Exhibit 99.1
| Media | Investors |
| Stephen Hagey | Christopher Oltmann |
| (805) 530-5817 | (818) 264-4907 |
PennyMac Financial Services, Inc. Reports
Fourth Quarter and Full-Year 2016 Results
Westlake Village, CA, February 2, 2017 – PennyMac Financial Services, Inc. (NYSE: PFSI) today reported net income of $113.8 million for the fourth quarter of 2016, on revenue of $289.3 million. Net income attributable to PFSI common stockholders was $22.7 million, or $1.00 per diluted share. Book value per share increased to $15.49, up from $14.41 at September 30, 2016.
Fourth Quarter 2016 Highlights
| · | | Pretax income of $129.4 million was down 7 percent from record results in the prior quarter, driven by continued strength in the Production segment and improved earnings contribution from the Servicing segment |
| · | | Production segment pretax income of $93.4 million, down 38 percent from the prior quarter’s record results, driven by lower interest rate lock commitments (IRLCs) and margins |
| o | | Total loan production activity of $22.1 billion in unpaid principal balance (UPB), up 7 percent from the prior quarter |
| o | | Record production volumes for both correspondent and consumer direct channels; $20.0 billion in UPB of correspondent production and $2.0 billion in UPB of consumer direct originations, up 6 percent and 22 percent, respectively, from the prior quarter |
| o | | IRLCs on correspondent government and consumer direct loans totaled $14.7 billion, down 10 percent from the prior quarter’s record levels |
| · | | Servicing segment pretax income of $35.1 million, compared with a pretax loss of $10.7 million in the prior quarter |
| o | | Results included a non-cash valuation gain in mortgage servicing rights (MSRs) of $151.6 million; losses from hedges and excess servicing spread (ESS) liability totaled $133.4 million |
| o | | Servicing segment pretax income excluding valuation-related changes was $24.6 million, up 150 percent from the prior quarter1 |
| o | | Servicing portfolio reached $194.2 billion in UPB, up 7 percent from September 30, 2016 |
1 Excludes changes in the fair value of MSRs, the ESS liability, and gains/(losses) on hedging derivatives which were $151.6 million, $(17.1) million, and $(116.3) million, respectively, and provision for credit losses on active loans of $(7.8) million, in the fourth quarter.
| · | | Investment Management segment pretax income of $0.4 million compared with pretax income of $0.2 million in the prior quarter |
| o | | Net assets under management were approximately $1.5 billion, essentially flat compared with September 30, 2016 |
Full-Year 2016 Highlights
| · | | Pretax income of $383.1 million, up 37 percent from the prior year and the highest level on record for PennyMac Financial |
| · | | Total net revenue of $931.9 million, up 31 percent from the prior year |
| · | | Loan production totaled $69.7 billion in UPB, an increase of 44 percent from the prior year, which included $6.4 billion in UPB of consumer direct production, an increase of 57 percent from the prior year |
| · | | Servicing portfolio reached $194.2 billion in UPB, up 21 percent from December 31, 2015, driven by organic additions from loan production |
“PennyMac Financial closed out a record year with outstanding earnings in the fourth quarter, driven by continued strength in our Production segment and improved contribution from our Servicing segment,” said Executive Chairman Stanford L. Kurland. “We were able to capitalize on the opportunities available during the year provided by a vibrant origination market with considerable refinance activity. We also made great strides in further building out the company’s leading mortgage origination and servicing platforms.”
