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): July 23, 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 July 23, 2024, PennyMac Financial Services, Inc. (the “Company”) issued a press release and a slide presentation announcing its financial results for the fiscal quarter ended June 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 July 23, 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 June 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 July 23, 2024, issued by PennyMac Financial Services,<br>Inc. pertaining to its financial results for the fiscal quarter ended June 30, 2024. |
| 99.2 | Slide Presentation for use beginning on July 23, 2024 in connection<br>with a presentation of financial results for the fiscal quarter ended June 30, 2024. |
| 104 | Cover<br>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: July 23, 2024 | /s/ Daniel S. Perotti |
| Daniel S. Perotti | |
| Senior Managing Director and Chief Financial Officer |
Exhibit 99.1
PennyMac Financial Services, Inc.Reports Second Quarter 2024 Results and Increases Quarterly Dividend
WESTLAKE VILLAGE, Calif. – July 23, 2024 – PennyMac Financial Services, Inc. (NYSE: PFSI) today reported net income of $98.3 million for the second quarter of 2024, or $1.85 per share on a diluted basis, on revenue of $406.1 million. Book value per share increased to $71.76 from $70.13 at March 31, 2024.
PFSI’s Board of Directors declared a second quarter cash dividend of $0.30 per share, a 50 percent increase from the prior quarter, payable on August 23, 2024, to common stockholders of record as of August 13, 2024.
Second Quarter 2024 Highlights
| · | Pretax income was $133.9 million, up from $43.9 million in the prior quarter<br>and $72.9 million in the second quarter of 2023 |
|---|---|
| · | Production segment pretax income was $41.3 million, up from $35.9 million<br>in the prior quarter and $24.4 million in the second quarter of 2023 |
| --- | --- |
| o | Total loan acquisitions and originations, including those fulfilled for PennyMac Mortgage Investment Trust (NYSE: PMT), were $27.2<br>billion in unpaid principal balance (UPB), up 25 percent from the prior quarter and 9 percent from the second quarter of 2023 |
| --- | --- |
| o | Broker direct interest rate lock commitments (IRLCs) were $4.3 billion in UPB, up 28 percent from the prior quarter and 52 percent<br>from the second quarter of 2023 |
| --- | --- |
| o | Consumer direct IRLCs were $2.7 billion in UPB, up 25 percent from the prior quarter and second quarter of 2023 |
| --- | --- |
| o | Government correspondent IRLCs totaled $11.1 billion in UPB, up 31 percent from the prior quarter and 3 percent from the second quarter<br>of 2023 |
| --- | --- |
| o | Conventional correspondent IRLCs for PFSI’s account totaled $9.9 billion in UPB, up 15 percent from the prior quarter and 32<br>percent from the second quarter of 2023 |
| --- | --- |
1
| o | Correspondent acquisitions of conventional conforming and jumbo loans fulfilled for PMT were $2.2 billion in UPB, up 26 percent from<br>the prior quarter and down 26 percent from the second quarter of 2023 |
|---|---|
| · | Servicing segment pretax income was $88.5 million, compared to $4.9 million<br>in the prior quarter and $46.5 million in the second quarter of 2023 |
| --- | --- |
| o | Pretax income excluding valuation-related items and non-recurring items was $149.0 million, up 20 percent from the prior quarter due<br>to higher net loan servicing fees, higher earnings from placement fees on custodial balances, and lower operating expenses |
| --- | --- |
| o | Valuation-related and non-recurring items included: |
| --- | --- |
| – | $99.4 million in mortgage servicing rights (MSR) fair value gains, before recognition of realization of cash flows, more than offset<br>by $171.8 million in hedging losses |
| --- | --- |
| – | Non-recurring, non-cash gain of $12.5 million related to a transaction within our closing services joint venture in our servicing<br>segment |
| --- | --- |
| · | Net impact on pretax income related to these items was $(59.9) million,<br> or $(0.82) in diluted earnings per share |
| --- | --- |
| – | $0.6 million provision for losses on active loans |
| --- | --- |
| o | Servicing portfolio grew to $632.7 billion in UPB, up 2 percent from March 31, 2024, and 10 percent from June 30, 2023 driven<br>by production volumes which more than offset prepayment activity |
| --- | --- |
| · | Investment Management segment pretax income was $4.0 million, up from $3.1<br>million in the prior quarter and $2.0 million in the second quarter of 2023 |
| --- | --- |
| o | Net assets under management (AUM) were $1.9 billion, essentially unchanged from March 31, 2024, and June 30, 2023 |
| --- | --- |
| · | Issued $650 million of senior unsecured notes due in November 2030 at<br>attractive terms and subsequently paid down short-term secured borrowings |
| --- | --- |
2
“PennyMac Financial generated strong earnings in the second quarter with an annualized operating return on equity of 16 percent,” said Chairman and CEO David Spector. “Given our continued strong financial results, I am pleased to note that PFSI’s Board of Directors approved a quarterly common cash dividend of $0.30 per share from $0.20 per share, an increase of 50 percent. Our large and growing servicing business continues to drive revenue and cash flow in this higher interest rate environment and notably, our per loan servicing expenses were at record low levels as we continue to leverage our proprietary technology and operational scale. In the second quarter, total acquisition and origination volumes were $27 billion, up 25 percent from the prior quarter, driving continued growth of our servicing portfolio to more than $630 billion in unpaid principal balance at quarter-end.”
Mr. Spector continued, “While our financial performance in recent periods has been strong, I continue to believe Pennymac’s best days are yet ahead. This quarter we successfully raised $650 million in unsecured senior notes at attractive terms, further strengthening our balance sheet and demonstrating our strong access to capital and liquidity. In this higher interest rate environment, we have gained considerable market share in our purchase-focused correspondent and broker-direct lending channels, and with nearly $115 billion in UPB of the loans in our servicing portfolio carrying a note rate greater than 6 percent, our consumer direct lending channel will have a tremendous opportunity to provide our customers with lower mortgage rates when interest rates decline. Our multi-channel approach to loan production drives strong competitive advantages for us and with our balanced business model, we remain one of the best-positioned in the industry to drive continued growth and financial returns.”
