PennyMac Financial Services, Inc. (NYSE: PFSI) today reported net income of $113.8 million for the fourth quarter of 2016, on revenue of $289.3 million. Net income attributable to PFSI common stockholders was $22.7 million, or $1.00 per diluted share. Book value per share increased to $15.49, up from $14.41 at September 30, 2016.

Fourth Quarter 2016 Highlights
  • Pretax income of $129.4 million was down 7 percent from record results in the prior quarter, driven by continued strength in the Production segment and improved earnings contribution from the Servicing segment
  • Production segment pretax income of $93.4 million, down 38 percent from the prior quarter's record results, driven by lower interest rate lock commitments (IRLCs) and margins
    • Total loan production activity of $22.1 billion in unpaid principal balance (UPB), up 7 percent from the prior quarter
    • Record production volumes for both correspondent and consumer direct channels; $20.0 billion in UPB of correspondent production and $2.0 billion in UPB of consumer direct originations, up 6 percent and 22 percent, respectively, from the prior quarter
    • IRLCs on correspondent government and consumer direct loans totaled $14.7 billion, down 10 percent from the prior quarter's record levels
  • Servicing segment pretax income of $35.1 million, compared with a pretax loss of $10.7 million in the prior quarter
    • Results included a non-cash valuation gain in mortgage servicing rights (MSRs) of $151.6 million; losses from hedges and excess servicing spread (ESS) liability totaled $133.4 million
    • Servicing segment pretax income excluding valuation-related changes was $24.6 million, up 150 percent from the prior quarter 1
    • Servicing portfolio reached $194.2 billion in UPB, up 7 percent from September 30, 2016
  • Investment Management segment pretax income of $0.4 million compared with pretax income of $0.2 million in the prior quarter
    • Net assets under management were approximately $1.5 billion, essentially flat compared with September 30, 2016

Full-Year 2016 Highlights
  • Pretax income of $383.1 million, up 37 percent from the prior year and the highest level on record for PennyMac Financial
  • Total net revenue of $931.9 million, up 31 percent from the prior year
  • Loan production totaled $69.7 billion in UPB, an increase of 44 percent from the prior year, which included $6.4 billion in UPB of consumer direct production, an increase of 57 percent from the prior year
  • Servicing portfolio reached $194.2 billion in UPB, up 21 percent from December 31, 2015, driven by organic additions from loan production

"PennyMac Financial closed out a record year with outstanding earnings in the fourth quarter, driven by continued strength in our Production segment and improved contribution from our Servicing segment," said Executive Chairman Stanford L. Kurland. "We were able to capitalize on the opportunities available during the year provided by a vibrant origination market with considerable refinance activity. We also made great strides in further building out the company's leading mortgage origination and servicing platforms."

The following table presents the contribution of PennyMac Financial's Production, Servicing and Investment Management segments to pretax income:

 
Quarter ended December 31, 2016

Mortgage Banking
 

Investment
Production   Servicing   Total

Management
  Total
(in thousands)
Revenue
Net gains on mortgage loans held for sale at fair value $ 103,413 $ 24,519 $ 127,932 $ - $ 127,932
Loan origination fees 39,572 - 39,572 - 39,572
Fulfillment fees from PMT 27,164 - - - 27,164
Net servicing fees - 95,528 - - 95,528
Management fees - - - 5,583 5,583
Carried Interest from Investment Funds - - - 36 36
Net interest income (expense):
Interest income 16,026 8,309 24,335 - 24,335
Interest expense   11,638   20,586     32,224     13     32,237  
4,388 (12,277 ) (7,889 ) (13 ) (7,902 )
Other   508   198     706     115     821  
Total net revenue   175,045   107,968     283,013     5,721     288,734  
Expenses   81,675   72,897     154,572     5,305     159,877  

Income before provision for income taxes and non-segment activities
93,370 35,071 128,441 416 128,857
Non-segment activities (1)   551  
Pre-tax income $ 93,370 $ 35,071   $ 128,441   $ 416   $ 129,408  
 

(1) Represents repricing Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement
 

Production Segment

Production includes the correspondent acquisition of newly originated government-insured mortgage loans for PennyMac Financial's own account, fulfillment services on behalf of PennyMac Mortgage Investment Trust (NYSE: PMT) and consumer direct lending.

