8-K
PennyMac Financial Services, Inc. (PFSI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934
Date of Report (Date of earliest eventreported): October 22, 2024
PennyMac
Financial Services, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 001-38727 | 83-1098934 |
|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission<br><br>File Number) | (IRS Employer<br><br>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<br>communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting<br>material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ¨ | Pre-commencement<br>communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ¨ | Pre-commencement<br>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. ¨
| Item2.02 | Results of Operations and Financial Condition. |
|---|
On October 22, 2024, PennyMac Financial Services, Inc. (the “Company”) issued a press release and a slide presentation announcing its financial results for the fiscal quarter ended September 30, 2024. A copy of the press release and the slide presentation used in connection with the Company’s presentation of financial results were made available on October 22, 2024 and are furnished as Exhibits 99.1 and Exhibit 99.2, respectively. In addition, the Company has made available other supplemental financial information for the fiscal quarter ended September 30, 2024 on its website at pfsi.pennymac.com.
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 October 22, 2024, issued by PennyMac Financial Services, Inc. pertaining to its financial results for the fiscal quarter ended September 30, 2024. |
| 99.2 | Slide Presentation for use beginning on October 22, 2024 in connection with a presentation of financial results for the fiscal quarter ended September 30, 2024. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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:<br> October 22, 2024 | /s/ Daniel S. Perotti |
| Daniel S. Perotti | |
| Senior Managing Director and Chief Financial Officer |
Exhibit 99.1
PennyMac Financial Services, Inc.Reports
Third Quarter 2024 Results
WESTLAKE VILLAGE, Calif. – October 22, 2024 – PennyMac Financial Services, Inc. (NYSE: PFSI) today reported net income of $69.4 million for the third quarter of 2024, or $1.30 per share on a diluted basis, on revenue of $411.8 million. Book value per share increased to $72.95 from $71.76 at June 30, 2024.
PFSI’s Board of Directors declared a third quarter cash dividend of $0.30 per share, payable on November 27, 2024, to common stockholders of record as of November 18, 2024.
Third Quarter 2024 Highlights
| · | Pretax income was $93.9 million, down from $133.9 million in the prior quarter<br>and $126.8 million in the third quarter of 2023 |
|---|---|
| · | Production segment pretax income was $107.9 million, up from $41.3 million<br>in the prior quarter and $25.2 million in the third quarter of 2023 |
| --- | --- |
| o | Total loan acquisitions and originations, including those fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT), were $31.7<br>billion in unpaid principal balance (UPB), up 17 percent from the prior quarter and 26 percent from the third quarter of 2023 |
| --- | --- |
| o | Broker direct interest rate lock commitments (IRLCs) were $5.3 billion in UPB, up 24 percent from the prior quarter and 78 percent<br>from the third quarter of 2023 |
| --- | --- |
| o | Consumer direct IRLCs were $5.2 billion in UPB, up 93 percent from the prior quarter and 206 percent from the third quarter of 2023 |
| --- | --- |
| o | Government correspondent IRLCs totaled $12.4 billion in UPB, up 12 percent from the prior quarter and 24 percent from the third quarter<br>of 2023 |
| --- | --- |
| o | Conventional correspondent IRLCs for PFSI’s account totaled $8.2 billion in UPB, down 17 percent from the prior quarter and<br>20 percent from the third quarter of 2023 as PMT retained a higher percentage of its conventional correspondent production volumes |
| --- | --- |
| o | Correspondent acquisitions of conventional conforming and jumbo loans fulfilled for PMT were $5.9 billion in UPB, up 167 percent from<br>the prior quarter and 116 percent from the third quarter of 2023 |
| --- | --- |
1
| · | Servicing segment pretax loss was $14.6 million, compared to pretax income<br>of $88.5 million in the prior quarter and $101.2 million in the third quarter of 2023 |
|---|---|
| o | Pretax income excluding valuation-related items and non-recurring items was $151.4 million, up from $149.0 million in the prior quarter |
| --- | --- |
| o | Valuation-related items included: |
| --- | --- |
| – | $402.4 million in mortgage servicing rights (MSR) fair value declines, before recognition of realization of cash flows, partially<br>offset by $242.1 million in hedging gains |
| --- | --- |
| · | Net impact on pretax income related to these items was $(160.4) million,<br>or $(2.19) in diluted earnings per share |
| --- | --- |
| – | $5.7 million provision for losses on active loans |
| --- | --- |
| o | Servicing portfolio grew to $648.1 billion in UPB, up 2 percent from June 30, 2024, and 10 percent from September 30, 2023<br>driven by production volumes which more than offset prepayment activity |
| --- | --- |
| · | Investment Management segment pretax income was $0.7 million, down from $4.0<br>million in the prior quarter and up from $0.4 million in the third quarter of 2023 |
| --- | --- |
| o | Net assets under management (AUM) were $1.9 billion, essentially unchanged from June 30, 2024 and September 30, 2023 |
| --- | --- |
“PennyMac Financial reported outstanding results in the third quarter, with an annualized operating return on equity of 20 percent,” said Chairman and CEO David Spector. “Our production segment pretax income nearly tripled from last quarter as lower mortgage rates provided us the opportunity to help many customers in our servicing portfolio lower their monthly mortgage payments through a refinance. At the same time, our servicing portfolio – now near $650 billion in unpaid principal balance and nearly 2.6 million customers – continues to grow, driving increased revenue and cash flow contributions, as well as low-cost leads for our consumer direct lending division.”
Mr. Spector continued, “We have built an operating platform that we believe is unmatched in the mortgage industry, able to handle large, growing volumes of loans at the highest quality standards while also delivering strong performance across various market environments. Our ability to swiftly react to the increased opportunity in the loan production market reflects our significant and ongoing investments in technology, the operational enhancements we have made, and ultimately the scale we have achieved. In this period of interest rate volatility, we expect to continue delivering strong financial results with annualized operating returns on equity in the high-teens to low-twenties, anchored by the continued growth of our servicing portfolio and low-cost structure.”
2
The following table presents the contributions of PennyMac Financial’s segments to pretax income:
| Quarter ended September 30, 2024 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Mortgage Banking | Investment | |||||||||||
| Production | Servicing | Total | Management | Total | ||||||||
| (in thousands) | ||||||||||||
| Revenue | ||||||||||||
| Net gains on loans held for sale at fair value | $ | 235,902 | $ | 20,917 | $ | 256,819 | $ | - | $ | 256,819 | ||
| Loan origination fees | 49,430 | - | 49,430 | - | 49,430 | |||||||
| Fulfillment fees from PMT | 11,492 | - | 11,492 | - | 11,492 | |||||||
| Net loan servicing fees | - | 75,830 | 75,830 | - | 75,830 | |||||||
| Management fees | - | - | - | 7,153 | 7,153 | |||||||
| Net interest (expense) income: | ||||||||||||
| Interest income | 79,386 | 145,985 | 225,371 | 99 | 225,470 | |||||||
| Interest expense | 81,496 | 136,101 | 217,597 | - | 217,597 | |||||||
| (2,110 | ) | 9,884 | 7,774 | 99 | 7,873 | |||||||
| Other | 625 | 512 | 1,137 | 2,100 | 3,237 | |||||||
| Total net revenue | 295,339 | 107,143 | 402,482 | 9,352 | 411,834 | |||||||
| Expenses | 187,486 | 121,765 | 309,251 | 8,658 | 317,909 | |||||||
| Income (loss) before provision for income taxes | $ | 107,853 | $ | (14,622 | ) | $ | 93,231 | $ | 694 | $ | 93,925 |
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 $31.7 billion in UPB, $25.7 billion of which was for its own account and $5.9 billion of which was fee-based fulfillment activity for PMT. Correspondent locks for PFSI and direct lending IRLCs totaled $31.2 billion in UPB, up 12 percent from the prior quarter and 24 percent from the third quarter of 2023.
Production segment pretax income was $107.9 million, up from $41.3 million in the prior quarter and $25.2 million in the third quarter of 2023. Production segment revenue totaled $295.6 million, up 46 percent from the prior quarter and 69 percent from the third quarter of 2023. The increase from the prior quarter and third quarter of 2023 was primarily due to higher volumes across all channels, with the largest increase in the consumer direct channel.
