PennyMac Financial Services, Inc. Reports Fourth Quarter and Full-Year 2023 Results

Rhea-AI Summary

PennyMac Financial Services, Inc. (NYSE: PFSI) reported a net loss of $36.8 million for Q4 2023, with a diluted loss per share of $(0.74) on revenue of $361.9 million. The company declared a Q4 cash dividend of $0.20 per share. Pretax loss was $54.2 million, including a non-recurring expense accrual of $158.4 million. The company issued a $125 million term loan, $750 million of senior notes, and redeemed $875 million in secured term notes. Total loan acquisitions and originations were $26.7 billion. The servicing segment saw a pretax loss of $95.5 million, with a provision for losses on active loans of $5.7 million. Net income for full-year 2023 was $144.7 million, down from $475.5 million in 2022.

Positive

• Declared a fourth quarter cash dividend of $0.20 per share
• Issued a 5-year $125 million term loan and $750 million of 6-year unsecured senior notes
• Total loan acquisitions and originations were $26.7 billion in UPB
• Net income for full-year 2023 was $144.7 million

Negative

• Net loss of $36.8 million for Q4 2023
• Pretax loss of $54.2 million, including a non-recurring expense accrual of $158.4 million
• Servicing segment pretax loss of $95.5 million

Insights

Financial Analyst

The reported net loss of $36.8 million by PennyMac Financial Services for the fourth quarter of 2023, contrasted with a pretax income of $126.8 million in the prior quarter, signals a significant reversal in profitability. This downturn is primarily attributed to a non-recurring expense accrual of $158.4 million due to arbitration concerning proprietary servicing software. Such a substantial one-time cost has a direct impact on the earnings per share, which fell to $(0.74) and thus can affect investor sentiment and stock price.

Moreover, the decrease in book value per share from $71.56 to $70.52 could be indicative of asset value decline or increased liabilities, a factor that is often scrutinized by shareholders as it reflects the intrinsic value of their investment. The issuance of $750 million in unsecured senior notes and the redemption of $875 million in secured term notes indicate refinancing activities that may adjust the company's debt profile, potentially affecting leverage ratios and interest expenses.

Despite the quarterly loss, the company's declaration of a $0.20 cash dividend might be seen as a positive signal to shareholders regarding the company's liquidity and commitment to returning value. However, the sustainability of such dividends may come into question if profitability does not improve.

Market Research Analyst

PennyMac's loan acquisitions and originations, including those for PennyMac Mortgage Investment Trust, have shown a mixed performance. While the total loan acquisitions and originations increased by 6 percent from the prior quarter, the consumer direct and broker direct interest rate lock commitments (IRLCs) have seen a decrease. This could be a reflection of market volatility and changing consumer behavior in the face of interest rate fluctuations. The increase in government correspondent IRLCs by 11 percent suggests a shift toward government-backed loans, which may be perceived as more secure in uncertain economic times.

On the other hand, the servicing segment's pretax loss of $95.5 million, compared to a pretax income in the prior quarter, is a significant concern. The servicing portfolio's growth to $607.2 billion in UPB, driven by production volumes, indicates an expansion in the company's servicing operations. However, the servicing segment's performance is heavily influenced by valuation-related and non-recurring items, such as the $370.7 million in MSR fair value losses, which were largely offset by hedging gains. These valuation adjustments are critical for understanding the segment's underlying performance and future profitability.

Legal Expert

The arbitration accrual of $158.4 million is a substantial legal expense that reflects the complexities and risks associated with proprietary technology disputes. While PennyMac Financial Services retains ownership and use of its servicing system, the financial impact of such legal matters is of particular interest to stakeholders. The outcome of this arbitration could have implications for future litigation risk and associated costs, which are important considerations for risk assessment and management.

Understanding the legal landscape and the implications of such disputes is essential for investors, as they can have material effects on a company's financial health and strategic options. Legal disputes can also distract management from core operations and may require additional resources to navigate, potentially affecting operational efficiency.

WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)-- PennyMac Financial Services, Inc. (NYSE: PFSI) today reported a net loss of $36.8 million for the fourth quarter of 2023, or $(0.74) per share on a diluted basis, on revenue of $361.9 million. Book value per share decreased to $70.52 from $71.56 at September 30, 2023.

PFSI’s Board of Directors declared a fourth quarter cash dividend of $0.20 per share, payable on February 23, 2024, to common stockholders of record as of February 13, 2024.

