4,729,647 |
| $ | 15,619,191 |
| $ | 8,022,045 |
|
| $ | 7,942,200 |
| $ | 5,765,845 |
|
Servicing fees received |
| $ | 35,317 |
| $ | 25,282 |
| $ | 69,312 |
| $ | 47,466 |
|
| $ | 58,480 |
| $ | 58,969 |
|
Net servicing advance recoveries |
| $ | (5,248) |
| $ | (3,730) |
| $ | (8,955) |
| $ | (4,338) |
| |||||||
Period end information: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net servicing advances |
| $ | (8,281) |
| $ | 1,902 |
| |||||||||||||
|
|
|
|
|
| |||||||||||||||
|
| March 31, |
| Demeber 31, |
| |||||||||||||||
|
| (in thousands) |
| |||||||||||||||||
Unpaid principal balance of mortgage loans outstanding at end of period |
| $ | 44,794,166 |
| $ | 29,546,095 |
|
|
|
|
|
|
|
| $ | 63,806,614 |
| $ | 60,687,246 |
|
Delinquencies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
30-89 days |
| $ | 1,030,350 |
| $ | 543,347 |
|
|
|
|
|
|
|
| $ | 1,341,118 |
| $ | 1,539,568 |
|
90 days or more or in foreclosure or bankruptcy |
| $ | 293,284 |
| $ | 120,560 |
|
|
|
|
|
|
| |||||||
90 days or more: |
|
|
|
|
| |||||||||||||||
Not in foreclosure |
| $ | 493,655 |
| $ | 340,313 |
| |||||||||||||
In foreclosure or bankruptcy |
| $ | 218,576 |
| $ | 227,025 |
| |||||||||||||
Foreclosed |
| $ | 2,734 |
| $ | 755 |
|
(1) | Net of guarantee fees paid to the Agencies. |
15
The unpaid principal balance (“UPB”) of the Company’s mortgage loan servicing portfolio is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| June 30, 2015 |
|
| March 31, 2016 |
| ||||||||||||||
|
|
|
| Contract |
|
|
|
|
|
| Contract |
|
|
| ||||||
|
| Servicing |
| servicing and |
| Total |
|
| Servicing |
| servicing and |
| Total |
| ||||||
|
| rights owned |
| subservicing |
| loans serviced |
|
| rights owned |
| subservicing |
| loans serviced |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Investor: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Non-affiliated entities |
| $ | 91,497,836 |
| $ | — |
| $ | 91,497,836 |
|
| $ | 113,763,634 |
| $ | — |
| $ | 113,763,634 |
|
Affiliated entities |
|
| — |
|
| 43,145,707 |
|
| 43,145,707 |
|
| — |
| 49,581,955 |
| 49,581,955 |
| |||
Mortgage loans held for sale |
|
| 1,526,779 |
|
| — |
|
| 1,526,779 |
|
|
| 1,561,006 |
|
| — |
|
| 1,561,006 |
|
|
| $ | 93,024,615 |
| $ | 43,145,707 |
| $ | 136,170,322 |
|
| $ | 115,324,640 |
| $ | 49,581,955 |
| $ | 164,906,595 |
|
Amount subserviced for the Company (1) |
| $ | — |
| $ | 21,388 |
| $ | 21,388 |
|
| $ | 18,987 |
| $ | — |
| $ | 18,987 |
|
Delinquent mortgage loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
30 days |
| $ | 2,027,394 |
| $ | 315,422 |
| $ | 2,342,816 |
|
| $ | 2,160,011 |
| $ | 274,941 |
| $ | 2,434,952 |
|
60 days |
|
| 625,385 |
|
| 147,600 |
|
| 772,985 |
|
| 676,586 |
| 91,663 |
| 768,249 |
| |||
90 days or more |
|
|
|
|
|
|
|
|
|
| ||||||||||
90 days or more : |
|
|
|
|
|
|
| |||||||||||||
Not in foreclosure |
|
| 923,790 |
|
| 986,192 |
|
| 1,909,982 |
|
| 1,331,215 |
| 627,798 |
| 1,959,013 |
| |||
In foreclosure |
|
| 479,039 |
|
| 1,405,262 |
|
| 1,884,301 |
| ||||||||||
In foreclosure or bankruptcy |
| 771,635 |
| 937,947 |
| 1,709,582 |
| |||||||||||||
Foreclosed |
|
| 23,321 |
|
| 547,110 |
|
| 570,431 |
|
|
| 74,248 |
|
| 476,034 |
|
| 550,282 |
|
|
| $ | 4,078,929 |
| $ | 3,401,586 |
| $ | 7,480,515 |
|
| $ | 5,013,695 |
| $ | 2,408,383 |
| $ | 7,422,078 |
|
Custodial funds managed by the Company (2) |
| $ | 2,724,892 |
| $ | 586,848 |
| $ | 3,311,740 |
|
| $ | 2,788,032 |
| $ | 672,739 |
| $ | 3,460,771 |
|
(1) | Certain of the mortgage loans serviced by the Company are subserviced on the Company’s behalf by other mortgage loan servicers. Mortgage loans are subserviced for the Company on a transitional basis |
(2) | Borrower and investor custodial cash accounts relate to mortgage loans serviced under the servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns interest on certain of the custodial funds it manages on behalf of the mortgage |
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| December 31, 2014 |
|
| December 31, 2015 |
| ||||||||||||||
|
|
|
| Contract |
|
|
|
|
|
| Contract |
|
|
| ||||||
|
| Servicing |
| servicing and |
| Total |
|
| Servicing |
| servicing and |
| Total |
| ||||||
|
| rights owned |
| subservicing |
| loans serviced |
|
| rights owned |
| subservicing |
| loans serviced |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Investor: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated entities |
| $ | 65,169,194 |
| $ | — |
| $ | 65,169,194 |
|
| $ | 111,409,601 |
| $ | — |
| $ | 111,409,601 |
|
Affiliated entities |
|
| — |
|
| 39,709,945 |
|
| 39,709,945 |
|
| — |
| 47,810,632 |
| 47,810,632 |
| |||
Mortgage loans held for sale |
|
| 1,100,910 |
|
| — |
|
| 1,100,910 |
|
|
| 1,052,485 |
|
| — |
|
| 1,052,485 |
|
|
| $ | 66,270,104 |
| $ | 39,709,945 |
| $ | 105,980,049 |
|
| $ | 112,462,086 |
| $ | 47,810,632 |
| $ | 160,272,718 |
|
Amount subserviced for the Company (1) |
| $ | — |
| $ | 330,768 |
| $ | 330,768 |
|
| $ | 14,454 |
| $ | — |
| $ | 14,454 |
|
Delinquent mortgage loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
30 days |
| $ | 1,372,915 |
| $ | 302,091 |
| $ | 1,675,006 |
|
| $ | 2,666,435 |
| $ | 349,859 |
| $ | 3,016,294 |
|
60 days |
|
| 434,428 |
|
| 135,777 |
|
| 570,205 |
|
| 834,617 |
| 136,924 |
| 971,541 |
| |||
90 days or more |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Not in foreclosure |
|
| 779,129 |
|
| 1,057,973 |
|
| 1,837,102 |
|
| 1,270,236 |
| 788,410 |
| 2,058,646 |
| |||
In foreclosure |
|
| 422,330 |
|
| 1,544,762 |
|
| 1,967,092 |
| ||||||||||
In foreclosure or bankruptcy |
| 656,617 |
| 1,180,014 |
| 1,836,631 |
| |||||||||||||
Foreclosed |
|
| 32,444 |
|
| 533,067 |
|
| 565,511 |
|
|
| 23,372 |
|
| 542,031 |
|
| 565,403 |
|
|
| $ | 3,041,246 |
|
| 3,573,670 |
| $ | 6,614,916 |
|
| $ | 5,451,277 |
| $ | 2,997,238 |
| $ | 8,448,515 |
|
Custodial funds managed by the Company (2) |
| $ | 1,522,295 |
| $ | 388,498 |
| $ | 1,910,793 |
|
| $ | 2,242,146 |
| $ | 502,751 |
| $ | 2,744,897 |
|
(1) | Certain of the mortgage loans serviced by the Company are subserviced on the Company’s behalf by other mortgage loan servicers. Mortgage loans are subserviced for the Company on a transitional basis |
(2) | Borrower and investor custodial cash accounts relate to mortgage loans serviced under the servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns interest on custodial funds it manages on behalf of the mortgage |
Following is a summary of the geographical distribution of mortgage loans included in the Company’s servicing portfolio for the top five and all other states as measured by UPB:
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| June 30, |
| December 31, |
|
| March 31, |
| December 31, |
| ||||
State |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||
California |
| $ | 35,872,153 |
| $ | 33,751,630 |
|
| $ | 39,514,062 |
| $ | 39,007,363 |
|
Texas |
|
| 9,624,745 |
|
| 6,954,778 |
|
| 12,761,033 |
| 12,191,722 |
| ||
Virginia |
|
| 7,979,310 |
|
| 6,360,171 |
|
| 10,358,703 |
|
| 9,816,114 |
| |
Florida |
|
| 7,743,502 |
|
| 5,573,215 |
|
| 10,195,413 |
| 9,709,940 |
| ||
Maryland |
|
| 4,941,871 |
|
| * |
|
| 6,522,300 |
|
| 6,151,945 |
| |
Washington |
|
| * |
|
| 3,830,587 |
| |||||||
All other states |
|
| 70,008,741 |
|
| 49,509,668 |
|
|
| 85,555,084 |
|
| 83,395,634 |
|
|
| $ | 136,170,322 |
| $ | 105,980,049 |
|
| $ | 164,906,595 |
| $ | 160,272,718 |
|
* State did not represent a top five state as of the respective date.
Note 6—Netting of Financial Instruments
The Company uses derivative financial instruments to manage exposure to interest rate risk for the interest rate lock commitments (“IRLCs”) it makes to purchase or originate mortgage loans at specified interest rates, its inventory of mortgage loans held for sale and MSRs. The Company has elected to present net derivative asset and liability positions, and cash collateral obtained from (or posted to) its counterparties when subject to a master netting arrangement that is legally enforceable on all counterparties in the event of default. The derivatives that are not subject to a master netting arrangement are IRLCs.
17
Following are summaries of derivative assets and related netting amounts.
Offsetting of Derivative Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2015 |
| December 31, 2014 |
|
| March 31, 2016 |
| December 31, 2015 |
| ||||||||||||||||||||||||||||
|
| Gross |
| Gross amount |
| Net amount |
| Gross |
| Gross amount |
| Net amount |
|
| Gross |
| Gross amount |
| Net amount |
| Gross |
| Gross amount |
| Net amount |
| ||||||||||||
|
| amount of |
| offset |
| of assets |
| amount of |
| offset |
| of assets |
|
| amount of |
| offset in the |
| of assets in the |
| amount of |
| offset in the |
| of assets in the |
| ||||||||||||
|
| recognized |
| in the |
| in the |
| recognized |
| in the |
| in the |
|
| recognized |
| consolidated |
| consolidated |
| recognized |
| consolidated |
| consolidated |
| ||||||||||||
|
| assets |
| balance sheet |
| balance sheet |
| assets |
| balance sheet |
| balance sheet |
|
| assets |
| balance sheet |
| balance sheet |
| assets |
| balance sheet |
| balance sheet |
| ||||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||||||||
Derivatives subject to master netting arrangements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Derivative assets not subject to a master netting arrangement - IRLCs |
| $ | 73,639 |
| $ | — |
| $ | 73,639 |
| $ | 45,885 |
| $ | — |
| $ | 45,885 |
| |||||||||||||||||||
Derivative assets subject to a master netting arrangement: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Forward purchase contracts |
| $ | 7,048 |
| $ | — |
| $ | 7,048 |
| $ | 9,060 |
| $ | — |
| $ | 9,060 |
|
|
| 56,180 |
|
| — |
|
| 56,180 |
|
| 4,181 |
|
| — |
|
| 4,181 |
|
Forward sale contracts |
|
| 26,652 |
|
| — |
|
| 26,652 |
|
| 320 |
|
| — |
|
| 320 |
|
|
| 41 |
|
| — |
|
| 41 |
|
| 4,965 |
|
| — |
|
| 4,965 |
|
MBS put options |
|
| 1,426 |
|
| — |
|
| 1,426 |
|
| 476 |
|
| — |
|
| 476 |
| |||||||||||||||||||
MBS call options |
|
| 253 |
|
| — |
|
| 253 |
|
| — |
|
| — |
|
| — |
| |||||||||||||||||||
Mortgage-backed security ("MBS") put options |
|
| 384 |
|
| — |
|
| 384 |
|
| 404 |
|
| — |
|
| 404 |
| |||||||||||||||||||
Put options on interest rate futures purchase contracts |
|
| 2,165 |
|
| — |
|
| 2,165 |
|
| 862 |
|
| — |
|
| 862 |
|
|
| 738 |
|
| — |
|
| 738 |
|
| 1,832 |
|
| — |
|
| 1,832 |
|
Call options on interest rate futures purchase contracts |
|
| 3,031 |
|
| — |
|
| 3,031 |
|
| 2,193 |
|
| — |
|
| 2,193 |
|
|
| 9,146 |
|
| — |
|
| 9,146 |
|
| 1,555 |
|
| — |
|
| 1,555 |
|
Netting |
|
| — |
|
| (31,378) |
|
| (31,378) |
|
| — |
|
| (7,807) |
|
| (7,807) |
|
|
| — |
|
| (50,074) |
|
| (50,074) |
|
| — |
|
| (8,542) |
|
| (8,542) |
|
|
|
| 40,575 |
|
| (31,378) |
|
| 9,197 |
|
| 12,911 |
|
| (7,807) |
|
| 5,104 |
|
|
| 66,489 |
|
| (50,074) |
|
| 16,415 |
|
| 12,937 |
|
| (8,542) |
|
| 4,395 |
|
Derivatives not subject to master netting arrangements - IRLCs |
|
| 34,371 |
|
| — |
|
| 34,371 |
|
| 33,353 |
|
| — |
|
| 33,353 |
| |||||||||||||||||||
|
| $ | 74,946 |
| $ | (31,378) |
| $ | 43,568 |
| $ | 46,264 |
| $ | (7,807) |
| $ | 38,457 |
|
| $ | 140,128 |
| $ | (50,074) |
| $ | 90,054 |
| $ | 58,822 |
| $ | (8,542) |
| $ | 50,280 |
|
Derivative Assets, Financial Assets, and Collateral Held by Counterparty
The following table summarizes by significant counterparty the amount of derivative asset positions after considering master netting arrangements and financial instruments or cash pledged that do not meet the accounting guidance qualifying for netting.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| June 30, 2015 |
| December 31, 2014 |
|
| March 31, 2016 |
| December 31, 2015 |
| ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| Gross amount not |
|
|
|
|
|
|
| Gross amount not |
|
|
|
|
|
|
|
| Gross amount not |
|
|
|
|
| Gross amount not |
|
|
| |||||||||||||||||||
|
|
|
|
| offset in the |
|
|
|
|
|
|
| offset in the |
|
|
|
|
|
|
|
| offset in the |
|
|
|
|
| offset in the |
|
|
| |||||||||||||||||||
|
|
|
|
| consolidated |
|
|
|
|
|
|
| consolidated |
|
|
|
|
|
|
|
| consolidated |
|
|
|
|
| consolidated |
|
|
| |||||||||||||||||||
|
|
|
|
| balance sheet |
|
|
|
|
|
|
| balance sheet |
|
|
|
|
|
|
|
| balance sheet |
|
|
|
|
| balance sheet |
|
|
| |||||||||||||||||||
|
| Net amount |
|
|
|
|
|
|
|
|
|
| Net amount |
|
|
|
|
|
|
|
|
|
|
| Net amount |
|
|
|
|
|
|
| Net amount |
|
|
|
|
|
|
| ||||||||||
|
| of assets |
|
|
| Cash |
|
|
|
| of assets |
|
|
| Cash |
|
|
|
| of assets in the |
|
|
| Cash |
|
|
| of assets in the |
|
|
| Cash |
|
|
| |||||||||||||||
|
| in the |
| Financial |
| collateral |
| Net |
| in the |
| Financial |
| collateral |
| Net |
|
| consolidated |
| Financial |
| collateral |
| Net |
| consolidated |
| Financial |
| collateral |
| Net |
| ||||||||||||||||
|
| balance sheet |
| instruments |
| received |
| amount |
| balance sheet |
| instruments |
| received |
| amount |
|
| balance sheet |
| instruments |
| received |
| amount |
| balance sheet |
| instruments |
| received |
| amount |
| ||||||||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||||||||||||||||||||
Interest rate lock commitments |
| $ | 34,371 |
| $ | — |
| $ | — |
| $ | 34,371 |
| $ | 33,353 |
| $ | — |
| $ | — |
| $ | 33,353 |
|
| $ | 73,639 |
| $ | — |
| $ | — |
| $ | 73,639 |
| $ | 45,885 |
| $ | — |
| $ | — |
| $ | 45,885 |
|
RJ O'Brien |
|
| 3,810 |
|
| — |
|
| — |
|
| 3,810 |
|
| 2,005 |
|
| — |
|
| — |
|
| 2,005 |
|
| 7,086 |
| — |
| — |
| 7,086 |
| 2,246 |
| — |
| — |
| 2,246 |
| ||||||||
Bank of Oklahoma |
|
| 1,303 |
|
| — |
|
| — |
|
| 1,303 |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||||||||||||||||
Fannie Mae |
| 3,568 |
| — |
| — |
| 3,568 |
| 453 |
| — |
| — |
| 453 |
| |||||||||||||||||||||||||||||||||
Jefferies & Co. |
|
| 1,201 |
|
| — |
|
| — |
|
| 1,201 |
|
| 764 |
|
| — |
|
| — |
|
| 764 |
|
| 1,562 |
| — |
| — |
| 1,562 |
| 888 |
| — |
| — |
| 888 |
| ||||||||
Bank of America, N.A. |
|
| 1,093 |
|
| — |
|
| — |
|
| 1,093 |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||||||||||||||||
JP Morgan |
|
| 565 |
|
| — |
|
| — |
|
| 565 |
|
| 526 |
|
| — |
|
| — |
|
| 526 |
|
| 1,259 |
| — |
| — |
| 1,259 |
| 53 |
| — |
| — |
| 53 |
| ||||||||
BNP Paribas |
| 1,100 |
| — |
| — |
| 1,100 |
| — |
| — |
| — |
| — |
| |||||||||||||||||||||||||||||||||
Citibank, N.A. |
|
| 441 |
|
| — |
|
| — |
|
| 441 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 823 |
| — |
| — |
| 823 |
| — |
| — |
| — |
| — |
| ||||||||
Morgan Stanley Bank, N.A. |
| 468 |
| — |
| — |
| 468 |
| — |
| — |
| — |
| — |
| |||||||||||||||||||||||||||||||||
Wells Fargo Bank, N.A. |
| 257 |
| — |
| — |
| 257 |
| — |
| — |
| — |
| — |
| |||||||||||||||||||||||||||||||||
Nomura |
| 236 |
| — |
| — |
| 236 |
| — |
| — |
| — |
| — |
| |||||||||||||||||||||||||||||||||
Goldman Sachs |
| — |
| — |
| — |
| — |
| 471 |
| — |
| — |
| 471 |
| |||||||||||||||||||||||||||||||||
Others |
|
| 784 |
|
| — |
|
| — |
|
| 784 |
|
| 1,809 |
|
| — |
|
| — |
|
| 1,809 |
|
|
| 56 |
|
| — |
|
| — |
|
| 56 |
|
| 284 |
|
| — |
|
| — |
|
| 284 |
|
|
| $ | 43,568 |
| $ | — |
| $ | — |
| $ | 43,568 |
| $ | 38,457 |
| $ | — |
| $ | — |
| $ | 38,457 |
|
| $ | 90,054 |
| $ | — |
| $ | — |
| $ | 90,054 |
| $ | 50,280 |
| $ | — |
| $ | — |
| $ | 50,280 |
|
18
Offsetting of Derivative Liabilities and Financial Liabilities
Following is a summary of net derivative liabilities and assets sold under agreements to repurchase and related netting amounts. As discussed above, all derivatives with the exception of IRLCs are subject to master netting arrangements. The mortgage loans sold under agreements to repurchase do not qualify for netting.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| June 30, 2015 |
| December 31, 2014 |
|
| March 31, 2016 |
| December 31, 2015 |
| ||||||||||||||||||||||||||||
|
|
|
|
|
| Net |
|
|
|
|
|
|
| Net |
|
|
|
|
|
| Net |
|
|
|
|
| Net |
| ||||||||||
|
|
|
|
|
| amount |
|
|
|
|
|
|
| amount |
|
|
|
|
|
| amount |
|
|
|
|
| amount |
| ||||||||||
|
| Gross |
| Gross amount |
| of liabilities |
| Gross |
| Gross amount |
| of liabilities |
|
| Gross |
| Gross amount |
| of liabilities |
| Gross |
| Gross amount |
| of liabilities |
| ||||||||||||
|
| amount of |
| offset in the |
| in the |
| amount of |
| offset in the |
| in the |
|
| amount of |
| offset in the |
| in the |
| amount of |
| offset in the |
| in the |
| ||||||||||||
|
| recognized |
| consolidated |
| consolidated |
| recognized |
| consolidated |
| consolidated |
|
| recognized |
| consolidated |
| consolidated |
| recognized |
| consolidated |
| consolidated |
| ||||||||||||
|
| liabilities |
| balance sheet |
| balance sheet |
| liabilities |
| balance sheet |
| balance sheet |
|
| liabilities |
| balance sheet |
| balance sheet |
| liabilities |
| balance sheet |
| balance sheet |
| ||||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||||||||
Derivatives subject to a master netting arrangement: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Derivative liabilities not subject to a master netting arrangement - IRLCs |
| $ | 1,754 |
| $ | — |
| $ | 1,754 |
| $ | 2,112 |
| $ | — |
| $ | 2,112 |
| |||||||||||||||||||
Derivative liabilities subject to a master netting arrangement: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Forward purchase contracts |
| $ | 14,316 |
| $ | — |
| $ | 14,316 |
| $ | 141 |
| $ | — |
| $ | 141 |
|
|
| 9 |
|
| — |
|
| 9 |
|
| 9,004 |
|
| — |
|
| 9,004 |
|
Forward sale contracts |
|
| 7,093 |
|
| — |
|
| 7,093 |
|
| 16,110 |
|
| — |
|
| 16,110 |
|
| 58,865 |
| ��— |
| 58,865 |
| 7,497 |
| — |
| 7,497 |
| ||||||
Put options on interest rate futures sale contracts |
|
| — |
|
| — |
|
| — |
|
| 8 |
|
| — |
|
| 8 |
| |||||||||||||||||||
Put options on interest rate futures purchase contracts |
| 1,287 |
| — |
| 1,287 |
| 203 |
| — |
| 203 |
| |||||||||||||||||||||||||
Call options on interest rate futures purchase contracts |
| 16 |
| — |
| 16 |
| 47 |
| — |
| 47 |
| |||||||||||||||||||||||||
Netting |
|
| — |
|
| (14,459) |
|
| (14,459) |
|
| — |
|
| (10,698) |
|
| (10,698) |
|
|
| — |
|
| (52,016) |
|
| (52,016) |
|
| — |
|
| (9,780) |
|
| (9,780) |
|
|
|
| 21,409 |
|
| (14,459) |
|
| 6,950 |
|
| 16,259 |
|
| (10,698) |
|
| 5,561 |
|
|
| 60,177 |
|
| (52,016) |
|
| 8,161 |
|
| 16,751 |
|
| (9,780) |
|
| 6,971 |
|
Derivatives not subject to a master netting arrangement - IRLCs |
|
| 6,634 |
|
| — |
|
| 6,634 |
|
| 952 |
|
| — |
|
| 952 |
| |||||||||||||||||||
Total derivatives |
|
| 28,043 |
|
| (14,459) |
|
| 13,584 |
|
| 17,211 |
|
| (10,698) |
|
| 6,513 |
|
|
| 61,931 |
|
| (52,016) |
|
| 9,915 |
|
| 18,863 |
|
| (9,780) |
|
| 9,083 |
|
Mortgage loans sold under agreements to repurchase: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Amount outstanding |
|
| 1,264,046 |
|
| — |
|
| 1,264,046 |
|
| 822,621 |
|
| — |
|
| 822,621 |
|
| 1,658,729 |
| — |
| 1,658,729 |
| 1,167,405 |
| — |
| 1,167,405 |
| ||||||
Unamortized debt issuance costs |
|
| (798) |
|
| — |
|
| (798) |
|
| (439) |
|
| — |
|
| (439) |
|
|
| (151) |
|
| — |
|
| (151) |
|
| (674) |
|
| — |
|
| (674) |
|
|
|
| 1,263,248 |
|
| — |
|
| 1,263,248 |
|
| 822,182 |
|
| — |
|
| 822,182 |
|
|
| 1,658,578 |
|
| — |
|
| 1,658,578 |
|
| 1,166,731 |
|
| — |
|
| 1,166,731 |
|
|
| $ | 1,291,291 |
| $ | (14,459) |
| $ | 1,276,832 |
| $ | 839,393 |
| $ | (10,698) |
| $ | 828,695 |
|
| $ | 1,720,509 |
| $ | (52,016) |
| $ | 1,668,493 |
| $ | 1,185,594 |
| $ | (9,780) |
| $ | 1,175,814 |
|
19
Derivative Liabilities, Financial Liabilities, and Collateral Held by Counterparty
The following table summarizes by significant counterparty the amount of derivative liabilities and mortgage loansassets sold under agreements to repurchase after considering master netting arrangements and financial instruments or cash pledged that do not qualify under the accounting guidance for netting. All assets sold under agreements to repurchase are secured by sufficient collateral or have fair value that exceeds the liability amount recorded on the consolidated balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2015 |
| December 31, 2014 |
|
| March 31, 2016 |
| December 31, 2015 |
| ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| Gross amount |
|
|
|
|
|
|
| Gross amount |
|
|
|
|
|
|
|
| Gross amount |
|
|
|
|
|
|
| Gross amount |
|
|
|
| ||||||||||||||||
|
|
|
|
| not offset in the |
|
|
|
|
|
|
| not offset in the |
|
|
|
|
|
|
|
| not offset in the |
|
|
|
|
|
|
| not offset in the |
|
|
|
| ||||||||||||||||
|
|
|
|
| consolidated |
|
|
|
|
|
|
| consolidated |
|
|
|
|
|
|
|
| consolidated |
|
|
|
|
|
|
| consolidated |
|
|
|
| ||||||||||||||||
|
|
|
|
| balance sheet |
|
|
|
|
|
|
| balance sheet |
|
|
|
|
|
|
|
| balance sheet |
|
|
|
|
|
|
| balance sheet |
|
|
|
| ||||||||||||||||
|
| Net amount |
|
|
|
|
|
|
|
|
|
| Net amount |
|
|
|
|
|
|
|
|
|
|
| Net amount |
|
|
|
|
|
|
| Net amount |
| Net amount |
|
|
|
|
|
|
| Net amount |
| ||||||
|
| of liabilities |
|
|
|
|
|
|
|
|
|
| of liabilities |
|
|
|
|
|
|
|
|
|
|
| of liabilities |
|
|
|
|
|
|
| of liabilities |
| of liabilities |
|
|
|
|
|
|
| of liabilities |
| ||||||
|
| in the |
|
|
|
| Cash |
|
|
|
| in the |
|
|
|
| Cash |
|
|
|
|
| in the |
|
|
|
| Cash |
| in the |
| in the |
|
|
|
| Cash |
| in the |
| ||||||||||
|
| consolidated |
| Financial |
| collateral |
| Net |
| consolidated |
| Financial |
| collateral |
| Net |
|
| consolidated |
| Financial |
| collateral |
| consolidated |
| consolidated |
| Financial |
| collateral |
| consolidated |
| ||||||||||||||||
|
| balance sheet |
| instruments |
| pledged |
| amount |
| balance sheet |
| instruments |
| pledged |
| amount |
|
| balance sheet |
| instruments |
| pledged |
| balance sheet |
| balance sheet |
| instruments |
| pledged |
| balance sheet |
| ||||||||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||||||||||||||||||||
Interest rate lock commitments |
| $ | 6,634 |
| $ | — |
| $ | — |
| $ | 6,634 |
| $ | 952 |
| $ | — |
| $ | — |
| $ | 952 |
|
| $ | 1,754 |
| $ | — |
| $ | — |
| $ | 1,754 |
| $ | 2,112 |
| $ | — |
| $ | — |
| $ | 2,112 |
|
Bank of America, N.A. |
|
| 495,513 |
|
| (491,620) |
|
| — |
|
| 3,893 |
|
| 271,130 |
|
| (269,510) |
|
| — |
|
| 1,620 |
| |||||||||||||||||||||||||
Credit Suisse First Boston Mortgage Capital LLC |
|
| 491,115 |
|
| (488,906) |
|
| — |
|
| 2,209 |
|
| 464,737 |
|
| (463,541) |
|
| — |
|
| 1,196 |
|
|
| 876,227 |
|
| (875,639) |
|
| — |
|
| 588 |
|
| 795,179 |
|
| (794,470) |
|
| — |
|
| 709 |
|
Bank of America, N.A. |
|
| 488,048 |
|
| (488,048) |
|
| — |
|
| — |
|
| 236,909 |
|
| (236,771) |
|
| — |
|
| 138 |
| |||||||||||||||||||||||||
Morgan Stanley Bank, N.A. |
|
| 192,091 |
|
| (191,268) |
|
| — |
|
| 823 |
|
| 122,148 |
|
| (122,031) |
|
| — |
|
| 117 |
|
|
| 162,164 |
|
| (162,164) |
|
| — |
|
| — |
|
| 49,763 |
|
| (49,521) |
|
| — |
|
| 242 |
|
Citibank, N.A. |
|
| 95,824 |
|
| (95,824) |
|
| — |
|
| — |
|
| 699 |
|
| (278) |
|
| — |
|
| 421 |
|
|
| 129,306 |
|
| (129,306) |
|
| — |
|
| — |
|
| 55,948 |
|
| (53,904) |
|
| — |
|
| 2,044 |
|
Royal Bank of Canada |
|
| 824 |
|
| — |
|
| — |
|
| 824 |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||||||||||||||||
Barclays |
|
| 584 |
|
| — |
|
| — |
|
| 584 |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||||||||||||||||
Daiwa Capital Markets |
|
| 549 |
|
| — |
|
| — |
|
| 549 |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||||||||||||||||
Bank of Oklahoma |
|
| 453 |
|
| — |
|
| — |
|
| 453 |
|
| 135 |
|
| — |
|
| — |
|
| 135 |
| |||||||||||||||||||||||||
Goldman Sachs |
|
| 448 |
|
| — |
|
| — |
|
| 448 |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||||||||||||||||
Deutsche Bank |
|
| 384 |
|
| — |
|
| — |
|
| 384 |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||||||||||||||||
Bank of New York Mellon |
|
| 2,803 |
|
| — |
|
| — |
|
| 2,803 |
|
| 1,552 |
|
| — |
|
| — |
|
| 1,552 |
|
|
| 138 |
|
| — |
|
| — |
|
| 138 |
|
| 154 |
|
| — |
|
| — |
|
| 154 |
|
JP Morgan |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 672 |
|
| — |
|
| — |
|
| 672 |
| |||||||||||||||||||||||||
BNP Paribas |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 738 |
|
| — |
|
| — |
|
| 738 |
| |||||||||||||||||||||||||
Others |
|
| 1,115 |
|
| — |
|
| — |
|
| 1,115 |
|
| 2,137 |
|
| — |
|
| — |
|
| 2,137 |
|
|
| 300 |
|
| — |
|
| — |
|
| 300 |
|
| 657 |
|
| — |
|
| — |
|
| 657 |
|
|
| $ | 1,277,630 |
| $ | (1,264,046) |
| $ | — |
| $ | 13,584 |
| $ | 829,134 |
| $ | (822,621) |
| $ | — |
| $ | 6,513 |
|
| $ | 1,668,644 |
| $ | (1,658,729) |
| $ | — |
| $ | 9,915 |
| $ | 1,176,488 |
| $ | (1,167,405) |
| $ | — |
| $ | 9,083 |
|
Note 7—Fair Value
The Company’s consolidated financial statements include assets and liabilities that are measured based on their fair values. The application of fair value may be on a recurring or nonrecurring basis depending on the accounting principles applicable to the specific asset or liability and whether management has elected to carry the item at its fair value as discussed in the following paragraphs.
The Company groups its assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the observability of the inputs used to determine fair value. These levels are:
· | Level 1—Quoted prices in active markets for identical assets or liabilities. |
· | Level 2—Prices determined or determinable using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing an asset or liability and are developed based on market data obtained from sources independent of the Company. These may include quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk and other inputs. |
· | Level 3—Prices determined using significant unobservable inputs. In situations where observable inputs are unavailable (for example, when there is little or no market activity for an asset or liability at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Company’s own judgments about the factors that market participants use in pricing an asset or liability, and are based on the best information available in the circumstances. |
As a result of the difficulty in observing certain significant valuation inputs affecting “Level 3” fair value financial statement items, the Company is required to make judgments regarding these items’ fair values. Different persons in possession of the same facts may reasonably arrive at different conclusions as to the inputs to be applied in valuing these financial statement items and their fair values. Likewise, due to the
20
general illiquidity of some of these financial statement items, subsequent transactions may be at values significantly different from those reported.
Fair Value Accounting Elections
Management identified all of its non-cash financial assets, its originated MSRs relating to loans with initial interest rates of more than 4.5% and purchased MSRs purchased subject to ESSexcess servicing spread financing (“ESS”) to be accounted for at fair value so changes in fair value will be reflected in income as they occur and more timely reflect the results of the Company’s performance. Management has also identifiedelected to account for its ESS financing to be accounted for at fair value as a means of hedging the related MSR’sMSRs’ fair value risk.
For originatedThe Company’s subsequent accounting for MSRs relating toand mortgage servicing liabilities (“MSLs”) are based on the class of MSRs or MSLs. Originated MSRs backed by mortgage loans with initial interest rates of less than or equal to 4.5%, management has concluded that such assets present different risks to are accounted for using the Company than originatedamortization method. Originated MSRs relating to mortgage loans with initial interest rates of more than 4.5% and therefore require a different risk management approach. Management’s risk management efforts relating to these assetspurchased MSRs financed in part by ESS and MSLs are aimedaccounted for at mainly moderating the effects of non-interest rate risks on fair value such as the effect ofwith changes in home prices on the assets’ fair values. Management has identified these assets for accounting using the amortization method.value recorded in current period income.
Management’s risk management efforts in connection with MSRs relating to mortgage loans with initial interest rates of more than 4.5% are aimed at mainly moderating the effects of changes in interest rates on the assets’ fair values.
2021
During the quarters and six months ended June 30, 2015 and 2014, derivatives were used to hedge the fair value changes of the MSRs.
