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Section 1: 8-K (8-K)

PFSI Form 8-K (4Q19 Earnings)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): February 7, 2020 (February 6,  2020)

 

PennyMac Financial Services, Inc.

(formerly known as New PennyMac Financial Services, Inc.)

(Exact name of registrant as specified in its charter)

 

 

 

 

 

Delaware

001- 38727

83-1098934

(State or other jurisdiction

(Commission

(IRS Employer

of incorporation)

File Number)

Identification No.)

 

 

 

3043 Townsgate Road, Westlake Village, California

91361

(Address of principal executive offices)

(Zip Code)

 

(818) 224‑7442

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value

PFSI

New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

 

 

Item 2.02    Results of Operations and Financial Condition.

 

On February 6,  2020,  PennyMac Financial Services, Inc. (the “Company”) issued a press release announcing its unaudited financial results for the fiscal quarter and year ended December 31, 2019.  A copy of the press release and the slide presentation used in connection with the Company’s recorded presentation of financial results were made available on February 6,  2020 and are furnished as Exhibits 99.1 and Exhibit 99.2, respectively.

 

The information in Item 2.02 of this report, including the exhibits hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of Section 18, nor shall it be deemed incorporated by reference into any disclosure document relating to the Company, except to the extent, if any, expressly set forth by specific reference in such filing.

 

Item 9.01    Financial Statements and Exhibits.

 

(d)  Exhibits.

 

 

 

Exhibit No.

Description

 

 

99.1

Press Release, dated February 6, 2020, issued by PennyMac Financial Services, Inc. pertaining to its unaudited financial results for the fiscal quarter and year ended December 31, 2019.

99.2

Slide Presentation for use beginning on February 6, 2020 in connection with a recorded presentation of financial results for the fiscal quarter and year ended December 31, 2019.

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

PENNYMAC FINANCIAL SERVICES, INC.

 

 

 

 

 

 

Dated:  February 7, 2020

/s/ Andrew S. Chang

 

Andrew S. Chang

 

Senior Managing Director and Chief Financial Officer

 

 

 

(Back To Top)

Section 2: EX-99.1 (EX-99.1)

Ex 991 PFSI Earnings Release 4Q19

Exhibit 99.1

 

C:\Users\jpilkington\Downloads\Pennymac_Roof_FS_RGB.jpg

 

 

 

Media

Investors

Janis Allen

Isaac Garden

(805) 330-4899

(818) 264-4907

 

PennyMac Financial Services, Inc. Reports

Fourth Quarter and Full-Year 2019  Results

 

Westlake Village, CA,  February 6th,  2020 –  PennyMac Financial Services, Inc. (NYSE: PFSI) today reported net income of $152.7 million for the fourth quarter of 2019,  or $1.88  per share on a diluted basis, on revenue of $490.4 million.  Book value per share increased to $26.26 from $24.37 at September 30, 2019.

PFSI’s Board of Directors declared a fourth quarter cash dividend of $0.12 per share, payable on February 27, 2020, to common stockholders of record as of February 14, 2020.

Fourth Quarter 2019 Highlights

Pretax income was $203.4 million, up 22 percent from the prior quarter and 249 percent from the fourth quarter of 2018

oRecord pretax income and operating earnings1 driven by strong Production segment results and operating performance in the Servicing segment

Production segment pretax income was $203.3 million, up 13 percent from the prior quarter and 700 percent from the fourth quarter of 2018, driven by record loan production volumes across all channels

oTotal loan acquisitions and originations were $42.4 billion in unpaid principal balance (UPB), up 22 percent from the prior quarter and 118 percent from the fourth quarter of 2018

1In the fourth quarter of 2017, diluted earnings per share were $2.44, which included a $1.79 contribution from the remeasurement of deferred tax items due to enactment of the Tax Cuts and Jobs Act of 2017

oPFSI’s correspondent interest rate lock commitments (IRLCs) totaled $16.9 billion in UPB, up 1 percent from the prior quarter and 84 percent from the fourth quarter of 20182

oDirect lending IRLCs were a record $6.5 billion in UPB, up 16 percent from the prior quarter and 235 percent from the fourth quarter of 2018

$5.4 billion in UPB of locks in the consumer direct channel; $1.1 billion in UPB of locks in the broker direct channel

oCorrespondent acquisitions of conventional loans fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT) were $20.5  billion in UPB, up 23 percent from the prior quarter and 126 percent from the fourth quarter of 2018

Servicing segment pretax loss was $5.1 million, versus a  pretax loss of $18.1 million in the prior quarter and pretax income of $29.3 million in the fourth quarter of 2018

oValuation-related items included a $160.6 million gain in the fair value of mortgage servicing rights (MSRs) and $194.6  million in hedging and other losses; net impact on pretax income was $(34.0) million and on earnings per share was $(0.31)

oPretax income excluding valuation-related items was $39.1 million, up 55 percent from the prior quarter and down 12  percent from the fourth quarter of 2018

Operating expenses decreased by $6.5 million from the prior quarter primarily due to a reduction in vendor expenses following the completion of our Servicing Systems Environment (SSE)

oThe servicing portfolio grew to $368.7 billion in UPB, up 6  percent from September 30, 2019

Investment Management segment pretax income was $5.2  million,  up from $5.0 million in the prior quarter and $2.5 million in the fourth quarter of 2018

oRevenue was $11.8 million, essentially unchanged from the prior quarter and up 50 percent from the fourth quarter of 2018

oNet assets under management (AUM) were $2.5 billion, up 10  percent from September 30, 2019,  driven by $215 million in new common equity raised by PMT during the quarter, including $201 million in December

2Consists of correspondent government and non-delegated IRLCs

2

Notable activity after quarter end:

Completed the acquisition of a bulk Ginnie Mae MSR portfolio totaling $2.4 billion in UPB

Full-Year 2019 Highlights

·

Pretax income of $529.4 million, up 98 percent from the prior year and the highest level on record for PennyMac Financial

oDiluted earnings per share of $4.89,  up from $2.59 in 2018 and also a record

·

Total net revenue of $1.5  billion, up 50 percent from the prior year

·

Record loan production of $117.6 billion in UPB, an increase of 74 percent from the prior year, which included $9.8 billion in UPB of consumer direct production, an increase of 209 percent from the prior year

·

Servicing portfolio growth of 23 percent

·

Net AUM growth of 56 percent, driven by $830 million in new common equity raised by PMT

“PennyMac Financial delivered outstanding performance across all of its businesses in the fourth quarter and throughout 2019,” said President and CEO David Spector.  “Book value per share grew 22 percent for the year, driven by record profitability in our Production segment and our ability to successfully hedge the interest rate risk inherent in mortgage servicing rights in a year characterized by significant interest rate volatility.  Each of our production channels grew market share this year and substantial growth in our consumer direct lending channel was a major contributor to the Company’s earnings.  Further, our industry-leading correspondent channel became the largest aggregator of residential mortgage loans in the U.S., according to Inside Mortgage Finance.  Our servicing portfolio also grew more than 20 percent for the year while our technology investments continue to drive greater operating efficiency and better service for our 1.8 million customers.  With our maturing, balanced business model, the opportunity to continue capturing market share gains across our businesses and the strong foundation provided by our large and growing servicing portfolio, we expect PFSI to earn a mid-teens return on equity across different market environments; however, we expect PFSI to deliver a higher ROE in 2020.”

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended December 31, 2019

 

 

 

Mortgage Banking

 

Investment

 

 

 

 

 

Production

 

Servicing

 

Total

 

Management

 

Total

 

 

 

(in thousands)

 

Revenue

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

 

Net gains on loans held for sale at fair value

 

$

227,751 

 

$

29,736 

 

$

257,487 

 

$

 

$

257,487 

 

Loan origination fees

 

 

63,868 

 

 

 

 

63,868 

 

 

 

 

63,868 

 

Fulfillment fees from PMT

 

 

58,297 

 

 

 

 

58,297 

 

 

 

 

58,297 

 

Net servicing fees

 

 

 

 

87,731 

 

 

87,731 

 

 

 

 

87,731 

 

Management fees

 

 

 

 

 

 

 

 

10,314 

 

 

10,314 

 

Net interest income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

26,624 

 

 

49,391 

 

 

76,015 

 

 

 

 

76,015 

 

Interest expense

 

 

23,737 

 

 

41,378 

 

 

65,115 

 

 

17 

 

 

65,132 

 

 

 

 

2,887 

 

 

8,013 

 

 

10,900 

 

 

(17)

 

 

10,883 

 

Other

 

 

360 

 

 

(21)

 

 

339 

 

 

1,456 

 

 

1,795 

 

Total net revenue

 

 

353,163 

 

 

125,459 

 

 

478,622 

 

 

11,753 

 

 

490,375 

 

Expenses

 

 

149,863 

 

 

130,586 

 

 

280,449 

 

 

6,560 

 

 

287,009 

 

Pretax income (loss)

 

$

203,300 

 

$

(5,127)

 

$

198,173 

 

$

5,193 

 

$

203,366 

 

 

Production Segment

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

PennyMac Financial’s loan production activity for the quarter totaled $42.4 billion in UPB, $21.9  billion of which was for its own account, and $20.5 billion of which was fee-based fulfillment activity for PMT.  Correspondent government, non-delegated and direct lending IRLCs totaled $23.4  billion in UPB, up 4 percent from the prior quarter and 110 percent from the fourth quarter of 2018.

