PENNYMAC FINANCIAL SERVICES, INC.

CIK:0001568669|SEC Filings

CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Net gains on mortgage loans held for sale at fair value:
From non-affiliates	$ 46,019	$ 99,597	$ 105,047	$ 188,248
Net gains on mortgage loans held for sale at fair value	60,946	98,091	132,360	185,047
Mortgage loan origination fees from non-affiliates	22,886	28,303	46,241	52,498
Mortgage loan origination fees	24,428	30,193	48,991	55,767
Mortgage loan servicing fees
From non-affiliates and affiliates	138,871	112,348	274,354	218,815
Ancillary and other fees	13,637	11,202	27,808	23,068
Net servicing fees	161,942	134,192	322,615	263,507
Amortization, impairment and change in fair value of mortgage servicing rights and mortgage servicing liabilities	(47,257)	(94,435)	(84,220)	(152,360)
Change in fair value of excess servicing spread payable to PennyMac Mortgage Investment Trust	(48,253)	(87,279)	(92,137)	(142,431)
Net mortgage loan servicing fees	113,689	46,913	230,478	121,076
Management fees, net:
Management fees	5,664	6,007	11,439	11,381
Interest income:
From non-affiliates	53,206	32,948	93,845	55,002
Interest income	55,104	34,973	97,719	58,832
Interest expense:
To non-affiliates	28,706	32,511	61,517	57,338
Interest expense	32,616	36,877	69,361	66,351
Net interest income (expense):	22,488	(1,904)	28,358	(7,519)
Result of real estate acquired in settlement of loans	13	(119)	(15)	(144)
Other	2,571	1,116	4,443	2,581
Total net revenue	244,298	201,721	482,499	406,194
Expenses
Compensation	98,540	82,967	200,553	168,207
Servicing	28,490	24,702	54,789	51,545
Technology	15,154	11,581	29,774	22,937
Occupancy and equipment	6,507	5,965	12,884	11,007
Professional services	5,587	4,523	11,325	8,341
Loan origination	5,144	5,116	7,259	9,249
Marketing	2,218	2,483	4,379	4,219
Other	7,960	6,424	13,842	10,697
Total expenses	169,600	143,761	334,805	286,202
Income before provision for income taxes	74,698	57,960	147,694	119,992
Provision for income taxes	6,293	7,214	12,363	14,860
Net income	68,405	50,746	135,331	105,132
Less: Net income attributable to noncontrolling interest	50,568	40,267	100,875	83,774
Net income attributable to PennyMac Financial Services, Inc. common stockholders	$ 17,837	$ 10,479	$ 34,456	$ 21,358
Earnings per share
Basic (in dollars per share)	$ 0.71	$ 0.45	$ 1.41	$ 0.93
Diluted (in dollars per share)	$ 0.70	$ 0.44	$ 1.38	$ 0.91
Weighted-average shares outstanding
Basic (in shares)	24,959	23,388	24,399	23,006
Diluted (in shares)	78,825	77,650	78,947	77,641
PMT
Net gains on mortgage loans held for sale at fair value:
From PennyMac Mortgage Investment Trust	$ 14,927	$ (1,506)	$ 27,313	$ (3,201)
Mortgage loan origination fees from PennyMac Mortgage Investment Trust	1,542	1,890	2,750	3,269
Fulfillment fees from PennyMac Mortgage Investment Trust	14,559	21,107	26,503	37,677
Mortgage loan servicing fees
From non-affiliates and affiliates	9,431	10,099	20,450	20,585
Changes in fair value included in income	(996)	7,156	(7,917)	9,929
Management fees, net:
Management fees	5,728	5,638	11,424	10,646
Interest income:
From PennyMac Mortgage Investment Trust	1,898	2,025	3,874	3,830
Interest expense:
To PennyMac Mortgage Investment Trust	3,910	4,366	7,844	9,013
Change in fair value of investment in and dividends received from affiliate	108	76	290	215
Investment Funds
Mortgage loan servicing fees
From non-affiliates and affiliates	3	543	3	1,039
Management fees, net:
Management fees	(64)	369	15	735
Carried Interest from Investment Funds	$ (168)	$ 241	$ (348)	$ 113

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Cash flow from operating activities
Net income	$ 135,331	$ 105,132