3
The components of net gains on loans held for sale are detailed in the following table:
| Quarter ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| September 30, <br> 2024 | June 30, <br> 2024 | September 30, <br> 2023 | |||||||
| (in thousands) | |||||||||
| Receipt of MSRs | $ | 578,982 | $ | 541,207 | $ | 450,936 | |||
| Gain on sale of loans and mortgage servicing rights recapture payable to PennyMac Mortgage Investment Trust | 2,506 | (473 | ) | (500 | ) | ||||
| Provision for representations and warranties, net | (589 | ) | (53 | ) | (1,459 | ) | |||
| Cash loss, including cash hedging results | (382,148 | ) | (321,270 | ) | (251,245 | ) | |||
| Fair value changes of pipeline, inventory and hedges | 58,068 | (43,347 | ) | (46,358 | ) | ||||
| Net gains on mortgage loans held for sale | $ | 256,819 | $ | 176,064 | $ | 151,374 | |||
| Net gains on mortgage loans held for sale by segment: | |||||||||
| Production | $ | 235,902 | $ | 154,317 | $ | 127,821 | |||
| Servicing | $ | 20,917 | $ | 21,747 | $ | 23,553 |
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 $11.5 million in the third quarter, up 160 percent from the prior quarter and 108 percent from the third quarter of 2023. The increase from the prior quarter was primarily due to higher volumes of conventional correspondent loans retained by PMT. In the fourth quarter, we expect PMT to retain approximately 15 to 25 percent of total conventional correspondent production, a decline from 42 percent in the third quarter.
Net interest expense in the third quarter was $2.1 million, compared to net interest income of $1.2 million in the prior quarter. Interest income totaled $79.4 million, down from $84.6 million in the prior quarter, and interest expense totaled $81.5 million, down from $83.4 million in the prior quarter, both primarily due to lower market interest rates.
4
Production segment expenses were $187.5 million, up 16 percent from the prior quarter and 26 percent from the third quarter of 2023, both primarily due to higher volumes in the direct lending channels.
Servicing Segment
The Servicing segment includes income from owned MSRs and subservicing. The total servicing portfolio grew to $648.1 billion in UPB at September 30, 2024, an increase of 2 percent from June 30, 2024 and 10 percent from September 30, 2023. PennyMac Financial’s owned MSR portfolio grew to $416.4 billion in UPB, up 3 percent from June 30, 2024, and 17 percent from September 30, 2023. PennyMac Financial subservices $231.4 billion in UPB for PMT and subservices on an interim basis $258 million in UPB of previously owned loans that have been repurchased by the United States Veterans Affairs (VA) pursuant to the Veterans Affairs Servicing Purchase (VASP) program.
The table below details PennyMac Financial’s servicing portfolio UPB:
| September 30, <br> 2024 | June 30, <br> 2024 | September 30, <br> 2023 | ||||
|---|---|---|---|---|---|---|
| (in thousands) | ||||||
| Prime servicing: | ||||||
| Owned | ||||||
| Mortgage servicing rights and liabilities | ||||||
| Originated | $ | 393,947,146 | $ | 379,882,952 | $ | 333,372,910 |
| Purchased | 16,104,333 | 16,568,065 | 17,924,005 | |||
| 410,051,479 | 396,451,017 | 351,296,915 | ||||
| Loans held for sale | 6,366,787 | 6,108,082 | 5,181,866 | |||
| 416,418,266 | 402,559,099 | 356,478,781 | ||||
| Subserviced for PMT | 231,369,983 | 230,170,703 | 232,903,327 | |||
| Subserviced for U.S. Department of Veterans Affairs | 257,696 | - | - | |||
| Total prime servicing | 648,045,945 | 632,729,802 | 589,382,108 | |||
| Special servicing - subserviced for PMT | 8,340 | 8,810 | 10,780 | |||
| Total loans serviced | $ | 648,054,285 | $ | 632,738,612 | $ | 589,392,888 |
Servicing segment pretax loss was $14.6 million, down from pretax income of $88.5 million in the prior quarter and $101.2 million in the third quarter of 2023. Servicing segment net revenues totaled $107.1 million, down from $194.2 million in the prior quarter and $217.1 million in the third quarter of 2023.
Revenue from net loan servicing fees totaled $75.8 million, down from $167.6 million in the prior quarter and $185.4 million in the third quarter of 2023. Loan servicing fees were $462.0 million, up from $440.7 million in the prior quarter primarily due to growth in PFSI’s owned portfolio, reduced by $225.8 million in realization of cash flows, which was up from last quarter due to higher prepayment expectations as a result of lower market interest rates. Net valuation related declines were $160.4 million, compared to $72.4 million of such losses in the prior quarter. MSR fair value losses, before realization of cash flows, were $402.4 million due to lower market interest rates and hedging gains were $242.1 million, also driven by declining interest rates.
5
The following table presents a breakdown of net loan servicing fees:
| Quarter ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| September 30, <br> 2024 | June 30, <br> 2024 | September 30, <br> 2023 | |||||||
| (in thousands) | |||||||||
| Loan servicing fees | $ | 462,037 | $ | 440,696 | $ | 387,934 | |||
| Changes in fair value of MSRs and MSLs resulting from: | |||||||||
| Realization of cash flows | (225,836 | ) | (200,740 | ) | (177,775 | ) | |||
| Change in fair value inputs | (402,422 | ) | 99,425 | 398,871 | |||||
| Hedging gains (losses) | 242,051 | (171,777 | ) | (423,656 | ) | ||||
| Net change in fair value of MSRs and MSLs | (386,207 | ) | (273,092 | ) | (202,560 | ) | |||
| Net loan servicing fees | $ | 75,830 | $ | 167,604 | $ | 185,374 |
Servicing segment revenue included $20.9 million in net gains on loans held for sale related to early buyout loans (EBOs), down slightly from $21.7 million in the prior quarter and $23.6 million in the third quarter of 2023. These EBOs are previously delinquent loans that were brought back to performing status through PennyMac Financial’s successful servicing efforts.
Net interest income totaled $9.9 million, compared to net interest expense of $8.4 million in the prior quarter and net interest income of $7.2 million in the third quarter of 2023. Interest income was $146.0 million, up from $116.1 million in the prior quarter due to increased earnings from placement fees on custodial balances due to higher average balances outstanding. Interest expense was $136.1 million, up from $124.5 million in the prior quarter due to higher average balances of debt outstanding during the quarter.
Servicing segment expenses totaled $121.8 million, up from $105.7 million in the prior quarter primarily due to higher stock-based compensation, which had declined in the last quarter and increased in the current quarter related to the projected payout of certain share-based awards.
Investment Management Segment
PennyMac Financial manages PMT for which it earns base management fees and may earn incentive compensation. Net AUM were $1.9 billion as of September 30, 2024, essentially unchanged from June 30, 2024 and September 30, 2023.
6
Pretax income for the Investment Management segment was $0.7 million, down from $4.0 million in the prior quarter and up from $0.4 million in the third quarter of 2023. Base management fees from PMT were $7.2 million, essentially unchanged from the prior quarter and third quarter of 2023. No performance incentive fees were earned in the third quarter.
The following table presents a breakdown of management fees:
| Quarter ended | ||||||
|---|---|---|---|---|---|---|
| September 30, <br> 2024 | June 30, <br> 2024 | September 30, <br> 2023 | ||||
| (in thousands) | ||||||
| Management fees: | ||||||
| Base | $ | 7,153 | $ | 7,133 | $ | 7,175 |
| Performance incentive | - | - | - | |||
| Total management fees | $ | 7,153 | $ | 7,133 | $ | 7,175 |
| Net assets of PennyMac Mortgage Investment Trust at quarter end | $ | 1,936,787 | $ | 1,939,869 | $ | 1,949,078 |
Investment Management segment expenses totaled $8.7 million, up from $5.3 million in the prior quarter and $8.4 million in the third quarter of 2023.
7
Consolidated Expenses
Total expenses were $317.9 million, up from $272.3 million in the prior quarter primarily due to increased production segment expenses due to higher volumes and stock-based compensation expense as mentioned above.
Taxes
PFSI recorded a provision for tax expense of $24.6 million, resulting in an effective tax rate of 26.1 percent.
