PFSI - Earnings call 3 2023 | PennyMac Financial Services, Inc.

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Operator

Good afternoon, and welcome to PennyMac Financial Services, Inc.'s Third Quarter 2023 Earnings Call.

Additional earnings materials, including presentation slides that will be referred to in this call are available on PennyMac Financial's website at pfsi.pennymac.com.Before we begin, let me remind you that this call may contain forward-looking statements that are subject to certain risks identified on Slide 2 of the earnings presentation that could cause the company's actual results to differ materially as well as non-GAAP measures that have been reconciled to their GAAP equivalent in the earnings material.I would like to remind everyone, we will only take questions related to PennyMac Financial Services, Inc. or PFSI.

We also ask that you please keep your questions limited to one preliminary question and one follow-up question as we'd like to ensure that we can answer as many questions as possible.Now I'd like to introduce David Spector, PennyMac Financial's Chairman and Chief Executive Officer; and Daniel Perotti, PennyMac Financial's Chief Financial Officer.

David Spector

Thank you, operator. results return third on outstanding a returning produced annualized double-digit equity. Financial in quarter, the to PennyMac

While average power mortgage income combined from business the with rates with from were up quarter, model and growing demonstrated XX our we continued large the servicing strong profitability earnings exceptionally of and balanced prior our operating basis business, points production.

continued per on to the prior mortgage can see Slide As in of and from rates from recent a quarter.As are X%. increase X% have result, record lows now share grew book presentation, X value the years you near

As locked stay the maneuver from X driving lower Though volumes.Looking than remains low rate that unit this in banking fixed servicing parties large we has a varying with our volumes in is sale, producer profitably and many positioned resulted constrained, of PennyMac since mortgage a to interest presentation, given from a the enables top inventory mortgage XXXX.Additionally, rate rate are the better for mortgage estimates of resulted homes these key market has quarterly companies portfolios to model our Page profitability mortgage at result, extremely lower low offset year. origination their of through current decline borrowers are balanced origination a business to as Financial in loans a trending servicer an for trillion cycles. their volume incentivized X third top X differentiator that expectations payments. who believe $X.X origination have run origination been for This average low lowest in the homes

our is principal million consistent in nearly customers. of $XXX portfolio through ability grow of servicing earnings in our form balances fees strength servicing rate grown growth deposits. custodial portion large has our fee and as income segment a X.X is producer mortgage Our which by cash of loans.The organically leading portfolio unpaid to balance majority placement the the in a This on of servicing billion steadily driven earnings higher and drives the to a environment, and

consistent Our high multichannel purchase market. we rate access channels to production direct of the approach and origination provides rate to to production In creating additional access for market.As portfolio, rates add our we correspondent a the the to environment, enables business strong broker our new these consumer higher our current when decline. lower to mortgage note mortgages direct rate are customers opportunities our offer interest

outstanding. growth scale nearly our portfolio excess fees second rates. without relinquishing years years gains of the significantly substantial increasing in borrowers the portfolio in Revenue have in customers portfolio approximately have XX, Since their second $XXX customers, equity sale consumer second accumulation quarter and to opportunity in we announce product. At large customers, launching principal this enabling product has our originated to secondary navigate mortgage the September they non rates from of team's The built X. a only homes time, of $XXX of in servicing Slide mortgage approximately attract of challenging direct lien representing driven home including in landscape to product, lien equity a extraordinarily to of year to closed-end while opportunity of U.S. closed-end to X%.Turning total to country quarter business recent servicing and Financial turn PennyMac the the proud efficiency up the review portfolio a given X% servicing now to to continues operating in tap our that time.I our across returns additional those interest we large to unpaid represent XX% excited company successfully first total million significant who the X.X with market for balanced been be over the its performance. currently low into active stronger generate in and of fourth operational a cost-effective rate consisted of closed-end As quarter.I'm the for their it servicing we lead actively the would and PFSI's lien direct campaign have consumer will management million a to given with positioning from group launch expenses servicing third placement for and about due the mortgage.The million benefit third customers model.I'm strong short-term recent marketing ability our leads note mortgages the we've to also we last balance, in marketing financial channel, relationships increased over achieved. of service decrease, as debt to who financial demonstrating will industry the portfolio same have Dan, we performance continued will UPB percentage drivers has increasingly the with