Production segment pretax income was $203.3 million, up 13 percent from the prior quarter and 700 percent from the fourth quarter of 2018.  Production revenue totaled $353.2 million, up 12 percent from the prior quarter and 229 percent from the fourth quarter of 2018.  The quarter-over-quarter increase was driven by a $14.4 million increase in loan origination fees, a $13.1 million increase in fulfillment fees from PMT, and an $11.6 million increase in net gains on loans held for sale.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

 

    

2019

    

2019

    

2018

 

 

 

(in thousands)

 

Receipt of MSRs in loan sale transactions

 

$

328,182 

 

$

227,256 

 

$

141,100 

 

Mortgage servicing rights recapture payable to PennyMac Mortgage Investment Trust

 

 

(2,624)

 

 

(1,896)

 

 

(1,259)

 

Provision for representations and warranties, net

 

 

(1,583)

 

 

(1,333)

 

 

(229)

 

Cash investment (1)

 

 

4,694 

 

 

(108,408)

 

 

(46,260)

 

Fair value changes of pipeline, inventory and hedges

 

 

(71,182)

 

 

120,113 

 

 

(33,604)

 

Net gains on loans held for sale

 

$

257,487 

 

$

235,732 

 

$

59,748 

 

Net gains on loans held for sale by segment:

 

 

 

 

 

 

 

 

 

 

Production

 

$

227,751 

 

$

216,132 

 

$

36,848 

 

Servicing

 

$

 

29,736 

 

$

19,600 

 

$

22,900 

 

 

(1)  Net of cash hedging results

 

PennyMac Financial performs fulfillment services for conventional conforming and jumbo loans acquired by PMT from non-affiliates in its correspondent production business.  These services include, but are not limited to,  marketing,  relationship management,  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 $58.3 million in the fourth quarter, up 29 percent  from the prior quarter and 104 percent from the fourth quarter of 2018.  The quarter-over-quarter increase in  fulfillment fee revenue was driven primarily by a  23 percent increase in acquisition volumes by PMT and a slight increase in the weighted average fulfillment fee rate to 28  basis points from 27 basis points in the prior quarter.

Net interest income totaled $2.9  million,  down from $4.0 million in the prior quarter and $15.3 million in the fourth quarter of 2018.   Net interest income in the third quarter of 2019 and the fourth quarter of 2018 included  incentives totaling $1.6 million and $12.6 million, respectively, which the Company was entitled to receive under one of its master repurchase agreements to finance mortgage loans that satisfied certain consumer relief characteristics.  As expected and previously disclosed,  the lender completed the orderly wind down of the incentive program during the quarter ended September 30, 2019 and accordingly, the related master repurchase

5

agreement expired.  As a result, there were no consumer relief incentives in the fourth quarter of 2019.

Production segment expenses were $149.9 million, up 10 percent from the prior quarter and 83 percent from the fourth quarter of 2018 as a result of the increase in volumes.

Servicing Segment

Servicing includes income from owned MSRs,  subservicing and special servicing activities.  Servicing segment pretax loss was $5.1 million, versus a pretax loss of $18.1 million in the prior quarter and pretax income of $29.3 million in the fourth quarter of 2018.  Servicing segment revenues totaled $125.5  million, up 15  percent from the prior quarter and down 7  percent from the fourth quarter of 2018.  The quarter-over-quarter increase was primarily driven by higher servicing fees related to a larger servicing portfolio and lower net valuation-related losses.

Net loan servicing fees totaled $87.7 million and included $234.9 million in servicing fees reduced by $113.1 million from the realization of MSR cash flows.  Net valuation-related losses totaled $34.0  million, and included  MSR fair value gains  of $160.6 million more than offset by hedging losses  of $192.4 million and a $2.3 million change in the fair value of the excess servicing spread liability.  The MSR fair value gains primarily resulted from expectations for decreased prepayment activity in the future as a result of higher interest rates in the fourth quarter.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

 

    

2019

    

2019

    

2018

 

 

 

(in thousands)

 

Loan servicing fees (1)

 

$

234,871 

 

$

224,949 

 

$

194,405 

 

Effect of MSRs:

 

 

 

 

 

 

 

 

 

 

Realization of cash flows

 

 

(113,102)

 

 

(117,220)

 

 

(82,250)

 

Change in fair value of MSRs

 

 

160,611 

 

 

(295,510)

 

 

(67,277)

 

Change in fair value of excess servicing spread financing

 

 

(2,263)

 

 

3,864 

 

 

526 

 

Hedging (losses) gains

 

 

(192,386)

 

 

250,146 

 

 

59,808 

 

Total change in fair value of MSRs

 

 

(147,140)

 

 

(158,720)

 

 

(89,193)

 

Net loan servicing fees

 

$

87,731 

 

$

66,229 

 

$

105,212 

 

 

(1)  Includes contractually-specified servicing fees

 

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Servicing segment revenue also included $29.7 million in net gains on loans held for sale from the securitization of reperforming government-insured and guaranteed loans, compared to $19.6 million in the prior quarter and $22.9 million in the fourth quarter of 2018.  These loans were previously purchased out of Ginnie Mae securitizations as early buyout (EBO) loans and brought back to performing status through PennyMac Financial’s successful servicing efforts, primarily with the use of loan modifications.  Net interest income totaled $8.0 million, down from $23.1 million in the prior quarter and up from $6.0 million in the fourth quarter of 2018.  Interest income decreased by $11.6 million from the prior quarter,  primarily driven by lower  interest income related to custodial deposit balances,  as seasonal tax disbursements reduced balances and earnings rates declined.   Interest expense was up $3.4 million from the prior quarter, driven by elevated EBO activity.

Servicing segment expenses totaled $130.6 million,  up 2 percent from the prior quarter driven by a larger servicing portfolio partially offset by lower vendor-related fees as a result of the completion of SSE, our proprietary servicing system.

The total servicing portfolio reached $368.7 billion in UPB at December 31,  2019, an increase of 6 percent from September 30, 2019 and 23 percent from December 31,  2018, driven by the Company’s loan production activities.  PennyMac Financial subservices and conducts special servicing for $135.4 billion in UPB, an increase of 12 percent from September 30, 2019 and 43 percent from December 31,  2018.  PennyMac Financial’s owned MSR portfolio grew to $233.3 billion in UPB, an increase of 2 percent from September 30, 2019 and 14 percent from December 31, 2018.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

September 30,

 

December 31,

 

 

    

2019

    

2019

    

2018

 

 

 

(in thousands)

 

Prime servicing:

 

 

 

 

 

 

 

 

 

 

Owned

 

 

 

 

 

 

 

 

 

 

Mortgage servicing rights

 

 

 

 

 

 

 

 

 

 

Originated

 

$

166,188,825 

 

$

157,437,101 

 

$

144,296,544 

 

Acquisitions

 

 

59,598,279 

 

 

63,778,892 

 

 

56,757,600 

 

 

 

 

225,787,104 

 

 

221,215,993 

 

 

201,054,144 

 

Mortgage servicing liabilities

 

 

2,758,454 

 

 

2,327,687 

 

 

1,160,938 

 

Mortgage loans held for sale

 

 

4,724,006 

 

 

4,323,252 

 

 

2,420,636 

 

 

 

 

233,269,564 

 

 

227,866,932 

 

 

204,635,718 

 

Subserviced for PMT

 

 

135,288,944 

 

 

120,460,120 

 

 

94,074,625 

 

Total prime servicing

 

 

368,558,508 

 

 

348,327,052 

 

 

298,710,343 

 

Special servicing:

 

 

 

 

 

 

 

 

 

 

Subserviced for PMT

 

 

125,724 

 

 

147,956 

 

 

583,529 

 

Total loans serviced

 

$

368,684,232 

 

$

348,475,008 

 

$

299,293,872 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans serviced: 

 

 

 

 

 

 

 

 

 

 

Owned

 

 

 

 

 

 

 

 

 

 

Mortgage servicing rights

 

$

225,787,104 

 

$

221,215,993 

 

$

201,054,144 

 

Mortgage servicing liabilities

 

 

2,758,454 

 

 

2,327,687 

 

 

1,160,938 

 

Mortgage loans held for sale

 

 

4,724,006 

 

 

4,323,252 

 

 

2,420,636 

 

 

 

 

233,269,564 

 

 

227,866,932 

 

 

204,635,718 

 

Subserviced

 

 

135,414,668 

 

 

120,608,076 

 

 

94,658,154 

 

Total mortgage loans serviced

 

$

368,684,232 

 

$

348,475,008 

 

$

299,293,872 

 

 

Investment Management Segment

PennyMac Financial manages PMT for which it earns base management fees and may earn incentive compensation.  Net AUM were $2.5 billion as of December 31,  2019,  up 10 percent from September 30, 2019 and 56 percent from December 31,  2018.  The quarter-over-quarter growth was driven by PMT’s issuance of approximately $215 million of common shares during the quarter.