***
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 Tuesday, October 22, 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 4,000 people across the country. For the twelve months ended September 30, 2024, PennyMac Financial’s production of newly originated loans totaled $107 billion in unpaid principal balance, making it a top lender in the nation. As of September 30, 2024, PennyMac Financial serviced loans totaling $648 billion in unpaid principal balance, making it a top mortgage servicer in the nation. Additional information about PennyMac Financial Services, Inc. is available at pfsi.pennymac.com.
| Media | Investors |
|---|---|
| Kristyn Clark | Kevin Chamberlain |
| mediarelations@pennymac.com | Isaac Garden 805.225.8224 |
| PFSI_IR@pennymac.com | |
| 818.224.7028 |
8
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, our 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; changes in real estate values, housing prices and housing sales; changes in macroeconomic, consumer and real estate market conditions; 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; 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; difficulties inherent in adjusting the size of our operations to reflect changes in business levels; purchase opportunities for mortgage servicing rights; our substantial amount of indebtedness; increases in loan delinquencies, defaults and forbearances; our dependence on U.S. government-sponsored entities and changes in their current roles or their guarantees or guidelines; 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; our obligation to indemnify PMT if our services fail to meet certain criteria or characteristics or under other circumstances; investment management and incentive fees; conflicts of interest in allocating our services and investment opportunities among us and our advised entity; 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 severe weather events, man-made or other natural conditions, including 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 press release contains financial information calculated other than in accordance with U.S. generally accepted accounting principles (“GAAP”), such as pretax income excluding valuation-related items and operating net income that provide a meaningful perspective on the Company’s business results since the Company utilizes this information to evaluate and manage the business. Non-GAAP disclosures have limitations as an analytical tool and should not be viewed as a substitute for financial information determined in accordance with GAAP.
9
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| June 30, <br> 2024 | September 30, <br> 2023 | ||||
|---|---|---|---|---|---|
| ASSETS | |||||
| Cash | 145,814 | $ | 595,336 | $ | 1,177,304 |
| Short-term investment at fair value | 667,934 | 188,772 | 5,553 | ||
| Principal-only stripped mortgage-backed securities at fair value | 960,267 | 914,223 | - | ||
| Loans held for sale at fair value | 6,565,704 | 6,238,959 | 5,186,656 | ||
| Derivative assets | 190,612 | 145,887 | 103,366 | ||
| Servicing advances, net | 400,764 | 414,235 | 399,281 | ||
| Mortgage servicing rights at fair value | 7,752,292 | 7,923,078 | 7,084,356 | ||
| Investment in PennyMac Mortgage Investment Trust at fair value | 1,070 | 1,031 | 930 | ||
| Receivable from PennyMac Mortgage Investment Trust | 32,603 | 29,413 | 27,613 | ||
| Loans eligible for repurchase | 5,512,289 | 4,560,058 | 4,445,814 | ||
| Other | 642,189 | 566,573 | 518,441 | ||
| Total assets | 22,871,538 | $ | 21,577,565 | $ | 18,949,314 |
| LIABILITIES | |||||
| Assets sold under agreements to repurchase | 6,600,997 | $ | 6,408,428 | $ | 4,411,747 |
| Mortgage loan participation purchase and sale agreements | 517,527 | 511,837 | 498,392 | ||
| Notes payable secured by mortgage servicing assets | 1,723,632 | 1,723,144 | 2,673,402 | ||
| Unsecured senior notes | 3,162,239 | 3,160,226 | 1,782,689 | ||
| Derivative liabilities | 41,471 | 18,830 | 41,200 | ||
| Mortgage servicing liabilities at fair value | 1,718 | 1,708 | 1,818 | ||
| Accounts payable and accrued expenses | 331,512 | 294,812 | 306,821 | ||
| Payable to PennyMac Mortgage Investment Trust | 81,040 | 100,220 | 97,975 | ||
| Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement | 26,099 | 26,099 | 26,099 | ||
| Income taxes payable | 1,105,550 | 1,082,397 | 1,059,993 | ||
| Liability for loans eligible for repurchase | 5,512,289 | 4,560,058 | 4,445,814 | ||
| Liability for losses under representations and warranties | 28,286 | 28,688 | 30,491 | ||
| Total liabilities | 19,132,360 | 17,916,447 | 15,376,441 | ||
| STOCKHOLDERS' EQUITY | |||||
| Common stock¾authorized 200,000,000 shares of 0.0001 par value; issued and outstanding 51,257,630, 51,017,418, and 49,925,752 shares, respectively | 5 | 5 | 5 | ||
| Additional paid-in capital | 54,415 | 30,053 | 11,475 | ||
| Retained earnings | 3,684,758 | 3,631,060 | 3,561,393 | ||
| Total stockholders' equity | 3,739,178 | 3,661,118 | 3,572,873 | ||
| Total liabilities and stockholders’ equity | 22,871,538 | $ | 21,577,565 | $ | 18,949,314 |
All values are in US Dollars.
10
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| Quarter ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| September 30, <br> 2024 | June 30, <br> 2024 | September 30, <br> 2023 | |||||||
| (in thousands, except per share amounts) | |||||||||
| Revenues | |||||||||
| Net gains on loans held for sale at fair value | $ | 256,819 | $ | 176,064 | $ | 151,374 | |||
| Loan origination fees | 49,430 | 42,075 | 37,701 | ||||||
| Fulfillment fees from PennyMac Mortgage Investment Trust | 11,492 | 4,427 | 5,531 | ||||||
| Net loan servicing fees: | |||||||||
| Loan servicing fees | 462,037 | 440,696 | 387,934 | ||||||
| Change in fair value of mortgage servicing rights and mortgage servicing liabilities | (628,258 | ) | (101,315 | ) | 221,096 | ||||
| Mortgage servicing rights hedging results | 242,051 | (171,777 | ) | (423,656 | ) | ||||
| Net loan servicing fees | 75,830 | 167,604 | 185,374 | ||||||
| Net interest income (expense): | |||||||||
| Interest income | 225,470 | 200,811 | 166,552 | ||||||
| Interest expense | 217,597 | 207,871 | 156,863 | ||||||
| 7,873 | (7,060 | ) | 9,689 | ||||||
| Management fees from PennyMac Mortgage Investment Trust | 7,153 | 7,133 | 7,175 | ||||||
| Other | 3,237 | 15,884 | 3,464 | ||||||
| Total net revenues | 411,834 | 406,127 | 400,308 | ||||||
| Expenses | |||||||||
| Compensation | 171,316 | 141,956 | 156,909 | ||||||
| Loan origination | 45,208 | 40,270 | 28,889 | ||||||
| Technology | 37,059 | 35,690 | 39,000 | ||||||
| Servicing | 28,885 | 22,920 | 13,242 | ||||||
| Professional services | 9,339 | 9,404 | 11,942 | ||||||
| Occupancy and equipment | 8,156 | 7,893 | 8,900 | ||||||
| Marketing and advertising | 5,088 | 5,445 | 4,632 | ||||||
| Other | 12,858 | 8,695 | 9,997 | ||||||
| Total expenses | 317,909 | 272,273 | 273,511 | ||||||
| Income before provision for income taxes | 93,925 | 133,854 | 126,797 | ||||||
| Provision for income taxes | 24,557 | 35,596 | 33,927 | ||||||
| Net income | $ | 69,368 | $ | 98,258 | $ | 92,870 | |||
| Earnings per share | |||||||||
| Basic | $ | 1.36 | $ | 1.93 | $ | 1.86 | |||
| Diluted | $ | 1.30 | $ | 1.85 | $ | 1.77 | |||
| Weighted-average common shares outstanding | |||||||||
| Basic | 51,180 | 50,955 | 49,902 | ||||||
| Diluted | 53,495 | 53,204 | 52,561 | ||||||
| Dividend declared per share | $ | 0.30 | $ | 0.20 | $ | 0.20 |
11
PENNYMAC FINANCIAL SERVICES, INC. RECONCILIATIONOF
GAAP NET INCOME TO OPERATING NET INCOME ANDANNUALIZED OPERATING RETURN ON EQUITY
| Quarter Ended | |||
|---|---|---|---|
| September 30, 2024 | |||
| (in thousands, except annualized operating return on equity) | |||
| Net income | $ | 69,368 | |
| Decrease in fair value of MSRs and MSLs due to changes in valuation inputs used in the valuation model | 402,422 | ||
| Hedging gains associated with MSRs | (242,051 | ) | |
| Tax impacts of adjustments^(1)^ | 43,060 | ||