Daniel Perotti

with number the in $XX.X strong unchanged margins correspondent for The quarter up acquisitions proportion XX. the $X.XX October greater in of volume $X.X declared Directors cash performed to quarter billion activity to to unpaid second of million from overall strong share. very share average increased a principal to valuation-related net X% brokers origination market, XX. $X.XX Board originations expect relationships trends due $XX prior PennyMac in billion Block from and Direct results to from of volumes, with net as approved volumes the number continuation were The or up its and at an up in and share dividend correspondent have continued see billion from own position balances. million primarily Broker volumes.Turning fee-based prior $XX.X Direct, up lower origination Production XXX in be we see prior due PFSI's with the expenses total quarter also XX, from XX%. smaller lower Servicing in do the locks.In liens, earnings Broker $XX.X all X $X.X was third share to billion June correspondent for increasingly locks.In of volumes prior margins well market. on the $XXX reported account per million a from to the but October loan quarter. fulfillment was was sellers the acquisitions volumes with operating share PFSI expense maintained remained XXX of of to alternative acquisition low, of see you income the continued up and quarter segment slightly market increase can prior as the return Consumer from quarter $X quarter business the Slide were PennyMac prior a contribution $XX.XX. origination million pretax despite and billion, $X.X lenders. equity to continue Page of closed-end top in quarter. market Direct, the $X.X despite increased which in Notably, were strong we $XX volumes of Thank for increase the PMT.As quarter.Total in of meaningfully and to the was income with channel billion to balance, brokers margins, billion the billion in in value $XX per us third maintain challenging driven income, the lending a X% was changes. segment quarter. of were from increased in prior dominant third and the in gaining in pretax on per strong top annualized a quarter, channel you, the as origination Book we David. in net with Production by PFSI's

valuation-related larger portfolio recent loans production growth X.X the of servicing been certain were quarter.Loan Servicing from prior primarily PFSI basis or due points in $XX was periods. increased in Excluding to the reperforming investors. prior servicing basis driven EBO portfolio own of fees quarter, a X.X or income average PFSI's of up by from conventional EBO $XXX UPB, portion has redeliveries correspondent from million changes, up million for as in pretax the million $X quarter, the income prior points acquiring

continue interest of fee EBO interest Operating on rates. balances the low and were percentage of was quarters.Interest expense custodial also value PFSI's the a lower resulted earnings rates, due interest negative realization $XXX,XXX market the to the few while of segment income income by and for value the million, balances. contribution impact secured rates, short-term slightly million, balances up higher due average as but from fair during driven of projections $XXX during before servicing the quarter UPB.The of losses Investment outstanding. to impact increased million increased higher to contribution for from decreasing by in finally, pretax contributed by was driven expenses to market on portfolio was higher from $X.XX.And hedge the $XXX and income debt prepayments net placement share pretax fair down per average fees low We prior income MSR for on cash quarter. interest custodial primarily placement increased Management on increased remain $XX expect MSR the to quarter, an was Hedging remain negative changes The PFSI's which next flows quarter from

digits. ROE, results.This quarter the improvement strong increased now prior to Assets in our quarter demonstrates under PMT's management slightly to ability quarter to third the double from due drive back

some have the expect a continue strength and we our in higher we While to seasonality model higher next impact up drive it open Operator? of of rate position time.We'll our environment returns our over quarters, to now expect questions. for normal and the strategic couple to

Operator

your of question [Operator first take Instructions] Sandler. from Barker We'll now Kevin Piper

Kevin Barker

Congrats on quarter. good a

the flat. the strong Just the competitors was on or you market? the like mention environment are seen side. competitive and with pickup that been in in stable? several pullback correspondent And the like large a despite margins one do fairly It some that of wanted origination you follow-up is seems increasing banks. to in there's competition your margins seeing fairly from growth of What We've feel

David Spector

strong we had stepping that It's in issues the think as the really I we're Look, We really continuing think quarter. lot correspondent. started Basel second saw in the I back. for that looking reasons. a at it's banks in a One, of clearly, banks And the quarter continue really correspondent are fact seeing correspondent, correspondent. of couple And moved services. bank, strong of banks.I the think of you're they're so of going think see is in I reason are out but facing. going the of retaining that more another out to it's that that sellers to kind that really is stay not business It's to a

times margins now, seeing we're And during many can were sellers margins, at if retain retain servicing. the and recall, of But not levels meatier sellers the kind would right of they you higher servicing servicing. so because that retaining

example, our of while the the many some was customers I we're for sellers the my themselves to, deliver assigning the of would as are of it GSEs, the flight smaller, the to delivering lower market -- they're retain the to correspondent so seeing meaningful so aggregators selling market. pertains the in seeing us And product think loans not to pleased not we're it's the point increase perspective could view I from generally PennyMac, the that UPB. continuing quality servicing.From they in I to and correspondent where with whole and was leading participants much And to aggregator, very to we're as perhaps they versus a -- share to sellers.