The following table presents the contribution of PennyMac Financial’s Production, Servicing and Investment Management segments to pretax income:
| | Quarter ended December 31, 2016 | |
| | Mortgage Banking | | Investment | | | |
| | Production | | Servicing | | Total | | Management | | Total | |
| | (in thousands) | |
Revenue | | | | | | | | | | | | | | | | |
Net gains on mortgage loans held for sale at fair value | | $ | 103,413 | | $ | 24,519 | | $ | 127,932 | | $ | – | | $ | 127,932 | |
Loan origination fees | | | 39,572 | | | – | | | 39,572 | | | – | | | 39,572 | |
Fulfillment fees from PMT | | | 27,164 | | | – | | | – | | | – | | | 27,164 | |
Net servicing fees | | | – | | | 95,528 | | | – | | | – | | | 95,528 | |
Management fees | | | – | | | – | | | – | | | 5,583 | | | 5,583 | |
Carried Interest from Investment Funds | | | – | | | – | | | – | | | 36 | | | 36 | |
Net interest income (expense): | | | | | | | | | | | | | | | | |
Interest income | | | 16,026 | | | 8,309 | | | 24,335 | | | – | | | 24,335 | |
Interest expense | | | 11,638 | | | 20,586 | | | 32,224 | | | 13 | | | 32,237 | |
| | | 4,388 | | | (12,277) | | | (7,889) | | | (13) | | | (7,902) | |
Other | | | 508 | | | 198 | | | 706 | | | 115 | | | 821 | |
Total net revenue | | | 175,045 | | | 107,968 | | | 283,013 | | | 5,721 | | | 288,734 | |
Expenses | | | 81,675 | | | 72,897 | | | 154,572 | | | 5,305 | | | 159,877 | |
Income before provision for income taxes and non-segment activities | | | 93,370 | | | 35,071 | | | 128,441 | | | 416 | | | 128,857 | |
Non-segment activities(1) | | | | | | | | | | | | | | | 551 | |
Pre-tax income | | $ | 93,370 | | $ | 35,071 | | $ | 128,441 | | $ | 416 | | $ | 129,408 | |
| (1) | | Represents repricing Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement |
Production Segment
Production includes the correspondent acquisition of newly originated government-insured mortgage loans for PennyMac Financial’s own account, fulfillment services on behalf of PennyMac Mortgage Investment Trust (NYSE: PMT) and consumer direct lending.
PennyMac Financial’s loan production activity totaled $22.1 billion in UPB, of which $14.6 billion in UPB was for its own account, and $7.5 billion was fee-based fulfillment activity for PMT. IRLCs on correspondent government and consumer direct loans totaled $14.7 billion in UPB.
Production segment pretax income was $93.4 million, a decrease of 38 percent from the third quarter. Production revenue totaled $175.0 million, a decrease of 25 percent from the third quarter, primarily resulting from a 38 percent quarter-over-quarter decrease in net gains on mortgage loans held for sale, reflecting lower lock volumes and margins in both production channels compared to recent high levels in the third quarter. Third quarter results also included a $6.6 million benefit in provision for representations and warranties due to a change in estimate.
The components of net gains on mortgage loans held for sale are detailed in the following table:
| | Quarter ended | |
| | December 31, | | September 30, | | December 31, | |
| | 2016 | | 2016 | | 2015 | |
| | (in thousands) | |
Receipt of MSRs in loan sale transactions | | $ | 190,735 | | $ | 143,960 | | $ | 112,196 | |
Mortgage servicing rights recapture payable to PennyMac Mortgage Investment Trust | | | (2,535) | | | (1,690) | | | (1,993) | |
Provision for representations and warranties, net | | | (845) | | | 5,796 | | | (1,978) | |
Cash investment (1) | | | 29,038 | | | 26,855 | | | (7,885) | |
Fair value changes of pipeline, inventory and hedges | | | (88,461) | | | 7,200 | | | (21,604) | |
Net gains on mortgage loans held for sale | | $ | 127,932 | | $ | 182,121 | | $ | 78,736 | |
| | | | | | | | | | |
Net gains on mortgage loans held for sale by segment: | | | | | | | | | | |
Production | | $ | 103,413 | | $ | 166,506 | | $ | 65,893 | |
Servicing | | $ | 24,519 | | $ | 15,615 | | $ | 12,843 | |
| (1) | | Net of cash hedge expense |
PennyMac Financial performs fulfillment services for conventional conforming and jumbo loans acquired by PMT in its correspondent production business. These services include, but are not limited to: marketing; relationship management; the approval of correspondent sellers and the ongoing monitoring of their performance; reviewing loan data, documentation and appraisals to assess loan quality and risk; pricing; hedging and activities related to the subsequent sale and securitization of loans in the secondary mortgage markets for PMT. Fees earned from fulfillment of correspondent loans on behalf of PMT totaled $27.2 million in the fourth quarter, down slightly from $27.3 million in the third quarter. Fulfillment fee revenue was driven by continued strong acquisition volumes by PMT. The average fulfillment fee rate during the fourth quarter was 36 basis points, down from 38 basis points in the third quarter.