| Operating net income | $ | 186,679 | |
| Average stockholders' equity | $ | 3,694,831 | |
| Annualized operating return on equity | 20 | % | |
| ^(1)^ | Assumes a tax rate of 26.85% | ||
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12
Exhibit 99.2
| PennyMac Financial Services, Inc.<br>3Q24 EARNINGS REPORT<br>October 2024 |
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| 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,<br>estimates, projections and assumptions with respect to, among other things, our financial results, future operations, business plans and investment strategies, as well as industry<br>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,<br>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<br>any future period may vary materially from those projected herein and from past results discussed herein. These forward-looking statements include, but are not limited to,<br>statements regarding future changes in interest rates, prepayment rates and the housing market; future loan origination, servicing and production, including future production,<br>operating and hedge expenses; future loan delinquencies, defaults and forbearances; future earnings and return on equity as well as other business and financial expectations.<br>Factors which could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: interest rate changes; changes in real estate<br>values, housing prices and housing sales; changes in macroeconomic, consumer and real estate market conditions; the continually changing federal, state and local laws and<br>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<br>applicable to our business; the mortgage lending and servicing-related regulations promulgated by the Consumer Financial Protection Bureau and its enforcement of these<br>regulations; the licensing and operational requirements of states and other jurisdictions applicable to our business, to which our bank competitors are not subject; foreclosure<br>delays and changes in foreclosure practices; difficulties inherent in adjusting the size of our operations to reflect changes in business levels; purchase opportunities for mortgage<br>servicing rights; our substantial amount of indebtedness; increases in loan delinquencies, defaults and forbearances; our dependence on U.S. government-sponsored entities and<br>changes in their current roles or their guarantees or guidelines; our reliance on PennyMac Mortgage Investment Trust (NYSE: PMT) as a significant contributor to our mortgage<br>banking business; maintaining sufficient capital and liquidity and compliance with financial covenants; our obligation to indemnify third-party purchasers or repurchase loans if<br>loans that we originate, acquire, service or assist in the fulfillment of, fail to meet certain criteria; our obligation to indemnify PMT if our services fail to meet certain criteria or<br>characteristics or under other circumstances; investment management and incentive fees; conflicts of interest in allocating our services and investment opportunities among us<br>and our advised entity; our ability to mitigate cybersecurity risks, cyber incidents and technology disruptions; the effect of public opinion on our reputation; our exposure to risks of<br>loss and disruptions in operations resulting from severe weather events, man-made or other natural conditions, including climate change and pandemics; our ability to effectively<br>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<br>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<br>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<br>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<br>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.<br>This presentation contains financial information calculated other than in accordance with U.S. generally accepted accounting principles (“GAAP”), such as pretax income excluding<br>valuation-related items and operating net income that provide a meaningful perspective on the Company’s business results since the Company utilizes this information to evaluate<br>and manage the business. Non-GAAP disclosures have limitations as an analytical tool and should not be viewed as a substitute for financial information determined in accordance<br>with GAAP.<br>2<br>FORWARD-LOOKING STATEMENTS |
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| 3<br>PRODUCTION<br>INVESTMENT<br>MANAGEMENT<br>Annualized SERVICING<br>return on equity<br>Annualized<br>operating return on<br>equity⁽³⁾<br>8% 20%<br>Net<br>income<br>Diluted<br>EPS⁽¹⁾<br>$69mm $1.30<br>Pretax income<br>Total loan<br>acquisitions and<br>originations⁽²⁾<br>PFSI<br>correspondent<br>lock volume<br>Broker direct<br>lock volume<br>Consumer<br>direct lock<br>volume<br>$108mm $31.7bn $20.7bn $5.3bn $5.2bn<br>Pretax income<br>MSR⁽¹⁾ fair value<br>changes, and<br>hedging results<br>MSR fair value<br>changes and<br>hedging impact<br>to diluted EPS<br>Pretax income<br>excluding<br>valuation-related<br>items⁽⁴⁾<br>Total servicing<br>portfolio UPB⁽¹⁾⁽²⁾<br>$(15)mm $(160)mm $(2.19) $151mm $648bn<br>Pretax income Net AUM⁽¹⁾ Revenue<br>$1mm $1.9bn $9.4mm<br>THIRD QUARTER HIGHLIGHTS<br>3Q24 Results<br>Book value<br>per share<br>Dividend per<br>common share<br>$72.95 $0.30<br>Note: All figures are for 3Q24 or are as of 9/30/24<br>(1) EPS = earnings per share; MSR = mortgage servicing rights; UPB = unpaid principal balance, includes loans held for sale at fair value; AUM = assets under management<br>(2) Includes volume fulfilled or subserviced for PennyMac Mortgage Investment Trust (NYSE: PMT)<br>(3) See slide 32 for a reconciliation of GAAP net income to non-GAAP annualized operating return on equity<br>(4) Excludes $402 million in MSR fair value declines, $242 million in hedging gains, and a $6 million provision for losses on active loans - see slide 13 for additional details<br>Strong operating results partially offset by net fair value declines on hedged mortgage servicing rights |
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| 4<br>ORIGINATION MARKET EXPECTATIONS REFLECT GROWTH<br>U.S. Mortgage Origination Market(1)<br>($ in trillions)<br>Mortgage Rates Have Declined<br>Note: Figures may not sum due to rounding<br>(1) Actual originations: Inside Mortgage Finance. Forecast originations: Average of Mortgage Bankers Association (9/23/24) and Fannie Mae (10/10/24) forecasts.<br>(2) Freddie Mac Primary Mortgage Market Survey. 6.44% as of 10/17/24<br>• Current third-party estimates for industry originations average $1.7 trillion in 2024 and $2.3 trillion in 2025, reflecting<br>projections for rates to decline and growth in overall volumes<br>• Mortgage banking companies with large servicing portfolios and diversified business models are positioned to generate<br>meaningful profitability as the mortgage markets decrease or increase in size<br>Purchase Average 30-year fixed rate mortgage Refinance (2) |
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| Mortgage Banking Operating Pretax Income<br>($ in millions)<br>Production<br>Servicing net of valuation related changes and non-recurring items(1)<br>• Continued increase in operating return on equity in recent periods as the mortgage market improves<br>‒ Production pretax income was up 161% from the prior quarter, driven by strong contributions from the direct<br>lending channels<br>‒ Servicing to continue providing a strong base level of operating earnings, with additional upside potential for<br>the production segment as the origination market grows<br>5<br>BUILDING ON DOUBLE DIGIT OPERATING RETURNS IN 2024<br>Annualized Operating ROE(1)<br>Note: Figures may not sum due to rounding<br>(1) See slide 32 for a reconciliation of GAAP to non-GAAP items |