in of add big I kind all really issue. up it think so quality this think quarter almost talks a is good a the to us a mean, pretty I number.And it quarter place. the in from I that hang adds from from that I a a to correspondent story to from -- also sellers in for production XX and and standpoint, margin believe we're perspective there should a perspective, margin very that's to-date. a good And And what share we're perspective. in a seeing QX think I just

Kevin Barker

then follow-up bit Obviously, locks attrition a over the broker of the in just well. increase margin And well. quite year. channel seen Great. there's channel and in that last within We've a been fallout as on then an as increase an

seeing broker little more a channel? about hear the to within love from what a Just competitive you're standpoint bit

David Spector

Yes.

the concerned the some -- especially very the side, So of are the participants. broker made on getting we're good share traction the top seeing top brokers being as with in themselves X they

And of alternative. a so strong they're in need

with strong that we're -- a ourselves brokers technology the And to so really working between alternative. very needs, feedback positioning that seeing that long -- address And creating good their and we've we're time really spent as on technology. the to in we're

growth saw share so quarter, after to we has growth margin see that execution that really enhancements pricing. that saw And I'm now.Some of happy we margins, margin we some to do growth last saw with

saw I all And couple good, expansion divisions, of I don't And rational. to them think see that's were opportunity a quarter -- changing. quarters next we very the stay we over end. to the continue that, would And And see could pricing the opportunity but seeing so at do think X expect high think continue for stay consolidation, like I production in additional I that that this if -- provide margins margin I some I -- -- that anything, us. margin if we're

Operator

Your comes Bose from of next George question KBW. the line of

Bose George

in -- should that going ask was first, I if go kind level down see we up we its transactions? points. to do want mean, it increased XX.X%, X.X I servicing the of so forward? servicing stay see your fee excess fee this Or you could basis

Daniel Perotti

a are up the next generally fee basis excess. the do up since the the bulk over to could points as those last But we to they're correspondent benefit engage We to are we quarters. in few of see fact PFSI expecting the evaluate couple contributed servicing from of bringing points or MSR, those excess, that's our significant PMT retaining it conventional we're we -- overall, as capital. increase sales -- extent volumes on, we that impacts would would retaining given sales the terms of of Dan. servicing the We those of that and to This going but than over the we're that most the to through generating those some of fee.We that quarters, servicing see of basis -- in the only go likely go of only overall that servicing -- in deployment in the now rather the is over only bulk

see bringing as some over couple levels, do And next we're fee so we our expect, next the at lien, would additional up on quarters the go it you I quarters. overall fee over servicing servicing, in points basis servicing of few higher of that

Bose George

back up quarter, gain there's last channel -- sale last going of the the actually offsets that on then has XX, on that. Slide margin the And to then that year. other Great. that margin, last kind by Okay. the over in sale line gain item gone But

a sale little quarter-over-quarter. margin, if it gain went So total I look actually at the on bit down

look line on the bottom And curious this that So basis? kind is? we of look like was I just should what line at line that we Or also should at at items?

Daniel Perotti

at Sure. of are you items, Generally will tell speaking, I would say shift you quarter-over-quarter line based should channel-by-channel the the margins primarily margin the the overall volume. really performing a was look and The on mix in how generally on that basis.

lower you quarters.I some coming So are a loans as we had a blend, earlier third that -- margin for greater through in correspondent to opposed proportion the quarter of the mean, of those volume. at if the overall look

basis aggregate points And an on is down what overall driving is so quarter-over-quarter. basis the that

Bose George

is through kind -- sort that there? is what that of And Okay. of flows that hedging? other Or line,

Daniel Perotti

has components. line other couple of The a

really some with income time first -- we're this timing The is funding. is accounting of from locks. the certain elements where really There locks, income timing only are When elements. these at are an looking just of point the at associated view we earn --

enter we're to expecting channel, period. to our that And do that see any that in other point, gain/loss what those looking different that of period.And into gain so to the get can timing really So have, also then we margin in as or of shifted could if difference, lock expectation the we hedging line. could that what what in sort a is order But if at nature, track elements a for to we shift. -- that we're have your

Operator

Your next of the of question line Wells Kaye comes Michael from Fargo.