Production segment expenses were $81.7 million, a 1 percent decrease from the third quarter.
Servicing Segment
Servicing includes income from owned MSRs, in addition to subservicing and special servicing activities. Servicing segment pretax income was $35.1 million in the fourth quarter compared to a pretax loss of $10.7 million in the third quarter. Servicing segment revenues in the fourth quarter totaled $108.0 million, a 103 percent increase from the third quarter, primarily due to an increase in net loan servicing fees.
Net loan servicing fees totaled $95.5 million for the fourth quarter and included $127.5 million in servicing fees reduced by $50.2 million of amortization and realization of MSR cash flows. Amortization and realization of MSR cash flows decreased from elevated levels in the prior quarter, driven by lower expected prepayment activity partially offset by a larger MSR asset. Net loan servicing fees also included $151.6 million in MSR fair value gains and recovery of impairment for MSRs carried at lower of amortized cost or fair value, primarily reflecting the sharp rise in mortgage rates during the fourth quarter and expectations for lower prepayment activity in the future. In addition, net loan servicing fees included $116.3 million in hedging losses and $17.1 million in losses due to the change in fair value of the ESS liability. Net loan servicing fees also included $1.3 million in servicing activity fees related to a bulk sale of loans by PMT.
The following table presents a breakdown of net loan servicing fees:
| | Quarter ended | |
| | December 31, | | September 30, | | December 31, | |
| | 2016 | | 2016 | | 2015 | |
| | (in thousands) | |
Servicing fees(1) | | $ | 127,483 | | $ | 122,587 | | $ | 112,689 | |
Effect of MSRs: | | | | | | | | | | |
Amortization and realization of cash flows(2) | | | (50,204) | | | (56,637) | | | (44,505) | |
Change in fair value and provision for/recovery of impairment of MSRs carried at lower of amortized cost or fair value | | | 151,599 | | | (43,219) | | | 42,615 | |
Change in fair value of excess servicing spread financing | | | (17,061) | | | 4,107 | | | (6,864) | |
Hedging (losses) gains | | | (116,289) | | | 19,026 | | | (26,976) | |
Total amortization, impairment and change in fair value of MSRs | | | (31,955) | | | (76,723) | | | (35,730) | |
Net loan servicing fees | | $ | 95,528 | | $ | 45,864 | | $ | 76,959 | |
| (1) | | Includes contractually-specified servicing fees |
| (2) | | Includes realization of cash flows from the Mortgage Servicing Liability which was previously included in fair value changes. Prior periods have been adjusted accordingly. |
Servicing segment revenue also included $24.5 million in net gains on mortgage loans held for sale in the fourth quarter resulting from the securitization of reperforming government-insured and guaranteed loans, versus $15.6 million in the third quarter. These loans were previously purchased out of Ginnie Mae securitizations and brought back to performing status through PennyMac Financial’s successful servicing efforts, primarily with the use of loan modifications.
Servicing segment expenses totaled $72.9 million, a 14 percent increase from the third quarter, primarily resulting from increased provisions for losses on delinquent and defaulted government loans and EBO transaction-related expense. Such loss provisions are contemplated in valuation of the MSR asset prior to being recorded as a loss provision.
The total servicing portfolio reached $194.2 billion in UPB at December 31, 2016, an increase of 7 percent from the prior quarter end. Of the total servicing portfolio, prime servicing was $191.7 billion in UPB and special servicing was $2.6 billion in UPB. PennyMac Financial subservices and conducts special servicing for $60.9 billion in UPB, an increase of 9 percent from September 30, 2016, due to new correspondent conventional loan acquisitions by PMT. PennyMac Financial’s owned MSR portfolio grew to $129.2 billion in UPB, an increase of 6 percent over the prior quarter end, primarily resulting from the acquisition of government-insured mortgage loans in its correspondent channel and production activities in its consumer direct channel.
