PennyMac Financial Services, Inc. Reports Third Quarter 2016 Results

PennyMac Financial Services, Inc. (NYSE: PFSI) today reported net income of $122.3 million for the third quarter of 2016, on revenue of $291.4 million. Net income attributable to PFSI common stockholders was $23.7 million, or $1.06 per diluted share. Book value per share increased to $14.41, up from $13.28 at June 30, 2016.

Third Quarter Highlights
  • Pretax income of $139.3 million, up 65 percent from the prior quarter and the highest level on record for PennyMac Financial, driven by continued momentum in correspondent and consumer direct production
  • Production segment pretax income of $149.8 million, up 43 percent from the prior quarter
    • Total loan production activity of $20.6 billion in unpaid principal balance (UPB), up 28 percent from the prior quarter
    • Record production volumes for both correspondent and consumer direct channels; $18.9 billion in UPB of correspondent production and $1.7 billion in UPB of consumer direct originations, up 30 percent and 12 percent from the prior quarter, respectively
  • Servicing segment pretax loss of $10.7 million, versus a pretax loss of $21.0 million in the prior quarter
    • Results included non-cash valuation losses on mortgage servicing rights (MSRs) of $39.0 million; gains from hedges and excess servicing spread (ESS) liability totaled $23.1 million
    • Servicing segment pretax income excluding fair value changes was $5.1 million, down 73 percent from the prior quarter 1
    • Servicing portfolio reached $182.1 billion in UPB, up 6 percent from June 30, 2016
    • Completed the previously announced acquisition and transfer of approximately $1 billion in UPB of MSRs related to defaulted government loans from a large bank 2
  • Investment Management segment pretax income of $0.2 million compared with pretax income of $0.7 million in the prior quarter
    • Net assets under management were approximately $1.6 billion, down modestly from June 30, 2016, driven by PennyMac Mortgage Investment Trust's (PMT) repurchase of its common shares of beneficial interest

"PennyMac Financial's continuing strong financial performance reflects our operational foundation and our ability to capture the significant opportunities in the U.S. mortgage market," said Chairman and Chief Executive Officer Stanford L. Kurland. "We have once again achieved record quarterly earnings driven by record production volumes in each of PennyMac Financial's correspondent and consumer direct channels. We have been able to capitalize on the strong origination market and the unique ability of our platform to scale up quickly and efficiently to generate strong volumes amid continuing low interest rates. PennyMac Financial's leading position in mortgage banking and our best-in-class operating platform make us well-positioned to continue to capitalize on the opportunities we see."

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