Financial Statement Items Measured at Fair Value on a Recurring Basis
Following is a summary of financial statement items that are measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| June 30, 2015 |
|
| March 31, 2016 |
| ||||||||||||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| ||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Short-term investments |
| $ | 23,577 |
| $ | — |
| $ | — |
| $ | 23,577 |
|
| $ | 28,264 |
| $ | — |
| $ | — |
| $ | 28,264 |
|
Mortgage loans held for sale at fair value |
|
| — |
|
| 1,560,177 |
|
| 34,085 |
|
| 1,594,262 |
|
| — |
| 1,620,933 |
| 33,030 |
| 1,653,963 |
| ||||
Derivative assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest rate lock commitments |
|
| — |
|
| — |
|
| 34,371 |
|
| 34,371 |
|
| — |
| — |
| 73,639 |
| 73,639 |
| ||||
Forward purchase contracts |
|
| — |
|
| 7,048 |
|
| — |
|
| 7,048 |
|
| — |
| 56,180 |
| — |
| 56,180 |
| ||||
Forward sales contracts |
|
| — |
|
| 26,652 |
|
| — |
|
| 26,652 |
|
| — |
| 41 |
| — |
| 41 |
| ||||
MBS put options |
|
| — |
|
| 1,426 |
|
| — |
|
| 1,426 |
|
| — |
| 384 |
| — |
| 384 |
| ||||
MBS call options |
|
| — |
|
| 253 |
|
| — |
|
| 253 |
| |||||||||||||
Put options on interest rate futures purchase contracts |
|
| 2,165 |
|
| — |
|
| — |
|
| 2,165 |
|
| 738 |
| — |
| — |
| 738 |
| ||||
Call options on interest rate futures purchase contracts |
|
| 3,031 |
|
| — |
|
| — |
|
| 3,031 |
|
|
| 9,146 |
|
| — |
|
| — |
|
| 9,146 |
|
Total derivative assets before netting |
|
| 5,196 |
|
| 35,379 |
|
| 34,371 |
|
| 74,946 |
|
| 9,884 |
| 56,605 |
| 73,639 |
| 140,128 |
| ||||
Netting (1) |
|
| — |
|
| — |
|
| — |
|
| (31,378) |
|
|
| — |
|
| — |
|
| — |
|
| (50,074) |
|
Total derivative assets |
|
| 5,196 |
|
| 35,379 |
|
| 34,371 |
|
| 43,568 |
|
| 9,884 |
| 56,605 |
| 73,639 |
| 90,054 |
| ||||
Investment in PennyMac Mortgage Investment Trust |
|
| 1,307 |
|
| — |
|
| — |
|
| 1,307 |
|
| 1,023 |
| — |
| — |
| 1,023 |
| ||||
Mortgage servicing rights at fair value |
|
| — |
|
| — |
|
| 581,269 |
|
| 581,269 |
|
|
| — |
|
| — |
|
| 594,403 |
|
| 594,403 |
|
|
| $ | 30,080 |
| $ | 1,595,556 |
| $ | 649,725 |
| $ | 2,243,983 |
|
| $ | 39,171 |
| $ | 1,677,538 |
| $ | 701,072 |
| $ | 2,367,707 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust |
| $ | — |
| $ | — |
| $ | 359,102 |
| $ | 359,102 |
|
| $ | — |
| $ | — |
| $ | 321,976 |
| $ | 321,976 |
|
Derivative liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest rate lock commitments |
|
| — |
|
| — |
|
| 6,634 |
|
| 6,634 |
|
| — |
| — |
| 1,754 |
| 1,754 |
| ||||
Forward purchase contracts |
|
| — |
|
| 14,316 |
|
| — |
|
| 14,316 |
|
| — |
| 9 |
| — |
| 9 |
| ||||
Forward sales contracts |
|
| — |
|
| 7,093 |
|
| — |
|
| 7,093 |
|
| — |
| 58,865 |
| — |
| 58,865 |
| ||||
Put options on interest rate futures purchase contracts |
| 1,287 |
| — |
| — |
| 1,287 |
| |||||||||||||||||
Call options on interest rate futures purchase contracts |
|
| 16 |
|
| — |
|
| — |
|
| 16 |
| |||||||||||||
Total derivative liabilities before netting |
|
| — |
|
| 21,409 |
|
| 6,634 |
|
| 28,043 |
|
| 1,303 |
| 58,874 |
| 1,754 |
| 61,931 |
| ||||
Netting (1) |
|
| — |
|
| — |
|
| — |
|
| (14,459) |
|
|
| — |
|
| — |
|
| — |
|
| (52,016) |
|
Total derivative liabilities |
|
| — |
|
| 21,409 |
|
| 6,634 |
|
| 13,584 |
|
| 1,303 |
| 58,874 |
| 1,754 |
| 9,915 |
| ||||
Mortgage servicing liabilities |
|
| — |
|
| — |
|
| 11,791 |
|
| 11,791 |
|
|
| — |
|
| — |
|
| 6,747 |
|
| 6,747 |
|
|
| $ | — |
| $ | 21,409 |
| $ | 377,527 |
| $ | 384,477 |
|
| $ | 1,303 |
| $ | 58,874 |
| $ | 330,477 |
| $ | 338,638 |
|
(1) | Derivatives are reported net of cash collateral received and paid and, to the extent that the criteria of the accounting guidance covering the offsetting of amounts related to certain contracts are met, positions with the same counterparty are netted as part of a legally enforceable master netting agreement. |
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2015 |
| ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| ||||
|
| (in thousands) |
| ||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments |
| $ | 46,319 |
| $ | — |
| $ | — |
| $ | 46,319 |
|
Mortgage loans held for sale at fair value |
|
| — |
|
| 1,052,673 |
|
| 48,531 |
|
| 1,101,204 |
|
Derivative assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments |
|
| — |
|
| — |
|
| 45,885 |
|
| 45,885 |
|
Forward purchase contracts |
|
| — |
|
| 4,181 |
|
| — |
|
| 4,181 |
|
Forward sales contracts |
|
| — |
|
| 4,965 |
|
| — |
|
| 4,965 |
|
MBS put options |
|
| — |
|
| 404 |
|
| — |
|
| 404 |
|
Put options on interest rate futures purchase contracts |
|
| 1,832 |
|
| — |
|
| — |
|
| 1,832 |
|
Call options on interest rate futures purchase contracts |
|
| 1,555 |
|
| — |
|
| — |
|
| 1,555 |
|
Total derivative assets before netting |
|
| 3,387 |
|
| 9,550 |
|
| 45,885 |
|
| 58,822 |
|
Netting (1) |
|
| — |
|
| — |
|
| — |
|
| (8,542) |
|
Total derivative assets |
|
| 3,387 |
|
| 9,550 |
|
| 45,885 |
|
| 50,280 |
|
Investment in PennyMac Mortgage Investment Trust |
|
| 1,145 |
|
| — |
|
| — |
|
| 1,145 |
|
Mortgage servicing rights at fair value |
|
| — |
|
| — |
|
| 660,247 |
|
| 660,247 |
|
|
| $ | 50,851 |
| $ | 1,062,223 |
| $ | 754,663 |
| $ | 1,859,195 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust |
| $ | — |
| $ | — |
| $ | 412,425 |
| $ | 412,425 |
|
Derivative liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments |
|
| — |
|
| — |
|
| 2,112 |
|
| 2,112 |
|
Forward purchase contracts |
|
| — |
|
| 9,004 |
|
| — |
|
| 9,004 |
|
Forward sales contracts |
|
| — |
|
| 7,497 |
|
| — |
|
| 7,497 |
|
Put options on interest rate futures purchase contracts |
|
| 203 |
|
| — |
|
| — |
|
| 203 |
|
Call options on interest rate futures purchase contracts |
|
| 47 |
|
| — |
|
| — |
|
| 47 |
|
Total derivative liabilities before netting |
|
| 250 |
|
| 16,501 |
|
| 2,112 |
|
| 18,863 |
|
Netting (1) |
|
| — |
|
| — |
|
| — |
|
| (9,780) |
|
Total derivative liabilities |
|
| 250 |
|
| 16,501 |
|
| 2,112 |
|
| 9,083 |
|
Mortgage servicing liabilities |
|
| — |
|
| — |
|
| 1,399 |
|
| 1,399 |
|
|
| $ | 250 |
| $ | 16,501 |
| $ | 415,936 |
| $ | 422,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Derivatives are reported net of cash collateral received and paid and, to the extent that the criteria of the accounting guidance covering the offsetting of amounts related to certain contracts are met, positions with the same counterparty are netted as part of a legally enforceable master netting agreement. |
2123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2014 |
| ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| ||||
|
| (in thousands) |
| ||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments |
| $ | 21,687 |
| $ | — |
| $ | — |
| $ | 21,687 |
|
Mortgage loans held for sale at fair value |
|
| — |
|
| 937,976 |
|
| 209,908 |
|
| 1,147,884 |
|
Derivative assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments |
|
| — |
|
| — |
|
| 33,353 |
|
| 33,353 |
|
Forward purchase contracts |
|
| — |
|
| 9,060 |
|
| — |
|
| 9,060 |
|
Forward sales contracts |
|
| — |
|
| 320 |
|
| — |
|
| 320 |
|
MBS put options |
|
| — |
|
| 476 |
|
| — |
|
| 476 |
|
Put options on interest rate futures purchase contracts |
|
| 862 |
|
| — |
|
| — |
|
| 862 |
|
Call options on interest rate futures purchase contracts |
|
| 2,193 |
|
| — |
|
| — |
|
| 2,193 |
|
Total derivative assets before netting |
|
| 3,055 |
|
| 9,856 |
|
| 33,353 |
|
| 46,264 |
|
Netting (1) |
|
| — |
|
| — |
|
| — |
|
| (7,807) |
|
Total derivative assets |
|
| 3,055 |
|
| 9,856 |
|
| 33,353 |
|
| 38,457 |
|
Investment in PennyMac Mortgage Investment Trust |
|
| 1,582 |
|
|
|
|
|
|
|
| 1,582 |
|
Mortgage servicing rights at fair value |
|
| — |
|
| — |
|
| 325,383 |
|
| 325,383 |
|
|
| $ | 26,324 |
| $ | 947,832 |
| $ | 568,644 |
| $ | 1,534,993 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust |
| $ | — |
| $ | — |
| $ | 191,166 |
| $ | 191,166 |
|
Derivative liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments |
|
| — |
|
| — |
|
| 952 |
|
| 952 |
|
Forward purchase contracts |
|
| — |
|
| 141 |
|
| — |
|
| 141 |
|
Forward sales contracts |
|
| — |
|
| 16,110 |
|
| — |
|
| 16,110 |
|
Put options on interest rate futures sale contracts |
|
| 8 |
|
| — |
|
| — |
|
| 8 |
|
Total derivative liabilities before netting |
|
| 8 |
|
| 16,251 |
|
| 952 |
|
| 17,211 |
|
Netting (1) |
|
| — |
|
| — |
|
| — |
|
| (10,698) |
|
Total derivative liabilities |
|
| 8 |
|
| 16,251 |
|
| 952 |
|
| 6,513 |
|
Mortgage servicing liabilities |
|
| — |
|
| — |
|
| 6,306 |
|
| 6,306 |
|
|
| $ | 8 |
| $ | 16,251 |
| $ | 198,424 |
| $ | 203,985 |
|
|
|
22
As shown above, certainall or a portion of the Company’s mortgage loans held for sale, IRLCs, MSRs, at fair value, mortgage servicing liabilitiesMSLs and ESS financing at fair value are measured using Level 3 fair value inputs. Following are roll forwards of these items for the quarters ended March 31, 2016 and six months ended June 30, 2015 and 2014:2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| Quarter ended June 30, 2015 |
|
| Quarter ended March 31, 2016 |
| ||||||||||||||||||||
|
| Mortgage |
| Net interest |
| Mortgage |
|
|
|
|
| Mortgage |
| Net interest |
| Mortgage |
|
|
| |||||||
|
| loans held |
| rate lock |
| servicing |
|
|
|
|
| loans held |
| rate lock |
| servicing |
|
|
| |||||||
|
| for sale |
| commitments (1) |
| rights |
|
| Total |
|
| for sale |
| commitments (1) |
| rights |
| Total |
| |||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2015 |
| $ | 83,684 |
| $ | 54,392 |
| $ | 361,413 |
| $ | 499,489 |
| |||||||||||||
Balance, December 31, 2015 |
| $ | 48,531 |
| $ | 43,773 |
| $ | 660,247 |
| $ | 752,551 |
| |||||||||||||
Purchases |
|
| 400,705 |
|
| — |
|
| 206,996 |
|
| 607,701 |
|
| 345,886 |
| — |
| 11 |
| 345,897 |
| ||||
Sales |
|
| (386,586) |
|
| — |
|
| — |
|
| (386,586) |
|
| (283,732) |
| — |
| — |
| (283,732) |
| ||||
Repayments |
|
| (11,610) |
|
| — |
|
| — |
|
| (11,610) |
| |||||||||||||
Interest rate lock commitments issued, net |
|
| — |
|
| 61,365 |
|
| — |
|
| 61,365 |
|
| — |
| 78,463 |
| — |
| 78,463 |
| ||||
Mortgage servicing rights resulting from mortgage loan sales |
|
| — |
|
| — |
|
| 3,443 |
|
| 3,443 |
|
| — |
| — |
| 4,468 |
| 4,468 |
| ||||
Changes in fair value included in income arising from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| �� | ||||
Changes in instrument-specific credit risk |
|
| 1,739 |
|
| — |
|
| — |
|
| 1,739 |
|
| 1,769 |
| — |
| (48,876) |
| (47,107) |
| ||||
Other factors |
|
| 746 |
|
| (10,245) |
|
| 9,417 |
|
| (82) |
|
|
| — |
|
| 71,670 |
|
| (21,447) |
|
| 50,223 |
|
|
|
| 2,485 |
|
| (10,245) |
|
| 9,417 |
|
| 1,657 |
|
|
| 1,769 |
|
| 71,670 |
|
| (70,323) |
|
| 3,116 |
|
Transfers of mortgage loans held for sale from Level 3 to Level 2 (2) |
|
| (54,593) |
|
| — |
|
| — |
|
| (54,593) |
|
| (79,424) |
| — |
| — |
| (79,424) |
| ||||
Transfers of interest rate lock commitments to mortgage loans held for sale |
|
| — |
|
| (77,775) |
|
| — |
|
| (77,775) |
|
|
| — |
|
| (122,021) |
|
| — |
|
| (122,021) |
|
Balance, June 30, 2015 |
| $ | 34,085 |
| $ | 27,737 |
| $ | 581,269 |
| $ | 643,091 |
| |||||||||||||
Changes in fair value recognized during the period relating to assets still held at June 30, 2015 |
| $ | 481 |
| $ | (10,245) |
| $ | 9,417 |
| $ | (347) |
| |||||||||||||
Balance, March 31, 2016 |
| $ | 33,030 |
| $ | 71,885 |
| $ | 594,403 |
| $ | 699,318 |
| |||||||||||||
Changes in fair value recognized during the period relating to assets still held at March 31, 2016 |
| $ | 501 |
| $ | 71,885 |
| $ | (21,447) |
| $ | 50,939 |
|
(1) | For the purpose of this table, the IRLC asset and liability positions are shown net. |
(2) | Mortgage loans held for sale are transferred from Level 3 to Level 2 as a result of the mortgage loan becoming saleable into active mortgage markets pursuant to a loan modification or borrower reperformance or resolution of deficiencies. |
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, 2016 |
| |||||||
|
| Excess |
|
|
|
|
|
| ||
|
| servicing |
| Mortgage |
|
|
|
| ||
|
| spread |
| servicing |
|
|
|
| ||
|
| financing |
| liabilities |
| Total |
| |||
|
| (in thousands) |
| |||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015 |
| $ | 412,425 |
| $ | 1,399 |
| $ | 413,824 |
|
Excess servicing spread financing issued pursuant to a recapture agreement with PennyMac Mortgage Investment Trust |
|
| 1,911 |
|
| — |
|
| 1,911 |
|
Accrual of interest on excess servicing spread |
|
| 7,015 |
|
| — |
|
| 7,015 |
|
Repayment |
|
| (20,881) |
|
| — |
|
| (20,881) |
|
Repurchase |
|
| (59,045) |
|
| — |
|
| (59,045) |
|
Mortgage servicing liabilities resulting from mortgage loan sales |
|
| — |
|
| 5,409 |
|
| 5,409 |
|
Changes in fair value included in income |
|
| (19,449) |
|
| (61) |
|
| (19,510) |
|
Balance, March 31, 2016 |
| $ | 321,976 |
| $ | 6,747 |
| $ | 328,723 |
|
Changes in fair value recognized during the period relating to liabilities still held at March 31, 2016 |
| $ | (12,239) |
| $ | (61) |
| $ | (12,300) |
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, 2015 |
| ||||||||||
|
| Mortgage |
| Net interest |
| Mortgage |
|
|
|
| |||
|
| loans held |
| rate lock |
| servicing |
|
|
|
| |||
|
| for sale |
| commitments (1) |
| rights |
| Total |
| ||||
|
| (in thousands) |
| ||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2014 |
| $ | 209,908 |
| $ | 32,401 |
| $ | 325,383 |
| $ | 567,692 |
|
Purchases |
|
| 65,613 |
|
| — |
|
| 63,137 |
|
| 128,750 |
|
Sales |
|
| (125,268) |
|
| — |
|
| — |
|
| (125,268) |
|
Repayments |
|
| (8,392) |
|
| — |
|
| — |
|
| (8,392) |
|
Interest rate lock commitments issued, net |
|
| — |
|
| 82,780 |
|
| — |
|
| 82,780 |
|
Mortgage servicing rights resulting from mortgage loan sales |
|
| — |
|
| — |
|
| 2,675 |
|
| 2,675 |
|
Changes in fair value included in income arising from: |
|
| — |
|
|
|
|
|
|
|
|
|
|
Changes in instrument-specific credit risk |
|
| (33) |
|
| — |
|
| — |
|
| (33) |
|
Other factors |
|
| 778 |
|
| (47) |
|
| (29,782) |
|
| (29,051) |
|
|
|
| 745 |
|
| (47) |
|
| (29,782) |
|
| (29,084) |
|
Transfers of mortgage loans held for sale from Level 3 to Level 2 (2) |
|
| (58,922) |
|
| — |
|
| — |
|
| (58,922) |
|
Transfers of interest rate lock commitments to mortgage loans held for sale |
|
| — |
|
| (60,742) |
|
| — |
|
| (60,742) |
|
Balance, March 31, 2015 |
| $ | 83,684 |
| $ | 54,392 |
| $ | 361,413 |
| $ | 499,489 |
|
Changes in fair value recognized during the period relating to assets still held at March 31, 2015 |
| $ | 640 |
| $ | (47) |
| $ | (29,782) |
| $ | (29,189) |
|
(1) | For the purpose of this table, the interest rate lock asset and liability positions are shown net. |
(2) | Mortgage loans held for sale are transferred from Level 3 to Level 2 as a result of the mortgage loan becoming saleable into active mortgage markets pursuant to a loan modification |
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended June 30, 2015 |
| |||||||
|
| Excess |
|
|
|
|
|
| ||
|
| servicing |
| Mortgage |
|
|
|
| ||
|
| spread |
| servicing |
|
|
|
| ||
|
| financing |
| liabilities |
| Total |
| |||
|
| (in thousands) |
| |||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2015 |
| $ | 222,309 |
| $ | 6,529 |
| $ | 228,838 |
|
Issuance of excess servicing spread financing |
|
| 140,875 |
|
| — |
|
| 140,875 |
|
Mortgage servicing liabilities resulting from mortgage loan sales |
|
| — |
|
| 9,156 |
|
| 9,156 |
|
Excess servicing spread financing issued pursuant to a recapture agreement with PennyMac Mortgage Investment Trust |
|
| 1,319 |
|
| — |
|
| 1,319 |
|
Accrual of interest on excess servicing spread |
|
| 5,818 |
|
| — |
|
| 5,818 |
|
Repayments |
|
| (18,352) |
|
| — |
|
| (18,352) |
|
Changes in fair value included in income |
|
| 7,133 |
|
| (3,894) |
|
| 3,239 |
|
Balance, June 30, 2015 |
| $ | 359,102 |
| $ | 11,791 |
| $ | 370,893 |
|
Changes in fair value recognized during the period relating to liabilities still held at June 30, 2015 |
| $ | 7,133 |
| $ | (3,894) |
| $ | 3,239 |
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended June 30, 2014 |
| ||||||||||
|
| Mortgage |
| Net interest |
| Mortgage |
|
|
|
| |||
|
| loans held |
| rate lock |
| servicing |
|
|
|
| |||
|
| for sale |
| commitments (1) |
| rights |
| Total |
| ||||
|
| (in thousands) |
| ||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2014 |
| $ | 3,985 |
| $ | 14,297 |
| $ | 246,984 |
| $ | 265,266 |
|
Purchases |
|
| 679,882 |
|
| — |
|
| 71,778 |
|
| 751,660 |
|
Repayments |
|
| (15,033) |
|
| — |
|
| — |
|
| (15,033) |
|
Interest rate lock commitments issued, net |
|
| — |
|
| 46,394 |
|
| — |
|
| 46,394 |
|
Mortgage servicing rights resulting from mortgage loan sales |
|
| — |
|
| — |
|
| 7,333 |
|
| 7,333 |
|
Sales |
|
| (407,133) |
|
| — |
|
| (10,881) |
|
| (418,014) |
|
Changes in fair value included in income arising from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in instrument-specific credit risk |
|
| — |
|
| — |
|
| — |
|
| — |
|
Other factors |
|
| (2,789) |
|
| 14,126 |
|
| (6,615) |
|
| 4,722 |
|
|
|
| (2,789) |
|
| 14,126 |
|
| (6,615) |
|
| 4,722 |
|
Transfers of mortgage loans held for sale from Level 3 to Level 2 (2) |
|
| (4,256) |
|
| — |
|
| — |
|
| (4,256) |
|
Transfers of interest rate lock commitments to mortgage loans held for sale |
|
| — |
|
| (45,067) |
|
| — |
|
| (45,067) |
|
Balance, June 30, 2014 |
| $ | 254,656 |
| $ | 29,750 |
| $ | 308,599 |
| $ | 593,005 |
|
Changes in fair value recognized during the period relating to assets still held at June 30, 2014 |
| $ | (2,789) |
| $ | 29,750 |
| $ | (6,615) |
| $ | 20,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Quarter ended June 30, 2014 |
|
| Quarter ended March 31, 2015 |
| ||||||||||||||
|
| Excess |
|
|
|
|
|
| Excess |
|
|
|
|
| ||||||
|
| servicing |
| Mortgage |
|
|
|
| servicing |
| Mortgage |
|
|
| ||||||
|
| spread |
| servicing |
|
|
|
| spread |
| servicing |
|
|
| ||||||
|
| financing |
| liabilities |
| Total |
|
| financing |
| liabilities |
| Total |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Balance, March 31, 2014 |
| $ | 151,019 |
| $ | — |
| $ | 151,019 |
| ||||||||||
Balance, December 31, 2014 |
| $ | 191,166 |
| $ | 6,306 |
| $ | 197,472 |
| ||||||||||
Issuance of excess servicing spread financing |
|
| 52,867 |
|
| — |
|
| 52,867 |
|
| 46,412 |
| — |
| 46,412 |
| |||
Excess servicing spread financing issued pursuant to a recapture agreement with PennyMac Mortgage Investment |
|
| 2,362 |
|
| — |
|
| 2,362 |
|
| 1,246 |
| — |
| 1,246 |
| |||
Mortgage servicing liabilities resulting from mortgage loan sales |
| — |
| 2,928 |
| 2,928 |
| |||||||||||||
Accrual of interest on excess servicing spread |
|
| 3,139 |
|
| — |
|
| 3,139 |
|
| 3,752 |
| — |
| 3,752 |
| |||
Repayments |
|
| (9,081) |
|
| — |
|
| (9,081) |
|
| (12,731) |
| — |
| (12,731) |
| |||
Changes in fair value included in income |
|
| (10,062) |
|
| 5,821 |
|
| (4,241) |
|
|
| (7,536) |
|
| (2,705) |
|
| (10,241) |
|
Balance, June 30, 2014 |
| $ | 190,244 |
| $ | 5,821 |
| $ | 196,065 |
| ||||||||||
Changes in fair value recognized during the period relating to liabilities still held at June 30, 2014 |
| $ | (10,062) |
| $ | 5,821 |
| $ | (4,241) |
| ||||||||||
Balance, March 31, 2015 |
| $ | 222,309 |
| $ | 6,529 |
| $ | 228,838 |
| ||||||||||
Changes in fair value recognized during the period relating to liabilities still held at March 31, 2015 |
| $ | (7,536) |
| $ | (2,705) |
| $ | (10,241) |
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six months ended June 30, 2015 |
| ||||||||||
|
| Mortgage |
| Net interest |
| Mortgage |
|
|
|
| |||
|
| loans held |
| rate lock |
| servicing |
|
|
|
| |||
|
| for sale |
| commitments (1) |
| rights |
|
| Total |
| |||
|
| (in thousands) |
| ||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2014 |
| $ | 209,908 |
| $ | 32,401 |
| $ | 325,383 |
| $ | 567,692 |
|
Purchases |
|
| 466,285 |
|
| — |
|
| 270,133 |
|
| 736,418 |
|
Sales |
|
| (511,854) |
|
| — |
|
| — |
|
| (511,854) |
|
Repayments |
|
| (20,002) |
|
| — |
|
| — |
|
| (20,002) |
|
Interest rate lock commitments issued, net |
|
| — |
|
| 144,145 |
|
| — |
|
| 144,145 |
|
Mortgage servicing rights resulting from mortgage loan sales |
|
| — |
|
| — |
|
| 6,118 |
|
| 6,118 |
|
Changes in fair value included in income arising from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in instrument-specific credit risk |
|
| 4,054 |
|
| — |
|
| — |
|
| 4,054 |
|
Other factors |
|
| (791) |
|
| (10,292) |
|
| (20,365) |
|
| (31,448) |
|
|
|
| 3,263 |
|
| (10,292) |
|
| (20,365) |
|
| (27,394) |
|
Transfers of mortgage loans held for sale from Level 3 to Level 2 (2) |
|
| (113,515) |
|
| — |
|
| — |
|
| (113,515) |
|
Transfers of interest rate lock commitments to mortgage loans held for sale |
|
| — |
|
| (138,517) |
|
| — |
|
| (138,517) |
|
Balance, June 30, 2015 |
| $ | 34,085 |
| $ | 27,737 |
| $ | 581,269 |
| $ | 643,091 |
|
Changes in fair value recognized during the period relating to assets still held at June 30, 2015 |
| $ | 906 |
| $ | (10,292) |
| $ | (20,365) |
| $ | (29,751) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six months ended June 30, 2015 |
| |||||||
|
| Excess |
|
|
|
|
|
| ||
|
| servicing |
| Mortgage |
|
|
|
| ||
|
| spread |
| servicing |
|
|
|
| ||
|
| financing |
| liabilities |
| Total |
| |||
|
| (in thousands) |
| |||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2014 |
| $ | 191,166 |
| $ | 6,306 |
| $ | 197,472 |
|
Issuance of excess servicing spread financing |
|
| 187,287 |
|
| — |
|
| 187,287 |
|
Mortgage servicing liabilities resulting from mortgage loan sales |
|
| — |
|
| 12,084 |
|
| 12,084 |
|
Excess servicing spread financing issued pursuant to a recapture agreement with PennyMac Mortgage Investment Trust |
|
| 2,565 |
|
| — |
|
| 2,565 |
|
Accrual of interest on excess servicing spread |
|
| 9,570 |
|
| — |
|
| 9,570 |
|
Repayments |
|
| (31,083) |
|
| — |
|
| (31,083) |
|
Changes in fair value included in income |
|
| (403) |
|
| (6,599) |
|
| (7,002) |
|
Balance, June 30, 2015 |
| $ | 359,102 |
| $ | 11,791 |
| $ | 370,893 |
|
Changes in fair value recognized during the year relating to liabilities still held at June 30, 2015 |
| $ | (403) |
| $ | (6,599) |
| $ | (7,002) |
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six months ended June 30, 2014 |
| ||||||||||
|
| Mortgage |
| Net interest |
| Mortgage |
|
|
|
| |||
|
| loans held |
| rate lock |
| servicing |
|
|
|
| |||
|
| for sale |
| commitments (1) |
| rights |
| Total |
| ||||
|
| (in thousands) |
| ||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2013 |
| $ | 3,933 |
| $ | 6,761 |
| $ | 224,913 |
| $ | 235,607 |
|
Purchases |
|
| 679,882 |
|
| — |
|
| 97,644 |
|
| 777,526 |
|
Repayments |
|
| (15,047) |
|
| — |
|
| — |
|
| (15,047) |
|
Interest rate lock commitments issued, net |
|
| — |
|
| 82,832 |
|
| — |
|
| 82,832 |
|
Mortgage servicing rights resulting from mortgage loan sales |
|
| — |
|
| — |
|
| 14,266 |
|
| 14,266 |
|
Sales |
|
| (407,133) |
|
| — |
|
| (10,881) |
|
| (418,014) |
|
Changes in fair value included in income arising from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in instrument-specific credit risk |
|
| — |
|
| — |
|
| — |
|
| — |
|
Other factors |
|
| (2,723) |
|
| 19,479 |
|
| (17,343) |
|
| (587) |
|
|
|
| (2,723) |
|
| 19,479 |
|
| (17,343) |
|
| (587) |
|
Transfers of mortgage loans held for sale from Level 3 to Level 2 (2) |
|
| (4,256) |
|
| — |
|
| — |
|
| (4,256) |
|
Transfers of interest rate lock commitments to mortgage loans held for sale |
|
| — |
|
| (79,322) |
|
| — |
|
| (79,322) |
|
Balance, June 30, 2014 |
| $ | 254,656 |
| $ | 29,750 |
| $ | 308,599 |
| $ | 593,005 |
|
Changes in fair value recognized during the period relating to assets still held at June 30, 2014 |
| $ | (2,723) |
| $ | 29,750 |
| $ | (17,343) |
| $ | 9,684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six months ended June 30, 2014 |
| |||||||
|
| Excess |
| Mortgage |
|
|
|
| ||
|
| servicing spread |
| servicing |
|
|
|
| ||
|
| financing |
| liabilities |
| Total |
| |||
|
| (in thousands) |
| |||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2013 |
| $ | 138,723 |
| $ | — |
| $ | 138,723 |
|
Issuance of excess servicing spread financing |
|
| 73,393 |
|
| — |
|
| 73,393 |
|
Excess servicing spread financing issued pursuant to a recapture agreement with PennyMac Mortgage Investment Trust |
|
| 3,475 |
|
| — |
|
| 3,475 |
|
Accrual of interest on excess servicing spread financing |
|
| 6,001 |
|
| — |
|
| 6,001 |
|
Repayments |
|
| (16,494) |
|
| — |
|
| (16,494) |
|
Changes in fair value included in income |
|
| (14,854) |
|
| 5,821 |
|
| (9,033) |
|
Balance, June 30, 2014 |
| $ | 190,244 |
| $ | 5,821 |
| $ | 196,065 |
|
Changes in fair value recognized during the period relating to liabilities still held at June 30, 2014 |
| $ | (14,854) |
| $ | 5,821 |
| $ | (9,033) |
|
The information used in the preceding roll forwards represents activity for any financial statement items identified as using Level 3“Level 3” significant fair value inputs at either the beginning or the end of the periods presented. The Company had transfers among the fair value levels arising from transfers of IRLCs to mortgage loans held for sale at fair value upon purchase or funding of the respective mortgage loans and from the return to salability in the active secondary market of certain mortgage loans held for sale. Such mortgage loans becamebecome saleable into the active secondary market due to curing of the loans’ defects through borrower reperformance, modification of the loan or resolution of deficiencies contained in the borrowers’ credit file.
2625
Financial Statement Items Measured at Fair Value for under the Fair Value Option
Net changes in fair values included in income for financial statement items carried at fair value as a result of management’s election of the fair value option by income statement line item are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, | ||||||||||||||||||||||
|
| Quarter ended June 30, |
|
| 2016 |
| 2015 | ||||||||||||||||||||||||||||||
|
| 2015 |
| 2014 |
|
| Net gains on |
|
|
|
|
|
|
| Net gains on |
|
|
|
|
|
| ||||||||||||||||
|
| Net gains on |
|
|
|
|
|
|
| Net gains on |
|
|
|
|
|
|
|
| mortgage |
| Net mortgage |
|
|
| mortgage |
| Net mortgage |
|
| ||||||||
|
| mortgage |
|
|
|
|
| mortgage |
|
|
|
|
|
| loans held |
| loan |
|
|
| loans held |
| loan |
|
| ||||||||||||
|
| loans held |
| Net loan |
|
|
| loans held |
| Net loan |
|
|
|
| for sale at |
| servicing |
|
|
| for sale at |
| servicing |
|
| ||||||||||||
|
| for sale at |
| servicing |
|
|
| for sale at |
| servicing |
|
|
|
| fair value |
| fees |
| Total |
| fair value |
| fees |
| Total | ||||||||||||
|
| fair value |
| fees |
| Total |
| fair value |
| fees |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| (in thousands) |
|
| (in thousands) | ||||||||||||||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Mortgage loans held for sale at fair value |
| $ | 68,503 |
| $ | — |
| $ | 68,503 |
| $ | 67,993 |
| $ | — |
| $ | 67,993 |
|
| $ | 136,082 |
| $ | — |
| $ | 136,082 |
| $ | 84,531 |
| $ | — |
| $ | 84,531 |
Mortgage servicing rights at fair value |
|
| — |
|
| 9,417 |
|
| 9,417 |
|
| — |
|
| (6,615) |
|
| (6,615) |
|
|
| — |
|
| (70,323) |
|
| (70,323) |
|
| — |
|
| (29,782) |
|
| (29,782) |
|
| $ | 68,503 |
| $ | 9,417 |
| $ | 77,920 |
| $ | 67,993 |
| $ | (6,615) |
| $ | 61,378 |
|
| $ | 136,082 |
| $ | (70,323) |
| $ | 65,759 |
| $ | 84,531 |
| $ | (29,782) |
| $ | 54,749 |
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust |
| $ | — |
| $ | (7,133) |
| $ | (7,133) |
| $ | — |
| $ | 10,062 |
| $ | 10,062 |
|
| $ | — |
| $ | 19,449 |
| $ | 19,449 |
| $ | — |
| $ | 7,536 |
| $ | 7,536 |
Mortgage servicing liabilities at fair value |
|
| — |
|
| 3,894 |
|
| 3,894 |
|
| — |
|
| (5,821) |
|
| (5,821) |
|
|
| — |
|
| 61 |
|
| 61 |
|
| — |
|
| 2,705 |
|
| 2,705 |
|
| $ | — |
| $ | (3,239) |
| $ | (3,239) |
| $ | — |
| $ | 4,241 |
| $ | 4,241 |
|
| $ | — |
| $ | 19,510 |
| $ | 19,510 |
| $ | — |
| $ | 10,241 |
| $ | 10,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six months ended June 30, |
| ||||||||||||||||
|
| 2015 |
| 2014 |
| ||||||||||||||
|
| Net gains on |
|
|
|
|
|
|
| Net gains on |
|
|
|
|
|
|
| ||
|
| mortgage |
|
|
|
|
|
|
| mortgage |
|
|
|
|
|
|
| ||
|
| loans held |
| Net |
|
|
|
| loans held |
| Net |
|
|
|
| ||||
|
| for sale at |
| servicing |
|
|
|
| for sale at |
| servicing |
|
|
|
| ||||
|
| fair value |
| fees |
| Total |
| fair value |
| fees |
| Total |
| ||||||
|
| (in thousands) |
| ||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans held for sale at fair value |
| $ | 149,817 |
| $ | — |
| $ | 149,817 |
| $ | 117,895 |
| $ | — |
| $ | 117,895 |
|
Mortgage servicing rights at fair value |
|
| — |
|
| (20,365) |
|
| (20,365) |
|
| — |
|
| (17,343) |
|
| (17,343) |
|
|
| $ | 149,817 |
| $ | (20,365) |
| $ | 129,452 |
| $ | 117,895 |
| $ | (17,343) |
| $ | 100,552 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust |
| $ | — |
| $ | 403 |
| $ | 403 |
| $ | — |
| $ | 14,854 |
| $ | 14,854 |
|
Mortgage servicing liabilities at fair value |
|
| — |
|
| 6,599 |
|
| 6,599 |
|
| — |
|
| (5,821) |
|
| (5,821) |
|
|
| $ | — |
| $ | 7,002 |
| $ | 7,002 |
| $ | — |
| $ | 9,033 |
| $ | 9,033 |
|
Following are the fair value and related principal amounts due upon maturity of loans, long-term receivables and long-term debt instruments with contractual principal amountsassets accounted for under the fair value option:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| June 30, 2015 |
|
| March 31, 2016 |
| ||||||||||||||
|
|
|
|
| Principal |
|
|
|
|
|
|
|
| Principal |
|
|
| |||
|
|
|
|
| amount |
|
|
|
|
|
|
|
| amount |
|
|
| |||
|
| Fair |
| due upon |
|
|
|
|
| Fair |
| due upon |
|
|
| |||||
|
| value |
| maturity |
| Difference |
|
| value |
| maturity |
| Difference |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Mortgage loans held for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Current through 89 days delinquent |
| $ | 1,575,185 |
| $ | 1,503,666 |
| $ | 71,519 |
|
| $ | 1,634,315 |
| $ | 1,540,687 |
| $ | 93,628 |
|
90 days or more delinquent: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Not in foreclosure |
|
| 15,696 |
|
| 15,819 |
|
| (123) |
|
| 13,354 |
| 13,623 |
| (269) |
| |||
In foreclosure |
|
| 3,381 |
|
| 3,922 |
|
| (541) |
|
|
| 6,294 |
|
| 6,696 |
|
| (402) |
|
|
| $ | 1,594,262 |
| $ | 1,523,407 |
| $ | 70,855 |
|
| $ | 1,653,963 |
| $ | 1,561,006 |
| $ | 92,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2015 |
| |||||||
|
|
|
|
| Principal |
|
|
|
| |
|
|
|
|
| amount |
|
|
|
| |
|
| Fair |
| due upon |
|
|
|
| ||
|
| value |
| maturity |
| Difference |
| |||
|
| (in thousands) |
| |||||||
Mortgage loans held for sale: |
|
|
|
|
|
|
|
|
|
|
Current through 89 days delinquent |
| $ | 1,068,548 |
| $ | 1,016,314 |
| $ | 52,234 |
|
90 days or more delinquent: |
|
|
|
|
|
|
|
|
|
|
Not in foreclosure |
|
| 26,399 |
|
| 26,999 |
|
| (600) |
|
In foreclosure |
|
| 6,257 |
|
| 6,598 |
|
| (341) |
|
|
| $ | 1,101,204 |
| $ | 1,049,911 |
| $ | 51,293 |
|
2726
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2014 |
| |||||||
|
|
|
|
| Principal |
|
|
|
| |
|
|
|
|
| amount |
|
|
|
| |
|
| Fair |
| due upon |
|
|
|
| ||
|
| value |
| maturity |
| Difference |
| |||
|
| (in thousands) |
| |||||||
Mortgage loans held for sale: |
|
|
|
|
|
|
|
|
|
|
Current through 89 days delinquent |
| $ | 950,697 |
| $ | 894,924 |
| $ | 55,773 |
|
90 days or more delinquent: |
|
|
|
|
|
|
|
|
|
|
Not in foreclosure |
|
| 126,171 |
|
| 128,533 |
|
| (2,362) |
|
In foreclosure |
|
| 71,016 |
|
| 72,039 |
|
| (1,023) |
|
|
| $ | 1,147,884 |
| $ | 1,095,496 |
| $ | 52,388 |
|
Financial Statement Items Measured at Fair Value on a Nonrecurring Basis
Following is a summary of financial statement items that were remeasuredmeasured at fair value on a nonrecurring basis during the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2015 |
| ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| ||||
|
| (in thousands) |
| ||||||||||
Mortgage servicing rights at lower of amortized cost or fair value |
| $ | — |
| $ | — |
| $ | 159,119 |
| $ | 159,119 |
|
|
| $ | — |
| $ | — |
| $ | 159,119 |
| $ | 159,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, 2016 |
| ||||||||||
|
| Level��1 |
| Level 2 |
| Level 3 |
| Total |
| ||||
|
| (in thousands) |
| ||||||||||
Mortgage servicing rights at lower of amortized cost or fair value |
| $ | — |
| $ | — |
| $ | 738,196 |
| $ | 738,196 |
|
Real estate acquired in settlement of loans |
|
| — |
|
| — |
|
| 2,320 |
|
| 2,320 |
|
|
| $ | — |
| $ | — |
| $ | 740,516 |
| $ | 740,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2014 |
| ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| ||||
|
| (in thousands) |
| ||||||||||
Mortgage servicing rights at lower of amortized cost or fair value |
| $ | — |
| $ | — |
| $ | 139,505 |
| $ | 139,505 |
|
|
| $ | — |
| $ | — |
| $ | 139,505 |
| $ | 139,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2015 |
| ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| ||||
|
| (in thousands) |
| ||||||||||
Mortgage servicing rights at lower of amortized cost or fair value |
| $ | — |
| $ | — |
| $ | 202,991 |
| $ | 202,991 |
|
|
| $ | — |
| $ | — |
| $ | 202,991 |
| $ | 202,991 |
|
The following table summarizes the total gains (losses) on assets measured at fair value on a nonrecurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended June 30, |
| Six months ended June 30, |
| ||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
| ||||
|
| (in thousands) |
| ||||||||||
Mortgage servicing rights at lower of amortized cost or fair value |
| $ | 13,566 |
| $ | (3,786) |
| $ | (18,126) |
| $ | (4,207) |
|
|
| $ | 13,566 |
| $ | (3,786) |
| $ | (18,126) |
| $ | (4,207) |
|
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, |
| ||||
|
| 2016 |
| 2015 |
| ||
| (in thousands) | ||||||
Mortgage servicing rights at lower of amortized cost or fair value |
| $ | (77,073) |
| $ | (31,692) |
|
Real estate acquired in settlement of loans |
|
| (435) |
|
| — |
|
|
| $ | (77,508) |
| $ | (31,692) |
|
Fair Value of Financial Instruments Carried at Amortized Cost
The Company’s Cash as well as itsCarried Interest due from Investment Funds, Note receivable from PennyMac Mortgage Investment Trustsecured, Mortgage loansAssets sold under agreements to repurchase, Mortgage loan participation and sale agreementagreements, NoteNotes payable, Obligations under capital lease, Note receivable from PMT and amounts receivable from and payable to the Advised Entities are carried at amortized cost.
Cash is measured using a “Level 1” fair value input.
ManagementThe Company has concluded that the carrying value of the Carried Interest due from Investment Funds approximates its fair value as the balance represents the amount distributable to the Company at the balance sheet date assuming liquidation of the Investment Funds.
The Company’s Note receivable from PennyMac Mortgage Investment Trust, Mortgage loans sold under agreements to repurchase, Mortgage loan participation and sale agreement and Note payable areborrowings carried at amortized cost. These borrowingscost do not have observable inputs and the fair value is measured using management’s estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation. The Company has classified these financial instruments as “Level 3” fair value financial statement items as of June 30, 2015March 31, 2016 and December 31, 2014
28
2015 due to the lack of observable inputs to estimate thetheir fair value. Managementvalues.
The Company has concluded that the fair value of these financial statement items approximates their carrying values due to their short terms and variable interest rates.
The Company also carries the receivables from and payables to the Advised Entities at cost. Management has concluded thatand the fairNote receivable from PMT approximates the carrying value of such balances approximates their carrying values due to thetheir short terms of such balances.and/or variable interest rates.
Valuation Techniques and AssumptionsInputs
Most of the Company’s financial assets, a portion of its MSRs and its MSLs and ESS liabilityliabilities are carried at fair value with changes in fair value recognized in current period income. Certain of the Company’s financial assets and all of its MSRs, ESS and ESSMSLs are “Level 3” fair value financial statement items which require the use of unobservable inputs that are significant to the estimation of the items’ fair values. Unobservable inputs reflect the Company’s own assumptionsjudgments about the factors that market participants use in pricing an asset or liability, and are based on the best information available under the circumstances.
Due to the difficulty in estimating the fair values of “Level 3” fair value financial statement items, management has assigned the responsibility for estimating the fair value of these items to specialized staff and subjects the valuation
27
process to significant executivesenior management oversight. The Company’s Financial Analysis and Valuation group (the “FAV group”) is responsible for estimating the fair values of “Level 3” fair value financial statement items other than IRLCs and maintaining its valuation policies and procedures.
With respect to the Level 3non-IRLC “Level 3” valuations, the FAV group reports to the Company’s senior management valuation committee, which oversees and approves the valuations. The FAV group monitors the models used for valuation of the Company’s “Level 3” fair value financial statement items, including the models’ performance versus actual results, and reports those results to the Company’s senior management valuation committee. The Company’s senior management valuation committee includes PFSI’s chief executive, financial, operating, creditrisk and asset/liability management officers.
The FAV group is responsible for reporting to the Company’s senior management valuation committee on a monthly basis on the changes in the valuation of the portfolio,“Level 3” fair value financial statement items, including major factors affecting the valuation and any changes in model methods and inputs. To assess the reasonableness of its valuations, the FAV group presents an analysis of the effect on the valuation of changes to the significant inputs to the models.
With respect to IRLCs, the Company has assigned responsibility for developing fair values to its Capital Markets Risk Management staff. The fair values developed by the Capital Markets Risk Management staff are submitted toreviewed by the Company’s senior management Secondary Marketing Working Group. The Company’s Secondary Marketing Working Group includes PFSI’s chief executive, operating, institutional mortgage banking, capital markets, asset/liability management, portfolio risk and capital markets operations officers.Capital Markets Operations group.
Following is a description of the techniques and inputs used in estimating the fair values of “Level 2” and “Level 3” fair value financial statement items:
Mortgage Loans Held for Sale
A substantial portionMost of the Company’s mortgage loans held for sale at fair value are saleable into active markets and are therefore categorized as “Level 2” fair value financial statement items and their fair values are determined using their quoted market or contracted selling price or market price equivalent.
Certain of the Company’s mortgage loans may become non-saleable into active markets due to identification of a defect by the Company or to the repurchase by the Company of a mortgage loansloan with an identified defects.defect. The Company may also purchase certain delinquent government guaranteed or insured mortgage loans from Ginnie Mae guaranteed pools in its mortgage loan servicing portfolio. The Company’s right to purchase such mortgage loans arises as the result of the borrower’s failure to make payments for at least three consecutive months preceding the month of repurchase by the Company and provides an alternative to the Company’s obligation to continue advancing principal and interest at the coupon rate of the related Ginnie Mae security. To the extent such mortgage loans (“early buyout loans”) have not become saleable into another Ginnie Mae guaranteed security by becoming current either through the borrower’s reperformance or through completion of a modification of the mortgage loan’s terms, the Company measures such mortgage loans along with other mortgage loans with identified defects using “Level 3” fair value inputs.