The table below details PennyMac Financial’s servicing portfolio UPB:
| | December 31, | | September 30, | | December 31, | |
| | 2016 | | 2016 | | 2015 | |
| | (in thousands) | |
Loans serviced at period end: | | | | | | | | | | |
Prime servicing: | | | | | | | | | | |
Owned | | | | | | | | | | |
Mortgage servicing rights | | | | | | | | | | |
Originated | | $ | 89,516,155 | | $ | 78,732,061 | | $ | 59,880,349 | |
Acquisitions | | | 39,660,951 | | | 42,580,927 | | | 50,722,355 | |
| | | 129,177,106 | | | 121,312,988 | | | 110,602,704 | |
Mortgage servicing liabilities | | | 2,097,234 | | | 1,717,859 | | | 806,897 | |
Mortgage loans held for sale | | | 2,101,283 | | | 2,945,465 | | | 1,052,485 | |
| | | 133,375,623 | | | 125,976,312 | | | 112,462,086 | |
Subserviced for Advised Entities | | | 58,305,410 | | | 53,247,024 | | | 43,963,378 | |
Total prime servicing | | | 191,681,033 | | | 179,223,336 | | | 156,425,464 | |
Special servicing: | | | | | | | | | | |
Subserviced for Advised Entities | | | 2,558,969 | | | 2,853,307 | | | 3,847,254 | |
Total loans serviced | | $ | 194,240,002 | | $ | 182,076,643 | | $ | 160,272,718 | |
| | | | | | | | | | |
Mortgage loans serviced: | | | | | | | | | | |
Owned | | | | | | | | | | |
Mortgage servicing rights | | $ | 129,177,106 | | $ | 121,312,988 | | $ | 110,602,704 | |
Mortgage servicing liabilities | | | 2,074,896 | | | 1,717,859 | | | 806,897 | |
Mortgage loans held for sale | | | 2,101,283 | | | 2,945,465 | | | 1,052,485 | |
| | | 133,353,285 | | | 125,976,312 | | | 112,462,086 | |
Subserviced | | | 60,886,717 | | | 56,100,331 | | | 47,810,632 | |
Total mortgage loans serviced | | $ | 194,240,002 | | $ | 182,076,643 | | $ | 160,272,718 | |
Investment Management Segment
PennyMac Financial manages PMT and two private Investment Funds for which it earns base management fees and may earn incentive compensation. Net assets under management were approximately $1.5 billion as of December 31, 2016, essentially flat compared with September 30, 2016.
Pretax income for the Investment Management segment was $0.4 million compared with pretax income of $0.2 million in the third quarter. Management fees, which include base management fees from PMT and the private Investment Funds, as well as any earned incentive fees from PMT, increased 1 percent from the prior quarter. Other revenue increased $113,000 quarter-over-quarter, driven by an increase in the value of PMT shares held by PennyMac Financial.
The following table presents a breakdown of management fees and carried interest:
| | Quarter ended | |
| | December 31, | | September 30, | | December 31, | |
| | 2016 | | 2016 | | 2015 | |
| | (in thousands) | |
Management fees: | | | | | | | | | | |
PennyMac Mortgage Investment Trust | | | | | | | | | | |
Base | | $ | 5,081 | | $ | 5,025 | | $ | 5,670 | |
Performance incentive | | | – | | | – | | | – | |
| | | 5,081 | | | 5,025 | | | 5,670 | |
Investment Funds | | | 502 | | | 496 | | | 659 | |
Total management fees | | | 5,583 | | | 5,521 | | | 6,329 | |
Carried Interest | | | 36 | | | 107 | | | (270) | |
Total management fees and Carried Interest | | $ | 5,619 | | $ | 5,628 | | $ | 6,059 | |
| | | | | | | | | | |
Net assets of Advised Entities: | | | | | | | | | | |
PennyMac Mortgage Investment Trust | | $ | 1,351,114 | | $ | 1,354,918 | | $ | 1,496,112 | |
Investment Funds | | | 197,550 | | | 201,802 | | | 231,744 | |
| | $ | 1,548,664 | | $ | 1,556,720 | | $ | 1,727,856 | |
Investment Management segment expenses totaled $5.3 million, a 2 percent decrease from the third quarter.
Consolidated Expenses
Total expenses for the fourth quarter were $159.9 million, a 5 percent increase from the third quarter. The increase in total expenses was primarily due to an increase in servicing expenses related to increased provisions for losses on delinquent and defaulted government loans and an increase in technology expense due to higher software fees. Higher expenses were partially offset by a decrease in compensation expense driven by lower employee incentive compensation.