PennyMac Financial's loan production activity totaled $22.1 billion in UPB, of which $14.6 billion in UPB was for its own account, and $7.5 billion was fee-based fulfillment activity for PMT. IRLCs on correspondent government and consumer direct loans totaled $14.7 billion in UPB.

Production segment pretax income was $93.4 million, a decrease of 38 percent from the third quarter. Production revenue totaled $175.0 million, a decrease of 25 percent from the third quarter, primarily resulting from a 38 percent quarter-over-quarter decrease in net gains on mortgage loans held for sale, reflecting lower lock volumes and margins in both production channels compared to recent high levels in the third quarter. Third quarter results also included a $6.6 million benefit in provision for representations and warranties due to a change in estimate.

The components of net gains on mortgage loans held for sale are detailed in the following table:
 
Quarter ended
December 31,

2016
  September 30,

2016
  December 31,

2015
(in thousands)
 
Receipt of MSRs in loan sale transactions $ 190,735 $ 143,960 $ 112,196

Mortgage servicing rights recapture payable to PennyMac Mortgage Investment Trust
(2,535 ) (1,690 ) (1,993 )
Provision for representations and warranties, net (845 ) 5,796 (1,978 )
Cash investment (1) 29,038 26,855 (7,885 )

Fair value changes of pipeline, inventory and hedges
  (88,461 )   7,200     (21,604 )
Net gains on mortgage loans held for sale $ 127,932   $ 182,121   $ 78,736  
 

Net gains on mortgage loans held for sale by segment:
Production $ 103,413   $ 166,506   $ 65,893  
Servicing $ 24,519   $ 15,615   $ 12,843  
 
(1) Net of cash hedge expense
 

PennyMac Financial performs fulfillment services for conventional conforming and jumbo loans acquired by PMT in its correspondent production business. These services include, but are not limited to: marketing; relationship management; the approval of correspondent sellers and the ongoing monitoring of their performance; reviewing loan data, documentation and appraisals to assess loan quality and risk; pricing; hedging and activities related to the subsequent sale and securitization of loans in the secondary mortgage markets for PMT. Fees earned from fulfillment of correspondent loans on behalf of PMT totaled $27.2 million in the fourth quarter, down slightly from $27.3 million in the third quarter. Fulfillment fee revenue was driven by continued strong acquisition volumes by PMT. The average fulfillment fee rate during the fourth quarter was 36 basis points, down from 38 basis points in the third quarter.

Production segment expenses were $81.7 million, a 1 percent decrease from the third quarter.

Servicing Segment

Servicing includes income from owned MSRs, in addition to subservicing and special servicing activities. Servicing segment pretax income was $35.1 million in the fourth quarter compared to a pretax loss of $10.7 million in the third quarter. Servicing segment revenues in the fourth quarter totaled $108.0 million, a 103 percent increase from the third quarter, primarily due to an increase in net loan servicing fees.

Net loan servicing fees totaled $95.5 million for the fourth quarter and included $127.5 million in servicing fees reduced by $50.2 million of amortization and realization of MSR cash flows. Amortization and realization of MSR cash flows decreased from elevated levels in the prior quarter, driven by lower expected prepayment activity partially offset by a larger MSR asset. Net loan servicing fees also included $151.6 million in MSR fair value gains and recovery of impairment for MSRs carried at lower of amortized cost or fair value, primarily reflecting the sharp rise in mortgage rates during the fourth quarter and expectations for lower prepayment activity in the future. In addition, net loan servicing fees included $116.3 million in hedging losses and $17.1 million in losses due to the change in fair value of the ESS liability. Net loan servicing fees also included $1.3 million in servicing activity fees related to a bulk sale of loans by PMT.

The following table presents a breakdown of net loan servicing fees:
 
Quarter ended
December 31,

2016
  September 30,

2016
  December 31,

2015
(in thousands)
 
Servicing fees (1) $ 127,483 $ 122,587 $ 112,689
Effect of MSRs:
Amortization and realization of cash flows (2) (50,204 ) (56,637 ) (44,505 )

Change in fair value and provision for/recovery of impairment of MSRs carried at lower of amortized cost or fair value
151,599 (43,219 ) 42,615

Change in fair value of excess servicing spread financing
(17,061 ) 4,107 (6,864 )
Hedging (losses) gains   (116,289 )   19,026     (26,976 )

Total amortization, impairment and change in fair value of MSRs
  (31,955 )   (76,723 )   (35,730 )
Net loan servicing fees $ 95,528   $ 45,864   $ 76,959  
 
(1) Includes contractually-specified servicing fees

(2) Includes realization of cash flows from the Mortgage Servicing Liability which was previously included in fair value changes. Prior periods have been adjusted accordingly.
 