29
The significant unobservable inputs used in the fair value measurement of the Company’s “Level 3” fair value mortgage loans held for sale at fair value are discount rates, home price projections, voluntary prepayment speeds and total prepayment speeds. Significant changes in any of those inputs in isolation could result in a significant change to the mortgage loans’ fair value measurement. Increases in home price projections are generally accompanied by an increase in voluntary prepayment speeds.
28
Following is a quantitative summary of key “Level 3” fair value inputs used in the valuation of mortgage loans held for sale at fair value:
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
Key inputs |
| June 30, 2015 |
| December 31, 2014 |
|
| March 31, 2016 |
| December 31, 2015 |
|
Discount rate |
|
|
|
|
|
|
|
|
|
|
Range |
| 2.3% – 9.4% |
| 2.3% – 9.6% |
|
| 2.5% – 8.3% |
| 2.5% – 9.1% |
|
Weighted average |
| 3.2% |
| 2.4% |
|
| 3.1% |
| 2.8% |
|
Twelve-month projected housing price index change |
|
|
|
|
|
|
|
|
|
|
Range |
| 3.5% – 5.9% |
| 4.2% – 5.4% |
|
| 2.1% – 5.1% |
| 1.8% – 5.0% |
|
Weighted average |
| 3.9% |
| 4.5% |
|
| 3.8% |
| 3.7% |
|
Prepayment/resale speed (1) |
|
|
|
|
| |||||
Voluntary prepayment / resale speed (1) |
|
|
|
|
| |||||
Range |
| 1.4% – 19.1% |
| 1.3% – 15.5% |
|
| 0.6% – 18.6% |
| 0.6% – 20.1% |
|
Weighted average |
| 16.2% |
| 15.1% |
|
| 14.8% |
| 16.6% |
|
Total prepayment speed (2) |
|
|
|
|
|
|
|
|
|
|
Range |
| 1.4% – 35.5% |
| 2.1% – 38.1% |
|
| 0.8% – 37.3% |
| 0.7% – 37.6% |
|
Weighted average |
| 28.9% |
| 35.7% |
|
| 29.1% |
| 30.9% |
|
(1)Voluntary prepayment/resaleprepayment speed is measured using Life Voluntary Conditional Prepayment Rate (“CPR”).
(2)Total prepayment speed is measured using Life Total CPR.
Changes in fair value attributable to changes in instrument specific credit risk are measured by reference to the change in the respective mortgage loan’s delinquency status at period end from the later of the beginning of the period or acquisition date. Changes in fair value of mortgage loans held for sale are included in Net gains on mortgage loans held for sale at fair value in the Company’s consolidated statements of income.
Derivative Financial Instruments
Interest Rate Lock Commitments
The Company categorizes IRLCs as a “Level 3” fair value financial statement item. The Company estimates the fair value of an IRLC based on quoted Agency mortgage-backed securities (“MBS”)MBS prices, its estimate of the fair value of the MSRs it expects to receive in the sale of the mortgage loans and the probability that the mortgage loan will fund or be purchased (the “pull-through rate”).
The significant unobservable inputs used in the fair value measurement of the Company’s IRLCs are the pull-through rate and the MSR component of the Company’s estimate of the fair value of the mortgage loans it has committed to purchase. Significant changes in the pull-through rate or the MSR component of the IRLCs, in isolation, could result in significant changes in fair value measurement. The financial effects of changes in these inputs are generally inversely correlated as increasing interest rates have a positive effect on the fair value of the MSR component of IRLC fair value, but increase the pull-through rate for loans thatthe IRLC, the principal and interest payment components of which have decreased in fair value. Changes in fair value of IRLCs are included in Net gains on mortgage loans held for sale at fair value in the Consolidated statements of income.
3029
Following is a quantitative summary of key unobservable“Level 3” fair value inputs used in the valuation of IRLCs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key inputs |
| June 30, 2015 |
| December 31, 2014 |
|
| March 31, 2016 |
| December 31, 2015 |
|
Pull-through rate |
|
|
|
|
|
|
|
|
|
|
Range |
| 51.5% – 100.0% |
| 55.4% – 99.9% |
|
| 47.4% – 100.0% |
| 54.1% – 100.0% |
|
Weighted average |
| 92.8% |
| 85.5% |
|
| 86.8% |
| 90.1% |
|
Mortgage servicing rights value expressed as: |
|
|
|
|
|
|
|
|
|
|
Servicing fee multiple |
|
|
|
|
|
|
|
|
|
|
Range |
| 1.2 – 5.1 |
| 2.0 – 5.0 |
|
| 1.1 – 5.8 |
| 1.0 – 5.8 |
|
Weighted average |
| 4.0 |
| 3.7 |
|
| 4.3 |
| 4.4 |
|
Percentage of unpaid principal balance |
|
|
|
|
|
|
|
|
|
|
Range |
| 0.2% – 3.7% |
| 0.4% – 3.1% |
|
| 0.2% – 2.9% |
| 0.2% – 3.8% |
|
Weighted average |
| 1.4% |
| 1.2% |
|
| 1.3% |
| 1.5% |
|
Hedging Derivatives
The remaining derivative financial instruments held or issued by the Company are categorized as “Level 1” or “Level 2” fair value financial statement items. For “Level 1” fair value derivative financial instruments, the Company determines fair value with reference to the respective derivatives’ quoted prices. For “Level 2” fair value derivative financial instruments, theThe Company estimates the fair value of commitments to sell orand purchase mortgage loans based on observable MBS prices. The Company estimates the fair value of MBS options based on observed interest rate volatilities in the MBS market. Changes in fair value of IRLCs and hedging derivatives are included in Net gains on mortgage loans held for sale at fair value in the Company’s consolidated statements of income.
Mortgage Servicing Rights
MSRs are categorized as “Level 3” fair value financial statement items. The Company uses a discounted cash flow approach to estimate the fair value of MSRs. This approach consists of projecting net servicing cash flows discounted at a rate that management believes market participants would use in their determinations of fair value. The key inputs used in the estimation of the fair value of MSRs include the prepayment rates of the underlying mortgage loans, the applicable discount rate or pricing spread, and the per-loan annual cost to service the respective mortgage loans. Changes in the fair value of MSRs are included in Net servicing fees—Amortization, impairment and change in fair value of mortgage servicing rights in the Company’s consolidated statements of income.
3130
Following are the key “Level 3” fair value inputs used in determining the fair value of MSRs at the time of initial recognition, excluding MSR purchases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||||
|
| Fair |
| Amortized |
| Fair |
| Amortized |
|
| Fair |
| Amortized |
| Fair |
| Amortized |
|
|
| value |
| cost |
| value |
| cost |
|
| value |
| cost |
| value |
| cost |
|
|
| (Amount recognized and unpaid principal balance of underlying mortgage loans in thousands) |
|
| (Amount recognized and unpaid principal balance of underlying mortgage loans in thousands) |
| ||||||||||||
MSR and pool characteristics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount recognized |
| $3,443 |
| $125,561 |
| $7,333 |
| $42,327 |
|
| $4,468 |
| $96,314 |
| $2,675 |
| $67,281 |
|
Unpaid principal balance of underlying mortgage loans |
| $280,613 |
| $8,762,024 |
| $600,196 |
| $3,550,411 |
|
| $367,807 |
| $6,984,172 |
| $241,518 |
| $5,137,085 |
|
Weighted average servicing fee rate (in basis points) |
| 34 |
| 36 |
| 33 |
| 30 |
|
| 33 |
| 33 |
| 31 |
| 33 |
|
Key inputs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pricing spread (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range |
| 7.0% – 13.4% |
| 6.8% – 15.7% |
| 8.3% – 16.2% |
| 6.8% – 15.2% |
|
| 7.2% – 9.8% |
| 7.2% – 12.8% |
| 7.3% - 14.4% |
| 6.8% - 15.9% |
|
Weighted average |
| 9.9% |
| 9.0% |
| 11.5% |
| 10.9% |
|
| 8.7% |
| 8.9% |
| 10.7% |
| 9.8% |
|
Annual total prepayment speed (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range |
| 7.7% – 46.0% |
| 7.7% – 34.0% |
| 7.6% – 25.0% |
| 7.6% – 43.6% |
|
| 4.1% – 52.3% |
| 3.8% – 48.0% |
| 7.6% - 62.4% |
| 7.6% - 39.4% |
|
Weighted average |
| 10.2% |
| 8.3% |
| 8.8% |
| 8.2% |
|
| 13.2% |
| 11.1% |
| 11.9% |
| 8.9% |
|
Life (in years) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range |
| 1.5 – 7.3 |
| 2.1 – 7.3 |
| 2.1 – 7.5 |
| 1.5 – 7.3 |
|
| 1.3 – 11.7 |
| 1.5 – 11.9 |
| 1.1 – 7.3 |
| 1.8 – 7.3 |
|
Weighted average |
| 6.6 |
| 7.0 |
| 7.0 |
| 7.1 |
|
| 6.4 |
| 7.2 |
| 6.1 |
| 6.9 |
|
Per-loan annual cost of servicing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range |
| $59 – $82 |
| $59 – $82 |
| $53 – $100 |
| $53 – $100 |
|
| $68 – $95 |
| $68 – $95 |
| $59 – $82 |
| $58 – $82 |
|
Weighted average |
| $74 |
| $75 |
| $88 |
| $90 |
|
| $82 |
| $82 |
| $74 |
| $75 |
|
(1) | Pricing spread represents a margin that is applied to a reference interest rate’s forward rate curve to develop periodic discount rates. The Company applies a pricing spread to the United States Dollar London Interbank Offered Rate (“LIBOR”) curve for purposes of discounting cash flows relating to |
(2) | Prepayment speed is measured using Life Total CPR. |
3231
|
|
|
|
|
|
|
|
|
|
|
| Six months ended June 30, |
| ||||||
|
| 2015 |
| 2014 |
| ||||
|
| Fair |
| Amortized |
| Fair |
| Amortized |
|
|
| value |
| cost |
| value |
| cost |
|
|
| (Amount recognized and unpaid principal balance of underlying mortgage loans in thousands) |
| ||||||
MSR and pool characteristics: |
|
|
|
|
|
|
|
|
|
Amount recognized |
| $6,118 |
| $192,842 |
| $14,266 |
| $72,908 |
|
Unpaid principal balance of underlying mortgage loans |
| $522,130 |
| $13,899,109 |
| $1,111,663 |
| $6,174,010 |
|
Weighted average servicing fee rate (in basis points) |
| 33 |
| 35 |
| 33 |
| 30 |
|
Key inputs: |
|
|
|
|
|
|
|
|
|
Pricing spread (1) |
|
|
|
|
|
|
|
|
|
Range |
| 7.0% – 14.4% |
| 6.8% – 15.9% |
| 8.3% – 16.2% |
| 6.8% – 15.2% |
|
Weighted average |
| 10.3% |
| 9.3% |
| 11.3% |
| 10.7% |
|
Annual total prepayment speed (2) |
|
|
|
|
|
|
|
|
|
Range |
| 7.7% – 62.4% |
| 7.6% – 39.4% |
| 7.6% – 25.0% |
| 7.6% – 45.3% |
|
Weighted average |
| 11.0% |
| 8.5% |
| 8.7% |
| 8.1% |
|
Life (in years) |
|
|
|
|
|
|
|
|
|
Range |
| 1.1 – 7.3 |
| 1.8 – 7.3 |
| 2.1 – 7.5 |
| 1.5 – 7.5 |
|
Weighted average |
| 6.4 |
| 7.0 |
| 7.1 |
| 7.1 |
|
Per-loan annual cost of servicing |
|
|
|
|
|
|
|
|
|
Range |
| $59 – $82 |
| $59 – $82 |
| $53 – $100 |
| $53 – $100 |
|
Weighted average |
| $74 |
| $75 |
| $92 |
| $94 |
|
|
|
|
|
33
Following is a quantitative summary of key inputs used in the valuation and assessment for impairment of the Company’s MSRs at period end and the effect on fair value from adverse changes in those inputs (weighted averages are based upon UPB):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2015 |
| December 31, 2014 |
|
| March 31, 2016 |
| December 31, 2015 |
| ||||||||
|
| Fair |
| Amortized |
| Fair |
| Amortized |
|
| Fair |
| Amortized |
| Fair |
| Amortized |
|
|
| value |
| cost |
| value |
| cost |
|
| value |
| cost |
| value |
| cost |
|
|
| (Carrying value, unpaid principal balance of underlying |
|
| (Carrying value, unpaid principal balance of underlying |
| ||||||||||||
|
| mortgage loans and effect on fair value amounts in thousands) |
|
| mortgage loans and effect on fair value amounts in thousands) |
| ||||||||||||
MSR and pool characteristics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value |
| $581,269 |
| $554,241 |
| $325,383 |
| $405,445 |
|
| $594,403 |
| $742,679 |
| $660,247 |
| $751,688 |
|
Unpaid principal balance of underlying mortgage loans |
| $48,725,042 |
| $41,956,370 |
| $30,945,000 |
| $33,745,613 |
|
| $51,921,008 |
| $60,915,870 |
| $54,182,477 |
| $56,420,227 |
|
Weighted average note interest rate |
| 4.05% |
| 3.80% |
| 4.24% |
| 3.82% |
|
| 4.1% |
| 3.8% |
| 4.1% |
| 3.8% |
|
Weighted average servicing fee rate (in basis points) |
| 32 |
| 31 |
| 31 |
| 30 |
|
| 32 |
| 32 |
| 32 |
| 32 |
|
Key inputs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pricing spread (1) (2) |
|
|
|
|
|
|
|
|
| |||||||||
Pricing spread (1) |
|
|
|
|
|
|
|
|
| |||||||||
Range |
| 2.9% – 16.3% |
| 6.3% – 16.2% |
| 2.9% – 21.3% |
| 6.3% – 15.3% |
|
| 7.2% – 13.8% |
| 7.2% – 12.5% |
| 7.2% – 14.1% |
| 7.2% – 12.8% |
|
Weighted average |
| 9.0% |
| 8.8% |
| 9.2% |
| 9.7% |
|
| 8.7% |
| 8.7% |
| 8.9% |
| 8.9% |
|
Effect on fair value of: |
|
|
|
|
|
|
|
|
| |||||||||
Effect on fair value of (2): |
|
|
|
|
|
|
|
|
| |||||||||
5% adverse change |
| ($10,987) |
| ($11,667) |
| ($5,550) |
| ($8,710) |
|
| ($9,718) |
| ($12,423) |
| ($11,115) |
| ($13,467) |
|
10% adverse change |
| ($21,570) |
| ($22,892) |
| ($10,908) |
| ($17,083) |
|
| ($19,116) |
| ($24,432) |
| ($21,857) |
| ($26,472) |
|
20% adverse change |
| ($41,609) |
| ($44,110) |
| ($21,084) |
| ($32,890) |
|
| ($37,010) |
| ($47,287) |
| ($42,293) |
| ($51,183) |
|
Average life (in years) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range |
| 0.4 – 8.2 |
| 1.7 – 7.3 |
| 0.4 – 8.2 |
| 1.6 – 7.3 |
|
| 1.7 – 9.3 |
| 0.4 – 9.2 |
| 1.9 – 9.0 |
| 1.8 – 9.1 |
|
Weighted average |
| 6.2 |
| 6.8 |
| 5.8 |
| 6.8 |
|
| 6.4 |
| 6.5 |
| 6.9 |
| 7.4 |
|
Prepayment speed (1) (3) |
|
|
|
|
|
|
|
|
| |||||||||
Prepayment speed (3) |
|
|
|
|
|
|
|
|
| |||||||||
Range |
| 7.6% – 59.3% |
| 7.7% – 34.1% |
| 7.6% – 60.5% |
| 7.6% – 42.8% |
|
| 6.3% – 46.9% |
| 6.9% – 91.8% |
| 5.3% – 43.8% |
| 5.7% – 46.7% |
|
Weighted average |
| 9.7% |
| 8.5% |
| 11.2% |
| 8.5% |
|
| 11.9% |
| 12.3% |
| 9.7% |
| 9.5% |
|
Effect on fair value of: |
|
|
|
|
|
|
|
|
| |||||||||
Effect on fair value of (2): |
|
|
|
|
|
|
|
|
| |||||||||
5% adverse change |
| ($11,286) |
| ($10,346) |
| ($7,052) |
| ($7,359) |
|
| ($12,601) |
| ($17,044) |
| ($12,475) |
| ($14,360) |
|
10% adverse change |
| ($22,187) |
| ($20,371) |
| ($13,835) |
| ($14,494) |
|
| ($24,706) |
| ($33,381) |
| ($24,499) |
| ($28,197) |
|
20% adverse change |
| ($42,914) |
| ($39,513) |
| ($26,654) |
| ($28,132) |
|
| ($47,537) |
| ($64,093) |
| ($47,286) |
| ($54,406) |
|
Annual per-loan cost of servicing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range |
| $59 – $96 |
| $59 – $81 |
| $59 – $109 |
| $59 – $81 |
|
| $68 – $91 |
| $68 – $91 |
| $68 – $97 |
| $68 – $95 |
|
Weighted average |
| $77 |
| $75 |
| $76 |
| $75 |
|
| $84 |
| $82 |
| $86 |
| $84 |
|
Effect on fair value of: |
|
|
|
|
|
|
|
|
| |||||||||
Effect on fair value of (2): |
|
|
|
|
|
|
|
|
| |||||||||
5% adverse change |
| ($5,268) |
| ($3,902) |
| ($2,910) |
| ($2,992) |
|
| ($6,288) |
| ($5,647) |
| ($6,812) |
| ($5,725) |
|
10% adverse change |
| ($10,536) |
| ($7,804) |
| ($5,819) |
| ($5,983) |
|
| ($12,575) |
| ($11,294) |
| ($13,624) |
| ($11,451) |
|
20% adverse change |
| ($21,072) |
| ($15,608) |
| ($11,638) |
| ($11,967) |
|
| ($25,150) |
| ($22,588) |
| ($27,247) |
| ($22,901) |
|
(1) | The |
(2) | For MSRs carried at fair value, |
|
|
(3) | Prepayment speed is measured using Life Total CPR. |
The preceding sensitivity analyses are limited in that they were performed at a particular point in time; only contemplate the movements in the indicated inputs; do not incorporate changes to other inputs; are subject to the accuracy of various models and assumptionsinputs used; and do not incorporate other factors that would affect the Company’s overall financial performance in such scenarios, including operational adjustments made by management to account for changing circumstances. For these reasons, the preceding estimates should not be viewed as earnings forecasts.
3432
Excess Servicing Spread Financing at Fair Value
The Company categorizes ESS financing as a “Level 3” fair value financial statement item. The Company uses a discounted cash flow approach to estimate the fair value of ESS financing.ESS. The key inputs used in the estimation of ESS fair value include pricing spread and prepayment speed. Significant changes to either of those inputs in isolation could result in a significant change in the ESS fair value.value of ESS. Changes in these key inputs are not necessarily directly related.
ESS is generally subject to fair value increases when mortgage interest rates increase. Increasing mortgage interest rates normally slow mortgage refinancing activity. Decreased refinancing activity increases the life of the mortgage loans underlying the ESS, thereby increasing ESS’ fair value, which is the liability owed to PMT. Increases in the fair value of ESS decrease income and are included in Amortization, impairment and change in fair value ofNet mortgage loan servicing rights.fees.
Interest expense for ESS is accrued using the interest method based upon the expected cash flows from the ESS through the expected life of the underlying mortgage loans. Other changes in fair value are recorded in ChangeAmortization, impairment and change in fair value of excessmortgage servicing spread payable to PennyMac Mortgage Investment Trustrights.
Following are the key inputs used in estimating the fair value of ESS:
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, |
| December 31, |
|
| March 31, |
| December 31, |
|
|
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
|
|
|
|
|
|
| |||||
Carrying value (in thousands) |
| $321,976 |
| $412,425 |
| |||||
ESS and pool characteristics: |
|
|
|
|
|
|
|
|
|
|
Unpaid principal balance of underlying loans (in thousands) |
| $46,809,508 |
| $28,227,340 |
| |||||
Unpaid principal balance of underlying mortgage loans (in thousands) |
| $38,076,993 |
| $51,966,405 |
| |||||
Average servicing fee rate (in basis points) |
| 32 |
| 31 |
|
| 34 |
| 32 |
|
Average excess servicing spread (in basis points) |
| 16 |
| 16 |
|
| 19 |
| 17 |
|
Key inputs: |
|
|
|
|
|
|
|
|
|
|
Pricing spread (1) |
|
|
|
|
|
|
|
|
|
|
Range |
| 1.7% - 12.4% |
| 1.7% – 12.0% |
|
| 4.8% – 6.5% |
| 4.8% – 6.5% |
|
Weighted average |
| 5.0% |
| 5.3% |
|
| 5.8% |
| 5.7% |
|
Average life (in years) |
|
|
|
|
|
|
|
|
|
|
Range |
| 0.3 - 7.3 |
| 0.4 – 7.3 |
|
| 1.8 – 9.3 |
| 1.4 – 9.0 |
|
Weighted average |
| 6.2 |
| 5.8 |
|
| 6.8 |
| 6.9 |
|
Annualized prepayment speed (2) |
|
|
|
|
|
|
|
|
|
|
Range |
| 7.6% - 74.3% |
| 7.6% – 74.6% |
|
| 6.2% – 44.5% |
| 5.2% – 52.4% |
|
Weighted average |
| 9.7% |
| 11.2% |
|
| 11.0% |
| 9.6% |
|
(1)Pricing spread represents a margin that is applied to a reference interest rate’s forward rate curve to develop periodic discount rates. The Company applies a pricing spread to the United States Dollar LIBOR curve for purposes of discounting cash flows relating to ESS.
(2)Prepayment speed is measured using Life Total CPR.
35
Note 8—Mortgage Loans Held for Sale at Fair Value
Mortgage loans held for sale at fair value include the following:
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| June 30, |
| December 31, |
|
| March 31, |
| December 31, |
| ||||
|
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||
Government-insured or guaranteed |
| $ | 1,508,666 |
| $ | 866,148 |
|
| $ | 1,560,690 |
| $ | 992,805 |
|
Conventional conforming |
|
| 51,511 |
|
| 66,229 |
|
| 60,243 |
| 59,868 |
| ||
Jumbo |
|
| — |
|
| 5,599 |
| |||||||
Delinquent mortgage loans purchased from Ginnie Mae pools serviced by the Company |
|
| 27,823 |
|
| 206,331 |
|
| 24,210 |
| 42,600 |
| ||
Mortgage loans repurchased pursuant to representations and warranties |
|
| 6,262 |
|
| 3,577 |
|
|
| 8,820 |
|
| 5,931 |
|
|
| $ | 1,594,262 |
| $ | 1,147,884 |
|
| $ | 1,653,963 |
| $ | 1,101,204 |
|
Fair value of mortgage loans pledged to secure mortgage loans sold under agreements to repurchase |
| $ | 1,369,324 |
| $ | 976,772 |
| |||||||
Fair value of mortgage loans pledged to secure mortgage loan participation and sale agreement |
| $ | 202,076 |
| $ | 148,133 |
| |||||||
Fair value of mortgage loans pledged to secure: |
|
|
|
|
| |||||||||
Mortgage loans sold under agreements to repurchase |
| $ | 1,373,996 |
| $ | 833,748 |
| |||||||
Mortgage loan participation and sale agreements |
| $ | 258,078 |
|
| 245,741 |
| |||||||
|
|
| 1,632,074 |
| $ | 1,079,489 |
|
33
Note 9—Derivative Financial Instruments
The Company is exposed to fair value risk relative to its mortgage loans held for sale as well as to its IRLCs and MSRs. The Company bears fair value risk from the time an IRLC is made to PMT or a loan applicant to the time the mortgage loan is sold. The Company is exposed to loss in fair value of its IRLCs and mortgage loans held for sale when market mortgage interest rates increase. The Company is exposed to loss in fair value of its MSRs when market mortgage interest rates decrease.
The Company engages in interest rate risk management activities in an effort to reduce the variability of earnings caused by changes in market interest rates. To manage this fair value risk resulting from interest rate risk, the Company uses derivative financial instruments acquired with the intention of reducing the risk that changes in market interest rates will result in unfavorable changes in the fair value of the Company’s IRLCs, inventory of mortgage loans held for sale and MSRs.
The Company does not use derivative financial instruments for purposes other than in support of its risk management activities other than IRLCs, which are generated in the process of purchasing or originating mortgage loans held for sale. The Company records all derivative financial instruments at fair value and records changes in fair value in current period income.
36
The Company had the following derivative financial instruments recorded on its consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| June 30, 2015 |
| December 31, 2014 |
|
| March 31, 2016 |
| December 31, 2015 |
| ||||||||||||||||||||||||
|
|
|
| Fair value |
|
|
| Fair value |
|
|
|
| Fair value |
|
|
| Fair value |
| ||||||||||||||||
|
| Notional |
| Derivative |
| Derivative |
| Notional |
| Derivative |
| Derivative |
|
| Notional |
| Derivative |
| Derivative |
| Notional |
| Derivative |
| Derivative |
| ||||||||
Instrument |
| amount |
| assets |
| liabilities |
| amount |
| assets |
| liabilities |
|
| amount |
| assets |
| liabilities |
| amount |
| assets |
| liabilities |
| ||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||||
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Free-standing derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Interest rate lock commitments |
| 4,296,134 |
| $ | 34,371 |
| $ | 6,634 |
| 1,765,597 |
| $ | 33,353 |
| $ | 952 |
|
| 3,477,022 |
| $ | 73,639 |
| $ | 1,754 |
| 3,487,366 |
| $ | 45,885 |
| $ | 2,112 |
|
Forward purchase contracts |
| 6,202,418 |
|
| 7,048 |
|
| 14,316 |
| 2,634,218 |
|
| 9,060 |
|
| 141 |
|
| 9,464,470 |
| 56,180 |
| 9 |
| 5,254,293 |
| 4,181 |
| 9,004 |
| ||||
Forward sales contracts |
| 9,789,564 |
|
| 26,652 |
|
| 7,093 |
| 3,901,851 |
|
| 320 |
|
| 16,110 |
|
| 10,418,906 |
| 41 |
| 58,865 |
| 6,230,811 |
| 4,965 |
| 7,497 |
| ||||
MBS put options |
| 327,500 |
|
| 1,426 |
|
| — |
| 340,000 |
|
| 476 |
|
| — |
|
| 1,375,000 |
| 384 |
| — |
| 1,275,000 |
| 404 |
| — |
| ||||
MBS call options |
| 160,000 |
|
| 253 |
|
| — |
| — |
|
| — |
|
| — |
| |||||||||||||||||
Put options on interest rate futures purchase contracts |
| 2,019,500 |
|
| 2,165 |
|
| — |
| 755,000 |
|
| 862 |
|
| — |
|
| 1,750,000 |
| 738 |
| 1,287 |
| 1,650,000 |
| 1,832 |
| 203 |
| ||||
Call options on interest rate futures purchase contracts |
| 1,025,000 |
|
| 3,031 |
|
| — |
| 630,000 |
|
| 2,193 |
|
| — |
|
| 3,937,500 |
| 9,146 |
| 16 |
| 600,000 |
| 1,555 |
| 47 |
| ||||
Put options on interest rate futures sale contracts |
| — |
|
| — |
|
| — |
| 50,000 |
|
| — |
|
| 8 |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| — |
|
Total derivatives before netting |
|
|
|
| 74,946 |
|
| 28,043 |
|
|
|
| 46,264 |
|
| 17,211 |
|
|
|
| 140,128 |
| 61,931 |
|
|
| 58,822 |
| 18,863 |
| ||||
Netting |
|
|
|
| (31,378) |
|
| (14,459) |
|
|
|
| (7,807) |
|
| (10,698) |
|
|
|
|
| (50,074) |
|
| (52,016) |
|
|
|
| (8,542) |
|
| (9,780) |
|
|
|
|
| $ | 43,568 |
| $ | 13,584 |
|
|
| $ | 38,457 |
| $ | 6,513 |
|
|
|
| $ | 90,054 |
| $ | 9,915 |
|
|
| $ | 50,280 |
| $ | 9,083 |
|
Margin deposits with (collateral received from) derivative counterparties, net |
|
|
| $ | 16,919 |
|
|
|
|
|
| $ | (2,891) |
|
|
|
| |||||||||||||||||
Deposits placed with derivative counterparties, net |
|
|
| $ | 1,940 |
|
|
|
|
|
| $ | 1,238 |
|
|
|
|
The following table summarizes the notional value activity for derivative contracts used in the Company’s hedging activities:
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended June 30, 2015 |
| ||||||
|
| Balance |
|
|
|
|
| Balance |
|
|
| beginning of |
|
|
| Dispositions/ |
| end of |
|
Instrument |
| period |
| Additions |
| expirations |
| period |
|
|
| (in thousands) |
| ||||||
Forward purchase contracts |
| 5,124,867 |
| 25,739,853 |
| (24,662,302) |
| 6,202,418 |
|
Forward sale contracts |
| 7,464,527 |
| 37,634,838 |
| (35,309,801) |
| 9,789,564 |
|
MBS put options |
| 450,000 |
| 457,500 |
| (580,000) |
| 327,500 |
|
MBS call options |
| — |
| 160,000 |
| — |
| 160,000 |
|
Put options on interest rate futures purchase contracts |
| 1,470,500 |
| 2,284,500 |
| (1,735,500) |
| 2,019,500 |
|
Call options on interest rate futures purchase contracts |
| 870,000 |
| 2,170,000 |
| (2,015,000) |
| 1,025,000 |
|
Put options on interest rate futures sale contracts |
| 100,000 |
| — |
| (100,000) |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended June 30, 2014 |
| ||||||
|
| Balance |
|
|
|
|
| Balance |
|
|
| beginning of |
|
|
| Dispositions/ |
| end of |
|
Instrument |
| period |
| Additions |
| expirations |
| period |
|
|
| (in thousands) |
| ||||||
Forward purchase contracts |
| 1,506,667 |
| 10,611,283 |
| (9,328,673) |
| 2,789,277 |
|
Forward sale contracts |
| 2,829,176 |
| 15,842,070 |
| (14,054,146) |
| 4,617,100 |
|
MBS put options |
| 175,000 |
| 255,000 |
| (205,000) |
| 225,000 |
|
MBS call options |
| 160,000 |
| 145,000 |
| (210,000) |
| 95,000 |
|
Put options on interest rate futures sales contracts |
| 325,000 |
| 377,500 |
| (325,000) |
| 377,500 |
|
Call options on interest rate futures sales contracts |
| 100,000 |
| 205,000 |
| (135,000) |
| 170,000 |
|
Treasury futures purchase contracts |
| — |
| 56,700 |
| (56,700) |
| — |
|
Treasury futures sale contracts |
| — |
| 56,700 |
| (56,700) |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, 2016 |
| ||||||
|
| Balance |
|
|
|
|
| Balance |
|
|
| beginning of |
|
|
| Dispositions/ |
| end of |
|
Instrument |
| period |
| Additions |
| expirations |
| period |
|
|
| (in thousands) |
| ||||||
Forward purchase contracts |
| 5,254,293 |
| 30,812,375 |
| (26,602,198) |
| 9,464,470 |
|
Forward sale contracts |
| 6,230,811 |
| 39,396,426 |
| (35,208,331) |
| 10,418,906 |
|
MBS put options |
| 1,275,000 |
| 2,700,000 |
| (2,600,000) |
| 1,375,000 |
|
Put options on interest rate futures purchase contracts |
| 1,650,000 |
| 3,025,000 |
| (2,925,000) |
| 1,750,000 |
|
Call options on interest rate futures purchase contracts |
| 600,000 |
| 3,637,500 |
| (300,000) |
| 3,937,500 |
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, 2015 |
| ||||||
|
| Balance |
|
|
|
|
| Balance |
|
|
| beginning of |
|
|
| Dispositions/ |
| end of |
|
Instrument |
| period |
| Additions |
| expirations |
| period |
|
|
| (in thousands) |
| ||||||
Forward purchase contracts |
| 2,634,218 |
| 19,635,850 |
| (17,145,201) |
| 5,124,867 |
|
Forward sale contracts |
| 3,901,851 |
| 26,740,272 |
| (23,177,596) |
| 7,464,527 |
|
MBS put options |
| 340,000 |
| 785,000 |
| (675,000) |
| 450,000 |
|
Put options on interest rate futures purchase contracts |
| 755,000 |
| 1,540,500 |
| (825,000) |
| 1,470,500 |
|
Call options on interest rate futures purchase contracts |
| 630,000 |
| 745,000 |
| (505,000) |
| 870,000 |
|
Put options on interest rate futures sale contracts |
| 50,000 |
| 50,000 |
| — |
| 100,000 |
|
Call options on interest rate futures sale contracts |
| — |
| 35,100 |
| (35,100) |
| — |
|
3734
|
|
|
|
|
|
|
|
|
|
|
| Six months ended June 30, 2015 |
| ||||||
|
| Balance |
|
|
|
|
| Balance |
|
|
| beginning of |
|
|
| Dispositions/ |
| end of |
|
Instrument |
| period |
| Additions |
| expirations |
| period |
|
|
| (in thousands) |
| ||||||
Forward purchase contracts |
| 2,634,218 |
| 45,375,703 |
| (41,807,503) |
| 6,202,418 |
|
Forward sale contracts |
| 3,901,851 |
| 64,375,110 |
| (58,487,397) |
| 9,789,564 |
|
MBS put options |
| 340,000 |
| 1,242,500 |
| (1,255,000) |
| 327,500 |
|
MBS call options |
| — |
| 160,000 |
| — |
| 160,000 |
|
Put options on interest rate futures purchase contracts |
| 755,000 |
| 3,825,000 |
| (2,560,500) |
| 2,019,500 |
|
Call options on interest rate futures purchase contracts |
| 630,000 |
| 2,915,000 |
| (2,520,000) |
| 1,025,000 |
|
Put options on interest rate futures sale contracts |
| 50,000 |
| 50,000 |
| (100,000) |
| — |
|
Call options on interest rate futures sale contracts |
| — |
| 35,100 |
| (35,100) |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
| Six months ended June 30, 2014 |
| ||||||
|
| Balance |
|
|
|
|
| Balance |
|
|
| beginning of |
|
|
| Dispositions/ |
| end of |
|
Instrument |
| period |
| Additions |
| expirations |
| period |
|
|
| (in thousands) |
| ||||||
Forward purchase contracts |
| 1,418,527 |
| 17,510,671 |
| (16,139,921) |
| 2,789,277 |
|
Forward sale contracts |
| 2,659,000 |
| 26,382,189 |
| (24,424,089) |
| 4,617,100 |
|
MBS put options |
| 185,000 |
| 640,000 |
| (600,000) |
| 225,000 |
|
MBS call options |
| 105,000 |
| 540,000 |
| (550,000) |
| 95,000 |
|
Put options on interest rate futures purchase contracts |
| — |
| 702,500 |
| (325,000) |
| 377,500 |
|
Call options on interest rate futures purchase contracts |
| — |
| 380,000 |
| (210,000) |
| 170,000 |
|
Treasury futures purchase contracts |
| — |
| 78,300 |
| (78,300) |
| — |
|
Treasury futures sale contracts |
| — |
| 87,400 |
| (87,400) |
| — |
|
TheFollowing are the gains and (losses) recognized by the Company recorded net gains on derivative financial instruments used to hedge IRLCs and mortgage loans held for sale at fair value totaling $45.0 million and $19.2 million for the quarter and six months ended June 30, 2015, respectively, and net losses of $38.8 million and $58.8 million for the quarter and six months ended June 30, 2014, respectively. Netincome statement line items where such gains and losses on derivative financial instruments used to hedge IRLCs and mortgage loans held for sale at fair value are included in Net gains on mortgage loans held for sale at fair value in the Company’s consolidated statements of income.included:
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, |
| ||||
Hedged item |
| Income statement line |
| 2016 |
| 2015 |
| ||
|
|
|
| (in thousands) |
| ||||
Interest rate lock commitments and mortgage loans held for sale |
| Net gains on mortgage loans held for sale |
| $ | (69,177) |
| $ | (25,789) |
|
Mortgage servicing rights |
| Net mortgage loan servicing fees |
| $ | 58,720 |
| $ | 17,121 |
|
The Company recorded net losses on derivative financial instruments used to hedge fair value changes of MSRs totaling $28.3 million and $11.2 million for the quarter and six months ended June 30, 2015, respectively, and net gains on derivative financial instruments used to hedge fair value changes of MSRs totaling $9.6 million and $9.2 million for the quarter and six months ended June 30, 2014, respectively. Net gains and losses on derivative financial instruments used to hedge fair value changes of MSRs are included in Amortization, impairment and change in fair value of mortgage servicing rights in the Company’s consolidated statements of income.
38
Note 10—Mortgage Servicing Rights
Carried at Fair Value:
The activity in MSRs carried at fair value is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Quarter ended June 30, |
| Six months ended June 30, |
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
| 2016 |
| 2015 |
| ||||||
|
| (in thousands) |
| (in thousands) |
| ||||||||||||||
Balance at beginning of period |
| $ | 361,413 |
| $ | 246,984 |
| $ | 325,383 |
| $ | 224,913 |
| $ | 660,247 |
| $ | 325,383 |
|
Additions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Purchases |
|
| 206,996 |
|
| 71,778 |
|
| 270,133 |
|
| 97,644 |
|
| 11 |
| 63,137 |
| |
Mortgage servicing rights resulting from mortgage loan sales |
|
| 3,443 |
|
| 7,333 |
|
| 6,118 |
|
| 14,266 |
|
| 4,468 |
|
| 2,675 |
|
|
|
| 210,439 |
|
| 79,111 |
|
| 276,251 |
|
| 111,910 |
|
| 4,479 |
|
| 65,812 |
|
Sales |
|
| — |
|
| (10,881) |
|
| — |
|
| (10,881) | |||||||
Change in fair value due to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Changes in valuation inputs or assumptions used in valuation model (1) |
|
| 26,308 |
|
| 2,511 |
|
| 8,593 |
|
| (445) | |||||||
Changes in valuation inputs used in valuation model (1) |
|
| (48,876) |
| (17,715) |
| |||||||||||||
Other changes in fair value (2) |
|
| (16,891) |
|
| (9,126) |
|
| (28,958) |
|
| (16,898) |
|
| (21,447) |
|
| (12,067) |
|
Total change in fair value |
|
| 9,417 |
|
| (6,615) |
|
| (20,365) |
|
| (17,343) |
|
| (70,323) |
|
| (29,782) |
|
Balance at end of period |
| $ | 581,269 |
| $ | 308,599 |
| $ | 581,269 |
| $ | 308,599 |
| $ | 594,403 |
| $ | 361,413 |
|
Fair value of mortgage servicing rights pledged to secure: |
|
|
|
|
| ||||||||||||||
Assets sold under agreements to repurchase |
| $ | 475,920 |
| $ | — |
| ||||||||||||
Note payable |
|
| 117,805 |
|
| 413,582 |
| ||||||||||||
|
| $ | 593,725 |
| $ | 413,582 |
|
(1) | Principally reflects changes in discount rates and prepayment speed inputs, primarily due to changes |
(2) | Represents changes due to realization of cash flows. |
35
Carried at Lower of Amortized Cost or Fair Value:
The activity in MSRs carried at the lower of amortized cost or fair value is summarized below:
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, |
| ||||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| 2016 |
| 2015 |
| ||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
|
|
|
|
|
| |||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Amortized cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Balance at beginning of period |
| $ | 470,490 |
| $ | 287,187 |
| $ | 415,245 |
| $ | 263,373 |
|
| $ | 798,925 |
| $ | 415,245 |
|
Mortgage servicing rights resulting from mortgage loan sales |
|
| 125,561 |
|
| 42,327 |
|
| 192,842 |
|
| 72,908 |
|
| 96,314 |
| 67,281 |
| ||
Amortization |
|
| (14,493) |
|
| (7,603) |
|
| (26,529) |
|
| (14,370) |
|
|
| (28,250) |
|
| (12,036) |
|
Application of valuation allowance to write down mortgage servicing rights with other-than-temporary impairment |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||
Balance at end of period |
|
| 581,558 |
|
| 321,911 |
|
| 581,558 |
|
| 321,911 |
|
| $ | 866,989 |
| $ | 470,490 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Valuation allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Balance at beginning of period |
|
| (41,492) |
|
| (5,043) |
|
| (9,800) |
|
| (4,622) |
|
| (47,237) |
| (9,800) |
| ||
Additions |
|
| 14,175 |
|
| (3,786) |
|
| (17,517) |
|
| (4,207) |
|
|
| (77,073) |
|
| (31,692) |
|
Application of valuation allowance to write down mortgage servicing rights with other-than-temporary impairment |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||
Balance at end of period |
|
| (27,317) |
|
| (8,829) |
|
| (27,317) |
|
| (8,829) |
|
|
| (124,310) |
|
| (41,492) |
|
Mortgage servicing rights, net |
| $ | 554,241 |
| $ | 313,082 |
| $ | 554,241 |
| $ | 313,082 |
|
| $ | 742,679 |
| $ | 428,998 |
|
Fair value of mortgage servicing rights at beginning of period |
| $ | 766,345 |
| $ | 416,802 |
| |||||||||||||
Fair value of mortgage servicing rights at end of period |
| $ | 569,969 |
| $ | 321,383 |
| $ | 569,969 |
| $ | 321,383 |
|
| $ | 743,062 |
| $ | 437,824 |
|
Fair value of mortgage servicing rights at beginning of period |
| $ | 437,824 |
| $ | 291,535 |
| $ | 416,802 |
| $ | 269,422 |
| |||||||
Fair value of mortgage servicing rights pledged to secure: |
|
|
|
|
| |||||||||||||||
Assets sold under agreements to repurchase |
| $ | 720,817 |
| $ | — |
| |||||||||||||
Note payable |
|
| 18,233 |
|
| — |
| |||||||||||||
|
| $ | 739,050 |
| $ | — |
|
39
The fair value of mortgage servicing rights pledged to secure the note payable totaled $536.2 million and $303.8 million as of June 30, 2015 and 2014, respectively.