Pretax income for the Investment Management segment was $5.2 million,  up from $5.0 million in the prior quarter and $2.5 million in the fourth quarter of 2018.  Management fees, which include base management and performance incentive fees from PMT,  increased 2 percent from the prior quarter and 57 percent from the fourth quarter of 2018.  Base management fees were $8.4  million, up from $7.9 million in the prior quarter and $5.8 million in the fourth quarter of 2018 as a result of PFSI’s increased AUM.  Performance-based incentive fees were $1.9 million,

8

down slightly from $2.2 million in the prior quarter and up from $0.7 million in the fourth quarter of 2018, driven by PMT’s continued strong financial performance.

The following table presents a breakdown of management fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

 

    

2019

    

2019

    

2018

 

 

 

(in thousands)

 

Management fees:

 

 

 

 

 

 

 

 

 

 

PennyMac Mortgage Investment Trust

 

 

 

 

 

 

 

 

 

 

Base

 

$

8,441 

 

$

7,914 

 

$

5,810 

 

Performance incentive

 

 

1,873 

 

 

2,184 

 

 

749 

 

Total management fees

 

$

10,314 

 

$

10,098 

 

$

6,559 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets of PennyMac Mortgage Investment Trust

 

$

2,450,916 

 

$

2,219,611 

 

$

1,566,132 

 

 

Investment Management segment expenses totaled $6.6 million,  down 3 percent from the prior quarter and up 22 percent from the fourth quarter of 2018.

Consolidated Expenses

Total expenses were $287.0 million, up 6 percent from the prior quarter and 49 percent from the fourth quarter of 2018.  The year-over-year change was primarily driven by higher volumes of activity in the Production segment.

Chairman Stanford L. Kurland concluded, “As I  reflect on the past twelve years, I am incredibly proud of the organization we have built and I believe our dedicated employees and the depth of our management team are unmatched in the industry.  PennyMac Financial has unique capabilities, including its synergistic partnership with PennyMac Mortgage Investment Trust, the REIT that we manage, as well as our best-in-class operating platform, which have established this Company as a leading mortgage banking enterprise.  Our people, platform and governance infrastructure, which includes our focus on risk management, position us well to sustain our competitive advantage in the residential mortgage market across a variety of economic environments.  As I relinquish my day-to-day responsibilities but continue my involvement as Chairman of the Board, I am confident that the management team will continue to build on the established foundation in place for future growth, while providing superior, long-term returns to our stockholders.”

***

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Management’s slide presentation will be available in the Investor Relations section of the Company’s website at ir.pennymacfinancial.com beginning at 1:30 p.m. (Pacific Time) on Thursday,  February 6,  2020.

About PennyMac Financial Services, Inc.

PennyMac Financial Services, Inc. is a specialty financial services firm with a comprehensive mortgage platform and integrated business focused on the production and servicing of U.S. mortgage loans and the management of investments related to the U.S. mortgage market.  Additional information about PennyMac Financial Services, Inc. is available at ir.pennymacfinancial.com.

10

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management’s beliefs, estimates, projections, the recently completed corporate reorganization, the expected benefits and market and financial impact of the reorganization and assumptions with respect to, among other things, the Company’s financial results, future operations, business plans and investment strategies, as well as industry and market conditions, all of which are subject to change.  Words like “believe,” “expect,” “anticipate,” “promise,” “plan,” and other expressions or words of similar meanings, as well as future or conditional verbs such as “will,” “would,” “should,” “could,” or “may” are generally intended to identify forward-looking statements. Actual results and operations for any future period may vary materially from those projected herein and from past results discussed herein. Factors which could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: the continually changing federal, state and local laws and regulations applicable to the highly regulated industry in which we operate; lawsuits or governmental actions that may result from any noncompliance with the laws and regulations applicable to our businesses; the mortgage lending and servicing-related regulations promulgated by the Consumer Financial Protection Bureau and its enforcement of these regulations; our dependence on U.S. governmentsponsored entities and changes in their current roles or their guarantees or guidelines; changes to government mortgage modification programs; the licensing and operational requirements of states and other jurisdictions applicable to the Company’s businesses, to which our bank competitors are not subject; foreclosure delays and changes in foreclosure practices; certain banking regulations that may limit our business activities; changes in macroeconomic and U.S. real estate market conditions; difficulties inherent in growing loan production volume; difficulties inherent in adjusting the size of our operations to reflect changes in business levels; purchase opportunities for mortgage servicing rights and our success in winning bids; changes in prevailing interest rates; expected discontinuation of LIBOR; 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 thirdparty purchasers or repurchase loans if loans that we originate, acquire, service or assist in the fulfillment of, fail to meet certain criteria or characteristics or under other circumstances; our obligation to indemnify PMT if its services fail to meet certain criteria or characteristics or under other circumstances; decreases in the returns on the assets that we select and manage for our clients, and our resulting management and incentive fees; the extensive amount of  regulation applicable to our investment management segment; conflicts of interest in allocating our services and investment opportunities among us and our advised entities; the effect of public opinion on our reputation; our recent growth; our ability to effectively identify, manage, monitor and mitigate financial risks; our initiation of new business activities or investment strategies or expansion of existing business activities or investment strategies; our ability to detect misconduct and fraud; our ability to mitigate cybersecurity risks and cyber incidents; our exposure to risks of loss with real estate investments resulting from adverse weather conditions and man-made or natural disasters; 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.

11

PENNYMAC FINANCIAL SERVICES, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

    

December 31,

    

September 30,

    

December 31,

 

 

 

2019

 

2019

 

2018

 

 

 

(in thousands, except share amounts)

 

ASSETS

 

 

 

 

 

 

 

 

 

 

Cash

 

$

188,291  

 

$

201,268 

 

$

155,289 

 

Short-term investments at fair value

 

 

74,611 

 

 

90,663 

 

 

117,824 

 

Loans held for sale at fair value

 

 

4,912,953 

 

 

4,522,971 

 

 

2,521,647 

 

Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell pledged to creditors

 

 

107,512 

 

 

107,678 

 

 

131,025 

 

Derivative assets

 

 

159,686 

 

 

232,948 

 

 

96,347 

 

Servicing advances, net

 

 

344,379 

 

 

271,501 

 

 

313,197 

 

Investment in PennyMac Mortgage Investment Trust at fair value

 

 

1,672 

 

 

1,667 

 

 

1,397 

 

Mortgage servicing rights

 

 

2,926,790 

 

 

2,556,253 

 

 

2,820,612 

 

Real estate acquired in settlement of loans

 

 

20,326 

 

 

20,328 

 

 

2,250 

 

Operating lease right-of-use assets

 

 

73,090 

 

 

53,384 

 

 

 

Furniture, fixtures, equipment and building improvements, net

 

 

30,480 

 

 

32,221 

 

 

33,374 

 

Capitalized software, net

 

 

63,130 

 

 

57,975 

 

 

39,748 

 

Receivable from PennyMac Mortgage Investment Trust

 

 

48,159 

 

 

39,744 

 

 

33,464 

 

Loans eligible for repurchase

 

 

1,046,527 

 

 

892,631 

 

 

1,102,840 

 

Other

 

 

206,411 

 

 

221,967 

 

 

109,559 

 

Total assets

 

$

10,204,017  

 

$

9,303,199 

 

$

7,478,573 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

Assets sold under agreements to repurchase

 

$

4,141,053  

 

$

3,538,889 

 

$

1,933,859 

 

Mortgage loan participation and sale agreements

 

 

497,948 

 

 

514,625 

 

 

532,251 

 

Notes payable secured by mortgage servicing rights

 

 

1,294,070 

 

 

1,293,625 

 

 

1,292,291 

 

Obligations under capital lease

 

 

20,810 

 

 

23,881 

 

 

6,605 

 

Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value

 

 

178,586 

 

 

183,141 

 

 

216,110 

 

Derivative liabilities

 

 

22,330 

 

 

14,035 

 

 

3,064 

 

Operating lease liabilities

 

 

91,320 

 

 

72,160 

 

 

 

Mortgage servicing liabilities at fair value

 

 

29,140 

 

 

34,294 

 

 

8,681 

 

Accounts payable and accrued expenses

 

 

175,273 

 