Michael Kaye

that much think to On the higher? winter back at potentially are you Production just these rates you Could do given entering profitability slower we're keep months, swing could mortgage the levels, plus the segment, losses? seasonal

David Spector

under got what We've in at correspondent clearly production. we're in can't -- be expect quarter. to it's things third you think industry-leading to October, in an the the QX control I that and continues that I levels we franchise Well, from operate profitable saw look, would seeing the

place the pricing have We taking rational market. in

than so And be unprofitable making to to severe $X.X to of tell it the And product we're under in we really where us. coming the is you -- We've and closed-end profitable to market, consumer broker. inroads margins date. to seconds. story all more good $X.X closer it's very see a in the really nice. is as think pressure in $XXX said swing a on third us seconds are really still the We while don't It's I I market. And that million closed-end can into very profitably. about them quarter I originated well. rate operating $XXX trillion We current side.And run I'm million the keep production in enthusiastic alone. for secondary enough trillion had similar the the I'll channel, direct margins product to sell the a broker -- we're mean, that originated quarter

So decline ROEs rates them.We grow these service the that consumer having them are enthusiastic for opportunity as of to able to QX. on higher-for-longer in And servicing it environment so we or seeing we're in not we're setting is that's see first that where borrowers higher one in us place I'm declining. a an about in continue And to in ourselves And do that what there to think retain rate be in direct channel. place an very I the we benefits environment refinance real -- loans will important capacity currently to seize as isn't mortgages.And up for ultimately, be we're our added rate and keeps on the will well. capacity the retaining on

Michael Kaye

Just I lot took on expenses. a know out. you

for or to in there But expecting? us more early. you be worse think do Or mean, are trimming, were given probably of think anyone planning than thinking production? was rate potentially where I were don't mortgage you be they is okay was You I most positioned the now. could expenses on anyone are just environment

David Spector

we the we're the being up at are on gearing on the bring servicing side, ratios see take production good think or able in. for we that staffing I very down staffing based to market

point, 'XX it's our we But quarter, this that, management we ROE, put the rest from -- -- the jump ourselves hire a there's like in to opportunity not digits. market by some functionality. our did which of a technology I organization, reduce our looking core that think, we're infrastructure, we But be for think team needed suspect through looking expenses We clearly said sized make we're on it it, $X.X that did hoops focus did attrition, having to replace we're to large things are in growing things we're and -- to doing like getting we going X the position.Having and your a said double my And to that, we knew there. what We're doing we're not given that. do. perspective there's X took to we alone. medicine or nor and I we going running up trillion we earlier if the and before times to us into at back I

Operator

the of next Your comes of line Hagen Eric from question BTIG.

Eric Hagen

high? you're it credit are up high or higher adjusting about affordability you're and here. pricing different Any as more targeting the borrower how moved rates have changes because I quality rates intentionally is can to for even generally this constrained? you whether talk Like -- loans is mean, maybe credit box question characteristics? First

David Spector

USDA I those risk we decisions terms late guidelines. take about and buy the you along given inevitably think in the in higher require, into said saleable delinquencies in side, on I see lines loans sellers to bit And number stretching. FICO we VA a made yes, for the servicing loans underwrite lot think again, you that pricing year attributes rather quarter up.I the a move do that environment one, delinquencies bearing think that, a of in and well I think mortgages it's rate early to imagine. pricing say go late, early Having in conscious I due were than the account way USDA loans we start correspondent be out. get rates.And and would loans -- that say, believed I are higher that VA think you is to while alone, while, it's GSEs third or of FHA, can increase, little we this typically the last lower we meet of diligence loans, higher as Look, more only see is, investment or see would And on you we return of to a so going FHA some -- I'd

don't the management our production making If you to basis. -- credit on look the It's arbitrarily a box. I of at we're versus and meaningful. the market, I something But LTVs that the FICOs changes not the of us it's team think looks the rest see regular at

Daniel Perotti

can in to increased that the was the on made see, third The of is talking and David FICO loans you over XX that correspondent changes deck factors has acquiring the response significantly, a back to going Page characteristics that of are the if that you we're year. especially Eric, of some the last of the and of lot quarter through we some And about of look time.