Mr. Kurland concluded, “We are entering a more normalized mortgage market environment with the interest rate increases that began in the fourth quarter. While we expect a strong purchase origination market with increased volume over the 2016 levels, a reduction in refinance activity should result in a decrease in the overall mortgage origination market. PennyMac Financial has demonstrated the ability to react to market volatility in the past and operate successfully across different market environments. With the changes in the market, we are making adjustments required to maximize profitability in the current environment.”
Management’s slide presentation will be available in the Investor Relations section of the Company’s website at www.ir.pennymacfinancial.com beginning at 1:30 p.m. (Pacific Standard Time) on Thursday, February 2, 2017.
About PennyMac Financial Services, Inc.
PennyMac Financial Services, Inc. is a specialty financial services firm with a comprehensive mortgage platform and integrated business focused on the production and servicing of U.S. mortgage loans and the management of investments related to the U.S. mortgage market. PennyMac Financial Services, Inc. trades on the New York Stock Exchange under the symbol “PFSI.” Additional information about PennyMac Financial Services, Inc. is available at www.ir.pennymacfinancial.com.
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management’s beliefs, estimates, projections and assumptions with respect to, among other things, the Company’s financial results, future operations, business plans and investment strategies, as well as industry and market conditions, all of which are subject to change. Words like “believe,” “expect,” “anticipate,” “promise,” “plan,” and other expressions or words of similar meanings, as well as future or conditional verbs such as “will,” “would,” “should,” “could,” or “may” are generally intended to identify forward-looking statements. Actual results and operations for any future period may vary materially from those projected herein and from past results discussed herein. Factors which could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: the continually changing federal, state and local laws and regulations applicable to the highly regulated industry in which we operate; lawsuits or governmental actions that may result from any noncompliance with the laws and regulations applicable to our businesses; the mortgage lending and servicing-related regulations promulgated by the Consumer Financial Protection Bureau and its enforcement of these regulations; our dependence on U.S. government‑sponsored entities and changes in their current roles or their guarantees or guidelines; changes to government mortgage modification programs; the licensing and operational requirements of states and other jurisdictions applicable to the Company’s businesses, to which our bank competitors are not subject; foreclosure delays and changes in foreclosure practices; certain banking regulations that may limit our business activities; our dependence on the multifamily and commercial real estate sectors for future originations of 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 and our success in winning bids; changes in prevailing interest rates; increases in loan delinquencies and defaults; our reliance on PennyMac Mortgage Investment Trust (NYSE: PMT) as a significant source of financing for, and revenue related to, our mortgage banking business; any required additional capital and liquidity to support business growth that may not be available on acceptable terms, if at all; our obligation to indemnify third‑party purchasers or repurchase loans if loans that we originate, acquire, service or assist in the fulfillment of, fail to meet certain criteria or characteristics or under other circumstances; our obligation to indemnify PMT and the Investment Funds if its services fail to meet certain criteria or characteristics or under other circumstances; decreases in the returns on the assets that we select and manage for our clients, and our resulting management and incentive fees; the extensive amount of regulation applicable to our investment management segment; conflicts of interest in allocating our services and investment opportunities among us and our advised entities; the effect of public opinion on our reputation; our recent growth; our ability to effectively identify, manage, monitor and mitigate financial risks; our initiation of new business activities or expansion of existing business activities; our ability to
detect misconduct and fraud; and our ability to mitigate cybersecurity risks and cyber incidents. You should not place undue reliance on any forward-looking statement and should consider all of the uncertainties and risks described above, as well as those more fully discussed in reports and other documents filed by the Company with the Securities and Exchange Commission from time to time. The Company undertakes no obligation to publicly update or revise any forward-looking statements or any other information contained herein, and the statements made in this press release are current as of the date of this release only.