Fourth Quarter 2023 Highlights

• Pretax loss was $54.2 million, compared to pretax income of $126.8 million in the prior quarter and $67.7 million in the fourth quarter of 2022
  • Includes a non-recurring expense accrual of $158.4 million in the servicing segment as a result of the long-standing arbitration related to the development of our proprietary servicing software
• Issued 5-year $125 million term loan secured by Ginnie Mae MSR and servicing advances
• Issued $750 million of 6-year unsecured senior notes due in December 2029
• Redeemed $875 million in secured term notes due in 2025
• Production segment pretax income of $39.4 million, up from $25.2 million in the prior quarter and a pretax loss of $9.0 million in the fourth quarter of 2022
  • Total loan acquisitions and originations, including those fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT), were $26.7 billion in unpaid principal balance (UPB), up 6 percent from the prior quarter and 16 percent from the fourth quarter of 2022
  • Consumer direct interest rate lock commitments (IRLCs) were $1.6 billion in UPB, down 6 percent from the prior quarter and 5 percent from the fourth quarter of 2022
  • Broker direct IRLCs were $2.8 billion in UPB, down 7 percent from the prior quarter and up 38 percent from the fourth quarter of 2022
  • Government correspondent IRLCs totaled $11.2 billion in UPB, up 11 percent from the prior quarter and 5 percent from the fourth quarter of 2022
  • Conventional correspondent IRLCs for PFSI’s account totaled $10.0 billion in UPB, down 3 percent from the prior quarter and up 110 percent from the fourth quarter of 2022
  • Correspondent acquisitions of conventional conforming loans fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT) were $2.5 billion in UPB, down 10 percent from the prior quarter and 63 percent from the fourth quarter of 2022
• Servicing segment pretax loss was $95.5 million, compared to pretax income of $101.2 million in the prior quarter and $75.6 million in the fourth quarter of 2022
  • Pretax income excluding valuation-related and non-recurring items was $144.4 million, up 20 percent from the prior quarter due to lower operating expenses, higher servicing fee revenue and decreased realization of MSR cash flows, partially offset by higher net interest expense
  • Valuation-related and non-recurring items included:
    • $370.7 million in mortgage servicing rights (MSR) fair value losses largely offset by $294.8 million in hedging gains
    • $158.4 million arbitration accrual
      • Net impact on pretax income related to these items was $(234.3) million, or $(3.25) in earnings per share
    • $5.7 million provision for losses on active loans
  • Servicing portfolio grew to $607.2 billion in UPB, up 3 percent from September 30, 2023 driven by production volumes which more than offset prepayment activity
• Investment Management segment pretax income was $1.9 million, up from $0.4 million in the prior quarter and $1.2 million in the fourth quarter of 2022
  • Net assets under management (AUM) were $2.0 billion, essentially unchanged from September 30, 2023

Full-Year 2023 Highlights

• Net income of $144.7 million, down from $475.5 million in 2022
• Pretax income of $183.6 million, down from $665.2 million in 2022
• Total net revenue of $1.4 billion, down from $2.0 billion in 2022
• Repurchased 1.2 million shares of PFSI’s common stock for an approximate cost of $71 million
• Loan production of $99.4 billion in UPB, a decrease of 9 percent from 2022
• Servicing portfolio UPB of $607.2 billion at year end, up 10 percent from December 31, 2022

“PennyMac Financial produced an annualized operating return on equity of 15%¹ in the fourth quarter, marking the culmination of another outstanding year for the company and highlighting the strength of our balanced business model,” said Chairman and CEO David Spector. “The net loss in the fourth quarter was primarily driven by a one-time accrual related to the award in our long-running arbitration with Black Knight. While we disagree with the final ruling, we are very pleased to retain ownership of our industry-leading servicing system, as well as the ability to utilize it as we see fit to benefit our customers and stakeholders.”

Mr. Spector continued, “2023 was one of the more challenging origination markets in recent history, with industry volumes down approximately 40 percent from 2022 and unit originations at their lowest levels since 1990. However, Pennymac, through its multi-channel production platform, produced nearly $100 billion in UPB of mortgage loans, down only 9 percent from 2022, demonstrating both our strong access to the purchase market and our ability to profitably support our customers and business partners. These production volumes continued to drive the organic growth of our servicing portfolio, which ended the year at more than $600 billion in UPB, up 10 percent from the end of last year. Our scaled and growing servicing business is key to the success we have achieved, driving earnings in higher interest rate environments and future opportunities as our customer base continues to expand.”