3
The following table presents the contributions of PennyMac Financial’s segments to pretax income:
| Quarter ended June 30, 2024 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Mortgage Banking | Investment | ||||||||||||
| Production | Servicing | Total | Management | Total | |||||||||
| (in thousands) | |||||||||||||
| Revenues | |||||||||||||
| Net gains on loans held for sale at fair value | $ | 154,317 | $ | 21,747 | $ | 176,064 | $ | - | $ | 176,064 | |||
| Loan origination fees | 42,075 | - | 42,075 | - | 42,075 | ||||||||
| Fulfillment fees from PMT | 4,427 | - | 4,427 | - | 4,427 | ||||||||
| Net loan servicing fees | - | 167,604 | 167,604 | - | 167,604 | ||||||||
| Management fees | - | - | - | 7,133 | 7,133 | ||||||||
| Net interest income (expense): | |||||||||||||
| Interest income | 84,613 | 116,119 | 200,732 | 79 | 200,811 | ||||||||
| Interest expense | 83,376 | 124,495 | 207,871 | - | 207,871 | ||||||||
| 1,237 | (8,376 | ) | (7,139 | ) | 79 | (7,060 | ) | ||||||
| Other | 509 | 13,250 | 13,759 | 2,125 | 15,884 | ||||||||
| Total net revenues | 202,565 | 194,225 | 396,790 | 9,337 | 406,127 | ||||||||
| Expenses | 161,286 | 105,685 | 266,971 | 5,302 | 272,273 | ||||||||
| Income before provision for income taxes | $ | 41,279 | $ | 88,540 | $ | 129,819 | $ | 4,035 | $ | 133,854 |
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 $27.2 billion in UPB, $25.0 billion of which was for its own account and $2.2 billion of which was fee-based fulfillment activity for PMT. Correspondent locks for PFSI and direct lending IRLCs totaled $28.0 billion in UPB, up 24 percent from the prior quarter and 20 percent from the second quarter of 2023.
Production segment pretax income was $41.3 million, up from $35.9 million in the prior quarter and $24.4 million in the second quarter of 2023. Production segment revenue totaled $202.6 million, up 10 percent from the prior quarter and 19 percent from the second quarter of 2023. The increase from the prior quarter was primarily due to higher volumes across all channels, and the increase from the second quarter of 2023 was primarily due to higher overall volumes and higher margins in the direct lending channels.
4
The components of net gains on loans held for sale are detailed in the following table:
| Quarter ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| June 30, <br> 2024 | March 31, <br> 2024 | June 30, <br> 2023 | |||||||
| (in thousands) | |||||||||
| Receipt of MSRs | $ | 541,207 | $ | 412,520 | $ | 562,523 | |||
| Mortgage servicing rights recapture payable to PennyMac Mortgage Investment Trust | (473 | ) | (353 | ) | (509 | ) | |||
| Provision for representations and warranties, net | (53 | ) | (632 | ) | (1,131 | ) | |||
| Cash loss, including cash hedging results | (321,270 | ) | (158,971 | ) | (308,199 | ) | |||
| Fair value changes of pipeline, inventory and hedges | (43,347 | ) | (90,123 | ) | (111,265 | ) | |||
| Net gains on loans held for sale | $ | 176,064 | $ | 162,441 | $ | 141,419 | |||
| Net gains on loans held for sale by segment: | |||||||||
| Production | $ | 154,317 | $ | 141,431 | $ | 126,249 | |||
| Servicing | $ | 21,747 | $ | 21,010 | $ | 15,170 |
PennyMac Financial performs fulfillment services for certain conventional conforming and jumbo loans acquired by PMT from non-affiliates in its correspondent production business. These services include, but are not limited to, marketing, relationship management, correspondent seller approval and monitoring, loan file review, underwriting, pricing, hedging and activities related to the subsequent sale and securitization of loans in the secondary mortgage markets for PMT.
Fees earned from the fulfillment of correspondent loans on behalf of PMT totaled $4.4 million in the second quarter, up 10 percent from the prior quarter and down 19 percent from the second quarter of 2023. The increase from the prior quarter was primarily due to higher volumes acquired for PMT’s account. In the third quarter, PMT expects to retain approximately 30 to 50 percent of total conventional correspondent production, an increase from 18 percent in the second quarter.
Net interest income in the second quarter totaled $1.2 million, down from $2.0 million in the prior quarter. Interest income totaled $84.6 million, up from $63.9 million in the prior quarter, and interest expense totaled $83.4 million, up from $61.9 million in the prior quarter, both primarily due to higher average balance of loans held for sale and the associated financing during the quarter.
Production segment expenses were $161.3 million, up 8 percent from the prior quarter and 10 percent from the second quarter of 2023, both primarily due to higher overall volumes.
5
Servicing Segment
The Servicing segment includes income from owned MSRs and subservicing. The total servicing portfolio grew to $632.7 billion in UPB at June 30, 2024, an increase of 2 percent from March 31, 2024, and 10 percent from June 30, 2023. PennyMac Financial’s owned MSR portfolio grew to $402.6 billion in UPB, up 4 percent from March 31, 2024, and 18 percent from June 30, 2023. PennyMac Financial subservices $230.2 billion in UPB for PMT.
The table below details PennyMac Financial’s servicing portfolio UPB:
| June 30, <br> 2024 | March 31, <br> 2024 | June 30, <br> 2023 | ||||
|---|---|---|---|---|---|---|
| (in thousands) | ||||||
| Prime servicing: | ||||||
| Owned | ||||||
| Mortgage servicing rights and liabilities | ||||||
| Originated | $ | 379,882,952 | $ | 364,441,567 | $ | 319,257,805 |
| Purchased | 16,568,065 | 17,051,740 | 18,474,265 | |||
| 396,451,017 | 381,493,307 | 337,732,070 | ||||
| Loans held for sale | 6,108,082 | 5,111,719 | 4,250,706 | |||
| 402,559,099 | 386,605,026 | 341,982,776 | ||||
| Subserviced for PMT | 230,170,703 | 230,809,585 | 234,463,739 | |||
| Total prime servicing | 632,729,802 | 617,414,611 | 576,446,515 | |||
| Special servicing - subserviced for PMT | 8,810 | 9,427 | 12,780 | |||
| Total loans serviced | $ | 632,738,612 | $ | 617,424,038 | $ | 576,459,295 |
Servicing segment pretax income was $88.5 million, up from $4.9 million in the prior quarter and $46.5 million in the second quarter of 2023. Servicing segment net revenues totaled $194.2 million, up from $111.6 million in the prior quarter and $156.4 million in the second quarter of 2023.