Servicing segment revenue also included $24.5 million in net gains on mortgage loans held for sale in the fourth quarter resulting from the securitization of reperforming government-insured and guaranteed loans, versus $15.6 million in the third quarter. These loans were previously purchased out of Ginnie Mae securitizations and brought back to performing status through PennyMac Financial's successful servicing efforts, primarily with the use of loan modifications.

Servicing segment expenses totaled $72.9 million, a 14 percent increase from the third quarter, primarily resulting from increased provisions for losses on delinquent and defaulted government loans and EBO transaction-related expense. Such loss provisions are contemplated in valuation of the MSR asset prior to being recorded as a loss provision.

The total servicing portfolio reached $194.2 billion in UPB at December 31, 2016, an increase of 7 percent from the prior quarter end. Of the total servicing portfolio, prime servicing was $191.7 billion in UPB and special servicing was $2.6 billion in UPB. PennyMac Financial subservices and conducts special servicing for $60.9 billion in UPB, an increase of 9 percent from September 30, 2016, due to new correspondent conventional loan acquisitions by PMT. PennyMac Financial's owned MSR portfolio grew to $129.2 billion in UPB, an increase of 6 percent over the prior quarter end, primarily resulting from the acquisition of government-insured mortgage loans in its correspondent channel and production activities in its consumer direct channel.

The table below details PennyMac Financial's servicing portfolio UPB:
     
December 31,

2016

September 30,

2016
December 31,

2015
(in thousands)
Loans serviced at period end:
Prime servicing:
Owned
Mortgage servicing rights
Originated $ 89,516,155 $ 78,732,061 $ 59,880,349
Acquisitions   39,660,951   42,580,927   50,722,355
129,177,106 121,312,988 110,602,704
Mortgage servicing liabilities 2,097,234 1,717,859 806,897
Mortgage loans held for sale   2,101,283   2,945,465   1,052,485
133,375,623 125,976,312 112,462,086
Subserviced for Advised Entities   58,305,410   53,247,024   43,963,378
Total prime servicing   191,681,033   179,223,336   156,425,464
Special servicing:
Subserviced for Advised Entities   2,558,969   2,853,307   3,847,254
Total loans serviced $ 194,240,002 $ 182,076,643 $ 160,272,718
 
Mortgage loans serviced:
Owned
Mortgage servicing rights $ 129,177,106 $ 121,312,988 $ 110,602,704
Mortgage servicing liabilities 2,074,896 1,717,859 806,897
Mortgage loans held for sale   2,101,283   2,945,465   1,052,485
133,353,285 125,976,312 112,462,086
Subserviced   60,886,717   56,100,331   47,810,632
Total mortgage loans serviced $ 194,240,002 $ 182,076,643 $ 160,272,718
 

Investment Management Segment

PennyMac Financial manages PMT and two private Investment Funds for which it earns base management fees and may earn incentive compensation. Net assets under management were approximately $1.5 billion as of December 31, 2016, essentially flat compared with September 30, 2016.

Pretax income for the Investment Management segment was $0.4 million compared with pretax income of $0.2 million in the third quarter. Management fees, which include base management fees from PMT and the private Investment Funds, as well as any earned incentive fees from PMT, increased 1 percent from the prior quarter. Other revenue increased $113,000 quarter-over-quarter, driven by an increase in the value of PMT shares held by PennyMac Financial.

The following table presents a breakdown of management fees and carried interest:
 
Quarter ended
December 31,

2016
  September 30,

2016
  December 31,

2015
(in thousands)
Management fees:
PennyMac Mortgage Investment Trust
Base $ 5,081 $ 5,025 $ 5,670
Performance incentive   -   -   -  
5,081 5,025 5,670
Investment Funds   502   496   659  
Total management fees   5,583   5,521   6,329  
Carried Interest   36   107   (270 )
Total management fees and Carried Interest $ 5,619 $ 5,628 $ 6,059  
 
Net assets of Advised Entities:
PennyMac Mortgage Investment Trust $ 1,351,114 $ 1,354,918 $ 1,496,112
Investment Funds   197,550   201,802   231,744  
$ 1,548,664 $ 1,556,720 $ 1,727,856  
 

Investment Management segment expenses totaled $5.3 million, a 2 percent decrease from the third quarter.