 

215,379 

 

 

156,212 

 

Payable to PennyMac Mortgage Investment Trust

 

 

73,280 

 

 

61,862 

 

 

104,631 

 

Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement

 

 

46,158 

 

 

46,537 

 

 

46,537 

 

Income taxes payable

 

 

504,569 

 

 

480,559 

 

 

400,546 

 

Liability for loans eligible for repurchase

 

 

1,046,527 

 

 

892,631 

 

 

1,102,840 

 

Liability for losses under representations and warranties

 

 

21,446 

 

 

19,968 

 

 

21,155 

 

Total liabilities

 

 

8,142,510 

 

 

7,391,586 

 

 

5,824,782 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

Common stock—authorized 200,000,000 shares of $0.0001 par value; issued and outstanding 78,515,047, 78,434,556, and 77,480,172 shares, respectively

 

 

 

 

 

 

 

Additional paid-in capital

 

 

1,335,107 

 

 

1,328,166 

 

 

1,310,648 

 

Retained earnings

 

 

726,392 

 

 

583,439 

 

 

343,135 

 

Total stockholders' equity attributable to PennyMac Financial Services, Inc. common stockholders

 

 

2,061,507 

 

 

1,911,613 

 

 

1,653,791 

 

Total liabilities and stockholders’ equity

 

$

10,204,017 

 

$

9,303,199 

 

$

7,478,573 

 

 

12

PENNYMAC FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended

 

 

    

December 31,

    

September 30,

    

December 31,

 

 

 

2019 

 

2019 

 

2018 

 

 

 

(in thousands, except earnings per share)

 

Revenue

 

 

 

 

 

 

 

 

 

 

Net gains on loans held for sale at fair value

 

$

257,487  

 

$

235,732 

 

$

59,748 

 

Loan origination fees

 

 

63,868 

 

 

49,434 

 

 

26,165 

 

Fulfillment fees from PennyMac Mortgage Investment Trust

 

 

58,297 

 

 

45,149 

 

 

28,591 

 

Net loan servicing fees:

 

 

 

 

 

 

 

 

 

 

Loan servicing fees

 

 

 

 

 

 

 

 

 

 

From non-affiliates

 

 

196,655 

 

 

185,967 

 

 

163,565 

 

From PennyMac Mortgage Investment Trust

 

 

13,695 

 

 

12,964 

 

 

11,524 

 

Other fees

 

 

24,521 

 

 

26,018 

 

 

19,316 

 

 

 

 

234,871 

 

 

224,949 

 

 

194,405 

 

Change in estimated fair value of mortgage servicing rights and excess servicing spread financing

 

 

(147,140)

 

 

(158,720)

 

 

(89,193)

 

Net loan servicing fees

 

 

87,731 

 

 

66,229 

 

 

105,212 

 

Net interest income:

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

76,015 

 

 

83,452 

 

 

57,733 

 

Interest expense

 

 

65,132 

 

 

56,380 

 

 

36,461 

 

 

 

 

10,883 

 

 

27,072 

 

 

21,272 

 

Management fees from PennyMac Mortgage Investment Trust

 

 

10,314 

 

 

10,098 

 

 

6,559 

 

Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust

 

 

39 

 

 

66 

 

 

(87)

 

Results of real estate acquired in settlement of loans

 

 

(648)

 

 

188 

 

 

410 

 

Revaluation of payable to exchange Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement

 

 

379 

 

 

 

 

1,126 

 

Other

 

 

2,025 

 

 

2,379 

 

 

2,205 

 

Total net revenue

 

 

490,375 

 

 

436,347 

 

 

251,201 

 

Expenses

 

 

 

 

 

 

 

 

 

 

Compensation

 

 

141,009 

 

 

141,132 

 

 

99,353 

 

Servicing

 

 

57,487 

 

 

47,909 

 

 

41,518 

 

Technology

 

 

15,515 

 

 

20,385 

 

 

15,056 

 

Loan origination

 

 

44,919 

 

 

34,851 

 

 

12,936 

 

Occupancy and equipment

 

 

7,841 

 

 

7,257 

 

 

7,151 

 

Professional services

 

 

10,983 

 

 

9,682 

 

 

9,173 

 

Other

 

 

9,255 

 

 

8,934 

 

 

7,708 

 

Total expenses

 

 

287,009 

 

 

270,150 

 

 

192,895 

 

Income before provision for income taxes

 

 

203,366 

 

 

166,197 

 

 

58,306 

 

Provision for income taxes

 

 

50,705 

 

 

44,724 

 

 

5,346 

 

Net income

 

 

152,661 

 

 

121,473 

 

 

52,960 

 

Less: Net income attributable to noncontrolling interest

 

 

 

 

 

 

14,211 

 

Net income attributable to PennyMac Financial Services, Inc. common stockholders

 

$

152,661 

 

$

121,473 

 

$

38,749 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.95 

 

$

1.55 

 

$

0.65 

 

Diluted

 

$

1.88 

 

$

1.51 

 

$

0.63 

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

 

 

 

Basic

 

 

78,466 

 

 

78,361 

 

 

59,876 

 

Diluted

 

 

81,076 

 

 

80,382 

 

 

61,468 

 

13

PENNYMAC FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Year ended December 31,

 

 

 

2019 

 

2018 

 

2017 

 

 

 

(in thousands, except earnings per share)

 

Revenue

 

 

 

 

 

 

 

 

 

 

Net gains on loans held for sale at fair value

 

$

725,528 

 

$

249,022 

 

$

391,804 

 

Loan origination fees

 

 

174,156 

 

 

101,641 

 

 

119,202 

 

Fulfillment fees from PennyMac Mortgage Investment Trust

 

 

160,610 

 

 

81,350 

 

 

80,359 

 

Net loan servicing fees:

 

 

 

 

 

 

 

 

 

 

Loan servicing fees:

 

 

 

 

 

 

 

 

 

 

From non-affiliates

 

 

730,165 

 

 

585,101 

 

 

475,848 

 

From PennyMac Mortgage Investment Trust

 

 

48,797 

 

 

42,045 

 

 

43,064 

 

Investment funds

 

 

 

 

 

 

1,461 

 

Other fees

 

 

98,564 

 

 

64,133 

 

 

58,924 

 

 

 

 

877,526 

 

 

691,282 

 

 

579,297 

 

Change in estimated fair value of mortgage servicing rights and excess servicing spread financing

 

 

(583,861)

 

 

(245,889)

 

 

(273,238)

 

Net loan servicing fees

 

 

293,665 

 

 

445,393 

 

 

306,059 

 

Net interest income (expense):

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

288,700 

 

 

216,416 

 

 

143,179 

 

Interest expense

 

 

211,979 

 

 

144,597 

 

 

144,520 

 

 

 

 

76,721 

 

 

71,819 

 

 

(1,341)

 

Management fees, net:

 

 

 

 

 

 

 

 

 

 

From PennyMac Mortgage Investment Trust

 

 

36,492 

 

 

24,465 

 

 

22,584 

 

From Investment Funds

 

 

 

 

 

 

1,001 

 

 

 

 

36,492 

 

 

24,469 

 

 

23,585 

 

Carried Interest from Investment Funds

 

 

 

 

(365)

 

 

(1,040)

 

Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust

 

 

416 

 

 

332 

 

 

118 

 

Results of real estate acquired in settlement of loans

 

 

557 

 

 

589 

 

 

94 

 

Revaluation of payable to exchange Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement

 

 

379 

 

 

1,126 

 

 

32,940 

 

Other

 

 

8,880 

 

 

9,253 

 

 

3,683 

 

Total net revenue

 

 

1,477,404 

 

 

984,629 

 

 

955,463 

 

Expenses

 

 

 

 

 

 

 

 

 

 

Compensation

 

 

503,458 

 

 

403,270 

 

 

358,721 

 

Servicing

 

 

164,697 

 

 

137,104 

 

 

117,696 

 

Loan origination

 

 

117,338 

 

 

27,398 

 

 

20,429 

 

Technology

 

 

67,946 

 

 

60,103 

 

 

52,013 

 

Occupancy and equipment

 

 

28,916 

 

 

27,152 

 

 

22,615 

 

Professional services

 

 

32,859 

 

 

27,615 

 

 

17,845 

 

Other

 

 

32,746 

 

 

34,290 

 

 

30,235 

 

Total expenses

 

 

947,960 

 

 

716,932 

 

 

619,554 

 

Income before provision for income taxes

 

 

529,444 

 

 

267,697 

 

 

335,909 

 

Provision for income taxes

 

 

136,479 

 

 

23,254 

 

 

24,387 

 

Net income

 

 

392,965 

 

 

244,443 

 

 

311,522 

 

Less: Net income attributable to noncontrolling interest 

 

 

 

 

156,749 

 

 

210,765 

 

Net income attributable to PennyMac Financial Services, Inc.common stockholders

 