Revenue from net loan servicing fees totaled $167.6 million, up from $101.0 million in the prior quarter and $146.1 million in the second quarter of 2023. Loan servicing fees were $440.7 million, up from $424.2 million in the prior quarter primarily due to growth in PFSI’s owned portfolio, reduced by $200.7 million in realization of cash flows. Net valuation related declines were $72.4 million, down from $124.7 million in the prior quarter. MSR fair value gains, before realization of cash flows, were $99.4 million and hedging losses were $171.8 million driven by high hedge costs and significant interest rate volatility during the quarter.
6
The following table presents a breakdown of net loan servicing fees:
| Quarter ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| June 30, <br> 2024 | March 31, <br> 2024 | June 30, <br> 2023 | |||||||
| (in thousands) | |||||||||
| Loan servicing fees | $ | 440,696 | $ | 424,184 | $ | 356,471 | |||
| Changes in fair value of MSRs and MSLs resulting from: | |||||||||
| Realization of cash flows | (200,740 | ) | (198,564 | ) | (174,162 | ) | |||
| Change in fair value inputs | 99,425 | 169,979 | 118,905 | ||||||
| Hedging losses | (171,777 | ) | (294,645 | ) | (155,136 | ) | |||
| Net change in fair value of MSRs and MSLs | (273,092 | ) | (323,230 | ) | (210,393 | ) | |||
| Net loan servicing fees | $ | 167,604 | $ | 100,954 | $ | 146,078 |
Servicing segment revenue included $21.7 million in net gains on loans held for sale related to early buyout loans (EBOs), up slightly from the prior quarter and up from $15.2 million in the second 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 expense totaled $8.4 million, compared to $11.5 million in the prior quarter and $5.1 million in the second quarter of 2023. Interest income was $116.1 million, up from $92.4 million in the prior quarter due to increased earnings from placement fees on custodial balances. Interest expense was $124.5 million, up from $103.9 million in the prior quarter due to higher average balances of debt outstanding during the quarter.
Servicing segment expenses totaled $105.7 million, down slightly from $106.7 million in the prior quarter.
7
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 June 30, 2024, essentially unchanged from March 31, 2024 and June 30, 2023.
Pretax income for the Investment Management segment was $4.0 million, up from $3.1 million in the prior quarter and $2.0 million in the second quarter of 2023. Base management fees from PMT were $7.1 million, essentially unchanged from the prior quarter and second quarter of 2023. No performance incentive fees were earned in the first quarter.
The following table presents a breakdown of management fees:
| Quarter<br> ended | ||||||
|---|---|---|---|---|---|---|
| June 30,<br> <br> 2024 | March 31,<br> <br> 2024 | June 30,<br> <br> 2023 | ||||
| (in thousands) | ||||||
| Management fees: | ||||||
| Base | $ | 7,133 | $ | 7,188 | $ | 7,078 |
| Performance incentive | - | - | - | |||
| Total management fees | $ | 7,133 | $ | 7,188 | $ | 7,078 |
| Net assets of PennyMac Mortgage Investment Trust at quarter<br> end | $ | 1,939,869 | $ | 1,958,914 | $ | 1,931,496 |
Investment Management segment expenses totaled $5.3 million, down from $6.3 million in the prior quarter and $7.5 million in the second quarter of 2023.
Consolidated Expenses
Total expenses were $272.3 million, up from $261.8 million in the prior quarter primarily due to increased production segment expenses due to higher volumes.
Taxes
PFSI recorded a provision for tax expense of $35.6 million, resulting in an effective tax rate of 26.6 percent.
8
***
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, July 23, 2024. Management will also host a conference call and live audio webcast at 5:00 p.m. Eastern Time to review the Company’s financial results. The webcast can be accessed at pfsi.pennymac.com, and a replay will be available shortly after its conclusion.
About PennyMac Financial Services, Inc.
PennyMac Financial Services, Inc. is a specialty financial services firm focused on the production and servicing of U.S. mortgage loans and the management of investments related to the U.S. mortgage market. Founded in 2008, the company is recognized as a leader in the U.S. residential mortgage industry and employs approximately 3,900 people across the country. For the twelve months ended June 30, 2024, PennyMac Financial’s production of newly originated loans totaled $101 billion in unpaid principal balance, making it a top lender in the nation. As of June 30, 2024, PennyMac Financial serviced loans totaling $633 billion in unpaid principal balance, making it a top five mortgage servicer in the nation. Additional information about PennyMac Financial Services, Inc. is available at pfsi.pennymac.com.
| Media | Investors |
|---|---|
| Lauren Padilla | Kevin Chamberlain |
| mediarelations@pennymac.com | Isaac Garden 805.225.8224 |
| PFSI_IR@pennymac.com | |
| 818.224.7028 |
9
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 and U.S. 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; our dependence on U.S. government-sponsored entities and changes in their current roles or their guarantees or guidelines; the licensing and operational requirements of states and other jurisdictions applicable to our business, to which our bank competitors are not subject; foreclosure delays and changes in foreclosure practices; 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 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 entities; our ability to mitigate cybersecurity risks, cyber incidents and technology disruptions; the effect of public opinion on our reputation; our exposure to risks of loss and disruptions in operations resulting from severe weather events, man-made or other natural conditions, 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.