Consolidated Expenses

Total expenses for the fourth quarter were $159.9 million, a 5 percent increase from the third quarter. The increase in total expenses was primarily due to an increase in servicing expenses related to increased provisions for losses on delinquent and defaulted government loans and an increase in technology expense due to higher software fees. Higher expenses were partially offset by a decrease in compensation expense driven by lower employee incentive compensation.

Mr. Kurland concluded, "We are entering a more normalized mortgage market environment with the interest rate increases that began in the fourth quarter. While we expect a strong purchase origination market with increased volume over the 2016 levels, a reduction in refinance activity should result in a decrease in the overall mortgage origination market. PennyMac Financial has demonstrated the ability to react to market volatility in the past and operate successfully across different market environments. With the changes in the market, we are making adjustments required to maximize profitability in the current environment."

Management's slide presentation will be available in the Investor Relations section of the Company's website at www.ir.pennymacfinancial.com beginning at 1:30 p.m. (Pacific Standard Time) on Thursday, February 2, 2017.

About PennyMac Financial Services, Inc.

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

1 Excludes changes in the fair value of MSRs, the ESS liability, and gains/(losses) on hedging derivatives which were $151.6 million, $(17.1) million, and $(116.3) million, respectively, and provision for credit losses on active loans of $(7.8) million, in the fourth quarter.

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management's beliefs, estimates, projections and assumptions with respect to, among other things, the Company's financial results, future operations, business plans and investment strategies, as well as industry and market conditions, all of which are subject to change. Words like "believe," "expect," "anticipate," "promise," "plan," and other expressions or words of similar meanings, as well as future or conditional verbs such as "will," "would," "should," "could," or "may" are generally intended to identify forward-looking statements. Actual results and operations for any future period may vary materially from those projected herein and from past results discussed herein. Factors which could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: the continually changing federal, state and local laws and regulations applicable to the highly regulated industry in which we operate; lawsuits or governmental actions that may result from any noncompliance with the laws and regulations applicable to our businesses; the mortgage lending and servicing-related regulations promulgated by the Consumer Financial Protection Bureau and its enforcement of these regulations; our dependence on U.S. government-sponsored entities and changes in their current roles or their guarantees or guidelines; changes to government mortgage modification programs; the licensing and operational requirements of states and other jurisdictions applicable to the Company's businesses, to which our bank competitors are not subject; foreclosure delays and changes in foreclosure practices; certain banking regulations that may limit our business activities; our dependence on the multifamily and commercial real estate sectors for future originations of commercial mortgage loans and other commercial real estate related loans; changes in macroeconomic and U.S. real estate market conditions; difficulties inherent in growing loan production volume; difficulties inherent in adjusting the size of our operations to reflect changes in business levels; purchase opportunities for mortgage servicing rights and our success in winning bids; changes in prevailing interest rates; increases in loan delinquencies and defaults; our reliance on PennyMac Mortgage Investment Trust (NYSE: PMT) as a significant source of financing for, and revenue related to, our mortgage banking business; any required additional capital and liquidity to support business growth that may not be available on acceptable terms, if at all; our obligation to indemnify third-party purchasers or repurchase loans if loans that we originate, acquire, service or assist in the fulfillment of, fail to meet certain criteria or characteristics or under other circumstances; our obligation to indemnify PMT and the Investment Funds if its services fail to meet certain criteria or characteristics or under other circumstances; decreases in the returns on the assets that we select and manage for our clients, and our resulting management and incentive fees; the extensive amount of regulation applicable to our investment management segment; conflicts of interest in allocating our services and investment opportunities among us and our advised entities; the effect of public opinion on our reputation; our recent growth; our ability to effectively identify, manage, monitor and mitigate financial risks; our initiation of new business activities or expansion of existing business activities; our ability to detect misconduct and fraud; and our ability to mitigate cybersecurity risks and cyber incidents. 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.
     