Mr. Spector concluded, “I am extraordinarily proud of what we accomplished in 2023 and I am even more excited about PennyMac Financial’s future. Our long track record of strong operational and financial performance is unique in the mortgage industry and has been driven by the resilience of our balanced business model with industry-leading positions in both production and servicing, as well as our strong capital and risk management disciplines. I believe we are the most well-positioned company in the industry with proprietary, industry-leading technology, a strong balance sheet, and a growing population of servicing customers that stand to benefit from the products and services we offer to best fit their home ownership needs.”

¹ See page 15 for a reconciliation of non-GAAP items

The following table presents the contributions of PennyMac Financial’s segments to pretax income:

	Quarter ended December 31, 2023
	Mortgage Banking											Investment Management
	Production			Servicing				Total							Total
	(in thousands)
Revenue
Net gains on loans held for sale at fair value	$	124,267		$	24,498			$	148,765			$	-		$	148,765
Loan origination fees		38,059			-				38,059				-			38,059
Fulfillment fees from PMT		4,931			-				4,931				-			4,931
Net loan servicing fees		-			162,311				162,311				-			162,311
Management fees		-			-				-				7,252			7,252
Net interest income (expense):
Interest income		73,370			91,569				164,939				3			164,942
Interest expense		65,199			105,302				170,501				-			170,501
		8,171			(13,733	)			(5,562	)			3			(5,559	)
Other		1,055			2,698				3,753				2,427			6,180
Total net revenue		176,483			175,774				352,257				9,682			361,939
Expenses		137,126			271,300				408,426				7,743			416,169
Income before provision for income taxes	$	39,357		$	(95,526	)		$	(56,169	)		$	1,939		$	(54,230	)

Production Segment

The Production segment includes the correspondent acquisition of newly originated government-insured and certain conventional conforming loans for PennyMac Financial’s own account, fulfillment services on behalf of PMT and direct lending through the consumer direct and broker direct channels, including the underwriting and acquisition of loans from correspondent sellers on a non-delegated basis.

PennyMac Financial’s loan production activity for the quarter totaled $26.7 billion in UPB, $24.2 billion of which was for its own account, and $2.5 billion of which was fee-based fulfillment activity for PMT. Correspondent locks for PFSI and direct lending IRLCs totaled $25.6 billion in UPB, up 2 percent from the prior quarter and 34 percent from the fourth quarter of 2022.

Production segment pretax income was $39.4 million, up from pretax income of $25.2 million in the prior quarter and a pretax loss of $9.0 million in the fourth quarter of 2022. Production segment revenue totaled $176.5 million, essentially unchanged from the prior quarter and up 34 percent from the fourth quarter of 2022. The increase from the fourth quarter of 2022 was driven primarily by higher net gains on loans held for sale due to higher volumes and margins.

The components of net gains on loans held for sale are detailed in the following table:

	Quarter ended
	December 31, 2023				September 30, 2023				December 31, 2022
	(in thousands)
Receipt of MSRs	$	549,965			$	450,936			$	358,462
Mortgage servicing rights recapture payable to PennyMac Mortgage Investment Trust		(290	)			(500	)			(512	)
Provision for liability for representations and warranties, net		(1,002	)			(1,459	)			(444	)
Cash loss, including cash hedging results		(606,160	)			(251,245	)			(340,869	)
Fair value changes of pipeline, inventory and hedges		206,252				(46,358	)			85,276
Net gains on mortgage loans held for sale	$	148,765			$	151,374			$	101,913
Net gains on mortgage loans held for sale by segment:
Production	$	124,267			$	127,821			$	84,708
Servicing	$	24,498			$	23,553			$	17,205

PennyMac Financial performs fulfillment services for certain conventional conforming and jumbo loans acquired by PMT from non-affiliates in its correspondent production business. These services include, but are not limited to, marketing, relationship management, correspondent seller approval and monitoring, loan file review, underwriting, pricing, hedging and activities related to the subsequent sale and securitization of loans in the secondary mortgage markets for PMT.

Fees earned from the fulfillment of correspondent loans on behalf of PMT totaled $4.9 million in the fourth quarter, down 11 percent from the prior quarter and 60 percent from the fourth quarter of 2022. The quarter-over-quarter decrease was driven by lower conventional acquisition volumes for PMT’s account.