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| 6<br>EARNINGS GROWTH TO BE DRIVEN BY REFINANCE RECAPTURE OPPORTUNITY<br>Gov’t. Loan Refinance Recapture Rates<br>Conv. Loans Refinance Recapture Rates<br>> 7.00%<br>6.50 - 6.99%<br>6.00 - 6.49%<br>5.50 - 5.99%<br>5.00 - 5.49%<br>> 7.00%<br>6.50 - 6.99%<br>6.00 - 6.49%<br>5.50 - 5.99%<br>5.00 - 5.49%<br>• Large opportunity as<br>borrowers with loans<br>originated at higher note<br>rates seek to refinance<br>‒ Higher recapture rates for<br>government-insured or<br>guaranteed loans versus<br>conventional loans due to<br>streamlined refinance<br>programs<br>‒ Introduction of closed-end<br>second liens in 2022 for<br>customers to access home<br>equity while retaining their<br>low-rate, first lien mortgage<br>• We currently expect<br>annualized operating<br>returns on equity in the<br>high-teens to low-twenties<br>(1) Includes first-lien conventional and other loans serviced for PFSI’s own account as well as those subserviced loans for PMT in 2025<br>(2) Numerator = UPB of new consumer direct first lien refinance originations; denominator = UPB of payoffs with no transfer of title or MLS listing identified<br>(3) Numerator = UPB of new consumer direct first lien refinance originations + UPB of new consumer direct closed-end second lien (CES) originations from portfolio customers + UPB of<br>retained first-liens for associated CES originations; denominator = UPB of payoffs with no transfer of title or MLS listing identified + UPB of retained first-liens for associated CES originations<br>Refinance recapture(2)<br>Refinance recapture (inc. CES)(3)<br>Refinance recapture(2)<br>Refinance recapture (inc. CES)(3)<br>Gov’t. Loans: Note Rates >5%<br>(UPB in billions)<br>Conv. Loans: Note Rates >5%(1)<br>(UPB in billions)<br>9/30/24<br>9/30/24 |
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| 7<br>Operating Expenses<br>(bps of average servicing portfolio UPB)<br>Revenue From Servicing & Placement Fees<br>($ in millions)<br>SERVICING PROVIDES GROWING CASH FLOW AND SCALE BENEFITS<br>• Increasing revenue contribution due to portfolio growth over time<br>• Higher proportion of owned servicing in more recent periods drives<br>increased servicing fees<br>• Increasing contribution from placement fees driven by higher<br>short-term rates in the current market environment<br>• Increased scale and efficiency as the portfolio grows<br>• Lower variable costs due to the implementation of SSE, our<br>proprietary servicing system in 2019<br>• Continuing to increase efficiency through the use of emerging<br>technologies, including capabilities of generative artificial<br>intelligence<br>• Delinquencies remain low in the current market environment,<br>further reducing operating expenses<br>(1) (1)<br>(1) LTM = Last Twelve Months<br>Loan servicing, ancillary, and other fees<br>Earnings on custodial balances and deposits and other income |
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| PENNYMAC’S MARKET SHARE OVER TIME ACROSS ITS BUSINESSES<br>8<br>Loan Servicing Market Share Correspondent Production Market Share(1) (1)<br>Broker Direct Market Share(1) Consumer Direct Market Share(1)<br>Note: All figures are for PFSI and include volume fulfilled or subserviced for PMT<br>(1) Historical market share: Inside Mortgage Finance; excludes second lien originations. For LTM 3Q24, we estimate $1.5 trillion in total origination volume, and that the correspondent channel represented 29% of the overall origination market, retail represented 53%,<br>and broker represented 18%. Loan servicing market share is based on PFSI’s servicing portfolio UPB of $648 billion divided by $14.2 trillion in mortgage debt outstanding |
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| 9<br>PRODUCTION SEGMENT HIGHLIGHTS – VOLUME BY CHANNEL<br>Broker Direct<br>(UPB in billions)<br>Consumer Direct<br>(UPB in billions)<br>Note: Figures may not sum due to rounding<br>(1) Government-insured or guaranteed loans and certain conventional loans acquired through PMT’s correspondent production business and subsequently sold to PFSI; PFSI earns income from holding and selling or securitizing the loans<br>(2) Loans fulfilled for PMT; for these loans, PFSI earns a fulfillment fee from PMT rather than income from holding and selling or securitizing the loans<br>(3) Includes locks related to both PFSI and PMT loan acquisitions<br>(4) Commitments to originate mortgage loans at specified terms at period end<br>Correspondent<br>(UPB in billions)<br>Conv. and Jumbo Acquisitions - for PMT(2)<br>Total Locks(3)<br>Originations<br>Locks<br>Locks:<br>(UPB in billions) $9.1<br>Acquisitions:<br>(UPB in billions) $9.2<br>Locks:<br>(UPB in billions) $1.9<br>Originations:<br>(UPB in billions) $1.6<br>Committed pipeline(4):<br>(UPB in billions) $2.0<br>Locks:<br>(UPB in billions) $1.6<br>Originations:<br>(UPB in billions) $1.2<br>Committed pipeline(4):<br>(UPB in billions) $2.7<br>Originations<br>Locks<br>Conv. Acquisitions - for PFSI(1)<br>Gov’t. Acquisitions - for PFSI(1)<br>October 2024 (Estimated) October 2024 (Estimated) October 2024 (Estimated) |
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| • Revenue per fallout adjusted lock for PFSI’s own account was 88 basis points in 3Q24, up from 62 basis points in 2Q24<br>‒ Higher volumes across all three channels, with the largest increase in consumer direct; lower margins in consumer direct due to a<br>higher percentage of refinance loans versus lower-balance closed end second liens<br>• Production expenses (net of loan origination expense) increased 18% from the prior quarter due to higher volumes in the direct<br>lending channels<br>10<br>DRIVERS OF PRODUCTION SEGMENT RESULTS<br>(1) Expected revenue net of direct origination costs at time of lock<br>(2) Includes government-insured or guaranteed loans and certain conventional loans for PFSI’s own account<br>(3) Reflects timing of revenue and loan origination expense recognition, hedging, pricing & execution changes, and other items<br>3Q23 2Q24 3Q24<br>($ in millions)<br>Fallout<br>Adjusted<br>Locks<br>Margin /<br>Fulfillment<br>Fee (bps)(1)<br>Revenue<br>Contribution<br>(net of Loan<br>origination<br>expense)<br>% of<br>Production<br>Revenue<br>Fallout<br>Adjusted<br>Locks<br>Margin /<br>Fulfillment<br>Fee (bps)(1)<br>Revenue<br>Contribution<br>(net of Loan<br>origination<br>expense)<br>% of<br>Production<br>Revenue<br>Fallout<br>Adjusted<br>Locks<br>Margin /<br>Fulfillment<br>Fee (bps)(1)<br>Revenue<br>Contribution<br>(net of Loan<br>origination<br>expense)<br>% of<br>Production<br>Revenue<br>PFSI Correspondent(2) $ 20,060 33 $ 66.6 46% $ 20,503 30 $ 61.3 38% $ 19,887 33 $ 65.3 26%<br>Broker Direct 2,267 97 22.0 15% 3,105 103 32.0 20% 3,763 97 36.4 15%<br>Consumer Direct 1,065 474 50.4 35% 1,764 393 69.3 43% 3,421 323 110.4 44%<br>Other(3) n/a n/a 1.0 1% n/a n/a (4.7) (3)% n/a n/a 26.6 11%<br>Total PFSI account revenues<br>(net of Loan origination expense) $ 23,392 60 $ 140.0 96% $ 25,372 62 $ 157.8 97% $ 27,071 88 $ 238.6 95%<br>PMT Conventional Correspondent 2,667 21 5.5 4% 2,148 21 4.4 3% 6,894 17 11.5 5%<br>Total Production revenues<br>(net of Loan origination expense) 56 $ 145.6 100% 59 $ 162.3 100% 74 $ 250.1 100%<br>Production expenses<br>(less Loan origination expense) $ 26,059 46 $ 120.4 83% $ 27,520 44 $ 121.0 75% $ 33,964 42 $ 142.3 57%<br>Production segment<br>pretax income 10 $ 25.2 17% 15 $ 41.3 25% 32 $ 107.9 43% |