10
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| March 31, <br> 2024 | June 30, <br> 2023 | ||||
|---|---|---|---|---|---|
| ASSETS | |||||
| Cash | 595,336 | $ | 927,394 | $ | 1,532,399 |
| Short-term investment at fair value | 188,772 | 69 | 8,088 | ||
| Principal-only stripped mortgage-backed securities at fair value | 914,223 | 524,576 | - | ||
| Loans held for sale at fair value | 6,238,959 | 5,200,350 | 4,270,494 | ||
| Derivative assets | 145,887 | 108,987 | 85,517 | ||
| Servicing advances, net | 414,235 | 499,955 | 500,122 | ||
| Mortgage servicing rights at fair value | 7,923,078 | 7,483,210 | 6,510,585 | ||
| Investment in PennyMac Mortgage Investment Trust at fair value | 1,031 | 1,101 | 1,011 | ||
| Receivable from PennyMac Mortgage Investment Trust | 29,413 | 30,835 | 25,046 | ||
| Loans eligible for repurchase | 4,560,058 | 4,401,896 | 4,401,098 | ||
| Other | 566,573 | 623,368 | 650,108 | ||
| Total assets | 21,577,565 | $ | 19,801,741 | $ | 17,984,468 |
| LIABILITIES | |||||
| Assets sold under agreements to repurchase | 6,408,428 | $ | 5,435,354 | $ | 3,780,524 |
| Mortgage loan participation purchase and sale agreements | 511,837 | 363,798 | 505,712 | ||
| Notes payable secured by mortgage servicing assets | 1,723,144 | 1,972,020 | 2,472,726 | ||
| Unsecured senior notes | 3,160,226 | 2,521,031 | 1,781,756 | ||
| Derivative liabilities | 18,830 | 40,784 | 22,039 | ||
| Mortgage servicing liabilities at fair value | 1,708 | 1,732 | 1,940 | ||
| Accounts payable and accrued expenses | 294,812 | 263,338 | 334,234 | ||
| Payable to PennyMac Mortgage Investment Trust | 100,220 | 127,993 | 123,287 | ||
| Payable to exchanged Private National<br> Mortgage Acceptance Company, LLC unitholders under tax receivable agreement | 26,099 | 26,099 | 26,099 | ||
| Income taxes payable | 1,082,397 | 1,047,337 | 1,026,147 | ||
| Liability for loans eligible for repurchase | 4,560,058 | 4,401,896 | 4,401,098 | ||
| Liability for losses under representations and warranties | 28,688 | 29,976 | 30,146 | ||
| Total liabilities | 17,916,447 | 16,231,358 | 14,505,708 | ||
| STOCKHOLDERS' EQUITY | |||||
| Common<br> stock¾authorized<br> 200,000,000 shares of 0.0001 par value; issued and outstanding 51,017,418, 50,907,865, and 49,857,588 shares,<br> respectively | 5 | 5 | 5 | ||
| Additional paid-in capital | 30,053 | 27,179 | - | ||
| Retained earnings | 3,631,060 | 3,543,199 | 3,478,755 | ||
| Total stockholders' equity | 3,661,118 | 3,570,383 | 3,478,760 | ||
| Total liabilities and stockholders’ equity | 21,577,565 | $ | 19,801,741 | $ | 17,984,468 |
All values are in US Dollars.
11
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| Quarter ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| June 30, <br> 2024 | March 31, <br> 2024 | June 30, <br> 2023 | |||||||
| (in thousands, except per share amounts) | |||||||||
| Revenues | |||||||||
| Net gains on loans held for sale at fair value | $ | 176,064 | $ | 162,441 | $ | 141,419 | |||
| Loan origination fees | 42,075 | 36,371 | 38,968 | ||||||
| Fulfillment fees from PennyMac Mortgage Investment Trust | 4,427 | 4,016 | 5,441 | ||||||
| Net loan servicing fees: | |||||||||
| Loan servicing fees | 440,696 | 424,184 | 356,471 | ||||||
| Change in fair value of mortgage servicing rights and mortgage servicing liabilities | (101,315 | ) | (28,585 | ) | (55,257 | ) | |||
| Mortgage servicing rights hedging results | (171,777 | ) | (294,645 | ) | (155,136 | ) | |||
| Net loan servicing fees | 167,604 | 100,954 | 146,078 | ||||||
| Net interest expense: | |||||||||
| Interest income | 200,811 | 156,426 | 172,952 | ||||||
| Interest expense | 207,871 | 165,769 | 178,642 | ||||||
| (7,060 | ) | (9,343 | ) | (5,690 | ) | ||||
| Management fees from PennyMac Mortgage Investment Trust | 7,133 | 7,188 | 7,078 | ||||||
| Other | 15,884 | 4,033 | 3,253 | ||||||
| Total net revenues | 406,127 | 305,660 | 336,547 | ||||||
| Expenses | |||||||||
| Compensation | 141,956 | 146,376 | 136,982 | ||||||
| Technology | 35,690 | 35,967 | 35,244 | ||||||
| Loan origination | 40,270 | 30,568 | 31,646 | ||||||
| Servicing | 22,920 | 16,104 | 14,652 | ||||||
| Professional services | 9,404 | 9,262 | 17,888 | ||||||
| Occupancy and equipment | 7,893 | 8,676 | 10,066 | ||||||
| Marketing and advertising | 5,445 | 3,671 | 5,578 | ||||||
| Other | 8,695 | 11,153 | 11,574 | ||||||
| Total expenses | 272,273 | 261,777 | 263,630 | ||||||
| Income before provision for income taxes | 133,854 | 43,883 | 72,917 | ||||||
| Provision for income taxes | 35,596 | 4,575 | 14,667 | ||||||
| Net income | $ | 98,258 | $ | 39,308 | $ | 58,250 | |||
| Earnings per share | |||||||||
| Basic | $ | 1.93 | $ | 0.78 | $ | 1.17 | |||
| Diluted | $ | 1.85 | $ | 0.74 | $ | 1.11 | |||
| Weighted-average common shares outstanding | |||||||||
| Basic | 50,955 | 50,547 | 49,874 | ||||||
| Diluted | 53,204 | 53,100 | 52,264 | ||||||
| Dividend declared per share | $ | 0.20 | $ | 0.20 | $ | 0.20 |
12
PENNYMAC FINANCIAL SERVICES, INC. RECONCILIATIONOF
GAAP NET INCOME TO OPERATING NET INCOME ANDANNUALIZED OPERATING RETURN ON EQUITY
| Quarter ended | |||
|---|---|---|---|
| June 30, 2024 | |||
| (in thousands, except annualized<br><br> operating return on equity) | |||
| Net income | $ | 98,258 | |
| Increase in fair value of MSRs and MSLs due to changes in valuation inputs used in the valuation model | (99,425 | ) | |
| Hedging losses associated with MSRs | 171,777 | ||
| Non-recurring items | (12,484 | ) | |
| Adjustments | $ | 59,868 | |
| Tax impacts of adjustments^(1)^ | 16,075 | ||
| Operating net income | $ | 142,051 | |
| Average stockholders' equity | $ | 3,614,238 | |
| Annualized operating return on equity | 16 | % |
^(1)^ Assumes a tax rate of 26.85%
13
Exhibit 99.2
| PennyMac Financial Services, Inc.<br>2Q24 EARNINGS REPORT<br>July 2024 |
|---|