The following table summarizes the Company’s estimate of future amortization of its existing MSRs. This estimate was developed with the inputs used inapplicable to the June 30, 2015March 31, 2016 valuation of MSRs. The inputs underlying the following estimate will change as market conditions and portfolio composition and behavior change, causing both actual and projected amortization levels to change over time.
|
|
|
|
|
|
| ||
|
| Estimated MSR |
|
| Estimated MSR |
| ||
Twelve month period ending June 30, |
| amortization |
| |||||
Twelve month period ending March 31, |
| amortization |
| |||||
|
| (in thousands) |
|
| (in thousands) |
| ||
2016 |
| $ | 56,195 |
| ||||
2017 |
| 55,880 |
|
| $ | 120,550 |
| |
2018 |
| 52,838 |
|
| 99,839 |
| ||
2019 |
| 49,207 |
|
| 85,343 |
| ||
2020 |
| 45,351 |
|
| 74,798 |
| ||
2021 |
| 65,910 |
| |||||
Thereafter |
|
| 322,087 |
|
|
| 420,549 |
|
|
| $ | 581,558 |
|
| $ | 866,989 |
|
36
Servicing fees relating to MSRs are recorded in Net mortgage loan servicing fees—Loan servicing fees—From non-affiliates on the consolidated statements of income; late charges and other ancillary fees relating to MSRs are recorded in Net servicing fees—Loan servicing fees—Ancillary and other fees on the Company’s consolidated statements of income. The fees are summarized below:
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, |
| ||||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| 2016 |
| 2015 |
| ||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| (in thousands) |
| ||||||||
|
| (in thousands) |
|
|
|
|
|
|
| |||||||||||
Contractual servicing fees |
| $ | 66,867 |
| $ | 43,314 |
| $ | 116,968 |
| $ | 79,414 |
|
| $ | 91,327 |
| $ | 50,101 |
|
Ancillary and other fees: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Late charges |
|
| 1,467 |
|
| 963 |
|
| 3,118 |
|
| 1,850 |
|
| 1,535 |
| 1,651 |
| ||
Other |
|
| 691 |
|
| 248 |
|
| 1,402 |
|
| 424 |
|
|
| 384 |
|
| 711 |
|
|
| $ | 69,025 |
| $ | 44,525 |
| $ | 121,488 |
| $ | 81,688 |
|
| $ | 93,246 |
| $ | 52,463 |
|
|
|
|
|
|
|
Mortgage Servicing Liabilities Carried at Fair Value:
The activity in mortgage servicing liabilities carried at fair value is summarized below:
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, |
| ||||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| 2016 |
| 2015 |
| ||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| (in thousands) | |||||||||
|
| (in thousands) |
|
|
|
|
|
|
| |||||||||||
Balance at beginning of period |
| $ | 6,529 |
| $ | — |
| $ | 6,306 |
| $ | — |
|
| $ | 1,399 |
| $ | 6,306 |
|
Mortgage servicing liabilities resulting from mortgage loan sales |
|
| 9,156 |
|
| — |
|
| 12,084 |
|
| — |
|
| 5,409 |
| 2,928 |
| ||
Change in fair value |
|
| (3,894) |
|
| 5,821 |
|
| (6,599) |
|
| 5,821 |
|
|
| (61) |
|
| (2,705) |
|
Balance at end of period |
| $ | 11,791 |
| $ | 5,821 |
| $ | 11,791 |
| $ | 5,821 |
|
| $ | 6,747 |
| $ | 6,529 |
|
|
|
|
|
|
|
|
|
Note 11—Carried Interest Due from Investment Funds
The activity in the Company’s Carried Interest due from Investment Funds is summarized as follows:
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, |
| ||||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| 2016 |
| 2015 |
| ||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| (in thousands) |
| ||||||||
|
| (in thousands) |
|
|
|
|
|
|
| |||||||||||
Balance at beginning of period |
| $ | 68,531 |
| $ | 63,299 |
| $ | 67,298 |
| $ | 61,142 |
|
| $ | 69,926 |
| $ | 67,298 |
|
Carried Interest recognized during the period |
|
| 182 |
|
| 1,834 |
|
| 1,415 |
|
| 3,991 |
|
| 593 |
| 1,233 |
| ||
Proceeds received during the period |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
Balance at end of period |
| $ | 68,713 |
| $ | 65,133 |
| $ | 68,713 |
| $ | 65,133 |
|
| $ | 70,519 |
| $ | 68,531 |
|
40
The amount of the Carried Interest that will be received by the Company depends on the Investment Funds’ future performance. As a result, the amount of Carried Interest recorded by the Company is based on the cash flows that would be produced assuming termination of the Investment Funds at period end and may be reduced in future periods based on the performance of the Investment Funds in those periods. However, the Company is not required to pay guaranteed returns to the Investment Funds and the amount of any reduction to Carried Interest will be limited to the amounts previously recognized.
Management expects the Carried Interest to be collected by the Company when the Investment Funds liquidate. The commitment period for the Investment Funds ended on December 31, 2011. The Investment Fund limited liability company and limited partnership agreements specify that the funds will continue in existence through December 31, 2016, subject to three one-year extensions by PCM at its discretion.
Note 12—Investment in PennyMac Mortgage Investment Trust at Fair Value
Following is a summary of Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended June 30, |
| Six months ended June 30, |
| ||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
| ||||
|
| (in thousands) |
| ||||||||||
Dividends received from PennyMac Mortgage Investment Trust |
| $ | 46 |
| $ | 44 |
| $ | 138 |
| $ | 88 |
|
Change in fair value of investment in PennyMac Mortgage Investment Trust |
|
| (290) |
|
| (147) |
|
| (275) |
|
| (76) |
|
|
| $ | (244) |
| $ | (103) |
| $ | (137) |
| $ | 12 |
|
Fair value of PennyMac Mortgage Investment Trust shares at period end |
| $ | 1,307 |
| $ | 1,646 |
|
|
|
|
|
|
|
Note 13—Borrowings
As of June 30, 2015, the Company maintained six borrowing facilities: four repurchase facilities that provide funding for mortgage loans held for sale; one repurchase mortgage loan participation and sale agreement; and one note payable secured by MSRs and servicing advances made relating to certain loans in the Company’s mortgage loan servicing portfolio.
The borrowing facilities described throughout this Note 12 contain various covenants, including financial covenants governing PLS’sthe Company’s net worth, debt to equitydebt-to-equity ratio, profitability and liquidity. Management believes that PLSthe Company was in compliance with these requirementscovenants as of June 30, 2015.March 31, 2016.
37
Mortgage LoansAssets Sold Under Agreement to Repurchase
The Company has multiple borrowing facilities in the form of asset sales under agreements to repurchase. These borrowing facilities are secured by mortgage loans held for sale are in the form of mortgage loan sale and repurchase agreements.at fair value or MSRs. Eligible mortgage loans and participation certificates secured by MSRs and advances are sold at advance rates based on the loan type.collateral sold. Interest is charged at a rate based on the buyer’s overnight cost of funds rate for one agreementtwo agreements and on LIBOR for the other threefour agreements. Mortgage loansLoans and MSRs financed under these agreements may be re-pledged by the lenders. One facility also provides financing for government-insured loans purchased out of Ginnie Mae securities for modification or default resolution.
41
Financial data pertaining to mortgage loansassets sold under agreements to repurchase are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended June 30, |
| Six months ended June 30, |
| ||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
| ||||
|
| (in thousands) |
| ||||||||||
Period end: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance (1) |
| $ | 1,264,046 |
| $ | 825,267 |
|
|
|
|
|
|
|
Unused amount (2) |
| $ | 35,954 |
| $ | 674,733 |
|
|
|
|
|
|
|
Weighted average interest rate (3) |
|
| 1.80 | % |
| 1.85 | % |
|
|
|
|
|
|
Fair value of mortgage loans securing agreements to repurchase |
| $ | 1,369,324 |
| $ | 997,506 |
|
|
|
|
|
|
|
Margin deposits placed with counterparties (4) |
| $ | 2,500 |
| $ | 1,500 |
|
|
|
|
|
|
|
During the period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average balance of mortgage loans sold under agreements to repurchase |
| $ | 819,988 |
| $ | 527,990 |
| $ | 719,003 |
| $ | 410,196 |
|
Weighted average interest rate (3) |
|
| 1.80 | % |
| 1.83 | % |
| 1.80 | % |
| 1.81 | % |
Total interest expense |
| $ | 4,758 |
| $ | 3,682 |
| $ | 8,498 |
| $ | 6,011 |
|
Maximum daily amount outstanding |
| $ | 1,264,046 |
| $ | 873,301 |
| $ | 1,264,046 |
| $ | 873,301 |
|
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, |
| ||||
|
| 2016 |
| 2015 |
| ||
|
| (dollars in thousands) | |||||
During the period: |
|
|
|
|
|
|
|
Average balance of assets sold under agreements to repurchase |
| $ | 1,039,573 |
| $ | 616,896 |
|
Weighted average interest rate (1) |
|
| 2.61% |
|
| 1.79% |
|
Total interest expense |
| $ | 8,660 |
| $ | 3,809 |
|
Maximum daily amount outstanding |
| $ | 1,688,605 |
| $ | 992,187 |
|
|
|
|
|
|
|
|
|
|
|
| March 31, |
|
| December 31, |
|
|
| 2016 |
| 2015 |
| ||
|
| (dollars in thousands) | |||||
Carrying value: |
|
|
|
|
|
|
|
Unpaid principal balance |
| $ | 1,658,728 |
| $ | 1,167,405 |
|
Unamortized debt issuance costs |
|
| (150) |
|
| (674) |
|
|
| $ | 1,658,578 |
| $ | 1,166,731 |
|
Unused amount (2) |
| $ | 348,272 |
| $ | 40,178 |
|
Fair value of assets securing repurchase agreements |
|
|
|
|
|
|
|
Mortgage loans |
| $ | 1,373,996 |
| $ | 833,748 |
|
Mortgage servicing rights |
|
| 1,196,737 |
|
| 1,132,568 |
|
|
| $ | 2,570,733 |
| $ | 1,966,316 |
|
Weighted average interest rate |
|
| 2.42% |
|
| 2.50% |
|
Margin deposits placed with counterparties (3) |
| $ | 2,500 |
| $ | 1,500 |
|
(1) | Excludes |
(2) | The amount the Company is able to borrow under |
(3) |
|
| Margin deposits are included in Other assets on the Company’s consolidated balance sheet. |
Following is a summary of maturities of outstanding advances under repurchase agreements by maturity date:
|
|
|
|
|
Remaining maturity at |
| Balance |
| |
|
| (in thousands) |
| |
Within 30 days |
| $ |
| |
Over 30 to 90 days |
|
|
| |
Over 90 days |
|
|
| |
|
|
|
| |
|
|
|
| |
Total loans sold under agreements to repurchase |
| $ |
| |
Weighted average maturity (in months) |
|
|
|
38
The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest)interest payable) relating to the Company’s mortgage loans held for sale sold under agreements to repurchase is summarized by counterparty below as of June 30, 2015:March 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average |
|
|
|
|
|
|
|
| maturity of advances |
|
|
|
|
|
|
|
| under repurchase |
|
|
|
Counterparty |
| Amount at risk |
| agreement |
| Facility maturity |
| |
|
| (in thousands) |
|
|
|
|
| |
Credit Suisse First Boston Mortgage Capital LLC |
| $ | June 9, 2016 |
| September | |||
Credit Suisse First Boston Mortgage Capital LLC |
|
| 44,877 | June 9, 2016 | March 30, |
| ||
Bank of America, N.A. |
| $ |
|
|
|
|
| |
Morgan Stanley Bank, N.A. |
| $ |
|
|
| July |
| |
Citibank, N.A. |
| $ |
|
|
|
|
|
42
The Company is subject to margin calls during the period the agreements are outstanding and therefore may be required to repay a portion of the borrowings before the respective agreements mature if the fair value (as determined by the applicable lender) of the mortgage loansassets securing those agreements decreases.
Mortgage Loan Participation and Sale Agreement
UnderOne of the borrowing facilities secured by mortgage loans held for sale is in the form of a mortgage loan participation and sale agreement, participationagreement. Participation certificates, each of which represents an undivided beneficial ownership interest in mortgage loans that have been pooled with Fannie Mae, Freddie Mac or Ginnie Mae, are sold to the lender pending the securitization of the mortgage loans and sale of the resulting securities. A commitment to sell the securities resulting from the pending securitization between the Company and a non-affiliate is also assigned to the lender as part ofat the sale of thetime a participation certificate.certificate is sold.
The purchase price paid by the lender for each participation certificate is based on the trade price of the security, plus an amount of interest expected to accrue on the security to its anticipated delivery date, minus a present value adjustment, any related hedging costs and a holdback amount that is based on a percentage of the purchase price and is not required to be paid to the Company until the settlement of the security and its delivery to the lender.
The mortgage loan participation and sale agreement is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Quarter ended |
| Six months ended |
|
| Quarter ended March 31, |
| ||||||
|
| June 30, 2015 |
| June 30, 2015 |
|
| 2016 |
| 2015 |
| ||||
|
| (in thousands) |
|
| (dollars in thousands) |
| ||||||||
Period end: |
|
|
|
|
|
|
| |||||||
Mortgage loan participation and sale agreement secured by mortgage loan participation certificates |
| $ | 195,959 |
|
|
|
| |||||||
Mortgage loans pledged to secure mortgage loan participation and sale agreement |
| $ | 202,076 |
|
|
|
| |||||||
During the period: |
|
|
|
|
|
|
|
|
|
|
|
| ||
Average balance |
| $ | 162,150 |
| $ | 144,484 |
|
| $ | 167,556 |
| $ | 143,638 |
|
Weighted average interest rate (1) |
|
| 1.43 | % |
| 1.43 | % |
| 1.66% |
| 1.25% |
| ||
Total interest expense |
| $ | 651 |
| $ | 1,239 |
|
| $ | 781 |
| $ | 519 |
|
Maximum daily amount outstanding |
| $ | 246,636 |
| $ | 259,832 |
| |||||||
|
|
|
|
|
| |||||||||
|
| March 31, |
| December 31, |
| |||||||||
|
| 2016 |
| 2015 |
| |||||||||
|
| (dollars in thousands) |
| |||||||||||
Carrying value: |
|
|
|
|
| |||||||||
Unpaid principal balance |
| $ | 246,636 |
| $ | 234,898 |
| |||||||
Unamortized debt issuance costs |
|
| — |
|
| (26) |
| |||||||
|
| $ | 246,636 |
| $ | 234,872 |
| |||||||
Weighted average interest rate |
|
| 1.68% |
| 1.45% |
| ||||||||
Mortgage loans pledged to secure mortgage loan participation and sale agreement |
| $ | 258,078 |
| $ | 245,741 |
|
(1) | Excludes the effect of amortization of |
Note
39
Notes Payable
The Company entered into a revolving credit agreement classified as a note payable, dated as of December 30, 2015, pursuant to which the lenders have agreed to make revolving loans in an amount not to exceed $100,000,000. As of March 31, 2016, $50.0 million was outstanding related to this note payable. Interest on the note payable accrues at an annual rate of interest equal to, at the election of the Company, either an alternate base rate or LIBOR plus the applicable contract margin. The maturity date of the note payable is summarized below:364 days following the date of the revolving credit agreement. The proceeds of the loans are to be used solely for working capital and general corporate purposes of the Company and its subsidiaries.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended June 30, |
|
| Six months ended June 30, |
| ||||||||
|
| 2015 |
| 2014 |
|
| 2015 |
| 2014 |
| ||||
|
| (in thousands) |
| |||||||||||
Period end: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note payable secured by: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights |
| $ | 246,456 |
| $ | 115,314 |
|
|
|
|
|
|
|
|
Servicing advances |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
| $ | 246,456 |
| $ | 115,314 |
|
|
|
|
|
|
|
|
Assets pledged to secure note payable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights |
| $ | 536,172 |
| $ | 303,831 |
|
|
|
|
|
|
|
|
Servicing advances |
| $ | — |
| $ | — |
|
|
|
|
|
|
|
|
During the period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average balance |
| $ | 214,618 |
| $ | 78,177 |
|
| $ | 178,152 |
| $ | 65,337 |
|
Weighted average interest rate |
|
| 3.00 | % |
| 2.95 | % |
|
| 2.98 | % |
| 2.94 | % |
Total interest expense |
| $ | 2,463 |
| $ | 861 |
|
| $ | 4,098 |
| $ | 1,520 |
|
TheAs of March 31, 2016, a second note payable, with a balance of $78.8 million of principal outstanding, is secured by servicing advances and MSRs relating to certain mortgage loans in the Company’s mortgage loan servicing portfolio, and currently provides for advance rates of 50% of the carrying value of
43
MSRs pledged and 85% of the amount of the servicing advances pledged.portfolio. Interest is charged at a rate based on LIBOR plus the lender’s overnight cost of funds.applicable contract margin.
On April 30,Notes payable are summarized below:
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, |
| ||||
|
| 2016 |
| 2015 |
| ||
|
| (dollars in thousands) | |||||
During the period: |
|
|
|
|
|
|
|
Average balance |
| $ | 85,167 |
| $ | 141,280 |
|
Weighted average interest rate (1) |
|
| 4.40% |
|
| 2.96% |
|
Total interest expense |
| $ | 1,598 |
| $ | 1,635 |
|
Maximum daily amount outstanding |
| $ | 128,849 |
| $ | 146,855 |
|
|
|
|
|
|
|
|
|
|
| March 31, |
| December 31, |
| ||
|
| 2016 |
| 2015 |
| ||
|
| (in thousands) | |||||
Carrying value: |
|
|
|
|
|
|
|
Unpaid principal balance |
| $ | 128,849 |
| $ | 62,677 |
|
Unamortized debt issuance costs |
|
| (1,156) |
|
| (1,541) |
|
|
| $ | 127,693 |
| $ | 61,136 |
|
Assets pledged to secure notes payable: |
|
|
|
|
|
|
|
Mortgage servicing rights |
| $ | 136,038 |
| $ | 20,881 |
|
Cash |
| $ | 95,826 |
| $ | 93,757 |
|
Carried Interest |
| $ | 70,519 |
| $ | 69,296 |
|
(1) | Excluding the effect of amortization of debt issuance costs totaling $654,000 during the quarter ended March 31, 2016. |
40
Obligations under Capital Lease
In December 2015, the maximum loan amount of the note payable was increased from $257 million to $407 million. In connection with this increase, the Company entered into an agreement with PMT pursuant to which PMT may borrow up to $150 million from the Company for the purpose of financing ESS.a capital lease transaction secured by certain fixed assets and capitalized software. The Company then re-pledges the ESS to secure the note payable. At June 30, 2015, PMT had advances payable to the Company totaling $52.5 million under this arrangement.capital lease matures on December 9, 2019 and bears interest at a spread over one month LIBOR.
Obligations under capital lease are summarized below:
|
|
|
|
|
|
|
|
| Quarter ended March 31, | ||||
|
| 2016 |
| 2015 | ||
|
| (dollars in thousands) | ||||
During the period: |
|
|
|
|
|
|
Average balance |
| $ | 12,825 |
| $ | — |
Weighted average interest rate |
|
| 2.44% |
|
| — |
Total interest expense |
| $ | 63 |
| $ | — |
Maximum daily amount outstanding |
| $ | 13,596 |
| $ | — |
|
|
|
|
|
|
|
|
| March 31, |
| December 31, | ||
|
| 2016 |
| 2015 | ||
|
| (in thousands) | ||||
Unpaid principal balance |
| $ | 12,070 |
| $ | 13,579 |
Assets pledged to secure obligations under capital lease: |
|
|
|
|
|
|
Furniture, fixtures and equipment |
| $ | 11,356 |
| $ | 14,034 |
Capitalized software |
| $ | 541 |
| $ | 783 |
Excess Servicing Spread Financing
In conjunction with the Company’s purchase from non-affiliates of certain MSRs onrelating to pools of Agency-backed residential mortgage loans, the Company has entered into sale and assignment agreements with PMT which are treated as financings and are carried at fair value with changes in fair value recognized in current period income. Under these agreements, the Company sold to PMT the right to receive ESS cash flows relating to certain MSRs. The Company retained a fixed base servicing fee and all ancillary income associated with servicing the mortgage loans. The Company continues to be the servicer of the mortgage loans and provides all servicing functions, including the responsibility to make servicing advances.
Following is a summary of ESS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Balance at beginning of period |
| $ | 222,309 |
| $ | 151,019 |
| $ | 191,166 |
| $ | 138,723 |
|
| $ | 412,425 |
| $ | 191,166 |
|
Issuances of excess servicing spread to PennyMac Mortgage Investment Trust: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
For cash |
|
| 140,875 |
|
| 52,867 |
|
| 187,287 |
|
| 73,393 |
|
| — |
| 46,412 |
| ||
Pursuant to a recapture agreement |
|
| 1,319 |
|
| 2,362 |
|
| 2,565 |
|
| 3,475 |
| |||||||
Pursuant to a recapture agreement with PennyMac Mortgage Investment Trust |
| 1,911 |
| 1,246 |
| |||||||||||||||
Accrual of interest |
|
| 5,818 |
|
| 3,139 |
|
| 9,570 |
|
| 6,001 |
|
| 7,015 |
| 3,752 |
| ||
Repayments |
|
| (18,352) |
|
| (9,081) |
|
| (31,083) |
|
| (16,494) |
| |||||||
Repayment |
| (20,881) |
| (12,731) |
| |||||||||||||||
Repurchase |
| (59,045) |
| — |
| |||||||||||||||
Change in fair value |
|
| 7,133 |
|
| (10,062) |
|
| (403) |
|
| (14,854) |
|
|
| (19,449) |
|
| (7,536) |
|
Balance at end of period |
| $ | 359,102 |
| $ | 190,244 |
| $ | 359,102 |
| $ | 190,244 |
|
| $ | 321,976 |
| $ | 222,309 |
|
|
|
|
|
|
|
On February 29, 2016, the Company and PMT terminated that certain master spread acquisition and MSR servicing agreement that the parties entered into effective February 1, 2013 (the “2/1/13 Spread Acquisition Agreement”) and all amendments thereto. In connection with the termination of the 2/1/13 Spread Acquisition Agreement, the Company reacquired from PMT all of its right, title and interest in and to all of the Fannie Mae ESS previously sold by the Company to PMT under the 2/1/13 Spread Acquisition Agreement and then subject to such 2/1/13 Spread Acquisition Agreement. On February 29, 2016, the Company also reacquired from PMT all of its right, title and interest in and to all of the Freddie Mac ESS previously sold to PMT by the Company. During the quarter ended March 31, 2016, the amount of ESS sold by PMT to the Company under these reacquisitions was $59.0 million.
41
Note 14—13—Liability for Losses Under Representations and Warranties
Following is a summary of activity in the Company’s liability for representations and warranties:
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, |
| ||||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| 2016 |
| 2015 |
| ||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| (in thousands) |
| ||||||||
|
| (in thousands) |
|
|
|
|
|
|
| |||||||||||
Balance at beginning of period |
| $ | 14,689 |
| $ | 8,974 |
| $ | 13,259 |
| $ | 8,123 |
|
| $ | 20,611 |
| $ | 13,259 |
|
Provision for losses on loans sold |
|
| 1,748 |
|
| 1,204 |
|
| 3,243 |
|
| 2,055 |
| |||||||
Provision for losses on mortgage loans sold |
| 2,082 |
| 1,495 |
| |||||||||||||||
Incurred losses |
|
| (180) |
|
| — |
|
| (245) |
|
| — |
|
|
| (484) |
|
| (65) |
|
Balance at end of period |
| $ | 16,257 |
| $ | 10,178 |
| $ | 16,257 |
| $ | 10,178 |
|
| $ | 22,209 |
| $ | 14,689 |
|
Unpaid principal balance of mortgage loans subject to representations and warranties at period end |
| $ | 44,794,166 |
| $ | 29,882,252 |
|
|
|
|
|
|
|
| $ | 63,806,614 |
| $ | 39,624,553 |
|
Note 15—14—Income Taxes
The Company’s effective tax rate wasrates for the quarters ended March 31, 2016 and 2015 were 11.9% and 11.5% for both the quarter and six months ended June 30, 2015. For the quarter and six months ended June 30, 2014, the Company’s effective tax rates were 11.4% and 11.3%, respectively. The difference between the Company’s effective tax rate and the statutory rate is primarily due to the allocation of earnings to the noncontrolling interest unitholders. As the noncontrolling interest unitholders convert their ownership units into the Company’s shares, the portion of the Company’s income that will be subject to corporate federal and state statutory tax rates will increase, which will in turn increase the Company’s effective income tax rate.
44
Note 16—15—Noncontrolling Interest
During the quarter and six months ended June 30, 2015, respectively,March 31, 2016, PennyMac unitholders exchanged 89,388 and 133,3883,220 Class A units for the Company’s Class A common stock. The effect of the exchanges reduced the percentage of the Noncontrolling interest in Private National Mortgage Acceptance Company, LLC from 71.1% at December 31, 2015 to 71.0% at March 31, 2016.
During the quarter ended March 31, 2015, PennyMac unitholders exchanged 44,000 units for the Company’s Class A common stock. The effect of the exchanges reduced the percentage of the Noncontrolling interest in Private National Mortgage Acceptance Company, LLC from 71.6% at December 31, 2014 to 71.3%71.5% at June 30,March 31, 2015.
During the quarter and six months ended June 30, 2014, respectively, PennyMac unitholders exchanged 412,500 and 479,209 Class A units for the Company’s Class A common stock. The effect of the exchanges reduced the percentage of the Noncontrolling interest in Private National Mortgage Acceptance Company, LLC from 72.6% at December 31, 2013 to 71.9% at June 30, 2014.
Net income attributable to the Company’s common stockholders and the effects of changes in noncontrolling ownership interest in PennyMac isare summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||
|
| (in thousands, except share amounts) |
|
| (in thousands, except share amounts) |
| ||||||||||||||
Net income attributable to PennyMac Financial Services, Inc. common stockholders |
| $ | 12,749 |
| $ | 9,618 |
| $ | 21,777 |
| $ | 17,590 |
|
| $ | 5,175 |
| $ | 9,028 |
|
Increase in the Company's additional paid-in capital for exchanges of Class A units of Private National Mortgage Acceptance Company, LLC to Class A stock of PennyMac Financial Services, Inc. (Class A shares issued, 89,388 and 133,388 during the quarter and six months ended June 30, 2015, respectively, and 412,500 and 479,209 during the quarter and six months ended June 30, 2014, respectively) |
| $ | 1,640 |
| $ | 4,035 |
| $ | 2,432 |
| $ | 4,598 |
| |||||||
Increase in the Company's additional paid-in capital for exchanges of Class A units of Private National Mortgage Acceptance Company, LLC to Class A stock of PennyMac Financial Services, Inc. (Class A shares issued, 3,220, and 44,000 shares during the quarters ended March 31, 2016 and 2015, respectively) |
| $ | 601 |
| $ | 792 |
|
42
Note 17—16—Net Gains on Mortgage Loans Held for Sale
Net gains on mortgage loans held for sale at fair value is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Cash (loss) gain: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Sales proceeds |
| $ | (38,944) |
| $ | 10,241 |
| $ | (36,214) |
| $ | 14,722 |
| |||||||
Mortgage loans |
| $ | 21,401 |
| $ | 2,730 |
| |||||||||||||
Hedging activities |
|
| 17,995 |
|
| (25,549) |
|
| (334) |
|
| (35,805) |
|
|
| (72,541) |
|
| (18,329) |
|
|
|
| (20,949) |
|
| (15,308) |
|
| (36,548) |
|
| (21,083) |
|
| (51,140) |
| (15,599) |
| ||
Non-cash gain: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
From non-affiliates: |
|
|
|
|
| |||||||||||||||
Mortgage servicing rights resulting from mortgage loan sales |
|
| 129,004 |
|
| 49,660 |
|
| 198,960 |
|
| 87,174 |
|
|
| 100,782 |
| 69,956 |
| |
Mortgage servicing liabilities resulting from mortgage loan sales |
|
| (9,156) |
|
| — |
|
| (12,084) |
|
| — |
|
|
| (5,409) |
| (2,928) |
| |
MSR and ESS recapture payable to PennyMac Mortgage Investment Trust |
|
| (1,456) |
|
| (2,526) |
|
| (2,745) |
|
| (4,424) |
| |||||||
Provision for losses relating to representations and warranties on loans sold |
|
| (1,748) |
|
| (1,204) |
|
| (3,243) |
|
| (2,055) |
|
|
| (2,082) |
| (1,495) |
| |
Change in fair value relating to loans and hedging derivatives held at period end: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Change in fair value relating to mortgage loans and hedging derivatives held at period end: |
|
|
|
|
|
| ||||||||||||||
Interest rate lock commitments |
|
| (26,654) |
|
| 15,453 |
|
| (4,663) |
|
| 22,989 |
|
|
| 28,112 |
| 21,991 |
| |
Mortgage loans |
|
| (12,120) |
|
| 6,830 |
|
| 81 |
|
| 14,658 |
|
|
| 19,848 |
| 12,201 |
| |
Hedging derivatives |
|
| 27,034 |
|
| (13,201) |
|
| 19,575 |
|
| (23,017) |
|
|
| 3,365 |
|
| (7,459) |
|
|
| $ | 83,955 |
| $ | 39,704 |
| $ | 159,333 |
| $ | 74,242 |
|
|
| 93,476 |
| 76,667 |
| |
Recapture payable to PennyMac Mortgage Investment Trust |
|
| (1,952) |
|
| (1,289) |
| |||||||||||||
|
| $ | 91,524 |
| $ | 75,378 |
| |||||||||||||
|
|
|
|
|
|
|
45
Note 18—17—Net Interest Expense
Net interest expense is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
From non-affiliates: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Short-term investments |
| $ | 933 |
| $ | 325 |
| $ | 1,445 |
| $ | 526 |
|
| $ | 172 |
| $ | 130 |
|
Mortgage loans held for sale at fair value |
|
| 11,718 |
|
| 5,927 |
|
| 20,139 |
|
| 9,836 |
|
|
| 10,481 |
| 8,421 |
| |
Custodial funds |
|
| 1,274 |
|
| 382 |
| |||||||||||||
|
|
| 12,651 |
|
| 6,252 |
|
| 21,584 |
|
| 10,362 |
|
|
| 11,927 |
| 8,933 |
| |
From PennyMac Mortgage Investment Trust—Note receivable |
|
| 533 |
|
| — |
|
| 533 |
|
| — |
| |||||||
From PennyMac Mortgage Investment Trust |
|
| 1,602 |
|
| — |
| |||||||||||||
|
|
| 13,184 |
|
| 6,252 |
|
| 22,117 |
|
| 10,362 |
|
|
| 13,529 |
|
| 8,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
To non-affiliates: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Mortgage loans sold under agreements to repurchase |
|
| 4,758 |
|
| 3,682 |
|
| 8,498 |
|
| 6,011 |
| |||||||
Mortgage loan participation and sale agreement |
|
| 651 |
|
| — |
|
| 1,239 |
|
| — |
| |||||||
Note payable |
|
| 2,463 |
|
| 861 |
|
| 4,098 |
|
| 1,520 |
| |||||||
Assets sold under agreements to repurchase |
|
| 8,660 |
| 3,809 |
| ||||||||||||||
Mortgage loan participation and sale agreements |
|
| 781 |
| 519 |
| ||||||||||||||
Notes payable |
|
| 1,598 |
| 1,635 |
| ||||||||||||||
Obligations under capital lease |
|
| 63 |
| — |
| ||||||||||||||
Interest shortfall on repayments of mortgage loans serviced for Agency securitizations |
|
| 1,676 |
|
| 375 |
|
| 3,200 |
|
| 593 |
|
|
| 2,105 |
| 1,524 |
| |
Interest on mortgage loan impound deposits |
|
| 983 |
|
| 675 |
|
| 1,573 |
|
| 993 |
|
|
| 765 |
|
| 590 |
|
|
|
| 10,531 |
|
| 5,593 |
|
| 18,608 |
|
| 9,117 |
|
|
| 13,972 |
| 8,077 |
| |
To PennyMac Mortgage Investment Trust—Excess servicing spread financing at fair value |
|
| 5,818 |
|
| 3,139 |
|
| 9,570 |
|
| 6,001 |
|
|
| 7,015 |
|
| 3,752 |
|
|
|
| 16,349 |
|
| 8,732 |
|
| 28,178 |
|
| 15,118 |
|
|
| 20,987 |
|
| 11,829 |
|
|
| $ | (3,165) |
| $ | (2,480) |
| $ | (6,061) |
| $ | (4,756) |
|
| $ | (7,458) |
| $ | (2,896) |
|
43
Note 19—18—Stock-based Compensation
The Company’s 2013 Equity Incentive Plan provides for grants of stock options, time-based and performance-based restricted stock units (“RSUs”), stock appreciation rights, performance units and stock grants. As of June 30, 2015, the Company has 1.9 million units available for future awards. The Company estimates the cost of the stock options, time-based RSUs and performance-based RSUs awarded with reference to the fair value of the Company’s Class A common stock on the date of the grants. Compensation costs are fixed, except for the performance-based RSUs, at the grant’s estimated fair value on the grant date as all grantees are employees of PennyMac or directors of the Company. Expense relating to grants is included in Compensation in the Company’s consolidated statements of income.
Following is a summary of the stock-based compensation expense by type of instrument awarded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
|
|
|
|
|
|
| ||||||||||||||
Performance-based RSUs |
| $ | 2,788 |
| $ | 1,871 |
| |||||||||||||
Stock options |
| $ | 1,516 |
| $ | 1,375 |
| $ | 2,996 |
| $ | 2,562 |
|
| 1,080 |
| 1,480 |
| ||
Performance-based RSUs |
|
| 2,474 |
|
| 1,112 |
|
| 4,345 |
|
| 1,874 |
| |||||||
Time-based RSUs |
|
| 602 |
|
| 437 |
|
| 1,137 |
|
| 873 |
|
| 484 |
| 535 |
| ||
Exchangeable PNMAC units |
|
| 25 |
|
| 62 |
| |||||||||||||
|
| $ | 4,592 |
| $ | 2,924 |
| $ | 8,478 |
| $ | 5,309 |
|
| $ | 4,377 |
| $ | 3,948 |
|
46
Following is a summary of equity awards:award activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Quarter ended June 30, 2015 |
|
| Quarter ended March 31, 2016 |
| ||||||||||||||
|
|
|
| Performance- |
| Time-based |
|
|
|
| Performance- |
| Time-based |
| ||||||
|
| Stock options |
| based RSUs |
| RSUs |
|
| Stock options |
| based RSUs |
| RSUs |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
March 31, 2015 |
|
| 1,881 |
|
| 2,398 |
|
| 289 |
| ||||||||||
December 31, 2015 |
| 1,845 |
|
| 2,351 |
|
| 271 |
| |||||||||||
Granted |
|
| — |
| — |
| 32 |
|
| 962 |
| 813 |
| 251 |
| |||||
Vested |
|
|
|
| — |
| (40) |
|
| — |
| — |
| (66) |
| |||||
Exercised |
|
| — |
| — |
| — |
|
| — |
| — |
| — |
| |||||
Forfeited or canceled |
|
| (12) |
|
| (17) |
|
| (5) |
|
|
| (8) |
|
| (478) |
|
| (2) |
|
June 30, 2015 |
|
| 1,869 |
|
| 2,381 |
|
| 276 |
| ||||||||||
March 31, 2016 |
|
| 2,799 |
|
| 2,686 |
|
| 454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Quarter ended June 30, 2014 |
|
| Quarter ended March 31, 2015 |
| ||||||||||||||
|
|
|
| Performance- |
| Time-based |
|
|
|
| Performance- |
| Time-based |
| ||||||
|
| Stock options |
| based RSUs |
| RSUs |
|
| Stock options |
| based RSUs |
| RSUs |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
March 31, 2014 |
|
| 1,169 |
|
| 1,102 |
|
| 198 |
| ||||||||||
December 31, 2014 |
| 1,167 |
|
| 1,257 |
|
| 202 |
| |||||||||||
Granted |
|
| — |
| — |
| 38 |
|
| 715 |
| 1,143 |
| 118 |
| |||||
Vested |
|
|
|
| — |
| (31) |
|
| — |
| — |
| (31) |
| |||||
Exercised |
| �� | — |
| — |
| — |
|
| — |
| — |
| — |
| |||||
Forfeited or canceled |
|
| (7) |
|
| (2) |
|
| (3) |
|
|
| (1) |
|
| (2) |
|
| — |
|
June 30, 2014 |
|
| 1,162 |
|
| 1,100 |
|
| 202 |
| ||||||||||
March 31, 2015 |
|
| 1,881 |
|
| 2,398 |
|
| 289 |
|
Hfs10
Note 19—Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
| Six months ended June 30, 2015 |
| |||||||
|
|
|
| Performance- |
| Time-based |
| |||
|
| Stock options |
| based RSUs |
| RSUs |
| |||
|
| (in thousands) |
| |||||||
December 31, 2014 |
|
| 1,167 |
|
| 1,257 |
|
| 202 |
|
Granted |
|
| 715 |
|
| 1,143 |
|
| 150 |
|
Vested (1) |
|
|
|
|
| — |
|
| (71) |
|
Expired or canceled |
|
| (13) |
|
| (19) |
|
| (5) |
|
June 30, 2015 |
|
| 1,869 |
|
| 2,381 |
|
| 276 |
|
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, |
| ||||
|
| 2016 |
| 2015 |
| ||
|
| (in thousands) |
| ||||
Cash paid for interest |
| $ | 21,781 |
| $ | 11,606 |
|
Cash paid for income taxes |
| $ | 25 |
| $ | 1,902 |
|
Non-cash investing activity: |
|
|
|
|
|
|
|
Mortgage servicing rights resulting from mortgage loan sales |
| $ | 100,782 |
| $ | 69,956 |
|
Mortgage servicing liabilities resulting from mortgage loan sales |
| $ | 5,409 |
| $ | 2,928 |
|
Mortgage servicing rights transferred to PMT pursuant to a recapture agreement |
| $ | 131 |
| $ | — |
|
Non-cash financing activity: |
|
|
|
|
|
|
|
Transfer of excess servicing spread pursuant to recapture agreement with PennyMac Mortgage Investment Trust |
| $ | 1,911 |
| $ | 1,246 |
|
Issuance of common stock in settlement of director fees |
| $ | 74 |
| $ | 74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six months ended June 30, 2014 |
| |||||||
|
|
|
| Performance- |
| Time-based |
| |||
|
| Stock options |
| based RSUs |
| RSUs |
| |||
|
| (in thousands) |
| |||||||
December 31, 2013 |
|
| 422 |
|
| 496 |
|
| 100 |
|
Granted |
|
| 753 |
|
| 614 |
|
| 138 |
|
Vested (1) |
|
|
|
|
| — |
|
| (31) |
|
Expired or canceled |
|
| (13) |
|
| (10) |
|
| (5) |
|
June 30, 2014 |
|
| 1,162 |
|
| 1,100 |
|
| 202 |
|
Hfs10
(1) Not applicable to a rollforward of stock options outstanding.
4744
Note 20—Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
| Six months ended June 30, |
| ||||
|
| 2015 |
| 2014 |
| ||
|
| (in thousands) |
| ||||
Cash paid for interest |
| $ | 27,231 |
| $ | 14,243 |
|
Cash paid for income taxes |
| $ | 1,907 |
| $ | 1,432 |
|
Non-cash investing activity: |
|
|
|
|
|
|
|
Mortgage servicing rights resulting from mortgage loan sales |
| $ | 198,960 |
| $ | 87,174 |
|
Mortgage servicing liabilities resulting from mortgage loan sales |
| $ | 12,084 |
| $ | — |
|
Non-cash financing activity: |
|
|
|
|
|
|
|
Transfer of excess servicing spread pursuant to recapture agreement with PennyMac Mortgage Investment Trust |
| $ | 2,565 |
| $ | 3,475 |
|
Issuance of common stock in settlement of director fees |
| $ | 149 |
| $ | 74 |
|
Note 21—Regulatory Net WorthCapital and Agency CapitalLiquidity Requirements
The Company, through PLS and PennyMac, is required to maintain specified levels of liquidity and equity to remain a seller/servicer in good standing with the Agencies. Such equity requirements generally are tied to the size of the Company’s loan servicing portfolio or loan origination volume.