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| Correspondent Broker Direct<br>PRODUCTION SEGMENT HIGHLIGHTS – BUSINESS TRENDS BY CHANNEL<br>11<br>Consumer Direct<br>● Pennymac remains the largest<br>correspondent aggregator in the U.S.<br>● Lock and acquisition volumes for PFSI’s<br>account were down 2% from 2Q24 as<br>PMT retained approximately 42% of total<br>conventional correspondent production in<br>3Q24 compared to 18% in 2Q24<br>‒ We expect PMT to retain approximately<br>15 - 25% of total conventional<br>correspondent production in 4Q24<br>● 794 correspondent sellers at September<br>30, 2024, essentially unchanged from<br>June 30, 2024<br>● Purchase volume in 3Q24 was 91% of<br>total acquisitions<br>Multi-channel approach provides flexibility and has proven to be a competitive advantage, supporting profitability and pricing<br>discipline while driving growth of the servicing portfolio<br>● Lock volumes were up 24% and<br>originations were up 8% from 2Q24<br>● Approved brokers totaled 4,411 at<br>September 30, 2024, up 3% from June<br>30, 2024 and 25% from September 30,<br>2023, representing approximately a<br>quarter of the total population of<br>brokers<br>‒ Top brokers see Pennymac as a<br>strong alternative to the top two<br>channel lenders<br>● Purchase volume in 3Q24 was 82% of<br>total originations<br>● Strong trends in jumbo originations,<br>which were 11% of total originations in<br>3Q24<br>● Lock volumes were up 93% and<br>originations were up 69% from 2Q24<br>‒ Increase due primarily to higher<br>refinance volumes<br>● Continue to provide for the spectrum of<br>needs of the nearly 2.6 million<br>customers in our servicing portfolio<br>‒ Refinance lock volume in 3Q24 was<br>$4.8 billion, or 92% of total locks, up<br>from $2.2 billion, or 83% of total locks in<br>2Q24<br>‒ 97% of total origination volume,<br>including both first and second-lien,<br>was sourced from our large and<br>growing servicing portfolio<br>‒ $278 million of closed-end second lien<br>mortgage loans funded in 3Q24, up<br>from $257 million in 2Q24 |
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| Selected Operational Metrics<br>2Q24 3Q24<br>Loans serviced (in thousands) 2,513 2,558<br>60+ day delinquency rate - owned portfolio(1) 3.0% 3.4%<br>60+ day delinquency rate - sub-serviced portfolio(2) 0.6% 0.6%<br>Actual CPR - owned portfolio(1) 6.7% 8.5%<br>Actual CPR - sub-serviced portfolio(2) 5.6% 5.7%<br>UPB of completed modifications ($ in millions)(3) $3,213 $3,186<br>EBO loan volume ($ in millions)(4) $665 $694<br>Prime owned Prime subserviced and other<br>SERVICING SEGMENT HIGHLIGHTS<br>12<br>Loan Servicing Portfolio Composition<br>(UPB in billions)<br>Net Portfolio Growth<br>(UPB in billions)<br>(1) Owned portfolio is predominantly government-insured and guaranteed loans – see Appendix slide 27 for additional details; delinquency data based on loan count (i.e., not UPB); CPR = Conditional Prepayment Rate<br>(2) Represents PMT’s MSRs that we service<br>(3) UPB of completed modifications includes loss mitigation efforts associated with partial claims programs<br>(4) Early buyouts of delinquent loans from Ginnie Mae pools during the period<br>(5) Also includes loans sold with servicing released in connection with any asset sales by PMT<br>(6) Includes consumer and broker direct production, government and conventional correspondent acquisitions, and conventional conforming and jumbo loan acquisitions subserviced for PMT<br>(5)<br>(6)<br>• Servicing portfolio totaled $648.1 billion in UPB at September<br>30, 2024, up 2% Q/Q and 10% Y/Y<br>• Production volumes more than offset prepayment activity,<br>leading to continued portfolio growth<br>• 60+ day delinquency rates for owned MSR increased slightly<br>from the end of the prior quarter<br>• Modification and EBO loan volume were relatively unchanged<br>from the prior quarter |
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| SERVICING PROFITABILITY EXCLUDING VALUATION-RELATED CHANGES<br>13 (1) Of average portfolio UPB, annualized (2) Comprised of net gains on mortgage loans held for sale at fair value and interest income related to EBO loans (3) Consists of interest shortfall and recording and release fees<br>(4) Changes in fair value do not include realization of MSR cash flows (5) Considered in the assessment of MSR fair value changes<br>• Loan servicing fees increased from the prior quarter due to growth in the owned portfolio; operating expenses increased slightly<br>• Earnings on custodial balances and deposits increased from the prior quarter due to higher average balances<br>– Custodial funds managed for PFSI’s owned servicing portfolio averaged $6.9 billion in 3Q24, up from $5.7 billion in 2Q24<br>• Realization of cash flows increased $25 million from the prior quarter due to continued growth of the owned portfolio and higher<br>prepayment expectations due to lower mortgage rates<br>3Q23 2Q24 3Q24<br>$ in millions<br>basis<br>points⁽¹⁾ $ in millions<br>basis<br>points⁽¹⁾ $ in millions<br>basis<br>points⁽¹⁾<br>Loan servicing fees $ 387.9 26.7 $ 440.7 28.2 $ 462.0 28.9<br>Earnings on custodial balances and deposits and other income 99.4 6.8 111.6 7.1 137.9 8.6<br>Realization of MSR cash flows (177.8) (12.2) (200.7) (12.9) (225.8) (14.1)<br>EBO loan-related revenue⁽²⁾ 29.0 2.0 26.8 1.7 29.7 1.9<br>Servicing expenses:<br>Operating expenses (111.2) (7.6) (91.4) (5.9) (102.9) (6.4)<br>Payoff-related expense⁽³⁾ (9.4) (0.6) (10.4) (0.7) (18.5) (1.2)<br>Losses and provisions for defaulted loans (10.3) (0.7) (13.3) (0.9) (13.4) (0.8)<br>EBO loan transaction-related expense (0.2) (0.0) (0.6) (0.0) (0.7) (0.0)<br>Interest expense (87.5) (6.0) (113.6) (7.3) (116.9) (7.3)<br>Non-GAAP: Pretax income excluding fair value changes and non-recurring items $ 120.0 8.2 $ 149.0 9.5 $ 151.4 9.5<br>Valuation-related changes<br>MSR fair value⁽⁴⁾ 398.9 99.4 (402.4)<br>Hedging derivatives gains (losses) (423.7) (171.8) 242.1<br>(Provision for) reversal of losses on active loans⁽⁵⁾ 6.0 (0.6) (5.7)<br>Non-GAAP: Servicing segment pretax income excluding non-recurring items $ 101.2 $ 76.1 $ (14.6)<br>Non-recurring items - 12.5 -<br>GAAP: Servicing segment pretax income $ 101.2 $ 88.5 $ (14.6)<br>Average servicing portfolio UPB $ 582,262 $ 624,746 $ 640,492 |
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| 14<br>HEDGING APPROACH MODERATES THE VOLATILITY OF PFSI’S RESULTS<br>MSR Valuation Changes and Offsets<br>($ in millions)<br>MSR fair value change before realization of cash flows<br>Hedging and related gains (losses)<br>Production pretax income<br>• PFSI seeks to moderate the impact of interest rate<br>changes on the fair value of its MSR asset through a<br>comprehensive hedging strategy that also considers<br>production-related income<br>• In 3Q24, MSR fair value decreased due to lower<br>market interest rates<br>• Hedging gains, excluding hedge costs, offset 78% of<br>MSR fair value declines<br>– Hedge costs were significantly elevated during the<br>quarter given interest rate volatility and the inverted<br>yield curve<br>• Production pretax income was $108 million, up from<br>$41 million in the prior quarter |
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| INVESTMENT MANAGEMENT SEGMENT HIGHLIGHTS<br>15<br>Investment Management AUM<br>($ in billions)<br>Investment Management Revenues<br>($ in millions)<br>● Net AUM as of September 30, 2024 were $1.9 billion, essentially unchanged from June 30, 2024 and September 30, 2023<br>● Investment Management segment revenues were $9.4 million, essentially unchanged from 2Q24 and up 7% from 3Q23 |
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| APPENDIX |
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| 17<br>ESTABLISHED LEADER WITH SUBSTANTIAL LONG-TERM GROWTH POTENTIAL<br>IN<br>SERVICING(1)<br>YEARS FOR PFSI AS A<br>PUBLIC COMPANY<br>YEARS OF<br>OPERATIONS<br>PMT<br>• CORRESPONDENT<br>PRODUCTION<br>• BROKER DIRECT<br>• CONSUMER DIRECT<br>IN PRODUCTION(1)<br>IS A LEADING<br>RESIDENTIAL<br>MORTGAGE<br>REIT #<br>$648 billion outstanding<br>16 11<br>$107 billion in LTM 3Q24<br>Note: All figures are for PFSI and include volume fulfilled or subserviced for PMT; all figures are as of 9/30/24 unless otherwise noted<br>(1) Inside Mortgage Finance for the 12 months ended 6/30/24 or as of 6/30/24<br>$1.9 billion in assets<br>under management<br>6<br>15-year track record<br>#2<br>2.6 million customers |