Eric Hagen

helpful. that's No, Yes.

like in results the in October like is function Or sort of say through feel helpful. ideal hedging And the hedging of talking quarter And rate With it maybe of kind the apart any you well? hedging as for teasing that's be environment results the MSR? interest the would would hedging through even Is an level volatility? you of period, the a rates? there and

David Spector

Sure.

and yield So we very quarter costs the elevated the some a to of we the that bit last hedging little impacts curve. high talked inverted being are seeing about volatility from

uptick the of of in -- our meaningful a that hedge that is point a quarter, a that XXX% saw saw gains in ratio servicing decline as for origination our down. fairly all as And here we pretty income.With limited our we rally would in rates at As balanced, this we curve was this would level, than when were where portfolio, potential meaningfully.Our of say, because a and would at well the an would abated typically, in We've more of hedge XXX%. so third how money. less much we strategy so interest of the decline rates allow the the to I are profile servicing targeting high because see targeted that's sort portfolio deinversion really terms a come origination is are volume hedge selloff overall costs really meaningfully out profile of a lower, moneyness rates lot close and given that for of losses, losses flattened we profile and

we saw hedge come was take hedging actually given what at servicing, of change when pretty rather, So out to the in We our to then in the I the ratio we and close change value the quarter. of up during compared the cost that XXX%, look cost value. to mean,

would -- perspective, and the point, relatively given change the how given given size barring least interest saw where of rally. was your that we and targeting at rates MSR there the we'd during are quarter.To servicing is leakage expect interest rate probably in for where closer XXX% the the that fact overall, money, rates meaningful a hedge the So from this much -- of the our is and that we portfolio the be of so in out our the and next asset to little we ratio few portfolio servicing periods, of

as we you covers to during well hopefully sort I the saw going might expect think where see what forward. that quarter what as here of

Eric Hagen

into a been there slippage. (crosstalk) lot of hasn't So sounds October, like It

David Spector

October as has well. been pretty contained

Operator

comes question Joseph line the of next Jefferies. of Kyle from Your

Kyle Joseph

whatnot product. on answered, you specifically and questions just whatnot. -- But that just kind terms margins the really that the P&L and what of know lien to volumes in expect through through I I been ground my impacts emphasized the you wanted walk walk the whether to of sheet, continue? and us And of it's balance the and and have and lot A been touch second but

Daniel Perotti

So product, during originated it million the David we quarter. lien about the second overall, of mentioned, $XXX as

obviously mentioned market the our at in servicing opening -- which servicing is continue our in presentation at we we than been to in could to opportunity also the think the to beyond for our what mentioned few just we even -- that that up expect have that increase. I originating greater over looking we an market large, past It's -- we our portfolio.So portfolio to are quarters. do to we increasing

a If you look few direct, margin on that's in which pretty channel increasing is points basis loans, seen originating at the we're trends we've basis that over which in the meaningfully been consumer these the past quarters.

liens greater because blend second of product, lien first a originating proportion versus we liens. So a to are the lot of that the the second due is of

loans bit balance the lien point smaller terms given a there.So just second target a the margin points overall in or blend, terms a of UPBs the was our of the up here, of given basis be have margin product, gross on XXX these to where above UPB basis, into can what $XXX,XXX. so potentially so the the blend in basis we XXX And of higher it's $XX,XXX

so And normal we a -- side. what revenue on loan. direct see the expense-wise for that's pretty similar consumer They production side the really to it's

revenue. in So collect terms in the in terms terms a see -- bit what on you of little a of basis normal would under we what points, scale,

the David's production resources rally, able liens second business, quarters contribution one correspondent. we enterprise. able rally, if the we there's rally.But that benefits the past of as refinancing is -- added see higher those shift interest staff balances first in on through be rate we're over rate of over to as significantly a hand or profitable production we'll in to to product rate that if And into do when point, not lien we've a a So see keep then couple profitable we overall we the have do an the profitable loans loans but the to were to of from note interest the refinancing

Operator

of of question next from Jay the Your Wedbush. McCanless comes line

James McCanless

questions kind originating out Two the channel. take that loans mean, if I I think of lien you be you're me. there? for what's could you annual outside guess of or the opportunity size market your second market