The Agencies’ capital and liquidity requirements, the calculations of which are specified by each Agency, are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Agency capital |
| ||||||||||
|
| June 30, 2015 |
| December 31, 2014 |
| ||||||||
Agency–company subject to requirement |
| Balance (1) |
| Requirement |
| Balance (1) |
| Requirement |
| ||||
|
| (in thousands) |
| ||||||||||
Fannie Mae–PLS |
| $ | 697,123 |
| $ | 342,926 |
| $ | 583,686 |
| $ | 35,507 |
|
Freddie Mac–PLS |
| $ | 697,799 |
| $ | 4,386 |
| $ | 583,819 |
| $ | 3,721 |
|
Ginnie Mae–PLS |
| $ | 643,515 |
| $ | 177,531 |
| $ | 536,009 |
| $ | 111,457 |
|
Ginnie Mae–PennyMac |
| $ | 883,662 |
| $ | 213,037 |
| $ | 763,907 |
| $ | 133,748 |
|
HUD–PLS |
| $ | 643,515 |
| $ | 2,500 |
| $ | 539,844 |
| $ | 2,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Agency capital / liquidity |
| ||||||||||
|
| March 31, 2016 |
| December 31, 2015 |
| ||||||||
Agency–company subject to requirement |
| Balance (1) |
| Requirement |
| Balance (1) |
| Requirement |
| ||||
|
| (in thousands) |
| ||||||||||
Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae - PLS |
| $ | 956,699 |
| $ | 290,808 |
| $ | 835,157 |
| $ | 283,655 |
|
Freddie Mac - PLS |
| $ | 956,699 |
| $ | 290,808 |
| $ | 835,157 |
| $ | 283,655 |
|
Ginnie Mae - PLS |
| $ | 755,460 |
| $ | 379,361 |
| $ | 633,222 |
| $ | 386,732 |
|
Ginnie Mae - PennyMac |
| $ | 928,317 |
| $ | 417,297 |
| $ | 894,731 |
| $ | 425,405 |
|
HUD - PLS |
| $ | 755,460 |
| $ | 2,500 |
| $ | 633,222 |
| $ | 2,500 |
|
Liquidity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae / Freddie Mac - PLS |
| $ | 124,788 |
| $ | 39,811 |
| $ | 145,431 |
| $ | 38,936 |
|
Ginnie Mae - PLS |
| $ | 124,788 |
| $ | 97,619 |
| $ | 145,431 |
| $ | 95,868 |
|
(1) | Calculated in compliance with the respective Agency’s requirements. |
Noncompliance with the respective Agencies’ capital requirements can result in the respective Agency taking various remedial actions up to and including removing PennyMac’s ability to sell loans to and service loans on behalf of the respective Agency. PennyMac and PLS had Agency capital and liquidity in excess of the respective Agencies’ requirements at June 30, 2015.March 31, 2016.
Note 22—21—Commitments and Contingencies
Litigation
The business of the Company involves the collection of numerous accounts, as well as the validation of liens and compliance with various state and federal lending and servicing laws. Accordingly, the Company may be involved in proceedings, claims, and legal actions arising in the ordinary course of business. As of June 30, 2015,March 31, 2016, the Company was not involved in any legal proceedings, claims, or actions that in management’s view would be reasonably likely to have a material adverse effect on the Company.
48
Commitments to Fund and Sell Mortgage Loans
|
|
|
|
|
|
|
|
| |
|
| (in thousands) |
| |
Commitments to purchase mortgage loans from PennyMac Mortgage Investment Trust |
| $ |
| |
Commitments to fund mortgage loans |
|
|
| |
|
| $ |
| |
Commitments to sell mortgage loans |
| $ |
|
Note 23—22—Segments and Related Information
The Company operates in three segments: loan production, loan servicing and investment management.
Two of the segments are in the mortgage banking business: loan production and loan servicing. The loan production segment performs mortgage loan origination, acquisition and sale activities. The loan servicing segment performs servicing of newly originated mortgage loans, execution and management of (“early buyout loansloans” or “EBO”) and
45
servicing of mortgage loans sourced and managed by the investment management segment, including executing the loan resolution strategy identified by the investment management segment relating to distressed mortgage loans.
The investment management segment represents the activities of the Company’s investment manager, which include sourcing, performing diligence, bidding and closing investment asset acquisitions, managing correspondent lendingproduction activities for PMT and managing the acquired assets for the Advised Entities.
During the quarter ended June 30, 2015, the Company updated its method for allocating incentive compensation for executive management and shared services to each segment. Incentive compensation for executive management and shared services is now allocated to each segment based on its contribution to earnings rather than on usage of such executive management and shared services. The financial highlights below reflect the change in expense allocation method for the periods ended June 30, 2015. The financial highlights for the periods ended June 30, 2014 have not been restated. Following is a summary of the effect of the change in allocation on the segments’ expenses for the periods ended June 30, 2014:
|
|
|
|
|
|
|
|
|
| Quarter ended |
| Six months ended |
| ||
|
| June 30, 2014 |
| ||||
|
| (in thousands) |
| ||||
Increase (decrease) in segment expenses: |
|
|
|
|
|
|
|
Mortgage banking |
|
|
|
|
|
|
|
Production |
| $ | 453 |
| $ | 513 |
|
Servicing |
|
| 1,441 |
|
| 3,223 |
|
|
|
| 1,894 |
|
| 3,736 |
|
Investment management |
|
| (1,894) |
|
| (3,736) |
|
|
| $ | — |
| $ | — |
|
49
Financial highlights by segment are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Quarter ended June 30, 2015 |
|
| Quarter ended March 31, 2016 |
| ||||||||||||||||||||||||||
|
| Mortgage Banking |
| Investment |
|
|
|
|
| Mortgage Banking |
| Investment |
|
|
| |||||||||||||||||
|
| Production |
| Servicing |
| Total |
| Management |
| Total |
|
| Production |
| Servicing |
| Total |
| Management |
| Total |
| ||||||||||
|
| (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Revenues (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net gains (losses) on mortgage loans held for sale at fair value |
| $ | 86,377 |
| $ | (2,422) |
| $ | 83,955 |
| $ | — |
| $ | 83,955 |
| ||||||||||||||||
Loan origination fees |
|
| 24,421 |
|
| — |
|
| 24,421 |
|
| — |
|
| 24,421 |
| ||||||||||||||||
|
| (in thousands) |
| |||||||||||||||||||||||||||||
Revenues: (1) |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net gains on mortgage loans held for sale at fair value |
| $ | 78,214 |
| $ | 13,310 |
| $ | 91,524 |
| $ | — |
| $ | 91,524 |
| ||||||||||||||||
Mortgage loan origination fees |
| 22,434 |
| — |
| 22,434 |
| — |
| 22,434 |
| |||||||||||||||||||||
Fulfillment fees from PennyMac Mortgage Investment Trust |
|
| 15,333 |
|
| — |
|
| 15,333 |
|
| — |
|
| 15,333 |
|
| 12,935 |
| — |
| 12,935 |
| — |
| 12,935 |
| |||||
Net servicing fees |
|
| — |
|
| 68,549 |
|
| 68,549 |
|
| — |
|
| 68,549 |
| ||||||||||||||||
Net mortgage loan servicing fees |
| — |
| 17,519 |
| 17,519 |
| — |
| 17,519 |
| |||||||||||||||||||||
Management fees |
|
| — |
|
| — |
|
| — |
|
| 6,963 |
|
| 6,963 |
|
| — |
| — |
| — |
| 5,912 |
| 5,912 |
| |||||
Carried Interest from Investment Funds |
|
| — |
|
| — |
|
| — |
|
| 182 |
|
| 182 |
|
| — |
| — |
| — |
| 593 |
| 593 |
| |||||
Net interest income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Interest income |
|
| 10,200 |
|
| 2,984 |
|
| 13,184 |
|
| — |
|
| 13,184 |
|
| 8,377 |
| 5,151 |
| 13,528 |
| 1 |
| 13,529 |
| |||||
Interest expense |
|
| 5,200 |
|
| 11,149 |
|
| 16,349 |
|
| — |
|
| 16,349 |
|
|
| 4,883 |
|
| 16,144 |
|
| 21,027 |
|
| 10 |
|
| 21,037 |
|
|
|
| 5,000 |
|
| (8,165) |
|
| (3,165) |
|
| — |
|
| (3,165) |
|
| 3,494 |
| (10,993) |
| (7,499) |
| (9) |
| (7,508) |
| |||||
Other |
|
| 235 |
|
| 101 |
|
| 336 |
|
| (223) |
|
| 113 |
|
|
| 239 |
|
| (232) |
|
| 7 |
|
| (64) |
|
| (57) |
|
Total net revenue |
|
| 131,366 |
|
| 58,063 |
|
| 189,429 |
|
| 6,922 |
|
| 196,351 |
|
| 117,316 |
| 19,604 |
| 136,920 |
| 6,432 |
| 143,352 |
| |||||
Expenses |
|
| 55,085 |
|
| 60,508 |
|
| 115,593 |
|
| 5,959 |
|
| 121,552 |
|
|
| 48,908 |
|
| 59,066 |
|
| 107,974 |
|
| 5,288 |
|
| 113,262 |
|
Income (loss) before provision for income taxes and non-segment activities |
| 68,408 |
| (39,462) |
| 28,946 |
| 1,144 |
| 30,090 |
| |||||||||||||||||||||
Non-segment activities (2) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 49 |
| ||||||||||||||||
Income (loss) before provision for income taxes |
| $ | 76,281 |
| $ | (2,445) |
| $ | 73,836 |
| $ | 963 |
| $ | 74,799 |
|
| $ | 68,408 |
| $ | (39,462) |
| $ | 28,946 |
| $ | 1,144 |
| $ | 30,139 |
|
Segment assets at period end (2) |
| $ | 1,631,661 |
| $ | 1,671,371 |
| $ | 3,303,032 |
| $ | 88,050 |
| $ | 3,391,082 |
| ||||||||||||||||
Segment assets at period end (3) |
| $ | 1,751,604 |
| $ | 2,118,587 |
| $ | 3,870,191 |
| $ | 91,980 |
| $ | 3,962,171 |
|
(1) | All revenues are from external customers. |
(2) | Relates to parent Company interest expense eliminated in consolidation. |
(3) | Excludes parent Company assets, which consist primarily of deferred tax asset of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended June 30, 2014 |
| |||||||||||||
|
| Mortgage Banking |
| Investment |
|
|
|
| ||||||||
|
| Production |
| Servicing |
| Total |
| Management |
| Total |
| |||||
|
| (in thousands) |
| |||||||||||||
Revenues (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains on mortgage loans held for sale at fair value |
| $ | 38,101 |
| $ | 1,603 |
| $ | 39,704 |
| $ | — |
| $ | 39,704 |
|
Loan origination fees |
|
| 10,345 |
|
| — |
|
| 10,345 |
|
| — |
|
| 10,345 |
|
Fulfillment fees from PennyMac Mortgage Investment Trust |
|
| 12,433 |
|
| — |
|
| 12,433 |
|
| — |
|
| 12,433 |
|
Net servicing fees |
|
| — |
|
| 56,969 |
|
| 56,969 |
|
| — |
|
| 56,969 |
|
Management fees |
|
| — |
|
| — |
|
| — |
|
| 10,998 |
|
| 10,998 |
|
Carried Interest from Investment Funds |
|
| — |
|
| — |
|
| — |
|
| 1,834 |
|
| 1,834 |
|
Net interest income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| 5,697 |
|
| 554 |
|
| 6,251 |
|
| 1 |
|
| 6,252 |
|
Interest expense |
|
| 3,072 |
|
| 5,660 |
|
| 8,732 |
|
| — |
|
| 8,732 |
|
|
|
| 2,625 |
|
| (5,106) |
|
| (2,481) |
|
| 1 |
|
| (2,480) |
|
Other |
|
| 383 |
|
| 265 |
|
| 648 |
|
| (16) |
|
| 632 |
|
Total net revenue |
|
| 63,887 |
|
| 53,731 |
|
| 117,618 |
|
| 12,817 |
|
| 130,435 |
|
Expenses |
|
| 31,126 |
|
| 33,772 |
|
| 64,898 |
|
| 7,490 |
|
| 72,388 |
|
Income before provision for income taxes |
| $ | 32,761 |
| $ | 19,959 |
| $ | 52,720 |
| $ | 5,327 |
| $ | 58,047 |
|
Segment assets at period end (2) |
| $ | 1,117,090 |
| $ | 895,169 |
| $ | 2,012,259 |
| $ | 111,285 |
| $ | 2,123,544 |
|
|
|
|
|
5046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six months ended June 30, 2015 |
| |||||||||||||
|
| Mortgage Banking |
| Investment |
|
|
|
| ||||||||
|
| Production |
| Servicing |
| Total |
| Management |
| Total |
| |||||
|
| (in thousands) |
| |||||||||||||
Revenues (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) on mortgage loans held for sale at fair value |
| $ | 163,356 |
| $ | (4,023) |
| $ | 159,333 |
| $ | — |
| $ | 159,333 |
|
Loan origination fees |
|
| 41,103 |
|
| — |
|
| 41,103 |
|
| — |
|
| 41,103 |
|
Fulfillment fees from PennyMac Mortgage Investment Trust |
|
| 28,199 |
|
| — |
|
| 28,199 |
|
| — |
|
| 28,199 |
|
Net servicing fees |
|
| — |
|
| 95,325 |
|
| 95,325 |
|
| — |
|
| 95,325 |
|
Management fees |
|
| — |
|
| — |
|
| — |
|
| 15,452 |
|
| 15,452 |
|
Carried Interest from Investment Funds |
|
| — |
|
| — |
|
| — |
|
| 1,415 |
|
| 1,415 |
|
Net interest income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| 16,813 |
|
| 5,304 |
|
| 22,117 |
|
| — |
|
| 22,117 |
|
Interest expense |
|
| 8,841 |
|
| 19,337 |
|
| 28,178 |
|
| — |
|
| 28,178 |
|
|
|
| 7,972 |
|
| (14,033) |
|
| (6,061) |
|
| — |
|
| (6,061) |
|
Other |
|
| 1,148 |
|
| 719 |
|
| 1,867 |
|
| 32 |
|
| 1,899 |
|
Total net revenue |
|
| 241,778 |
|
| 77,988 |
|
| 319,766 |
|
| 16,899 |
|
| 336,665 |
|
Expenses |
|
| 98,065 |
|
| 98,550 |
|
| 196,615 |
|
| 12,013 |
|
| 208,628 |
|
Income (loss) before provision for income taxes |
| $ | 143,713 |
| $ | (20,562) |
| $ | 123,151 |
| $ | 4,886 |
| $ | 128,037 |
|
Segment assets at period end (2) |
| $ | 1,631,661 |
| $ | 1,671,371 |
| $ | 3,303,032 |
| $ | 88,050 |
| $ | 3,391,082 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, 2015 |
| |||||||||||||
|
| Mortgage Banking |
| Investment |
|
|
|
| ||||||||
|
| Production |
| Servicing |
| Total |
| Management |
| Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
| |||||||||||||
Revenues: (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains on mortgage loans held for sale at fair value |
| $ | 76,979 |
| $ | (1,601) |
| $ | 75,378 |
| $ | — |
| $ | 75,378 |
|
Mortgage loan origination fees |
|
| 16,682 |
|
| — |
|
| 16,682 |
|
| — |
|
| 16,682 |
|
Fulfillment fees from PennyMac Mortgage Investment Trust |
|
| 12,866 |
|
| — |
|
| 12,866 |
|
| — |
|
| 12,866 |
|
Net mortgage loan servicing fees |
|
| — |
|
| 26,776 |
|
| 26,776 |
|
| — |
|
| 26,776 |
|
Management fees |
|
| — |
|
| — |
|
| — |
|
| 8,489 |
|
| 8,489 |
|
Carried Interest from Investment Funds |
|
| — |
|
| — |
|
| — |
|
| 1,233 |
|
| 1,233 |
|
Net interest income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| 7,016 |
|
| 1,917 |
|
| 8,933 |
|
| — |
|
| 8,933 |
|
Interest expense |
|
| 3,641 |
|
| 8,188 |
|
| 11,829 |
|
| — |
|
| 11,829 |
|
|
|
| 3,375 |
|
| (6,271) |
|
| (2,896) |
|
| — |
|
| (2,896) |
|
Other |
|
| 913 |
|
| 618 |
|
| 1,531 |
|
| 255 |
|
| 1,786 |
|
Total net revenue |
|
| 110,815 |
|
| 19,522 |
|
| 130,337 |
|
| 9,977 |
|
| 140,314 |
|
Expenses |
|
| 40,132 |
|
| 38,067 |
|
| 78,199 |
|
| 8,877 |
|
| 87,076 |
|
Income before provision for income taxes |
| $ | 70,683 |
| $ | (18,545) |
| $ | 52,138 |
| $ | 1,100 |
| $ | 53,238 |
|
Segment assets at period end (2) |
| $ | 1,399,817 |
| $ | 1,322,301 |
| $ | 2,722,118 |
| $ | 92,093 |
| $ | 2,814,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| �� |
|
| Six months ended June 30, 2014 |
| |||||||||||||
|
| Mortgage Banking |
| Investment |
|
|
|
| ||||||||
|
| Production |
| Servicing |
| Total |
| Management |
| Total |
| |||||
|
| (in thousands) |
| |||||||||||||
Revenues (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains on mortgage loans held for sale at fair value |
| $ | 72,639 |
| $ | 1,603 |
| $ | 74,242 |
| $ | — |
| $ | 74,242 |
|
Loan origination fees |
|
| 17,225 |
|
| — |
|
| 17,225 |
|
| — |
|
| 17,225 |
|
Fulfillment fees from PennyMac Mortgage Investment Trust |
|
| 21,335 |
|
| — |
|
| 21,335 |
|
| — |
|
| 21,335 |
|
Net servicing fees |
|
| — |
|
| 100,733 |
|
| 100,733 |
|
| — |
|
| 100,733 |
|
Management fees |
|
| — |
|
| — |
|
| — |
|
| 21,107 |
|
| 21,107 |
|
Carried Interest from Investment Funds |
|
| — |
|
| — |
|
| — |
|
| 3,991 |
|
| 3,991 |
|
Net interest income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| 9,803 |
|
| 554 |
|
| 10,357 |
|
| 5 |
|
| 10,362 |
|
Interest expense |
|
| 5,401 |
|
| 9,717 |
|
| 15,118 |
|
| — |
|
| 15,118 |
|
|
|
| 4,402 |
|
| (9,163) |
|
| (4,761) |
|
| 5 |
|
| (4,756) |
|
Other |
|
| 1,026 |
|
| 784 |
|
| 1,810 |
|
| 240 |
|
| 2,050 |
|
Total net revenue |
|
| 116,627 |
|
| 93,957 |
|
| 210,584 |
|
| 25,343 |
|
| 235,927 |
|
Expenses |
|
| 57,912 |
|
| 56,885 |
|
| 114,797 |
|
| 14,022 |
|
| 128,819 |
|
Income before provision for income taxes |
| $ | 58,715 |
| $ | 37,072 |
| $ | 95,787 |
| $ | 11,321 |
| $ | 107,108 |
|
Segment assets at period end (2) |
| $ | 1,117,090 |
| $ | 895,169 |
| $ | 2,012,259 |
| $ | 111,285 |
| $ | 2,123,544 |
|
(1)All revenues are from external customers.
(2)Excludes parent Company assets, which consist primarily of deferred tax assets of $55.8$42.1 million.
51
Note 24—23—Recently Issued Accounting Pronouncements
In April of February 2015,, the FASB issued ASU 2015-03. The amendments in this 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU require2015-02”). ASU 2015-02 affects reporting entities that debt issuance costsare required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership and affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU.
party relationships. ASU 2015-03 should be applied on a retrospective basis and2015-02 is effective for the Company for financial statements issued for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. As a result ofThe Company adopted ASU 2015-02 effective January 1, 2016. The adoption of ASU 2015-03, the Company reclassified $439,000 in debt issuance costs from Other assets to Mortgage loans sold under agreements to repurchase. There were2015-02 had no changes toeffect on the Company’s consolidated statementsfinancial statements.
On January 5, 2016, the FASB issued ASU No. 2016-01, Financial Instruments–Overall: Recognition and Measurement of income or consolidated statements of cash flows as a result ofFinancial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 affects the Company’saccounting for equity investments, financial liabilities under the fair value option, the presentation and disclosure requirements for financial instruments, and the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities.
The classification and measurement guidance will be effective for the Company in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years with early adoption permitted for certain provisions. Company is currently assessing the potential effect that the adoption of ASU 2015-03.2016-01 will have on its consolidated financial statements.
On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification.
Note 25—Subsequent Events
47
ASU 2016-02 is expected to impact the Company’s consolidated financial statements as the Company has certain lease arrangements for which it is the lessee. ASU 2016-02 supersedes previous leasing standards. ASU 2016-02 is effective for the Company for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently assessing the potential impact that the adoption of ASU 2016-02 will have on its consolidated financial statements.
Management has evaluated all events andIn March of 2016, The FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of the accounting for share-based payment award transactions, through the date the Company issued these consolidated financial statements. During this period:including:
· |
|
· |
|
· |
|
· |
|
· | Establishes GAAP for the classification of employee taxes paid when an employer withholds shares for tax withholding purposes. Cash paid by an employer when directly withholding shares for tax- withholding purposes should be classified as a financing activity. This guidance establishes GAAP related to |
ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any organization in any interim or annual period. The Company is currently assessing the potential effect that the adoption of ASU 2016-09 will have on its consolidated financial statements.
Note 24—Subsequent Events
On May 3, 2016, the Company through its subsidiary, Private National Mortgage Acceptance Company, LLC (“PennyMac”), entered into Schedule Number 002 (the “Schedule”) pursuant to that certain Master Lease Agreement, dated as of December 9, 2015 (the “Master Lease”), with Banc of America Leasing & Capital, LLC (“BALC”). Pursuant to the terms of the Master Lease, the Company may borrow funds from BALC on an uncommitted basis for the purpose of financing equipment and/or leasehold improvements described and on the terms set forth in schedules from time to time. The Master Lease is guaranteed in full by the Company’s indirect controlled subsidiary, PennyMac Loan Services, LLC. Pursuant to the Schedule, PennyMac is financing equipment with an aggregate cost of approximately $12.7 million. The Schedule has a three-year term and interim rent and base rent is payable pursuant to the terms thereof. At
5248
the expiration of the three-year term, the Company is obligated to purchase the leased equipment on an as-is, where-is basis for a nominal amount. PennyMac has elected to treat the Master Lease as a capital lease obligation.
49
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement Regarding Forward-Looking Statements
The following discussion and analysis of financial condition and results of operations should be read with the consolidated financial statements and the related notes of PennyMac Financial Services, Inc. (“PFSI”) included within this Quarterly Report on Form 10-Q.
Statements contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different from those expressed or implied in such statements. You can identify these forward-looking statements by words such as “may,” “will,” “should,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan” and other similar expressions. You should consider our forward-looking statements in light of the risks discussed under the heading “Risk Factors,” as well as our consolidated financial statements, related notes, and the other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and our other filings with the United States Securities and Exchange Commission (“SEC”). The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date hereof and we assume no obligation to update or supplement any forward-looking statements.
Overview
The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our consolidated results of operations and financial condition. Unless the context indicates otherwise, references in this Quarterly Report on Form 10-Q to the words “we,” “us,” “our” and the “Company” refer to PFSI.
Our Company
We are a specialty financial services firm with a comprehensive mortgage platform and integrated business primarily focused on the production and servicing of U.S. residential mortgage loans (activities which we refer to as mortgage banking) and the management of investments related to the U.S. mortgage market. We believe that our operating capabilities, specialized expertise, access to long-term investment capital, and our management’s experience across all aspects of the mortgage business will allow us to profitably grow these activities and capitalize on other related opportunities as they arise in the future.
We operate and control all of the business and affairs of Private National Mortgage Acceptance Company, LLC (“PennyMac”) and are its sole managing member. PennyMac was founded in 2008 by members of our executive leadership team and two strategic partners, BlackRock Mortgage Ventures, LLC and HC Partners, LLC, formerly known as Highfields Capital Investments, LLC, together with its affiliates.
We conduct our business in three segments: loan production, loan servicing (together, these two activities comprise our mortgage banking activities) and investment management. Our principal mortgage banking subsidiary, PennyMac Loan Services, LLC (“PLS”), is a non-bank producer and servicer of mortgage loans in the United States. PLS is a seller/servicer for the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), each of which is a government-sponsored entity (“GSE”). It is also an approved issuer of securities guaranteed by the Government National Mortgage Association (“Ginnie Mae”), a lender of the Federal Housing Administration (“FHA”), a lender/servicer of the Veterans Administration (“VA”) and the U.S. Department of Agriculture (“USDA”), and a servicer for the Home Affordable Modification Program (“HAMP”). We refer to each of Fannie Mae, Freddie Mac, Ginnie Mae, FHA, VA and USDA as an “Agency” and collectively as the “Agencies.” PLS is able to service loans in all 50 states, the District of Columbia, Guam and the U.S. Virgin Islands, and originate loans in 49 states and the District of Columbia, either because PLS is properly licensed in a particular jurisdiction or exempt or otherwise not required to be licensed in that jurisdiction.
Our investment management subsidiary, PNMAC Capital Management, LLC (“PCM”), is a Delaware limited liability company registered with the Securities and Exchange Commission (“SEC”) as an SEC registered investment adviser.adviser under the Investment Advisors Act of 1940, as amended, PCM manages PennyMac Mortgage Investment Trust (“PMT”), a mortgage real estate investment trust, listed on the New York Stock Exchange under the ticker symbol PMT. PCM also managesPMT, PNMAC
50
Mortgage Opportunity Fund, LLC and PNMAC Mortgage Opportunity Fund, L.P.,LP, both registered under the Investment Company Act of 1940 (“Investment Company Act”), as amended, an affiliate of these fundsFunds and PNMAC Mortgage Opportunity Fund Investors, LLC. We refer to these funds collectively as our “Investment Funds” and, together with PMT, as our “Advised Entities.”
Mortgage Banking
Loan Production
Mortgage loans produced through ourOur loan production segment are sourcedsources mortgage loans through two channels: correspondent production and consumer direct lending.
53
In our correspondent production channel, we manage, on behalf of PMT and for our own account, the acquisition of newly originated, prime credit quality, first-lien residential mortgage loans that have been underwritten to investor guidelines. PMT acquires, from approved correspondent sellers, newly originated mortgage loans, including both conventional and government-insured or guaranteed residential mortgage loans that qualify for inclusion in securitizations that are guaranteed by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and the Government National Mortgage Association (“Ginnie Mae”). We refer to each of Fannie Mae, Freddie Mac and Ginnie Mae as an “Agency” and collectively as the “Agencies”.Agencies. For conventional mortgage loans, we perform fulfillment activities for PMT and earn a fulfillment fee for each mortgage loan purchased by PMT. In the case of government-insured or guaranteedgovernment insured mortgage loans, we purchase them from PMT at PMT’s cost plus a sourcing fee and fulfill them for our own account.
Through our consumer direct lending channel, we originate new prime credit quality, first-lien residential conventional and government-insured or guaranteed mortgage loans on a national basis to allow customers to purchase or refinance their homes. OurThe consumer direct model relies on the Internet and call center-based staff to acquire and interact with customers across the country. We do not have a “brick and mortar” branch network and have been developing our consumer direct operations with call centers strategically positioned across the United States.
For mortgage loans originated through our consumer direct lending channel, we conduct our own fulfillment, earn interest income and gains or losses during the holding period and upon the sale or securitization of these mortgage loans, and retain the associated mortgage servicing rights (“MSRs”)MSRs (subject to sharing with PMT a portion of such MSRs or cash with respect to certain consumer direct originated mortgage loans that refinance mortgage loans for which the related MSRsmortgage servicing rights (“MSRs”) or excess servicing spread (“ESS”) was held by PMT).
Our loan production activity is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||
|
| (in thousands) |
|
| (in thousands) | |||||||||||||||
Unpaid principal balance of mortgage loans purchased and originated for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Government-insured or guaranteed mortgage loans acquired from PennyMac Mortgage Investment Trust |
| $ | 8,082,764 |
| $ | 3,748,874 |
| $ | 12,818,138 |
| $ | 6,722,951 |
|
| $ | 6,495,722 |
| $ | 4,735,374 |
|
Mortgage loans sourced through our consumer direct channel |
|
| 1,138,269 |
|
| 403,491 |
|
| 2,035,267 |
|
| 717,279 |
|
|
| 1,206,983 |
|
| 896,998 |
|
|
| $ | 9,221,033 |
| $ | 4,152,365 |
| $ | 14,853,405 |
| $ | 7,440,230 |
|
| $ | 7,702,705 |
| $ | 5,632,372 |
|
Unpaid principal balance of mortgage loans fulfilled for PennyMac Mortgage Investment Trust |
| $ | 3,579,078 |
| $ | 2,991,764 |
| $ | 6,469,210 |
| $ | 4,911,342 |
|
| $ | 3,259,363 |
| $ | 2,890,132 |
|
Loan Servicing
Our mortgage loan servicing segment performs mortgage loan administration, collection, and default management activities, including the collection and remittance of mortgage loan payments; response to customer inquiries; accounting for principal and interest; holding custodial (impounded) funds for the payment of property taxes and insurance premiums; counseling delinquent mortgagors; and supervising foreclosures and property dispositions. We service a diverse portfolio of mortgage loans both as the owner of MSRs and on behalf of other MSR or mortgage owners. We provide servicing for conventional and government-insured or guaranteed mortgage loans (“prime servicing”), as well as servicing for distressed mortgage loans that have been acquired as investments by our Advised Entities (“special servicing”). As of June 30, 2015,March 31, 2016, the portfolio of mortgage loans that we serviced or subserviced totaled approximately $136.2$164.9 billion in unpaid principal balance (“UPB”).
51
Investment Management
We are an investment manager through our subsidiary, PCM. PCM currently manages PMT and the Investment Funds. PMT and the Investment FundsAdvised Entities. The Advised Entities had combined net assets of approximately $1.8$1.6 billion as of June 30, 2015.March 31, 2016. For these activities, we earn management fees as a percentage of net assets and incentive compensation based on investmentthe entities’ performance.
54
Observations on Current Market Conditions
Our business is affected by macroeconomic conditions in the United States, including economic growth, unemployment rates, the residential housing market and interest rate levels and expectations. The U.S. economy continues to grow, albeit at a slower pace, as reflected in recent economic data. During the secondfirst quarter of 2015,2016, real U.S. gross domestic product expanded at an annual rate of 0.2%0.5% compared to a 4.6% increase for the second quarter of 2014 and a 0.2% decrease0.6% for the first quarter of 2015 and 1.4% for the fourth quarter of 2015. The national seasonally adjusted unemployment rate was 5.3%5.0% at June 30,March 31, 2016 compared to 5.0% at December 31, 2015 compared toand 5.5% at March 31, 2015 and 6.1% at June 30, 2014.2015. Delinquency rates on residential real estate loans remain elevated compared to historical rates, but have been steadily declining. As reported by the Federal Reserve Bank, during the firstfourth quarter of 2015, the delinquency rate on residential real estate loans held by commercial banks was 6.1%5.1%, a reduction from 7.8%6.1% during the first quarter of 2014.2015.
Residential real estate activity appears to be improving.expanding. The seasonally adjusted annual rate of existing home sales for June 2015March 2016 was 9.6%1.5% higher than for June 2014,March 2015, and the national median existing home price for all housing types was $236,400,$222,700, a 6.5%5.7% increase from June 2014.March 2015 (Source: National Association of Realtors®). On a national level, foreclosure filings during the second quarter of 2015 increasedMarch 2016 decreased by 9%7.8% as compared to the second quarter of 2014. ForeclosureMarch 2015. However, foreclosure activity is expected to remain above historical average levels through 20152016 and beyond.
Changes in fixed-rate residential mortgage loan interest rates generally follow changes in long-term U.S. Treasury yields. Thirty-year fixed mortgage interest rates ranged from a low of 3.65%3.62% to a high of 4.09%3.97% during the secondfirst quarter of 20152016 while during the secondfirst quarter of 2014,2015, thirty-year fixed mortgage interest rates ranged from a low of 4.12%3.59% to a high of 4.41%3.86% (Source: the Federal Home Loan Mortgage Corporation’sFreddie Mac’s Weekly Primary Mortgage Market Survey). Interest rates generally declined in the first quarter of 2016 and generally increased in the first of 2015. This impacted MSR and other interest rate sensitive asset valuations and production activity.
Mortgage lenders originated an estimated $445$380 billion of home loans during the secondfirst quarter of 2015, up 150%2016, down 6.2% from the second quarter of 2014. Although the low interest rate environment in the first quarter of 2015 led to an increase in the volume of borrowers seeking to refinance, we expect purchase-money loans to constitute a greater proportion of2015. Total mortgage originations in the future. Mortgage originations are forecast to remain relatively flat,be somewhat lower in 2016 versus 2015, with current industry estimates for 2015 totaling $1.42016 averaging $1.6 trillion (Source: average of Fannie Mae, Freddie Mac and Mortgage Bankers Association forecasts).
We expect effortsbelieve there is long-term market opportunity for the production of non-Agency jumbo mortgage loans. However, most new jumbo mortgage loans are either being originated or purchased by banks, and the current market for jumbo mortgage loan securitizations is limited, as evidenced by weak demand and inconsistent pricing observed over the past twelve months. Prime jumbo MBS securitizations totaled $1.0 billion in UPB during the first quarter of 2016, a decrease from $4.2 billion during the first quarter of 2015. During the three months ended March 31, 2016, we produced approximately $7 million in UPB of jumbo loans compared to expand GSE product offerings (including 97% loan-to-value loans) and a recent reduction$62 million in Federal Housing Administration mortgage insurance premiums to make mortgage credit more affordable. In our correspondent production business, we continue to see increased competition from new and existing market participants.UPB of jumbo loans produced during the three months ended March 31, 2015.
In our capacity as an investment manager, we continue to see a robust market for distressed residential mortgage loans (sales of loan pools that consist of either non-performing loans, troubled but performing loans or a combination thereof) offered for sale. During 2014, the pool of sellers expanded to include new programmatic sellers, such as HUD and Freddie Mac. During the second quarter of 2015, we reviewed 30 mortgage loan pools totaling approximately $9.8 billion in UPB. This compares to our review of 57 mortgage loan pools totaling approximately $18.2 billion in UPB during the second quarter of 2014. We acquired for PMT distressed loans with fair values totaling $242 million and $261 million during the quarter ended June 30, 2015 and 2014, respectively. While we expect to see a continued supply of distressed whole loans,loans; however, we believe the pricing for recent transactions has been less attractive for buyers. We remain patient and selective for PMT in making new investments in distressed wholemortgage loans and we continue to monitor the market to assess best execution opportunities for distressed portfolio investments held by the Advised Entities.
5552
Results of Operations
Our results of operations are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Revenues: |
|
|
|
|
|
| ||||||||||||||
Net gains on mortgage loans held for sale at fair value |
| $ | 83,955 |
| $ | 39,704 |
| $ | 159,333 |
| $ | 74,242 |
|
| $ | 91,524 |
| $ | 75,378 |
|
Loan origination fees |
|
| 24,421 |
|
| 10,345 |
|
| 41,103 |
|
| 17,225 |
| |||||||
Mortgage loan origination fees |
|
| 22,434 |
| 16,682 |
| ||||||||||||||
Fulfillment fees from PennyMac Mortgage Investment Trust |
|
| 15,333 |
|
| 12,433 |
|
| 28,199 |
|
| 21,335 |
|
|
| 12,935 |
| 12,866 |
| |
Net loan servicing fees |
|
| 68,549 |
|
| 56,969 |
|
| 95,325 |
|
| 100,733 |
| |||||||
Net mortgage loan servicing fees |
|
| 17,519 |
| 26,776 |
| ||||||||||||||
Management fees |
|
| 6,963 |
|
| 10,998 |
|
| 15,452 |
|
| 21,107 |
|
|
| 5,912 |
| 8,489 |
| |
Carried Interest from Investment Funds |
|
| 182 |
|
| 1,834 |
|
| 1,415 |
|
| 3,991 |
|
|
| 593 |
| 1,233 |
| |
Net interest expense |
|
| (3,165) |
|
| (2,480) |
|
| (6,061) |
|
| (4,756) |
|
|
| (7,458) |
| (2,896) |
| |
Other |
|
| 113 |
|
| 632 |
|
| 1,899 |
|
| 2,050 |
|
|
| (58) |
|
| 1,786 |
|
Total net revenue |
|
| 196,351 |
|
| 130,435 |
|
| 336,665 |
|
| 235,927 |
|
|
| 143,401 |
| 140,314 |
| |
Total expenses |
|
| 121,552 |
|
| 72,388 |
|
| 208,628 |
|
| 128,819 |
| |||||||
Expenses |
|
| 113,262 |
| 87,076 |
| ||||||||||||||
Provision for income taxes |
|
| 8,619 |
|
| 6,630 |
|
| 14,733 |
|
| 12,153 |
|
|
| 3,596 |
|
| 6,114 |
|
Net income |
| $ | 66,180 |
| $ | 51,417 |
| $ | 113,304 |
| $ | 94,955 |
|
| $ | 26,543 |
| $ | 47,124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Income before provision for income taxes by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Mortgage banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Production |
| $ | 76,281 |
| $ | 32,761 |
| $ | 143,713 |
| $ | 58,715 |
|
| $ | 68,408 |
| $ | 70,683 |
|
Servicing |
|
| (2,445) |
|
| 19,959 |
|
| (20,562) |
|
| 37,072 |
|
|
| (39,462) |
|
| (18,545) |
|
Total mortgage banking |
|
| 73,836 |
|
| 52,720 |
|
| 123,151 |
|
| 95,787 |
|
|
| 28,946 |
| 52,138 |
| |
Investment management |
|
| 963 |
|
| 5,327 |
|
| 4,886 |
|
| 11,321 |
|
|
| 1,144 |
| 1,100 |
| |
Non-segment activities (1) |
|
| 49 |
|
| — |
| |||||||||||||
|
| $ | 74,799 |
| $ | 58,047 |
| $ | 128,037 |
| $ | 107,108 |
|
| $ | 30,139 |
| $ | 53,238 |
|
During the period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Interest rate lock commitments issued |
| $ | 11,588,488 |
| $ | 5,156,744 |
| $ | 19,381,813 |
| $ | 9,081,337 |
|
| $ | 8,740,418 |
| $ | 7,793,325 |
|
Fair value of mortgage loans purchased and originated for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Government-insured or guaranteed loans acquired from PennyMac Mortgage Investment Trust |
| $ | 8,524,895 |
| $ | 3,955,329 |
| $ | 13,514,733 |
| $ | 7,085,859 |
|
| $ | 6,850,276 |
| $ | 4,989,838 |
|
Mortgage loans originated through consumer direct channel |
|
| 1,148,435 |
|
| 410,125 |
|
| 2,052,648 |
|
| 728,430 |
|
|
| 1,218,163 |
|
| 904,213 |
|
Commercial real estate |
|
| 4,600 |
|
| — |
| |||||||||||||
|
| $ | 9,673,330 |
| $ | 4,365,454 |
| $ | 15,567,381 |
| $ | 7,814,289 |
|
| $ | 8,073,039 |
| $ | 5,894,051 |
|
Unpaid principal balance of mortgage loans fulfilled for PennyMac Mortgage Investment Trust |
| $ | 3,579,078 |
| $ | 2,991,764 |
| $ | 6,469,210 |
| $ | 4,911,342 |
|
| $ | 3,259,363 |
| $ | 2,890,132 |
|
At period end: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Unpaid principal balance of mortgage loan servicing portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Owned |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Owned: |
|
|
|
|
|
| ||||||||||||||
Mortgage servicing rights |
| $ | 90,681,412 |
| $ | 57,051,424 |
|
|
|
|
|
|
|
| $ | 112,836,878 |
| $ | 71,985,989 |
|
Mortgage servicing liabilities |
|
| 816,424 |
|
| — |
|
|
|
|
|
|
|
|
| 926,756 |
|
| 421,452 |
|
Mortgage loans held for sale |
|
| 1,526,779 |
|
| 959,014 |
|
|
|
|
|
|
|
|
| 1,561,006 |
|
| 1,288,744 |
|
|
|
| 93,024,615 |
|
| 58,010,438 |
|
|
|
|
|
|
|
|
| 115,324,640 |
|
| 73,696,185 |
|
Subserviced |
|
| 43,145,707 |
|
| 35,554,830 |
|
|
|
|
|
|
|
|
| 49,581,955 |
|
| 41,542,426 |
|
|
| $ | 136,170,322 |
| $ | 93,565,268 |
|
|
|
|
|
|
|
| $ | 164,906,595 |
| $ | 115,238,611 |
|
Net assets of Advised Entities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
PennyMac Mortgage Investment Trust |
| $ | 1,525,297 |
| $ | 1,577,160 |
|
|
|
|
|
|
|
| $ | 1,414,503 |
| $ | 1,542,159 |
|
Investment Funds |
|
| 316,383 |
|
| 565,926 |
|
|
|
|
|
|
|
|
| 207,706 |
|
| 413,155 |
|
|
| $ | 1,841,680 |
| $ | 2,143,086 |
|
|
|
|
|
|
|
| $ | 1,622,209 |
| $ | 1,955,314 |
|
(1) | Relates to parent Company interest expense eliminated in consolidation. |
Net income increased $14.8 million and $18.3decreased $20.6 million during the quarter and six months ended June 30, 2015, respectively,March 31, 2016, when compared to the same periodsperiod in 2014.2015. The increase in net income during the quarter and six months ended June 30, 2015 was primarily due to increased net gains on mortgage loans at fair value, loan servicing and origination fees, partially offset by increased expenses incurred to accommodate the growth of our mortgage banking segments.