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| OVERVIEW OF PENNYMAC FINANCIAL’S BUSINESSES<br>18<br>LOAN PRODUCTION<br>Correspondent aggregation of newly<br>originated loans from third-party sellers<br>Fulfillment fees for PMT’s delegated<br>conventional loans<br>PFSI earns gains on all loan production<br>with the exception of loans fulfilled for<br>PMT<br>Broker direct and consumer direct<br>origination of conventional and<br>government-insured loans<br>LOAN SERVICING<br>Servicing for owned MSRs and<br>subservicing for MSRs owned by PMT<br>Major loan servicer for Fannie Mae, Freddie<br>Mac and Ginnie Mae<br>Industry-leading capabilities in special<br>servicing<br>Organic growth results from loan<br>production, supplemented by MSR<br>acquisitions and PMT investment activity<br>INVESTMENT MANAGEMENT<br>External manager of PMT, which invests in<br>mortgage-related assets:<br>GSE credit risk transfer investments<br>MSR investments<br>Investments in agency MBS, senior<br>non-agency MBS and asset-backed<br>securities<br>Synergistic partnership with PMT<br>Complex and highly regulated mortgage industry requires effective governance, compliance and operating systems<br>Operating platform has been developed organically and is highly scalable<br>Commitment to strong corporate governance, compliance and risk management since inception<br>PFSI is well-positioned to navigate the current market and regulatory environment |
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| 19<br>PFSI’S BALANCED BUSINESS MODEL IS A FLYWHEEL<br>• Diversified business through correspondent,<br>broker direct and consumer direct channels<br>• Correspondent and broker direct channels<br>in particular allow PFSI to access<br>purchase-money volume<br>• Lacks the fixed overhead of the traditional, retail<br>origination model<br>• Recurring fee income business captured over the<br>life of the loan<br>• With higher interest rates, expected life of the loan<br>increases resulting in a more valuable MSR asset<br>• Creates a natural hedge to production income<br>Large volumes of production grow servicing portfolio<br>Loan Production<br><br>nd largest in the U.S.(1)<br>Loan Servicing<br><br>th largest in the U.S.(1)<br>In both businesses, scale and efficiency are critical for success<br>2 6<br>Customer base of 2.6 million<br>drives leads for consumer direct<br>Note: All figures are for PFSI and include volume fulfilled or subserviced for PMT; all figures are as of 9/30/24 unless otherwise noted<br>(1) Inside Mortgage Finance for the 12 months ended 6/30/24 or as of 6/30/24 |
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| 20<br>TOP LENDER WITH COMPREHENSIVE AND EFFICIENT MULTI-CHANNEL PLATFORM<br>Centralized, cost-efficient fulfillment division supports all channels<br>Multiple access points<br>to the origination<br>market with a proven<br>ability to allocate<br>resources towards<br>channels with<br>opportunity in the<br>current environment<br>Significant and<br>ongoing investments<br>in mortgage-banking<br>technology provide<br>an exceptional loan<br>origination<br>experience for our<br>customers and<br>business partners<br>Scalable technology platform providing our consumers, brokers and correspondent<br>partners with the liquidity, tools and products they need to succeed<br>(1) Inside Mortgage Finance; includes volumes fulfilled for PMT<br>Strong access to<br>purchase market<br>Drives organic servicing<br>portfolio growth<br>Strong access to<br>purchase market<br>Positive and<br>consistent execution<br>for brokers<br>Internet and<br>call-center based<br>Cost-efficient leads<br>from our large<br>servicing portfolio<br>Correspondent Broker Direct Consumer Direct<br>#2 producer of residential<br>mortgage loans in LTM 2Q24⁽¹⁾<br>20 |
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| 21<br>TECHNOLOGY INNOVATION TO UNLOCK ADDITIONAL STAKEHOLDER VALUE<br>Servicing<br>Systems<br>Environment<br>Direct and white<br>label subservicing<br>Partnerships with<br>third parties<br>Commercialization<br>Drive efficiencies for<br>our core businesses<br>Leverage SSE to expand our current<br>sub-servicing business beyond PMT<br>Commercialize SSE into a multi-tenant,<br>industry-leading servicing software platform<br>Partner with innovative technologists to<br>develop a comprehensive marketplace of next<br>generation mortgage banking technology<br>Proven, low-cost servicing system with<br>multiple competitive advantages versus<br>others in the market<br>With our SSE technology free and clear of any restrictions on use or development,<br>we are actively exploring a continuum of potential opportunities with benefits for our many stakeholders |
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| PFSI Purchase Mix Industry Purchase Mix(5)<br>22<br>TRACK RECORD OF STRONG PERFORMANCE ACROSS MARKET ENVIRONMENTS<br>Proven ability to<br>generate attractive<br>ROEs…<br>…across different<br>market environments…<br>…with a strong<br>orientation towards<br>purchase money<br>mortgages.<br>(1) Represents partial year; initial public offering was May 8, 2013<br>(2) Adjusted return on equity was 7% excluding arbitration accrual of $158 million and related tax impact<br>(3) Inside Mortgage Finance<br>Average: 21%<br>U.S. Origination Market(3)<br>(in trillions)<br>PFSI's Annualized Return on Average Common Stockholders' Equity (ROE)<br>10-Year Treasury Yield(4)<br>(4) Bloomberg<br>(5) Inside Mortgage Finance for historical industry purchase mix, 3Q24 is an estimate of Mortgage Bankers Association (9/23/24) and Fannie Mae (10/10/24) forecasts |
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| MSR & Servicing Advance Financing<br>PFSI’S STRONG BALANCE SHEET AND DIVERSE CAPITAL STRUCTURES<br>23<br>Low Debt-to-Equity (D/E) Ratio<br>Diverse Financing Sources<br>High Tangible Net Worth (TNW)(2)/Assets<br>• High tangible net worth (TNW) / assets excluding loans<br>eligible for repurchase<br>• Targeted debt-to-equity ratio near or below 3.5x with<br>fluctuations largely driven by the origination environment or<br>other market opportunities<br>• Targeted non-funding debt-to-equity ratio below 1.5x<br>• Unsecured senior notes provide low, fixed interest rates;<br>first maturity in October 2025<br>• As of September 30, 2024 total liquidity including cash<br>and amounts available to draw with collateral pledged<br>was $3.8 billion<br>Non-funding D/E(1) Total D/E<br>TNW / Assets TNW / Assets ex. Loans eligible for repurchase<br>Financing capacity<br>across multiple<br>banks<br>Note: All figures are as of September 30, 2024<br>(1) Non-funding debt includes face value of unsecured senior notes and notes payable secured by MSR, in addition to the amount drawn on the variable funding note<br>(2) Tangible net worth excludes capitalized software |
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| CURRENT MARKET ENVIRONMENT AND MACROECONOMIC TRENDS<br>24<br>Average 30-year fixed rate mortgage(1)<br>Macroeconomic Metrics(3) Footnotes<br>10-year Treasury Bond Yield(2)<br>9/30/23 12/31/23 3/31/24 6/30/24 9/30/24<br>10-year Treasury bond yield 4.6% 3.9% 4.2% 4.4% 3.8%<br>2/10 year Treasury yield spread -0.5% -0.4% -0.4% -0.4% 0.1%<br>30-year fixed rate mortgage 7.3% 6.6% 6.8% 6.9% 6.1%<br>Secondary mortgage rate 6.3% 5.3% 5.6% 5.8% 5.0%<br>U.S. home price appreciation<br>(Y/Y% change) 4.1% 5.7% 6.5% 5.5% 5.0%<br>Residential mortgage<br>originations (in billions) $405 $315 $325 $435 $470<br>6.86% 6.08% 4.40% 3.78%<br>(1) Freddie Mac Primary Mortgage Market Survey. 6.44% as of 10/17/24<br>(2) U.S. Department of the Treasury. 4.09% as of 10/17/24<br>(3) 10-year Treasury bond yield and 2/10 year Treasury yield spread: Bloomberg<br>Average 30-year fixed rate mortgage: Freddie Mac Primary Mortgage Market Survey<br>Average secondary mortgage rate: 30-Year FNCL Par Coupon Index (MTGEFNCL),<br>Bloomberg<br>U.S. home price appreciation: S&P CoreLogic Case-Shiller U.S. National Home Price NSA<br>Index (SPCSUSA); data is as of 7/31/24<br>Residential mortgage originations are for the quarterly period ended; source: Inside<br>Mortgage Finance |
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| September 30, 2024 Mortgage<br>Servicing Rights<br>Unaudited ($ in millions)<br>Pool UPB(1) $410,031<br>Weighted average coupon 4.4%<br>Weighted average servicing fee/spread 0.38%<br>Weighted average prepayment speed assumption (CPR) 9.1%<br>Fair value $7,752<br>As a multiple of servicing fee 4.9<br>25<br>MSR ASSET VALUATION<br>(1) Excludes loans held for sale at fair value |