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| | December 31, | | September 30, | | December 31, | |
| | 2016 | | 2016 | | 2015 | |
| | (in thousands, except share amounts) | |
ASSETS | | | | | | | | | | |
Cash | | $ | 99,367 | | $ | 94,727 | | $ | 105,472 | |
Short-term investments at fair value | | | 85,964 | | | 58,749 | | | 46,319 | |
Mortgage loans held for sale at fair value | | | 2,172,815 | | | 3,127,377 | | | 1,101,204 | |
Derivative assets | | | 82,905 | | | 135,777 | | | 50,280 | |
Servicing advances, net | | | 348,306 | | | 306,150 | | | 299,354 | |
Carried Interest due from Investment Funds | | | 70,906 | | | 70,870 | | | 69,926 | |
Investment in PennyMac Mortgage Investment Trust at fair value | | | 1,228 | | | 1,169 | | | 1,145 | |
Mortgage servicing rights | | | 1,627,672 | | | 1,337,674 | | | 1,411,935 | |
Real estate acquired in settlement of loans | | | 1,418 | | | 1,996 | | | – | |
Furniture, fixtures, equipment and building improvements, net | | | 31,321 | | | 29,121 | | | 16,311 | |
Capitalized software, net | | | 11,205 | | | 8,361 | | | 3,025 | |
Note receivable from PennyMac Mortgage Investment Trust | | | 150,000 | | | 150,000 | | | 150,000 | |
Receivable from Investment Funds | | | 1,219 | | | 1,596 | | | 1,316 | |
Receivable from PennyMac Mortgage Investment Trust | | | 16,416 | | | 14,747 | | | 18,965 | |
Deferred tax asset | | | – | | | – | | | 18,378 | |
Loans eligible for repurchase | | | 382,268 | | | 197,819 | | | 166,070 | |
Other | | | 50,892 | | | 60,061 | | | 45,594 | |
Total assets | | $ | 5,133,902 | | $ | 5,596,194 | | $ | 3,505,294 | |
| | | | | | | | | | |
LIABILITIES | | | | | | | | | | |
Assets sold under agreements to repurchase | | $ | 1,735,114 | | $ | 2,491,366 | | $ | 1,166,731 | |
Mortgage loan participation and sale agreements | | | 671,426 | | | 782,913 | | | 234,872 | |
Notes payable | | | 150,942 | | | 110,619 | | | 61,136 | |
Obligations under capital lease | | | 23,424 | | | 20,700 | | | 13,579 | |
Excess servicing spread financing payableto PennyMac Mortgage Investment Trust at fair value | | | 288,669 | | | 280,367 | | | 412,425 | |
Derivative liabilities | | | 22,362 | | | 4,426 | | | 9,083 | |
Mortgage servicing liabilities at fair value | | | 15,192 | | | 13,045 | | | 1,399 | |
Accounts payable and accrued expenses | | | 134,611 | | | 106,684 | | | 89,915 | |
Payable to Investment Funds | | | 20,393 | | | 27,265 | | | 30,429 | |
Payable to PennyMac Mortgage Investment Trust | | | 170,036 | | | 165,264 | | | 162,379 | |
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement | | | 75,954 | | | 75,434 | | | 74,315 | |
Income taxes payable | | | 25,088 | | | 11,415 | | | – | |
Liability for loans eligible for repurchase | | | 382,268 | | | 197,819 | | | 166,070 | |
Liability for losses under representations and warranties | | | 19,067 | | | 18,473 | | | 20,611 | |
Total liabilities | | | 3,734,546 | | | 4,305,790 | | | 2,442,944 | |
| | | | | | | | | | |
STOCKHOLDERS' EQUITY | | | | | | | | | | |
Class A common stock—authorized 200,000,000 shares of $0.0001 par value; issued and outstanding, 22,426,779, 22,274,145 and 21,990,831 shares, respectively | | | 2 | | | 2 | | | 2 | |
Class B common stock—authorized 1,000 shares of $0.0001 par value; issued and outstanding, 49, 49 and 51 shares, respectively | | | – | | | – | | | – | |
Additional paid-in capital | | | 182,772 | | | 179,134 | | | 172,354 | |
Retained earnings | | | 164,549 | | | 141,805 | | | 98,470 | |
Total stockholders' equity attributable to PennyMac Financial Services, Inc. common stockholders | | | 347,323 | | | 320,941 | | | 270,826 | |