Net income increased $3.2 million and decreased $8.5 million during the quarter and six months ended June 30, 2014, respectively, when compared to the same periods in 2013. The increasedecrease in net income during the quarter ended June 30, 2014March 31, 2016 was primarily due to increased loan servicing fee income resulting from the growtha decrease in ournet mortgage loan servicing portfolio. Thefees caused by a significant decrease in fair value and increase in impairment of our MSRs, net income during the six months ended June 30, 2014 was primarily due to the effects of the contraction in the mortgage loan origination market. Our mortgage loan production decreased by $1.1 billion during the six months ended June 30, 2014 when compared to the same period in 2013.ESS and hedging gains.
5653
Net Gains on Mortgage Loans Held for Sale at Fair Value
During the quarter and six months ended June 30, 2015,March 31, 2016, we recognized net gains on mortgage loans held for sale at fair value totaling $84.0$91.5 million, and $159.3an increase of $16.1 million respectively, increases of $44.3 million and $85.1 million, respectively, from the same periodsperiod in 2014.2015. The increase during these periods was due to growth in the volume of mortgage loans that we purchasedcommitted to purchase or originate and originated and subsequently sold along withan improvement in production margins.
During the quarter and six months ended June 30, 2014, we recognized net gains on mortgage loans held for sale at fair value totaling $39.7 million and $74.2 million, respectively, decreasesmargins resulting from an increase in volume of $3.0 million and $8.4 million, respectively, from the same periods in 2013.
In addition to more favorable market conditions, we have been able to improve our margins through growth in our consumer direct mortgage loan activities,channel, which generally produceearns higher margins than our correspondent activities.production channel.
Most of our mortgage loan production currently is centered in government-insured or guaranteed loans. Over recent periods, the margins on correspondent government-insured or guaranteed mortgage loans have tended to be higher than those on conventional correspondent production. Government-insured or guaranteed mortgage lending is not as competitive as conventional conforming mortgage lending due to the added complexity involved in the origination and servicing of government-insured or guaranteed mortgage loans. We source the majority of our government-insured or guaranteed mortgage loan production through PMT. PMT is not approved by Ginnie Mae as an issuer of Ginnie Mae-guaranteed securities which are backed by government-insured or guaranteed mortgage loans. We purchase the government-insured or guaranteed mortgage loans that PMT acquires through its correspondent lending activities and pay PMT a sourcing fee of three basis points on the UPB of such mortgage loans.
Our net gains on mortgage loans held for sale at fair value include both cash and non-cash elements. We receive proceeds on sale that include both cash and our estimate of the fair value of the MSRs.MSRs and mortgage servicing liabilities created and incurred in such transactions. During the quarterquarters ended March 31, 2016 and six months ended June 30, 2015, the net gains on mortgage loans held for sale at fair value included $119.8$95.4 million and $186.9$67.0 million, respectively, in fair value of MSRs received as part of proceeds on sales, net of mortgage servicing liabilities incurred. We also recognize a liability for our estimate of the losses we expect to incur in the future as a result of claims made against us in connection with the representations and warranties that we made in the loan sales transactions. During the quarterquarters ended March 31, 2016 and six months ended June 30, 2015, we included provisions for losses relating to the representations and warranties we provided totaling $1.7$2.1 million and $3.2$1.5 million, respectively, in our Net gains on mortgage loans held for sale at fair value.
5754
Our net gains on mortgage loans held for sale are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Cash (loss) gain: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Sales proceeds |
| $ | (38,944) |
| $ | 10,241 |
| $ | (36,214) |
| $ | 14,722 |
| |||||||
Mortgage loans |
| $ | 21,401 |
| $ | 2,730 |
| |||||||||||||
Hedging activities |
|
| 17,995 |
|
| (25,549) |
|
| (334) |
|
| (35,805) |
|
|
| (72,541) |
|
| (18,329) |
|
|
|
| (20,949) |
|
| (15,308) |
|
| (36,548) |
|
| (21,083) |
|
|
| (51,140) |
|
| (15,599) |
|
Non-cash gain: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Mortgage servicing rights resulting from mortgage loan sales |
|
| 129,004 |
|
| 49,660 |
|
| 198,960 |
|
| 87,174 |
|
|
| 100,782 |
| 69,956 |
| |
Mortgage servicing liabilities resulting from mortgage loan sales |
|
| (9,156) |
|
| — |
|
| (12,084) |
|
| — |
|
|
| (5,409) |
| (2,928) |
| |
MSR and ESS recapture payable to PennyMac Mortgage Investment Trust |
|
| (1,456) |
|
| (2,526) |
|
| (2,745) |
|
| (4,424) |
| |||||||
Provision for losses relating to representations and warranties on loans sold |
|
| (1,748) |
|
| (1,204) |
|
| (3,243) |
|
| (2,055) |
| |||||||
Change in fair value relating to loans and hedging derivatives held at period end: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Provision for losses relating to representations and warranties on mortgage loans sold |
|
| (2,082) |
| (1,495) |
| ||||||||||||||
Change in fair value relating to mortgage loans and derivative financial instruments outstanding at period end: |
|
|
|
|
|
| ||||||||||||||
Interest rate lock commitments |
|
| (26,654) |
|
| 15,453 |
|
| (4,663) |
|
| 22,989 |
|
|
| 28,112 |
| 21,991 |
| |
Mortgage loans |
|
| (12,120) |
|
| 6,830 |
|
| 81 |
|
| 14,658 |
|
|
| 19,848 |
| 12,201 |
| |
Hedging derivatives |
|
| 27,034 |
|
| (13,201) |
|
| 19,575 |
|
| (23,017) |
|
|
| 3,365 |
|
| (7,459) |
|
|
|
| 93,476 |
|
| 76,667 |
| |||||||||||||
Recapture payable to PennyMac Mortgage Investment Trust |
|
| (1,952) |
|
| (1,289) |
| |||||||||||||
|
| $ | 83,955 |
| $ | 39,704 |
| $ | 159,333 |
| $ | 74,242 |
|
| $ | 91,524 |
| $ | 75,378 |
|
During the period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Unpaid principal balance of mortgage loans sold |
| $ | 9,416,468 |
| $ | 4,510,460 |
| $ | 14,925,336 |
| $ | 7,654,026 |
|
| $ | 7,615,057 |
| $ | 5,508,868 |
|
Interest rate lock commitments issued: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Conventional mortgage loans |
| $ | 9,936,246 |
| $ | 4,397,933 |
| $ | 15,945,804 |
| $ | 4,518,848 |
|
| $ | 547,317 |
| $ | 6,009,558 |
|
Government-insured or guaranteed loans |
|
| 1,652,242 |
|
| 758,811 |
|
| 3,436,009 |
|
| 4,562,489 |
| |||||||
Government-insured or guaranteed mortgage loans |
|
| 8,193,101 |
|
| 1,783,767 |
| |||||||||||||
|
| $ | 11,588,488 |
| $ | 5,156,744 |
| $ | 19,381,813 |
| $ | 9,081,337 |
|
| $ | 8,740,418 |
| $ | 7,793,325 |
|
Period end: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Mortgage loans held for sale at fair value |
| $ | 1,594,262 |
| $ | 1,000,415 |
|
|
|
|
|
|
|
| $ | 1,653,963 |
| $ | 1,353,944 |
|
Commitments to fund and purchase mortgage loans |
| $ | 4,296,134 |
| $ | 1,754,845 |
|
|
|
|
|
|
|
| $ | 3,477,022 |
| $ | 3,123,645 |
|
Provision for Losses on Representations and Warranties
We record our estimate of the losses that we expect to incur in the future as a result of claims against us in connection with the representations and warranties providedwe provide to the purchasers and insurers of the mortgage loans we soldsell in our Net gains on sale of mortgage loans held for sale at fair value. Our agreements with the Agenciespurchasers and insurers include representations and warranties related to the mortgage loans we sell to the Agencies.sell. The representations and warranties require adherence to Agencypurchaser and insurer origination and underwriting guidelines, including but not limited to the validity of the lien securing the mortgage loan, property eligibility, borrower credit, income and asset requirements, and compliance with applicable federal, state and local law.
In the event of a breach of our representations and warranties, we may be required to either repurchase the mortgage loans with the identified defects or indemnify the investorpurchaser or insurer. In such cases, we bear any subsequent credit loss on the mortgage loans. Our credit loss may be reduced by any recourse we have to correspondent lenders that sold such mortgage loans and breached similar or other representations and warranties. In such event, we have the right to seek a recovery of related repurchase losses from that correspondent lender.
The method used to estimate our losses on representations and warranties is a function of our estimate of future defaults, mortgage loan repurchase rates, the severity of loss in the event of defaults and the probability of reimbursement by the correspondent mortgage loan seller. We establish a liability at the time loans are sold and review our liability estimate on a periodic basis.
58
We recorded provisions for losses under representations and warranties as a component of Net gains on mortgage loans held for sale at fair value totaling $1.7 million and $3.2 million during the quarter and six months ended June 30, 2015, respectively, compared to $1.2 million and $2.1 million during the quarter and six months ended June 30, 2014, respectively.March 31, 2016, compared to $1.5 million during the quarter ended March 31, 2015. The increase in provisionsprovision for losses under representations and warranties during the quarter and six months ended June 30, 2015March 31, 2016 compared to the same periodsperiod in 20142015 was primarily due to an increase in the volume of mortgage loan sales activity.
55
Following is a summary of mortgage loan repurchase and loss activity and the UPB of mortgage loans subject to representations and warranties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
During the period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Indemnification activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Mortgage loans indemnified by PFSI at beginning of period |
| $ | 2,202 |
| $ | 80 |
| $ | 1,521 |
| $ | 80 |
|
| $ | 3,470 |
| $ | 1,521 |
|
New indemnifications |
|
| 868 |
|
| 484 |
|
| 1,549 |
|
| 484 |
|
| 139 |
| 681 |
| ||
Less: |
|
|
|
|
| |||||||||||||||
Indemnified mortgage loans repurchased |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
| ||
Less: Indemnified mortgage loans repaid or refinanced |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||
Indemnified mortgage loans repaid or refinanced |
|
| 69 |
|
| — |
| |||||||||||||
Mortgage loans indemnified by PFSI at end of period |
| $ | 3,070 |
| $ | 564 |
| $ | 3,070 |
| $ | 564 |
|
| $ | 3,540 |
| $ | 2,202 |
|
Repurchase activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Total mortgage loans repurchased by PFSI |
| $ | 7,291 |
| $ | — |
| $ | 11,781 |
| $ | 1,890 |
|
| $ | 6,913 |
| $ | 4,490 |
|
Less: Mortgage loans repurchased by correspondent lenders |
|
| 7,756 |
|
| — |
|
| 8,276 |
|
| 798 |
| |||||||
Less: Mortgage loans repaid by borrowers |
|
| 1,585 |
|
| — |
|
| 1,958 |
|
| — |
| |||||||
Mortgage loans repurchased by PFSI with losses chargeable to liability for representations and warranties |
| $ | (2,050) |
| $ | — |
| $ | 1,547 |
| $ | 1,092 |
| |||||||
Less: |
|
|
|
|
| |||||||||||||||
Mortgage loans repurchased by correspondent lenders |
| 3,265 |
| 520 |
| |||||||||||||||
Mortgage loans repaid by borrowers or resold with defects resolved |
|
| 327 |
|
| 373 |
| |||||||||||||
Net mortgage loans repurchased by PFSI with losses chargeable to liability for representations and warranties |
| $ | 3,321 |
| $ | 3,597 |
| |||||||||||||
Losses charged to liability for representations and warranties |
| $ | 180 |
| $ | — |
| $ | 245 |
| $ | — |
|
| $ | 484 |
| $ | 65 |
|
Period end: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Unpaid principal balance of mortgage loans subject to representations and warranties |
| $ | 44,794,166 |
| $ | 29,882,252 |
|
|
|
|
|
|
|
| $ | 63,806,614 |
| $ | 39,624,553 |
|
Liability for representations and warranties |
| $ | 16,257 |
| $ | 10,178 |
|
|
|
|
|
|
|
| $ | 22,209 |
| $ | 14,689 |
|
During the quarter and six months ended June 30, 2015,March 31, 2016, we repurchased mortgage loans totaling $7.3 million and $11.8$6.9 million in UPB, respectively. After recovery of repurchase losses from the selling correspondent lenders, weUPB. We recorded losses of $180,000 and $245,000, respectively,$484,000 net of recoveries from correspondent lenders, as a result of these repurchases. As the outstanding balance of mortgage loans we purchase and sell subject to representations and warranties increases and the loans sold continue to season, we expect the level of repurchase activity to increase.
The level of the liability for losses under representations and warranties is difficult to estimate and requires considerable management judgment. The level of mortgage loan repurchase losses is dependent on economic factors, investorpurchaser or insurer loss mitigation strategies, and other external conditions that may change over the lives of the underlying mortgage loans. Our estimate of the liability for representations and warranties is prepared initiallydeveloped by our credit administration staff. The liability estimate is reviewed and approved by our senior management credit committee which includes PFSI’s chief executive, operating,the senior executives of the Company and of the loan production, loan servicing and credit and enterprise risk mortgage fulfillment, institutional mortgage banking and shared services officers.management areas. We did not record any adjustments to previously recorded liabilities for representations and warranties during any of the periods presented.
Our representations and warranties are generally not subject to stated limits of exposure. However, we believe that the current UPB of mortgage loans sold by us to date represents the maximum exposure to repurchases related to representations and warranties.
59
Other Loan Production-Related Revenuesmortgage loan production-related revenues
Loan origination fees increased $14.1 million and $23.9$5.8 million during the quarter and six months ended June 30, 2015, respectively,March 31, 2016, compared to the same periodsperiod in 20142015 primarily due to growth in the volume of correspondent purchases and increases in certain fees we charge in our loan production activities.
56
Fulfillment fees from PMT, which represent fees we collect for services we perform on behalf of PMT in connection with its acquisition, packaging and sale of mortgage loans, are calculated as a percentage of the UPB of the mortgage loans we fulfill for PMT. Fulfillment fees increased $2.9 million and $6.9 million$69,000 during the quarter and six months ended June 30, 2015, respectively,March 31, 2016 compared to the same periodsperiod in 2014, primarily due to growth2015. The effect of the increase in the volume of Agency-eligible mortgage loans we fulfilled on behalf of PMT. for PMT was offset by a reduction in the average fulfillment fee rate we charged during 2016 as compared to 2015 resulting from contractual discretionary reductions in fulfillment fees made to facilitate certain transactions.
Summarized below are our fulfillment fees:
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, |
| ||||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| 2016 |
| 2015 |
| ||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| (in thousands) |
| ||||||||
|
| (in thousands) |
|
|
|
|
|
|
| |||||||||||
Fulfillment fee revenue |
| $ | 15,333 |
| $ | 12,433 |
| $ | 28,199 |
| $ | 21,335 |
|
| $ | 12,935 |
| $ | 12,866 |
|
Unpaid principal balance of loans fulfilled |
| $ | 3,579,078 |
| $ | 2,991,764 |
| $ | 6,469,210 |
| $ | 4,911,342 |
| |||||||
Unpaid principal balance of mortgage loans fulfilled |
| $ | 3,259,363 |
| $ | 2,890,132 |
| |||||||||||||
Average fulfillment fee rate (in basis points) |
|
| 43 |
|
| 42 |
|
| 44 |
|
| 43 |
|
|
| 40 |
| 45 |
|
Net mortgage loan servicing fees
Our net mortgage loan servicing fees are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Net loan servicing fees: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Loan servicing fees |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net mortgage loan servicing fees: |
|
|
|
|
| |||||||||||||||
Mortgage loan servicing fees: |
|
|
|
|
| |||||||||||||||
From non-affiliates |
| $ | 66,867 |
| $ | 43,314 |
| $ | 116,968 |
| $ | 79,414 |
|
| $ | 91,327 |
| $ | 50,101 |
|
From PennyMac Mortgage Investment Trust |
|
| 12,136 |
|
| 14,180 |
|
| 22,806 |
|
| 28,771 |
|
|
| 11,453 |
| 10,670 |
| |
From Investment Funds |
|
| 153 |
|
| 4,161 |
|
| 1,121 |
|
| 5,638 |
|
|
| 701 |
| 968 |
| |
Ancillary and other fees |
|
| 11,850 |
|
| 4,838 |
|
| 23,035 |
|
| 9,989 |
|
|
| 11,452 |
|
| 11,185 |
|
|
|
| 91,006 |
|
| 66,493 |
|
| 163,930 |
|
| 123,812 |
|
| 114,933 |
| 72,924 |
| ||
Amortization, impairment and change in fair value of mortgage servicing rights |
|
| (22,457) |
|
| (9,524) |
|
| (68,605) |
|
| (23,079) |
| |||||||
Amortization, impairment and change in fair value of mortgage servicing rights and excess servicing spread |
|
| (97,414) |
|
| (46,148) |
| |||||||||||||
Net loan servicing fees |
| $ | 68,549 |
| $ | 56,969 |
| $ | 95,325 |
| $ | 100,733 |
|
| $ | 17,519 |
| $ | 26,776 |
|
Average servicing portfolio |
| $ | 125,390,557 |
| $ | 87,537,569 |
| $ | 117,979,004 |
| $ | 84,010,149 |
| |||||||
Average mortgage loan servicing portfolio |
| $ | 162,734,071 |
| $ | 109,882,352 |
|
60
Following is a summary of our mortgage loan servicing portfolio:portfolio in UPB:
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| June 30, |
| December 31, |
|
| March 31, |
| December 31, |
| ||||
|
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||
Mortgage loans serviced at period end: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Prime servicing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated |
| $ | 44,794,166 |
| $ | 36,564,434 |
|
| $ | 64,485,308 |
| $ | 59,880,349 |
|
Acquired |
|
| 45,887,246 |
|
| 28,126,179 |
|
|
| 48,351,570 |
|
| 50,722,355 |
|
|
|
| 90,681,412 |
|
| 64,690,613 |
|
|
| 112,836,878 |
|
| 110,602,704 |
|
Mortgage servicing liabilities |
|
| 816,424 |
|
| 478,581 |
| |||||||
Mortgage servicing liabilities–Originated |
|
| 926,756 |
|
| 806,897 |
| |||||||
Mortgage loans held for sale |
|
| 1,526,779 |
|
| 1,100,910 |
|
|
| 1,561,006 |
|
| 1,052,485 |
|
|
|
| 93,024,615 |
|
| 66,270,104 |
|
|
| 115,324,640 |
|
| 112,462,086 |
|
Subserviced for Advised Entities |
|
| 39,011,761 |
|
| 35,416,466 |
|
|
| 45,940,082 |
|
| 43,963,378 |
|
Total prime servicing |
|
| 132,036,376 |
|
| 101,686,570 |
|
|
| 161,264,722 |
|
| 156,425,464 |
|
Special servicing: |
|
|
|
|
|
|
| |||||||
Subserviced for Advised Entities |
|
| 4,133,946 |
|
| 4,293,479 |
| |||||||
Special servicing–Subserviced for Advised Entities |
|
| 3,641,873 |
|
| 3,847,254 |
| |||||||
Total special servicing |
|
| 4,133,946 |
|
| 4,293,479 |
|
|
| 3,641,873 |
|
| 3,847,254 |
|
Total mortgage loans serviced |
| $ | 136,170,322 |
| $ | 105,980,049 |
|
| $ | 164,906,595 |
| $ | 160,272,718 |
|
Loan
57
During the first quarter of 2016, loan servicing fees increased $24.5$42.0 million and $40.1 million during the quarter and six months ended June 30, 2015, respectively, compared to the same periodsperiod in 2014 2015, primarily due to an increase in mortgage loan servicing fees from non-affiliatesnonaffiliates resulting from growth in our mortgage loan servicing portfolio due to our purchases of MSRs supplemented with the ongoing sales of mortgage loans with servicing rights retained. The increase in loan servicing fees was partially offset by a decrease in loan servicing fees from our Advised Entities due to activity fees relating to a sale of reperforming mortgage loans by PMT in 2014 that did not recur in 2015 and to an additional waiver of activity fees granted to the Investment Funds during the quarter ended June 30, 2015 relating to the sale of reperforming loans during 2014. .
Amortization, impairment and change in fair value of mortgage servicing rights are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Amortization and realization of cash flows |
| $ | (31,384) |
| $ | (16,729) |
| $ | (55,488) |
| $ | (31,268) |
|
| $ | (49,696) |
| $ | (24,104) |
|
Change in fair value of mortgage servicing rights and mortgage servicing liabilities carried at fair value and provision for impairment of mortgage servicing rights carried at lower of amortized cost or fair value |
|
| 44,377 |
|
| (12,474) |
|
| (2,324) |
|
| (15,851) |
|
|
| (125,887) |
|
| (46,701) |
|
|
|
| 12,993 |
|
| (29,203) |
|
| (57,812) |
|
| (47,119) |
| |||||||
Change in fair value of excess servicing spread |
|
| (7,133) |
|
| 10,062 |
|
| 403 |
|
| 14,854 |
|
|
| 19,449 |
|
| 7,536 |
|
Hedging (losses) gains |
|
| (28,317) |
|
| 9,617 |
|
| (11,196) |
|
| 9,186 |
| |||||||
Total amortization, impairment and change in fair value of mortgage servicing rights |
| $ | (22,457) |
| $ | (9,524) |
| $ | (68,605) |
| $ | (23,079) |
| |||||||
Hedging gains |
|
| 58,720 |
|
| 17,121 |
| |||||||||||||
Total fair value adjustments, net of hedging results |
|
| (47,718) |
|
| (22,044) |
| |||||||||||||
Total amortization, impairment and change in fair value of mortgage servicing rights and excess servicing spread |
| $ | (97,414) |
| $ | (46,148) |
| |||||||||||||
Average mortgage servicing rights balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At lower of amortized cost or fair value |
| $ | 488,354 |
| $ | 297,663 |
| $ | 454,522 |
| $ | 284,241 |
|
| $ | 741,686 |
| $ | 414,308 |
|
At fair value |
| $ | 467,328 |
| $ | 263,238 |
| $ | 403,481 |
| $ | 244,102 |
|
|
| 618,992 |
|
| 329,117 |
|
|
| $ | 1,360,678 |
| $ | 743,425 |
| |||||||||||||
Mortgage servicing rights at period end: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At lower of amortized cost or fair value |
| $ | 581,269 |
| $ | 313,082 |
|
|
|
|
|
|
|
| $ | 742,679 |
| $ | 428,998 |
|
At fair value |
| $ | 554,241 |
|
| 308,599 |
|
|
|
|
|
|
|
|
| 594,403 |
|
| 361,413 |
|
|
| $ | 1,135,510 |
| $ | 621,681 |
|
|
|
|
|
|
|
| $ | 1,337,082 |
| $ | 790,411 |
|
61
Amortization, impairment and change in fair value of mortgage servicing rights increased $12.9 million and $45.5$25.7 million during the quarter and six months ended June 30, 2015, respectively,March 31, 2016, compared to the same periodsperiod in 2014.2015. This increase was primarily due to increased amortization of a growing mortgage servicing asset and increased impairment of MSRs resulting from the effect on fair value of the decreasing interest rate environment that prevailed during muchthe first quarter of 2015, and a reduction in the Federal Housing Administration’s mortgage insurance premium. 2016.
Management fees and Carried Interest
Management fees and Carried Interest are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||
|
| (in thousands) |
|
| (in thousands) | |||||||||||||||
Management fees: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
PennyMac Mortgage Investment Trust: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Base management fee |
| $ | 5,709 |
| $ | 5,838 |
| $ | 11,439 |
| $ | 11,359 |
|
| $ | 5,352 |
| $ | 5,730 |
|
Performance incentive fee |
|
| 70 |
|
| 3,074 |
|
| 1,343 |
|
| 5,627 |
|
|
| — |
|
| 1,273 |
|
|
|
| 5,779 |
|
| 8,912 |
|
| 12,782 |
|
| 16,986 |
|
| 5,352 |
|
| 7,003 |
| |
Investment Funds |
|
| 1,184 |
|
| 2,086 |
|
| 2,670 |
|
| 4,121 |
|
|
| 560 |
|
| 1,486 |
|
Total management fees |
|
| 6,963 |
|
| 10,998 |
|
| 15,452 |
|
| 21,107 |
|
| 5,912 |
|
| 8,489 |
| |
Carried Interest |
|
| 182 |
|
| 1,834 |
|
| 1,415 |
|
| 3,991 |
|
|
| 593 |
|
| 1,233 |
|
Total management fees and Carried Interest |
| $ | 7,145 |
| $ | 12,832 |
| $ | 16,867 |
| $ | 25,098 |
|
| $ | 6,505 |
| $ | 9,722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net assets of Advised Entities at period end: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
PennyMac Mortgage Investment Trust |
| $ | 1,525,297 |
| $ | 1,577,160 |
|
|
|
|
|
|
|
| $ | 1,414,503 |
| $ | 1,542,159 |
|
Investment Funds |
|
| 316,383 |
|
| 565,926 |
|
|
|
|
|
|
|
|
| 207,706 |
|
| 413,155 |
|
|
| $ | 1,841,680 |
| $ | 2,143,086 |
|
|
|
|
|
|
|
| $ | 1,622,209 |
| $ | 1,955,314 |
|
58
Management fees from PMT decreased $3.1 million and $4.2$1.7 million during the quarter and six months ended June 30, 2015, respectively,March 31, 2016, compared to the same periodsperiod in 20142015. The decrease was primarily due to a decrease in performance incentive fees resulting from reductions in PMT’s net income during the period over which incentive fees are calculated. to:
| · | a decrease in base management fees of $378,000 due to a decrease in PMT’s shareholders’ equity upon which its base management fee is based; and |
· | a decrease in performance incentive fees of $1.3 million resulting from a decline in PMT’s financial performance over the four-quarter period for which incentive fees were calculated. |
Management fees from the Investment Funds decreased $902,000 and $ 1.5 million$926,000 during the quarter and six months ended June 30, 2015, respectively,March 31, 2016, compared to the same periodsperiod in 2014.2015. The decrease was due to a reduction in the Investment Funds’ net asset values as a result of continued distributions to the Investment Funds’ investors following the end of the Investment Funds’ commitment periods at December 31, 2011, which reduced the investment base on which the management fees are computed.period.
Carried Interest from Investment Funds decreased $1.7 million and $2.6$640,000 during the quarter ended March 31, 2016, compared to the same period in 2015 primarily due to reduced performance of the Investment Funds’
assets during the quarter ended March 31, 2016 as compared to the quarter ended March 31, 2015.
Other revenues
Net interest expense increased $4.6 million during the quarter and six months ended June 30, 2015, respectively,March 31, 2016, compared to the same periods in 2014 primarilyquarter ended March 31, 2015 due to decreasesgrowth in the Investment Funds’ returnsfinancing of our investments in 2015 compared to 2014.
62
Other revenuesnon-interest earning assets, primarily MSRs.
The results of our holdings of common shares of PMT, which is included in Changes in fair value of investment in and dividends received from PMT are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Dividends received from PennyMac Mortgage Investment Trust |
| $ | 46 |
| $ | 44 |
| $ | 138 |
| $ | 88 |
|
| $ | 35 |
| $ | 92 |
|
Change in fair value of investment in PennyMac Mortgage Investment Trust | �� |
| (290) |
|
| (147) |
|
| (275) |
|
| (76) |
|
|
| (121) |
|
| 15 |
|
|
| $ | (244) |
| $ | (103) |
| $ | (137) |
| $ | 12 |
|
| $ | (86) |
| $ | 107 |
|
Fair value of PennyMac Mortgage Investment Trust shares at period end |
| $ | 1,307 |
| $ | 1,646 |
|
|
|
|
|
|
|
| $ | 1,023 |
| $ | 1,597 |
|
Change in fair value of investment in and dividends received from PMT decreased $141,000 and $149,000$193,000 during the quarter and six months ended June 30, 2015, respectively,March 31, 2016, compared to the same periodsperiod in 2014 as the increase in dividend income was not sufficient2015 due to offsetboth a decrease in the gain onfair value of our investment in common shares ofPMT and a decrease in dividends received from PMT. We held 75,000 common shares of PMT during each of the periods ended June 30, 2015March 31, 2016 and 2014.2015.
Expenses
Our compensation expense is summarized below:
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended March 31, |
| ||||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| 2016 |
| 2015 |
| ||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| (in thousands) |
| ||||||||
|
| (in thousands) |
|
|
|
|
|
|
| |||||||||||
Salaries and wages |
| $ | 40,207 |
| $ | 28,202 |
| $ | 75,649 |
| $ | 54,561 |
|
| $ | 48,113 |
| $ | 35,442 |
|
Incentive compensation |
|
| 18,134 |
|
| 10,340 |
|
| 28,484 |
|
| 18,294 |
|
|
| 6,330 |
|
| 10,350 |
|
Taxes and benefits |
|
| 7,117 |
|
| 4,689 |
|
| 13,842 |
|
| 9,486 |
|
|
| 8,882 |
|
| 6,725 |
|
Stock and unit-based compensation |
|
| 4,964 |
|
| 3,740 |
|
| 10,591 |
|
| 7,516 |
|
|
| 4,973 |
|
| 5,627 |
|
|
| $ | 70,422 |
| $ | 46,971 |
| $ | 128,566 |
| $ | 89,857 |
|
| $ | 68,298 |
| $ | 58,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Average headcount |
|
| 2,186 |
|
| 1,506 |
|
| 2,046 |
|
| 1,463 |
| |||||||
Period end headcount |
|
| 2,354 |
|
| 1,589 |
|
|
|
|
|
|
| |||||||
Head count: |
|
|
|
|
| |||||||||||||||
Average |
| 2,590 |
| 1,907 |
| |||||||||||||||
Period end |
| 2,617 |
| 2,047 |
|
Compensation expense increased $23.5$10.2 million, or 17.5% during the quarter ended March 31, 2016 compared to the same period in 2015. The increase in compensation expense was primarily due to the development of and $38.7growth
59
in our mortgage banking segments. Incentive compensation decreased primarily due to our reduced profitability during the quarter ended March 31, 2016 as compared to the quarter ended March 31, 2015.
Servicing expense increased $11.2 million during the quarter and six months ended June 30, 2015, respectively,March 31, 2016 compared to the same periodsperiod in 20142015. The increase was primarily due to growth in our workforce to support the growth of our mortgage banking operations.
Servicing expense increased $16.9 million and $23.6 million during the quarter and six months ended June 30, 2015, respectively, compared to the same periods in 2014 primarily due to growth in our purchased mortgage loan servicing portfolio which includes large purchases of MSRs backed by seasonedand to increased servicing advance losses relating to delinquent government-insured or guaranteed mortgage loans that are subject to nonreimbursable servicing advance losses, and increased activity related to our early buyout program.we service.
Technology expense increased $2.7 million and $4.9$1.9 million during the quarter and six months ended June 30, 2015, respectively,March 31, 2016 compared to the same periodsperiod in 20142015 primarily due to increased software costs as part of our continued investment in loan production and expansion of our servicing infrastructure.
Loan origination expense increased $2.2 million and $5.1 million during the quarter and six months ended June 30, 2015, respectively, compared to the same periods in 2014 due to increased loan production in 2015 compared to 2014.
63
Expenses Allocated to PMT
PMT reimburses us for other expenses, including common overhead expenses incurred on its behalf by us, in accordance with the terms of our management agreement with PMT. The expense amounts presented in our consolidated statements of income are net of these allocations. The amount of total expenses that we allocated to PMT during the quarter and six months ended June 30, 2015 remained generally consistent compared to the same periods in 2014 and included a discretionary waiver, in accordance with the terms of the management agreement, of $700,000 of overhead expenses otherwise allocable to PMT.
ExpenseCommon overhead expense amounts allocated to PMT during the periodperiods ended June 30,March 31, 2016 and 2015 and 2014 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 (1) |
| 2015 |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Technology |
| $ | 1,178 |
| $ | 1,005 |
| $ | 2,316 |
| $ | 2,057 |
|
| $ | 1,145 |
| $ | 1,138 |
|
Occupancy |
|
| 487 |
|
| 570 |
|
| 966 |
| 1,058 |
|
| 573 |
| 479 |
| |||
Depreciation and amortization |
|
| 537 |
|
| 501 |
|
| 1,109 |
| 990 |
|
| 399 |
| 572 |
| |||
Other |
|
| 500 |
|
| 562 |
|
| 1,040 |
|
| 1,110 |
|
|
| 444 |
|
| 540 |
|
Total expenses |
| $ | 2,702 |
| $ | 2,638 |
| $ | 5,431 |
| $ | 5,215 |
|
| $ | 2,561 |
| $ | 2,729 |
|
(1) | On December 15, 2015, we and PMT amended our management agreement to provide that the total costs and expenses incurred by us in any quarter and reimbursable by PMT is capped at an amount equal to the product of (A) 70 basis points (0.0070), multiplied by (B) PMT’s shareholders’ equity (as defined in the management agreement) as of the last day of such quarter, divided by four (4). |
Provision for Income Taxes
Our effective tax rates were 11.5% and11.9% during the quarter ended March 31, 2016 compared to 11.5% during the quarter and six months ended June 30, 2015, respectively, compared to 11.4% and 11.3% during the same periodsperiod in 2014, respectively.2015. The difference between our effective tax rate and the statutory rate is primarily due to the allocation of earnings to the noncontrolling interest unitholders. As the noncontrolling interest unitholders convert their ownership units into our shares, we expect an increase in allocated earnings that will be subject to corporate federal and state statutory tax rates, which will in turn increase our effective income tax rate.
60
Balance Sheet Analysis
Following is a summary of key balance sheet items as of the dates presented:
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| June 30, |
| December 31, |
|
| March 31, |
| December 31, |
| ||||
|
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and short-term investments |
| $ | 98,305 |
| $ | 97,943 |
|
| $ | 144,824 |
| $ | 151,791 |
|
Mortgage loans held for sale at fair value |
|
| 1,594,262 |
|
| 1,147,884 |
|
| 1,653,963 |
| 1,101,204 |
| ||
Servicing advances, net |
|
| 244,806 |
|
| 228,630 |
|
| 284,140 |
| 299,354 |
| ||
Receivable from affiliates |
|
| 70,919 |
|
| 26,162 |
|
| 168,766 |
| 170,281 |
| ||
Carried Interest due from Investment Funds |
|
| 68,713 |
|
| 67,298 |
|
| 70,519 |
| 69,926 |
| ||
Mortgage servicing rights |
|
| 1,135,510 |
|
| 730,828 |
|
| 1,337,082 |
| 1,411,935 |
| ||
Other assets |
|
| 218,090 |
|
| 207,941 |
| |||||||
Other |
|
| 321,969 |
|
| 300,803 |
| |||||||
Total assets |
| $ | 3,430,605 |
| $ | 2,506,686 |
|
| $ | 3,981,263 |
| $ | 3,505,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Borrowings |
| $ | 1,705,663 |
| $ | 1,112,675 |
|
| $ | 2,044,977 |
| $ | 1,462,739 |
|
Payable to affiliates |
|
| 530,056 |
|
| 350,389 |
|
| 578,188 |
| 679,548 |
| ||
Other liabilities |
|
| 275,413 |
|
| 236,356 |
| |||||||
Other |
|
| 264,885 |
|
| 300,657 |
| |||||||
Total liabilities |
|
| 2,511,132 |
|
| 1,699,420 |
|
|
| 2,888,050 |
| 2,442,944 |
| |
Total stockholders' equity |
|
| 919,473 |
|
| 807,266 |
| |||||||
Stockholders' equity |
|
| 1,093,213 |
|
| 1,062,350 |
| |||||||
Total liabilities and stockholders' equity |
| $ | 3,430,605 |
| $ | 2,506,686 |
|
| $ | 3,981,263 |
| $ | 3,505,294 |
|
Total assets increased $923.9$476.0 million from $2.5$3.5 billion at December 31, 20142015 to $3.4$4.0 billion at June 30, 2015.March 31, 2016. The increase was primarily due to an increase of $446.4$552.8 million in mortgage loans held for sale at fair value, and an increase of $404.7 million in MSRs, resulting from growth in our mortgage banking operations and purchases of MSRs.loan production.
64
Total liabilities increased by $811.7$445.1 million from $1.7$2.4 billion as of December 31, 20142015 to $2.5$2.9 billion as of June 30, 2015.March 31, 2016. The increase was primarily attributable to an increase of $441.1$582.2 million in mortgage loans sold under agreements to repurchase, an increase of $52.3 million in sales of mortgage loan participation certificates, and increase of $99.6 million in note payable allborrowings to fund growth in our inventory of mortgage loans held for sale at fair value and MSRs, and an increase of $167.9 million in liabilities relating to the sale of ESS to PMT.MSRs.
Cash Flows
Our cash flows for the six monthsquarters ended June 30,March 31, 2016 and 2015 and 2014 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Six months ended June 30, |
|
|
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| Change |
|
| 2016 |
| 2015 |
| Change |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Cash flow activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating |
| $ | (421,410) |
| $ | (431,444) |
| $ | 10,034 |
|
| $ | (516,862) |
| $ | (168,494) |
| $ | (348,368) |
|
Investing |
| (316,047) |
| 5,612 |
| (321,659) |
|
| 41,755 |
| (58,386) |
| 100,141 |
| ||||||
Financing |
|
| 735,929 |
|
| 466,003 |
|
| 269,926 |
|
| 486,195 |
| 232,656 |
| 253,539 |
| |||
Net cash flows |
| $ | (1,528) |
| $ | 40,171 |
| $ | (41,699) |
|
| $ | 11,088 |
| $ | 5,776 |
| $ | 5,312 |
|
|
|
|
|
|
|
|
|
Our cash flows resulted in a net decreaseincrease in cash of $1.5$11.1 million during the six monthsquarter ended June 30, 2015.March 31, 2016. The decreaseincrease was due to cash used in our operating and investing activities exceedingoffset by cash provided by our investing and financing activities exceeding cash used in our operating activities.
Operating activities
CashNet cash used in operating activities totaled $421.4$516.9 million and $431.4$168.5 million during the six monthsquarters ended June 30,March 31, 2016 and 2015, and 2014, respectively, primarily due to the growth of our inventory of mortgage loans held for sale at fair value.
61
Investing activities
Net cash provided by investing activities during the quarter ended March 31, 2016 totaled $41.8 million primarily due to $38.6 million in net settlements of derivative financial instruments received in our hedging of MSRs and to a $18.1 million reduction in short-term investments. Net cash used in investing activities during the six monthsquarter ended June 30,March 31, 2015 totaled $316.0$58.4 million primarily due to our purchasespurchase of MSRs during the period. Net cash provided by investing activities during the six months ended June 30, 2014 totaled $5.6 million primarily due to the decrease in short-term investments.
Financing activities
Net cash provided by financing activities totaled $735.9$486.2 million and $466.0$232.7 million during the six monthsquarters ended June 30,March 31, 2016 and 2015, and 2014, respectively, primarily due to increased sales of loans under agreements to repurchase and a mortgage loan participation agreement used to financefinancing for the growth in our inventory of mortgage loans held for sale. Cash provided bysale at fair value. In the quarter ended March 31, 2015, financing activitiesproceeds were also reflects the proceeds received from sales of ESS of $187.3 million and $73.4 million during the six months ended June 30, 2015 and 2014, respectively, used to finance purchases of governmentfor investments in MSRs. A portion of the cash provided by financing activities during the six months ended June 30, 2015 was loaned to PMT to finance ESS.