| 2<br>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 and forbearances; future earnings and return on equity as well as other business and financial expectations. Factors which<br>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<br>prices and housing sales; changes in macroeconomic and U.S. real estate market conditions; the continually changing federal, state and local laws and regulations applicable to the<br>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;<br>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.<br>government-sponsored entities and changes in their current roles or their guarantees or guidelines; the licensing and operational requirements of states and other jurisdictions<br>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<br>operations to reflect changes in business levels; purchase opportunities for mortgage servicing rights; our substantial amount of indebtedness; increases in loan delinquencies,<br>defaults and forbearances; our reliance on PennyMac Mortgage Investment Trust (NYSE: PMT) as a significant contributor to our mortgage banking business; maintaining sufficient<br>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<br>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;<br>investment management and incentive fees; conflicts of interest in allocating our services and investment opportunities among us and our advised entities; our ability to mitigate<br>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<br>from severe weather events, man-made or other natural conditions, climate change and pandemics; our ability to effectively identify, manage and hedge our credit, interest rate,<br>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<br>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<br>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<br>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<br>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>FORWARD-LOOKING STATEMENTS |
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| 3<br>PRODUCTION<br>INVESTMENT<br>MANAGEMENT<br>SERVICING<br>Strong operating performance partially offset by net fair value declines on hedged mortgage servicing rights<br>Annualized<br>return on equity<br>Annualized<br>operating return on<br>equity⁽³⁾<br>11% 16%<br>Net<br>income<br>Diluted<br>EPS⁽¹⁾<br>$98mm $1.85<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>$41mm $27.2bn $21.0bn $4.3bn $2.7bn<br>Pretax income<br>MSR⁽¹⁾ fair value<br>changes, hedge,<br>and non-recurring<br>items impact<br>MSR fair value<br>changes, hedge<br>and non-recurring<br>items impact to<br>diluted EPS<br>Pretax income<br>excluding<br>valuation-related<br>items and<br>non-recurring<br>items⁽⁴⁾<br>Total servicing<br>portfolio UPB⁽¹⁾⁽²⁾<br>$89mm $(60)mm $(0.82) $149mm $633bn<br>Pretax income Net AUM⁽¹⁾ Revenue<br>$4mm $1.9bn $9.3mm<br>SECOND QUARTER HIGHLIGHTS<br>2Q24 Results<br>Book value<br>per share<br>Dividend per<br>common share<br>$71.76 $0.30<br>Note: All figures are for 2Q24 or are as of 6/30/24<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 $99 million in MSR fair value gains, $172 million in hedging losses, a $1 million provision for losses on active loans, and a non-recurring, non-cash gain of $12 million related to a transaction within our closing services joint venture in our servicing<br>segment - see slide 13 for additional details |
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| 4<br>ORIGINATION MARKET EXPECTATIONS REFLECT GROWTH<br>U.S. Mortgage Origination Market(1)<br>($ in trillions)<br>Mortgage Rates Remain Near Recent Highs<br>Note: Figures may not sum due to rounding<br>(1) Actual originations: Inside Mortgage Finance. Forecast originations: Average of Mortgage Bankers Association (7/19/24) and Fannie Mae (6/10/24) forecasts.<br>(2) Freddie Mac Primary Mortgage Market Survey. 6.77% as of 7/18/24<br> • Current third-party estimates for industry originations average $1.7 trillion in 2024 and $2.1 trillion in 2025, reflecting<br>projections for rates to decline and growth in refinance volumes<br> • Mortgage banking companies with large servicing portfolios and diversified business models are positioned to generate<br>meaningful profitability as the mortgage markets decrease or increase in size<br>Purchase Average 30-year fixed rate mortgage Refinance (2) |
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| Mortgage Banking Operating Pretax Income<br>($ 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<br> • Operating return on equity expected to be in the mid-to-high teens for the remainder of 2024<br> ‒ Servicing to continue driving earnings with additional upside potential from the production segment as<br>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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| Total Servicing Portfolio With Note Rates of 5% or Greater(1)<br>(UPB in billions)<br>FUTURE RECAPTURE OPPORTUNITIES ENHANCED BY RECENT PRODUCTION<br>6<br> • Pennymac, through its multi-channel production platform, has been one of the largest producers of mortgage loans in<br>recent periods as interest rates increased(1)<br> ‒ Pennymac retains MSRs on nearly all mortgage loan production, driving continued organic servicing portfolio growth<br> ‒ Quarterly production adds approximately $20 - $25 billion in UPB of loans at prevailing mortgage rates to the servicing portfolio each<br>quarter<br> • The continued addition of higher interest rate loans to the servicing portfolio provides significant refinance opportunities<br>for Consumer Direct when mortgage rates decline<br>Note: Figures may not sum due to rounding<br>(1) Includes volume acquired or subserviced for PMT and includes loans held for sale at fair value<br>10%<br>of total<br>servicing<br>portfolio<br>Note Rate of 5.00% up to 6.00% Note Rate of 6.00% or Greater<br>18%<br>of total<br>servicing<br>portfolio |
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| 7<br>Operating Expenses<br>(bps of average servicing portfolio UPB)<br>Revenue From Servicing & Placement Fees<br>($ 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 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 2Q24, 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 $633 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) $9.5<br>Acquisitions:<br>(UPB in billions) $8.1<br>Locks:<br>(UPB in billions) $1.5<br>Originations:<br>(UPB in billions) $1.1<br>Committed pipeline(4):<br>(UPB in billions) $1.4<br>Locks:<br>(UPB in billions) $1.3<br>Originations:<br>(UPB in billions) $0.7<br>Committed pipeline(4):<br>(UPB in billions) $1.5<br>Originations<br>Locks<br>Conv. Acquisitions - for PFSI(1)<br>Gov’t. Acquisitions - for PFSI(1)<br>July 2024 (Estimated) July 2024 (Estimated) July 2024 (Estimated) |