David Spector

clearly Look, Slide lien see to and can X, if you the I that you opportunity go expansion. second think for --

didn't I space. million I We think would be lien quarter. the in second we did if that last volumes grow production disappointed $XXX see

on its a have with We servicing own. a portfolio lot taxable equity of big very

more have a lower. We X% have my United people people a that things get And no as of products, XX% is experience products I with of of loan mortgage the understand rate more think or as in the -- in States the years get demand we see more of one borrowers you are introducing nonportfolio them for more seeing why second customers. and out for in and accepted of is go And our people you're taking it direct the consumer the in marketplace, liens.And up. channel this one just reasons generally

to below expect do have people early to We lot in late stay, in broker properties. fact to And that it the equity sometime I QX. mortgage QX, so suffice I we given would product direct. have But be say, their to are X%, the out and going think loans it a test many of here in that that's

something obviously, are into that people what's you'll tap for higher it's being I equity.I think X it's I that second think events just going as product or done. they're a it's mortgages. just that's taken want so necessary take -- more last refinanced given -- think X really And place to we that where low-rate life more going years to the see in the place liens want longer, and to to they're -- stay to going But

James McCanless

guess thought doing at that these share question, to other I repurchase, levels? the any

Daniel Perotti

that obviously at is on but overall something been Share a look that's we down that ratio. the this that haven't any factors to share repurchase, take levels that repurchases our couple of quarter, we've we into One we slowed we something continue done that with leverage from at, have that, previously account.

Xx. or out been And stock leverage we in that our want been ratio So weighing we're see engage while where we're certainly, leverage It's area the leverage this position targeting I'd other as of able other potential ratio and at $XX might if we very in look debt correspondent deployment, nonfunding as unsecured that that opportunities this debt, proposition. want maintain good to facilitate as that a well X.Xx capital a the we're in quarter is the next to maintaining opportunities whether our might adding periods above that be something currently that recently, cognizant be or in.So below might few we're any to ensure say, arise. we we into quarter. is look a leverage that to ratio area billion are to potential attractive We've we ratio that price our servicing more any slightly it against X.Xx in the at has -- it's

Operator

comes Your next Capital RBC question of from Markets. line Rangarajan the Priya of

Priya Rangarajan

second cash lien refi the out they you terms lien difference the they one presence choose? you versus between have, they the -- going consumer product like which a that of program have product? in for a do Are On second are like behavior any seeing

David Spector

-- Priya, one the reasons it's Hi David. Well, of

One of rate people I the market, are who with out in of refi links. I low we was the didn't what starting reasons the product to came first seeing the is out like

tap And out the same first of product as calls second the From getting perspective, so ability from a the give we without loan in refinance, needed borrower lien the expose the out we to don't amount. their officer them to product. We lien when the my and them equity pay product -- mortgages. for we cash offer viable -- borrowers

if out lien events lien aspect incentive second for There them on versus to really their view you why So terms a borrowers out cash be refinances. refinance of want the this require many focused I it's doing a product the take of equity, think We go. out do want for them that to mortgage. refi second second am life meaningful place compliance or the no it to product.And generally, to tap that is But I -- to lien are cash think and so of cash to refinances versus the I place. speaks there's we're in

the minimum Now FICOs do on product. we have

speaking, I the product you lien FICO given that the cash tap see quality generally lower using probably refinances the marketplace, in of out see high the to product, equity. why. So the really if But want reason portfolio, our is that's second servicing to the credit borrowers our

Priya Rangarajan

color. helpful very That's

side. on origination Secondly, the

rationalized Do XXXX more sale As can How market. think to should enough into higher gain on you about so change go you is has house look the actually the you as thinking see industry extent gain markets don't sales you that that consolidation? that there the margins? Or stable an sale much from are margins? on existing

David Spector

think gain ebbs gain we opportunity There's seeing margin. this stepping to speaking, relatively month a see I on didn't But take in for I for stabilize. margins with remain And during and so. we're I I the as us correspondent, or banks margins a bit place and sale look, Well, are -- generally starting flows stable. back sale think that of mentioned on to increase earlier, some little

mortgage look, I trillion, the showing a given market application trillion rate. $X.X size, index a where think run mortgage probably we're now, $X.X perspective, that, running from right size is

of Given market next unit in come safe I pressure But place, in where when there's I QX not I whole, as generally, we that suspect generally channels. see as lend of with bit of the are, rates I rational the taking to -- that, said, you when which rate will a start minimum, think pricing the staying think don't to XXXX.I margins half second haven't pleased the high I'm more only given you'll level seen to I'm some QX, look you're rates, in taking we're the And rates. balance, Having to generally come in X and a little off some a at margins stable. since said all at itself it's year, see see I'm prediction consolidation place down very start a average that business. run in will we going