Liquidity and Capital Resources
Our liquidity reflects our ability to meet our current obligations (including our operating expenses and, when applicable, the retirement of, and margin calls relating to, our debt, and margin calls relating to hedges on our commitments to purchase or originate mortgage loans), fund new originations and purchases, and make investments as we identify them. We expect our primary sources of liquidity to be through cash flows from business activities, proceeds from borrowings, proceeds from and issuance of ESS and/or additional equity offerings. We believe that our liquidity is sufficient to meet our current liquidity needs.
Our current leverage strategy is to finance our assets where we believe such borrowing is prudent, appropriate and available. Our borrowing activities are in the form of sales of mortgage loansassets sold under agreements to repurchase, sales of mortgage loan participation certificates, ESS financing and a note payable, secured by MSRsa revolving credit agreement, ESS and loan servicing
65
advances.a capital lease. All of our borrowings other than ESS and the capital lease have short-term maturities and provide for terms of approximately one year. We will continue to finance most of our assets on a short-term basis until long-term financing becomes more available.Because a significant portion of our current debt facilities consists of short-term borrowings, we expect to renew these facilities in advance of maturity in order to ensure our ongoing liquidity and access to capital or otherwise allow ourselves sufficient time to replace any necessary financing.
Our repurchase agreements represent the sales of mortgage loansassets together with agreements for us to buy back the mortgage loansrespective assets at a later date. Our repurchase agreements are summarized below:The table below presents the average outstanding, maximum and ending balances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Quarter ended June 30, |
| Six months ended June 30, |
|
| Quarter ended March 31, |
| ||||||||||||
|
| 2015 |
| 2014 |
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Repurchase agreements outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Average balance |
| $ | 819,988 |
| $ | 527,990 |
| $ | 719,003 |
| $ | 410,196 |
|
| $ | 1,039,573 |
| $ | 616,896 |
|
Maximum daily balance |
| $ | 1,264,046 |
| $ | 873,301 |
| $ | 1,264,046 |
| $ | 873,301 |
|
| $ | 1,688,605 |
| $ | 992,187 |
|
Balance at period end |
| $ | 1,264,046 |
| $ | 825,267 |
|
|
|
|
|
| $ | 1,658,728 |
| $ | 992,187 |
|
The difference between the maximum and average daily amounts outstanding is due to the effect of variations in the timing and levels of production and sales on mortgage loan inventories during the period.
PLS’s debtOur secured financing agreements at PLS require itus to comply with various financial covenants. The most significant financial covenants currently include the following:
· | positive net income during each calendar quarter; |
· | a minimum in unrestricted cash and cash equivalents of $20 million; |
· | a minimum tangible net worth of $200 million; |
· | a maximum ratio of total liabilities to tangible net worth of 10:1; and |
· | at least one other warehouse or repurchase facility that finances amounts and assets similar to those being financed under of our existing |
With respect to servicing performed for PMT, PLS is also subject to certain covenants under its debt agreements. Covenants of PLS in PMT’s debt agreements are equally or sometimes less restrictive than the covenants described above.
62
In addition to the covenants noted above, our revolving credit agreement and capital lease contain additional financial covenants including, but not limited to,
· | a minimum of cash and carried interest equal to the amount borrowed under the revolving credit agreement; |
· | a minimum of unrestricted cash and cash equivalents equal to $25 million; |
· | a minimum tangible net worth of $500 million; |
· | a minimum asset coverage ratio (the ratio of the total asset amount to the total commitment) of 2.5; and |
· | a maximum ratio of total indebtedness to tangible net worth ratio of 5:1. |
Although these financial covenants limit the amount of indebtedness that we may incur and affect our liquidity through minimum cash reserve requirements, we believe that these covenants currently provide us with sufficient flexibility to successfully operate our business and obtain the financing necessary to achieve that purpose.
With respect to servicing performed for PMT, PLS is also subject to certain covenants under its debt agreements. Covenants in PMT’s debt agreements are equally or sometimes less restrictive than the covenants described above.
Our debt financing agreements also contain margin call provisions that, upon notice from the applicable lender at its option, require us to transfer cash or, in some instances, additional assets in an amount sufficient to eliminate any margin deficit. A margin deficit will generally result from any decline in the market value (as determined by the applicable lender) of the assets subject to the related financing agreement. Upon notice from the applicable lender, we will generally be required to satisfy the margin call on the day of such notice or within one business day thereafter, depending on the timing of the notice.
We are also subject to liquidity and net worth requirements established by FHFA and GNMA for Agency seller/servicers. Effective December 31, 2015, FHFA and Ginnie Mae have established new minimum liquidity requirements and revised their net worth requirements for their approved non-depository single-family sellers/servicers in the case of Fannie Mae and Freddie Mac and Ginnie Mae for its approved single-family issuers, as summarized below:
· | FHFA liquidity requirement is equal to 0.035% (3.5 basis points) of total Agency servicing UPB plus an incremental 200 basis points of the amount by which total nonperforming Agency servicing UPB exceeds 6% of the applicable Agency servicing UPB; allowable assets to satisfy liquidity requirement include cash and cash equivalents (unrestricted), certain investment-grade securities that are available for sale or held for trading including Agency mortgage-backed securities, obligations of Fannie Mae or Freddie Mac, and U.S. Treasury obligations, and unused and available portions of committed servicing advance lines; |
· | FHFA net worth requirement is a tangible net worth/total assets ratio greater than or equal to 6%; |
· | Ginnie Mae single-family issuer minimum liquidity requirement is equal to the greater of $1.0 million or 0.10% (10 basis points) of the issuer’s outstanding Ginnie Mae single-family securities, which must be met with cash and cash equivalents; and |
· | Ginnie Mae net worth requirement is equal to $2.5 million plus 0.35% (35 basis points) of the issuer’s outstanding Ginnie Mae single-family obligations. |
We believe that we are currently in compliance with the applicable Agency requirements.
We have purchased portfolios of MSRs and have financed them in part through the sale to PMT of the right to receive ESS. The repaymentoutstanding amount of the ESS financing is based on the current valuation of such ESS and amounts received on the underlying mortgage loans.
We continue to explore a variety of means of financing our continued growth, including debt financing through bank warehouse lines of credit, financing MSR purchases through bank lines of credit, additionalloans, repurchase agreements, securitization transactions and corporate debt.
63
However, there can be no assurance as to how much additional financing capacity such efforts will produce, what form the financing will take or whether such efforts will be successful.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
Off-Balance Sheet Arrangements and Guarantees
As of June 30, 2015,March 31, 2016, we have not entered into any off-balance sheet arrangements or guarantees.
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Contractual Obligations
As of June 30, 2015,March 31, 2016, we had on-balance sheet contractual obligations of $1.3$1.7 billion to finance assets under agreements to repurchase and $196.0$246.6 million to finance assets under our mortgage loan participation and sale agreement. We also had a contractual obligationobligations of $246.5$127.7 million relating to notes payable. Additionally, the Company entered into ESS transactions and a note payablecapital lease transaction secured by MSRs.certain fixed assets and capitalized software of which $12.1 million was outstanding as of March 31, 2016. We also lease our primary office facilities under an agreement that expires on February 28, 2017 and we license certain software to support our loan servicing operations.
Payment obligations under these agreements are summarized below:
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| Payments due by period |
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| Payments due by period |
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| Less than |
| 1-3 |
| 3-5 |
| More than |
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| Less than |
| 1-3 |
| 3-5 |
| More than |
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Contractual obligations |
| Total |
| 1 year |
| years |
| years |
| 5 years |
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| Total |
| 1 year |
| years |
| years |
| 5 years |
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| (in thousands) |
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| (in thousands) |
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Mortgage loans sold under agreements to repurchase |
| $ | 1,263,248 |
| $ | 1,263,248 |
| $ | — |
| $ | — |
| $ | — |
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Mortgage loan participation and sale agreement |
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| 195,959 |
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| 195,959 |
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| — |
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| — |
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| — |
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Note payable |
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| 246,456 |
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| 246,456 |
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| — |
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| — |
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| — |
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Assets sold under agreements to repurchase |
| $ | 1,658,728 |
| $ | 1,658,728 |
| $ | — |
| $ | — |
| $ | — |
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Mortgage loan participation and sale agreements |
| 246,636 |
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| 246,636 |
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| — |
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| — |
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| — |
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Notes payable |
| 128,849 |
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| 128,849 |
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| — |
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| — |
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| — |
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Obligations under capital lease |
| 12,070 |
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| 4,770 |
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| 7,300 |
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| — |
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| — |
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Excess servicing spread financing at fair value payable to PennyMac Mortgage Investment Trust (1) |
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| 359,102 |
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| — |
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| — |
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| — |
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| 359,102 |
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| 321,976 |
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| — |
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| — |
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| — |
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| 321,976 |
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Anticipated interest payments related to long-term debt obligations |
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| 179,694 |
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| 24,833 |
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| 40,823 |
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| 31,297 |
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| 82,741 |
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Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement |
| 74,275 |
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| — |
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| — |
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| — |
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| 74,275 |
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Anticipated interest payments related to excess servicing spread financing at fair value |
| 152,475 |
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| 21,597 |
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| 35,153 |
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| 26,753 |
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| 68,972 |
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Software licenses (2) |
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| 22,244 |
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| 11,122 |
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| 11,122 |
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| — |
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| — |
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| 5,420 |
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| 5,420 |
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| — |
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| — |
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| — |
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Office leases |
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| 39,644 |
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| 5,994 |
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| 8,864 |
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| 8,048 |
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| 16,738 |
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| 59,821 |
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| 7,183 |
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| 15,832 |
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| 16,738 |
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| 20,068 |
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Total |
| $ | 2,306,347 |
| $ | 1,747,612 |
| $ | 60,809 |
| $ | 39,345 |
| $ | 458,581 |
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| $ | 2,660,250 |
| $ | 2,073,183 |
| $ | 58,285 |
| $ | 43,491 |
| $ | 485,291 |
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(1) | The ESS financing obligation payable to PMT does not have a stated contractual |
(2) | Software licenses include both volume and activity based fees that are dependent on the number of loans serviced during each period and include a base fee of approximately |
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The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest) relating to our assets sold under agreements to repurchase is summarized by counterparty below as of June 30, 2015:March 31, 2016:
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| Weighted average |
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| maturity of |
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| advances under |
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Counterparty |
| Amount at risk |
| repurchase agreement |
| Facility |
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Credit Suisse First Boston Mortgage Capital, LLC |
| $ | June 9, 2016 |
| September | |||
Credit Suisse First Boston Mortgage Capital LLC |
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| 44,877 | June 9, 2016 | March 30, |
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Bank of America, N.A. Gestation Agreement |
| $ |
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Morgan Stanley |
| $ |
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| July |
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Citibank, N.A. |
| $ |
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Management Agreements
PMT Management Agreement
We externally manage and advise PMT pursuant to a management agreement. Our management agreement with PMT requires us to oversee PMT’s business affairs in conformity with the investment policies that are approved and monitored by its board of trustees. We are responsible for PMT’s day-to-day management and perform such services and activities related to PMT’s assets and operations as may be appropriate. Pursuant to our management agreement, we collect a base management fee and may collect a performance incentive fee.
The management agreement provides that:
· | The base management fee is calculated quarterly and is equal to the sum of (i) 1.5% per year of PMT’s shareholders’ equity up to $2 billion, (ii) 1.375% per year of shareholders’ equity in excess of $2 billion and up to $5 billion, and (iii) 1.25% per year of PMT’s shareholders’ equity in excess of $5 billion. |
· | The performance incentive fee is calculated at a defined annualized percentage of the amount by which PMT’s “net income,” on a rolling four‑quarter basis and before deducting the incentive fee, exceeds certain levels of return on “equity.” |
The performance incentive fee is calculated quarterly and is equal to the sum of: (a) 10% of the amount by which PMT’s net income for the quarter exceeds (i) an 8% return on equity plus the “high watermark,” up to (ii) a 12% return on PMT’s equity; plus (b) 15% of the amount by which PMT’s net income for the quarter exceeds (i) a 12% return on PMT’s equity plus the “high watermark,” up to (ii) a 16% return on PMT’s equity; plus (c) 20% of the amount by which PMT’s net income for the quarter exceeds a 16% return on equity plus the “high watermark.”
For the purpose of determining the amount of the performance incentive fee:
“Net income” is defined as net income or loss computed in accordance with U.S. GAAP and certain other non‑cash charges determined after discussions between us and PMT’s independent trustees and approval by a majority of PMT’s independent trustees.
“Equity” is the weighted average of the issue price per common share of all of PMT’s public offerings, multiplied by the weighted average number of common shares outstanding (including restricted share units) in the four‑quarter period.
The “high watermark” starts at zero and is adjusted quarterly. The quarterly adjustment reflects the amount by which the net income (stated as a percentage of return on equity) in that quarter exceeds or falls short of the lesser of 8% and the average Fannie Mae 30‑year MBS yield (the “target yield”) for the four quarters then ended. If the net income is lower than the target yield, the high watermark is increased by the difference. If the net income is higher than the target yield, the high watermark is reduced by the difference. Each time a performance incentive fee is earned, the high watermark returns to zero. As a result,
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the threshold amounts required for us to earn a performance incentive fee are adjusted cumulatively based on the performance of PMT’s net income over (or under) the target yield, until the net income in excess of the target yield exceeds the then‑current cumulative high watermark amount, and a performance incentive fee is earned.
The base management fee and the performance incentive fee are both receivable quarterly in arrears. The performance incentive fee may be paid in cash or in PMT’s common shares (subject to a limit of no more than 50% paid in common shares), at PMT’s option.
Under our management agreement, we are entitled to reimbursement of our organizational and operating expenses, including third-party expenses, incurred on PMT’s behalf. Additionally, on December 15, 2015, we amended our management agreement to provide that the total overhead costs and expenses incurred by us in any quarter and reimbursable by PMT is capped at an amount as defined in the management agreement.
The term of the management agreement, as amended, expires on February 1, 2017, subject to automatic renewal for additional 18‑month periods, unless terminated earlier in accordance with the terms of the management agreement.
In the event of termination by PMT, we may be entitled to a termination fee in certain circumstances. The termination fee is equal to three times the sum of (a) the average annual base management fee, and (b) the average annual performance incentive fee earned by us, in each case during the 24-month period before termination.
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Investment Funds Management Agreements
We have investment management agreements with the Investment Funds pursuant to which we receive management fees consisting of base management fees and carried interest. The Investment Funds will continue in existence through December 31, 2016, subject to three one-year extensions by PCM at its discretion, in accordance with the terms of the limited liability company and limited partnership agreements that govern the Investment Funds.
Loan Servicing Agreements
PMT Loan Servicing Agreement
We have a loan servicing agreement with PMT, pursuant to which we provide loan servicing for its portfolio of residential mortgage loans. The servicing agreement provides for servicing fees payable to us based on the delinquency, bankruptcy and/or foreclosure status of the serviced loan or whether the underlying mortgage property has become REO.
· | The base servicing fee rates for distressed whole mortgage loans are charged based on a monthly per‑loan dollar amount, with the actual dollar amount for each loan based on the delinquency, bankruptcy and/or foreclosure status of such loan or whether the |
· | The base servicing fee rates for non‑distressed mortgage loans subserviced by us on PMT’s behalf are also calculated through a monthly per‑loan dollar amount, with the actual dollar amount for each mortgage loan based on whether the mortgage loan is a fixed‑rate or adjustable‑rate loan. The base servicing fee rates for mortgage loans subserviced on PMT’s behalf are $7.50 per month for fixed‑rate mortgage loans and $8.50 per month for adjustable rate mortgage loans. To the extent that these mortgage loans become delinquent, we are entitled to an additional servicing fee per mortgage loan falling within a range of $10 to |
· | We are required to provide a range of services and activities significantly greater in scope than the services provided in connection with a customary servicing arrangement because PMT does not have any |
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employees or infrastructure. For these services, we receive a supplemental servicing fee of $25 per month for each distressed whole |
· | We, on behalf of PMT, currently participate in the Home Affordable Modification Program (“HAMP”) of the U.S. Department of the Treasury and U.S. Department of Housing and Urban Development (“HUD”) (and other similar mortgage loan modification programs). HAMP establishes standard loan modification guidelines for “at risk” homeowners and provides incentive payments to certain participants, including mortgage loan servicers, for achieving modifications and successfully remaining in the program. The mortgage loan servicing agreement entitles us to retain any incentive payments made to |
We also remain entitled to market‑based fees and charges, including boarding and deboarding fees, liquidation and disposition fees, assumption, modification and origination fees and late charges relating to loans it serviceswe service for PMT.
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Investment Funds Loan Servicing Agreements
We have also entered into loan servicing agreements with the Investment Funds. Our servicing agreements with the Investment Funds generally provide for fee revenue, which varies depending on the type and quality of the loans being serviced. We are also entitled to certain customary market-based fees and charges. This arrangement was modified, effective January 1, 2012, with respect to one of the Investment Funds. At that time, we settled our accrued servicing fee rebate and amended our servicing agreement with such fund to charge scheduled servicing fees in place of the previous “at cost” servicing arrangement.
Mortgage Banking and Warehouse Services Agreement
We have also entered into a mortgage banking and warehouse services agreement (the “MBWS agreement”), pursuant to which we provide PMT with certain mortgage banking services, including fulfillment and disposition-related services, with respect to loans acquired by PMT from correspondent lenders, and certain warehouse lending services, including fulfillment and administrative services, with respect to loans financed by PMT for its warehouse lending clients.
The MBWS agreement provides for a fulfillment fee paid to us based on the type of mortgage loan that PMT acquires. The fulfillment fee is equal to a percentage of the UPB of mortgage loans purchased by PMT, with the addition of potential fee rate discounts applicable to PMT’s monthly purchase volume in excess of designated thresholds. We have also agreed to provide such services exclusively for PMT’s benefit, and we and our affiliates are prohibited from providing such services for any other third party.
Presently, the applicable fulfillment fee percentages are (i) 0.50% for conventional mortgage loans, (ii) 0.88% for loans saleable in accordance with the Ginnie Mae Mortgage‑Backed Securities Guide, (iii) 0.80% for the U.S. Department of the Treasury and HUD’s Home Affordable Refinance Program (“HARP”) mortgage loans with a loan‑to‑value ratio of 105% or less, (iv) 1.20% for HARP mortgage loans with a loan‑to‑value ratio of more than 105%, and (v)(iii) 0.50% for all other mortgage loans not contemplated above; provided, however, that we may, in our sole discretion, reduce the amount of the applicable fulfillment fee and credit the amount of such reduction to the reimbursement otherwise due as described below. This reduction may only be credited to the reimbursement applicable to the month in which the related mortgage loan was funded.
In the event that PMT purchases mortgage loans with ana total UPB in any month totaling moregreater than $2.5 billion and less than $5 billion, we have agreed to discount the amount of such fulfillment fees by reimbursing PMT an amount equal to the product of (i) 0.025%, (ii) the amount of UPB in excess of $2.5 billion, and (iii) the percentage of the total UPB relating to mortgage loans for which we collected fulfillment fees in such month. In the event PMT purchases mortgage loans with ana total UPB in any month greater than $5 billion, we have agreed to further discount the amount of fulfillment fees by reimbursing PMT an amount equal to the product of (i) 0.05%, (ii) the amount of UPB in excess of $5
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$5 billion, and (iii) the percentage of the total UPB relating to mortgage loans for which we collected fulfillment fees in such month.
PMT does not hold the Ginnie Mae approval required to issue Ginnie Mae MBS and act as a servicer. Accordingly, under the MBWS agreement, we currently purchase loans saleable in accordance with the Ginnie Mae Mortgage‑Backed Securities Guide “as is” and without recourse of any kind to PMT at its cost, less fees collected by PMT from the seller, plus accrued interest and a sourcing fee of three basis points.points, in each case on the UPB of the loan, less loan administrative fees collected by PMT from the seller.
In consideration for the mortgage banking services provided by us with respect to PMT’s acquisition of mortgage loans under PLS’s early purchase program, we are entitled to fees (i) accruing at a rate equal to $25,000$1,500 per year per early purchase facility administered by us, and (ii) in the amount of $50$35 for each mortgage loan PMT acquires. In consideration for the warehouse services provided by us with respect to mortgage loans that PMT finances for its warehouse lending clients, with respect to each facility, we are entitled to fees (i) accruing at a rate equal to $25,000$40,000 per year,annum for each of the first twenty (20) warehouse lending facilities active in any month and $10,000 per annum for each additional warehouse lending facility active in any month, and (ii) in the amount of $50 for each mortgage loan that PMT finances thereunder. Where PMT has entered into both an early purchase agreement and a warehouse lending agreement with the same client, we shall only be entitled to one $25,000 per year fee and, with respect to any mortgage loan that becomes subject to both such agreements, only one $50 per mortgage loan fee.
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The term of the MBWS agreement expires on February 1, 2017, subject to automatic renewal for additional 18‑month periods, unless terminated earlier in accordance with the terms of the agreement.
MSR Recapture Agreement
Pursuant to the terms of a MSR recapture agreement, as amended, if we refinance through our consumer direct lending business mortgage loans for which PMT previously held the MSRs, we are generally required to transfer and convey to one of PMT’s wholly‑owned subsidiaries, without cost to PMT, the MSRs with respect to new mortgage loans originated in those refinancings (or, under certain circumstances, other mortgage loans) that have a total UPB that is not less than 30% of the total UPB of all thesuch mortgage loans so originated.
Where the fair value of the aggregate MSRs to be transferred for the applicable month is less than $200,000, we may, at our option, pay cash to PMT in an amount equal to such fair market value instead of transferring such MSRs. The MSR recapture agreement expires, unless terminated earlier in accordance with the agreement, on February 1, 2017, subject to automatic renewal for additional 18‑month periods.
Spread Acquisition and MSR Servicing Agreements
Effective February 1, 2013, we entered into a master spread acquisition and MSR servicing agreement (the “2/1/13 Spread Acquisition Agreement”), pursuant to which we may sellpreviously sold to PMT or one of its wholly owned subsidiaries the rights to receive certain ESS from MSRs acquired by us from banks and other third party financial institutions. We arewere generally required to service or subservice the related mortgage loans for the applicable agency or investor. We only used the 2/1/13 Spread Acquisition Agreement for the purpose of selling ESS relating to Fannie Mae MSRs. The specific terms of each transaction under the 2/1/13 Spread Acquisition Agreement arewere subject to the terms thereof, as modified and supplemented by the terms of a confirmation executed in connection with such transaction.
To the extent we refinancerefinanced any of the mortgage loans relating to the ESS sold to PMT, the 2/1/13 Spread Acquisition Agreement containscontained recapture provisions requiring that we transfer to PMT, at no cost, the ESS relating to a certain percentage of the UPB of the newly originated mortgage loans. To the extent the fair value of the aggregate ESS to be transferred for the applicable month iswas less than $200,000, we may,were, at our option, permitted to pay cash to PMT in an amount equal to such fair value instead of transferring such ESS.
On December 30, 2013, we entered into a second master spread acquisition and MSR servicing agreement with PMT (the “12/30/13 Spread Acquisition Agreement”). The terms ofFebruary 29, 2016, the 12/30/parties terminated the 2/1/13 Spread Acquisition Agreement are substantially similar toand all amendments thereto. In connection with the termstermination of the 2/1/13 Spread Acquisition Agreement, except that we only intendreacquired from PMT all of its right, title and interest in and to sellall of the Fannie Mae ESS relatingpreviously sold by us to Ginnie Mae MSRs under the 12/30/PMT and then subject to such 2/1/13 Spread Acquisition Agreement.
To the extent we refinance any of the mortgage loans relating to the ESS it sells to PMT, the 12/30/13 Spread Acquisition Agreement also contains recapture provisions requiring that we transfer to PMT, at no cost, the ESS relating to a certain percentage of the UPB of the newly originated mortgage loans. However, under the 12/30/13 Spread Acquisition Agreement, in any month where the transferred ESS relating to newly originated Ginnie Mae mortgage loans is not equivalent to at least 90% of the product of the excess servicing fee rate and the UPB of the refinanced mortgage loans, we are also required to transfer additional ESS or cash in the amount of such shortfall. Similarly, in any month where the transferred ESS relating to modified Ginnie Mae mortgage loans is not equivalent to at least 90% of the product of the excess servicing fee rate and the UPB of the modified mortgage loans, the 12/30/13 Spread Acquisition Agreement contains provisions that require us to transfer additional ESS or cash in the amount of such shortfall. To the extent the fair value of the aggregate ESS to be transferred for the applicable month is less than $200,000, we may, at our option, pay cash to PMT in an amount equal to such fair value instead of transferring such ESS.
In connection with our entry into the 12/30/13 Spread Acquisition Agreement, we were also required to amend the terms of our loan and security agreement (the “LSA”) with Credit Suisse First Boston Mortgage Capital LLC (“CSFB”), pursuant to which we pledged to CSFB all of its rights and interests in the Ginnie Mae MSRs we own or acquire, and a separate acknowledgement agreement with respect thereto, by and among Ginnie Mae, CSFB and us. Separately, as a condition to permitting us to transfer to PMT the ESS relating to a portion of our pledged Ginnie Mae MSRs, CSFB required PMT to enter into a Security and Subordination Agreement (the “Security Agreement”), pursuant to which PMT pledged to CSFB its rights under the 12/30/13 Spread Acquisition Agreement and its interest in any ESS purchased thereunder. CSFB’s lien on the ESS remains subordinate to the rights and interests of Ginnie Mae pursuant to the provisions of the 12/30/13 Spread Acquisition Agreement and the terms of the acknowledgement agreement.
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The Security Agreement permits CSFB to liquidate PMT’s ESS along with the related MSRs to the extent there exists an event of default under the LSA, and it contains certain trigger events, including breaches of representations, warranties or covenants and defaults under other of PMT’s credit facilities, that would require us to either (i) repay in full the outstanding loan amount under the LSA or (ii) repurchase the ESS from PMT at fair value. To the extent we are unable to repay the loan under the LSA or repurchase the ESS, an event of default would exist under the LSA, thereby entitling CSFB to liquidate the ESS and the related MSRs. In the event the ESS is liquidated as a result of certain actions or inactions by us, PMT generally would be entitled to seek indemnity from us under the 12/30/13 Spread Acquisition Agreement.
On December 19, 2014, we entered into a thirdsecond master spread acquisition and MSR servicing agreement with PMT (the “12/19/14 Spread Acquisition Agreement”). The terms of the 12/19/14 Spread Acquisition Agreement are substantially similar to the terms of the 2/1/13 Spread Acquisition Agreement, except that we only intend to sell ESS relating to Freddie Mac MSRs under the 12/19/14 Spread Acquisition Agreement.
To the extent we refinance any of the mortgage loans relating to the ESS we sell to PMT, the 12/19/14 Spread Acquisition Agreement also contains recapture provisions requiring that we transfer to PMT, at no cost, the ESS relating to a certain percentage of the UPB of the newly originated mortgage loans. To the extent the fair market value of the aggregate ESS to be transferred for the applicable month is less than $200,000, we may, at our option, pay cash to PMT in an amount equal to such fair market value in lieu of transferring such ESS.
Note ReceivableOn February 29, 2016, we reacquired from PMT all of its right, title and interest in and to all of the Freddie Mae ESS previously sold by us to PMT and then subject to such 12/19/14 Spread Acquisition Agreement. The 12/19/14 Spread Acquisition Agreement remains in full force and effect.
On April 30, 2015, we entered into anamended and restated a third master spread acquisition and MSR servicing agreement with PMT (the “4/30/15 Spread Acquisition Agreement”). The terms of the 4/30/15 Spread Acquisition Agreement are substantially similar to the terms of the 2/1/13 Spread Acquisition Agreement and the 12/19/14 Spread Acquisition Agreement, except that we only intend to sell ESS relating to Ginnie Mae MSRs under the 4/30/15 Spread Acquisition Agreement. The primary purpose of the amendment and restatement to the 4/30/15 Spread Agreement was to evidence the ownership of the ESS under participation certificates and to otherwise incorporate the terms of previously executed amendments.
To the extent we refinance any of the mortgage loans relating to the ESS we sell to PMT, the 4/30/15 Spread Acquisition Agreement also contains recapture provisions requiring that we transfer to PMT, at no cost, the ESS relating to a lending facilitycertain percentage of the UPB of the newly originated mortgage loans. However, under the 4/30/15 Spread Acquisition Agreement, in any month where the transferred ESS relating to newly originated Ginnie Mae mortgage loans is not equivalent to at least 90% of the product of the excess servicing fee rate and the UPB of the refinanced mortgage loans, we are also required to transfer additional ESS or cash in the amount of such shortfall. Similarly, in any month where the transferred ESS relating to modified Ginnie Mae mortgage loans is not equivalent to at least 90% of the product of the excess servicing fee rate and the UPB of the modified mortgage loans, the 4/30/15 Spread Acquisition Agreement contains provisions that require us to transfer additional ESS or cash in the amount of such shortfall. To the extent the fair value of the aggregate ESS to be transferred for the applicable month is less than $200,000, we may, at our option, pay cash to PMT in an amount equal to such fair value instead of transferring such ESS.
In connection with our entry into the 4/30/15 Spread Acquisition Agreement, we were also required to (i) amend and restate the terms of a loan and security agreement (the “LSA”) with Credit Suisse First Boston Mortgage Capital LLC (“CSFB”), pursuant to which we maypledged to CSFB all of our rights and interests in the Ginnie Mae MSRs we own or acquire, enabling us to finance certain of oursuch MSRs and servicing advance receivables.receivables, and (ii) enter into a separate acknowledgement agreement with respect thereto, by and among Ginnie Mae, CSFB and us. Under the terms of the amendment and restatement to the LSA, the maximum loan amount was increased from $257 million to $407 million. The $150 million increase was implemented for the purpose of facilitating the financing of excess servicing spread (“ESS”)ESS by PMT. On November 10, 2015, the LSA was further amended and restated to convert the form of the borrowing into a repurchase agreement (as amended and restated, the “MSR Repo”). The aggregate loan amount outstanding under the lending facilityMSR Repo and relating to advances outstanding with PMT is guaranteed in full by PMT.
Separately, as a condition to permitting us to transfer to PMT the ESS relating to a portion of our pledged Ginnie Mae MSRs, CSFB required PMT to enter into a Security and Subordination Agreement (the “Security Agreement”), pursuant to which PMT pledged to CSFB its rights under the 4/30/15 Spread Acquisition Agreement and its interest in any ESS purchased thereunder. CSFB’s lien on the ESS remains subordinate to the rights and interests of Ginnie Mae pursuant to the provisions of the 4/30/15 Spread Acquisition Agreement and the terms of the acknowledgement agreement.
The Security Agreement permits CSFB to liquidate PMT’s ESS along with the related MSRs to the extent there exists an event of default under the MSR Repo, and it contains certain trigger events, including breaches of representations, warranties or covenants and defaults under other of PMT’s credit facilities, that would require us to either (i) repay in full the outstanding loan amount under the MSR Repo or (ii) repurchase the ESS from PMT at fair
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value. To the extent we are unable to repay the loan under the MSR Repo or repurchase the ESS, an event of default would exist under the MSR Repo, thereby entitling CSFB to liquidate the ESS and the related MSRs. In the event the ESS is liquidated as a result of certain actions 69 or inactions by us, PMT generally would be entitled to seek indemnity from us under the 4/30/15 Spread Acquisition Agreement.
Note Receivable from PMT
In connection with certain of the amendment to the lending facility,amendments and restatements described above, we entered into an underlying loan and security agreement with PMT, dated as of April 30, 2015, pursuant to which PMT may borrow up to $150 million from us for the purpose of financing ESS.ESS (the “Underlying LSA”).
The principal amount of the borrowings under the Loan and Security AgreementUnderlying LSA is based upon a percentage of the market value of the ESS pledged by PMT, subject to the maximum loan amount$150 million sublimit described above. Pursuant to the underlying loan and security agreement,Underlying LSA, PMT granted us a security interest in all of its right, title and interest in, to and under the ESS pledged to secure loans.the borrowings.
We have agreed with PMT in connection with the Underlying LSA that PMT is required to repay us the principal amount of such borrowings plus accrued interest to the date of such repayment, and we are required, in turn, to repay our lenderCSFB the corresponding amount under the lending facility.MSR Repo. Interest accrues on the note receivable from PMT isrelating to the Underlying LSA at a rate based on CSFB’s cost of funds under the MSR Repo. PMT was also required to pay us a fee for the structuring of the lending facilityUnderlying LSA in an amount equal to the portion of the corresponding fee paid by us to our lenderCSFB allocable to the increase in the maximum loan amount under the MSR Repo resulting from the ESS financing. The note matures on October 30, 2015 and interest accrues at a rate based on the lender’s cost of funds.
Loan Purchase Agreements
We have entered into a mortgage loan purchase agreement and a flow commercial mortgage loan purchase agreement with PMT. Currently, we use the mortgage loan purchase agreement for the purpose of selling to PMT prime jumbo residential mortgage loans originated by us through our consumer direct lending business. We use the flow commercial mortgage loan purchase agreement for the purpose of selling to PMT small balance commercial mortgage loans, including multifamily mortgage loans, originated by us as part of our commercial lending business. Each of the loan purchase agreements contains customary terms and provisions, including representations and warranties, covenants, repurchase remedies and indemnities. The purchase prices paid to us by PMT for such loans are market-based.
Reimbursement Agreement
In connection with the IPO of PMT’s common shares on August 4, 2009, we entered into an agreement with PMT pursuant to which PMT agreed to reimburse us for the $2.9 million payment that it made to the underwriters in such offering (the “Conditional Reimbursement”) if PMT satisfied certain performance measures over a specified period of time. Effective February 1, 2013, the parties amended the terms of the reimbursement agreement to provide for the reimbursement to us of the Conditional Reimbursement if PMT is required to pay us performance incentive fees under the management agreement at a rate of $10 in reimbursement for every $100 of performance incentive fees earned. The reimbursement of the Conditional Reimbursement is subject to a maximum reimbursement in any particular 12 month period of $1.0 million and the maximum amount that may be reimbursed under the agreement is $2.9 million.
72
In the event the termination fee is payable to us under the management agreement and we have not received the full amount of the reimbursements and payments under the reimbursement agreement, such amount will be paid in full. The term of the reimbursement agreement expires on February 1, 2019.
Debt Obligations
As described further above in “Liquidity and Capital Resources,” we currently finance certain of our assets through borrowings with major financial institution counterparties in the form of sales of mortgage loansassets under agreements to repurchase, a mortgage loan participation and sale agreement, two notes payable, ESS and a note payable secured by MSRs and loan servicing advances.capital lease. The borrower under each of these facilities is PLS with the exception of the revolving credit agreement which is classified as a note payable and allthe capital lease, in which the borrower is PennyMac. All PLS obligations thereunderas previously noted are guaranteed by Private National Mortgage Acceptance Company, LLC.PennyMac.
70
Under the terms of these agreements, PLS is required to comply with certain financial covenants, as described further above in “Liquidity and Capital Resources,” and various non-financial covenants customary for transactions of this nature. As of June 30, 2015,March 31, 2016, we were in compliance in all material respects with these covenants.
The agreements also contain margin call provisions that, upon notice from the applicable lender, require us to transfer cash or, in some instances, additional assets in an amount sufficient to eliminate any margin deficit. Upon notice from the applicable lender, we will generally be required to satisfy the margin call on the day of such notice or within one business day thereafter, depending on the timing of the notice.
In addition, the agreements contain events of default (subject to certain materiality thresholds and grace periods), including payment defaults, breaches of covenants and/or certain representations and warranties, cross-defaults, guarantor defaults, servicer termination events and defaults, material adverse changes, bankruptcy or insolvency proceedings and other events of default customary for these types of transactions. The remedies for such events of default are also customary for these types of transactions and include the acceleration of the principal amount outstanding under the agreements and the liquidation by our lenders of the mortgage loans or other collateral then subject to the agreements.
All of PLS’sthe borrowings discussed above have short-term maturities that expire as follows as of June 30, 2015:follows:
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| |
|
| Outstanding |
| Committed |
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| Outstanding |
| Total |
| Committed |
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| |||||
Counterparty (1) |
| Indebtedness (2) |
| Facility |
| Maturity Date (3) |
|
| indebtedness (2) |
| facility size |
| Facility |
| Maturity date |
| |||||
|
| (in thousands) |
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|
| (in thousands) |
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| |||||||||||
Bank of America, N.A. |
| $ | 488,048 |
| $ | 225,000 |
| January 29, 2016 |
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Bank of America, N.A. |
| $ | 195,959 |
| $ | 200,000 |
| January 29, 2016 |
| ||||||||||||
Credit Suisse First Boston Mortgage Capital LLC |
| $ | 488,906 |
| $ | 500,000 |
| October 30, 2015 |
|
| $ | 407,000 |
| $ | 407,000 |
| $ | 407,000 |
| September 27, 2016 |
|
Credit Suisse First Boston Mortgage Capital LLC |
| $ | 246,456 |
| $ | 407,000 |
| October 30, 2015 |
|
| $ | 468,639 |
| $ | 500,000 |
| $ | 300,000 |
| March 30, 2017 |
|
Bank of America, N.A. |
| $ | 491,620 |
| $ | 500,000 |
| $ | 225,000 |
| March 29, 2017 |
| |||||||||
Bank of America, N.A. Mortgage Loan and |
| $ | 246,636 |
| $ | 250,000 |
| $ | — |
| March 29, 2017 |
| |||||||||
Citibank, N.A. |
| $ | 129,306 |
| $ | 100,000 |
| $ | 150,000 |
| October 20, 2016 |
| |||||||||
Morgan Stanley Bank, N.A. |
| $ | 191,268 |
| $ | 125,000 |
| July 29, 2015 |
|
| $ | 162,163 |
| $ | 200,000 |
| $ | 125,000 |
| July 26, 2016 |
|
Citibank, N.A. |
| $ | 95,824 |
| $ | 50,000 |
| September 7, 2015 |
| ||||||||||||
Barclays Bank PLC |
| $ | 78,849 |
| $ | 100,000 |
| $ | 100,000 |
| December 2, 2016 |
| |||||||||
Barclays Bank PLC |
| $ | — |
| $ | 300,000 |
| $ | 100,000 |
| December 2, 2016 |
| |||||||||
Credit Suisse AG |
| $ | 50,000 |
| $ | 100,000 |
| $ | 100,000 |
| December 28, 2016 |
|
(1) | The borrowing with Credit Suisse First Boston Mortgage Capital LLC (with a committed amount of $407 million) is in the form of sales of participation certificates representing beneficial ownership in MSRs and ESS under agreements to repurchase. The borrowings with Credit Suisse First Boston Mortgage Capital LLC (with a committed amount of $300 million), Bank of America, N.A. (with a committed amount of $225 million), Citibank, N.A. and |
(2) | Represents outstanding indebtedness reduced by cash collateral as of |
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Quantitative and Qualitative Disclosures About Market Risk
Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices, real estate values and other market based risks. The primary market risks that we are exposed to are credit risk, interest rate risk, prepayment risk, inflation risk and market value risk.
73
The following sensitivity analyses are limited in that they were performed at a particular point in time; only contemplate the movements in the indicated variables; do not incorporate changes to other variables; are subject to the accuracy of various models and assumptions used; and do not incorporate other factors that would affect our overall
71
financial performance in such scenarios, including operational adjustments made by management to account for changing circumstances. For these reasons, the following estimates should not be viewed as earnings forecasts.