$

392,965 

 

$

87,694 

 

$

100,757 

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

Basic

 

$

5.02 

 

$

2.62 

 

$

4.34 

 

Diluted

 

$

4.89 

 

$

2.59 

 

$

4.03 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

Basic

 

 

78,466 

 

 

33,524 

 

 

23,199 

 

Diluted

 

 

81,076 

 

 

35,322 

 

 

24,999 

 

 

14

(Back To Top)

Section 3: EX-99.2 (EX-99.2)

Exhibit 99.2

GRAPHIC

Fourth Quarter 2019 Earnings Report Exhibit 99.2

GRAPHIC

Forward-Looking Statements 2 This presentation 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. These forward-looking statements include statements regarding the Company’s corporate reorganization, the expected benefits of such reorganization and the related impact on existing stakeholders, estimates regarding future market capitalization and the anticipated financial impact of the corporate reorganization. Factors which could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: the continually changing federal, state and local laws and regulations applicable to the highly regulated industry in which we operate; lawsuits or governmental actions that may result from any noncompliance with the laws and regulations applicable to our businesses; the mortgage lending and servicing-related regulations promulgated by the Consumer Financial Protection Bureau and its enforcement of these regulations; our dependence on U.S. government-sponsored entities and changes in their current roles or their guarantees or guidelines; changes to government mortgage modification programs; the licensing and operational requirements of states and other jurisdictions applicable to the Company’s businesses, to which our bank competitors are not subject; foreclosure delays and changes in foreclosure practices; certain banking regulations that may limit our business activities; changes in macroeconomic and U.S. real estate market conditions; difficulties inherent in growing loan production volume; difficulties inherent in adjusting the size of our operations to reflect changes in business levels; purchase opportunities for mortgage servicing rights and our success in winning bids; changes in prevailing interest rates; expected discontinuation of LIBOR; increases in loan delinquencies and defaults; our reliance on PennyMac Mortgage Investment Trust (NYSE: PMT) as a significant source of financing for, and revenue related to, our mortgage banking business; any required additional capital and liquidity to support business growth that may not be available on acceptable terms, if at all; our obligation to indemnify third-party purchasers or repurchase loans if loans that we originate, acquire, service or assist in the fulfillment of, fail to meet certain criteria or characteristics or under other circumstances; our obligation to indemnify PMT if our 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. Our exposure to risks of loss resulting from adverse weather conditions and man- made or natural disasters; our ability to pay dividends to our stockholders; and or 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 presentation are current as of the date of this presentation only.

GRAPHIC

Fourth Quarter Highlights 3 . Net income was $152.7 million; diluted earnings per share (EPS) were $1.88 – Record pretax income and operating earnings(1) driven by continued strong Production segment results and improved operating performance in the Servicing segment – Book value per share increased to $26.26 from $24.37 at September 30, 2019 – PFSI’s Board of Directors declared a fourth quarter cash dividend of $0.12 per share, payable on February 27, 2020, to common stockholders of record as of February 14, 2020 . Production segment pretax income was $203.3 million, up 13% from 3Q19 and 700% from 4Q18 driven by record loan production volumes across all channels – Total loan acquisition and origination volume of $42.4 billion in unpaid principal balance (UPB), up 22% from 3Q19 and 118% from 4Q18 – PFSI’s correspondent lock volume totaled(2) $16.9 billion in UPB, up 1% Q/Q and 84% Y/Y – Direct lending locks were a record $6.5 billion in UPB, up 16% from 3Q19 and 235% from 4Q18 o $5.4 billion in UPB of locks in the consumer direct channel; $1.1 billion in UPB of locks in the broker direct channel – Correspondent acquisitions of conventional loans fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT) were $20.5 billion in UPB, up 23% from 3Q19 and 126% from 4Q18 (1) In 4Q17, diluted earnings per share were $2.44, which included a $1.79 contribution from the remeasurement of deferred tax items due to enactment of the Tax Cuts and Jobs Act of 2017 (2) Consists of correspondent government and non-delegated interest rate lock commitments (“IRLCs”)

GRAPHIC

4 . Servicing segment pretax loss was $5.1 million, versus a pretax loss of $18.1 million in 3Q19 and pretax income of $29.3 million in 4Q18 – Valuation-related items included a $160.6 million gain in the fair value of mortgage servicing rights (MSR) and $194.6 million in hedging and other losses; net impact on pretax income was $(34.0) million and on EPS was $(0.31) – Pretax income excluding valuation-related items was $39.1 million, up 55% from 3Q19 and down 12% from 4Q18 o Operating expenses decreased by $6.5 million Q/Q primarily due to a reduction in vendor expenses following the completion of our Servicing Systems Environment (SSE) – Servicing portfolio grew to $368.7 billion in UPB, up 6% from September 30, 2019 and 23% from December 31, 2018 . Investment Management segment pretax income was $5.2 million, up from $5.0 million in 3Q19 and $2.5 million in 4Q18 – Revenue of $11.8 million in 4Q19, essentially unchanged from 3Q19 and up 50% from 4Q18 – Net assets under management (AUM) were $2.5 billion, up 10% from September 30, 2019 driven by $215 million in new common equity raised by PMT during the quarter, including $201 million in December Notable activity after quarter-end: . Completed the acquisition of a bulk Ginnie Mae MSR portfolio totaling $2.4 billion in UPB Fourth Quarter Highlights (continued)

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3.0% 3.5% 4.0% 4.5% 5.0% Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 5 Average 30-year fixed rate mortgage(1) . The Federal Reserve continues to signal that it will maintain the current target Federal Funds rate, as it continues to monitor the balance between its maximum employment and 2% inflation target objectives . The average 30-year fixed rate mortgage ended the fourth quarter at 3.74%, 0.10% higher than at September 30th(1) – The 10-year Treasury bond yield ended the quarter at 1.92%, up 0.24% from September 30th(2) – Low interest rates have kept origination volumes high, and have resulted in increases to 2020 origination forecasts . Home prices continued to appreciate at a steady pace, moving closer in-line with wage growth – Tight supply continues to support home prices with most forecasts expecting moderate home price appreciation through 2021 . A healthy U.S. economy driven by low unemployment and a strong consumer continues to support historically low levels of delinquencies – The total U.S. mortgage delinquency rate was 3.40% as of December 31, 2019, down from 3.53% at September 30, 2019 and 3.88% at December 31, 2018(4) . Spreads on seasoned credit risk transfer (CRT) with higher note rates widened in 4Q19 due to accelerated prepayment speeds, while spreads for “on the run” and seasoned CRT with lower note rates were modestly tighter Current Market Environment 3.64% 3.74% (1) Freddie Mac Primary Mortgage Market Survey. 3.51% as of 1/30/20 (2) U.S. Department of the Treasury.1.54% as of 2/3/20 (3) Actual home sales: National Association of Realtors (existing) and the Census Bureau (new). Home sales forecast: Average of Mortgage Bankers Association and Fannie Mae. Actual purchase and total originations: Inside Mortgage Finance. Purchase and total originations forecast: Average of Mortgage Bankers Association, Fannie Mae, Freddie Mac. Actual home price appreciation: FHFA Home Price Index. 2019 Home price appreciation represents Y/Y change from December 2018 to December 2019. Forecasted home price appreciation: Average of Mortgage Bankers Association, Fannie Mae, Freddie Mac. (4) Black Knight Financial Services. Includes loans that are 30 days or more past due but not in foreclosure Macroeconomic Forecasts(3) 2016 2017 2018 2019 2020E 2021E New home sales ('000s) 561 616 620 681 730 759 Existing home sales ('000s) 5,440 5,547 5,339 5,340 5,443 5,530 Total originations ($ in billions) $2,065 $1,810 $1,630 $2,375 $1,986 $1,859 Purchase originations ($ in billions) $1,037 $1,144 $1,141 $1,281 $1,336 $1,377 U.S. Home Price Appreciation (Y/Y % Change) 5.8% 6.9% 6.3% 4.9% 3.5% 2.3% Green: denotes improvement since previous earnings report Red: denotes drop since previous earnings report

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$7.27 $12.32 $21.34 $26.26 6/30/13 12/31/15 12/31/18 12/31/19 17.8% 8.2% 21.9% 26.0% 12.7% 21.6% 2016 2017 2018 2019 Book Value Per Share of PFSI Return on Equity (ROE)(2) Contribution from Tax Cuts and Jobs Act 6 Significant Book Value Growth Driven by Strong ROEs 22% CAGR(1) . Balance of production and servicing income contributes to the stability of PFSI’s earnings and returns . Servicing pretax income excluding valuation-related changes has grown substantially with portfolio growth ($369 billion in UPB vs. $194 billion three years ago) We expect PFSI to earn mid-teens ROEs across different market environments; for 2020, we expect the ROE to be higher (1) Compounded annual growth rate (2) Return on average common equity is calculated based on net income attributable to common shareholders as a percentage of monthly average common equity during the year