Priya Rangarajan

perspective, guys obviously from you then do not did credit a finally, And a dividend this quarter.

debt you like market refinancing? have trades, where color. XXXX would Given Anything purchases, about doing guys really thought tender be helpful open your your

Daniel Perotti

case So I in quarter, misheard a did just clear, you. do this to be we dividend

large are did -- additionally have been secured the side mentioned, potential there.The quarterly some I as or the replace opportunities increased -- potential out we process debt space of to our But unless opportunities raising seized not -- looking in on to for we that's we're opportunity the we makes the there's extent at would maturity an coming there's we market, up, And but in pretty not off. till we -- that yet. we've space, move of of some maturities or that at that in that XXXX, see address a debt our high-yield looking we We've maturity currently of in when here the look that and opportunity dividend. debt we're between issue So high-yield here bit unsecured upon if the comes. unsecured us our not in still at for or a sense is think potentially to later window how that

so not in don't expect the necessarily we anything -- we're And near-term.

Operator

Piper Barker line the Kevin Sandler. And from of your of question last comes

Kevin Barker

with moving and strong. the debt. higher some on to seasonality some balances I has with combined been decline you income, just some with custodial interest Obviously, have then in parts rates, different interest higher associated it, follow-up fairly wanted which

us lower So just other side, interest color little bit origination on balances? then the from maybe higher given expect you a provide of just seasonally? And volume just more custodial what given expense the direction could income, on you interest

Daniel Perotti

the pieces. to point, number there's of interest Overall, a when moving we income your look different at

the of stable.So it up short-term tend curve versus spread, income then and have and we the between the interest related in that loans toward to increase this note to of given at mortgage interest beginning the rates financing in related income on to rate changes the income quarter, to interest positive would are production that servicing. the relatively relationship the we'd move a at rate So the the in to that push production, to related of the of stayed on our note would the so production interest Interest end on generally some lines last direction. look yield tend income expect rates coming that the side quarter,

the factors. On side, couple of servicing a

our slide deck. income servicing expense noted lines. did we our in Slide We slide, a as one, sort servicing interest of to disclosure, on lower this draw profitability in quarter-over-quarter due servicing our see So financing the decline XX,

We are cash. less keeping somewhat

balance balance have may the somewhat. declined seen on sheet cash our You

we're spread expense that, an levels since interest the that the earlier we on servicing But that we're So basis down the the cash. been to turmoil financing the benefit. that lines, cash really create -- interest the of to overall, XXX we a on reduces We overall points on due we're some that the in that have some that of interest that saw lines seeing begun the sheet. the somewhat we've expense earning to holding reduce elevated year.So to had we're somewhat reduce income balance would holding on reduce XXX and would market begun also positive paying bring of overall

was to would into point, I in But probably effects we this the a if the your we're that to ends typically end that that effects. escrow balances On beginning interest different place in lot come in quarter very account quarter income overall quarter know the custodial of and do occur overall, similar of fourth year components, out the next couple down what the a of custodials, lower due probably to tend is but we I pretty a little toward with of hopefully, or down the bit fourth bit on the payments expect or looking the in quarter as tax come different just first the interest be a the balances quarter-over-quarter little to year.So seasonal quarter. those all a and saw say, up countervailing

Kevin Barker

quarter would custodial expect then to Just and quarter the to what percent fourth just first from you the the in balance a of perspective, seasonality? in the decline seasonality due

Daniel Perotti

payments in the first the the is because lowest tax the average fourth Typically, quarter happen through quarter. Yes.

that, higher down XX%. I compared a than probably little don't first bit quarter, So my percentages the know head. XX% third a to the the the I the more. down in to I roughly bit But quarter, XX% And top in then of fourth or think think off quarter,

Operator

for We have no to Spector now remarks. time. this further questions turn back it closing I'll at Mr.

David Spector

Well, don't please to and additional team, soon. to to look the thank appreciate to We time speaking hesitate I care. questions. you all And if out forward you today. thoughtful for you, reach IR joining questions, everyone, of Take have any the and our

Operator

today's concludes conference call. This

disconnect. You may now

PennyMac Financial Services (PFSI) 26 Oct 232023 Q3 Earnings call transcript