Mortgage Servicing Rights
The following tables summarize the estimated change in fair value of MSRs accounted for using the amortization method as of June 30, 2015,March 31, 2016, given several shifts in pricing spreads, prepayment speed and annual per-loan cost of servicing:
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| |
Pricing spread shift in % |
| -20% |
| -10% |
| -5% |
| +5% |
| +10% |
| +20% |
|
| -20% |
| -10% |
| -5% |
| +5% |
| +10% |
| +20% |
| ||||||||||||
|
| (dollar amounts in thousands) |
|
| (dollar amounts in thousands) |
| ||||||||||||||||||||||||||||||||
Fair value |
| $ | 621,582 |
| $ | 594,730 |
| $ | 582,103 |
| $ | 558,302 |
| $ | 547,077 |
| $ | 525,859 |
|
| $ | 797,314 |
| $ | 769,230 |
| $ | 755,918 |
| $ | 730,639 |
| $ | 718,629 |
| $ | 695,775 |
|
Change in fair value: |
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| |
$ |
| $ | 51,613 |
| $ | 24,761 |
| $ | 12,134 |
| $ | (11,667) |
| $ | (22,892) |
| $ | (44,110) |
|
| $ | 54,253 |
| $ | 26,169 |
| $ | 12,857 |
| $ | (12,423) |
| $ | (24,432) |
| $ | (47,287) |
|
% |
|
| 9.06 | % |
| 4.34 | % |
| 2.13 | % |
| (2.05) | % |
| (4.02) | % |
| (7.74) | % |
| 7.30 | % |
| 3.52 | % |
| 1.73 | % |
| (1.67) | % |
| (3.29) | % |
| (6.36) | % |
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| |
Prepayment speed shift in % |
| -20% |
| -10% |
| -5% |
| +5% |
| +10% |
| +20% |
|
| -20% |
| -10% |
| -5% |
| +5% |
| +10% |
| +20% |
| ||||||||||||
|
| (dollar amounts in thousands) |
|
| (dollar amounts in thousands) |
| ||||||||||||||||||||||||||||||||
Fair value |
| $ | 614,868 |
| $ | 591,683 |
| $ | 580,651 |
| $ | 559,623 |
| $ | 549,598 |
| $ | 530,456 |
|
| $ | 819,287 |
| $ | 779,462 |
| $ | 760,861 |
| $ | 726,017 |
| $ | 709,681 |
| $ | 678,968 |
|
Change in fair value: |
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| |
$ |
| $ | 44,899 |
| $ | 21,714 |
| $ | 10,682 |
| $ | (10,346) |
| $ | (20,371) |
| $ | (39,513) |
|
| $ | 76,226 |
| $ | 36,400 |
| $ | 17,799 |
| $ | (17,044) |
| $ | (33,381) |
| $ | (64,093) |
|
% |
|
| 7.88 | % |
| 3.81 | % |
| 1.87 | % |
| (1.82) | % |
| (3.57) | % |
| (6.93) | % |
| 10.26 | % |
| 4.90 | % |
| 2.40 | % |
| (2.29) | % |
| (4.49) | % |
| (8.63) | % |
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| |
Per-loan servicing cost shift in % |
| -20% |
| -10% |
| -5% |
| +5% |
| +10% |
| +20% |
|
| -20% |
| -10% |
| -5% |
| +5% |
| +10% |
| +20% |
| ||||||||||||
|
| (dollar amounts in thousands) |
|
| (dollar amounts in thousands) |
| ||||||||||||||||||||||||||||||||
Fair value |
| $ | 585,577 |
| $ | 577,773 |
| $ | 573,871 |
| $ | 566,067 |
| $ | 562,165 |
| $ | 554,362 |
|
| $ | 765,649 |
| $ | 754,355 |
| $ | 748,708 |
| $ | 737,415 |
| $ | 731,768 |
| $ | 720,474 |
|
Change in fair value: |
|
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|
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| |
$ |
| $ | 15,608 |
| $ | 7,804 |
| $ | 3,902 |
| $ | (3,902) |
| $ | (7,804) |
| $ | (15,608) |
|
| $ | 22,588 |
| $ | 11,294 |
| $ | 5,647 |
| $ | (5,647) |
| $ | (11,294) |
| $ | (22,588) |
|
% |
|
| 2.74 | % |
| 1.37 | % |
| 0.68 |
| % | (0.68) | % |
| (1.37) | % |
| (2.74) | % |
| 3.04 | % |
| 1.52 | % |
| 0.76 |
| % | (0.76) | % |
| (1.52) | % |
| (3.04) | % |
The following tables summarize the estimated change in fair value of MSRs accounted for using the fair value method as of June 30, 2015,March 31, 2016, given several shifts in pricing spreads, prepayment speed and annual per loan cost of servicing:
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| |
Pricing spread shift in % |
| -20% |
| -10% |
| -5% |
| +5% |
| +10% |
| +20% |
|
| -20% |
| -10% |
| -5% |
| +5% |
| +10% |
| +20% |
| ||||||||||||
|
| (dollar amounts in thousands) |
|
| (dollar amounts in thousands) |
| ||||||||||||||||||||||||||||||||
Fair value |
| $ | 629,725 |
| $ | 604,544 |
| $ | 592,682 |
| $ | 570,282 |
| $ | 559,699 |
| $ | 539,660 |
|
| $ | 636,809 |
| $ | 614,864 |
| $ | 604,457 |
| $ | 584,684 |
| $ | 575,286 |
| $ | 557,393 |
|
Change in fair value: |
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| |
$ |
| $ | 48,456 |
| $ | 23,275 |
| $ | 11,413 |
| $ | (10,987) |
| $ | (21,570) |
| $ | (41,609) |
|
| $ | 42,406 |
| $ | 20,462 |
| $ | 10,054 |
| $ | (9,718) |
| $ | (19,116) |
| $ | (37,010) |
|
% |
|
| 8.34 | % |
| 4.00 | % |
| 1.96 | % |
| (1.89) | % |
| (3.71) | % |
| (7.16) | % |
| 7.13 | % |
| 3.44 | % |
| 1.69 | % |
| (1.63) | % |
| (3.22) | % |
| (6.23) | % |
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|
|
|
|
|
|
| |
Prepayment speed shift in % |
| -20% |
| -10% |
| -5% |
| +5% |
| +10% |
| +20% |
|
| -20% |
| -10% |
| -5% |
| +5% |
| +10% |
| +20% |
| ||||||||||||
|
| (dollar amounts in thousands) |
|
| (dollar amounts in thousands) |
| ||||||||||||||||||||||||||||||||
Fair value |
| $ | 630,689 |
| $ | 605,076 |
| $ | 592,959 |
| $ | 569,983 |
| $ | 559,082 |
| $ | 538,355 |
|
| $ | 650,427 |
| $ | 621,226 |
| $ | 607,535 |
| $ | 581,802 |
| $ | 569,697 |
| $ | 546,866 |
|
Change in fair value: |
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| |
$ |
| $ | 49,419 |
| $ | 23,807 |
| $ | 11,690 |
| $ | (11,286) |
| $ | (22,187) |
| $ | (42,914) |
|
| $ | 56,024 |
| $ | 26,823 |
| $ | 13,132 |
| $ | (12,601) |
| $ | (24,706) |
| $ | (47,537) |
|
% |
|
| 8.50 | % |
| 4.10 | % |
| 2.01 | % |
| (1.94) | % |
| (3.82) | % |
| (7.38) | % |
| 9.43 | % |
| 4.51 | % |
| 2.21 | % |
| (2.12) | % |
| (4.16) | % |
| (8.00) | % |
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| |
Per-loan servicing cost shift in % |
| -20% |
| -10% |
| -5% |
| +5% |
| +10% |
| +20% |
|
| -20% |
| -10% |
| -5% |
| +5% |
| +10% |
| +20% |
| ||||||||||||
|
| (dollar amounts in thousands) |
|
| (dollar amounts in thousands) |
| ||||||||||||||||||||||||||||||||
Fair value |
| $ | 602,341 |
| $ | 591,805 |
| $ | 586,537 |
| $ | 576,001 |
| $ | 570,733 |
| $ | 560,197 |
|
| $ | 619,553 |
| $ | 606,978 |
| $ | 600,690 |
| $ | 588,115 |
| $ | 581,828 |
| $ | 569,253 |
|
Change in fair value: |
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|
|
|
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|
|
|
|
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| |
$ |
| $ | 21,072 |
| $ | 10,536 |
| $ | 5,268 |
| $ | (5,268) |
| $ | (10,536) |
| $ | (21,072) |
|
| $ | 25,150 |
| $ | 12,575 |
| $ | 6,288 |
| $ | (6,288) |
| $ | (12,575) |
| $ | (25,150) |
|
% |
|
| 3.63 | % |
| 1.81 | % |
| 0.91 | % |
| (0.91) | % |
| (1.81) | % |
| (3.63) | % |
| 4.23 | % |
| 2.12 | % |
| 1.06 | % |
| (1.06) | % |
| (2.12) | % |
| (4.23) | % |
7472
Excess Servicing Spread Financing
The following tables summarize the estimated change in fair value of our excess servicing spread financing accounted for using the fair value method as of June 30, 2015,March 31, 2016, given several shifts in pricing spreads and prepayment speed (decrease in the liabilities’ values increases net income):
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|
|
Pricing spread shift in % |
| -20% |
| -10% |
| -5% |
| +5% |
| +10% |
| +20% |
|
| -20% |
| -10% |
| -5% |
| +5% |
| +10% |
| +20% |
| ||||||||||||
|
| (dollar amounts in thousands) |
|
| (dollar amounts in thousands) |
| ||||||||||||||||||||||||||||||||
Fair value |
| $ | 378,190 |
| $ | 368,409 |
| $ | 363,698 |
| $ | 354,617 |
| $ | 350,239 |
| $ | 341,789 |
|
| $ | 339,260 |
| $ | 330,391 |
| $ | 326,128 |
| $ | 317,929 |
| $ | 313,984 |
| $ | 306,386 |
|
Change in fair value: |
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|
$ |
| $ | 19,087 |
| $ | 9,306 |
| $ | 4,596 |
| $ | (4,485) |
| $ | (8,864) |
| $ | (17,313) |
|
| $ | 17,285 |
| $ | 8,415 |
| $ | 4,153 |
| $ | (4,047) |
| $ | (7,992) |
| $ | (15,590) |
|
% |
|
| 5.32 | % |
| 2.59 | % |
| 1.28 | % |
| (1.25) | % |
| (2.47) | % |
| (4.82) | % |
|
| 5.40 | % |
| 2.60 | % |
| 1.30 | % |
| (1.30) | % |
| (2.50) | % |
| (4.80) | % |
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
Prepayment speed shift in % |
| -20% |
| -10% |
| -5% |
| +5% |
| +10% |
| +20% |
|
| -20% |
| -10% |
| -5% |
| +5% |
| +10% |
| +20% |
| ||||||||||||
|
| (dollar amounts in thousands) |
|
| (dollar amounts in thousands) |
| ||||||||||||||||||||||||||||||||
Fair value |
| $ | 394,010 |
| $ | 375,874 |
| $ | 367,327 |
| $ | 351,184 |
| $ | 343,557 |
| $ | 329,117 |
|
| $ | 355,167 |
| $ | 337,833 |
| $ | 329,731 |
| $ | 314,549 |
| $ | 307,428 |
| $ | 294,036 |
|
Change in fair value: |
|
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|
$ |
| $ | 34,907 |
| $ | 16,772 |
| $ | 8,224 |
| $ | (7,918) |
| $ | (15,545) |
| $ | (29,985) |
|
| $ | 33,191 |
| $ | 15,857 |
| $ | 7,755 |
| $ | (7,427) |
| $ | (14,548) |
| $ | (27,939) |
|
% |
|
| 9.72 | % |
| 4.67 | % |
| 2.29 | % |
| (2.20) | % |
| (4.33) | % |
| (8.35) | % |
|
| 10.30 | % |
| 4.90 | % |
| 2.40 | % |
| (2.30) | % |
| (4.50) | % |
| (8.70) | % |
Item 3. Quantitative and Qualitative Disclosures About Market Risk
In response to this Item 3, the information set forth on pages 7470 to 7672 of this Report is incorporated herein by reference.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. However, no matter how well a control system is designed and operated, it can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in our periodic reports.
Our management has conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report as required by paragraph (b) of Rule 13a-15 under the Exchange Act. Based on our evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this Report, to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the sixthree months ended June 30, 2015March 31, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
7573
From time to time, we may be involved in various legal proceedings, claims and actions arising in the ordinary course of business. As of June 30, 2015,March 31, 2016, we were not involved in any such legal proceedings, claims or actions that management believes would be reasonably likely to have a material adverse effect on us.
As of the date of this filing, except as noted below, thereThere have been no material changes from the risk factors set forth under Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014,2015, filed with the SEC on March 13, 2015. The following risk factor under “Risks Related to Our Mortgage Banking Segment – Regulatory Risks” has been revised as follows:10, 2016 and our Quarterly Reports on Form 10-Q filed thereafter.
We may be subject to certain banking regulations that may limit our business activities.
As of June 30, 2015, PNC Financial Services Group Inc. (“PNC”) owned approximately 21% of the outstanding voting common shares of BlackRock, Inc. Based on PNC’s interests in and relationships with BlackRock, Inc., BlackRock, Inc. is deemed to be a non-bank subsidiary of PNC. BlackRock, Inc. is an affiliate of BlackRock Mortgage Ventures, LLC, which is one of our largest equity holders. Due to these relationships, we are deemed to be a non-bank subsidiary of PNC, which is regulated as a financial holding company under the Bank Holding Company Act of 1956, as amended. As a non-bank subsidiary of PNC, we may be subject to certain banking regulations, including the supervision and regulation of the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Such banking regulations could limit the activities and the types of businesses that we may conduct. The Federal Reserve has broad enforcement authority over financial holding companies and their subsidiaries. The Federal Reserve could exercise its power to restrict PNC from having a non-bank subsidiary that is engaged in any activity that, in the Federal Reserve’s opinion, is unauthorized or constitutes an unsafe or unsound business practice, and could exercise its power to restrict us from engaging in any such activity. The Federal Reserve may also impose substantial fines and other penalties for violations that we may commit. To the extent that we are subject to banking regulation, we could be at a competitive disadvantage because some of our competitors are not subject to these limitations.
In addition, provisions of the Dodd-Frank Act referred to as the “Volcker Rule” prohibit or restrict bank holding companies and their affiliates from having an ownership interest in, sponsoring, and conducting certain transactions with certain investment funds, including hedge funds and private equity funds (collectively “covered funds”). The Volcker Rule also prohibits the purchase and sale of certain financial instruments for specified short-term purposes (proprietary trading), which affects certain hedging activities, unless the trading is permitted by an exemption, such as for risk-mitigating hedging purposes. The Volcker Rule applies to us by virtue of our affiliation with PNC through BlackRock. On December 10, 2013, the regulatory agencies responsible for enforcing the Volcker Rule issued implementing regulations that became effective April 1, 2014. While the Dodd-Frank Act provided that bank holding companies were required to conform their proprietary trading and covered funds activities by July 21, 2014, in connection with issuing the final Volcker Rule, the Federal Reserve extended the conformance period until July 21, 2015, except for investments in and relationships with covered funds that were in place prior to December 31, 2013. The Federal Reserve is permitted, by rule or order, to extend the conformance period for one year at a time, for a total of not more than three years. On December 18, 2014, the Federal Reserve issued an order that further extends until July 21, 2016 the conformance period only for the prohibitions and restrictions in connection with covered funds activities under the Volcker Rule. The Federal Reserve stated in the order that it intends to exercise its authority again next year and grant the final one-year extension in order to permit bank holding companies until July 21, 2017 to conform to the covered funds requirements of the Volcker Rule. The Volcker Rule limits our ability to sponsor or manage covered funds and to acquire and retain ownership interests in covered funds, and limits investments in certain covered funds by our employees, among other restrictions. We will comply with the applicable prohibitions and restrictions to the extent any of our entities has an ownership interest in, sponsors or advises a covered fund. These requirements could disadvantage us against those competitors that are not subject to the Volcker Rule in the ability to trade financial instruments and to manage covered funds.
76
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
None.On May 3, 2016, we, through our subsidiary, Private National Mortgage Acceptance Company, LLC (“PennyMac”), entered into Schedule Number 002 (the “Schedule”) pursuant to that certain Master Lease Agreement, dated as of December 9, 2015 (the “Master Lease”), with Banc of America Leasing & Capital, LLC (“BALC”). Pursuant to the terms of the Master Lease, we may borrow funds from BALC on an uncommitted basis for the purpose of financing equipment and/or leasehold improvements described and on the terms set forth in schedules from time to time. The Master Lease is guaranteed in full by our indirect controlled subsidiary, PennyMac Loan Services, LLC. Pursuant to the Schedule, PennyMac is financing equipment with an aggregate cost of approximately $12.7 million. The Schedule has a three-year term and interim rent and base rent is payable pursuant to the terms thereof. At the expiration of the three-year term, we are obligated to purchase the leased equipment on an as-is, where-is basis for a nominal amount. PennyMac has elected to treat the Master Lease as a capital lease obligation as defined in Item 303(a)(5)(ii)(C) of Regulation S-K (17 CFR 229.303(a)(5)(ii)(C)).
The foregoing description of the Schedule and the Master Lease does not purport to be complete and is qualified in its entirety by reference to the full text of the Schedule, which has been filed as an exhibit to this Report, and the full text of the Master Lease, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed on December 14, 2015..
7774
Exhibit |
| Exhibit Description |
3.1 |
| Amended and Restated Certificate of Incorporation of PennyMac Financial Services, Inc. (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013). |
|
|
|
3.2 |
| Amended and Restated Bylaws of PennyMac Financial Services, Inc. (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on August 19, 2013). |
|
|
|
4.1 |
| Specimen Class A Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Registrant’s Amendment No. 4 to Form S-1 Registration Statement as filed with the SEC on April 29, 2013). |
|
|
|
10.1 |
| Fourth Amended and Restated Limited Liability Company Agreement of Private National Mortgage Acceptance Company, LLC, dated as of May 8, 2013 (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013). |
|
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|
10.2 |
| Exchange Agreement, dated as of May 8, 2013, between PennyMac Financial Services, Inc. and Private National Mortgage Acceptance Company, LLC and the Company Unitholders (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013). |
|
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|
10.3 |
| Tax Receivable Agreement, dated as of May 8, 2013, between PennyMac Financial Services, Inc. Private National Mortgage Acceptance Company, LLC and each of the Members (incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013). |
|
|
|
10.4 |
| Registration Rights Agreement, dated as of May 8, 2013, between PennyMac Financial Services, Inc. and the Holders (incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013). |
|
|
|
10.5 |
| Stockholder Agreement, dated as of May 8, 2013, between PennyMac Financial Services, Inc. and BlackRock Mortgage Ventures, LLC (incorporated by reference to Exhibit 10.5 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013). |
|
|
|
10.6 |
| Stockholder Agreement, dated as of May 8, 2013, between PennyMac Financial Services, Inc. and HC Partners LLC (incorporated by reference to Exhibit 10.6 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013). |
|
|
|
10.7† |
| PennyMac Financial Services, Inc. 2013 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 14, 2013). |
|
|
|
10.8† |
| PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Restricted Stock Unit Award Agreement for Non-Employee Directors (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 16, 2013). |
|
|
|
10.9† |
| PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Restricted Stock Unit Award Agreement for Executive Officers (incorporated by reference to Exhibit 10.9 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended |
|
|
|
10.10† |
| PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Restricted Stock Unit Award Agreement for Other Eligible Participants (incorporated by reference to Exhibit 10.10 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended |
|
|
|
|
|
75
|
|
|
78
|
| PennyMac Financial Services, Inc. 2013 Equity Incentive Plan Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on June 17, 2013). |
|
|
|
|
| Form of PennyMac Financial Services, Inc. Indemnification Agreement (incorporated by reference to Exhibit 10.8 of the Registrant’s Amendment No. 2 to Form S-1 Registration Statement as filed with the SEC on April 5, 2013). |
|
|
|
|
| Employment Agreement, dated |
|
|
|
|
| Employment Agreement, dated |
|
|
|
|
| Mortgage Banking and Warehouse Services Agreement, effective as of February 1, 2013, by and between PennyMac Loan Services, LLC and PennyMac Corp. (incorporated by reference to Exhibit 10.9 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
|
|
|
|
| Amendment No. 1 to Mortgage Banking and Warehouse Services Agreement, dated as of March 1, 2013, by and between PennyMac Loan Services LLC and PennyMac Corp. (incorporated by reference to Exhibit 10.31 of the Registrant’s Amendment No. 1 to Form S-1 Registration Statement as filed with the SEC on March 26, 2013). |
|
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|
| Amendment No. 2 to Mortgage Banking and Warehouse Services Agreement, dated as of August 14, 2013, by and between PennyMac Loan Services, LLC and PennyMac Corp. (incorporated by reference to Exhibit 1.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on August 19, 2013). |
10.18 | Amendment No. 3 to Mortgage Banking and Warehouse Services Agreement, dated as of December 15, 2015, by and between PennyMac Loan Services, LLC and PennyMac Corp. (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on November 16, 2015). | |
|
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|
10.19 |
| Second Amended and Restated Flow Servicing Agreement, dated as of March 1, 2013, by and between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.30 of the Registrant’s Amendment No. 1 to Form S-1 Registration Statement as filed with the SEC on March 26, 2013). |
|
|
|
10.20 |
| Amendment No. 1 to Second Amended and Restated Flow Servicing Agreement, dated as of November 14, 2013, by and between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on November 20, 2013). |
|
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|
10.21 |
| Amendment No. 2 to Second Amended and Restated Flow Servicing Agreement, dated as of June 1, 2014, by and between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.21 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014). |
|
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|
10.22 |
| Amendment No. 3 to Second Amended and Restated Flow Servicing Agreement, dated as of December 11, 2014, by and between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.22 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014). |
|
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|
7976
10.23 |
| Amendment No. 4 to Second Amended and Restated Flow Servicing Agreement, dated as of March 31, 2015, by and between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.23 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015). |
|
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|
10.24 |
| Amendment No. 5 to Second Amended and Restated Flow Servicing Agreement, dated as of September 1, 2015, between PennyMac Operating Partnership, L.P. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.23 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015). |
10.25 | MSR Recapture Agreement, effective as of February 1, 2013, by and between PennyMac Loan Services, LLC and PennyMac Corp. (incorporated by reference to Exhibit 10.11 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). | |
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|
| Amendment No. 1 to MSR Recapture Agreement, dated as of August 1, 2013, by and between PennyMac Loan Services, LLC and PennyMac Corp. (incorporated by reference to Exhibit 10.21 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on October 1, 2013). |
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|
| Amended and Restated Management Agreement, dated as of February 1, 2013, by and among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.12 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
|
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|
| Amendment Number One to Amended and Restated Management Agreement, dated as of December 15, 2015, by and among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on December 18, 2015). | |
10.29 |
| Amended and Restated Underwriting Fee Reimbursement Agreement, dated as of February 1, 2013, by and among PennyMac Mortgage Investment Trust, PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.13 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
|
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|
| Master Spread Acquisition and MSR Servicing Agreement, by and between PennyMac Loan Services, LLC and PennyMac Operating Partnership, L.P., dated as of February 1, 2013 (incorporated by reference to Exhibit 10.26 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
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|
| Amendment No. 1 to Master Spread Acquisition and MSR Servicing Agreement, by and between PennyMac Loan Services, LLC and PennyMac Operating Partnership, L.P., dated as of September 30, 2013 (incorporated by reference to Exhibit 10.25 of the Registrant’s Form S-1/A Registration Statement as filed with the SEC on October 23, 2013). |
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| Amendment No. 2 to Master Spread Acquisition and MSR Servicing Agreement, dated as of November 14, 2013, by and between PennyMac Loan Services, LLC and PennyMac Operating Partnership, L.P. (incorporated by reference to Exhibit 10.27 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2013). |
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| Amendment No. 3 to Master Spread Acquisition and MSR Servicing Agreement, dated as of March 19, 2014, by and between PennyMac Loan Services, LLC and PennyMac Operating Partnership, L.P. (incorporated by reference to Exhibit 10.28 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014). |
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77
| ||
10.34 |
| Amendment No. 4 to Master Spread Acquisition and MSR Servicing Agreement, dated as of March 3, 2015, by and between PennyMac Loan Services, LLC and PennyMac Operating Partnership, L.P. (incorporated by reference to Exhibit 10.32 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015). |
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| Master Spread Acquisition and MSR Servicing Agreement, by and between PennyMac Loan Services, LLC and PennyMac Holdings, LLC dated as of December 30, 2013 (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K/A as filed with the SEC on March 21, 2014). |
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80
|
| Amendment No. 1 to Master Spread Acquisition and MSR Servicing Agreement, dated as of June 1, 2014, by and between PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.31 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014). |
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| Amendment No. 2 to Master Spread Acquisition and MSR Servicing Agreement, dated as of March 3, 2015, by and between PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.35 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015). |
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| Amended and Restated Master Spread Acquisition and MSR Servicing Agreement, dated as of April 30, 2015, by and between PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 6, 2015). |
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10.39 | Amendment No. 1 to Amended and Restated Master Spread Acquisition and MSR Servicing Agreement, dated as of August 26, 2015, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.37 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015). | |
10.40 | Amendment No. 2 to Amended and Restated Master Spread Acquisition and MSR Servicing Agreement, dated as of November 10, 2015, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.40 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). | |
10.41 |
| Master Spread Acquisition and MSR Servicing Agreement, dated as of December 19, 2014, among PennyMac Loan Services, LLC, PennyMac Operating Partnership, L.P., and PennyMac Holdings, LLC (incorporated by reference to Exhibit 1.01 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 24, 2014). |
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|
| Amendment No. 1 to Master Spread Acquisition and MSR Servicing Agreement, dated as of March 3, 2015, among PennyMac Loan Services, LLC, PennyMac Operating Partnership, L.P., and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.38 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015). |
|
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| |
|
| Amended and Restated Flow Servicing Agreement, by and between PNMAC Mortgage Co., LLC and PennyMac Loan Services, LLC, dated August 1, 2010 (incorporated by reference to Exhibit 10.14 of the Registrant’s Amendment No. 1 to Form S-1 Registration Statement as filed with the SEC on March 26, 2013). |
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| Amendment No. 1 to the Amended and Restated Flow Servicing Agreement, dated as of December 4, 2014, by and among PennyMac Loan Services, LLC and PNMAC Mortgage Co., |
78
|
|
|
|
| Second Amended and Restated Flow Servicing Agreement, dated as of August 1, 2008, as amended effective as of January 1, 2012, by and between PNMAC Mortgage Opportunity Fund Investors, LLC and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.15 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
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|
| Amendment No. 1 to the Second Amended and Restated Flow Servicing Agreement, dated as of December 5, 2014, by and among PennyMac Loan Services, LLC and PNMAC Mortgage Opportunity Fund Investors, |
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| Amended and Restated Flow Servicing Agreement, dated as of August 1, 2010, by and between PNMAC Mortgage Opportunity Fund, LP and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.27 of the Registrant’s Amendment No. 1 to Form S-1 Registration Statement as filed with the SEC on March 26, 2013). |
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| Amendment No. 1 to the Amended and Restated Flow Servicing Agreement, dated as of December 4, 2014, by and among PennyMac Loan Services, LLC and PNMAC Mortgage Opportunity Fund, |
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|
81
|
| Investment Management Agreement, as amended and restated May 26, 2011, by and between PNMAC Mortgage Opportunity Fund, L.P. and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.16 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
|
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|
|
| Investment Management Agreement, dated as of August 1, 2008, between PNMAC Mortgage Opportunity Fund Investors, LLC and PNMAC Capital Management, LLC (incorporated by reference to Exhibit 10.17 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
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|
| Master Repurchase Agreement, dated as of March 17, 2011, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.18 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
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|
| Amendment No. 1 to Master Repurchase Agreement, dated as of July 21, 2011, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibits 10.19 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013). |
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| Amendment No. 2 to Master Repurchase Agreement, dated as of March 23, 2012, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibits 10.19 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013). |
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| Amendment No. 3 to Master Repurchase Agreement, dated as of August 28, 2012, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibits 10.19 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013). |
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| Amendment No. 4 to Master Repurchase Agreement, dated as of January 3, 2013, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibits 10.19 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013). |
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79
|
| Amendment No. 5 to Master Repurchase Agreement, dated as of March 28, 2013, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibits 10.19 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013). |
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| Amendment No. 6 to Master Repurchase Agreement, dated as of January 31, 2014, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on February 6, 2014). |
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| Amendment No. 7 to Master Repurchase Agreement, dated as of March 27, 2014, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.44 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014). |
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| Amendment No. 8 to Master Repurchase Agreement, dated as of August 13, 2014, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.48 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014). |
82
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| Amendment No. 9 to Master Repurchase Agreement, dated as of January 30, 2015, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.49 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014). |
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| Amendment No. 10 to Master Repurchase Agreement, dated as of March 29, 2016, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC. | |
10.63 |
| Guaranty, dated as of March 17, 2011, by Private National Mortgage Acceptance Company, LLC in favor of Bank of America, N.A (incorporated by reference to Exhibit 10.50 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014). |
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| Master Repurchase Agreement, dated as of June 26, 2012, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.20 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
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|
| Amendment Number One to the Master Repurchase Agreement, dated as of December 31, 2012, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.21 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
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| Amendment Number Two to the Master Repurchase Agreement, dated April 17, 2013, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.40 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on October 1, 2013). |
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| Amendment Number Three to the Master Repurchase Agreement, dated June 25, 2013, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.41 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on October 1, 2013). |
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| Amendment Number Four to the Master Repurchase Agreement, dated July 25, 2013, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.42 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on October 1, 2013). |
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80
|
| Amendment Number Five to the Master Repurchase Agreement, dated February 5, 2014, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.50 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014). |
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| Amendment Number Six to the Master Repurchase Agreement, dated February 25, 2014, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.51 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014). |
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| Amendment Number Seven to the Master Repurchase Agreement, dated July 24, 2014, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.54 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014). |
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| Amendment Number Eight to the Master Repurchase Agreement, dated August 7, 2014, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.55 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014). |
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| Amendment Number Nine to the Master Repurchase Agreement, dated September 8, 2014, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.58 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014). |
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| Amendment Number Ten to the Master Repurchase Agreement, dated July 6, 2015, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.69 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015). |
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| Amendment Number Eleven to the Master Repurchase Agreement, dated August 3, 2015, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on August 5, 2015). |
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| Amendment Number Twelve to the Master Repurchase Agreement, dated September 7, 2015, by and between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.72 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015). | |
10.77 | Amendment Number Thirteen to the Master Repurchase Agreement, dated October 22, 2015, between PennyMac Loan Services, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on October 28, 2015). | |
10.78 |
| Guaranty Agreement, dated as of June 26, 2012, by Private National Mortgage Acceptance Company, LLC in favor of Citibank, N.A (incorporated by reference to Exhibit 10.61 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014). |
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| Second Amended and Restated Loan and Security Agreement, dated as of March 27, 2012, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.22 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on February 7, 2013). |
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| Amendment No. 1 to Second Amended and Restated Loan Security Agreement, dated as of December 12, 2012, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.23 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013). |
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10.81 |
| Amendment No. 2 to Second Amended and Restated Loan Security Agreement, dated as of March 22, 2013, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.23 of the Registrant’s Amendment No. 3 to Form S-1 Registration Statement as filed with the SEC on April 22, 2013). |
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| Amendment No. 3 to Second Amended and Restated Loan Security Agreement, dated as of December 30, 2013, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on January 3, 2014). |
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| Amendment No. 4 to Second Amended and Restated Loan Security Agreement, dated as of October 31, 2014 among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.66 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014). |
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| Third Amended and Restated Loan and Security Agreement, dated as of March 27, 2015, among Credit Suisse First Boston Mortgage Capital LLC and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on April 2, 2015). |
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| Amendment No. 1 to Third Amended and Restated Loan and Security Agreement, dated as of June 5, 2015, among Credit Suisse First Boston Mortgage Capital LLC and PennyMac Loan Services, |
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| Amendment No. 2 to Third Amended and Restated Loan and Security Agreement, dated as of July 27, 2015, among Credit Suisse First Boston Mortgage Capital LLC and PennyMac Loan Services, |
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| Amendment No. 3 to Third Amended and Restated Loan and Security Agreement, dated as of August 26, 2015, among Credit Suisse First Boston Mortgage Capital LLC and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.83 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015). | |
10.88 |
| Master Spread Participation Agreement, dated as of March 27, 2015, by and among PennyMac Loan Services, LLC and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.73 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015). |
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| Amendment No. 1 to Master Spread Participation Agreement, dated as of August 26, 2015, by and among PennyMac Loan Services, LLC and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.85 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015). | |
10.90 | Amended and Restated Master Spread Participation Agreement, dated as of November 10, 2015, by and among PennyMac Loan Services, LLC and PennyMac Loan Services, LLC as the Initial Participant (incorporated by reference to Exhibit 10.189 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). | |
10.91 |
| Loan and Security Agreement, dated as of April 30, 2015, among PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 6, 2015). |
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10.92 | Amendment No. 1 to Loan and Security Agreement, dated as of October 30, 2015, by and between PennyMac Loan Services, LLC and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.87 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015). | |
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| Amendment No. 3 to Loan and Security Agreement, dated as of December 15, 2015, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC, and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.93 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). | |
10.95 | Amendment No. 4 to Loan and Security Agreement, dated as of January 28, 2016, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC, and PennyMac Holdings, LLC (incorporated by reference to Exhibit 10.94 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). | |
10.96 | Amendment No. 5 to Loan and Security Agreement, dated as of March 31, 2016, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC, and PennyMac Holdings, LLC. | |
10.97 |
| Second Amended and Restated Guaranty, dated as of March 27, 2015, by Private National Mortgage Acceptance Company, LLC in favor of Credit Suisse First Boston Mortgage Capital LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on April 2, 2015). |
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| Third Amended and Restated Guaranty (Participation Certificates and Servicing), dated as of November 10, 2015, by Private National Mortgage Acceptance Company, LLC in favor of Credit Suisse First Boston Mortgage Capital LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on November 16, 2015). | |
10.99 | Master Repurchase Agreement (Participation Certificates and Servicing), dated as of November 10, 2015, among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on November 16, 2015). | |
10.100 |
| Amended and Restated Master Repurchase Agreement, dated as of May 3, 2013, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.36 of the Registrant’s Amendment No. 5 to Form S-1 Registration Statement as filed with the SEC on May 7, 2013). |
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| Amendment No. 1 to Amended and Restated Master Repurchase Agreement, dated as of September 5, 2013, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.47 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on October 1, 2013). |
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| Amendment No. 2 to Amended and Restated Master Repurchase Agreement, dated as of January 10, 2014, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.58 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014). |
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| Amendment No. 3 to Amended and Restated Master Repurchase Agreement, dated as of March 13, 2014, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.59 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014). |
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| Amendment No. 4 to Amended and Restated Master Repurchase Agreement, dated as of April 30, 2014, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on May 5, 2014). |
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| Amendment No. 5 to Amended and Restated Master Repurchase Agreement, dated as of May 22, 2014, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.65 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014). |
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| Amendment No. 6 to Amended and Restated Master Repurchase Agreement, dated as of June 3, 2014, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.66 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014). |
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| Amendment No. 7 to Amended and Restated Master Repurchase Agreement, dated as of October 31, 2014, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.75 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014). |
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| Amendment No. 8 to Amended and Restated Master Repurchase Agreement, dated as of December 23, 2014, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.76 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014). |
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| Amendment No. 9 to Amended and Restated Master Repurchase Agreement, dated as of October 30, 2015, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.98 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015). | |
10.110 | Amendment No. 10 to Amended and Restated Master Repurchase Agreement, dated as of November 10, 2015, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.108 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). | |
10.111 | Amendment No. 11 to Amended and Restated Master Repurchase Agreement, dated as of December 15, 2015, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.109 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). | |
10.112 | Amendment No. 12 to Amended and Restated Master Repurchase Agreement, dated as of January 28, 2016, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.110 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). | |
10.113 | Second Amended and Restated Master Repurchase Agreement, dated as of March 31, 2016, by and among Credit Suisse First Boston Mortgage Capital LLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on April 6, 2016). | |
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10.114 |
| Guaranty, dated as of August 14, 2009, by Private National Mortgage Acceptance Company, LLC in favor of Credit Suisse First Boston Mortgage Capital LLC (incorporated by reference to Exhibit 10.77 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014). |
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| Master Repurchase Agreement, dated as of July 2, 2013, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 1.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on July 8, 2013). |
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| Amendment Number One to the Master Repurchase Agreement, dated as of August 26, 2013, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.49 of the Registrant’s Form S-1 Registration Statement as filed with the SEC on October 1, 2013). |
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| Amendment Number Two to the Master Repurchase Agreement, dated as of January 28, 2014, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.63 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014). |
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| Amendment Number Three to the Master Repurchase Agreement, dated as of June 30, 2014, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.70 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014). |
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| Amendment Number Four to the Master Repurchase Agreement, dated as of June 29, 2015, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.98 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015). |
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| Amendment Number Five to the Master Repurchase Agreement, dated as of July 27, 2015, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on July 27, 2015). |
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| Amendment Number Six to the Master Repurchase Agreement, dated as of November 9, 2015, by and between PennyMac Loan Services, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.118 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). | |
10.122 |
| Guaranty Agreement, dated as of July 2, 2013, by Private National Mortgage Acceptance Company, LLC in favor of Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 1.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on July 8, 2013). |
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| Mortgage Loan Participation Purchase and Sale Agreement, dated as of August 13, 2014, by and among PennyMac Loan Services, LLC, Private National Mortgage Acceptance Company, LLC and Bank of America, N.A. (incorporated by reference to Exhibit 10.72 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014). |
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| Amendment No. 1 to Mortgage Loan Participation Purchase and Sale Agreement, dated as of January 30, 2015, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.84 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014). |
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| Amendment No. 2 to Mortgage Loan Participation Purchase and Sale Agreement, dated as of December 22, 2015, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.122 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). |
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10.126 | Amendment No. 3 to Mortgage Loan Participation Purchase and Sale Agreement, dated as of March 29, 2016, by and among Bank of America, N.A., PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC. | |
10.127 |
| Amended and Restated Guaranty, dated as of August 13, 2014, by Private National Mortgage Acceptance Company, LLC in favor of Bank of America, N.A. (incorporated by reference to Exhibit 10.73 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014). |
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| Mortgage Loan Purchase Agreement, dated as of September 25, 2012, by and between PennyMac Loan Services, LLC and PennyMac Corp. (incorporated by reference to Exhibit 10.124 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). | |
10.129 |
| Flow Sale Agreement, dated as of June 16, 2015, by and between PennyMac Corp. and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.104 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015). |
10.130 | Flow Commercial Mortgage Loan Purchase Agreement, dated as of December 1, 2015, by and between PennyMac Loan Services, LLC and PennyMac Corp. (incorporated by reference to Exhibit 10.126 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). | |
10.131 | Servicing Agreement, dated as of July 13, 2015, between PennyMac Corp., PennyMac Holdings, LLC, any other parties signing this Agreement as owner of Mortgage Loans listed in Schedule I and any New Owners, PennyMac Loan Services, LLC, and Midland Loan Services, a division of PNC Bank, National Association (incorporated by reference to Exhibit 10.127 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). | |
10.132 | Commercial Mortgage Servicing Oversight Agreement, dated as of December 15, 2015, among PennyMac Corp., PennyMac Holdings, LLC, and PennyMac Loan Services, LLC (incorporated by reference to Exhibit 10.128 of the Registrant’s Annual Report on Form 10-K for the quarter ended December 31, 2015). | |
10.133 | Master Repurchase Agreement, dated as of December 4, 2015, among Barclays Bank PLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 10, 2015). | |
10.134 | Mortgage Loan Participation Purchase and Sale Agreement, dated as of December 4, 2015, between PennyMac Loan Services, LLC and Barclays Bank PLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 10, 2015). | |
10.135 | Loan and Security Agreement, dated as of December 4, 2015, among PennyMac Loan Services, LLC, Private National Mortgage Acceptance Company, LLC and Barclays Bank PLC (incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 10, 2015). | |
10.136 | Amendment Number One to the Loan and Security Agreement, dated as of February 26, 2016, among Barclays Bank PLC, PennyMac Loan Services, LLC and Private National Mortgage Acceptance Company, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on March 3, 2016) | |
10.137 | Master Lease Agreement No. 30350-90000, dated as of December 9, 2015, among Private National Mortgage Acceptance Company, LLC and Banc of America Leasing & Capital, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 14, 2015). |
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10.138 | Addendum to Master Lease Agreement No. 30350-90000, dated as of December 9, 2015, among Private National Mortgage Acceptance Company, LLC and Banc of America Leasing & Capital, LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 14, 2015). | |
10.139 | Schedule Number 001 to Master Lease Agreement, dated as of December 9, 2015, among Private National Mortgage Acceptance Company, LLC and Banc of America Leasing & Capital, LLC (incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 14, 2015). | |
10.140 | Schedule Number 002 to Master Lease Agreement, dated as of May 4, 2016, among Private National Mortgage Acceptance Company, LLC and Banc of America Leasing & Capital, LLC. | |
10.141 | Guaranty, dated as of December 9, 2015, by PennyMac Loan Services, LLC in favor of Banc of America Leasing & Capital, LLC (incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 14, 2015). | |
10.142 | Credit Agreement, dated December 30, 2015, by and among Private National Mortgage Acceptance Company, LLC, the lenders that are parties thereto, Credit Suisse AG and Credit Suisse Securities (USA) LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 30, 2015). | |
10.143 | Collateral and Guaranty Agreement, dated December 30, 2015, by and among Private National Mortgage Acceptance Company, LLC, Credit Suisse AG, Cayman Islands Branch, PennyMac Financial Services, Inc., PNMAC Capital Management, LLC, PennyMac Loan Services, LLC and PNMAC Opportunity Fund Associates, LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K as filed with the SEC on December 30, 2015). | |
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31.1 |
| Certification of Stanford L. Kurland pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2 |
| Certification of Anne D. McCallion pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
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32.1* |
| Certification of Stanford L. Kurland pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
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32.2* |
| Certification of Anne D. McCallion pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
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| Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of | ||
* |
| The certifications attached hereto as Exhibits 32.1 and 32.2 are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall | ||
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† |
| Indicates management contract or compensatory plan or arrangement. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| PENNYMAC FINANCIAL SERVICES, INC. | |
| (Registrant) | |
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Dated: | By: | /S/ STANFORD L. KURLAND |
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| Stanford L. Kurland |
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| Chairman of the Board of Directors and Chief Executive Officer |
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Dated: | By: | /S/ ANNE D. |
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| Anne D. McCallion |
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| Chief Financial Officer |
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