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U.S. Residential Mortgage Market Provides Significant Opportunities for PFSI Total Production(2) 1.7% 2.2% 2.8% 3.4% 3.8% 4.1% 5.0% 2013 2014 2015 2016 2017 2018 2019 Market Share U.S. Mortgage Origination Market(1) (in billions) 7 (1) See footnote 3 on page 5 (2) Source: Inside Mortgage Finance through 4Q19 . 2019 was the largest origination market since prior to the financial crisis, and while economists are forecasting the 2020 origination market to be smaller, their estimates have been increasing . PFSI is the third largest producer of residential mortgage loans in the U.S., with only 5.0% market share . Size and scale provide advantages critical for success in highly competitive mortgage market . Expanded growth opportunities in our consumer direct lending channel are driven by investments in systems and capacity infrastructure in addition to our large and growing servicing portfolio . Infrastructure for non-agency loans and home equity lines of credit (HELOC), including the synergistic partnership with PMT to securitize and invest in non-agency products positions PFSI in the event of changes in the mortgage market $2,375 $1,986 2019 2020 Purchase Refinance

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. enables brokers to effectively originate loans while remaining connected to PennyMac throughout the process PennyMac Continues to Invest in Mortgage Banking Technology 8 Production Systems Environment . Migrating our correspondent platform to Ellie Mae’s next generation Encompass Digital Lending Platform, leveraging proprietary systems and eventually seeking to consolidate all channels to a single, cloud-based platform . Enables further operational efficiencies, process consistencies and improved customer experiences across channels while increasing the velocity of system enhancements Pricing and Margin Management Systems . Best-in-industry pricing granularity and real-time pricing updates – can compute and disseminate hundreds of thousands of mid-day price updates within a minute . Organic, proprietary loan bidding system to optimize acquisition of loans in the correspondent channel Customer Acquisition . currently in development with enhanced data analytics to drive increased conversion and recapture for both our portfolio and new customer acquisition channels . Marketing initiatives focused on borrowers contemplating a new home purchase or refinance with automated lead generation, consumer marketing funnel analytics and distribution workflow . enables consumers to remain highly engaged through self service and communication features, resulting in more focused interactions with our customer-facing associates and improved overall operating efficiency Customer-Facing Portals 8

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Correspondent Production(1) Market Share Market Share Consumer Direct Production(1) Loan Servicing(1) Market Share Broker Direct Production(1) Market Share 9 Trends in PennyMac Financial’s Businesses (1) Source: Inside Mortgage Finance and company estimates for 4Q19 or as of 12/31/19. Inside Mortgage Finance estimates total 4Q19 origination market of $755 billion. Correspondent production share estimate is based on PFSI and PMT acquisition volume of $37.7 billion divided by $232 billion for the correspondent market (estimated to be 31% of total origination market). Consumer direct production share is based on PFSI originations of $3.8 billion divided by $421 billion for the retail market (estimated to be 56% of total origination market). Broker direct production share is based on PFSI originations of $842 million divided by $102 billion for the broker market (estimated to be 13% of total origination market). Loan servicing market share is based on PFSI’s servicing UPB of $368.7 billion divided by an estimated $11.0 trillion in mortgage debt outstanding as of December 31, 2019. 0.62% 0.58% 0.67% 0.90% 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19E 0.12% 0.45% 0.69% 0.83% 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19E 10.00% 14.93% 15.45% 16.25% 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19E 2.32% 2.76% 3.15% 3.36% 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19E

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$8.9 $14.3 $16.7 $9.0 $16.6 $20.5 $0.1 $0.5 $0.6 $18.8 $36.2 $36.6 4Q18 3Q19 4Q19 Government loans Conventional loans for PMT Non-delegated loans Total locks 10 (UPB in billions) Correspondent Volume and Mix Production Segment Highlights – Correspondent Channel (4) (5) . Correspondent acquisitions by PMT in 4Q19 totaled $37.7 billion in UPB, up 20% Q/Q and 109% Y/Y – 45% government loans; 55% conventional loans – Government acquisitions of $16.7 billion in UPB, up 16% Q/Q and 87% Y/Y – Conventional conforming acquisitions of $20.5 billion in UPB, up 23% Q/Q and 127% Y/Y – Non-delegated acquisitions increased 9% Q/Q to $580 million in UPB . PFSI’s correspondent lock volume(1) totaled $16.9 billion in UPB, up 1% Q/Q and 84% Y/Y – Delegated government locks totaled $16.2 billion in UPB, up 2% Q/Q and 81% Y/Y – Non-delegated locks totaled $647 million in UPB, down 24% Q/Q and up 185% Y/Y . PennyMac remained the largest correspondent aggregator in the U.S. for the second consecutive quarter(2) . January correspondent acquisitions totaled $11.1 billion in UPB; locks totaled $11.4 billion in UPB (1) Includes correspondent government and non-delegated IRLCs (2) Inside Mortgage Finance for 4Q19 (3) For government-insured, guaranteed and non-delegated loans, PFSI earns income from holding and selling or securitizing the loans (4) For conventional and jumbo loans, PFSI earns a fulfillment fee from PMT rather than income from holding and selling or securitizing the loans (5) Includes locks related to PMT loan acquisitions, including conventional loans for which PFSI earns a fulfillment fee upon loan funding (6) Includes net gains on loans held for sale, loan origination fees and net interest income for government-insured and non-delegated correspondent loans; lock volume adjusted for expected fallout for government-insured correspondent locks (3%) and non-delegated correspondent locks (27%) (7) Based on funded loans subject to fulfillment fee. The rate may reflect discretionary adjustments to facilitate the successful completion of certain loan transactions (3) 3Q19 4Q19 Revenue per fallout-adjusted PFSI correspondent lock(6) 36 39 Weighted average fulfillment fee (bps)(7) 27 28 3Q19 4Q19 Correspondent seller relationships 770 799 Purchase-money loans, as a % of total acquisitions 66% 55% Key Financial Metrics Selected Operational Metrics

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$0.7 $1.0 $1.2 $0.4 $1.7 $2.6 $1.2 $2.7 $3.8 $0.6 $2.3 $2.4 4Q18 3Q19 4Q19 Conventional Government Committed pipeline (UPB in billions) Consumer Direct Production Volume 11 Production Segment Highlights – Consumer Direct Channel (1) (1) Commitments to originate mortgage loans at specified terms at period end (2) Includes net gains on loans held for sale, loan origination fees and net interest income; lock volume adjusted for expected fallout, which was 29% in 4Q19 for consumer direct locks . Consumer direct production volume in 4Q19 totaled $3.8 billion in UPB, up 42% Q/Q and 217% Y/Y . Record volumes driven by continued investments to scale the production platform including increases in sales and fulfillment capacity to address the large opportunity . Enriched use of data driving improved lead generation capabilities, recapture rates and pull- through . Margins down modestly from 3Q19 . January 2020 consumer direct originations totaled $1.3 billion in UPB; locks totaled $2.3 billion in UPB – $2.8 billion committed pipeline at January 31, 2020(1) 3Q19 4Q19 Revenue per fallout-adjusted consumer direct lock (bps)(2) 437 424 Purchase-money loans, as a % of total originations 10% 6% Consumer Direct Metrics

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12 Production Segment Highlights – Broker Direct Channel Broker Direct Production Volume (UPB in millions) (1) (1) Commitments to originate mortgage loans at specified terms at period end (2) Includes net gains on loans held for sale, loan origination fees and net interest income; lock volume adjusted for expected fallout, which was 23% in 4Q19 for broker direct locks . Broker direct production volume in 4Q19 totaled $842 million in UPB, up 25% Q/Q and up from $199 million in 4Q18 – Increase in approved brokers and fulfillment capacity drove Q/Q origination volume growth – 10% Q/Q increase in purchase volume; 41% Q/Q increase in refinance volume . Lock volume of $1.1 billion in UPB, up 6% Q/Q and up from $279 million in 4Q18 . Approved brokers totaled 968 at December 31, 2019, up 9% from September 30, 2019 . Significant system enhancements to support the broker experience through the POWER portal planned for 2020 . January 2020 broker direct originations totaled $261 million in UPB; locks totaled $496 million in UPB – $484 million committed pipeline at January 31, 2020(1) 3Q19 4Q19 Revenue per fallout-adjusted broker direct lock (bps)(2) 140 129 Approved brokers 892 968 Purchase-money loans, as a % of total originations 52% 46% Broker Direct Metrics $139 $433 $519 $60 $242 $323 $199 $675 $842 $73 $382 $329 4Q18 3Q19 4Q19 Conventional loans Government loans Committed pipeline