Noncontrolling interests in Private National Mortgage Acceptance Company, LLC | | | 1,052,033 | | | 969,463 | | | 791,524 | |
Total stockholders' equity | | | 1,399,356 | | | 1,290,404 | | | 1,062,350 | |
Total liabilities and stockholders’ equity | | $ | 5,133,902 | | $ | 5,596,194 | | $ | 3,505,294 | |
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| | Quarter ended | |
| | December 31, | | September 30, | | December 31, | |
| | 2016 | | 2016 | | 2015 | |
| | (in thousands, except earnings per share) | |
Revenue | | | | | | | | | | |
Net gains on mortgage loans held for sale at fair value | | $ | 127,932 | | $ | 182,121 | | $ | 78,736 | |
Mortgage loan origination fees | | | 39,572 | | | 34,621 | | | 20,969 | |
Fulfillment fees from PennyMac Mortgage Investment Trust | | | 27,164 | | | 27,255 | | | 12,855 | |
Net mortgage loan servicing fees: | | | | | | | | | | |
Mortgage loan servicing fees | | | | | | | | | | |
From non-affiliates | | | 102,671 | | | 98,865 | | | 90,081 | |
From PennyMac Mortgage Investment Trust | | | 11,696 | | | 11,039 | | | 11,880 | |
From Investment Funds | | | 389 | | | 770 | | | 720 | |
Ancillary and other fees | | | 12,727 | | | 11,913 | | | 10,008 | |
| | | 127,483 | | | 122,587 | | | 112,689 | |
Amortization, impairment and change in estimated fair value of mortgage servicing rights and excess servicing spread | | | (31,955) | | | (76,723) | | | (35,730) | |
Net mortgage loan servicing fees | | | 95,528 | | | 45,864 | | | 76,959 | |
Management fees: | | | | | | | | | | |
From PennyMac Mortgage Investment Trust | | | 5,081 | | | 5,025 | | | 5,670 | |
From Investment Funds | | | 502 | | | 496 | | | 659 | |
| | | 5,583 | | | 5,521 | | | 6,329 | |
Carried Interest from Investment Funds | | | 36 | | | 107 | | | (270) | |
Net interest expense: | | | | | | | | | | |
Interest income | | | 24,335 | | | 22,709 | | | 11,985 | |
Interest expense | | | 32,237 | | | 27,516 | | | 19,415 | |
| | | (7,902) | | | (4,807) | | | (7,430) | |
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust | | | 94 | | | (13) | | | 65 | |
Results of real estate acquired in settlement of loans | | | (82) | | | 42 | | | – | |
Other | | | 1,360 | | | 684 | | | (973) | |
Total net revenue | | | 289,285 | | | 291,395 | | | 187,240 | |
Expenses | | | | | | | | | | |
Compensation | | | 94,576 | | | 96,132 | | | 71,566 | |
Servicing | | | 29,363 | | | 22,177 | | | 12,979 | |
Technology | | | 11,009 | | | 9,733 | | | 7,059 | |
Loan origination | | | 6,961 | | | 6,471 | | | 4,763 | |
Professional services | | | 5,155 | | | 4,631 | | | 4,583 | |
Other | | | 12,813 | | | 12,973 | | | 9,057 | |
Total expenses | | | 159,877 | | | 152,117 | | | 110,007 | |
Income before provision for income taxes | | | 129,408 | | | 139,278 | | | 77,233 | |
Provision for income taxes | | | 15,568 | | | 16,976 | | | 8,327 | |
Net income | | | 113,840 | | | 122,302 | | | 68,906 | |
Less: Net income attributable to noncontrolling interest | | | 91,096 | | | 98,617 | | | 56,135 | |
Net income attributable to PennyMac Financial Services, Inc. common stockholders | | $ | 22,744 | | $ | 23,685 | | $ | 12,771 | |
| | | | | | | | | | |
Earnings per share | | | | | | | | | | |
Basic | | $ | 1.02 | | $ | 1.07 | | $ | 0.58 | |
Diluted | | $ | 1.00 | | $ | 1.06 | | $ | 0.58 | |
Weighted-average common shares outstanding | | | | | | | | | | |
Basic | | | 22,339 | | | 22,217 | | | 21,912 | |
Diluted | | | 76,970 | | | 76,355 | | | 76,132 | |
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| | | | | | | | | | |
| | Year ended December 31, | |
| | 2016 | | 2015 | | 2014 | |
| | (in thousands, except earnings per share) | |
| | | | | | | |
Revenue | | | | | | | | | | |