Net interest income in the fourth quarter totaled $8.2 million, up from $2.5 million in the prior quarter. Interest income totaled $73.4 million, up from $62.2 million in the prior quarter, and interest expense totaled $65.2 million, up from $59.6 million in the prior quarter, both due to higher volumes and higher average note rates on newly originated loans.

Production segment expenses were $137.1 million, down 8 percent from the prior quarter and 2 percent from the fourth quarter of 2022. Production expenses, net of loan origination expense, were lower than the prior quarter primarily due to lower compensation accruals related to financial performance.

Servicing Segment

The Servicing segment includes income from owned MSRs, subservicing and special servicing activities. The total servicing portfolio grew to $607.2 billion in UPB at December 31, 2023, an increase of 3 percent from September 30, 2023 and 10 percent from December 31, 2022. PennyMac Financial subservices and conducts special servicing for $232.7 billion in UPB. PennyMac Financial’s owned MSR portfolio grew to $374.6 billion in UPB, an increase of 5 percent from September 30, 2023 and 18 percent from December 31, 2022.

The table below details PennyMac Financial’s servicing portfolio UPB:

	December 31, 2023			September 30, 2023			December 31, 2022
	(in thousands)
Prime servicing:
Owned
Mortgage servicing rights and liabilities
Originated	$	352,790,614		$	333,372,910		$	295,032,674
Purchased		17,478,397			17,924,005			19,568,122
		370,269,011			351,296,915			314,600,796
Loans held for sale		4,294,689			5,181,866			3,498,214
		374,563,700			356,478,781			318,099,010
Subserviced for PMT		232,643,144			232,903,327			233,554,875
Total prime servicing		607,206,844			589,382,108			551,653,885
Special servicing - subserviced for PMT		9,925			10,780			20,797
Total loans serviced	$	607,216,769		$	589,392,888		$	551,674,682

Servicing segment pretax loss was $95.5 million compared to pretax income of $101.2 million in the prior quarter and $75.6 million in the fourth quarter of 2022. Servicing segment pretax loss in the fourth quarter included a non-recurring arbitration accrual of $158.4 million. Servicing segment net revenues totaled $175.8 million, down from $217.1 million in the prior quarter and $199.0 million in the fourth quarter of 2022. The quarter-over-quarter decrease was driven primarily by lower net loan servicing fees and net interest expense in the fourth quarter versus net interest income in the prior quarter.

Revenue from net loan servicing fees totaled $162.3 million, down from $185.4 million in the prior quarter primarily driven by increased net valuation related losses and partially offset by increased loan servicing fees due to a larger servicing portfolio and lower realization of cash flows. Net loan servicing fee revenues included $402.5 million in loan servicing fees, reduced by $164.3 million from the realization of MSR cash flows. Net valuation-related losses totaled $75.9 million, and included MSR fair value losses of $370.7 million driven by the decline in mortgage interest rates, and hedging gains of $294.8 million.

The following table presents a breakdown of net loan servicing fees:

	Quarter ended
	December 31, 2023				September 30, 2023				December 31, 2022
	(in thousands)
Loan servicing fees	$	402,484			$	387,934			$	321,949
Changes in fair value of MSRs and MSLs resulting from:
Realization of cash flows		(164,255	)			(177,775	)			(148,835	)
Change in fair value inputs		(370,705	)			398,871				82,587
Hedging gains (losses)		294,787				(423,656	)			(72,870	)
Net change in fair value of MSRs and MSLs		(240,173	)			(202,560	)			(139,118	)
Net loan servicing fees	$	162,311			$	185,374			$	182,831

Servicing segment revenue included $24.5 million in net gains on loans held for sale related to reperforming government-insured and guaranteed loans purchased out of Ginnie Mae securitizations, or EBOs. These gains were up from $23.6 million in the prior quarter and $17.2 million in the fourth quarter of 2022. These EBOs are previously delinquent loans that were brought back to performing status through PennyMac Financial’s successful servicing efforts.

Net interest expense totaled $13.7 million, versus net interest income of $7.2 million in the prior quarter and net interest expense of $2.7 million in the fourth quarter of 2022. Interest income was $91.6 million, down from $104.4 million in the prior quarter due to decreased placement fees on custodial balances from seasonally lower average balances. Interest expense was $105.3 million, up from $97.2 million in the prior quarter due to higher average balances of debt outstanding during the quarter.