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$348.5 $368.7 ($22.2) $42.4 At 9/30/19 Runoff Additions from loan production At 12/31/19 (1) 13 Servicing Segment Highlights (1) Owned portfolio in predominantly government-insured and guaranteed loans under the FHA (54%), VA (37%), and USDA (9%) programs (2) Represents PMT’s MSRs. Excludes distressed loan investments (3) Early buyouts of delinquent loans from Ginnie Mae pools during the period (4) Also includes loans servicing released in connection with recent asset sales by PMT (5) Includes consumer direct production, government correspondent acquisitions, and conventional conforming and jumbo loan acquisitions subserviced for PMT (UPB in billions) . Servicing portfolio totaled $368.7 billion in UPB at December 31, 2019, up 6% Q/Q and 23% Y/Y . Record production volumes more than offset elevated prepayment activity, driving organic growth in the servicing portfolio . Modest increase in delinquency rate driven by multiple factors including seasonal increases at year-end . Low interest rate environment continues to support elevated EBO loan volume Loan Servicing Portfolio Composition Net Portfolio Growth (UPB in billions) (4) (5) $299.3 $348.5 $368.7 12/31/2018 9/30/2019 12/31/2019 Prime owned Prime subserviced and other 3Q19 4Q19 Loans serviced (in thousands) 1,704 1,778 60+ day delinquency rate - owned portfolio(1) 3.4% 3.7% 60+ day delinquency rate - sub-serviced portfolio(2) 0.4% 0.4% Actual CPR - owned portfolio(1) 22.8% 21.0% Actual CPR - sub-serviced(2) 21.1% 20.0% UPB of completed modifications ($ in millions) $604 $546 EBO loan volume ($ in millions)(3) $1,839 $1,682 Selected Operational Metrics

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$1.57 $2.22 $2.45 12/31/2018 9/30/2019 12/31/2019 $7.1 $9.6 $9.9 $0.7 $2.2 $1.9 $7.8 $11.8 $11.8 4Q18 3Q19 4Q19 Base management fees & other revenue Performance incentive Investment Management Revenues (1) 14 Investment Management Segment Highlights Investment Management AUM ($ in billions) . Net AUM as of December 31, 2019 were $2.5 billion, up 10% from September 30, 2019 . PMT successfully raised additional capital in 4Q19 as a result of increased investment opportunities and strong performance – PMT raised $215 million in new common equity during the quarter, including $201 million in December . Investment Management revenues were essentially unchanged Q/Q, as the increase in base management fees was offset by a modest reduction in performance-based incentive fees ($ in millions)

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15 MSR Valuation Changes and Offsets ($ in millions) Hedging Approach Continues to Moderate the Volatility of PFSI’s Results Note: Figures may not sum exactly due to rounding . PFSI seeks to moderate the impact of interest rate changes on the fair value of its MSR asset through a comprehensive hedge strategy that also considers production-related income . In 4Q19, MSR fair value increased primarily due to lower expected prepayment activity in the future related to higher interest rates – Partially offset by faster than expected prepayments during the quarter – Increase represented approximately 6% of the fair value at September 30, 2019 . Losses from hedging activities and a rate- driven fair value increase of the ESS liability more than offset MSR fair value gains –Hedge costs were elevated in 4Q19 and are included in these losses, which totaled $194.6 million ($67.3) ($295.5) $160.6 $60.3 $254.0 ($194.6) $25.4 $179.3 $203.3 4Q18 3Q19 4Q19 MSR fair value change before recognition of realization of cash flows Hedging and other gains (losses) Production pretax income

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16 (1) Of average portfolio UPB, annualized (2) Comprised of net gains on mortgage loans held for sale at fair value and net interest income related to EBO loans (3) Changes in fair value do not include realization of MSR cash flows, which are included in amortization and realization of MSR cash flows above (4) Includes fair value changes and provision for impairment (5) Considered in the assessment of MSR fair value changes 4Q19 Servicing Profitability Excluding Valuation-Related Changes 4Q18 3Q19 4Q19 . Servicing fee revenue increased Q/Q driven by a larger portfolio and lower realization of MSR cash flows – Somewhat offset by lower income from custodial deposits due to seasonally lower balances and decreased earnings rates . Operating expenses decreased by $6.5 million Q/Q, including a $5.4 million reduction in vendor expenses following the completion of SSE, our proprietary servicing system . Interest shortfall from prepayments remained elevated and increased $4 million Q/Q . Increased EBO-related income Q/Q driven by increased revenue from reperformance of loans bought out in prior periods $ in millions basis points(1) $ in millions basis points(1) $ in millions basis points(1) Operating revenue 217.9 $ 29.8 270.8 $ 31.7 273.0 $ 30.4 Realization of MSR cash flows (82.3) (11.2) (117.2) (13.7) (113.1) (12.6) EBO loan-related revenue(2) 37.4 5.1 33.6 3.9 40.3 4.5 Servicing expenses: Operating expenses (71.3) (9.7) (87.0) (10.2) (80.5) (9.0) Interest shortfall (4.5) (0.6) (12.5) (1.5) (16.5) (1.8) Credit losses and provisions for defaulted loans (19.0) (2.6) (20.8) (2.4) (23.8) (2.6) EBO loan transaction-related expense (8.3) (1.1) (19.9) (2.3) (18.5) (2.1) Financing expenses: Interest on ESS (3.6) (0.5) (2.3) (0.3) (2.2) (0.2) Interest to third parties (21.8) (3.0) (19.6) (2.3) (19.7) (2.2) Pretax income excluding valuation-related changes 44.5 $ 6.1 25.2 $ 3.0 39.1 $ 4.4 Valuation-related changes(3) MSR fair value(4) (67.3) (295.5) 160.6 ESS liability fair value 0.5 3.9 (2.3) Hedging derivatives gains (losses) 59.8 250.1 (192.4) Provision for credit losses on active loans(5) (8.3) (1.8) (10.2) Servicing segment pretax income 29.3 $ (18.1) $ (5.1) $ Average servicing portfolio UPB 292,721 $ 341,370 $ 359,022 $

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Appendix

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. Complex and highly regulated mortgage industry requires effective governance, compliance and operating systems . Operating platform has been developed organically and is highly scalable . Commitment to strong corporate governance, compliance and risk management since inception . PFSI is well positioned for continued growth in this market and regulatory environment Loan Production Loan Servicing Investment Management . Servicing for owned MSRs and subservicing for PMT . Major loan servicer for Fannie Mae, Freddie Mac and Ginnie Mae . Industry-leading capabilities in special servicing . Organic growth results from loan production, supplemented by MSR acquisitions and PMT investment activity . External manager of PMT, which is focused on investing in mortgage-related assets: – GSE credit risk transfers – MSRs and ESS – Investments in prime non- Agency MBS and asset-backed securities – HELOC and prime non-QM securitization interests(1) – Distressed whole loans . Synergistic partnership with PMT . Correspondent aggregation of newly originated loans from third-party sellers – PFSI earns gains on delegated government-insured and non- delegated loans – Fulfillment fees for PMT’s delegated conventional loans . Consumer direct origination of conventional and government- insured loans . Broker direct origination launched in 2018 18 Overview of PennyMac Financial’s Businesses (1) Home Equity Line of Credit = HELOC; Non-QM = Non-qualified mortgage

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PennyMac Financial Is a Strong Independent Mortgage Company 19 . Comprehensive mortgage platform and balanced model with leading production and servicing businesses . Strong balance sheet with low leverage versus competitors – Debt to equity of 3.0x . Diversified liquidity sources and term debt that finances the largest long-term asset (MSRs) – Unique and cost effective funding structures with strong bank partnerships to support growth . Well-developed and sophisticated risk management structure combines extensive market expertise with technology to identify and monitor risks across the enterprise . Simplified corporate structure in 2018; all equity ownership converted to a single class of common stock Considerable oversight from State regulators, the CFPB, GSEs, ratings agencies and bank counterparties As of December 31, 2019 ($ in millions) Mortgage Servicing Rights $2,927 Servicing Advances $345 Cash & Short-term Investments, receivables, other $972 Loans eligible for repurchase $1,047 Loans Held for Sale $4,913 Stockholders' Equity $2,062 MSR Financing $1,394 ESS Financing $179 Other Liabilities & Payables $983 Liability for loans eligible for repurchase $1,047 Warehouse Financing $4,539 $10,204 $10,204 Assets Liabilities & Equity