Adjustments to reconcile net income to net cash used in operating activities:
Net gains on mortgage loans held for sale at fair value	(132,360)	(185,047)
Amortization, impairment and change in fair value of mortgage servicing rights, mortgage servicing liabilities and excess servicing spread	92,137	142,431
Capitalization of interest on mortgage loans held for sale at fair value	(39,390)	(21,615)
Accrual of interest on excess servicing spread financing	7,844	9,013
Amortization of premiums and debt issuance costs	(13,385)	7,122
Results of real estate acquired in settlement of loans	15	144
Stock based compensation expense	12,235	10,390
Provision for servicing advance losses	12,097	18,030
Loss from disposition of fixed assets and impairment of capitalized software		377
Depreciation and amortization	5,647	4,117
Originations of mortgage loans held for sale	(2,518,992)	(2,353,899)
Purchase of mortgage loans from Ginnie Mae securities and early buyout investors for modification and subsequent sale	(2,002,582)	(1,814,080)
Sale and principal payments of mortgage loans held for sale to non-affiliates	22,832,809	24,497,179
Repurchase of mortgage loans subject to representations and warranties	(12,974)	(11,520)
Settlement of repurchase agreement derivative	7,478
Decrease in servicing advances	47,980	38,821
Collection of Carried Interest	7,834
Sale of real estate acquired in settlement of loans	2,130
Decrease (increase) in other assets	7,792	(29,492)
Increase (decrease) in accounts payable and accrued expenses	5,349	(30,395)
Payments to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement		(6,221)
Net cash provided by (used in) operating activities	595,898	(852,928)
Cash flow from investing activities
Decrease (increase) in short-term investments	71,509	(59,476)
Net settlement of derivative financial instruments used for hedging	(126,918)	(30,949)
Purchase of mortgage servicing rights	(30,129)	(159,465)
Purchase of furniture, fixtures, equipment and leasehold improvements	(4,321)	(4,668)
Acquisition of capitalized software	(7,664)	(7,719)
Increase in margin deposits	(3,774)	(12,071)
Net cash used in investing activities	(95,751)	(274,348)
Cash flow from financing activities
Sale of assets under agreements to repurchase	20,763,584	13,332,610
Repurchase of assets sold under agreements to repurchase	(21,319,387)	(12,046,244)
Issuance of mortgage loan participation certificates	12,486,542	10,491,796
Repayment of mortgage loan participation certificates	(12,485,880)	(10,919,650)
Advances on notes payable	650,000	435,000
Repayments of notes payable	(400,000)	(153,073)
Advances of obligations under capital lease		10,298
Repayments of obligations under capital lease	(7,939)	(7,081)
Repayment of excess servicing spread financing	(24,309)	(28,910)
Payment of debt issuance costs	(9,788)	(11,059)
Issuance of common stock pursuant to exercise of stock options	3,833	316
Repurchase of common stock	(4,826)
Net cash (used in) provided by financing activities	(348,170)	1,104,003
Net increase (decrease) in cash and restricted cash	151,977	(23,273)
Cash and restricted cash at beginning of period	38,173	99,642
Cash and restricted cash at end of period	190,150	76,369
Cash	189,663	75,978
Restricted cash included in Other assets	487	391
Investment Funds
Adjustments to reconcile net income to net cash used in operating activities:
Accrual of servicing rebate payable to Investment Funds		100
Carried Interest from Investment Funds	348	(113)
Collection of Carried Interest	7,834
Decrease (increase) in receivable from affiliates	405	(211)
Decrease in payable to affiliate	(2,023)	(5,157)