Servicing segment expenses totaled $271.3 million and included a non-recurring arbitration accrual of $158.4 million. Excluding this accrual, servicing segment expenses were $112.9 million, down slightly from the prior quarter.

Investment Management Segment

PennyMac Financial manages PMT for which it earns base management fees and may earn incentive compensation. Net AUM was $2.0 billion as of December 31, 2023, essentially unchanged from September 30, 2023 and December 31, 2022.

Pretax income for the Investment Management segment was $1.9 million, up from $0.4 million in the prior quarter and $1.2 million in the fourth quarter of 2022. Base management fees from PMT were $7.3 million, essentially unchanged from the prior quarter and the fourth quarter of 2022. No performance incentive fees were earned in the fourth quarter.

The following table presents a breakdown of management fees:

	Quarter ended
	December 31, 2023			September 30, 2023			December 31, 2022
	(in thousands)
Management fees:
Base	$	7,252		$	7,175		$	7,307
Performance incentive		-			-			-
Total management fees	$	7,252		$	7,175		$	7,307
Net assets of PennyMac Mortgage Investment Trust	$	1,957,090		$	1,949,078		$	1,962,815

Investment Management segment expenses totaled $7.7 million, down 8 percent from the prior quarter and 11 percent from the fourth quarter of 2022.

Consolidated Expenses

Total expenses were $416.2 million. Excluding the non-recurring arbitration accrual of $158.4 million, total expenses were $257.8 million, down from $273.5 million in the prior quarter and $272.7 million in the fourth quarter of 2022.

Taxes

PFSI recorded a benefit from income tax of $17.4 million in the fourth quarter, due to the pretax loss.

Management’s slide presentation and accompanying material will be available in the Investor Relations section of the Company’s website at pfsi.pennymac.com after the market closes on Thursday, February 1, 2024. Management will also host a conference call and live audio webcast at 5:00 p.m. Eastern Time to review the Company’s financial results. The webcast can be accessed at pfsi.pennymac.com, and a replay will be available shortly after its conclusion.

About PennyMac Financial Services, Inc.

PennyMac Financial Services, Inc. is a specialty financial services firm focused on the production and servicing of U.S. mortgage loans and the management of investments related to the U.S. mortgage market. Founded in 2008, the company is recognized as a leader in the U.S. residential mortgage industry and employs approximately 3,900 people across the country. In 2023, PennyMac Financial’s production of newly originated loans totaled $99 billion in unpaid principal balance, making it the second largest mortgage lender in the nation. As of December 31, 2023, PennyMac Financial serviced loans totaling $607 billion in unpaid principal balance, making it a top five mortgage servicer in the nation. Additional information about PennyMac Financial Services, Inc. is available at pfsi.pennymac.com.

Forward-Looking Statements

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,” “project,” “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: interest rate changes; declines in real estate or significant changes in U.S. housing prices or activity in the U.S. housing market; 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 business; 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; the licensing and operational requirements of states and other jurisdictions applicable to our business, to which our bank competitors are not subject; foreclosure delays and changes in foreclosure practices; changes in macroeconomic and U.S. real estate market conditions; 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; our substantial amount of indebtedness; increases in loan delinquencies, defaults and forbearances; our reliance on PennyMac Mortgage Investment Trust (NYSE: PMT) as a significant contributor to our mortgage banking business; maintaining sufficient capital and liquidity and compliance with financial covenants; our obligation to indemnify third-party purchasers or repurchase loans if loans that we originate, acquire, service or assist in the fulfillment of, fail to meet certain criteria or characteristics or under other circumstances; our obligation to indemnify PMT if our services fail to meet certain criteria or characteristics or under other circumstances; decreases in investment management and incentive fees; conflicts of interest in allocating our services and investment opportunities among us and our advised entities; our ability to mitigate cybersecurity risks, cyber incidents and technology disruptions; the effect of public opinion on our reputation; our exposure to risks of loss and disruptions in operations resulting from adverse weather conditions, man-made or natural disasters, climate change and pandemics; our ability to effectively identify, manage and hedge our credit, interest rate, prepayment, liquidity and climate risks; our initiation or expansion of new business activities or strategies; our ability to detect misconduct and fraud; our ability to pay dividends to our stockholders; and our organizational structure and certain requirements in our charter documents. You should not place undue reliance on any forward- looking statement and should consider all of the uncertainties and risks described above, as well as those more fully discussed in reports and other documents filed by the Company with the Securities and Exchange Commission from time to time. The Company undertakes no obligation to publicly update or revise any forward-looking statements or any other information contained herein, and the statements made in this press release are current as of the date of this release only.