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| 10<br>DRIVERS OF PRODUCTION SEGMENT RESULTS<br>(1) Expected revenue net of direct origination costs at time of lock<br>(2) Includes government-insured or guaranteed loans and certain conventional loans for PFSI’s own account<br>(3) Reflects timing of revenue and loan origination expense recognition, hedging, pricing & execution changes, and other items<br> • Revenue per fallout adjusted lock for PFSI’s own account was 62 basis points in 2Q24, down from 73 basis points in 1Q24<br> ‒ Higher volumes across all channels partially offset by lower margins in correspondent production as a result of highly competitive<br>pricing from some market participants<br> • Production expenses (net of loan origination expense) increased 2% from the prior quarter due to higher volumes<br>2Q23 1Q24 2Q24<br>($ 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) $ 17,803 31 $ 54.5 39% $ 16,660 35 $ 58.5 38% $ 20,503 30 $ 61.3 38%<br>Broker Direct 2,038 79 16.0 12% 2,423 103 24.8 16% 3,105 103 32.0 20%<br>Consumer Direct 1,369 362 49.6 36% 1,380 400 55.2 36% 1,764 393 69.3 43%<br>Other(3) n/a n/a 13.4 10% n/a n/a 11.7 8% n/a n/a (4.7) (3)%<br>Total PFSI account revenues<br> (net of Loan origination expense) $ 21,210 63 $ 133.6 96% $ 20,462 73 $ 150.3 97% $ 25,372 62 $ 157.8 97%<br>PMT Conventional Correspondent 2,501 22 5.4 4% 1,958 21 4.0 3% 2,148 21 4.4 3%<br>Total Production revenues<br> (net of Loan origination expense) 59 $ 139.0 100% 69 $ 154.3 100% 59 $ 162.3 100%<br>Production expenses<br> (less Loan origination expense) $ 23,711 48 $ 114.6 82% $ 22,421 53 $ 118.4 77% $ 27,520 44 $ 121.0 75%<br>Production segment<br> pretax income 10 $ 24.4 18% 16 $ 35.9 23% 15 $ 41.3 25% |
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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 volumes for PFSI’s account were up<br>23% and acquisitions were up 24% from<br>1Q24<br> ‒ Given recent capital raises, PMT<br>expects to retain approximately 30 -<br>50% of total conventional<br>correspondent production in 3Q24, an<br>increase from 18% in 2Q24<br> ● 797 correspondent sellers at June 30,<br>2024, down slightly from March 31, 2024<br> ● Purchase volume in 2Q24 was 92% 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 28% and<br>originations were up 45% from 1Q24<br> ● Approved brokers totaled 4,274 at June<br>30, 2024, up 5% from March 31, 2024<br>and 31% from June 30, 2023,<br>representing approximately a quarter of<br>the total population of brokers<br> ‒ Top brokers see Pennymac as a<br>strong alternative to the top two<br>channel lenders<br> ● Purchase volume in 2Q24 was 92% of<br>total originations<br> ● Lock volumes were up 25% and<br>originations were essentially unchanged<br>from 1Q24<br> ‒ Increase in locks due to higher refinance<br>volumes<br> ● Continue to provide for the spectrum of<br>needs of the 2.5 million customers in our<br>servicing portfolio<br> ‒ Purchase lock volume in 2Q24 was $457<br>million, or 17% of total locks, up from<br>$374 million in 1Q24<br> ‒ $410 million, or approximately 90% of<br>total purchase locks sourced from our<br>large and growing servicing portfolio<br> ‒ $257 million of closed-end second lien<br>mortgage loans funded in 2Q24, up from<br>$204 million in 1Q24 |
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| Selected Operational Metrics<br>1Q24 2Q24<br>Loans serviced (in thousands) 2,465 2,513<br>60+ day delinquency rate - owned portfolio(1) 2.9% 3.0%<br>60+ day delinquency rate - sub-serviced portfolio(2) 0.5% 0.6%<br>Actual CPR - owned portfolio(1) 5.4% 6.7%<br>Actual CPR - sub-serviced portfolio(2) 4.0% 5.6%<br>UPB of completed modifications ($ in millions)(3) $3,910 $3,213<br>EBO loan volume ($ in millions)(4) $681 $665<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 and excludes distressed loan investments<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> • Servicing portfolio totaled $632.7 billion in UPB at June 30,<br>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 increased slightly from the end of<br>the prior quarter<br> • Modification and EBO loan volume decreased from the prior<br>quarter<br>(5)<br>(6) |
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| SERVICING PROFITABILITY EXCLUDING VALUATION-RELATED CHANGES<br>13<br> • Loan servicing fees increased from the prior quarter due to growth in the owned portfolio; operating expenses declined from the prior quarter to 5.9<br>basis points of average servicing portfolio UPB<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 $5.7 billion in 2Q24, up from $4.6 billion in 1Q24<br> • Interest expense increased from the prior quarter due to higher average balances of debt outstanding, including PFSI’s issuance of unsecured<br>senior notes in May as well as financing for principal-only MBS used to hedge the MSR portfolio<br> • Non-recurring, non-cash gain of $12 million related to a transaction within our closing services joint venture<br>(1) Of average portfolio UPB, annualized (2) Comprised of net gains on mortgage loans held for sale at fair value and interest income related to EBO loans (3) Consists of interest shortfall and recording and release fees<br>(4) Changes in fair value do not include realization of MSR cash flows (5) Considered in the assessment of MSR fair value changes<br>2Q23 1Q24 2Q24<br>$ 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 $ 356.5 25.0 $ 424.2 27.7 $ 440.7 28.2<br>Earnings on custodial balances and deposits and other income 92.8 6.5 87.7 5.7 111.6 7.1<br>Realization of MSR cash flows (174.2) (12.2) (198.6) (13.0) (200.7) (12.9)<br>EBO loan-related revenue⁽²⁾ 20.0 1.4 26.4 1.7 26.8 1.7<br> Servicing expenses:<br> Operating expenses (103.4) (7.2) (97.6) (6.4) (91.4) (5.9)<br> Payoff-related expense⁽³⁾ (9.0) (0.6) (8.2) (0.5) (10.4) (0.7)<br> Losses and provisions for defaulted loans (13.3) (0.9) (13.2) (0.9) (13.3) (0.9)<br> EBO loan transaction-related expense (0.4) (0.0) (0.2) (0.0) (0.6) (0.0)<br> Interest expense (93.7) (6.6) (95.8) (6.3) (113.6) (7.3)<br> Pretax income excluding fair value changes and non-recurring items $ 75.3 5.3 $ 124.7 8.1 $ 149.0 9.5<br>Valuation-related changes<br> MSR fair value⁽⁴⁾ 118.9 170.0 99.4<br> Hedging derivatives gains (losses) (155.1) (294.6) (171.8)<br> Reversal of (provision for) losses on active loans⁽⁵⁾ 7.5 6.6 (0.6)<br>Servicing segment pretax income excluding non-recurring items $ 46.5 $ 6.5 $ 76.1<br> Non-recurring items 0.0 (1.6) 12.5<br>Servicing segment pretax income $ 46.5 $ 4.9 $ 88.5<br>Average servicing portfolio UPB $ 570,619 $ 612,733 $ 624,746 |