PMT
Adjustments to reconcile net income to net cash used in operating activities:
Change in fair value of investment in common shares of PennyMac Mortgage Investment Trust	(219)	(144)
Purchase of mortgage loans held for sale from PennyMac Mortgage Investment Trust	(19,267,316)	(21,244,194)
Sale of mortgage loans held for sale to Penny Mac Mortgage Investment Trust	1,427,637	40,222
Decrease (increase) in receivable from affiliates	5,873	(1,092)
Decrease in payable to affiliate	(38,580)	(37,650)
Increase in income taxes payable	12,778	$ 14,824
Cash flow from investing activities
Sale of assets purchased from PMT under agreement to resell	$ 5,546

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
ASSETS
Cash (includes $152,382 and $20,765 pledged to creditors)	$ 189,663	$ 37,725
Short-term investments at fair value	98,571	170,080
Mortgage loans held for sale at fair value (includes $2,498,583 and $3,081,987 pledged to creditors)	2,527,231	3,099,103
Derivative assets	92,471	78,179
Servicing advances, net (includes valuation allowance of $61,825 and $59,958; $94,715 and $114,643 pledged to creditors)	258,900	318,066
Mortgage servicing rights (includes $2,486,157 and $638,010 at fair value; $2,333,750 and $2,098,067 pledged to creditors)	2,486,157	2,119,588
Real estate acquired in settlement of loans	2,300	2,447
Furniture, fixtures, equipment and building improvements, net (includes $20,656 and $23,915 pledged to creditors)	29,607	29,453
Capitalized software, net (includes $1,347 and $1,568 pledged to creditors)	31,913	25,729
Mortgage loans eligible for repurchase	879,621	1,208,195
Other	85,223	98,107
Total assets	6,841,706	7,368,093
LIABILITIES
Assets sold under agreements to repurchase	1,825,813	2,381,538
Mortgage loans participation purchase and sale agreements	528,368	527,395
Notes payable	1,140,546	891,505
Obligations under capital lease	13,032	20,971
Derivative liabilities	4,094	5,796
Accounts payable and accrued expenses	114,005	106,716
Mortgage servicing liabilities at fair value	10,253	14,120
Income taxes payable	67,357	52,160
Liability for mortgage loans eligible for repurchase	879,621	1,208,195
Liability for losses under representations and warranties	20,587	20,053
Total liabilities	4,979,762	5,648,419
Commitments and contingencies - Note 14
STOCKHOLDERS' EQUITY
Additional paid-in capital	229,941	204,103
Retained earnings	299,951	265,306
Total stockholders' equity attributable to PennyMac Financial Services, Inc. common stockholders	529,895	469,411
Noncontrolling interest in Private National Mortgage Acceptance Company, LLC	1,332,049	1,250,263
Total stockholders' equity	1,861,944	1,719,674
Total liabilities and stockholders' equity	6,841,706	7,368,093
Class A Common Stock
STOCKHOLDERS' EQUITY
Common stock	3	2
Total stockholders' equity	3
Class B Common Stock
STOCKHOLDERS' EQUITY
Common stock
Investment Funds
ASSETS
Carried Interest due from Investment Funds pledged to creditors	370	8,552
Receivable, from affiliates	12	417
LIABILITIES
Payable to affiliates	404	2,427
PMT
ASSETS
Investment in PennyMac Mortgage Investment Trust at fair value	1,424	1,205
Assets purchased from PennyMac Mortgage Investment Trust under agreements to resell pledged to creditors	138,582	144,128
Receivable, from affiliates	19,661	27,119
LIABILITIES
Excess servicing spread financing payable to PennyMac Mortgage Investment Trust at fair value	229,470	236,534
Payable to affiliates	99,309	136,998
Private National Mortgage Acceptance Company, LLC
LIABILITIES
Payable to exchanged Private National Mortgage Acceptance Company, LLC unitholders under tax receivable agreement	$ 46,903	$ 44,011