The Company’s earnings materials contain financial information calculated other than in accordance with U.S. generally accepted accounting principles (“GAAP”), such as pretax income and operating return on equity excluding valuation-related changes and a non-recurring legal accrual that provides a meaningful perspective on the Company’s business results since the Company utilizes this information to evaluate and manage the business. Non-GAAP disclosure has limitations as an analytical tool and should not be viewed as a substitute for financial information determined in accordance with GAAP.

PENNYMAC FINANCIAL SERVICES, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED)
	December 31, 2023			September 30, 2023			December 31, 2022
	(in thousands, except share amounts)
ASSETS
Cash	$	938,371		$	1,177,304		$	1,328,536
Short-term investment at fair value		10,268			5,553			12,194
Loans held for sale at fair value		4,420,691			5,186,656			3,509,300
Derivative assets		179,079			103,366			99,003
Servicing advances, net		694,038			399,281			696,753
Mortgage servicing rights at fair value		7,099,348			7,084,356			5,953,621
Investment in PennyMac Mortgage Investment Trust at fair value		1,121			930			929
Receivable from PennyMac Mortgage Investment Trust		29,262			27,613			36,372
Loans eligible for repurchase		4,889,925			4,445,814			4,702,103
Other		582,460			518,441			483,773
Total assets	$	18,844,563		$	18,949,314		$	16,822,584
LIABILITIES
Assets sold under agreements to repurchase	$	3,763,956		$	4,411,747		$	3,001,283
Mortgage loan participation purchase and sale agreements		446,054			498,392			287,592
Notes payable secured by mortgage servicing assets		1,873,415			2,673,402			1,942,646
Unsecured senior notes		2,519,651			1,782,689			1,779,920
Derivative liabilities		53,275			41,200			21,712
Mortgage servicing liabilities at fair value		1,805			1,818			2,096
Accounts payable and accrued expenses		449,896			306,821			347,908
Payable to PennyMac Mortgage Investment Trust		208,210			97,975			205,011
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement		26,099			26,099			26,099
Income taxes payable		1,042,886			1,059,993			1,002,744
Liability for loans eligible for repurchase		4,889,925			4,445,814			4,702,103
Liability for losses under representations and warranties		30,788			30,491			32,421
Total liabilities		15,305,960			15,376,441			13,351,535
STOCKHOLDERS' EQUITY
Common stock—authorized 200,000,000 shares of $0.0001 par value; issued and outstanding 50,178,963, 49,925,752, and 49,988,492 shares, respectively		5			5			5
Additional paid-in capital		24,287			11,475			-
Retained earnings		3,514,311			3,561,393			3,471,044
Total stockholders' equity		3,538,603			3,572,873			3,471,049
Total liabilities and stockholders’ equity	$	18,844,563		$	18,949,314		$	16,822,584

PENNYMAC FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
	Quarter ended
	December 31, 2023					September 30, 2023					December 31, 2022
	(in thousands, except per share amounts)
Revenues
Net gains on loans held for sale at fair value	$	148,765				$	151,374				$	101,913
Loan origination fees		38,059					37,701					28,019
Fulfillment fees from PennyMac Mortgage Investment Trust		4,931					5,531					12,184
Net loan servicing fees:
Loan servicing fees		402,484					387,934					321,949
Change in fair value of mortgage servicing rights and mortgage servicing liabilities		(534,960	)				221,096					(66,248	)
Mortgage servicing rights hedging results		294,787					(423,656	)				(72,870	)
Net loan servicing fees		162,311					185,374					182,831
Net interest (expense) income :
Interest income		164,942					166,552					107,322
Interest expense		170,501					156,863					104,028
		(5,559	)				9,689					3,294
Management fees from PennyMac Mortgage Investment Trust		7,252					7,175					7,307
Other		6,180					3,464					4,898
Total net revenues		361,939					400,308					340,446
Expenses
Compensation		135,138					156,909					133,699
Legal settlements		160,025					(171	)				(427	)
Technology		32,870					39,000					34,896
Servicing		28,907					13,242					37,424
Loan origination		26,879					28,889					25,002
Professional services		9,684					11,942					16,144
Occupancy and equipment		8,772					8,900					9,985
Marketing and advertising		4,180					4,632					3,751
Other		9,714					10,168					12,243
Total expenses		416,169					273,511					272,717
(Loss) income before (benefit from) provision for income taxes		(54,230	)				126,797					67,729
(Benefit from) provision for income taxes		(17,388	)				33,927					30,112
Net (loss) income	$	(36,842	)			$	92,870				$	37,617
(Loss) earnings per share
Basic	$	(0.74	)			$	1.86				$	0.75
Diluted	$	(0.74	)			$	1.77				$	0.71
Weighted-average common shares outstanding
Basic		49,987					49,902					50,164
Diluted		49,987					52,561					53,088
Dividend declared per share	$	0.20				$	0.20				$	0.20