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| • 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 2Q24, MSR fair value increased slightly due to<br>higher market interest rates<br> • Hedging declines more than offset MSR fair value<br>gains<br> – Hedge costs of $35 million, or approximately 2% of<br>MSR fair value on an annualized basis during the<br>quarter<br> – Significant interest rate volatility during the period<br>drove performance lower<br>14<br>HEDGING APPROACH MODERATES THE VOLATILITY OF PFSI’S RESULTS<br>MSR Valuation Changes and Offsets<br>($ in millions)<br>MSR fair value change before realization of cash flows<br>Hedging and related losses<br>Production pretax income |
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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 June 30, 2024 were $1.9 billion, essentially unchanged from March 31, 2024 and June 30, 2023<br> ● Investment Management segment revenues were $9.3 million, down slightly from 1Q24 and 2Q23 |
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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>$633 billion outstanding<br>16 11<br>$101 billion in LTM 2Q24<br>Note: All figures are for PFSI and include volume fulfilled or subserviced for PMT; all figures are as of 6/30/24 unless otherwise noted<br>(1) Inside Mortgage Finance for the 12 months ended 3/31/24 or as of 3/31/24<br>$1.9 billion in assets<br>under management<br>5<br>15-year track record<br>#2<br>2.5 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 5<br>Customer base of 2.5 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 6/30/24 unless otherwise noted<br>(1) Inside Mortgage Finance for the 12 months ended 3/31/24 or as of 3/31/24 |
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| TOP LENDER WITH COMPREHENSIVE AND EFFICIENT MULTI-CHANNEL PLATFORM<br>20 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>20<br>#2 producer of residential<br>mortgage loans in LTM 1Q24⁽¹⁾ |
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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, 2Q24 is an estimate of Mortgage Bankers Association (7/19/24) and Fannie Mae (6/10/24) 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>o High tangible net worth (TNW) / assets excluding loans<br>eligible for repurchase<br>o 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>o Targeted non-funding debt-to-equity ratio below 1.5x<br>o Unsecured senior notes provide low, fixed interest rates;<br>first maturity in October 2025<br>o Issued $650 million of senior unsecured notes due<br>November 2030 at 7.125% and subsequently paid down<br>short-term secured borrowings<br>o As of June 30th, 2024 total liquidity including cash and<br>amounts available to draw with collateral pledged was<br>$3.4 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 June 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>6/30/23 9/30/23 12/31/23 3/31/24 6/30/24<br>10-year Treasury bond yield 3.8% 4.6% 3.9% 4.2% 4.4%<br>2/10 year Treasury yield spread -1.1% -0.5% -0.4% -0.4% -0.4%<br>30-year fixed rate mortgage 6.7% 7.3% 6.6% 6.8% 6.9%<br>Secondary mortgage rate 5.7% 6.3% 5.3% 5.6% 5.9%<br>U.S. home price appreciation<br>(Y/Y% change) 0.0% 4.0% 5.6% 6.5% 6.3%<br>Residential mortgage<br>originations (in billions) $420 $405 $315 $325 $435<br>6.79% 6.86% 4.20% 4.40%<br>(1) Freddie Mac Primary Mortgage Market Survey. 6.77% as of 7/18/24<br>(2) U.S. Department of the Treasury. 4.20% as of 7/18/24<br>(3) 10-year Treasury bond yield and 2/10 year Treasury yield spread: Bloomberg<br>Average 30-year fixed rate mortgage: Freddie Mac Primary Mortgage Market Survey<br>Average secondary mortgage rate: 30-Year FNCL Par Coupon Index (MTGEFNCL),<br>Bloomberg<br>U.S. home price appreciation: S&P CoreLogic Case-Shiller U.S. National Home Price NSA<br>Index (SPCSUSA); data is as of 4/30/24<br>Residential mortgage originations are for the quarterly period ended; source: Inside<br>Mortgage Finance |
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| June 30, 2024<br>Mortgage<br>Servicing Rights<br>Unaudited ($ in millions)<br>Pool UPB(1) $396,430<br>Weighted average coupon 4.3%<br>Weighted average servicing fee/spread 0.39%<br>Weighted average prepayment speed assumption (CPR) 7.9%<br>Fair value $7,923<br>As a multiple of servicing fee 5.2<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>(1) Owned MSR portfolio and includes loans acquired for sale at fair value; delinquency and foreclosure rates based on UPB; as of 6/30/24, the UPB of mortgage servicing rights owned by PFSI and loans held for sale totaled $403 billion<br> ● Overall mortgage delinquency rates increased from the prior quarter but remained in-line with levels in the same period last year<br> ● Servicing advances outstanding for PFSI’s MSR portfolio decreased to approximately $334 million at June 30, 2024 from $392<br>million at March 31, 2024<br> ‒ No principal and interest advances are outstanding |