Net gains on mortgage loans held for sale at fair value: | | | | | | | | | | |
From non-affiliates | | $ | 539,872 | | $ | 328,551 | | $ | 174,861 | |
Recapture payable to PennyMac Mortgage Investment Trust | | | (8,092) | | | (7,836) | | | (7,837) | |
| | | 531,780 | | | 320,715 | | | 167,024 | |
Mortgage loan origination fees | | | 125,534 | | | 91,520 | | | 41,576 | |
Fulfillment fees from PennyMac Mortgage Investment Trust | | | 86,465 | | | 58,607 | | | 48,719 | |
Net mortgage loan servicing fees: | | | | | | | | | | |
Mortgage loan servicing fees: | | | | | | | | | | |
From non-affiliates | | | 385,633 | | | 290,474 | | | 173,005 | |
From PennyMac Mortgage Investment Trust | | | 50,615 | | | 46,423 | | | 52,522 | |
From Investment Funds | | | 2,583 | | | 2,636 | | | 6,425 | |
Ancillary and other fees | | | 46,910 | | | 43,139 | | | 26,469 | |
| | | 485,741 | | | 382,672 | | | 258,421 | |
Amortization, impairment and change in fair value of mortgage servicing rights | | | (324,198) | | | (156,939) | | | (70,165) | |
Change in fair value of excess servicing spread payable to PennyMac Mortgage Investment Trust | | | 23,923 | | | 3,810 | | | 28,663 | |
| | | (300,275) | | | (153,129) | | | (41,502) | |
Net mortgage loan servicing fees | | | 185,466 | | | 229,543 | | | 216,919 | |
Management fees: | | | | | | | | | | |
From PennyMac Mortgage Investment Trust | | | 20,657 | | | 24,194 | | | 35,035 | |
From Investment Funds | | | 2,089 | | | 4,043 | | | 7,473 | |
| | | 22,746 | | | 28,237 | | | 42,508 | |
Carried Interest from Investment Funds | | | 980 | | | 2,628 | | | 6,156 | |
Net interest expense: | | | | | | | | | | |
Interest income: | | | | | | | | | | |
From non-affiliates | | | 73,297 | | | 45,812 | | | 27,771 | |
From PennyMac Mortgage Investment Trust | | | 7,830 | | | 3,343 | | | — | |
| | | 81,127 | | | 49,155 | | | 27,771 | |
Interest expense: | | | | | | | | | | |
To non-affiliates | | | 83,605 | | | 43,172 | | | 23,965 | |
To PennyMac Mortgage Investment Trust | | | 22,601 | | | 25,365 | | | 13,292 | |
| | | 106,206 | | | 68,537 | | | 37,257 | |
Net interest expense | | | (25,079) | | | (19,382) | | | (9,486) | |
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust | | | 224 | | | (230) | | | (6) | |
Result of real estate acquired in settlement of loans | | | (82) | | | — | | | — | |
Other | | | 3,853 | | | 1,472 | | | 4,867 | |
Total net revenue | | | 931,887 | | | 713,110 | | | 518,277 | |
Expenses | | | | | | | | | | |
Compensation | | | 342,153 | | | 274,262 | | | 190,707 | |
Servicing | | | 85,857 | | | 68,085 | | | 48,430 | |
Technology | | | 35,322 | | | 25,164 | | | 15,439 | |
Loan origination | | | 22,528 | | | 17,396 | | | 9,554 | |
Professional services | | | 18,078 | | | 15,473 | | | 11,108 | |
Other | | | 44,866 | | | 33,537 | | | 20,006 | |
Total expenses | | | 548,804 | | | 433,917 | | | 295,244 | |
Income before provision for income taxes | | | 383,083 | | | 279,193 | | | 223,033 | |
Provision for income taxes | | | 46,103 | | | 31,635 | | | 26,722 | |
Net income | | | 336,980 | | | 247,558 | | | 196,311 | |
Less: Net income attributable to noncontrolling interest | | | 270,901 | | | 200,330 | | | 159,469 | |
Net income attributable to PennyMac Financial Services, Inc. common stockholders | | $ | 66,079 | | $ | 47,228 | | $ | 36,842 | |
| | | | | | | | | | |
Earnings per share | | | | | | | | | | |
Basic | | $ | 2.98 | | $ | 2.17 | | $ | 1.73 | |
Diluted | | $ | 2.94 | | $ | 2.17 | | $ | 1.73 | |
Weighted average common shares outstanding | | | | | | | | | | |
Basic | | | 22,161 | | | 21,755 | | | 21,250 | |
Diluted | | | 76,629 | | | 76,104 | | | 75,955 | |
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