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20 PFSI Has Developed in a Sustainable Manner for Long-Term Growth • Disciplined growth to address the demands of the GSEs, Agencies, regulators and our financing partners - Since inception, PennyMac has focused on building and testing processes and systems before adding significant transaction volumes • Highly experienced management team has created a robust corporate governance system centered on compliance, risk management and quality control . Operations launched; de novo build of legacy-free mortgage servicer . Raised $500 million of capital in private opportunity funds . PMT formed in an initial public offering raising $320 million . Correspondent group established with a focus on operations development and process design . Added servicing leadership for prime portfolio and to drive scalable growth . Correspondent system launches . Expanded infrastructure with flagship operations facility in Moorpark, CA . Correspondent leadership team expands . Expanded infrastructure in Tampa, FL . Became largest non-bank correspondent aggregator . PFSI completed initial public offering . Expanded infrastructure in Fort Worth, TX . Continued organic growth . Servicing UPB reaches $100 billion . Stockholders’ equity surpasses $1 billion . Substantial growth in consumer direct capacity . Issued MSR-backed term notes . PFSI completes corporate reorganization . PennyMac becomes largest correspondent aggregator(1) Period End: Employees: 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 72 128 230 435 1,008 1,373 1,816 2,523 3,099 3,248 3,460 4,215 (1) Inside Mortgage Finance for 3Q19 and 4Q19

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21 Industry-leading platform built organically – not through acquisitions . Disciplined, sustainable growth for more than 11 years . Focused on building and testing processes and systems before large transaction volumes Distinctive expertise and full range of capabilities across mortgage banking and investment management  Loan production, e.g., loan fulfillment systems and operations, correspondent counterparty review and management  Credit, e.g., loan program development, underwriting and quality control  Capital markets, e.g., pooling and securitization, hedging/interest rate risk management  Servicing, e.g., customer service, default management, investor accounting  Corporate functions, e.g., enterprise risk management, internal audit, treasury, finance and accounting, legal, IT infrastructure and development . Over 4,200 employees . Highly experienced management team – 132 senior-most executives have, on average, 24 years of relevant industry experience Strong governance and compliance culture . Led by distinguished board which includes eight independent directors . Robust management governance structure with 9 committees that oversee key risks and controls . External oversight by regulators, business partners and other third parties Desired structure in place to compete effectively as a non-bank . Synergistic partnership with PMT, a leading residential mortgage REIT and long-term investment vehicle . Provides access to efficient capital and reduces balance sheet constraints on growth PennyMac Financial Is in a Unique Position Among Mortgage Specialists

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22 Why Are MSR Sales Occurring? How Do MSRs Come to Market? . Large servicers may sell MSRs due to operational pressures, higher regulatory capital requirements for banks (treatment under Basel III) and a re-focus on core customers/businesses . Independent mortgage banks sell MSRs from time to time due to a need for capital . Intermittent large bulk portfolio sales ($10+ billion in UPB) Require considerable coordination with selling institutions and Agencies . Mini-bulk sales (typically $500 million to $5 billion in UPB) . Flow/co-issue MSR transactions (monthly commitments, typically $20-$100 million in UPB) Alternative delivery method typically from larger independent originators Which MSR Transactions Are Attractive? . GSE and Ginnie Mae servicing in which PFSI has distinctive expertise . MSRs sold and operational servicing transferred to PFSI (not subserviced by a third party) . Measurable representation and warranty liability for PFSI PFSI is uniquely positioned to be a successful acquirer of MSRs • Proven track record of complex MSR and distressed loan transfers • Operational platform that addresses the demands of the Agencies, regulators and financing partners • Physical capacity in place to sustain servicing portfolio growth plans • Potential co-investment opportunity for PMT in the ESS Opportunity in MSR Acquisitions

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23 Excess Servicing Spread (e.g., 12.5bp) MSR Asset (e.g., 25bp servicing fee) Acquired by PFSI from Third-Party Seller(1) . PMT has co-invested in Agency MSRs acquired from third-party sellers by PFSI; presently only related to certain Ginnie Mae MSRs . PMT acquires the right to receive the ESS cash flows over the life of the underlying loans . PFSI owns the MSRs and services the loans (1) The contractual servicer and MSR owner is PLS, an indirect wholly-owned subsidiary of PFSI (2) Subject and subordinate to Agency rights (under the related servicer or issuer guide) and, as applicable, to PFSI’s pledge of MSRs under a note payable; does not change the contractual servicing fee paid by the Agency to the servicer Excess Servicing Spread(2) . Interest income from a portion of the contractual servicing fee – Realized yield dependent on prepayment speeds and recapture Base MSR . Income from a portion of the contractual servicing fee . Also entitled to ancillary income . Bears expenses of performing loan servicing activities . Required to advance certain payments largely for delinquent loans Base MSR (e.g., 12.5bp) Acquired by PMT from PFSI(1) Example transaction: actual transaction details may vary materially PFSI’s Mortgage Servicing Rights Investments in Partnership with PMT

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24 MSR Asset Valuation Note: Figures may not sum exactly due to rounding UPB $206,302 $19,485 $225,787 Weighted average coupon 3.92% 4.19% 3.95% Prepayment speed assumption (CPR) 12.9% 10.9% 12.7% Weighted average servicing fee rate 0.35% 0.34% 0.35% Fair value of MSR $2,677.7 $249.1 $2,926.8 As a multiple of servicing fee 3.75 3.75 3.75 Related excess servicing spread liability - $178.6 $178.6 December 31, 2019 Unaudited ($ in millions) Total Subjectto excess servicing spread liability Not subject to excess servicing spread liability

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25 Note: Figures may not sum exactly due to rounding (1) Consists of prime jumbo and non-QM loans Acquisitions and Originations by Product First Lien Acquisitions/Originations Second Lien Originations Consumer Direct Fundings HELOC - $ 1 $ 1 $ 1 $ 2 $ Unaudited ($ in millions) Correspondent Acquisitions Delegated Conventional Conforming 9,052 $ 8,130 $ 10,737 $ 16,644 $ 20,510 $ Delegated Government 8,885 6,752 10,574 14,346 16,653 Delegated Non-Agency(1) 5 5 4 3 - Non-Delegated 120 174 402 531 580 Total 18,061 $ 15,061 $ 21,718 $ 31,524 $ 37,742 $ Consumer Direct Originations Conventional 740 $ 609 $ 838 $ 1,006 $ 1,203 $ Government 447 748 1,127 1,651 2,566 Jumbo - - - - - Total 1,187 $ 1,357 $ 1,965 $ 2,657 $ 3,768 $ Broker Direct Originations Conventional 139 $ 121 $ 289 $ 433 $ 519 $ Government 60 75 153 242 323 Jumbo - - - - - Total 199 $ 196 $ 442 $ 675 $ 842 $ Total acquisitions/originations 19,448 $ 16,614 $ 24,125 $ 34,856 $ 42,353 $ UPB of loans fulfilled for PMT 9,056 $ 8,136 $ 10,741 $ 16,647 $ 20,510 $ 4Q18 1Q19 2Q19 4Q19 3Q19

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26 Interest Rate Locks by Product First Lien Locks Note: Figures may not sum exactly due to rounding (1) Consists of prime jumbo and non-QM loans Unaudited ($ in millions) Correspondent Locks Delegated Conventional Conforming 9,639 $ 8,974 $ 12,628 $ 19,461 $ 19,736 $ Delegated Government 8,962 7,385 12,028 15,933 16,225 Delegated Non-Agency(1) 11 13 14 1 - Non-Delegated 227 360 636 853 647 Total 18,839 $ 16,732 $ 25,307 $ 36,248 $ 36,608 $ Consumer Direct Locks Conventional 925 $ 1,103 $ 1,413 $ 1,777 $ 2,053 $ Government 735 1,226 1,938 2,844 3,407 Jumbo 13 11 6 6 6 Total 1,673 $ 2,340 $ 3,357 $ 4,627 $ 5,466 $ Broker Direct Locks Conventional 195 $ 187 $ 461 $ 617 $ 662 $ Government 84 133 249 390 404 Jumbo - - - - - Total 279 $ 321 $ 710 $ 1,007 $ 1,066 $ Total locks 20,791 $ 19,393 $ 29,373 $ 41,883 $ 43,141 $ 4Q18 1Q19 2Q19 3Q19 4Q19

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27 Credit Characteristics by Acquisition / Origination Period Correspondent Consumer Direct Broker Direct 4Q18 1Q19 2Q19 3Q19 4Q19 4Q18 1Q19 2Q19 3Q19 4Q19 Government-insured 700 699 698 701 703 Government-insured 44 44 43 42 42 Conventional 751 750 755 760 762 Conventional 38 38 36 35 35 Weighted Average DTI Weighted Average FICO 4Q18 1Q19 2Q19 3Q19 4Q19 4Q18 1Q19 2Q19 3Q19 4Q19 Government-insured 696 699 703 709 711 Government-insured 44 44 43 42 42 Conventional 730 733 738 743 747 Conventional 38 37 37 36 35 Weighted Average DTI Weighted Average FICO 4Q18 1Q19 2Q19 3Q19 4Q19 4Q18 1Q19 2Q19 3Q19 4Q19 Government-insured 689 680 697 712 715 Government-insured 45 45 44 43 43 Conventional 746 742 752 759 758 Conventional 38 38 37 36 36 Weighted Average DTI Weighted Average FICO

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