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| 27<br>PFSI’S OWNED MSR PORTFOLIO CHARACTERISTICS<br>Note: Figures may not sum due to rounding<br>(1) Government loans include loans securitized in Ginnie Mae pools as well as loans sold to private investors<br>(2) Other represents MSRs collateralized by conventional loans sold to private investors<br>(3) Loan-to-values for closed-end seconds include only the second lien balance<br>(4) Excludes loans held for sale at fair value<br>As of June 30, 2024<br>Segment UPB<br>($ 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 $139.1 35.1% 680 4.3% 46 317 $205 678 93% 67% 4.8%<br>VA $124.5 31.4% 456 3.7% 36 323 $273 728 90% 70% 2.1%<br>USDA $20.9 5.3% 141 3.9% 55 308 $148 699 98% 65% 4.8%<br>GSE<br>FNMA $48.1 12.1% 156 4.8% 26 317 $309 761 73% 61% 0.4%<br>FHLMC $58.9 14.8% 185 5.1% 20 325 $318 757 75% 65% 0.4%<br>Other and Closed-End Seconds<br>Other⁽²⁾ $4.2 1.1% 12 6.7% 11 348 $352 770 74% 69% 0.2%<br>Closed-End Seconds⁽³⁾ $0.9 0.2% 11 10.1% 8 248 $77 743 18% 17% 0.1%<br>Grand Total $396.5 100.0% 1,641 4.3% 37 320 $242 718 87% 67% 2.7% |
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| ACQUISITIONS AND ORIGINATIONS BY PRODUCT<br>28<br>Note: Figures may not sum due to rounding<br>Unaudited ($ in millions) 2Q23 3Q23 4Q23 1Q24 2Q24<br>Correspondent Acquisitions<br>Conventional Conforming - for PMT $ 3,029 $ 2,759 $ 2,477 $ 1,769 $ 2,195<br>Conventional Conforming - for PFSI 7,018 9,933 10,129 8,190 10,007<br>Government - for PFSI 11,139 8,848 11,011 8,167 10,301<br>Jumbo - for PMT - 1 3 3 34<br>Total $ 21,186 $ 21,541 $ 23,620 $ 18,128 $ 22,537<br>Broker Direct Originations - for PFSI<br>Conventional Conforming $ 1,436 $ 1,591 $ 1,560 $ 1,524 $ 2,059<br>Government 685 621 623 619 865<br>Jumbo 19 10 18 42 241<br>Closed-end second liens - - - 9 15<br>Total $ 2,140 $ 2,223 $ 2,201 $ 2,193 $ 3,179<br>Consumer Direct Originations - for PFSI<br>Conventional Conforming $ 400 $ 378 $ 264 $ 265 $ 374<br>Government 1,028 741 372 931 804<br>Jumbo 4 3 2 - 12<br>Closed-end second liens 122 199 226 204 257<br>Total $ 1,553 $ 1,322 $ 864 $ 1,400 $ 1,447<br>Total acquisitions / originations $ 24,879 $ 25,085 $ 26,685 $ 21,721 $ 27,163<br>UPB of loans fulfilled for PMT<br>(included in correspondent acquisitions $ 3,029 $ 2,760 $ 2,480 $ 1,772 $ 2,229 |
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| INTEREST RATE LOCKS BY PRODUCT<br>29<br>Note: Figures may not sum due to rounding<br>Unaudited ($ in millions) 2Q23 3Q23 4Q23 1Q24 2Q24<br>Correspondent Locks<br>Conventional Conforming - for PMT $ 3,322 $ 3,493 $ 2,737 $ 2,472 $ 2,602<br>Conventional Conforming - for PFSI 7,523 10,333 9,977 8,614 9,914<br>Government - for PFSI 10,735 10,063 11,197 8,467 11,100<br>Jumbo - for PMT - 2 5 10 90<br>Total $ 21,581 $ 23,891 $ 23,916 $ 19,563 $ 23,706<br>Broker Direct Locks - for PFSI<br>Conventional Conforming $ 1,869 $ 2,146 $ 1,910 $ 2,234 $ 2,559<br>Government 921 828 844 989 1,266<br>Jumbo 32 15 30 116 433<br>Closed-end second liens - - 3 14 29<br>Total $ 2,822 $ 2,989 $ 2,787 $ 3,352 $ 4,287<br>Consumer Direct Locks - for PFSI<br>Conventional Conforming $ 575 $ 559 $ 371 $ 474 $ 551<br>Government 1,383 817 887 1,338 1,698<br>Jumbo 2 5 3 12 21<br>Closed-end second liens 205 326 335 328 428<br>Total $ 2,166 $ 1,707 $ 1,597 $ 2,152 $ 2,698<br>Total locks $ 26,568 $ 28,586 $ 28,300 $ 25,068 $ 30,691 |
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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>2Q23 3Q23 4Q23 1Q24 2Q24 2Q23 3Q23 4Q23 1Q24 2Q24<br>Government-insured 715 712 714 719 715 Government-insured 45 45 46 44 44<br>Conventional 762 762 762 765 765 Conventional 38 38 39 38 38<br>Weighted Average FICO Weighted Average DTI<br>2Q23 3Q23 4Q23 1Q24 2Q24 2Q23 3Q23 4Q23 1Q24 2Q24<br>Government-insured 712 711 715 723 714 Government-insured 45 46 47 46 46<br>Conventional 761 761 763 762 764 Conventional 38 39 39 39 39<br>Weighted Average FICO Weighted Average DTI<br>2Q23 3Q23 4Q23 1Q24 2Q24 2Q23 3Q23 4Q23 1Q24 2Q24<br>Government-insured 661 683 674 688 692 Government-insured 44 45 45 45 45<br>Conventional 744 743 747 746 747 Conventional 37 38 38 38 39 |
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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) 2Q23 1Q24 2Q24<br>Net income $ 58.3 $ 39.3 $ 98.3<br>Provision for income taxes 14.7 4.6 35.6<br>Income before provision for income taxes 72.9 43.9 133.9<br> Depreciation and amortization 13.2 14.2 14.2<br> Increase in fair value of MSRs and MSLs due to changes in<br> valuation inputs used in the valuation model<br>(118.9) (170.0) (99.4)<br> Hedging losses associated with MSRs 155.1 294.6 171.8<br> Stock-based compensation 0.4 4.6 (2.2)<br> Non-recurring items - 1.6 (12.5)<br> Interest expense on corporate debt and capital lease $ 23.7 $ 38.8 $ 44.0<br>Adjusted EBITDA $ 146.4 $ 227.7 $ 249.7 |
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| ($ in millions) 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24<br>Net income (loss) $ 30.4 $ 58.3 $ 92.9 $ (36.8) $ 39.3 $ 98.3<br> (Increase) decrease in fair value of MSRs and MSLs due to changes in<br> valuation inputs used in the valuation model 90.3 (118.9) (398.9) 370.7 (170.0) (99.4)<br> Hedging losses (gains) associated with MSRs (47.2) 155.1 423.7 (294.8) 294.6 171.8<br> Non-recurring items - - - 158.4 1.6 (12.5)<br>Adjustments $ 43.0 $ 36.2 $ 24.8 $ 234.3 $ 126.3 $ 59.9<br> Tax impacts of adjustments⁽¹⁾ 11.6 9.7 6.7 62.9 33.9 16.1<br>Operating net income $ 61.9 $ 84.8 $ 111.0 $ 134.5 $ 131.7 $ 142.1<br>Average stockholders' equity $ 3,463.5 $ 3,440.9 $ 3,517.5 $ 3,555.4 $ 3,552.3 $ 3,614.2<br>Annualized operating return on equity 7% 10% 13% 15% 15% 16%<br>($ in millions) 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24<br>Servicing pretax income (loss) $ 57.4 $ 46.5 $ 101.2 $ (95.5) $ 4.9 $ 88.5<br> (Increase) decrease in fair value of MSRs and MSLs due to changes in<br> valuation inputs used in the valuation model 90.3 (118.9) (398.9) 370.7 (170.0) (99.4)<br> Hedging losses (gains) associated with MSRs (47.2) 155.1 423.7 (294.8) 294.6 171.8<br> Non-recurring items - - - 158.4 1.6 (12.5)<br> Provision for credit losses on active loans (6.1) (7.5) (6.0) 5.7 (6.6) 0.6<br>Servicing pretax income net of valuation related changes and<br>non-recurring items $ 94.4 $ 75.3 $ 120.0 $ 144.4 $ 124.7 $ 149.0<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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