PENNYMAC FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
	Year ended December 31,
		2023				2022				2021
	(in thousands, except earnings per share)
Revenue
Net gains on loans held for sale at fair value	$	545,943			$	791,633			$	2,464,401
Loan origination fees		146,118				169,859				384,154
Fulfillment fees from PennyMac Mortgage Investment Trust		27,826				67,991				178,927
Net loan servicing fees:
Loan servicing fees:
From non-affiliates		1,268,650				1,054,828				875,570
From PennyMac Mortgage Investment Trust		81,347				81,915				80,658
Other fees		134,949				91,894				118,884
		1,484,946				1,228,637				1,075,112
Change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread financing		(605,568	)			354,176				(416,943	)
Hedging results		(236,778	)			(631,484	)			(475,215	)
Net loan servicing fees		642,600				951,329				182,954
Net interest expense:
Interest income		632,924				294,062				300,169
Interest expense		637,777				335,427				390,699
		(4,853	)			(41,365	)			(90,530	)
Management fees from PennyMac Mortgage Investment Trust		28,762				31,065				37,801
Other		15,260				15,243				9,654
Total net revenue		1,401,656				1,985,755				3,167,361
Expenses
Compensation		576,964				735,231				999,802
Legal settlements		162,770				4,649				(4	)
Technology		143,152				139,950				141,426
Loan origination		114,500				173,622				330,788
Servicing		69,433				59,628				109,835
Professional services		60,521				73,270				94,283
Occupancy and equipment		36,558				40,124				35,810
Marketing and advertising		17,631				46,762				44,806
Other		36,496				47,272				51,432
Total expenses		1,218,025				1,320,508				1,808,178
Income before provision for income taxes		183,631				665,247				1,359,183
Provision for income taxes		38,975				189,740				355,693
Net income	$	144,656			$	475,507			$	1,003,490
Earnings per share
Basic	$	2.89			$	8.96			$	15.73
Diluted	$	2.74			$	8.50			$	14.87
Weighted average shares outstanding
Basic		49,978				53,065				63,799
Diluted		52,733				55,950				67,471

PENNYMAC FINANCIAL SERVICES, INC. RECONCILIATION OF PRETAX LOSS TO OPERATING NET INCOME
	Quarter ended
	December 31, 2023
	(in thousands, except annualized operating return on equity)
Loss before benefit from income taxes	$	(54,230	)
Decrease in fair value of MSRs and MSLs due to changes in valuation inputs used in the valuation model		370,705
Hedging gains associated with MSRs		(294,787	)
Non-recurring item - accrual for arbitration result		158,368
Operating pretax income	$	180,056
Tax expense(1)		48,345
Operating net income	$	131,711
Average stockholders' equity	$	3,555,398
Annualized operating return on equity		15	%
(1) Assumes a tax rate of 26.85%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240201302460/en/

Media

Kristyn Clark

kristyn.clark@pennymac.com

(805) 395-9943

Investors

Kevin Chamberlain

Isaac Garden

PFSI_IR@pennymac.com

(818) 224-7028

Source: PennyMac Financial Services, Inc.

FAQ

What was PennyMac Financial Services, Inc.'s net loss for Q4 2023?

PennyMac Financial Services, Inc. reported a net loss of $36.8 million for the fourth quarter of 2023.

What was the declared cash dividend per share for Q4?

The declared cash dividend per share for Q4 was $0.20.

What were the total loan acquisitions and originations for PennyMac Financial Services, Inc.?

The total loan acquisitions and originations were $26.7 billion in unpaid principal balance (UPB).

What was the net income for full-year 2023?

The net income for full-year 2023 was $144.7 million.