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| DELINQUENCY TRENDS AND SERVICING ADVANCES OUTSTANDING<br>26<br>Historical Trends in Delinquency and Foreclosure Rates(1)<br>30-60 Day 60-90 Day 90+ Day In foreclosure<br>Footnote<br>● Overall mortgage delinquency rates increased from the prior quarter but remain within expected levels for a predominately<br>government-insured or guaranteed loan portfolio<br>● Servicing advances outstanding for PFSI’s MSR portfolio were approximately $331 million at September 30, 2024, essentially<br>unchanged from June 30, 2024<br>‒ No principal and interest advances are outstanding |
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| 27<br>PFSI’S OWNED MSR PORTFOLIO CHARACTERISTICS<br>Note: Figures may not sum due to rounding<br>(1) Government loans include loans securitized in Ginnie Mae pools as well as loans sold to private investors<br>(2) Other represents MSRs collateralized by conventional loans sold to private investors<br>(3) Loan-to-values for closed-end seconds include only the second lien balance<br>(4) Excludes loans held for sale at fair value<br>As of September 30, 2024<br>Segment UPB<br>($ in billions)⁽⁴⁾<br>% of<br>Total UPB<br>Loan<br>count<br>(in thousands)<br>Note<br>rate<br>Seasoning<br>(months)<br>Remaining<br>maturity<br>(months)<br>Loan size<br>($ in<br>thousands)<br>FICO credit<br>score at<br>origination<br>Original<br>LTV<br>Current<br>LTV<br>60+<br>Delinquency<br>(by UPB)<br>Government⁽¹⁾<br>FHA $144.8 35.3% 699 4.4% 46 317 $207 680 93% 68% 5.5%<br>VA $124.4 30.3% 455 3.8% 38 321 $274 729 90% 69% 2.3%<br>USDA $20.8 5.1% 141 4.0% 57 307 $148 699 98% 65% 5.3%<br>GSE<br>FNMA $50.5 12.3% 162 4.9% 27 317 $312 762 74% 61% 0.5%<br>FHLMC $62.8 15.3% 195 5.2% 21 325 $321 758 75% 65% 0.5%<br>Other and Closed-End Seconds<br>Other⁽²⁾ $5.6 1.4% 15 6.8% 11 348 $366 771 74% 69% 0.2%<br>Closed-End Seconds⁽³⁾ $1.1 0.3% 14 10.1% 9 248 $78 743 18% 17% 0.2%<br>Grand Total $410.1 100.0% 1,681 4.4% 37 319 $244 719 87% 67% 3.1% |
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| ACQUISITIONS AND ORIGINATIONS BY PRODUCT<br>28<br>Note: Figures may not sum due to rounding<br>Unaudited ($ in millions) 3Q23 4Q23 1Q24 2Q24 3Q24<br>Correspondent Acquisitions<br>Conventional Conforming - for PMT $ 2,759 $ 2,477 $ 1,769 $ 2,195 $ 5,851<br>Conventional Conforming - for PFSI 9,933 10,129 8,190 10,007 8,092<br>Government - for PFSI 8,848 11,011 8,167 10,301 11,788<br>Jumbo - for PMT 1 3 3 34 97<br>Total $ 21,541 $ 23,620 $ 18,128 $ 22,537 $ 25,829<br>Broker Direct Originations - for PFSI<br>Conventional Conforming $ 1,591 $ 1,560 $ 1,524 $ 2,059 $ 1,844<br>Government 621 623 619 865 1,183<br>Jumbo 10 18 42 241 368<br>Closed-end second liens - - 9 15 28<br>Total $ 2,223 $ 2,201 $ 2,193 $ 3,179 $ 3,424<br>Consumer Direct Originations - for PFSI<br>Conventional Conforming $ 378 $ 264 $ 265 $ 374 $ 365<br>Government 741 372 931 804 1,786<br>Jumbo 3 2 - 12 15<br>Closed-end second liens 199 226 204 257 278<br>Total $ 1,322 $ 864 $ 1,400 $ 1,447 $ 2,444<br>Total acquisitions / originations $ 25,085 $ 26,685 $ 21,721 $ 27,163 $ 31,696<br>UPB of loans fulfilled for PMT<br>(included in correspondent acquisitions $ 2,760 $ 2,480 $ 1,772 $ 2,229 $ 5,948 |
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| INTEREST RATE LOCKS BY PRODUCT<br>29<br>Note: Figures may not sum due to rounding<br>Unaudited ($ in millions) 3Q23 4Q23 1Q24 2Q24 3Q24<br>Correspondent Locks<br>Conventional Conforming - for PMT $ 3,493 $ 2,737 $ 2,472 $ 2,602 $ 7,373<br>Conventional Conforming - for PFSI 10,333 9,977 8,614 9,914 8,229<br>Government - for PFSI 10,063 11,197 8,467 11,100 12,448<br>Jumbo - for PMT 2 5 10 90 253<br>Total $ 23,891 $ 23,916 $ 19,563 $ 23,706 $ 28,304<br>Broker Direct Locks - for PFSI<br>Conventional Conforming $ 2,146 $ 1,910 $ 2,234 $ 2,559 $ 2,533<br>Government 828 844 989 1,266 2,039<br>Jumbo 15 30 116 433 720<br>Closed-end second liens - 3 14 29 43<br>Total $ 2,989 $ 2,787 $ 3,352 $ 4,287 $ 5,335<br>Consumer Direct Locks - for PFSI<br>Conventional Conforming $ 559 $ 371 $ 474 $ 551 $ 785<br>Government 817 887 1,338 1,698 3,972<br>Jumbo 5 3 12 21 26<br>Closed-end second liens 326 335 328 428 435<br>Total $ 1,707 $ 1,597 $ 2,152 $ 2,698 $ 5,218<br>Total locks $ 28,586 $ 28,300 $ 25,068 $ 30,691 $ 38,856 |
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| CREDIT CHARACTERISTICS BY ACQUISITION/ORIGINATION PERIOD<br>30<br>Correspondent<br>Broker Direct<br>Consumer Direct<br>Weighted Average FICO Weighted Average DTI<br>3Q23 4Q23 1Q24 2Q24 3Q24 3Q23 4Q23 1Q24 2Q24 3Q24<br>Government-insured 712 714 719 715 715 Government-insured 45 46 44 44 44<br>Conventional 762 762 765 765 770 Conventional 38 39 38 38 38<br>Weighted Average FICO Weighted Average DTI<br>3Q23 4Q23 1Q24 2Q24 3Q24 3Q23 4Q23 1Q24 2Q24 3Q24<br>Government-insured 711 715 723 714 716 Government-insured 46 47 46 46 46<br>Conventional 761 763 762 764 765 Conventional 39 39 39 39 38<br>Weighted Average FICO Weighted Average DTI<br>3Q23 4Q23 1Q24 2Q24 3Q24 3Q23 4Q23 1Q24 2Q24 3Q24<br>Government-insured 683 674 688 692 702 Government-insured 45 45 45 45 45<br>Conventional 743 747 746 747 752 Conventional 38 38 38 39 38 |
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| RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA<br>31<br>Note: Figures may not sum due to rounding<br>($ in millions) 3Q23 2Q24 3Q24<br>Net income $ 92.9 $ 98.3 $ 69.4<br>Provision for income taxes 33.9 35.6 24.6<br>Income before provision for income taxes 126.8 133.9 93.9<br>Depreciation and amortization 13.2 14.2 13.8<br>Decrease (increase) in the fair value of MSRs and MSLs due to changes in<br>valuation inputs used in the valuation model (398.9) (99.4) 402.4<br>Hedging (gains) losses associated with MSRs 423.7 171.8 (242.1)<br>Stock-based compensation 8.8 (2.2) 18.9<br>Non-recurring items - (12.5) -<br>Interest expense on corporate debt and capital lease $ 23.9 $ 44.0 $ 51.1<br>Adjusted EBITDA $ 197.5 $ 249.7 $ 338.1 |
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| ($ in millions) 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24<br>Net income (loss) $ 58.3 $ 92.9 $ (36.8) $ 39.3 $ 98.3 $ 69.4<br>Decrease (increase) in the fair value of MSRs and MSLs due to<br>changes in valuation inputs used in the valuation model (118.9) (398.9) 370.7 (170.0) (99.4) 402.4<br>Hedging (gains) losses associated with MSRs 155.1 423.7 (294.8) 294.6 171.8 (242.1)<br>Non-recurring items - - 158.4 1.6 (12.5) -<br>Tax impacts of adjustments⁽¹⁾ 9.7 6.7 62.9 33.9 16.1 43.1<br>Operating net income $ 84.8 $ 111.0 $ 134.5 $ 131.7 $ 142.1 $ 186.7<br>Average stockholders' equity $ 3,440.9 $ 3,517.5 $ 3,555.4 $ 3,552.3 $ 3,614.2 $ 3,694.8<br>Annualized operating return on equity 10% 13% 15% 15% 16% 20%<br>($ in millions) 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24<br>Servicing pretax income (loss) $ 46.5 $ 101.2 $ (95.5) $ 4.9 $ 88.5 $ (14.6)<br>Decrease (increase) in the fair value of MSRs and MSLs due to<br>changes in valuation inputs used in the valuation model (118.9) (398.9) 370.7 (170.0) (99.4) 402.4<br>Hedging (gains) losses associated with MSRs 155.1 423.7 (294.8) 294.6 171.8 (242.1)<br>Non-recurring items - - 158.4 1.6 (12.5) -<br>Provision for credit losses on active loans (7.5) (6.0) 5.7 (6.6) 0.6 5.7<br>Servicing pretax income net of valuation related changes and<br>non-recurring items $ 75.3 $ 120.0 $ 144.4 $ 124.7 $ 149.0 $ 151.4<br>RECONCILIATION OF GAAP ITEMS TO NON-GAAP ITEMS<br>Note: Figures may not sum due to rounding 32 (1) Assumes a tax rate of 26.85%<br>Reconciliation of GAAP net income (loss) to operating net income and annualized operating return on equity<br>Reconciliation of GAAP servicing pretax income (loss) to servicing pretax income net of valuation related changes and<br>non-recurring items |
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