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
 

December 31, 2016

September 30, 2016

December 31, 2015
(in thousands, except share amounts)
ASSETS
Cash $ 99,367 $ 94,727 $ 105,472
Short-term investments at fair value 85,964 58,749 46,319
Mortgage loans held for sale at fair value 2,172,815 3,127,377 1,101,204
Derivative assets 82,905 135,777 50,280
Servicing advances, net 348,306 306,150 299,354
Carried Interest due from Investment Funds 70,906 70,870 69,926
Investment in PennyMac Mortgage Investment Trust at fair value 1,228 1,169 1,145
Mortgage servicing rights 1,627,672 1,337,674 1,411,935
Real estate acquired in settlement of loans 1,418 1,996 -
Furniture, fixtures, equipment and building improvements, net 31,321 29,121 16,311
Capitalized software, net 11,205 8,361 3,025
Note receivable from PennyMac Mortgage Investment Trust 150,000 150,000 150,000
Receivable from Investment Funds 1,219 1,596 1,316
Receivable from PennyMac Mortgage Investment Trust 16,416 14,747 18,965
Deferred tax asset - - 18,378
Loans eligible for repurchase 382,268 197,819 166,070
Other   50,892   60,061   45,594
Total assets $ 5,133,902 $ 5,596,194 $ 3,505,294
 
LIABILITIES
Assets sold under agreements to repurchase $ 1,735,114 $ 2,491,366 $ 1,166,731
Mortgage loan participation and sale agreements 671,426 782,913 234,872
Notes payable 150,942 110,619 61,136
Obligations under capital lease 23,424 20,700 13,579
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value 288,669 280,367 412,425
Derivative liabilities 22,362 4,426 9,083
Mortgage servicing liabilities at fair value 15,192 13,045 1,399
Accounts payable and accrued expenses 134,611 106,684 89,915
Payable to Investment Funds 20,393 27,265 30,429
Payable to PennyMac Mortgage Investment Trust 170,036 165,264 162,379

Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement
75,954 75,434 74,315
Income taxes payable 25,088 11,415 -
Liability for loans eligible for repurchase 382,268 197,819 166,070
Liability for losses under representations and warranties   19,067   18,473   20,611
Total liabilities   3,734,546   4,305,790   2,442,944
 
STOCKHOLDERS' EQUITY

Class A common stock---authorized 200,000,000 shares of $0.0001 par value; issued and outstanding, 22,426,779, 22,274,145 and 21,990,831 shares, respectively
2 2 2

Class B common stock---authorized 1,000 shares of $0.0001 par value; issued and outstanding, 49, 49 and 51 shares, respectively
- - -
Additional paid-in capital 182,772 179,134 172,354
Retained earnings   164,549   141,805   98,470

Total stockholders' equity attributable to PennyMac Financial Services, Inc. common stockholders
  347,323   320,941   270,826

Noncontrolling interests in Private National Mortgage Acceptance Company, LLC
  1,052,033   969,463   791,524
Total stockholders' equity   1,399,356   1,290,404   1,062,350
Total liabilities and stockholders' equity $ 5,133,902 $ 5,596,194 $ 3,505,294
 
 
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
   
Quarter ended
December 31,

2016
  September 30,

2016
December 31,

2015
(in thousands, except earnings per share)
Revenue
Net gains on mortgage loans held for sale at fair value $ 127,932 $ 182,121 $ 78,736
Mortgage loan origination fees 39,572 34,621 20,969
Fulfillment fees from PennyMac Mortgage Investment Trust 27,164 27,255 12,855
Net mortgage loan servicing fees:
Mortgage loan servicing fees
From non-affiliates 102,671 98,865 90,081
From PennyMac Mortgage Investment Trust 11,696 11,039 11,880
From Investment Funds 389 770 720
Ancillary and other fees   12,727     11,913     10,008  
127,483 122,587 112,689

Amortization, impairment and change in estimated fair value of mortgage servicing rights and excess servicing spread
  (31,955 )   (76,723 )   (35,730 )
Net mortgage loan servicing fees   95,528     45,864     76,959  
Management fees:
From PennyMac Mortgage Investment Trust 5,081 5,025 5,670
From Investment Funds   502     496     659  
  5,583     5,521     6,329  
Carried Interest from Investment Funds 36 107 (270 )
Net interest expense:
Interest income 24,335 22,709 11,985
Interest expense   32,237     27,516     19,415  
(7,902 ) (4,807 ) (7,430 )

Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust
94 (13 ) 65
Results of real estate acquired in settlement of loans (82 ) 42 -
Other   1,360     684     (973 )
Total net revenue   289,285     291,395     187,240  
Expenses
Compensation 94,576 96,132 71,566
Servicing 29,363 22,177 12,979
Technology 11,009 9,733 7,059
Loan origination 6,961 6,471 4,763
Professional services 5,155 4,631 4,583
Other   12,813     12,973     9,057  
Total expenses   159,877     152,117     110,007  
Income before provision for income taxes 129,408 139,278 77,233
Provision for income taxes   15,568     16,976     8,327  
Net income 113,840 122,302 68,906
Less: Net income attributable to noncontrolling interest   91,096     98,617     56,135  

Net income attributable to PennyMac Financial Services, Inc. common stockholders
$ 22,744   $ 23,685   $ 12,771  
 
Earnings per share
Basic $ 1.02 $ 1.07 $ 0.58
Diluted $ 1.00 $ 1.06 $ 0.58
Weighted-average common shares outstanding
Basic 22,339 22,217 21,912
Diluted 76,970 76,355 76,132
 
 
PENNYMAC FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
Year ended December 31,
2016     2015     2014  
(in thousands, except earnings per share)
 
Revenue
Net gains on mortgage loans held for sale at fair value:
From non-affiliates $ 539,872 $ 328,551 $ 174,861
Recapture payable to PennyMac Mortgage Investment Trust   (8,092 )   (7,836 )   (7,837 )
  531,780     320,715     167,024  
Mortgage loan origination fees 125,534 91,520 41,576
Fulfillment fees from PennyMac Mortgage Investment Trust 86,465 58,607 48,719
Net mortgage loan servicing fees:
Mortgage loan servicing fees:
From non-affiliates 385,633 290,474 173,005
From PennyMac Mortgage Investment Trust 50,615 46,423 52,522
From Investment Funds 2,583 2,636 6,425
Ancillary and other fees   46,910     43,139     26,469  
485,741 382,672 258,421
Amortization, impairment and change in fair value of mortgage servicing rights (324,198 ) (156,939 ) (70,165 )
Change in fair value of excess servicing spread payable to PennyMac Mortgage Investment Trust 23,923     3,810     28,663  
  (300,275 )   (153,129 )   (41,502 )
Net mortgage loan servicing fees   185,466     229,543     216,919  
Management fees:
From PennyMac Mortgage Investment Trust 20,657 24,194 35,035
From Investment Funds   2,089     4,043     7,473  
  22,746     28,237     42,508  
Carried Interest from Investment Funds 980 2,628 6,156
Net interest expense:
Interest income:
From non-affiliates 73,297 45,812 27,771
From PennyMac Mortgage Investment Trust   7,830     3,343      
  81,127     49,155     27,771  
Interest expense:
To non-affiliates 83,605 43,172 23,965
To PennyMac Mortgage Investment Trust   22,601     25,365     13,292  
  106,206     68,537     37,257  
Net interest expense   (25,079 )   (19,382 )   (9,486 )
Change in fair value of investment in and dividends received from PennyMac Mortgage Investment Trust 224 (230 ) (6 )
Result of real estate acquired in settlement of loans (82 )
Other   3,853     1,472     4,867  
Total net revenue   931,887     713,110     518,277  
Expenses
Compensation 342,153 274,262 190,707
Servicing 85,857 68,085 48,430
Technology 35,322 25,164 15,439
Loan origination 22,528 17,396 9,554
Professional services 18,078 15,473 11,108
Other   44,866     33,537     20,006  
Total expenses   548,804     433,917     295,244  
Income before provision for income taxes 383,083 279,193 223,033
Provision for income taxes   46,103     31,635     26,722  
Net income 336,980 247,558 196,311
Less: Net income attributable to noncontrolling interest   270,901     200,330     159,469  
Net income attributable to PennyMac Financial Services, Inc. common stockholders $ 66,079   $ 47,228   $ 36,842  
 
Earnings per share
Basic $ 2.98 $ 2.17 $ 1.73
Diluted $ 2.94 $ 2.17 $ 1.73
Weighted average common shares outstanding
Basic 22,161 21,755 21,250
Diluted 76,629 76,104 75,955

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